<PAGE>
As filed with the Securities and Exchange Commission on March __, 1999
Registration No. 333-**
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------------
PHARMACIA & UPJOHN, INC.
(Exact name of company as specified in its charter)
Delaware 98-0155411
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
95 Corporate Drive
Bridgewater, New Jersey 08807-0995
(Address of principal executive offices) (Zip Code)
Pharmacia & Upjohn, Inc.
Employee Savings Plan
(Full title of the plan)
Don W. Schmitz
Vice President, Associate General Counsel &
Corporate Secretary
Pharmacia & Upjohn, Inc.
95 Corporate Drive
Bridgewater, New Jersey 08807-0995
(Name and address of agent for service)
(908) 306-4400
(Telephone number, including area code, of agent for service)
---------------------------
Copy of all communications to:
Robert J. Lichtenstein
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
(215) 963-5000
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================
Proposed maximum Proposed maximum
Title of securities Amount to be offering price aggregate Amount of
to be registered registered (1) per share (2) offering price (2) registration fee (2) (3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock, $0.01 10,000,000 $56.65625 $566,562,500 $157,504.38
par value
================================================================================================================
</TABLE>
(1) This Registration Statement covers shares of Common Stock of Pharmacia
& Upjohn, Inc. which may be offered or sold pursuant to the Pharmacia &
Upjohn, Inc. Employee Savings Plan. In addition, pursuant to Rule
416(c) under the Securities Act of 1933, as amended, this Registration
Statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the Pharmacia & Upjohn, Inc. Employee
Savings Plan.
(2) Estimated pursuant to Paragraphs (c) and (h) of Rule 457 under the
Securities Act of 1933, as amended (the "Securities Act"), solely for
the purpose of calculating the registration fee, based upon the average
of the high and low sales prices of shares of the Company's Common
Stock on March 12, 1999, as reported on the New York Stock Exchange.
(3) The registration fee of $157,504.38 is included in a wire of
$220,506.13 from the Company.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENTS
Item 3. Incorporation of Documents by Reference.
The following documents filed with the U.S. Securities and
Exchange Commission (the "Commission") by Pharmacia & Upjohn, Inc. (the
"Company") (File No. 1-11557) pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are incorporated by reference in this Form S-8
Registration Statement (the "Registration Statement") and made a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 10-K");
2. The Company's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1998, June 30, 1998 and September 30, 1998;
3. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on October 24, 1995; and
All documents and reports filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents or reports. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified shall not be deemed to
constitute a part of the Registration Statement except as so modified and any
statement so superseded shall not be deemed to constitute a part of this
Registration Statement.
Independent Public Accountants
- ------------------------------
The consolidated balance sheets of the Company as of December 31,
1997 and 1996, and the consolidated statements of earnings, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997, which have been incorporated by reference in this Prospectus, have been
included and incorporated by reference herein in reliance on the report of
PricewaterhouseCoopers LLP, independent public accountants, given on the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information for the three-month periods ended
March 31, 1998 and 1997, the six-month periods ended June 30, 1998 and 1997 and
the nine-month periods ended September 30, 1998 and 1997, incorporated by
reference in this prospectus, the independent public accountants have reported
that they have applied limited procedures in accordance with
II-1
<PAGE>
professional standards for a review of such information. However, their separate
review reports included in the Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and 1997, June 30, 1998 and 1997 and September 30,
1998 and 1997, and incorporated by reference herein, state that they did not
audit and they do not express opinions on that interim financial information.
Accordingly, the degree of reliance on their review reports on such information
should be restricted in light of the limited nature of the review procedures
applied. The accountants are not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their reports on the unaudited interim
financial information because those reports are not a "report" or a "part" of
the registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act.
Item 4. Description of Securities.
Not Applicable
Item 5. Interests of Named Experts and Counsel.
Not Applicable
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a
court to award, or a corporation's board of directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Company's Certificate of Incorporation and By-laws provide for indemnification
of its directors, officers, employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. In addition, the Company has
entered into Indemnification Agreements with its executive officers and
directors. The Company has also purchased and maintained insurance for its
officers, directors, employees or agents against liabilities which an officer, a
director, an employee or an agent may incur in his capacity as such.
Item 7. Exemption from Registration Claimed.
Not Applicable
Item 8. Exhibits.
<TABLE>
<CAPTION>
Exhibit Numbers Exhibit
- ----------------------- ---------------------------------------------------------------------------
<S> <C> <C>
4 Restated Certificate of Incorporation and Restated By-laws of
Pharmacia & Upjohn, Inc. (incorporated by reference to Exhibits 4.1
and 4.2 to Pharmacia & Upjohn, Inc.'s Registration Statement on
Form S-8 filed May 3, 1996)
5.1 Opinion of Morgan, Lewis & Bockius LLP, counsel to the Company
15 Awareness Letter from PricewaterhouseCoopers LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Morgan, Lewis & Bockius LLP (included as part of
Exhibit 5.1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
24 Power of Attorney (included as part of the signature page)
99.1 Pharmacia & Upjohn, Inc. Employee Savings Plan (as amended and
restated effective as of January 1, 1997)
99.2 Amendment 1999-1 to the Pharmacia & Upjohn, Inc. Employee
Savings Plan (as amended and restated effective as of January 1,
1997)
</TABLE>
Item 9. Undertakings.
The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the Registration Statement any
facts or events arising after the effective date of
the Registration Statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the Registration
Statement.
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement;
provided, however, that subparagraphs (a)(1)(i) and (a)(1)(ii) of
this section do not apply if the information required to be
included in a post-effective amendment by those subparagraphs is
contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
The undersigned company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and each filing of the Pharmacia & Upjohn, Inc. Employee Savings Plan annual
report pursuant to Section 15(d) of the Securities Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned company hereby undertakes that, it will submit the
Pharmacia & Upjohn, Inc. Employee Savings Plan and any amendment thereto to the
Internal Revenue Service ("IRS") in a timely manner and will make all changes
required by the IRS in order to qualify the plan.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Bridgewater, State of New Jersey on this 18th day of March, 1999.
PHARMACIA & UPJOHN, INC.
By: /s/Fred Hassan
--------------------------------------------
Name: Fred Hassan
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by or on behalf of the following persons in the
capacities and on the dates indicated.
Each person, in so signing, also makes, constitutes and appoints Fred
Hassan, Christopher Coughlin and Richard Collier, and each such officer acting
singly, his true and lawful attorney-in-fact, in his name, place and stead to
execute and cause to be filed with the Securities and Exchange Commission any or
all amendments to this Registration Statement, with all exhibits and any and all
documents required to be filed with respect thereto, and to do and perform each
and every act and thing necessary to effectuate the same.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/Fred Hassan President and Chief Executive March 18, 1999
- -------------------------------- Officer
Fred Hassan
- -------------------------------- Executive Vice President and March __, 1999
Christopher Coughlin Chief Financial Officer
(Principal Financial Officer)
- -------------------------------- Senior Vice President (Principal March __, 1999
Robert Thompson Accounting Officer)
/s/Richard H. Brown Director March 18, 1999
- --------------------------------
Richard H. Brown
- -------------------------------- Director March __, 1999
Frank C. Carlucci
/s/Gustaf A.S. Douglas Director March 18, 1999
- --------------------------------
Gustaf A.S. Douglas
/s/M. Kathryn Eickhoff Director March 18, 1999
- --------------------------------
M. Kathryn Eickhoff
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/J. Soren Gyll Director March 18, 1999
- --------------------------------
J. Soren Gyll
/s/R.L. Berthold Lindquist Director March 18, 1999
- --------------------------------
R.L. Berthold Lindquist
/s/Olf G. Lund Director March 18, 1999
- --------------------------------
Olf G. Lund
/s/C. Steven McMillan Director March 18, 1999
- --------------------------------
C. Steven McMillan
/s/William U. Parfet Director March 18, 1999
- --------------------------------
William U. Parfet
/s/Ulla B. Reinius Director March 18, 1999
- --------------------------------
Ulla B. Reinius
/s/Bengt Samuelsson Director March 18, 1999
- --------------------------------
Bengt Samuelsson
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Numbers Exhibit
- ----------------------- -------------------------------------------------------------------
<S> <C> <C>
4 Restated Certificate of Incorporation and Restated By-laws of
Pharmacia & Upjohn, Inc. (incorporated by reference to Exhibits 4.1
and 4.2 to Pharmacia & Upjohn, Inc.'s Registration Statement on
Form S-8 filed May 3, 1996)
5.1 Opinion of Morgan, Lewis & Bockius LLP, counsel to the Company
15 Awareness Letter from PricewaterhouseCoopers LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Morgan, Lewis & Bockius LLP (included as part of
Exhibit 5.1)
24 Power of Attorney (included as part of the signature page)
99.1 Pharmacia & Upjohn, Inc. Employee Savings Plan (as amended and
restated effective as of January 1, 1997)
99.2 Amendment 1999-1 to the Pharmacia & Upjohn, Inc. Employee
Savings Plan (as amended and restated effective as of January 1,
1997)
</TABLE>
<PAGE>
EXHIBIT 5.1
March 19, 1999
Pharmacia & Upjohn, Inc.
95 Corporate Drive
Bridgewater, New Jersey 08807-0995
Ladies and Gentlemen:
We have acted as counsel to Pharmacia & Upjohn, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of a registration statement
on Form S-8 (the "Registration Statement") to be filed pursuant to the
Securities Act of 1933, as amended (the "Act") and relating to 10,000,000 shares
(the "Shares") of the Company's Common Stock, $0.01 par value per share (the
"Common Stock"). The Shares covered by this Registration Statement will be
issued pursuant to the Pharmacia & Upjohn, Inc. Employee Savings Plan (the
"Plan").
We have examined the Registration Statement and such corporate records, statutes
and other documents, as we have deemed relevant in rendering this opinion. As to
matters of fact, we have relied on representations of officers of the Company.
In our examination, we have assumed the genuineness of documents submitted to us
as originals and the conformity with originals of documents submitted to us as
copies thereof.
Based on the foregoing, it is our opinion that Shares originally issued by the
Company to participants in the Plan will be, when issued in accordance with the
terms of the Plan, validly issued, fully paid and nonassessable.
The opinion set forth above is limited to the General Corporation Law of the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Act or the rules or regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/Morgan, Lewis & Bockius LLP
<PAGE>
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Pharmacia & Upjohn, Inc.
Registration on Form S-8
We are aware that our reports dated April 27, 1998, July 27, 1998 and October
28, 1998 on our reviews of interim financial information of Pharmacia & Upjohn,
Inc. and Subsidiaries for the three month periods ended March 31, 1998 and 1997,
the three and six month periods ended June 30, 1998 and 1997 and for the three
and nine month periods ended September 30, 1998 and 1997, respectively, and
included in the Company's quarterly reports on Form 10-Q for the quarters then
ended are incorporated by reference in this registration statement on Form S-8
pertaining to the Pharmacia & Upjohn, Inc. Employee Savings Plan. Pursuant to
Rule 436(c) under the Securities Act of 1933, these reports should not be
considered a "report" or a "part" of the registration statement prepared or
certified by us within the meaning of Sections 7 and 11 of that Act.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 19, 1999
<PAGE>
EXHIBIT 23.1
Consent of Independent Public Accountants
We consent to the incorporation by reference in this registration statement on
Form S-8 pertaining to the Pharmacia & Upjohn, Inc. Employee Savings Plan of our
report dated February 17, 1998, on our audits of the consolidated financial
statements of Pharmacia & Upjohn, Inc. and its subsidiaries as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997. We also consent to the reference to our firm under the caption
"Independent Public Accountants."
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 19, 1999
<PAGE>
EXHIBIT 99.1
PHARMACIA & UPJOHN EMPLOYEE SAVING PLAN
(As Amended and Restated Effective as of January 1, 1997)
McDermott, Will & Emery
Chicago, Illinois
<PAGE>
AMENDMENT AND RESTATEMENT
-------------------------
OF
--
PHARMACIA & UPJOHN EMPLOYEE SAVINGS PLAN
----------------------------------------
WHEREAS, the Upjohn Employee Savings Plan (the "plan") was established by The
Upjohn Company (the "company") on October 1, 1965 and has been amended from time
to time, including an amendment and restatement of the plan effective January 1,
1994, and five subsequent amendments to the plan; and
WHEREAS, it now is deemed necessary and desirable to further amend and restate
the plan in its entirety;
NOW, THEREFORE, pursuant to the amending power reserved to the company under
subsection 15.1 of the plan, as amended, the plan be and is further amended and
restated in its entirety effective as of January 1, 1997 in the form attached
hereto entitled Pharmacia & Upjohn Employee Savings Plan (As Amended and
Restated Effective as of January 1, 1997).
* * * * *
IN WITNESS WHEREOF, the company has caused this amendment and restatement to be
signed by an officer thereunto duly authorized this 3 day of February, 1998.
PHARMACIA & UPJOHN COMPANY
By _________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.........................................................................................................1
Introduction.................................................................................................1
1.1 The Plan and Its Purpose....................................................................1
------------------------
1.2 Merger of ESOP Plan Into Plan...............................................................1
-----------------------------
1.3 Employers, Pharmacia & Upjohn Companies.....................................................2
---------------------------------------
1.4 Trustees, Trust Agreements, Trust Funds.....................................................2
---------------------------------------
1.5 Company Stock, Share Purchase Loan..........................................................2
----------------------------------
1.6 Participation Date, Accounting Date, Valuation Date, Plan Year..............................3
--------------------------------------------------------------
1.7 Participant, Inactive Participant...........................................................3
---------------------------------
1.8 Plan Administration.........................................................................3
-------------------
1.9 Supplements.................................................................................3
-----------
SECTION 2.........................................................................................................5
Eligibility and Participation................................................................................5
2.1 Eligibility.................................................................................5
-----------
2.2 Notice of Eligibility Enrollment............................................................6
--------------------------------
2.3 Continued Participation.....................................................................6
-----------------------
2.4 Covered Employee............................................................................6
----------------
2.5 Employment Date.............................................................................6
---------------
2.6 Service with Predecessor Company............................................................7
--------------------------------
2.7 Authorized Absences From Work...............................................................7
-----------------------------
2.8 Leased Employees............................................................................7
----------------
SECTION 3.........................................................................................................9
Participants' Contributions..................................................................................9
3.1 Matched and Voluntary Savings...............................................................9
-----------------------------
3.2 Before-Tax Savings..........................................................................9
------------------
3.3 After-Tax Savings...........................................................................9
-----------------
3.4 Base Pay...................................................................................10
--------
3.5 Variation or Suspension of Saving..........................................................10
---------------------------------
3.6 Election Procedure.........................................................................10
------------------
3.7 Deduction and Remittance of Participants' Before-Tax and After-Tax Savings.................10
--------------------------------------------------------------------------
3.8 Crediting and Investment of Savings........................................................11
-----------------------------------
3.9 Return of Withdrawn Savings................................................................11
---------------------------
3.10 Special Provisions for U.S. Foreign Service Employee.......................................11
----------------------------------------------------
3.11 Rollovers..................................................................................11
---------
SECTION 4........................................................................................................13
Employer Contributions......................................................................................13
4.1 Employer Loan Contributions................................................................13
---------------------------
4.2 Employer Adjustment Contributions..........................................................13
---------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.3 Individual Employer's Share of Employer Contributions......................................13
-----------------------------------------------------
4.4 Contributions of Participants' Savings.....................................................13
--------------------------------------
4.5 Verification of Employer Contributions.....................................................13
--------------------------------------
4.6 Discretionary Additional Employer Matching Contributions...................................14
--------------------------------------------------------
SECTION 5........................................................................................................16
Investment of Participant and Employer Contributions........................................................16
5.1 Savings Investment Elections...............................................................16
----------------------------
5.2 Investment Funds...........................................................................16
----------------
5.3 Investments Elections and Transfers........................................................16
-----------------------------------
5.4 Pharmacia & Upjohn Stock Fund..............................................................16
-----------------------------
5.5 ESOP Trust Fund............................................................................17
---------------
5.6 Diversification of Investments in Company Stock............................................18
-----------------------------------------------
5.7 Voting and Tendering of Common Stock.......................................................19
------------------------------------
SECTION 6........................................................................................................22
Accounting..................................................................................................22
6.1 Participants' Accounts.....................................................................22
----------------------
6.2 Crediting of Participants' Savings.........................................................23
----------------------------------
6.3 Transfer of Shares From Unreleased Share Account to Released Share Account.................23
--------------------------------------------------------------------------
6.4 Allocation of Company Stock Based upon Cash Dividends on Shares in ESOP Stock Accounts.....23
--------------------------------------------------------------------------------------
6.5 Allocation of Company Stock as a Matching Contribution.....................................24
------------------------------------------------------
6.6 Extra-Matching Allocation..................................................................24
-------------------------
6.7 Adjustment of Participant Accounts.........................................................24
----------------------------------
6.8 Temporary Investment Income in ESOP Trust Fund.............................................25
----------------------------------------------
6.9 Fair Market Value of Company Stock.........................................................25
----------------------------------
6.10 Stock Dividends, Stock Splits and Capital Reorganizations Affecting ESOP Shares............25
-------------------------------------------------------------------------------
6.11 ESOP Share Records.........................................................................25
------------------
6.12 Statement of Accounts......................................................................25
---------------------
SECTION 7........................................................................................................26
Inactive Participants.......................................................................................26
7.1 Inactive Participants......................................................................26
---------------------
7.2 Status of Inactive Participant.............................................................26
------------------------------
SECTION 8........................................................................................................27
Withdrawals and Loans.......................................................................................27
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
8.1 Withdrawals of After-Tax Savings, Employer Matching Contributions,
------------------------------------------------------------------
and Rollover Contributions.................................................................27
--------------------------
8.2 Withdrawals of Before-Tax Savings..........................................................28
---------------------------------
8.3 Loans to Participants......................................................................30
---------------------
SECTION 9........................................................................................................35
Settlement Dates and Distribution...........................................................................35
9.1 Settlement Dates...........................................................................35
----------------
9.2 Vesting and Distribution on Resignation or Dismissal.......................................35
----------------------------------------------------
9.3 Years of Participation.....................................................................36
----------------------
9.4 Years of Employment Service................................................................36
---------------------------
9.5 Forfeitures................................................................................37
-----------
9.6 Vesting and Distribution on Retirement Disability Leave of Absence, or Death...............38
----------------------------------------------------------------------------
9.7 Special Provisions as to Distributions Under the Plan......................................38
-----------------------------------------------------
9.8 Eligible Spouse............................................................................41
---------------
9.10 Missing Participant's or Beneficiaries.....................................................42
--------------------------------------
9.11 Direct Transfer of Eligible Rollover Distributions.........................................43
--------------------------------------------------
SECTION 10.......................................................................................................45
Benefit Limitations.........................................................................................45
10.1 Defined Contribution and Defined Benefit Plans.............................................45
----------------------------------------------
10.2 Limitation Year and Total Compensation.....................................................45
--------------------------------------
10.3 Defined Contribution Plan Limitations......................................................45
-------------------------------------
10.4 Combined Plan Limitations..................................................................46
-------------------------
10.5 Treatment of ESOP Interest Payments and Forfeitures........................................46
---------------------------------------------------
10.6 Dollar Limitation on Before-Tax Savings....................................................46
---------------------------------------
10.7 Percentage Limitation on Before-Tax Savings................................................47
-------------------------------------------
10.8 Percentage Limitation on After-Tax Savings and Employer Contributions......................49
---------------------------------------------------------------------
10.9 Allocation of Income to Distributions Under Subsections 10.6, 10.7 and 10.8................50
---------------------------------------------------------------------------
10.10 Multiple Use of Alternative Limitation.....................................................51
--------------------------------------
10.11 Highly Compensated Employee; Nonhighly Compensated Employee; Annual Compensation...........51
--------------------------------------------------------------------------------
SECTION 11.......................................................................................................53
Reemployment................................................................................................53
11.1 Rehired Employee...........................................................................53
----------------
11.2 Rehired Participant........................................................................53
-------------------
SECTION 12.......................................................................................................56
General Provisions..........................................................................................56
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
12.1 Interests Not Transferable.................................................................56
--------------------------
12.2 Facility of Payment........................................................................56
-------------------
12.3 Absence of Guaranty........................................................................56
-------------------
12.4 Employment Rights..........................................................................56
-----------------
12.5 Litigation by Participants or Other Persons................................................56
-------------------------------------------
12.6 Evidence...................................................................................57
--------
12.7 Gender and Number..........................................................................57
-----------------
12.8 Waiver of Notice...........................................................................57
----------------
12.9 Controlling Law............................................................................57
---------------
12.10 Statutory References......................................................................57
--------------------
12.11 Severability...............................................................................57
------------
12.12 Fiduciary Responsibilities.................................................................57
--------------------------
12.13 Indemnification............................................................................57
---------------
12.14 Automated Voice Response Systems, Computer Systems.........................................58
--------------------------------------------------
12.15 Examination of Plan Documents..............................................................58
-----------------------------
12.16 Notices....................................................................................58
-------
12.17 Immediate Distribution to Alternate Payees.................................................58
------------------------------------------
SECTION 13.......................................................................................................59
Plan Administration.........................................................................................59
13.1 Administrative Responsibility..............................................................59
-----------------------------
13.2 Committee Membership.......................................................................59
--------------------
13.3 Responsibilities and Authority of Board of Directors.......................................59
----------------------------------------------------
13.4 Responsibilities and Authority of the Committee............................................60
-----------------------------------------------
13.5 Manner of Action of the Committee..........................................................62
---------------------------------
13.6 Information Required by Committee..........................................................63
---------------------------------
13.7 Committee Decision Final...................................................................63
------------------------
13.8 Denial Procedure and Appeal Process........................................................63
-----------------------------------
13.9 Uniform Rules..............................................................................64
-------------
13.10 Committee Member Who is a Participant......................................................64
-------------------------------------
SECTION 14.......................................................................................................65
Relating to the Employers...................................................................................65
14.1 Action by Employers........................................................................65
-------------------
14.2 Additional Employers.......................................................................65
--------------------
14.3 Restrictions as to Reversion of Trust Assets to the Employers..............................65
-------------------------------------------------------------
SECTION 15.......................................................................................................67
Amendment, Termination or Plan Merger.......................................................................67
15.1 Amendment..................................................................................67
---------
15.2 Termination................................................................................67
-----------
15.3 Plan Merger................................................................................68
-----------
15.4 Notice of Amendment, Termination or Plan Merger............................................68
-----------------------------------------------
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
15.5 Nonforfeitability on Termination...........................................................68
--------------------------------
SECTION 16.......................................................................................................69
Benefit Protection..........................................................................................69
16.1 Overriding Provisions......................................................................69
---------------------
16.2 Amendment or Voiding of Overriding Provisions Prior to a Change in Control.................69
--------------------------------------------------------------------------
16.3 Definitions................................................................................69
-----------
16.4 Full Vesting Upon a Change in Control......................................................71
-------------------------------------
SUPPLEMENT A....................................................................................................A-1
SUPPLEMENT B....................................................................................................B-1
</TABLE>
v
<PAGE>
Index of Defined Terms
<TABLE>
<CAPTION>
<S> <C>
Account Balance..................................................................................................36
Accounting Date..............................................................................................3, B-1
Actual Contribution Percentage...................................................................................49
Actual Deferral Percentage.......................................................................................47
Additional Employer Matching Contribution........................................................................14
Affiliate.....................................................................................................2, 69
After-tax.........................................................................................................9
After-tax Savings.................................................................................................9
Alternative Limitation...........................................................................................51
Annual Addition..................................................................................................45
Annual Compensation..............................................................................................51
Associate........................................................................................................69
Authorized Absence from Work......................................................................................7
Base Pay.........................................................................................................10
Before-tax........................................................................................................9
Before-tax Savings Account.......................................................................................22
Beneficial Owner.................................................................................................69
Beneficiaries....................................................................................................42
Board of Directors...............................................................................................69
Call-in Employee..................................................................................................5
Change in Control................................................................................................69
Closing Price....................................................................................................19
Code.........................................................................................................1, B-1
Committee......................................................................................................3, 7
Common Stock..................................................................................................3, 70
Company.......................................................................................................1, 70
Company Stock.....................................................................................................3
Covered Employee..................................................................................................6
Determination Date..............................................................................................A-1
Disability Leave of Absence......................................................................................35
Disabled.........................................................................................................35
Effective Date....................................................................................................1
Eligible Distributee.............................................................................................44
Eligible Employee.......................................................................................47, 49, B-2
Eligible Participants............................................................................................24
Eligible Retirement Plan.........................................................................................44
Eligible Rollover Distribution...................................................................................43
Eligible Spouse..................................................................................................41
Employed..........................................................................................................6
Employee..........................................................................................................6
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Employer..........................................................................................................2
Employer Adjustment Contribution.................................................................................13
Employer Loan Contribution.......................................................................................13
Employer Matching Account........................................................................................22
Employment Date...................................................................................................6
Employment Service...............................................................................................36
Erisa.............................................................................................................1
Esop Plan.........................................................................................................1
Esop Stock Account...............................................................................................22
Esop Trust Fund...................................................................................................2
Esop Trustee......................................................................................................2
Excess Aggregate Contributions...................................................................................50
Excess Deferral..................................................................................................46
Excess Puerto Rico Code Deferral................................................................................B-1
Excess Puerto Rico Code Savings.................................................................................B-3
Excess Savings...................................................................................................48
Exchange Act.....................................................................................................70
Extra-matching Allocation........................................................................................24
For Cause........................................................................................................14
Forfeiture.......................................................................................................37
Group............................................................................................................71
Hardship Withdrawal..............................................................................................28
Highly Compensated Employee.................................................................................51, B-4
Holdback Amount..................................................................................................27
Hour of Service...................................................................................................5
Inactive Participant.............................................................................................26
Incumbent Board..................................................................................................70
Investment Funds.................................................................................................16
Key Employee....................................................................................................A-2
Leased Employee...................................................................................................7
Limitation Year..................................................................................................45
Loan Date........................................................................................................31
Matched Savings...................................................................................................9
Matching Allocation..............................................................................................24
Maximum Annual Addition..........................................................................................46
Non-key Employee................................................................................................A-2
Nonhighly Compensated Employee...................................................................................51
Normal Retirement Age............................................................................................35
One-year Break in Service........................................................................................37
Participant.......................................................................................................3
Participation Date................................................................................................3
Person...........................................................................................................71
Pharmacia & Upjohn Companies......................................................................................2
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Pharmacia & Upjohn Company........................................................................................2
Pharmacia & Upjohn Stock Fund....................................................................................17
Plan..............................................................................................................1
Plan Year.........................................................................................................3
Predecessor Company...............................................................................................7
Preferred Stock...................................................................................................3
Previously Reported..............................................................................................69
Proportionate Share..............................................................................................20
Puerto Rico Code................................................................................................B-1
Puerto Rico Participants........................................................................................B-1
Qualified Participant............................................................................................18
Real Deferred Percentage........................................................................................B-2
Released Share Account...........................................................................................17
Required Beginning Date..........................................................................................41
Rollover Account.................................................................................................22
Settlement Date..................................................................................................35
Share Purchase Loan...............................................................................................2
Stock Account Balances...........................................................................................18
Subsidiary........................................................................................................2
Temporary Employee................................................................................................5
Temporary Investment Income......................................................................................25
Top-heavy Plan..................................................................................................A-1
Top-paid Group...................................................................................................52
Total Compensation...............................................................................................45
Trust Agreements..................................................................................................2
Trust Fund........................................................................................................2
Trust Funds.......................................................................................................2
Trustee...........................................................................................................2
Trustees.........................................................................................................19
U.s. Reserve.....................................................................................................11
Unreleased Share Account.........................................................................................17
Valuation Date....................................................................................................3
Voluntary Savings.................................................................................................9
Voting Securities................................................................................................71
Whole Board......................................................................................................71
Willful..........................................................................................................14
Withdrawal Date..............................................................................................27, 28
Years of Employment Service......................................................................................37
Years of Participation...........................................................................................36
Years of Service..................................................................................................8
</TABLE>
viii
<PAGE>
PHARMACIA & UPJOHN EMPLOYEE SAVINGS PLAN
----------------------------------------
(As Amended and Restated Effective as of January 1, 1997)
SECTION 1.
----------
Introduction
------------
1.1 The Plan and Its Purpose. Pharmacia & Upjohn Employee Savings Plan (the
"plan"), originally was established as The Upjohn Employee Savings Plan by The
Upjohn Company on October 1, 1965. The plan has been amended from time to time,
and currently is maintained by Pharmacia & Upjohn Company (the "company") for
the exclusive benefit of its eligible employees and those of its subsidiaries
and affiliates that adopt and become employers under the plan. The provisions of
this subsection and the following provisions (subject to any subsequent
amendments) constitute an amendment and restatement of the plan effective as of
January 1, 1997 (the "effective date"). The purpose of the plan as so amended
and restated is to enable eligible employees to provide for their future
security by systematic savings and by sharing in the contributions of the
employers. The plan is intended to qu as a profit sharing plan under Section
401(a) of the Internal Revenue Code (the "Code") with a cash or deferred
arrangement under Section 401(k) of the Code and an employee stock ownership
feature under Section 4975(e)(7) of the Code and Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
1.2 Merger of ESOP Plan Into Plan. Prior to January 1, 1990, participating
employees made contributions under this plan that were matched in whole or in
part by employer contributions. On June 19, 1989, The Upjohn Company established
The Upjohn Company Employee Stock Ownership Plan (the "ESOP Plan"). A share
purchase loan (as defined in subparagraph 1.5(a)) was obtained by the ESOP
trustee (as defined in subsection 1.4) and the proceeds of the loan were applied
to purchase The Upjohn Company stock in the form of Series B convertible
perpetual preferred stock. As of December 31, 1989, the ESOP Plan was merged
into and became a part of this plan. The portion of the plan that constitutes
the merged ESOP Plan shall continue to be referred to where appropriate under
the plan as the "ESOP Plan". The ESOP Trust Fund (as described in subsection
1.4) serves as the funding vehicle for the ESOP Plan. A portion of the initial
share purchase loan was refinanced first in 1990 and again in 1997, and from
time to time additional share purchase loans may be made to the ESOP trustee.
Effective as of November 2, 1995, the stock of The Upjohn Company held under the
plan was converted into stock of Pharmacia & Upjohn, Inc. During the period of
each share purchase loan, employer loan contributions described in subsection
4.1 shall be made under this plan in amounts sufficient for the ESOP trustee to
repay each such loan in accordance with its terms. As payments on a share
purchase loan are made, shares of company stock purchased with the proceeds of
such loans will become available for allocation and crediting to the accounts of
eligible participants under this plan. From time to time the employers may, but
shall not
1
<PAGE>
be required to, make additional contributions under this plan so that a larger
number of shares of company stock may be credited to participants' accounts.
1.3 Employers, Pharmacia & Upjohn Companies. Certain subsidiaries and
affiliates of the company adopted the plan prior to the effective date. Upon the
recommendation of the committee and with the consent of the company, any other
United States subsidiary or affiliate of the company may adopt the plan after
the effective date in accordance with the provisions of subsection 14.2. For
purposes of the plan, a "subsidiary" of the company is any corporation 50
percent or more of the voting stock of which is owned directly or indirectly by
the company. For purposes of the plan, an "affiliate" of the company shall
include its parent corporation, Pharmacia & Upjohn, Inc., and any corporation
(other than the company and the company's subsidiaries) 50 percent or more of
the voting stock of which is owned directly or indirectly by Pharmacia & Upjohn,
Inc. The company and its subsidiaries and affiliates that have adopted the plan
are listed in Exhibit A, and are referred to collectively as the "employers" or
individually as an "employer". The employers as well as subsidiaries and
affiliates that have not adopted the plan are sometimes referred to collectively
as the "Pharmacia & Upjohn Companies," and individually as a "Pharmacia & Upjohn
Company".
1.4 Trustees, Trust Agreements, Trust Funds. Assets attributable to
participant and employer contributions under the plan are held and invested
under two trust funds. Funds contributed by participants, by the employers prior
to 1990, and by the employers Pursuant to subsection 4.6 are held and invested
in a trust fund (the "trust fund") by a corporate trustee appointed by the
company (the "trustee") acting under a trust agreement between the employers and
the trustee. Pursuant to a trust agreement between the company and a corporate
trustee appointed by the company (the "ESOP trustee"), a separate trust fund
(the "ESOP Trust Fund") holds company stock acquired through one or more share
purchase loans to the ESOP trustee. The terms "trustees,"trust funds" and "trust
agreements" shall mean, respectively, both trustees, trust funds and trust
agreements described above.
1.5 Company Stock, Share Purchase Loan. As used in this plan, the following
terms shall have the following meanings:
(a) Share Purchase Loan. The term "share purchase loan" means
any loan made to the ESOP trustee, the proceeds of which
are used to acquire company stock or to repay a prior
share purchase loan, and any alternative method of
refinancing such a share purchase loan. The team of each
share purchase loan shall meet the requirements of
Treasury Regulation 54.4975-7(b), including the
requirements that the loan bear a reasonable rate of
interest, be for a definite period (rather than payable on
demand), and be without recourse against the plan, and
that the only assets of the plan that may be given as
collateral are qualifying employer securities (as
described in subparagraph (b) next below) purchased with
the proceeds of that loan or with the proceeds of a prior
share purchase loan. ff more than one share purchase loan
to the ESOP trustee is outstanding at any time, the
2
<PAGE>
provisions of the plan shall be modified by the committee
to the extent it deems necessary or appropriate to reflect
such additional share purchase loan or loans.
(b) Company Stock. The term "company stock" means Series B
convertible perpetual preferred stock of Pharmacia &
Upjohn, Inc. ("preferred stock") or common stock of
Pharmacia & Upjohn, Inc. ("common stock") that in either
case is a qualifying employer security under Section
407(d)(5) of ERISA.
1.6 Participation Date, Accounting Date, Valuation Date, Plan Year. The
term "participation date" means the first day of each payroll period. The term
"accounting date" means the last day of each payroll period. The term "valuation
date" means each day that stocks and bonds are generally traded on U. S.
securities exchanges and if stocks and bonds are not generally traded on these
exchanges on that date, the last preceding date on which stocks and bonds were
generally traded on these exchanges.
The plan is administered on the basis of a "plan year" that will coincide with
the calendar year.
1.7 Participant, Inactive Participant. The term "participant" means an
employee of an employer who has met the eligibility requirements for
participation in the plan set forth in subsection 2.1, has enrolled in the plan
as provided in subsection 2.2, and is not an inactive participant as defined in
subsection 7.1.
1.8 Plan Administration. The plan is administered by the Pharmacia & Upjohn
U.S. Retirement and Savings Plan Committee (the "committee") consisting of three
or more members appointed by the company, as provided in Section 13.
1.9 Supplements. The provisions of the plan may be modified by supplements
added to the plan by amendments adopted by the company for a particular purpose
or with respect to a particular group of employees. Except to the extent
otherwise provided in that supplement, the provisions of each supplement shall
supersede the provisions of the plan to the extent necessary to eliminate
inconsistencies and accomplish the purpose of the supplement.
3
<PAGE>
SECTION 2.
----------
Eligibility and Participation
-----------------------------
2.1 Eligibility.
(a) Continuing Participants. Subject to the conditions and
limitations of the plan, each participant and inactive
participant in the plan immediately prior to the effective
date will continue as a participant or inactive
participant (as applicable) in the plan on and after that
date.
(b) Employees other than Temporary and Call-in Employees. Each
employee of an employer who is not a participant or
inactive participant in the plan immediately prior to the
effective date and is not a temporary or call-in employee
(as defined in subparagraph (c) below) will be eligible to
enroll in the plan and become a participant on any
participation date (at the start of a payroll period
applicable to the employee) occurring after the effective
date if he then is a covered employee (as defined in
subsection 2.4).
(c) Temporary and Call-In Employees. Each temporary or call-in
employee (as defined below) who: (i) is not a participant
or inactive participant in the plan immediately prior to
the effective date; (ii) is a covered employee (as defined
in subsection 2.4); and (iii) has completed 1,000 hours of
service (as defined below) during his total period of
employment with the Pharmacia & Upjohn Companies will be
eligible to enroll in the plan and become a participant in
the plan on a participation date (at the start of a
payroll period applicable to the employee) as soon as
practicable after the completion of the preceding
requirements but in no event more than 30 days after the
completion of such requirements. The term "temporary
employee" means an employee occupying a job that is
limited to six months (and 1,000 hours) during any twelve
month period. The term "call-in employee" means an
employee working in a temporarily vacant position or
during peak work load periods for up to a maximum of 1,200
hours per year. The term "hour of service" means each hour
for which an employee is directly or indirectly paid or
entitled to payment by the company, a subsidiary or an
affiliate for the performance of duties and for reasons
other than the performance of duties, including each hour
for which back pay, irrespective of mitigation of damages,
has been either awarded or agreed to by the company,
subsidiary or affiliate, determined and credited in
accordance with Department of Labor Reg. Sec. 2530.200b-2.
2.2 Notice of Eligibility Enrollment. Each employee of an employer will be
notified of the initial participation date on which he is eligible to enroll in
the plan. An eligible employee may
4
<PAGE>
enroll in the plan by following the enrollment procedure established by the
committee. By enrolling in the plan, the participant will authorize his employer
to periodically reduce the compensation otherwise payable to him by such
employer by amounts equal to the contributions he desires to make under Section
3.
2.3 Continued Participation. An employee who becomes a participant will
continue as a participant until he becomes an inactive participant pursuant to
Section 7.
2.4 Covered Employee. A "covered employee" means an employee of an employer
who:
(a) (i) Is a citizen of the United States and is not
working outside the United States for one or more
subsidiaries or affiliates that have not adopted
the plan;
(ii) Is a citizen of the United States who is a U.S.
foreign service employee, as defined under any
defined benefit plan maintained by a Pharmacia &
Upjohn Company; or
(iii) Is not a citizen of the United States but is
regularly employed by an employer in the United
States or its territories or possessions; and
(b) Is a member of a group of employees of an employer to
which the plan has been and continues to be extended by
the company or by agreement.
For all purposes of the plan, an individual shall be an "employee" of or be
"employed" by the employer for any plan year only if such individual is treated
by the employer as its employee for purposes of employment taxes and wage
withholding for Federal income taxes during such year, disregarding any
subsequent reclassification as an employee by the employer, any governmental
agency or court.
2.5 Employment Date. Subject to the provisions of Section 11, an employee's
"employment date" means the date of his employment by the Pharmacia & Upjohn
Companies.
2.6 Service with Predecessor Company. Unless and to the extent otherwise
provided in the plan or by the committee, an employee's employment with a
predecessor company will not be considered as employment with an employer for
eligibility and vesting purposes under this plan ff the employee is transferred
to employment with an employer or the predecessor company becomes an employer. A
"Predecessor company" means any corporation or other entity the stock, assets or
business of which was acquired by an employer prior to the effective date, or is
acquired by an employer on or after the effective date, whether by merger,
consolidation, purchase of assets or otherwise, and any predecessor thereto
designated by the committee.
2.7 Authorized Absences From Work. An "authorized absence from work" means:
5
<PAGE>
(a) A vacation accrued and taken under a Pharmacia & Upjohn
Company's vacation plan or policy.
(b) A leave of absence required by law or granted by a
Pharmacia & Upjohn Company on account of service in
military or governmental branches described in any
applicable statute granting reemployment rights to
employees who entered such branches, or service in any
other military or governmental branch designated by the
committee. Effective as of December 12, 1994 and
notwithstanding any provision of the plan to the contrary,
contributions, benefits and service credit with respect to
qualified military service will be provided in accordance
with Section 414(u) of the Code.
(c) Any other absence from active employment with a Pharmacia
& Upjohn Company that is approved by such Pharmacia &
Upjohn Company and not treated by it as a termination of
employment.
Authorized absences from work will be governed by rules uniformly applied to all
employees similarly situated.
2.8 Leased Employees. Leased employees shall not be eligible to participate
in this plan. A "leased employee" means any person who is not otherwise an
employee of a Pharmacia & Upjohn Company and who, pursuant to an agreement
between that Pharmacia & Upjohn Company and any other person, has performed
services for that Pharmacia & Upjohn Company, or for that Pharmacia & Upjohn
Company and related persons (determined in accordance with Section 414(n)(6) of
the Code), on a substantially full-time basis for a period of at least one year,
and such services are provided under the primary direction or control of that
Pharmacia & Upjohn Company. With respect to any leased employee who becomes an
employee of an employer, the requirements of Section 414(n)(4)(B) of the Code
relating to "years of service" shall be taken into account for vesting purposes
under subsection 9.4.
6
<PAGE>
SECTION 3.
Participants' Contributions
3.1 Matched and Voluntary Savings. In order to qu for matching allocations
of employer contributions pursuant to subsections 4.6, 6.5 and 6.6, a
participant must elect to make "matched savings" under the plan of one, two,
three, four or five percent of his base pay. A participant who is malting
matched savings at the rate of five percent of his base pay also may elect to
make "voluntary savings" of any whole percentage of his base pay not to exceed
an additional ten percent. However, no matching allocations shall be made under
subsections 4.6, 6.5 and 6.6 with respect to participants' voluntary savings' A
participant's election to make matched or voluntary savings on a before-tax or
after-tax basis must be made in accordance with rules and procedures established
by the committee and prior to the participation date on which such election is
to become effective. References in the following provisions of this Section 3
and elsewhere in the plan to savings made on a "before-tax" or "after-tax" basis
means savings made from base pay before or after the imposition of federal
income taxes, irrespective of whether before or after the imposition of state,
local or other taxes.
3.2 Before-Tax Savings. A participant who is a member of a covered group
may elect that all or a portion of his matched and voluntary savings be made on
a before-tax basis ("before-tax savings") by a reduction of the participants
base pay of the applicable percentage of such compensation and a contribution by
the employers pursuant to subsection 4.4 of the amount of such reduction. A
participants before-tax savings for any plan year are subject to the conditions
and limitations of Section 10. To the extent necessary to prevent a violation of
those limits, a participant's before-tax savings may be made in less than the
full percentage increments specified in subsection 3.1. If because of any of the
conditions and limitations described in Section 10, part or all of the
participant's elected before-tax savings cannot be contributed to the plan, the
portion that cannot be contributed shall be treated as additional base pay of
the participant.
3.3 After-Tax Savings. A participant who is a member of a covered group may
elect that all or a portion of his matched and voluntary savings be made on an
after-tax basis ("after-tax savings") by a deduction from the participant's base
pay of the applicable percentage of such compensation and a contribution by the
employers pursuant to subsection 4.4 of the amount of such deduction.
Participants' after-tax savings are subject to the conditions and limitations of
Section 10. To the extent necessary to prevent a violation of those limits, a
participant's before-tax savings may be made in less than the full percentage
increments specified in subsection 3.1.
3.4 Base Pay. A participant's "base pay" means the base wages or salary
payable to him by his employer for services rendered to the employer as an
employee, determined before any compensation reduction election under subsection
3.2 or under a plan maintained by his employer under Section 125 of the Code,
and exclusive of-
7
<PAGE>
(a) Overtime, premiums, incentive payments, bonuses,
commissions, compensation paid in a form other than cash,
and special allowances paid solely for overseas employment
service; and
(b) Any compensation paid to him for any period he ceases to
be a participant.
If a participant is paid on an hourly basis, his "base pay" shall be the amount
that (but for any compensation reduction election under subsection 3.2 or under
a plan maintained by his employer under Section 125 of the Code) would be paid
to him by his employer for regular hours worked or allowed up to the standard
number of hours in the work week at his location (and shall not include any
compensation described in subparagraphs (a) and (b) next above). If a
participant works an alternative work schedule, the committee will make an
equitable adjustment in the definition of "base pay" as applied to that
participant. For purposes of the plan, a participant's base pay for any plan
year shall not exceed $160,000 (or such other amount as the Secretary of the
Treasury may from time to time specify pursuant to Section 401(a)(17) of the
Code).
3.5 Variation or Suspension of Saving. A participant who is making
before-tax or after-tax savings, whether matched or voluntary, may elect to
change the rate of such savings within the limits specified in subsection 3.1,
or may elect to suspend such savings entirely. A participant's savings will be
automatically suspended for any period he continues employment with a Pharmacia
& Upjohn Company but is an inactive participant, as provided in subsection 7.1.
3.6 Election Procedure. A participant's election to commence, modify or
suspend his savings pursuant to the foregoing provisions of this Section 3 shall
be made pursuant to any procedure established by the committee.
3.7 Deduction and Remittance of Participants' Before-Tax and After-Tax
Savings. Participants' before-tax and after-tax savings shall be made by
compensation reductions and payroll deductions. It is anticipated that such
amounts Will be remitted by the employers to the trustee at the end of the
applicable payroll period, but in any event will be paid to the trustee within
15 business days after the end of the month for which the savings were made.
3.8 Crediting and Investment of Savings. Participants' savings shall be
credited to their plan accounts as provided in Section 6 and invested in one or
more of the investment funds described in subsection 5.2.
3.9 Return of Withdrawn Savings. Notwithstanding any other provision of the
plan, any employee of a Pharmacia & Upjohn Company who is then a participant or
an inactive participant may twice in each plan year return to the plan an amount
equal to, or less than, the amount of his after-tax savings that he has
withdrawn from the plan pursuant to subsection 8.1 during his last continuous
period of employment service less any amounts returned to the plan pursuant to
this subsection during that period. Such return shall be made by tendering a
money order, certified check or cashiers check payable to the trustee of the
plan in a manner specified by the committee. Pursuant
8
<PAGE>
to procedures established by the committee, the participant shall specify how
such amount shall be invested in the investment funds.
3.10 Special Provisions for U.S. Foreign Service Employee. The following
provisions shall apply to U.S. foreign service employees who enroll in and
become participants in the plan:
(a) A U.S. foreign service employee may elect that all or a
portion of his matched and voluntary savings be made on a
before-tax basis by a reduction of such employee's U.S.
reserve by the elected percentage of the employee's base
pay, and a contribution by the employers under the plan of
the amount of such reduction. "U.S. reserve" means a U.S.
foreign service employee's base pay less certain specified
deductions applied uniformly to all U.S. foreign service
employees, as determined in accordance with the company's
Foreign Service Compensation Balance Sheet.
(b) In no event shall before-tax savings by a U.S. foreign
service employee exceed the lesser of his U.S. reserve or
the limits described in Section 10.
(c) A U.S. foreign service employee may elect to make matched
and voluntary after-tax savings by contributing the
elected percentage of his base pay directly to the trustee
in accordance with procedures established by the
committee.
3.11 Rollovers. At the direction of the committee, and in accordance with
such rules as the committee may establish from time to time, rollovers described
in Sections 401(a)(31), 402(c) or 408(d)(3) of the Code may be received by the
trustee and will be credited to an account under the Plan established in the
name of the employee to be known as the employee's rollover account. An employee
may make a rollover contribution only ff he is a covered employee. In no event
shall the committee accept a rollover contribution unless the employee has
furnished such information as the committee deems necessary to determine that
the rollover contribution would meet the requirements of this subsection. If
after a rollover contribution has been received by the trustee on behalf of a
participant (or an eligible employee), the committee learns that all or part of
such rollover contribution did not meet the requirements of the Code and the
regulations and rulings thereunder, the committee may direct the trustee to make
a distribution to the participant (or eligible employee) of the nonqualified
portion of such rollover contribution (and earnings thereon) that were credited
to the rollover account of the participant (or eligible employee). Any eligible
employee who makes a rollover contribution to the plan will be treated as a
participant, except that such employee shall not be eligible, until he becomes a
participant in accordance with subsections 2.1 and 2.2, to make contributions to
the plan pursuant to subsections 3.2 or 3.3 or to share in any employer
contributions made pursuant to Section 4. An employee may direct the investment
of his rollover account in accordance with Section 5 and his rollover account
shall be adjusted from time to time along with all other participant accounts in
accordance with subsection 6.7. The employee always shall have a fully vested
and nonforfeitable interest in his rollover account.
9
<PAGE>
SECTION 4.
Employer Contributions
4.1 Employer Loan Contributions. Subject to the limitations set forth in
Section 10, for each plan year in which a share purchase loan is outstanding,
the committee win direct the employers to make an "employer loan contribution"
in cash to the ESOP trustee in such amount as is necessary for the ESOP trustee
to make principal and interest payments due on any share purchase loan
outstanding in that plan year, after applying dividends and certain forfeitures
to reduce the amount of such contributions pursuant to subsection 6.3 and
subparagraph 9.5(b). Each such payment by the ESOP trustee will release company
stock from the unreleased share account to the released share account of the
ESOP Trust Fund (as such terms are defined in subsection 5.5). Company stock
that is so released will be allocated to participants' ESOP stock accounts as
provided in subsection 6.5.
4.2 Employer Adjustment Contributions. Subject to the limitations set forth
in Section 10, for any plan year in which a share purchase loan remains
outstanding, ff so directed by the committee by writing filed with the chief
financial officer of the company, the employers will make an "employer
adjustment contribution" in cash to the ESOP trustee in the amount specified in
such writing. Such employer adjustment contribution shall be used to make an
additional payment on the share purchase loan then outstanding, and company
stock released from the unreleased share account as a result of such payment
shall be allocated to participants' ESOP stock accounts as provided in
subsection 6.5.
4.3 Individual Employer's Share of Employer Contributions. Each employer's
share of employer contributions to be made pursuant to subsections 4.1 and 4.2
shall be determined by the company.
4.4 Contributions of Participants' Savings. Subject to the conditions and
limitations of Section 10, and in addition to employer contributions required to
be made under subsections 4.1 and 42, each employer will make a contribution
under the plan with respect to each participant employed by it who has elected
pursuant to Section 3 to make before-tax or after-tax savings of the amount of
reductions and deductions made by the employer during each payroll period from
the participant's base pay.
4.5 Verification of Employer Contributions. The certificate of an
independent certified public accountant selected by the company as to the
correctness of any amounts or calculations relating to the employers'
contributions under the plan shall be conclusive on all persons.
4.6 Discretionary Additional Employer Matching Contributions. Subject to
the conditions and limitations set forth below in this subsection and in Section
10, but notwithstanding any other provisions of the plan to the contrary, for
each plan year the employers may make an "additional employer matching
contribution"in an amount determined pursuant to a resolution of the Board of
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Directors of the company adopted not later than March 31 of the next following
plan year (with each employer's share of such contribution to be determined by
the company), subject to the following:
(a) Such resolution shall specify either a fixed sum or a
definite basis or formula by which the amount of the
additional employer matching contribution for the plan
year can be determined; provided, however, that in no
event may the amount of the additional employer matching
contribution to be made for any plan year exceed the
maximum amount deductible on account of such contribution
by the employers for that plan year as an expense for
purposes of United States federal taxes on income or,
where applicable, the Puerto Rico Internal Revenue Code.
(b) An additional employer matching contribution made for any
plan year shall be allocated among, and credited to, the
employer matching accounts (as defined in subparagraph
6.1(c)) of eligible participants (as defined below), pro
rata, according to the amounts of matched savings made by
such participants, respectively, for that plan year. Only
for the purpose of allocating an additional employer
matching contribution for any plan year, the term
'eligible participant' as used above in this subparagraph
means each participant who made matched savings for that
plan year, other than a participant whose settlement date
occurred during that plan year (but prior to the last
business day of such year) because of the participant's
involuntary termination of employment with the Pharmacia &
Upjohn Companies for cause (as defined below) or voluntary
termination of employment with the Pharmacia & Upjohn
Companies. For purposes of this subparagraph, termination
of employment with "for cause" means the willful and
continued failure by an employee to substantially perform
the duties assigned to that employee by his employer
(other than any such failure resulting from the employee's
incapacity due to physical or mental illness) or the
employee's willfully engaging in conduct that is
demonstrably and materially injurious to any one or more
of the Pharmacia & Upjohn Companies, monetarily or
otherwise. For the purpose of the next preceding sentence,
an act or failure to act by an employee shall be deemed
"willful" only where such action is taken, or failed to be
taken, by the employee not in good faith and without
reasonable belief that the employee's action or omission
would be in the best interest of a Pharmacia & Upjohn
Company. Participants who become participants in the
company's PRTLOA program prior to January 1, 2000 shall be
entitled to share in any additional employer matching
contribution for the calendar year in which participation
in PRTLOA commences as ff in active employment with the
company at the end of such year.
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SECTION 5.
----------
Investment of Participant and Employer Contributions
----------------------------------------------------
5.1 Savings Investment Elections. When a covered employee enrolls in the
plan, he shall specify in the enrollment process his election that his entire
savings be invested in whole percentage amounts in one or more of the investment
funds maintained as part of the trust fund as described in subsection 5.2. A
participant or inactive participant may elect to change his investment election
in whole percentage amounts with respect to savings made after the date of the
election. Also, a participant or inactive participant may elect in accordance
with subsection 53 that part or all of the balances in his accounts in the finds
described in subsection 5.2 be transferred to any of the other funds in which
his savings may be invested. Elections permitted under this subsection and under
subsection 5.3 shall be made pursuant to procedures established by the
committee.
5.2 Investment Funds. The committee may designate, in its sole discretion,
one or more funds under the trust for the investment of participants' savings
(and those portions of participants' stock account balances as defined in
subparagraph 5.6(a) that participants elect to diversify under subsection 5.6).
The funds designated by the committee for this purpose shall be referred to
herein as the "investment funds." The committee, in its discretion, may from
time to time designate or establish new investment funds or eliminate existing
investment funds. Investment in any investment fund so established shall be made
in accordance with rules formulated by the committee and the accounting
procedures applied under the plan shall be modified by the committee to the
extent they deem appropriate to reflect investments in that investment fund.
5.3 Investments Elections and Transfers. The trustee shall invest
participants' before-tax and after-tax savings as soon as practicable after they
are received by or become available to the trustee. Each fund's earnings shall
be retained in, and reinvested as a part of, that fund. Effective as of any
valuation date, a participant or inactive participant may elect to change his
investment elections for both the participant's future savings (ff any) and the
existing balances `m' his accounts (other than his employer matching and ESOP
accounts, except as provided in subsection 5.6) by electing to transfer amounts
among the investment funds pursuant to a procedure established by the committee.
5.4 Pharmacia & Upjohn Stock Fund. Since January 1, 1990, no contributions
other than any additional employer matching contributions under subsection 4.6
(and participant loan repayments made in accordance with subparagraph 8.3(d)
that are credited to employer matching accounts, as defined in subparagraph
6.1(c)) are made to the "Pharmacia & Upjohn Stock Fund." Dividends and other
earnings on company stock in the Pharmacia & Upjohn Stock Fund shall be retained
in and reinvested as a part of that fund. Assets of the Pharmacia & Upjohn Stock
Fund have been and shall continue to be invested entirely in shares of common
stock of Pharmacia & Upjohn, Inc., except that the trustee may otherwise invest
assets of that fund on a short-term basis, including short-term investments in
any common or commingled trust fund maintained by the trustee. Notwithstanding
the foregoing, in the event Pharmacia & Upjohn, Inc. is the subject of a tender
offer (as such term
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is used in Section 14 of the Security Exchange Act of 1934) that applies to any
or all shares of common stock of Pharmacia & Upjohn, Inc. held in that fund, the
Pharmacia & Upjohn Stock Fund shall also consist of such securities or cash as
the trustee may receive for the stock in that fund as a result of the tender
offer or corporate reorganization following the tender offer.
5.5 ESOP Trust Fund. The ESOP Trust Fund consists of all property of any
kind held by the ESOP trustee. The committee shall continue to maintain or cause
to be maintained in the ESOP Trust Fund the following fund accounts:
(a) Unreleased Share Account. An "unreleased share account",
which shall reflect the shares of company stock acquired
by the ESOP trustee with the proceeds of a share purchase
loan prior to the transfer of such shares to the released
share account (as defined in subparagraph (b) next below),
employer loan and adjustment contributions not yet applied
to repay a share purchase loan, any temporary investment
income attributable to such contributions, any cash
dividends attributable to such shares or transferred to
the unreleased share account pursuant to subsection 6.4,
and any temporary investment income attributable to such
dividends.
(b) Released Share Account. A "released share account,"which
shall reflect the shares of company stock transferred from
the unreleased share account and all other assets of the
ESOP Trust Fund other than those assets credited to the
unreleased share account.
(c) Temporary Investment of Cash. At the direction of the
committee, cash held in the unreleased share account will
be invested by the ESOP trustee, to the extent
practicable, in short term securities or cash equivalents
having ready marketability or as otherwise provided in the
trust agreement.
In addition to the unreleased and released share accounts and participants' ESOP
accounts described in subsection 6.1, the committee may maintain or cause to be
maintained such other ESOP Trust Fund accounts and subaccounts as it considers
advisable.
5.6 Diversification of Investments in Company Stock. Pursuant to such rules
as the committee may establish from time to time, participants (including
inactive participants) may elect to diversify portions of their plan accounts
invested in company stock, subject to the following:
(a) Twenty-Five Percent Election. Each participant who has
attained age 55 years but has not attained age 60 years
and has at least ten years of employment service as
defined in subsection 9.4 (a "qualified participant") may
elect under rules established by the committee to transfer
up to 25 percent of the portion subject to diversification
(as described in subparagraph (c) next below) of either or
both of his Pharmacia & Upjohn Stock Fund and ESOP Trust
Fund account balances
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<PAGE>
("stock account balances") to one or more of the
investment funds provided under the plan for investment of
participants' matched and voluntary savings.
(b) Fifty Percent Election. Each participant who has attained
age 60 years and has at least ten years of employment
service (a "qualified participant") may elect under rules
established by the committee to transfer up to 50 percent
of the portion subject to diversification (as described in
subparagraph (c) next below) of either or both of his
stock account balances to one or more of the investment
funds provided under the plan for investment of
participants' matched and voluntary savings.
(c) Portion Subject to Diversification. The portion of a
qualified participant's stock account balances subject to
diversification shall be equal to:
(i) With respect to a participant's ESOP Trust Fund
account 25 percent (50 percent after the
qualified participant meets the requirements set
forth in subparagraph (b) next above) of the
total number of shares of company stock that have
ever been allocated to the account, less the
number of such shares previously diversified
pursuant to the participant's election under this
subsection; and
(ii) With respect to a participant's Pharmacia &
Upjohn Stock Fund account 25 percent (50 percent
after the qualified participant meets the
requirements set forth in subparagraph (b) next
above) of the balance of the participants account
as of the date of his current election less the
aggregate percentage of such account previously
diversified at the participant's election under
this subsection. A qualified participant's
Pharmacia & Upjohn Stock Fund account balance
shall be determined on the basis of the closing
price, as shown on the New York Stock Exchange
composite tape (the "closing price"), on the
accounting date as of which his diversification
election is to be effective or, if no shares were
traded on that accounting date, on the business
day on which shares of company stock were last
traded before such accounting date.
(d) Additional Election Rules. Elections under this subsection
may be effective as of any valuation date and shall be
based on the applicable stock account balance as of that
valuation date. In any one election, a qualified
participant may diversify the entire remaining portion of
his stock account or accounts subject to diversification,
or a part of such diversifiable portion equal to any whole
percentage of five percent or more of the applicable
account balance.
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<PAGE>
5.7 Voting and Tendering of Common Stock. The voting and tendering of
company stock held in the Pharmacia & Upjohn Stock Fund and the ESOP Trust Fund,
shall be subject to the following:
(a) Applicable Shares. For purposes of this subsection, shares
of company stock shall be deemed to be allocated and
credited to a participant's employer matching account in
an amount to be determined based on the balance in such
account on the accounting date coincident with or next
preceding the record date of any vote or tender offer and
the closing price of company stock on such accounting date
or, ff not traded on that date, on the business day on
which shares of company stock were last traded before that
accounting date. The number of shares of company stock
credited to a participant's ESOP stock account on such
accounting date shall be deemed to include anticipated
allocations of such stock pursuant to the provisions of
subsections 6.4 or 6.5.
(b) Voting of Company Stock. Each participant who has company
stock credited to his employer matching or ESOP stock
accounts shall be given notice of the date and purpose of
each meeting of the stockholders of Pharmacia & Upjohn,
Inc. at which shares of company stock are entitled to be
voted, and instructions shall be requested from each such
participant as to the voting at that meeting of such
company stock. If the participant furnishes instructions
within the time specified in the notification given to
him, the trustee and the ESOP trustee (the "trustees")
shall vote such company stock in accordance with the
participant's instructions. Each such participant also
shall direct how the trustees vote his proportionate share
(as defined below) of the votes attributable to shares of
company stock that have not been credited to any
participant's employer matching or ESOP stock accounts or
for which no instructions were timely received by the
trustees, whether or not credited to the account of any
participant. A participant's "proportionate share" shall
be a fraction, the numerator of which shall be the number
of votes attributable to shares of company stock credited
to the participant's employer matching and ESOP stock
accounts under the plan, and the denominator of which
shall be the total number of votes attributable to shares
of company stock credited to the employer matching and
ESOP stock accounts of all participants under the plan who
have provided timely instructions for the trustees under
this subparagraph. The committee shall establish
procedures under which notices shall be furnished to
participants as required by this subparagraph (b) and
under which the participants' instructions shall be
furnished to the trustees.
(c) Tendering of Company Shares. Each participant who has
shares of company stock credited to his employer matching
and ESOP stock accounts shall be furnished notice of any
tender offer for, or a request or invitation for tenders
of company stock made to the trustees. Instructions shall
be requested from each
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<PAGE>
such participant as to the tendering of shares of company
stock credited to his employer matching and ESOP stock
accounts and for this purpose participants shall be
provided with a reasonable period of time in which they
may consider any such tender offer for, or request or
invitation for tenders o company stock made to the
trustees. The trustees shall tender such company stock as
to which the trustees have received instructions to tender
from participants within the time specified. Company stock
credited to employer matching and ESOP stock accounts as
to which the trustees have not received instructions from
participants shall not be tendered. Each such participant
also shall furnish instructions with respect to tendering
by the trustees of his proportionate share (as defined
below) of the shares of stock that have not been credited
to any participants employer matching or ESOP accounts. A
participant's "proportionate share" shall be a fraction,
the numerator of which shall be the number of shares of
company stock credited to the participant's employer
matching and ESOP accounts under the plan, and the
denominator of which shall be the total number of shares
of company stock credited to the employer matching and
ESOP accounts under the plan of all participants who have
provided timely instructions for the trustee under this
subparagraph. The committee shall establish procedures
under which notices shall be furnished to participants as
required by this subparagraph (c) and under which the
participants' instructions shall be furnished to the
trustees.
In carrying out their responsibilities under this subsection the trustees may
rely on information furnished to them by (or under procedures established by)
the committee.
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<PAGE>
SECTION 6.
----------
Accounting
----------
6.1 Participants' Accounts. The committee shall maintain or cause to be
maintained under the plan the following accounts in the name of each
participant:
(a) Before-Tax Savings Account. A "before-tax savings account"
to reflect the participant's matched and voluntary
before-tax savings, and earnings resulting from the
investment of such savings.
(b) After-Tax Savings Account. An "after-tax savings account"
to reflect the participant's matched and voluntary
after-tax savings, and earnings resulting from the
investment of such savings.
(c) After-Tax Matching Account. An "employer matching account"
to reflect employer contributions made on behalf of the
participant prior to January 1, 1990, employer matching
contributions under subsection 4.6 and earnings resulting
from the investment of such contributions. All funds in
the participant's employer matching account are invested
in the Pharmacia & Upjohn Stock Fund.
(d) ESOP Stock Account. An "ESOP stock account" to reflect
shares of company stock allocated to the participant as a
result of employer contributions under the ESOP Plan,
shares of company stock transferred from the unreleased
share account and allocated to the participant as a result
of applying employer loan contributions, employer
adjustment contributions and other amounts to repay a
share purchase loan.
(e) Rollover Account. A "rollover account' to reflect any
rollover contributions made by the participant pursuant to
subsection 3.11 and any earnings resulting from the
investment of such savings.
Each before-tax account, after-tax savings account and rollover account shall be
divided into separate investment subaccounts reflecting the portions of such
accounts that are invested in the investment funds described in subsection 5.2.
The committee may establish and maintain in the names of participants such
additional accounts or subaccounts as it may deem necessary or advisable.
6.2 Crediting of Participants' Savings. As of each accounting date, each
participant's matched and voluntary before-tax savings since the preceding
accounting date shall be credited to his before-tax savings account and each
participant's matched and voluntary after-tax savings since the preceding
accounting date shall be credited to his after-tax savings account.
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<PAGE>
6.3 Transfer of Shares From Unreleased Share Account to Released Share
Account. Employer loan contributions, employer adjustment contributions, cash
dividends paid on shares of company stock held in the released share account and
unreleased share account, any investment income attributable to such
contributions or dividends, and certain forfeitures described in subparagraph
9.5(b) may be used, at the direction of the committee, to repay a share purchase
loan. The repayment of a share purchase loan shall cause a transfer of shares of
company stock from the unreleased share account to the released share account
each plan year (or more frequently, ff the committee so determines). The number
of shares to be transferred shall be determined by multiplying the number of
shares in the unreleased share account by a fraction, the numerator of which is
the principal and interest payments during that plan year (or other period) and
the denominator of which is the sum of the numerator plus the total projected
principal and interest payments during the remainder of the term of the share
purchase loan. If the requirements of Treasury Reg. Section 54.4975-7(b)(8)(ii)
are satisfied, the phrase principal and interest in the preceding sentence shall
be replaced by the word principal.
6.4 Allocation of Company Stock Based upon Cash Dividends on Shares in ESOP
Stock Accounts. The cash dividends on company stock in the participant's ESOP
stock account shall be applied toward repayment of any share purchase loan.
Company stock held in the released share account which is equal in value (based
upon the cost of the company stock to the ESOP trustee) to such cash dividends
shall be allocated to the participant's ESOP stock account. Such allocation
shall take place as of the date cash dividends on company stock are credited
under the plan. The full amount of the cash dividends will be transferred
immediately to the unreleased share account for use in repayment of the share
purchase loan. The shares of company stock allocated each year to a
participant's ESOP stock account under this subsection shall in no event have a
fair market value of less than the amount of the cash dividends on company stock
in the participant's ESOP stock account which are applied toward repayment of
the share purchase loan. To the extent necessary to make the allocation of
company stock to participants' ESOP stock accounts as described in this
subsection, company stock released as a result of a share purchase loan payment
in the next subsequent plan year may be retroactively allocated, as long as the
share purchase loan payment and such retroactive allocation are made no later
than the time prescribed by law for the company to file its federal tax return
for the taxable year of the company that coincides with the plan year for which
the allocation is made, including any extensions of time thereof The provisions
of this subsection shall be applied on a uniform basis under rules adopted by
the committee.
6.5 Allocation of Company Stock as a Matching Contribution. Subject to the
conditions and limitations of the plan, a portion of the company stock
transferred to the released share account pursuant to subsection 6.3 (other than
company stock allocated to ESOP stock accounts under subsection 6.4) shall be
allocated on each accounting date as a "matching allocation", under rules
adopted by the committee and applied on a uniform basis, to eligible
participants' ESOP stock accounts in an amount equal in value (based upon the
cost of the company stock to the ESOP Trustee) to 50 percent of the matched
savings made by such participants during the accounting period ending on that
accounting date. "Eligible participants" means participants who have made
matched savings during the accounting period for which an allocation is being
made. To the extent
18
<PAGE>
necessary to make a 50 percent matching allocation to each participant's ESOP
stock account during a plan year, company stock released as a result of an
employer loan contribution made in the next subsequent plan year may be
retroactively allocated, as long as such contribution and such retroactive
allocation are made no later than the time prescribed by law for the company to
file its federal tax return for the taxable year of the company that coincides
with the plan year for which the allocation is made, including any extensions of
time thereof Although the employers intend and expect to make a 50 percent
matching allocation for each plan year, they reserve the right to decrease or
increase the level of matching allocations. In no event, however, shall
allocations made for a plan year under this subsection and subsection 6.6 be
less than: (a) the amount of company stock transferred from the unreleased share
account as a result of employer loan contributions made in that plan year
reduced by (b) the amount of company stock retroactively allocated to the prior
plan year, if any.
6.6 Extra-Matching Allocation. If at the end of a plan year the shares of
company stock released pursuant to subsection 6.3 during that year exceed the
sum of the number of shares required to be allocated under subsections 6.4 and
6.5, such excess shares shall be allocated as an "extra- matching allocation" to
eligible participants on the last accounting date of the plan year, subject to
the limitations set forth in Section 10. For purposes of the extra-matching
allocation, "eligible participants" means participants and inactive participants
who made matched savings during the plan year and who have account balances
under the plan on the last accounting date of the plan year. The portion of the
total excess shares allocated to each eligible participant's account shall be
determined based on a fraction in which the numerator is the participant's
matched savings for the plan year and the denominator is the matched savings
made by all eligible participants for the plan year.
6.7 Adjustment of Participant Accounts. Pursuant to rules established by
the committee and applied on a uniform basis, as of each accounting date at the
end of a payroll period applicable to a participant, the participant's accounts
shall be credited with any savings made by the participant during the payroll
period ending on that date and credited with anticipated or actual matching
allocations of company stock, as applicable for such accounting date to the
participant under the committee rules. Pursuant to rules established by the
committee and applied on a uniform basis, as of each valuation date each
participant's accounts shall be adjusted to reflect the participant's share of
the adjusted net worth of the Pharmacia & Upjohn Stock Fund and the investment
fund or funds in which the participant's savings are invested, credited with any
cash dividends on company stock held in the participant's ESOP stock account
(which will then immediately be converted to shares of company stock), and
charged to reflect all distributions, withdrawals, loans and transfers not
previously charged.
6.8 Temporary Investment Income in ESOP Trust Fund. Temporary investment
income resulting from the investment of cash held in the unreleased share
account under the ESOP Trust Fund shall be credited to the account to which it
pertains. The term "temporary investment income" means income resulting from the
temporary investment of employer contributions, cash dividends and any other
amounts.
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<PAGE>
6.9 Fair Market Value of Company Stock. For purposes of the ESOP Trust
Fund, the fair market value of common stock shall be determined by the committee
in accordance with the provisions of Section 3(18)(A) of ERISA and the fair
market value of preferred stock shall be determined by the committee in
accordance with the provisions of Section 3(18)(B) of ERISA.
6.10 Stock Dividends, Stock Splits and Capital Reorganizations Affecting
ESOP Shares. Shares of company stock received by the ESOP trustee that are
attributable to stock dividends, stock splits or to any reorganization or
recapitalization of Pharmacia & Upjohn, Inc. shall be credited to the unreleased
share account ff attributable to shares held in that account, or shall be
credited to the released share account (including participants' ESOP stock
accounts) if attributable to shares held in the released share account so that
the interests of participants immediately after any such stock dividend, split,
reorganization or recapitalization are the same as such interests immediately
before such event.
6.11 ESOP Share Records. The committee shall maintain or cause to be
maintained records as to the number and cost of shares of company stock acquired
or transferred by or within the ESOP Trust Fund in accordance with the
applicable provisions of this Section 6.
6.12 Statement of Accounts. The committee will provide each participant
with a statement reflecting the balances in his accounts under the plan at such
times as are established by the committee. No participant except a person
authorized by the company or the committee, shall have the right to inspect the
records reflecting the accounts of any other participant.
20
<PAGE>
SECTION 7.
----------
Inactive Participants
---------------------
7.1 Inactive Participants. A participant will become an "inactive
participant" as of:
(a) The participation date as of which he elects to
discontinue his matched savings;
(b) The date he ceases to be a covered employee but continues
in the employ of a Pharmacia & Upjohn Company;
(c) The accounting date as of which the participant's savings
are suspended because of a withdrawal under subsection
8.2, or because of his failure to repay a loan under
subsection 8.3; or
(d) His settlement date.
The term inactive participant also will include alternate payees under a
qualified domestic relations order (as defined in Section 414(p) of the Code)
and the beneficiary of a deceased participant or of an inactive participant
until complete distribution of the benefits distributable to the beneficiary. A
participant who becomes an inactive participant will remain an inactive
participant until he or she again becomes a participant or until all amounts
allocated and credited to his accounts in all funds have been paid over to or
for him or forfeited pursuant to the provisions of the plan.
7.2 Status of Inactive Participant. An inactive participant will be
considered a participant for all purposes of the plan, except as follows:
(a) No savings may be made while an inactive participant.
(b) No share of employer contributions will be credited to his
ESOP stock account for the period during which he is an
inactive participant.
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<PAGE>
SECTION 8.
Withdrawals and Loans
8.1 Withdrawals of After-Tax Savings, Employer Matching Contributions, and
Rollover Contributions. A participant or inactive participant, pursuant to a
procedure established by the committee, may withdraw on any accounting date
(such date will be called his "withdrawal date") all or a portion of the
balances in his rollover account, his after-tax savings account, his employer
matching account, if any, as follows:
(a) Rollover Account. A participant or inactive participant
may withdraw all or any part of his rollover account
balance, without restriction.
(b) After-Tax Savings Account. The participant or inactive
participant may withdraw all or any part of his after-tax
savings account balance, provided that such withdrawal
shall be satisfied by: (1) first, distributing any
unwithdrawn after-tax savings that were made on or before
December 31, 1986; (2) then, distributing the portion of
his unwithdrawn after-tax savings made on or after January
1, 1987 along with a pro rata share of earnings on those
amounts; and (3) finally, distributing any remainder due
from the earnings allocated to his after-tax savings
account. Matched after-tax savings contributions made
after January 1, 1997 may be withdrawn only after such
contributions have been held in the plan for at least two
fall years of participation.
(c) Employer Matching Account. If an active or inactive
participant has three or more years of participation (as
defined in subsection 93) and has requested a withdrawal
of the maximum amount of his after-tax savings account
balance permissible under subparagraph (a) next. above,
such participant may request a withdrawal of any part or
all of his employer matching account balance; provided,
however, that for participants whose settlement date has
not occurred, the maximum amount ale for distribution
pursuant to this subparagraph shall be reduced by the
holdback amount (as defined below). The "holdback amount"
is equal to the employer contributions which have not been
credited to his employer matching account for at least two
full years of participation. A participant may request a
withdrawal of the holdback amount if the participant
qualifies for a hardship withdrawal of that amount,
applying the rules contained in subsection 8.2(b).
(d) No Withdrawals of ESOP Accounts. A participant may not
withdraw any portion of his ESOP accounts.
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<PAGE>
(e) Form of Distributions, Account Balances. Distributions
under this subsection 8.1 from the investment funds
described in subsection 5.2 will be made in cash, and
distributions from the Pharmacia & Upjohn Stock Fund will
be made in cash or company stock, or partly in each, as
directed by the committee (the number of shares of stock
to be distributed being determined on the basis of the
closing price on the withdrawal date or on the business
day on which shares of company stock were last traded
before the withdrawal date). Reference above to a
participant's or inactive participant's account balance
means the balance in his employer matching account as of
the withdrawal date, after all account balances have been
adjusted as of that date in accordance with subsection
6.7.
(f) Suspension of Allocations. If a participant makes a
withdrawal under this subsection 8.1 of his matched
after-tax savings made before January 1, 1997 and which
have not been held in the plan for at least two full years
of participation, employer contributions shall be
suspended for the following three calendar months.
8.2 Withdrawals of Before-Tax Savings. A participant or inactive
participant may, pursuant to a procedure established by the committee, withdraw
amounts from his before-tax savings account as of any accounting date (such date
shall be his "withdrawal date") in accordance with the following:
(a) Unrestricted Withdrawals. A participant or inactive
participant who has attained age 59-1/2 years but whose
settlement date has not occurred, or an inactive
participant whose settlement date has occurred, whether or
not he has attained age 59-1/2 years, may withdraw all or
a portion of his before-tax savings, including earnings
thereon, for any reason.
(b) Hardship Withdrawals. A participant or inactive
participant who is under age 59-1/2years and whose
settlement date has not occurred may withdraw all or a
portion of his before-tax savings, plus earnings credited
to such savings for any period ended before January 1,
1989, if the withdrawal is a hardship withdrawal. A
"hardship withdrawal" is a withdrawal of an amount that is
necessary to satisfy an immediate and heavy financial need
of the participant and for which other resources are not
reasonably available to the participant, and may include
amounts necessary to pay applicable income taxes and
penalties because of the hardship distribution. The
foregoing definition shall be applied as follows:
(i) Determination of Need. Determination by the
committee of whether an immediate and heavy
financial need exists shall be based on all
relevant facts and circumstances. Facts and
circumstances to be taken into account shall
include (but not be limited to):
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(A) the purchase (excluding mortgage
payments) of a principal residence for
the participant;
(B) preventing foreclosure on or eviction
from the participant s principal
residence;
(C) payments to prevent the termination of
utility service to the participant's
principal residence;
(D) unreimbursed medical expenses described
in Section 213(d) of the Code incurred
by or necessary to obtain care for the
participant the participants spouse, or
any dependents of the participant;
(E) funeral expenses incurred by the
participant for the participant's
spouse, parents, spouse's parents, or
any dependents of the participant;
(F) the expense of tuition, room and board,
and related educational fees for the
next 12 months of post secondary
education for the participant, the
participant's spouse, the participant's
children, or the participant's
dependents; or
(G) the payment of a state or federal income
tax levy.
The committee may rely on a participant's written
representation as to the nature of the hardship justifying
the withdrawal.
(ii) Determination of Amount Reed to Satisfy Need. If
the committee determines that a hardship exists
with respect to a participant, the committee may
require that a participant submit such
information as the committee deems necessary to
determine whether the amount of the requested
withdrawal is necessary to satisfy the
participant's immediate and heavy financial need.
The committee may rely on the participant's
representation as to the amount required and the
absence of other reasonably available resources,
such as insurance, the liquidation of the assets,
cessation of savings under the plan, other
distributions or nontaxable loans from the plan
or other qualified plans maintained by the
Pharmacia & Upjohn Companies, or commercial loans
on reasonable commercial terms.
(iii) Safe Harbor Election. In lieu of mailing a
written representation as to the absence of other
reasonably available resources, a participant who
has
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obtained all distributions (other than hardship
distributions) and all nontaxable loans currently
available under all qualified plans maintained by
the Pharmacia & Upjohn Companies may elect a
hardship withdrawal of an amount not in excess of
the amount of his immediate and heavy financial
need under the safe harbor provisions of Treasury
Regulation Section 1.401(k)-l(d)(2). The safe
harbor provisions require that: (A)the
participants matched savings and voluntary
savings (both before-tax and after-tax) be
suspended for the 12-month period beginning
immediately after the accounting date following
his withdrawal date, and (B) the annual dollar
limit on the participant's before-tax matched and
voluntary savings under subsection 10.6
applicable for the plan year following the plan
year in which the hardship withdrawal was
received be reduced by the aggregate amount of
the participant's before-tax matched and
voluntary savings made in the plan year of the
receipt of the hardship withdrawal.
8.3 Loans to Participants. Although the primary purpose of the plan is to
allow participants to accumulate retirement funds, it is recognized that under
some circumstances it would be in the best interest of participants to permit
loans to be made to them from their accounts under the plan. Accordingly, the
committee, pursuant to such rules as it may from time to time establish and
uniformly apply, may direct the trustee to make a loan for any purpose to a
participant, subject to the following:
(a) Terms and Conditions of Loans. All loans shall be subject to
the following terms and conditions:
(i) Each request for a loan must be made before the
participant's settlement date under a procedure
established by the committee on or before the
accounting date as of which the loan is to be
charged to the participant's accounts (the "loan
date"). If the committee determines before the
loan date that the participant's settlement date
has occurred, the participant's request
automatically will be cancelled.
(ii) Each loan shall be evidenced by a note in a form
furnished by the committee and shall bear
interest at the rate that is in effect on the
loan date. The interest rate for loans shall be
determined by the committee no less frequently
than quarterly based on appropriate factors in
accordance with Department of Labor regulations.
(iii) Each participant may have no more than three
loans outstanding at any time.
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(iv) Each loan to a participant shall be secured by a
pledge to the trustee of a portion of the
participant's vested account balances under the
plan.
(v) The making of a loan shall be deemed a consent by
the participant to charging his accounts under
the plan if any portion of the loan (and any
accrued interest thereon) has not been paid as of
the date set forth under subparagraph (e) next
below.
(b) Amount of Loans. The principal amount of any loan made to
a participant, when added to the outstanding balance
(including accrued but unsaid interest) of any prior loans
made to the participant from all qualified plans
maintained by the Pharmacia & Upjohn Companies, shall not
exceed the lesser of.
(i) $50,000, reduced by the excess (if any) of:
(A) the highest outstanding balance during
the one-year period ending immediately
preceding the loan date, over
(B) the outstanding balance on the loan
date,
of all such loans from all such plans; or
(ii) 50 percent of the sum of: (1) the net credit
balances in his accounts under the plan which
reflect his matched and voluntary savings and (2)
the portion of his employer matching account and
his ESOP accounts (valued in accordance with
subsection 6.9) in which he would have a
nonforfeitable interest (as provided under
subsection 9.2 or 9.6) ff his settlement date
were to occur on the loan date.
The principal amount of any loan made to a participant shall not
be less than a minimum amount determined by the committee, which
initially shall be $500, and in no event shall be more than the
balances in his before-tax, after-tax and employer matching
accounts.
(c) Sources for Loans. A loan granted under this subsection to
a participant shall be made by liquidating and converting
to cash, first, his after-tax savings account; next, his
employer matching account; and, finally, his before-tax
savings account. The investment funds in which a
participant's after-tax savings and before-tax savings are
invested shall be liquidated on a pro rata basis. A
participant's ESOP accounts may not be used as a source
for a loan.
(d) Repayment of Loans. Each loan shall specify a repayment
period of from one to five years. However, any loan used
to acquire any dwelling unit that within a reasonable time
is to be used (determined as of the loan date) as the
principal
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residence of the participant may be repaid over a period
of from one to ten years. Repayments must be made by
payroll deduction, except that a participant who enters
upon an authorized absence from work without pay while a
loan is outstanding shall make repayments by money order,
certified check or cashier's check during the period of
such absence. The committee shall separately account for
repayments made with respect to each participant loan, and
as repayments are credited with respect to a loan, the
unpaid balance of such loan shall be reduced. Repayments
of principal and interest shall be credited to the
participant's accounts, under uniform rules established by
the in the same proportion as funds borrowed from each
account bore to the total amount of the original loan.
Repayments credited to a participant's before-tax and
after-tax savings accounts shall be invested on a pro rata
basis in accordance with the participant's current
investment election as to future savings (or if the
participant is not currently making savings, in accordance
with his most recent investment election). Loans may be
prepaid at any time by money order, certified check or
cashiers check in accordance with rules and procedures
established by the committee. Loan repayments will be
suspended under the plan as permitted under Section
414(u)(4) of the Code.
(e) Loans in Suspense; Unpaid Loans at Termination. If a
participant falls to make scheduled loan repayments or
reaches his settlement date with an outstanding loan
balance, the following shall apply:
(i) If a participant whose settlement date has not
occurred fails for three consecutive months to
repay any portion of a loan made to him under the
plan and accrued interest thereon in accordance
with the terms of the loan, such loan will be
considered in suspense. A participant who has a
loan in suspense shall not be eligible to make
further loans or to make matched or voluntary
savings contributions under the plan. Loans in
suspense shall be further handled under uniform
rules established by the committee in accordance
with Internal Revenue Service and Department of
Labor rules and regulations.
(ii) If, ninety days after a participant's retirement,
resignation, dismissal or death, any loan or
portion of a loan made to him under the plan
remains outstanding, then, an amount equal to the
unpaid balance of such loan shall be deemed for
all purposes of the plan and for tax purposes to
have been distributed to the participant.
(iii) Participants who become participants in the
company's PRTLOA program prior to January 1, 2000
may continue to make loan payments during the
period covered by PRTLOA.
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SECTION 9.
----------
Settlement Dates and Distribution
---------------------------------
9.1 Settlement Dates. A participant's "settlement date" will be the date on
which the earliest of the following events occurs:
(a) Normal Retirement. The participant retires or is retired
from the employ of the Pharmacia & Upjohn Companies upon
attaining age 65 years ("normal retirement age").
(b) Deferred Retirement. The participant retires or is retired
from the employ of the Pharmacia & Upjohn Companies after
attaining normal retirement age.
(c) Disability Retirement. The participant retires or is
retired from the employ of the Pharmacia & Upjohn
Companies because he is disabled. A participant will be
considered "disabled" if he has qualified for long-term
benefits under the Pharmacia & Upjohn Absence Payment
Plan.
(d) Disability Leave of Absence. The participant is placed on
an authorized absence from work because of disability (a
"disability leave of absence").
(e) Death. The participant's death.
(f) Resignation or Dismissal. The participant resigns or is
dismissed from the employ of the Pharmacia & Upjohn
Companies before he qualifies for retirement under
subparagraph (a), (b), or (c) next above, and before being
placed on a disability leave of absence under subparagraph
(d) next above.
9.2 Vesting and Distribution on Resignation or Dismissal. A participant
always shall have a nonforfeitable interest in his entire before-tax and
after-tax savings accounts, and upon attaining normal retirement age, shall have
nonforfeitable interest in his entire employer matching account and ESOP
accounts. If a participant's settlement date occurs under subparagraph 9.1(f),
his nonforfeitable interest if any, in his employer matching account and his
ESOP accounts shall be determined in accordance with the following table:
Years of Nonforfeitable Percentage
Participation of Accounts
------------- -------------------------
less than 1 0
1 but less than 2 33-1/3
2 but less than 3 66-2/3
---------------------------------------------------------
3 or more 100
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provided, however, that if the participant has less than three years of
participation but has five or more years of employment service, he shall have a
nonforfeitable interest in his entire employer matching and ESOP accounts.
Any participant entitled to a nonforfeitable interest in his employer matching
and ESOP accounts under the terms of the plan as in effect immediately prior to
the effective date shall have a nonforfeitable interest in such amounts
hereunder, including participants who previously were participating in the
Pharmacia U.S. Inc. Employee Savings Plan. Benefits transferred to this plan
from the Pharmacia U.S. Inc. Employee Savings Plan shall be held hereunder in
conformance with Section 411(d)(6) of the Code and pursuant to rules and
procedures established by the committee.
The balances in a participant's before-tax and after-tax savings accounts, and
the portion of the balances in his employer matching and ESOP accounts in which
he has a nonforfeitable interest as of his settlement date, will be distributed
to him in accordance with subsection 9.6(b) as soon as practicable after his
settlement date, unless subparagraph 9.7(e) applies in his case and he has
chosen to defer distribution under the provisions of that subparagraph.
Reference as of any date to the participant's "account balance" in the following
provisions of this Section 9 relating to distributions means the balances in the
portion of his accounts in which he has a nonforfeitable interest, after all
required adjustments to his accounts under Section 6 until distribution.
9.3 Years of Participation. An employees "years of participation" means the
number of calendar months within his period of employment service during which
he was either a participant or an inactive participant divided by twelve,
excluding (if he incurs a one-year break in service) any period after his
settlement date and before he again becomes a participant.
9.4 Years of Employment Service. An employee's "employment service" means
his period of employment with the Pharmacia & Upjohn Companies commencing on his
employment date and ending on his settlement date, subject to the following:
(a) Authorized Absence from Work. An authorized absence from
work, as defined in subsection 2.6, will not interrupt,
continuity of employment for the purpose of determining
employment service.
(b) Reemployment. If an employee's employment with the
Pharmacia & Upjohn Companies terminates but he is
reemployed within twelve months, then, subject to the
provisions of Section 11, his employment shall be deemed
not to have terminated and his period of absence shall be
considered as a period of employment with the Pharmacia &
Upjohn Companies in determining his employment service.
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<PAGE>
A participant's "years of employment service" means the total years, months and
days of employment service determined as provided in this subsection.
9.5 Forfeitures. Forfeitures shall be handled under the plan as
follows:
(a) Separate Accounts. If a participant's settlement date
occurs under subparagraph 9.1(f), the portion, if any, of
his employer matching and ESOP account balances that he is
not entitled to receive as of his settlement date because
of the provisions of subsection 9.2 shall be maintained as
separate accounts in his name, subject to the adjustments
required under Section 6, until he incurs five consecutive
one-year breaks in service. When he incurs five
consecutive one-year breaks in service such accounts
shall become a "forfeiture." If the participant is
reemployed by a Pharmacia & Upjohn Company before he has
incurred five consecutive one-year breaks in service, the
provisions of Section 11 shall apply.
(b) Application of Forfeitures. Forfeitures attributable to a
participant's employer matching account shall be applied
to reduce the amount the employers otherwise would be
required to contribute under the plan after such
forfeitures arise. At the direction of the committee,
forfeitures from participants' ESOP accounts shall be used
to pay proper expenses of the plan and the trust funds.
(c) One-Year Break in Service. A participant shall incur a
"one-year break in service" if his settlement date occurs
under subparagraph 9.1(f) and he is not reemployed by a
Pharmacia & Upjohn Company prior to the first anniversary
of his settlement date. However, absences from work for
any period by reason of a participant's pregnancy, the
birth of a child of the participant, the placement of a
child with the participant in connection with the adoption
of the child by the participant, or for purposes of caring
for a child immediately following such birth or placement
shall be taken into account as service, to the extent
required by federal law, for the purpose of determining
whether a participant has incurred a one-year break in
service.
9.6 Vesting and Distribution on Retirement Disability Leave of Absence, or
Death. If a participants settlement date occurs under subparagraph 9.1(a), (b),
(c), (d) or (e), the participant or his beneficiary, as the case may be, shall
have a nonforfeitable interest in his entire employer matching and ESOP accounts
as well as in his entire before-tax and after-tax savings accounts. Subject to
the conditions and limitations set forth below and in subsection 9.7, the
balances in such accounts as of the participant s settlement date, after all
required adjustments under Section 6 have been made until distribution, will be
distributed to or for the benefit of the participant, or to or for the benefit
of his beneficiary, as the case may be, as follows:
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(a) Annuity Contracts. If the participant had attained normal
retirement age on or before his settlement date and has an
eligible spouse (as defined in subsection 9.8) as of the
date distribution of his accounts is to be made or begin,
he may elect that as soon as practicable after his
settlement date the committee direct the trustee to apply
the entire balances in his accounts to purchase an annuity
contract from a legal reserve life insurance company
selected by the committee. The annuity contract win
provide a monthly annuity payable to him for the balance
of his fife and, if he is survived by his eligible spouse,
a continuing monthly payment to his eligible spouse for
the balance of his eligible spouse's life equal to 50
percent of the amount of the monthly annuity that had been
payable to the participant under the contract.
(b) Lump Sum or Installment Distributions. If the participant
does not qualify for distribution under subparagraph (a)
next above, or if the participant does qualify but does
not make such election, distribution of his accounts shall
be made as soon as practicable after his settlement date
by one or both of the following methods:
(i) By payment in a lump sum.
(ii) By payment in a series of substantially equal
annual installments over a period specified by
the participant not to exceed fifteen years.
9.7 Special Provisions as to Distributions Under the Plan. Distributions
made under the plan pursuant to subsections 9.2 and 9.6 shall be subject to the
following:
(a) Participants' Distribution Elections. A participant may
make an election pursuant to a procedure established by
the committee as to how his account balances are to be
distributed to him and, in case of his death before
complete distribution thereof to his beneficiary, in the
event his account balances are to be distributed under
subparagraph 9.6(b). His beneficiary may elect pursuant to
a procedure established by the committee that distribution
be made in a manner permitted under subsection 9.6 not
directed by the participant that is in compliance with
federal law and regulations. If a participant has not
elected how his account balances are to be distributed to
him or to his beneficiary and his beneficiary fails to
make an election permitted by the prior sentence, the
committee shall decide how distribution of such account
balances shall be made.
(b) Installment Distributions. If a participant's account
balances are to be distributed to him or to his
beneficiary in installments under subparagraph 9.6(b)(ii),
distribution shall be made under that subparagraph in such
sequence and proportions of such account balances as the
participant shall have directed in his election made
pursuant to a procedure established by the committee or,
in the
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absence of such a direction, as the committee determines.
Any time after installment distributions to the
participant commence, the participant may elect, at such
time and in such manner as the committee shall determine
with respect to all such elections, to accelerate
installment payments, to receive his remaining account
balances in a lump sum as soon as practicable after the
election is made, or to temporarily suspend installment
distributions (as long as the participant's account
balances are fully distributed in according with the
following:
(i) If the participant's settlement date occurred for
a reason other than his death, the installment
payments shall be made over a period specified by
the participant not to exceed fifteen years or,
if smaller, the joint life and last survivor
expectancy of the participant and his beneficiary
(or the life expectancy of the participant if he
has no beneficiary). However, if the
participant's beneficiary is not the
participant's eligible spouse and is more than
ten years younger than the participant, the
installment payments shall be made over a period
not exceeding the joint life expectancy of the
participant and a beneficiary ten years younger
than the participant.
(ii) If the participant dies on or after his
settlement date but before his required beginning
date, installment payments shall be made over a
period not to exceed five years from the date of
the participant's death or, if greater, the
normal life expectancy of the participant's
beneficiary. However, if the participant's
beneficiary is not the participant's eligible
spouse, installment payments shall commence not
later than one year after the death of the
participant (or such later date as is prescribed
by regulations issued by the Secretary of the
Treasury) or, if the beneficiary is the
participant's eligible spouse, installment
payments shall commence by the date the
participant would have attained age 70-1/2years.
(iii) If a participant dies on or after his required
beginning date, installment payments shall be
made over a period not to exceed the period over
which payments would have been made to the
participant but for his death.
The committee from time to time may determine the minimum annual
amounts that may be distributed in installments under this
subparagraph. Life expectancies under this subparagraph shall be
determined by use of the expected return multiples contained in
Treasury Regulation Section 1.72-9. The life expectancy of the
participant and his eligible spouse shall be recalculated
annually, unless the participant elects that life expectancies
shall not be recalculated.
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<PAGE>
(c) Distribution of Cash or Shares. Distribution of a
participant's savings and employer matching account
balances shall be made in cash, except that, if the
participant so elects, the committee may distribute part
or all of the participant's employer matching account in
the form of shares of company stock held in the Pharmacia
& Upjohn Stock Fund (the number of shares to be
distributed being determined on the basis of the closing
price as of the valuation date as of which distribution is
to be made). A participant's ESOP account balances shall
be distributed in cash or in common stock of Pharmacia &
Upjohn, Inc., as the participant elects. With respect to
preferred stock in a participant's ESOP stock account, the
committee shall direct the ESOP trustee to sell such
shares to Pharmacia & Upjohn, Inc. (at not less than fair
market value) or to convert such shares to common stock.
(d) Commencement of Distributions. Unless the participant
elects otherwise, distribution of a participant's account
balances shall commence not later than the sixtieth day
after the end of the plan year in which the latest of the
following occurs:
(i) the participant attains normal retirement age; or
(ii) the participant's employment with the Pharmacia &
Upjohn Companies terminates; or
(iii) the amounts payable to the participant are
ascertained by the committee or, if the
participant previously could not be located after
malting reasonable efforts to do so, the date the
participant is located by the committee.
Notwithstanding the foregoing, distribution of such account
balances must commence not later than the participants required
beginning date. The term "required beginning date" means April 1
of the calendar year following the calendar year in which the
participant attains age 70-1/2. All distributions under the plan
shall comply with the requirements of Section 401(a)(9) of the
Code and the regulations thereunder.
(e) Vested Account Value of More than $5,000. Notwithstanding
any other provisions of the plan, if as of a participants
settlement date the total value of his vested accounts
that otherwise would be required to be distributed to him
under the plan exceeds $5,000 ($3,500 for the plan year
beginning on the effective date), no portion of such
accounts shall be distributed before the earliest of: (i)
the date the participant elects a total distribution of
such accounts; (ii) the date the participant attains age
70-1/2years; or (iii) the date the participant dies. The
participant's vested accounts shall then be distributed in
accordance with subsection 9.2 or 9.6, as applicable.
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<PAGE>
(f) Vested Account Value of $5,000 or Less. If as of a
participant's settlement date the total value of his
vested accounts is equal to or less than $5,000 ($3,500
for the plan year beginning on the effective date), such
accounts shall be distributed to him (or in the event of
his death, to his beneficiary) in a lump sum as soon as
practicable after his settlement date.
9.8 Eligible Spouse. The spouse of a participant will be considered an
"eligible spouse" as of any date if the participant and his spouse were lawfully
married under the laws of the state where the marriage was contracted and the
marriage remains legally effective on that date.
9.9 Designation of Beneficiaries. Each participant may, from time to time,
designate any person or persons as his beneficiary or beneficiaries (who may be
designated concurrently, contingently or successively) to whom his account
balances are to be paid in case of his death before he receives all of such
balances. A beneficiary designation will be effective only when it is signed and
filed with the committee while the participant is alive and will cancel all
beneficiary forms previously signed and filed by the participant; provided that
no beneficiary designation by a participant that names a beneficiary other than
the participant's eligible spouse, ff any, immediately prior to the
participant's death shall be effective unless such spouse has consented to the
designation of such other beneficiary on a form to be provided by the committee
which acknowledges the effect of the designation and is witnessed by a notary
public; provided further that such consent shall not be required if it is
established to the satisfaction of the committee that such consent cannot be
obtained because there is no eligible spouse, the eligible spouse cannot be
located or other circumstances et as prescribed in applicable federal law and
regulations. Any such consent shall be effective only with respect to the
eligible spouse giving the consent and shall be irrevocable with respect to the
beneficiary as whom the consent was given. If a deceased participant had failed
to designate a beneficiary as provided above, or if the beneficiary who had been
designated by a deceased participant dies before the participant or before
complete payment of his account balances, the committee shall direct payment of
such account balances to the participant's eligible spouse or ff there is no
eligible spouse, the committee, in its discretion, may direct payment to any of
the following classes of beneficiaries:
(a) The participant's surviving children;
(b) The participant's surviving parents;
(c) The participant's surviving brothers and sisters;
(d) An individual not described above who is a natural object
of the Participant's bounty or a dependent of the
participant; and
(e) The executor or administrator of the participant's estate
or, if such benefits are payable because of the death of a
person other than the participant, to the executor or
administrator of the estate of such person.
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The terms "beneficiary" or "beneficiaries" as defined above also shall include
any person or persons not designated by the participant but to whom the
participant's death benefits become payable under this subsection. In no event
may the beneficiary of a participant or inactive participant or the beneficiary
of a deceased participant or inactive participant designate a beneficiary.
9.10 Missing Participant's or Beneficiaries. Each participant and each
designated beneficiary must notify the committee from time to time of his post
office address and each change of post office address. Any communication,
statement or notice addressed to a participant or beneficiary at his last post
office address furnished to the committee, or if no such address was furnished
to the committee then at his last post office address as shown on his employers'
records, shall be binding on the participant or his beneficiary for all purposes
of the plan. If the committee notifies a participant or beneficiary that he is
entitled to a distribution and also notifies him of the provisions of this
subsection, and the participant or beneficiary fails to claim his benefits under
the plan, exercise control of his account balances in the plan, or otherwise
make his whereabouts known to the committee within three years after the
notification, the account balances of the participant or beneficiary will be
disposed of as follows:
(a) If the whereabouts of the participant is unknown to the
committee, but the whereabouts of the participant's
designated beneficiary then is known to the committee,
distribution will be made to the designated beneficiary,
if permitted by law;
(b) If the whereabouts of the participant and his designated
beneficiary then is unknown to the committee, the
committee may cause distribution of the participant's
account balances to be made to one of the classes of
beneficiaries described in subparagraphs 9.9(a) through
(f), if permitted by law; or
(c) If the committee then does not know the whereabouts of the
Participant such relatives or his designated beneficiary,
the participant's account balances will be forfeited;
provided that the account balances will be reinstated if a
claim is made by the participant or beneficiary for the
forfeited benefit.
9.11 Direct Transfer of Eligible Rollover Distributions. Certain
individuals who are to receive distributions under the plan may elect that such
distributions be paid in the form of a direct rollover (as defined in
Section-401(a)(31) of the Code and the regulations thereunder) to the trustee or
custodian of a plan eligible to accept direct rollovers, as described below:
(a) Distributions Eligible For Direct Rollover. A distribution
may be paid in a direct rollover under this subsection
only if the distribution constitutes an eligible rollover
distribution. An "eligible rollover distribution" means
any distribution under the plan to an eligible distributes
(as defined below) other than: (i) a distribution that is
one of a series of substantially equal payments made
annually or more frequently either over the life (or life
expectancy) of the participant or
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the joint lives (or life expectancies) of the participant
and the participant's designated beneficiary or over a
specified period of ten years or more, (ii) a distribution
required to meet the minimum distribution requirements of
Section 401(a)(9) of the Code, or (iii) a distribution
excluded from the definition of an "eligible rollover
distribution" under applicable Treasury tidings or
regulations. Notwithstanding the immediately preceding
sentence, an eligible rollover distribution includes only
those amounts that would be includable in the gross income
of the eligible distributes if such amounts were not
rolled over to another plan as provided under Section
402(c) of the Code.
(b) Eligible Distributee. An "eligible distributee" is: (i) a
participant (ii) a participant's surviving spouse who is
entitled to receive payment of the participant's account
balances after the participant's death, or (iii) the
spouse or former spouse of a participant who is an
alternate payee under a qualified domestic relations order
(as defined in Section 414(p) of the Code).
(c) Eligible Retirement Plan. A direct rollover of an eligible
rollover distribution may be made only to an eligible
retirement plan. Except as otherwise provided below, an
"eligible retirement plan" is: (i) an individual
retirement account described in Section 408(a) of the
Code, (ii) an individual retirement annuity described in
Section 408(b) of the Code (other than an endowment
contract), (iii) an annuity plan described in Section
403(a) of the Code, or (iv) a defined contribution plan
qualified under Section 401(a) of the Code that by its
terms permits the acceptance of rollover contributions.
With respect to the surviving spouse of a deceased
participant who is entitled to receive a distribution of
the participant s accounts, an eligible retirement plan
shall mean only an individual retirement account described
in Section 408(a) of the Code or an individual retirement
annuity described in Section 408(b) of the Code (other
than an endowment contract).
(d) Elections. An eligible distributee's election of a direct
rollover pursuant to this subsection must be filed with
the committee at such time and in such manner as the
committee shall determine. The committee shall establish
such rules and procedures as it deems necessary to provide
for distributions by means of direct rollover.
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SECTION 10.
-----------
Benefit Limitations
-------------------
10.1 Defined Contribution and Defined Benefit Plans. Section 415 of the
Code imposes certain limitations on the amount of benefits that may be provided
for a participant in a defined contribution plan, and for plan years prior to
January 1, 2000, certain combined limitations if he participates in both a
defined contribution plan and a defined benefit plan. The plan is a defined
contribution plan and some participants are also covered under a defined benefit
plan maintained by the employers. Therefore, each participant in the plan shall
be subject to the applicable benefit limitations set forth in this Section 10.
In applying the limitations set forth in subsections 10.3 and 10.4, reference to
- -the plan shall mean the plan and all other defined contribution plans (whether
or not terminated) maintained by the Pharmacia & Upjohn Companies, and reference
to a defined benefit plan maintained by the employers shall mean all defined
benefit plans (whether or not terminated) maintained by the Pharmacia & Upjohn
Companies.
10.2 Limitation Year and Total Compensation. For purposes of this Section
10:
(a) A "limitation year" means the calendar year.
(b) A participant's "total compensation" means, with respect
to any limitation year, the total of wages, salaries, and
fees for professional services actually rendered in the
course of employment with a Pharmacia & Upjohn Company,
including, but not limited to, compensation for services
on the basis of a percentage of profits and bonuses paid
to him during that year for services rendered to the
Pharmacia & Upjohn Companies as an employee.
10.3 Defined Contribution Plan Limitations. The annual addition to the
accounts of any participant for any limitation year shall not exceed the maximum
annual addition for that year.
"Annual addition" means the sum for that year of:
(a) that portion of the employers' contributions and
forfeitures (other than contributions and forfeitures
excludable pursuant to subsection 10.5) credited to his
accounts; and
(b) the participant's contributions, in the form of before-tax
savings and after-tax savings, including any after-tax
savings returned to the plan for that year under
subsection 3.9.
"Maximum annual addition" as applied to a participant for any limitation year
means the lesser of $30,000 (or such other amount as the Secretary of the
Treasury may from time to time specify pursuant to Section 415(c) of the Code)
or 25 percent of his total compensation. If, for any
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limitation year, the annual addition to the accounts of a participant exceeds
such limitations, the participant's after-tax savings (plus any earnings
thereon), if any, shall be returned to him to the extent necessary and then his
before-tax savings (plus any earnings thereon), if any, shall be returned to him
to the extent necessary, in order to make such limitations inapplicable. To the
extent matched savings are returned, any matching allocation with respect
thereto shall be forfeitable if the committee determines this is necessary to
comply with nondiscrimination requirements under the Code.
10.4 Combined Plan Limitations. This section shall apply only to plan years
beginning before January 1, 2000. If a participant in the plan is also covered
by a defined benefit plan, and the participant's total benefits under those
plans would cause the plan to violate the limitations of Section 415(e) of the
Code, then the participant's accrued benefit under such defined benefit plan
shall be limited to the extent necessary to comply with the limitations of such
Code Section. To the extent permitted by regulations issued under Section 415 of
the Code, the limitations imposed by the foregoing provisions of this Section 10
shall be adjusted annually to permit increased benefits to be paid under the
defined benefit plan to, or on account of participants who have retired or whose
employment has terminated and who have not received a lump sum option payment.
10.5 Treatment of ESOP Interest Payments and Forfeitures. The portion of
the employers' contributions which are deductible under Section 404(a)(9) of the
Code and which are used to pay interest on a share purchase loan and forfeitures
attributable to company stock purchased with a share purchase loan which are to
be allocated and credited to a participant's accounts (if any such forfeitures
are allocated and credited to participants' accounts under the plan) shall not
be treated as an annual addition for Section 415 purposes unless more than
one-third of such contributions are to be allocated to highly compensated
employees (as defined in subsection 10.11). The committee, in its discretion,
may limit allocations to highly compensated employees in order to comply with
the one-third limitation.
10.6 Dollar Limitation on Before-Tax Savings. Pursuant to Section 402(g) of
the Code, in no event shall a participant's before-tax savings for any plan year
exceed $9,500 (or such other amount as may be in effect under Section 402(g)(5)
of the Code). If for any plan year a portion of a participant's before-tax
savings exceeds such annual dollar limit (such portion is referred to as an
"excess deferral") the committee shall direct that the excess deferral (and the
income allocable to such excess deferral as determined under subsection 10.9) be
distributed to the participant not later than April 15 of the next following
plan year.
10.7 Percentage Limitation on Before-Tax Savings. Participants' before-tax
savings are intended to qualify as cash or deferred arrangements under Section
401(k) of the Code, and therefore such savings are subject to the following:
(a) Actual Deferral Percentage Test. In no event shall the
actual deferral percentage (as defined below) of eligible
employees who are highly compensated employees (as defined
in subsection 10.11)for any plan year exceed the greater
of:
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(i) the actual deferral percentage of nonhighly
compensated employees (as defined in subsection
10.11) for the prior plan year multiplied by
1.25; or
(ii) the actual deferral percentage of nonhighly
compensated employees for the prior plan year
multiplied by 2.0; provided that the actual
deferral percentage of such highly compensated
employees does not exceed that of all other
eligible employees by more than two percentage
points.
For the plan year beginning on January 1, 1997 (only), the phrase
such plan year shall be substituted for the phrase the prior plan
year wherever the latter phrase appears in the preceding sentence.
The "actual deferral percentage" of a group of eligible employees
for a plan year means the average of the ratios (determined
separately for each eligible employee in such group) of: (1) the
before-tax savings credited to each such eligible employee's
accounts for the plan year, to (2) the eligible employee's annual
compensation (as defined in subparagraph 10.11(c)) for the plan
year, whether or not the eligible employee was a participant for
the entire plan year. For purposes of this subsection, an
"eligible employee" for any plan year means an employee or former
employee who at any time during the plan year was eligible to
participate in the plan and make before-tax savings, and also
means an employee or former employee who at any time during the
plan year would have been eligible to participate in the plan and
make such contributions but for a withdrawal or the Section 415
contribution limitations described above in this Section 10.
(b) Monitoring of Before-Tax Savings. The committee shall
monitor before-tax savings from time to time during each
plan year and, to the extent necessary to ensure
compliance with Section 401(k) of the Code and this
subsection, shall determine: (i) whether any before-tax
savings that otherwise might be made by highly compensated
employees should be limited (if so, notice of such
limitation shall be given to affected participants); and
(ii) whether additional nonforfeitable contributions
should be made by an employer on behalf of participants
who are not highly compensated employees, pro rata,
according to the amount contributed on behalf of each of
them under subsection 32 for that plan year and without
further reduction in their employment compensation.
(c) Reduction of Before-Tax Savings. If, notwithstanding any
actions the committee takes under subparagraph (b) next
above, the plan would fail to satisfy the requirements of
Section 401(k) of the Code and this subsection, the
committee shalt to the extent necessary to meet such
requirements, reduce the before-tax savings made by highly
compensated employees, in the order of their contribution
amounts beginning with the largest dollar amount, in
descending order. The portions of a participant's
before-tax savings that are so reduced are referred to as
"excess savings."
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<PAGE>
(d) Distribution of Excess Savings. The committee shall direct
that excess savings for any plan year (and income
allocable to such excess savings as determined under
subsection 10.9) be distributed to the highly compensated
employees who made them not later than March 15 of the
next following plan year.
(e) Coordination of Distributions. If a participant has made
excess savings and excess deferrals (as defined in
subsection 10.6) for the same plan year, the distributions
of such excess amounts shall be coordinated to the extent
appropriate to eliminate duplication.
(f) Recharacterization of Excess Savings. Notwithstanding the
foregoing, in lieu of distribution of excess savings the
committee may permit a highly compensated employee to
elect to have such excess savings recharacterized as
after-tax savings, provided recharacterization would not
cause the plan to fail to satisfy the requirements of
Section 401(m) of the Code as described in subsection
10.8. Recharacterization must be made not later than March
15 of the plan year next following the plan year in which
the excess savings were made. If excess savings are
recharacterized as after-tax savings, such excess savings
shall be treated as before-tax savings in applying the
withdrawal provisions of subsection 8.2 and for all other
purposes required by Section 401(k) of the Code and the
regulations thereunder.
(g) Treatment of Before-Tax Savings as After-Tax Savings for
Testing Purposes. Solely for purposes of complying with
the limitations of subparagraph 10.8(a) with respect to
after-tax savings and additional employer matching
contributions, the committee may treat a portion of
participants' before-tax savings as additional employer
matching contributions to the extent permitted in
applicable regulations under Sections 401(k) and (m) of
the Code.
10.8 Percentage Limitation on After-Tax Savings and Employer Contributions.
After-tax savings made pursuant to subsection 3.3 and employer contributions
made under subsections 4.1, 4.2 and 4.6 are subject to the nondiscrimination
requirements of Section 401(m) of the Code, and therefore are subject to the
requirements of this subsection. The following requirements shall apply
separately to: (i) employer contributions under subsections 4.1 and 4.2, and
(ii) the total of after-tax savings and other employer contributions.
(a) Actual Contribution Percentage Test. In no event shall the
actual contribution percentage (as defined below) of
eligible employees who are highly compensated employees
for any plan year exceed the greater of:
(i) the actual contribution percentage of all other
eligible employees for the prior plan year
multiplied by 1.25; or
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<PAGE>
(ii) the actual contribution percentage of all other
eligible employees for the prior plan year
multiplied by 2.0; provided that the actual
contribution percentage of such highly
compensated employees does not exceed that of all
other eligible employees by more than two
percentage points.
For the plan year beginning on January 1, 1997 (only), the phrase
such plan year shall be substituted for the phrase the prior plan
year wherever the latter phrase appears in the preceding sentence.
The "actual contribution percentage"of a group of eligible
employees for a plan year means the average of the ratios
(determined separately for each eligible employee in such group)
of (1) the employer contributions under subsections 4.1 and 4.2 or
the after-tax savings (including before-tax savings
recharacterized as after-tax savings under subparagraph 10.7(f))
and the other employer contributions, as the case may be, made by
or on behalf of each such eligible employee for such plan year, to
(2) the eligible employee's annual compensation (as defined in
subsection 10.11) for such plan year. For purposes of this
subsection, an "eligible employee" is an employee who is eligible
to make after-tax savings or to receive employer contributions.
(b) Monitoring of After-Tax Savings and Employer
Contributions. The committee shall monitor such after-tax
savings and employer contributions from time to time
during each plan year and, to the extent necessary to
insure compliance with Section 401(m) of the Code and this
subsection, may limit after-tax savings or employer
contributions to be made for that plan year by or on
behalf of highly compensated employees. Notice of any such
limitation shall be given to affected participants.
(c) Reduction of After-Tax Savings and Employer Contributions.
If any after-tax savings or employer contributions are
made under the plan for any plan year with respect to one
or more highly compensated employees that otherwise would
result in the plants failure to satisfy the requirements
of Section 401(m) of the Code and this subsection, such
savings or contributions will be reduced to the extent
necessary to meet those requirements, in descending order,
beginning with after-tax savings and employer
contributions made by or on behalf of highly compensated
employees who prior to such reduction have the largest
dollar amount. The portion of such after-tax savings or
employer contributions that are so reduced are referred to
(either together or separately) as "excess aggregate
contributions."
(d) Distribution of Excess Aggregate Contributions. The
committee first shall direct that the portion of excess
aggregate contributions attributable to after- tax savings
for any plan year (and income allocable to such excess
aggregate contributions as determined under subsection
10.9) be distributed to the highly compensated employees
who made such savings not later than March 15 of the next
following plan year. The committee then shall direct that
the portion of excess aggregate
41
<PAGE>
contributions attributable to employer contributions for
any plan year (and income allocable to such excess
aggregate contributions as determined under subsection
10.9) be reallocated and credited to the appropriate
accounts of all eligible participants in the plan, pro
rata, according to their respective base pay for the plan
year.
(e) Treatment of Before-Tax Savings as After-Tax Savings for
Testing Purposes. As described in subparagraph 10.7(g),
solely for purposes of complying with the limitations of
subparagraph 10.8(a) with respect to after-tax savings and
additional employer matching contributions, the committee
may treat a portion of participants' before-tax savings as
additional employer matching contributions to the extent
permitted in applicable regulations under Sections 401(k)
and (m) of the Code.
10.9 Allocation of Income to Distributions Under Subsections 10.6, 10.7 and
10.8. The income allocable to distributions required under subsections 10.6,
10.7 and 10.8, as the case may be, shall be determined by multiplying the income
allocable to the participant's before-tax savings, employer contributions or
after-tax savings for that plan year to which such excess amount pertains by a
fraction. The numerator of the fraction shall be the excess amount and the
denominator shall be the total balance in the applicable account to which such
excess amount was credited as determined as of the end of that plan year,
reduced by the gain, and increased by the loss, allocable to such account
balance for that plan year.
10.10 Multiple Use of Alternative Limitation. In accordance with Treasury
Regulation Section 1.401(m)-2(c), multiple use of the alternative limitation
that occurs as a result of testing under the limitations described in
subsections 10.7 and 10.8 will be corrected in the manner described in Treasury
Regulation Section 1.401(m)-I(e). The term "alternative limitation" as used
above means the alternative methods of compliance with Sections 401(k) and
401(m) of the Code contained in Sections 401(k)(3)(A)(ii)(II) and
401(m)(2)(A)(ii) thereof respectively.
10.11 Highly Compensated Employee; Nonhighly Compensated Employee; Annual
Compensation.
(a) Highly Compensated Employee. A "highly compensated
employee" means any present or former employee who:
(i) was a 5 percent owner of a Pharmacia & Upjohn
Company during the current or immediately
preceding plan year; or
(ii) received annual compensation from the Pharmacia &
Upjohn Companies of ore than,$80,000 (or such
greater amount as may be determined by the
Commissioner of Internal Revenue) during the
immediately preceding
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<PAGE>
plan year and also was in the top-paid 20% of
the employees for such year.
(b) Nonhighly Compensated Employees. A "nonhighly compensated
employee" means any employee who is not a highly
compensated employee.
(c) Annual Compensation. For purposes of this subsection and
subsections 10.7 and 10.8, the term "annual compensation"
means as to any plan year the total amount of an
employee's compensation within the meaning of Section
415(c)(3) of the Code for that year for services rendered
to the Pharmacia & Upjohn companies as an employee
including (for plan years beginning on or after January 1,
1998) amounts deferred by the employee for that year
through compensation reductions pursuant to Sections 125
and 401(k) of the Code.
(d) Top-Paid Group. For purposes of subparagraph (a)(ii) next
above the term "top-paid group" means the top-paid 20
percent of the employees of the Pharmacia & Upjohn
Companies, exclusive of: (i) employees who have not
completed six months of service, (ii) employees who
normally work less than 17-1/2hours per week, (iii)
employees who normally work not more than six months
during any year, (iv) employees who have not attained age
21 years, (v) except to the extent provided in
regulations, employees who are included in a unit of
employees covered by an agreement which the Secretary of
Labor finds to be a collective bargaining agreement
between employee representatives and an employer, and (vi)
employees who are nonresident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) of
the Code) from any employer that constitutes income from
sources within the United States (within the meaning of
Section 861(a)(3) of the Code).
(e) Former Employees. A former employee shall be treated as a
highly compensated employee if such employee was a highly
compensated employee when such employee separated from
service or if such employee was a highly compensated
employee at any time after attaining age 55 years.
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SECTION 11.
-----------
Reemployment
------------
11.1 Rehired Employee. If a former employee of the Pharmacia & Upjohn
Companies who had not previously become a participant in the plan is reemployed
by a Pharmacia & Upjohn Company, then he shall become a participant during the
period of his reemployment only if he meets the eligibility requirements set
forth in subsection 2.1 and enrolls in the plan.
11.2 Rehired Participant. If a former participant or an inactive
participant whose employment with the Pharmacia & Upjohn Companies had
terminated is reemployed by a Pharmacia & Upjohn Company, the following
provisions shall apply notwithstanding any other provisions of the plan:
(a) Reemployment Before One-Year Break in Service. If he is
reemployed by a Pharmacia & Upjohn Company before he has incurred a one-year
break in service:
(i) He shall not be deemed to have terminated
employment with the Pharmacia & Upjohn Companies
for the purpose of determining his employment
service (and, therefore, the period beginning
immediately after the date of his previous
termination of employment and ending immediately
before the date of his reemployment shall be
considered as employment service), and he may
enroll in the plan and resume his savings on the
date he again becomes a covered employee.
(ii) If he did not have a nonforfeitable interest in
his entire employer matching account or his ESOP
accounts at the time of his previous termination
of employment the portion of such account or
accounts held under the plan pursuant to
subsection 9.5 that would have become a
forfeiture if he had incurred five consecutive
one-year breaks in service (as adjusted as of
each accounting date prior to his again becoming
an active participant) shall be reactivated in
kind and maintained for him during his period of
reemployment in accordance with the applicable
provisions of the plan, in addition to accounts
reflecting his savings.
(iii) if his period of reemployment with the Pharmacia
& Upjohn Companies subsequently ends because of
resignation or dismissal under subparagraph
9.1(f) and if he then has less than three years
of participation and five years of employment
service, his nonforfeitable interest in his
employer matching and ESOP accounts shall be
determined in accordance with subsection 9.2.
However, the balance in such an account first
shall be increased by the amounts previously
distributed to him from that account on or after
his previous termination of employment
44
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and prior to his again becoming an active
participant (or if shares of company stock had
been distributed to him in lieu of cash,
increased by an amount equal to the value of such
shares at the time of distribution, as determined
in accordance with subsection 6.10 or
subparagraph 9.7(c)). The applicable percentage
then shall be applied to the increased account
balance, the amount so determined then shall be
reduced by the amount added to such account
before the applicable percentage was applied, and
the resulting amount shall be the portion of his
employer matching or ESOP account balance (as the
case may be) in which he has a nonforfeitable
interest when his period of reemployment ends.
(b) Reemployment After One-Year Break in Service But Before
Five Consecutive One-Year Breaks in Service. If he is
reemployed by a Pharmacia & Upjohn Company after he has
incurred a one-year break in service, but before -he has
incurred five consecutive one-year breaks in service:
(i) He may enroll in the plan and resume savings on
the date he again becomes a covered employee.
(ii) His years of participation and years of
employment service at the time of his previous
termination of employment shall be added to the
years of participation and years of employment
service he earns after his reemployment.
(iii) Subparagraphs (a)(ii) and (a)(iii) next above
shall apply for purposes of determining his
nonforfeitable interest in his employer matching
and ESOP accounts.
(c) Reemployment After Five Consecutive One-Year Breaks in
Service. If he is reemployed by a Pharmacia & Upjohn Company after he has
incurred five consecutive one-year breaks in service:
(i) Subparagraphs (b)(i) and (b)(ii) next above
shall apply.
(ii) New employer matching and ESOP accounts shall be
established in his name to reflect his share of
employer contributions allocated under the plan
after he again becomes an active participant. His
prior before-tax and after-tax savings accounts
will reflect his savings allocated under the plan
after he again becomes an active participant, but
if the entire balances in such accounts
previously had been distributed new accounts will
be established in his name for that purpose as
well.
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<PAGE>
(iii) When the participant's period of reemployment
ends, if subparagraph 9.2 applies in his case,
his nonforfeitable interest in the new employer
matching and ESOP accounts established for him
pursuant to subparagraph (ii) next above shall be
determined on the basis of his years of
participation and years of employment service. If
the entire balance in his employer matching or
ESOP accounts in which he had a nonforfeitable
interest as of his previous settlement date was
not distributed to him before the date he again
became an active participant, he shall continue
to have the same nonforfeitable interest in such
prior accounts until they are distributed in
accordance with the plan after his reemployment
ends.
(d) Distributions After Reemployment. If the entire account balances
in which a rehired participant had a nonforfeitable interest at
the time of his previous termination of employment had not been
distributed to him, no distributions (other than withdrawals
permitted under subsections 8.1 and 8.2) shall be made from such
accounts after he again becomes an active participant and before
his period of reemployment ends. Notwithstanding the foregoing,
any rehired participant whose previous termination of employment
had occurred because of retirement under subparagraph 9.1(a), (b)
or (c) may elect to continue receiving distributions during his
period of reemployment in the same method and amount as he had
been receiving prior to his reemployment, until such distributions
are completed.
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SECTION 12.
-----------
General Provisions
------------------
12.1 Interests Not Transferable. Except as to amounts owed to an employer
with respect to which a participant has made a voluntary and revocable
assignment after benefits have become payable to or with respect to him under
the plan not to exceed 10 percent of any future benefit payment, the interests
of participants and their beneficiaries under the plan are not in any way
subject to their debts or other obligations and may not be voluntarily or
involuntarily sold, transferred, alienated or assigned. Notwithstanding the
foregoing, the plan shall comply with any domestic relations order that, in
accordance with procedures to be established by the committee, is determined to
be a qualified domestic relations order (as defined in Section 414(p)(1)(A) of
the Code).
12.2 Facility of Payment. When, in the committee's opinion, a participant
or beneficiary is under a legal disability or is incapacitated in any way so as
to be unable to manage his financial affairs, then to the extent permitted by
law, distributions may be made to the participant or beneficiary or his legal
representative, or to a relative or friend of the participant or beneficiary for
his benefit, or payments may be applied for the benefit of the participant or
beneficiary in any way the committee considers advisable.
12.3 Absence of Guaranty. Neither the committee nor any employer in any way
guarantees the trust funds from loss or depreciation. Subject to the provisions
of any share purchase loan, the employers do not guarantee any payment to any
person. The liability of the trustees or the committee to make any payment or
distribution under the plan is limited to the available assets of the applicable
trust fund.
12.4 Employment Rights. The plan does not constitute a contract of
employment, and participation in the plan will not give any employee the right
to be retained in the employ of the employers, nor any right or claim to any
benefit under the plan, unless such right or claim has specifically accrued
under -the terms of the plan.
12.5 Litigation by Participants or Other Persons. If a legal action is
brought against an employer, the committee (or any member thereof), the trustees
or any insurance company holding assets of the trust funds, by or on behalf of
any person with respect to benefits under the plan and such legal action results
adversely to that person, or if a legal action arises because of conflicting
claims to a participant's or beneficiary's benefits, the cost to any employer,
the committee (or any member thereof), the trustees or insurance company of
defending the action will be charged to the extent permitted by law to the sums,
if any, that were involved in the action or were payable to the participant or
beneficiary concerned.
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<PAGE>
12.6 Evidence. Evidence required of anyone under the plan may be by
certificate, affidavit, document or other information which the person or entity
acting on it considers pertinent and reliable, and signed, made or presented by
the proper party or parties.
12.7 Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine and neuter genders, the plural shall include
the singular, and the singular shall include the plural.
12.8 Waiver of Notice. Any notice required under the plan may be waived by
the person entitled to notice.
12.9 Controlling Law. To the extent not superseded by the laws of the
United States, the laws of Michigan shall be controlling in all matters relating
to the plan.
12.10 Statutory References. Any reference in the plan to a section of the
Code or of the ERISA, or to a section of any other federal law, shall include
any comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
12.11 Severability. In case any provisions of the plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the plan, and the plan shall be construed and
enforced as if such illegal and invalid provisions had never been set forth in
the plan.
12.12 Fiduciary Responsibilities. It is specifically intended that all
provisions of the plan shall be applied so that all fiduciaries with respect to
the plan shall be required to meet the prudence and other requirements and
responsibilities of applicable law to the extent such requirements or
responsibilities apply to them. No provisions of the plan are intended to
relieve a fiduciary from any responsibility, obligation, duty or liability
imposed by applicable law. In general, a fiduciary shall discharge his duties
with respect to the plan and the trust funds solely in the interests of
participants and beneficiaries and with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims.
12.13 Indemnification. To the extent permitted by law, any member or former
member of the committee, any person who was, is or becomes an officer or
director of the company or any of its subsidiaries or affiliates, any employee
of an employer to whom the committee or any employer has delegated any portion
of its responsibilities under the plan, and each of them, shall be indemnified
and saved harmless by the employers (to the extent not indemnified or saved
harmless under any liability insurance contract or other indemnification
arrangement with respect to the plan) from and against any and all liability to
which the committee members and such other persons may be subject by reason of
any act done or omitted to be done in good faith with respect to the
administration of the plan, including all expenses reasonably incurred in their
defense in the event that the employers failed to provide such defense after
having been requested in writing to do so.
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<PAGE>
12.14 Automated Voice Response Systems, Computer Systems. The committee, in
its discretion, may authorize participants to make various elections and
requests under the plan and to receive various information regarding their plan
accounts through the use of one or more of the following methods: (a) by written
communications, (b) the use of an telephonic, automated voice response system,
(c) the use of a computer network, or (d) any other method designated by the
committee.
12.15 Examination of Plan Documents. Copies of the plan and any amendments
thereto will be on file at the principal office of each employer where they may
be examined by any participant.
12.16 Notices. Any notice or document required to be given to or filed with
the committee shall be considered as given or filed if delivered or mailed by
registered or certified mail, postage prepaid, to Pharmacia & Upjohn U.S.
Retirement & Savings Plan Committee, in care of Pharmacia & Upjohn Company, 7000
Portage Road, Kalamazoo, Michigan 49001.
12.17 Immediate Distribution to Alternate Payees. The committee shall
direct distribution of the amount of a participant's account balances assigned
to an alternate payee under a qualified domestic relations order (as defined in
Section 414(p) of the Code) on the earliest date specified in such qualified
domestic relations order, without regard to whether such payments commence prior
to the participant's earliest retirement age (as defined in Section 414(p)(4)(B)
of the Code).
49
<PAGE>
SECTION 13.
-----------
Plan Administration
-------------------
13.1 Administrative Responsibility. The committee will be responsible for
the general administration of the plan, and its responsibilities and authority
in regard to plan administration are described in subsection 13.4. The company
has certain responsibilities and authority with respect to the plan and the
trust funds, as described in subsection 13.3. If at any time there are no
committee members, the term committee shall mean the company.
13.2 Committee Membership. The committee shall consist of three or more
members appointed by the company. The appointment of a member of the committee
by the company shall be effective not earlier than receipt by such person of
written notice of his appointment from the company and his written acceptance of
such appointment. The company shall promptly notify the other committee members
of the appointment of such member. A committee member may resign at any time by
giving thirty days' advance written notice to the company and the other
committee members. The company may remove a committee member by giving advance
written notice to him and the other committee members. The company may fill any
vacancy in the membership of the committee, or may appoint an additional member
or members of the committee, and shall give prompt written notice thereof to the
other committee members. While there is a vacancy in the membership of the
committee the remaining committee members shall have the same powers as the fall
committee until the vacancy is filled.
13.3 Responsibilities and Authority of Board of Directors. With respect to
the plan and the trust funds, the Board of Directors of the company shall have
the exclusive responsibility and authority to perform the following:
(a) To take any action with respect to the plan (including
amendment or termination thereof) permitted by its terms,
including any action (and amendment) which would
substantially change the rate of employer contributions or
participant savings;
(b) To set policy as to the nature and level of benefits
provided under the plan and the administration of the
plan;
(c) To appoint and remove committee members;
(d) To consent to any subsidiary or affiliate adopting and
becoming an employer under the plan, as recommended by the
committee, and to establish the terms under which any such
subsidiary or affiliate might become an employer
thereunder;
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<PAGE>
(e) To set policy as to the investment of the trust fund;
(f) To select, appoint and enter into agreements with
trustees, or to terminate such agreements, and to select
insurance companies and direct trustees to enter into or
to terminate contracts or agreements with-such insurance
companies;
(g) To allocate and transfer contributions made under the plan
among trustees and investment managers, provided that
allocation of contributions among trustees and investment
managers necessitated solely by participants' elections
among the investment funds shall not require action by the
Board of Directors; and
(h) To employ agents, attorneys, accountants, or other persons
(who also may be employed by the committee) and to
allocate or delegate to them such powers, rights and
duties as the Board of Directors may consider necessary or
advisable to properly carry out the responsibilities and
authority granted to the Board of Directors as described
above, provided that such allocation or delegation, and
the acceptance thereof by such agents, attorneys,
accountants, or other persons, are in writing.
13.4 Responsibilities and Authority of the Committee. Subject to the
authority granted the Board of Directors of the company in subsection 13.3, the
committee shall be responsible for the administration of the plan and shall
possess and exercise all authority necessary for this purpose. In exercising
this authority the committee, either in its own right or with the concurrence of
the Chief Executive Officer, as set out below, shall have, by way of
illustration and not of limitation, the following powers, rights and duties in
addition to those given it elsewhere in the plan, trust agreement and ESOP trust
agreement:
(a) With the written approval of the Chief Executive Officer
of the company,
(i) To take any action with respect to the plan
(including amendment thereof) which would not
substantially change the rate of employer
contributions or participant savings or adversely
affect compliance with a share purchase loan; and
(ii) To determine the form and terms of any annuity
contracts described in subparagraph 9.6(a).
(b) On its own initiative and authority,
(i) To select a chairman and secretary, if it
believes it advisable, who may, but need not, be
members of the committee;
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<PAGE>
(ii) To adopt such rules of procedure and regulations
as in its opinion may be necessary for the proper
and efficient administration of the plan and as
are consistent with the plan;
(iii) To enforce the plan and the rules and
regulations, if any, adopted by the committee;
(iv) To record its actions and decisions, with the
effect that there shall be no authority for any
material action, except as might appear in the
records of the Board of Directors or the
committee;
(v) To determine all questions arising with respect
to administration of the plan in their complete
discretion, including the power to determine the
rights or eligibility of employees or
participants and their beneficiaries, and the
amount of their respective benefits under the
plan, and to remedy ambiguities, inconsistencies
or omissions;
(vi) To from time to time evaluate the performance of
the trust fund and ESOP Trust Fund, including the
performance of trustees, insurance companies and
investment managers;
(vii) When requested by the company, to report to the
company as to the committee's evaluation of the
performance of the trust fund or ESOP Trust Fund;
(viii) To direct any trustee or insurance company as to
benefits payable under the plan pursuant to the
provisions of the plan;
(ix) To furnish the employers with such information as
may be required by them for tax or other purposes
as respects the plan;
(x) To employ agents, attorneys, accountants, or
other persons (who also may be employed by an
employer) and to allocate or delegate to them
such powers, rights and duties as the committee
may consider necessary or advisable to properly
carry out the administration of the plan;
provided that such allocation or delegation, and
the acceptance thereof by such agents, attorneys,
accountants, or other persons, are in writing;
(xi) To permit employees whose active participation in
the plan is ended because of a sale of a
business, merger, dissolution, or other similar
situation affecting a group of employees to elect
to have their account balances in which they have
a nonforfeitable right transferred to another
52
<PAGE>
qualified plan that provides for the receipt of
such transfers to the extent permitted by law;
(xii) Subject to the limitations set forth in the ESOP
trust agreement, to direct the ESOP trustee to
borrow such sum or sums; from time to time,
pursuant to such terms as the committee considers
desirable, to purchase shares of company stock
for the plan and to pledge as security for such
loans the company stock so purchased; and
(xiii) To furnish the trustees with such information as
they may require in order to carry out their
duties and responsibilities under the trust
agreements.
13.5 Manner of Action of the Committee. During a period in which two or
more members of the committee are acting, the following provisions shall apply
where the context admits:
(a) A member of the committee by writing may delegate any or
all of his rights, powers, duties and discretions under
the plan to any other member, with the consent of the
latter, and the committee by writing may delegate to an
administrative subcommittee (which may consist of one
person) any of its rights, powers, duties and discretions
under the plan.
(b) The committee also may authorize any of its members, or
the secretary of the committee or any other person, to
sign on its behalf notices, applications, certificates,
directions, consents, approvals, waivers, or other
documents in connection with the administration of the
plan or the trust funds.
(c) The members of the committee may act by meeting, or by
writing signed without meeting, and may sign any document
by signing one document or concurrent documents.
(d) An action or a decision of a majority of the members of
the committee as to a matter shall be as effective as if
taken or made by all members.
(e) If, because of the number qualified to act, there is an
even division of opinion among the members of the
committee as to a matter, the company shall decide the
matter.
(f) The certificate of the secretary of the committee or of a
majority of the members of the committee that the
committee has taken or authorized any action shall be
conclusive in favor of any person relying on the
certificate.
13.6 Information Required by Committee. The employers (and any subsidiary
or affiliate intending to become an employer) shall furnish the committee with
such data and information as the
53
<PAGE>
committee may deem necessary or desirable in order to administer the plan. The
records of an employer as to an employee's or participant's period or periods of
employment, termination of employment and the reason therefore, earnings as an
employee, contributions and reemployment will be conclusive on all persons
unless determined to the committee's satisfaction to be incorrect. Participants
and other persons entitled to benefits under the plan also shall furnish the
committee with such evidence, data or information as the committee considers
necessary or desirable to administer the plan.
13.7 Committee Decision Final. Subject to applicable law, and the
provisions of subsection 13.8, any interpretation of the provisions of the plan
and any decision on any matter within the discretion of the committee made by
the committee in good faith shall be binding on all persons. A misstatement or
other mistake of fact shall be corrected when it becomes known and the committee
shall make such adjustment on account thereof as it considers equitable and
practicable.
13.8 Denial Procedure and Appeal Process. If a participant, beneficiary or
any other person entitled to benefits under the plan has an unresolved question
about the form or the amount of the benefit to be received or being received
under the plan after consulting with his supervisor or human resources
representative, a formal review of the situation may be requested in writing of
the Manager, Retirement & Savings Plans, in care of Pharmacia & Upjohn Company,
7000 Portage Road, Kalamazoo, Michigan 49001 within 60 days after receiving
notification of his plan benefits or an estimate of his plan benefits. A review
decision will be made within 60 days after receipt of such request (120 days in
special circumstances) and the claimant will be informed of the decision within
90 days after receipt of such request (180 days in special circumstances).
However, if the claimant is not informed of the decision within the period
described above, the claimant may request a further review by the committee as
described below as if he had received notice of an adverse decision at the end
of that period. The decision will be written in a manner calculated to be
understood by the claimant, setting forth the specific reasons for any denial of
a benefit or benefit option, specific reference to pertinent plan provisions on
which such denial is based, a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary, and an explanation of the
plan's claim review procedure. The claimant also shall be advised that he or his
duly authorized representative may request a further review by the committee of
the decision denying the claim by filing with the Pharmacia & Upjohn U.S.
Retirement and Savings Plan Committee, in care of Pharmacia & Upjohn Company,
7000 Portage Road, Kalamazoo, Michigan 49001 within 60 days after such notice
has been received by the claimant a written request for such review and that he
may review pertinent documents, and submit issues and comments in writing,
within the same 60-day period. If such request is so filed, such review shall be
made by the committee within 60 days after receipt of such request, unless
special circumstances require an extension of time for processing in which case
the review will be completed and decision rendered within 120 days. The claimant
shall be given written notice of the decision which shall include specific
reasons for the decision, and specific references to the pertinent plan
provisions on which the decision is based. A decision by the committee is final
and terminates the review process.
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<PAGE>
13.9 Uniform Rules. The committee shall administer the plan on a reasonable
and nondiscriminatory basis and shall apply uniform rules to all employees and
participants similarly situated.
13.10 Committee Member Who is a Participant. If a member of the committee
is a participant in the plan, he may not decide or determine any matter or
question concerning his benefits or as to how they are to be paid to him that he
would not have the right to decide or determine if he were not a member of the
committee.
55
<PAGE>
SECTION 14.
-----------
Relating to the Employers
-------------------------
14.1 Action by Employers. Any action required or permitted of any employer
under the plan shall be by resolution of its Board of Directors or by a duly
authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee; provided,
however, that any action required or permitted by the company under the plan
(including but not limited to actions under Section 15) may be taken by the
committee if authorized by the Chief Executive Officer of the company, other
than an action that would substantially change employer contributions or
participant savings.
14.2 Additional Employers. Upon furnishing the committee with such
information as it may require and upon the recommendation of the committee and
the approval of the Board of Directors of the company, any United States
subsidiary or affiliate (other than a partnership) that is not an employer may
adopt the plan and become an employer and a party to any trust agreement or
insurance contract which forms a part of the trust funds:
(a) By filing with the committee and the applicable trustee a
certified copy of a resolution of the Board of Directors
of the subsidiary or affiliate providing for the adoption
of the plan; and
(b) By filing with the committee and the applicable trustee a
certified copy of a resolution of the Board of Directors
of the company consenting to such adoption.
Unless otherwise provided in the plan, a subsidiary or affiliate located in any
territory or possession of the United States shall be deemed a United States
subsidiary or affiliate.
14.3 Restrictions as to Reversion of Trust Assets to the Employers. No
employer shall have any right, title or interest in the assets of the trust
funds nor will any part of the assets of the trust funds revert or be repaid to
any employer, except as follows:
(a) If a contribution or a portion of a contribution is made
under the plan by an employer as a result of a mistake of
fact, such contribution or portion of a contribution shall
not be considered to have been contributed under the plan
by that employer and, after having been reduced by any
losses of the trust funds allocable thereto, shall be
returned to that employer from the trust funds within one
year of the date the amount is contributed under the plan
unless such return is prohibited by the terms of a share
purchase loan.
(b) Each contribution made by an employer under the plan is
conditioned upon the deductibility of such contribution as
an expense for federal income tax purposes
56
<PAGE>
and, therefore, to the extent that the deduction for a
contribution made by an employer is disallowed, then such
contribution or portion of a contribution, after having
been reduced by any losses of the trust funds allocable
thereto, shall be returned to that employer within one
year of the date of disallowance of the deduction unless
such return is prohibited by the terms of a share purchase
loan.
(c) If the plan, as applied to an employer, initially fails to
satisfy the requirements of the Code, as amended, the
contributions made by such employer shall be returned to
it within one year of the date of determination of the
nonqualified status unless such return is prohibited by
the terms of a share purchase loan.
In no event may the return of any assets of the trust funds pursuant to
subparagraphs (a) through (c) above cause the balances in the accounts of any
participants to be reduced to less than what the balances would have been if
such contributions had not been made.
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<PAGE>
SECTION 15.
-----------
Amendment, Termination or Plan Merger
-------------------------------------
15.1 Amendment. While the employers expect and intend to continue the plan,
the company reserves the right to amend the plan from time to time, subject to
the following:
(a) If an amendment substantially changes the duties and
liabilities of the committee under the plan, each member
of the committee shall be informed of the amendment as
soon as practicable thereafter; and'
(b) Except as provided in subsection 14.3, under no condition
shall any amendment reduce a participant's benefits to
less than the benefits he would be entitled to receive if
he had resigned from his employment with the Pharmacia &
Upjohn Companies on the day of the amendment.
In amending the plan, the company shall act in accordance with the procedures
specified in subsection 14.1. The foregoing provisions of this subsection
regarding the company's right to amend the plan shall be subject to the
provisions of Section 16 of the plan and shall be superseded by the provisions
of Section 16 to the extent they are inconsistent.
15.2 Termination. The plan will terminate as to all employers on any date
specified by the company (acting in accordance with the procedures specified in
subsection 14.1) if 30 days' advance written notice of the termination is given
to the committee, the other employers and the trustees. The plan will terminate
as to an individual employer on the first to occur of the following:
(a) The date it is terminated by the Board of Directors of
that employer if 30 days' advance written notice of the
termination is given to the committee, the other employers
and the trustees.
(b) The date that employer completely discontinues its
contributions under the plan.
(c) The date that employer is judicially declared
bankrupt or insolvent.
(d) The dissolution, merger, consolidation or reorganization
of that employer, or the sale by that employer of all or
substantially all of its assets, except that if any
employer is merged, dissolved or in any way reorganized
into, or consolidated with, any other employers, the plan
as applied to the former employer will automatically
continue in effect without a termination thereof
15.3 Plan Merger. In no event shall there be any merger or consolidation of
the plan with, or transfer of assets or liabilities to, any other plan unless
each participant in the plan would (if the plan
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<PAGE>
then terminated) receive a benefit immediately after the merger, consolidation,
or transfer that is equal to or greater than the benefit the participant would
have been entitled to receive immediately before the merger, consolidation, or
transfer (if the plan had then terminated).
15.4 Notice of Amendment, Termination or Plan Merger. Participants affected
thereby will be notified of a material amendment or the termination, merger or
consolidation of the plan within a reasonable time.
15.5 Nonforfeitability on Termination. If the plan is terminated, or if
there is a partial termination of the plan as respects any employer, all
adjustments required under the plan as of an accounting date shall be made as of
the accounting date next following the date of termination or partial
termination. The benefits of each participant with respect to whom the plan has
terminated, as determined as of such accounting date, will be nonforfeitable and
will be distributed as provided in subsection 9.6. All appropriate accounting
provisions of the plan will continue to apply until the interests of all
participants have been distributed under the plan. Notwithstanding the
foregoing, participants' before-tax savings and the earnings thereon shall be
distributable upon termination of the plan only if such termination and
distribution meet the requirements of Section 401(k)(10) of the Code.
59
<PAGE>
SECTION 16.
-----------
Benefit Protection
------------------
16.1 Overriding Provisions. The provisions of this Section 16, to the
extent they are not amended or declared void prior to a change in control
pursuant to subsection 16.2, shall remain in effect after a change in control
occurs and shall supersede any other provisions of the plan (including any
exhibits and supplements that form a part of the plan), except as otherwise
provided in the next sentence. After a change in control occurs, the provisions
of this Section 16 may be amended only to the extent required by law or required
to maintain the qualified status of the plan under Section 401(a) of the Code,
as it may be amended from time to time.
16.2 Amendment or Voiding of Overriding Provisions Prior to a Change in
Control. By the affirmative vote of a majority of the members of the whole board
of Pharmacia & Upjohn, Inc. taken prior to the occurrence of a change in
control, all or a designated portion or portions of the provisions of this
Section 16 following this subsection 16.2 may be amended or declared void.
16.3 Definitions. For purposes of this Section 16, the definitions set
forth below shall apply. Definitions set forth elsewhere in the plan also shall
apply to the provisions of this Section 16, except that where a definition set
forth elsewhere in the plan and a definition set forth in this subsection
conflict, the definition set forth in this subsection shall govern:
(a) "Affiliate" and "associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(b) "Beneficial owner" shall mean any person that beneficially
owns any voting securities within the meaning ascribed in
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act.
(c) "Board of Directors" as used in this subsection 16.3 shall
mean the Board of Directors of Pharmacia & Upjohn, Inc.
(d) A "change in control" of the company shall mean a change
in control of a nature that would be required to be
reported (assuming such event has not been "previously
reported") in response to Item l(a) of the Current Report
on Form 8- K, as in effect on November 2, 1995, pursuant
to Section 13 or 15(d) of the Exchange Act; provided that,
without limitation, a change in control shall be deemed to
have occurred at such time as:
(i) any person, together with all affiliates and
associates of such person, is or becomes the
beneficial owner, directly or indirectly, of 25
percent or
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<PAGE>
more of the combined voting power of the
company's voting securities; or
(ii) individuals who constitute the incumbent board
cease for any reason to constitute at least a
majority of the Board of Directors.
Notwithstanding anything in the foregoing to the contrary, no
change in control shall be deemed to have occurred for purposes of
this Section 16 by virtue of the acquisition, directly or
indirectly, of 25 percent or more of the combined voting power of
the company's voting securities by the company, any subsidiary of
the company, any employee benefit plan of the company or of any
subsidiary of the company or any entity holding voting securities
of or pursuant to the terms of any such plan.
(e) "Common stock" shall mean the common stock, par value $.01
per share, of the company (as the same may be changed by
reason of any combination, subdivision or reclassification
of the common stock).
(f) "Company" as used in this subsection 16.3 shall mean
Pharmacia & Upjohn, Inc. and any successor thereto because
of merger, consolidation or other reason.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(h) "Incumbent board" shall mean those individuals who
constitute the Board of Directors on November 2, 1995,
provided that any person becoming a member of the Board of
Directors after November 2, 1995 whose election, or
nomination for election, by the company's shareholders,
was approved by a vote of at least three-quarters of the
directors then comprising the incumbent board (either by a
specific vote or by approval of the proxy statement of the
company in which such person is named as a nominee for
director, without objection to such nomination) shall be
considered, for purposes of this subparagraph (h), as
though such person were a member of the incumbent board.
(i) "Person" shall mean any individual firm, corporation or
entity, and shall include any "group" as that term is used
in Rule 13d-5(b) of the General Rules and Regulations
under the Exchange Act.
(j) "Voting securities" shall mean all outstanding common
stock and all other outstanding capital stock of the
company, if any, entitled to vote on each matter on which
the holders of record of common stock shall be entitled to
vote.
(k) "Whole board" shall mean the total number of members of
the Board of Directors that there would be if there were
no vacancies on such board.
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16.4 Full Vesting Upon a Change in Control. Upon the occurrence of a change
in control, participants who are employed by a Pharmacia & Upjohn Company at the
time of the change in control, or after the change in control occurs, shall be
fully and immediately vested in all of their accounts under the plan, including
any amounts which are added to such accounts after the change in control.
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SUPPLEMENT A
------------
TO
--
PHARMACIA & UPJOHN EMPLOYEE SAVINGS PLAN
----------------------------------------
Special Rules for Top-Heavy Plans
---------------------------------
A-1. Purpose of Supplement. The purpose of this Supplement A is to comply with
the requirements of Section 416 of the Code. The provisions of this Supplement A
shall be effective for each plan year in which the plan is a "top-heavy plan'
within the meaning of Section 416(g) of the Code.
A-2. Top-Heavy Plan. In general, the plan will be a top-heavy plan for any plan
year it as of the last day of the next preceding plan year (the "determination
date"), the aggregate account balances of participants who are key employees (as
defined in paragraph A-3 and Section 416(i)(1) of the Code) exceed 60 percent of
the aggregate account balances of all participants. In maling the foregoing
determination, the following special rules shall apply:
(a) A participant's account balances shall be determined in
accordance with Section 416(g) of the Code and any
regulations issued and in effect thereunder, as applied to
the terms of the plan.
(b) A participant's account balances shall be increased by the
aggregate distributions, if any, made under the plan with
respect to the participant during the five-year period
ending on the determination date.
(c) The account balance of a participant who had been but no
longer is a key employee shall be disregarded.
(d) The accounts of a beneficiary or eligible spouse of a
participant shall be considered accounts of the
participant.
(e) Solely for the purpose of determining if the plan, or any
other plan included in a required aggregation group of
which this plan is a part, is top-heavy (within the
meaning of Section 416(g) of the Code) the accrued benefit
of an employee other than a key employee (within the
meaning of Section 416(i)(1) of the Code) shall be
determined under: (i) the method, if any, that uniformly
applies for accrual purposes under all plans maintained by
the Pharmacia & Upjohn Companies; or (H) if there is no
such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the
fractional accrual rate of Section 411(b)(1)(C) of the
Code.
A-1
<PAGE>
(f) The account balance of a participant who has not performed
services for the employers at any time during the five
year period ending on the determination date shall not be
taken into account.
A-3. Key Employees. A "key employee" is an employee or former employee and his
beneficiaries who, at any time during the plan year or four preceding plan
years, is:
(a) An officer of a Pharmacia & Upjohn Company receiving
annual compensation greater than 50 percent of the
limitation in effect under Section 415(b)(1)(A) of the
Code for any such year; provided that for purposes of this
subparagraph (a) no more than 50 employees of the
Pharmacia & Upjohn Companies shall be treated as officers;
(b) One of the ten employees of the Pharmacia & Upjohn
Companies owning (or considered as owning within the
meaning of Section 318 of the Code) both more than a
one-half percent interest and the largest interests in the
Pharmacia & Upjohn Companies and receiving annual
compensation from the Pharmacia & Upjohn Companies greater
than the limitation in effect under Section 415(c)(1)(A)
of the Code for any such year;
(c) A five percent owner (as defined in Section
416(i)(1)(B)(i) of the Code) of a Pharmacia & Upjohn
Company; or
(d) A one percent owner (as defined in Section
416(i)(1)(B)(ii) of the Code) of a Pharmacia & Upjohn
Company receiving annual compensation from the Pharmacia &
Upjohn Companies greater than $150,000.
A "non-key employee" is an employee or former employee (including a former key
employee), or a beneficiary thereof, who is not a key employee. For purposes of
this paragraph A-3, annual compensation means total compensation as defined in
subsection 10.2 of the plan. For purposes of subparagraph (b) next above, if two
employees have the same interest in the Pharmacia & Upjohn Companies, the one
having the greater annual compensation shall be deemed to have the larger
interest.
A-4. Minimum Vesting. For any plan year in which the plan is a top-heavy plan, a
participant's vested percentage in his employer matching account and ESOP stock
account shall be determined in accordance with subsection 9.2 or subsection 9.6
of the plan, whichever is applicable or, if more beneficial to the participant
the following schedule shall apply:
A-2
<PAGE>
Years of Employment
Service (as defined in Vested Percentage of
Subsection 9.4) Accounts
Less than 2 0%
2 20%
3 40%
4 60%
5 or more 100%
If the foregoing provisions of this paragraph A-4 become effective and the plan
subsequently ceases to be a top-heavy plan, each participant who has then
completed three or more years of employment service may elect to continue to
have his vested percentage in his Pharmacia & Upjohn matching account and ESOP
stock account determined under the provisions of this paragraph A-4. Such
election shall be made no later than 60 days after the later of: (i) the first
day of the plan year in which the plan ceases to be a top-heavy plan; or (ii)
the date participants are notified in writing of the changes in the plans'
status and their right to make such election. Any benefit that was
nonforfeitable before the plan ceased to be top-heavy shall rem nonforfeitable.
A-5. Minimum Employer Contributions. For any plan year in which the plan is a
top-heavy plan, the employer contributions (and forfeitures applied as a part of
employer contributions) for that year to be credited to each participant's
account who is not a key employee (whether or not he then is making matched
savings) shall not be less than three percent of such participant's total
compensation for that year. In no event, however, shall the employer
contributions (and forfeitures applied as a part of employer contributions)
credited to such accounts for any such year to a participant who is not a key
employee (expressed as a percentage of such participant's total compensation for
that year) exceed the largest amount of employer contributions and forfeitures
credited to those accounts for that year to a key employee (expressed as a
percentage of such key employee's total compensation for that year up to the
amount which may be considered under Section 401(a)(17) of the Code for that
year).
A-6. Aggregation of Plans. In accordance with Section 416(g)(2) of the Code,
other plans maintained by the Pharmacia & Upjohn Companies (including any such
plans maintained within the five year period ending on the determination date
which have been terminated) will be aggregated with this plan as permitted or
required for purposes of determining whether the plan is a top-heavy plan. The
plans required to be aggregated are: (i) each qualified plan of the employer in
which at least one key employee participates; and (ii) any other qualified plan
of the employer which enables a plan described in (i) to meet the requirements
of Sections 401(a)(4) or 410 of the Code. The plans permitted to be aggregated
are those described in the preceding sentence and any other plan or plans of the
Pharmacia & Upjohn Companies that, when considered as a group with those
described in the preceding sentence, would continue to satisfy the requirements
of Sections 401(a)(4) and 410 of the Code.
A-3
<PAGE>
A-7. Coordination of Benefits. R a participant in this plan also participates in
another qualified plan maintained by the Pharmacia & Upjohn Companies, the
minimum employer contributions otherwise required under paragraph A-5 may be
reduced or increased in accordance with regulations of the Secretary of the
Treasury to prevent inappropriate omissions or duplication of minimum benefits
or contributions. A participant who would otherwise receive a minimum benefit
under both a defined contribution plan and a defined benefit plan shall receive
a minimum benefit only under the defined benefit plan.
A-8. Adjustment of Combined Benefit Limitations. For any plan year prior to
January 1, 2000 in which the plan is a top-heavy plan, the limits of subsection
10.4 shall be adjusted in accordance with the provisions of Section 416(h) of
the Code.
A-9. Use of Terms. All terms and provisions of the plan shall apply to this
Supplement A, except that where the terms and provisions of the plan and this
Supplement A conflict, the terms and provisions of this Supplement A shall
govern.
A-4
<PAGE>
SUPPLEMENT B
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TO
--
PHARMACIA & UPJOHN EMPLOYEE SAVINGS PLAN
----------------------------------------
Special Rules Applicable to
---------------------------
Puerto Rico Participants
------------------------
B-1. Purpose and Effective Date. The purpose of this Supplement B is to provide
special rules applicable to participants employed in Puerto Rico in accordance
with the requirements of the Puerto Rico Internal Revenue Code ("Puerto Rico
Code"), as amended by the Puerto Rico Tax Reform Act of 1987. The provisions of
this Supplement B shall apply only to participants who are bona fide residents
of Puerto Rico during the entire taxable year, as defined in U.S. Treasury
Regulation Section 1.933-1 ("Puerto Rico participants").
B-2. Use of Terms and Conflict of Provisions. The terms and provisions of this
Supplement B shall apply in addition to all other provisions of the plan. If any
term or provision of this Supplement B conflicts with any term or provision of
the plan, the term or provision of this Supplement B shall apply with respect to
Qualification of the plan under the Puerto Rico Code, and the conflicting term
or provision of the plan shall apply with respect to Qualification of the plan
under Sections 401(a), 401(k) and 4975 of the United States Internal Revenue
Code "Code"). Notwithstanding the foregoing, the term "accounting date" as used
in the plan shall mean the Thursday following the end of a payroll period in the
case of Puerto Rico participants.
B-3. Dollar/Percentage Limitation on Before-Tax Savings. This paragraph B-3
shall apply to any group of Puerto Rico participants to whom the opportunity to
make before-tax savings has been extended by the company under the plan.
Pursuant to Section 1165(e)(7) of the Puerto Rico Code, in no event shall any
such participants before-tax savings for any calendar year exceed the lesser of
ten percent of the participant's total compensation (as defined in subparagraph
10.2(b)) for that year or $7,500 (or such other amount as may be determined
under the Puerto Rico Code from time to time). If, for any calendar year, a
portion-of a Puerto Rico participants before-tax savings exceeds such annual
dollar limit (such portion is referred to as an "excess Puerto Rico Code
deferral") the committee shall direct that the excess Puerto Rico Code deferral
(and the income allocable to such excess Puerto Rico Code deferral as determined
under subsection 10.9) be distributed to the participant not later than the end
of the next following calendar year. If for a calendar year a Puerto Rico
participant has made any combination of excess Puerto Rico Code deferrals,
excess Puerto Rico Code savings (as defined in paragraph B4), excess deferrals
(as defined in subsection 10.6) and excess savings (as defined in subsection
10.7), the distributions of such excess amounts shall be coordinated to the
extent appropriate to eliminate duplication.
B-4. Percentage Test on Before-Tax Savings. This paragraph B-4 shall apply to
Puerto Rico participants to whom the opportunity to make before-tax savings has
been extended by an employer
B-1
<PAGE>
under the plan. Such Puerto Rico participants' before-tax savings are intended
to qualify as cash or deferred contributions agreements under Section 1165(e) of
the Puerto Rico Code, and therefore such savings are subject to the following:
(a) Real Deferred Percentage Test. In no event shall the real
deferred percentage (as defined below) of eligible
employees of an employer who are highly compensated
employees (as defined in paragraph B-5) for any plan year
exceed the greater of:
(i) the real deferred percentage of all other
eligible employees of the employer for such plan
year multiplied by 1.25; or
(ii) the real deferred percentage of all other
eligible employees of the employer for such plan
year multiplied by 2.0; provided that the real
deferred percentage of such highly compensated
employees does not exceed that of all other
eligible employees of the employer by more than
two percentage points.
The "real deferred percentage" of a group of eligible employees of
an employer for a plan year means the average of the ratios
(determined separately for each eligible employee in such group)
of- (1) the before-tax savings credited to each such eligible
employees accounts for the plan year, to (2) the eligible
employees annual compensation (as defined in subsection 10.11) for
the plan year. For purposes of this paragraph, an "eligible
employee" for any plan year means an employee or former employee
of an employer who at any time during the plan year was a Puerto
Rico participant eligible to make before-tax savings under the
plan, and also means an employee or former employee of an employer
who at any time during the plan year would have been eligible to
make before-tax savings under the plan as a Puerto Rico
participant but for a withdrawal or the Code Section 415
contribution limitations described in Section 10.
(b) Monitoring of Before-Tax Savings. The committee shall
monitor before-tax savings from time to time during each
plan year and, to the extent necessary to ensure
compliance with Section 1165(e) of the Puerto Rico Code
and this paragraph B-4, shall determine: (i) whether any
before-tax savings that otherwise might be made by Puerto
Rico participants who are highly compensated employees
should be limited (if so, notice of such limitation shall
be given to affected participants); and (ii) whether
additional contributions should be made by an employer on
behalf of Puerto Rico participants who are not highly
compensated employees, pro rata, according to the amount
contributed on behalf of each of them under subsection 3.2
for that plan year and without further reduction in their
employment compensation.
B-2
<PAGE>
(c) Reduction of Before-Tax Savings. If notwithstanding
actions the committee may determine to take under
subparagraph (b) next above the plan would fail to satisfy
the requirements of Section 1165(e) of the Puerto Rico
Code and this paragraph, the committee shalt to the extent
necessary to meet such requirements, reduce the before-tax
savings made by Puerto Rico participants who are highly
compensated employees, in descending order, beginning with
before-tax savings made by highly compensated employees
with the highest real deferred percentages. The portions
of a participants before-tax savings that are so reduced
are referred to as "excess Puerto Rico Code savings".
(d) Distribution of Excess Puerto Rico Code. The committee may
direct that excess Puerto Rico Code savings for any plan
Year (and income allocable to such excess savings as
determined under subsection 10.9) be distributed to the
highly compensated employees who made them not later than
the last day of the next following plan year.
(e) Coordination of Distributions. If for a plan year a Puerto
Rico participant has made any combination of excess Puerto
Rico Code savings (as defined in this paragraph B-4,
excess Puerto Rico Code deferrals (as defined in paragraph
B-3), excess deferrals (as defined in subsection 10.6) and
excess savings (as defined in subsection 10.7), the
distributions of such excess amounts shall be coordinated
to the extent appropriate to eliminate duplication.
(f) Recharacterization of Excess Puerto Rico Code Savings.
Notwithstanding the foregoing, in lieu of distribution of
excess Puerto Rico Code savings the committee may permit a
highly compensated employee to elect to have such excess
Puerto Rico Code savings recharacterized as after-tax
savings, provided recharacterization would not cause the
plan to fail to satisfy the requirements of Section 401(m)
of the Code as described in subsection 10.8.
Recharacterization must be made not later than the last
day of the plan year next following the plan year in which
the excess Puerto Rico Code savings were made. If excess
Puerto Rico Code savings are recharacterized as after-tax
savings, such excess Puerto Rico Code savings shall be
treated as before-tax savings in applying the withdrawal
provisions of subsection 82 and for all other purposes
required by Section 1165(e) of the Puerto Rico Code and
the regulations thereunder.
B-5. Highly Compensated Employee. The plan is intended to meet the minimum
coverage requirements of Section 1165(a)(3) of the Puerto Rico Code, as well as
the nondiscrimination test of Section 1165(e) of the Puerto Rico Code (as set
forth in paragraph B-4). For purposes of determining whether such requirements
are met, the term "highly compensated employee" means any eligible employee of
an employer (as defined in paragraph B-4) who receives a higher annual
compensation (as defined in subsection 10.11) than two-thirds of the eligible
employees of such employer.
B-3
<PAGE>
B-6. Percentage Limitation on After-Tax Savings. In no event shall the after-tax
savings made by a Puerto Rico participant under the plan for any plan year
exceed ten percent of the participant's total compensation, as defined in
subparagraph 10.2(b), for such year nor may the aggregate after-tax savings made
by a Puerto Rico participant under the plan for all plan years in which he is a
participant exceed ten percent of the participant's aggregate total
compensation, as defined in subparagraph 10.2(b), for all such plan years.
B-7. Puerto Rico Employer's Share of Employer Contributions. Notwithstanding
subsection 4.3, in no event shall an employer subject to income tax under the
Puerto Rico Code contribute for any plan year an amount in excess of that
employer's current or accumulated profits, or in excess of the maximum amount
deductible on account thereof by that employer for that plan year as an expense
for purposes of income taxes under the Puerto Rico Code. It because of such
limitations an employer is prevented from contributing all or any part of its
share of the employers' contribution under the plan for any plan year, then the
portion of such share that the employer was so prevented from contributing shall
be contributed by the other employers, in such proportion as shall be determined
by the company.
B-4
<PAGE>
EXHIBIT A
---------
TO
--
PHARMACIA & UPJOHN EMPLOYEE SAVINGS PLAN
----------------------------------------
Employers
---------
Under
-----
Pharmacia & Upjohn Employee Savings Plan
----------------------------------------
Employers under the plan are as listed below, and all employees of the employers
shall be considered to be members of a group of employees to which the plan is
extended (as provided for in subparagraph 2.4(b) of the plan)) except as
otherwise noted:
Employer Ineligible Employee Groups
-------- --------------------------
Pharmacia & Upjohn Company
Pharmacia Iovision, Inc.
Pharmacia & Upjohn Caribe, Inc.*/*
Pharmacia Hepar Inc. (Effective 1/l/1998)
- --------
*/*Pharmacia & Upjohn Caribe, Inc. now is the employer for employee groups in
Puerto Rico previously employed by Upjohn Inter-American Incorporated and the
Upjohn Manufacturing Company. The provisions of Supplement B apply to such
employees.
Exhibit A - Page 1
<PAGE>
PHARMACIA & UPJOHN EMPLOYEE SAVINGS PLAN
AMENDMENT 1999-1
Pursuant to the authority reserved to Pharmacia & Upjohn Company (the "Company")
under Section 15.1 of the Pharmacia & Upjohn Employee Savings Plan (the "Plan"),
as amended and restated effective as of January 1, 1997, the Plan is hereby
amended as follows:
1. Subsection 3.1 is amended by changing the reference to "ten percent" in
the second sentence thereof to "thirteen percent."
2. Subsection 5.2 is amended and restated in its entirety as follows:
"5.2. Investment Funds. The committee may designate, in its sole
discretion, one or more funds under the trust for the investment of
participants' savings (and those portions of participants' stock account
balances as defined in subparagraph 5.6(a) that participants elect to
diversify under subsection 5.6); provided, however, that one such fund
shall be the Common Stock Investment Subaccount (as defined in subsection
5.4). The funds designated by the committee for this purpose shall be
referred to herein as the "investment funds." The committee, in its
discretion, may from time to time designate or establish new investment
funds or eliminate existing investment funds. Investment in any investment
fund so established shall be made in accordance with rules formulated by
the committee and the accounting procedures applied under the plan shall be
modified by the committee to the extent they deem appropriate to reflect
investments in that investment fund. The Plan is intended to constitute a
plan described in section 404(c) of ERISA and Title 29 of the Code of
Federal Regulations section 2550.404c-1. Thus, no fiduciary of the Plan
shall be liable for any loss, or by reason of any breach, which results
from any investment direction made by a participant, Beneficiary or
alternate payee. The company or its delegate shall comply with, or monitor
compliance with, as required, all disclosure and other responsibilities
described in Title 29 of the Code of Federal Regulations section
2550.404c-1(b)(2)(i)(A) and (b)(2)(i)(B)(1) except that the trustee shall
monitor compliance with those procedures established to provide
confidentiality of information relating to the exercise of voting and
tender rights by participants. If the company determines that a situation
has potential for undue influence by the company, the company shall direct
an independent party to perform such activities as are necessary to ensure
the confidentiality of the rights of participants.
1
<PAGE>
3. Subsection 5.4 is amended and restated, in its entirety, as follows:
"5.4 Pharmacia & Upjohn Stock Fund. The Pharmacia & Upjohn Stock Fund
shall be comprised of two subaccounts.
(a) The first subaccount shall be the "Pharmacia & Upjohn
Matching Stock Subaccount." Effective January 1, 1990, no
contributions other than any additional employer matching
contributions under subsection 4.6 (and participant loan
repayments made in accordance with subparagraph 8.3(d)
that are credited to employer matching accounts, as
defined in subparagraph 6.1(c)) are made to the Pharmacia
& Upjohn Matching Stock Subaccount.
(b) The second subaccount shall be the "Common Stock
Investment Subaccount." This subaccount shall be one of
the funds designated under subsection 5.2.
(c) Funds held in the Pharmacia & Upjohn Stock Fund shall be
invested and reinvested exclusively in common stock except
to the extent that cash is held to facilitate purchases
and sales within the fund, but investments in the
Pharmacia & Upjohn Stock Fund shall be accounted for on
the basis of units of the fund. Shares of common stock and
cash received by the fund that are attributable to
dividends, stock dividends, stock splits or to any
reorganization or recapitalization of Pharmacia & Upjohn,
Inc. shall remain in or be invested in, as applicable, the
Pharmacia & Upjohn Stock Fund and allocated to the
participant accounts under the appropriate subaccount in
proportion to the number of units of the Pharmacia &
Upjohn Stock Fund held in such accounts. The transfer
taxes, brokerage fees and other expenses incurred in
connection with the purchase, sale or distribution of
common stock shall be paid by the Pharmacia & Upjohn Stock
Fund, and shall be deemed part of the cost of such common
stock, or deducted in computing the sale proceeds
therefrom, as the case may be, unless paid by an employer.
The committee shall determine to what extent a participant
shall bear any other administrative fee incurred by the
Plan in connection with the transfer of the participant's
interest in the Pharmacia & Upjohn Stock Fund and provide
appropriate written notice to such participants."
4. All references in the Plan to the "Pharmacia & Upjohn Stock Fund" are
hereby replaced with references to the "Pharmacia & Upjohn Matching Stock
Subaccount."
2
<PAGE>
5. Subsection 5.7 is amended and restated to read, in its entirety, as
follows:
"5.7 Voting and Tendering of Company Stock. The voting and tendering of
company stock held in the Pharmacia & Upjohn Stock Fund and the ESOP Trust
Fund shall be subject to the following:
(a) Applicable Shares. For purposes of this subsection, shares
of company stock shall be deemed to be allocated and
credited to a participant's employer matching account,
before-tax savings account, after-tax savings account, or
rollover account in an amount to be determined based on
the balance in such account on the accounting date
coincident with or next preceding the record date of any
vote or tender offer and the closing price of company
stock on such accounting date or if not traded on that
date, on the business day on which shares of company stock
were last traded before that accounting date. The number
of shares of company stock credited to a participant's
ESOP stock account on such accounting date shall be deemed
to include anticipated allocations of such stock pursuant
to the provisions of subsections 6.4 or 6.5.
(b) Voting of Company Stock. Each participant who has company
stock credited to his employer matching account,
before-tax savings account, after-tax savings account,
rollover account or ESOP stock account shall be given
notice by the trustee and the ESOP trustee (the
"trustees") of the date and purpose of each meeting of the
stockholders of Pharmacia & Upjohn, Inc. at which shares
of company stock are entitled to be voted, and
instructions shall be requested from each such participant
as to the voting at the meeting of such company stock. If
the participant furnishes instructions within the time
specified in the notification given to him, the trustees
shall vote such company stock in accordance with the
participant's instructions. Shares of company stock that
have not been credited to any participant's employer
matching account before-tax savings account, after-tax
savings account, rollover account or ESOP stock account or
for which no instructions were timely received by the
trustees, whether or not credited to the account of any
participant shall be voted by the trustee in the same
proportion that the allocated and voted shares of company
stock have been voted by participants. The committee shall
establish procedures under which notices shall be
furnished to participants as required by this subparagraph
(b) and under which the participants' instructions shall
be furnished to the trustees.
(c) Tendering of Company Shares. Each participant who has
shares of company stock credited to his employer matching
account, before-tax savings account, after-tax savings
account, rollover account or ESOP
3
<PAGE>
stock account shall be furnished notice of any tender
offer for, or a request or invitation for tenders of,
tender company stock made to the trustees. Instructions
shall be requested from each such participant as to the
tendering of shares of company stock credited to his
employer matching account, before-tax savings account,
after-tax savings account, rollover account or ESOP stock
account and for this purpose participants shall be
provided with a reasonable period of time in which they
may consider any such tender offer for, or request or
invitation for tenders of, company stock made to the
trustees. The trustees shall tender such company stock as
to which the trustees have received instructions to tender
from participants within the time specified. Company stock
credited to employer matching account, before-tax savings
account, after-tax savings account, rollover account or
ESOP stock account as to which the trustees have not
received instructions from participants shall not be
tendered. Shares of stock that have not been credited to
any participant's employer matching account, before-tax
savings account, after-tax savings account, rollover
account or ESOP account shall be tendered by the trustee
in the same proportion that the allocated and tendered
shares of Company Stock have been tendered by
participants. The committee shall establish procedures
under which notices shall be furnished to participants as
required by this subparagraph (c) and under which the
participants' instructions shall be furnished to the
trustee. In carrying out their responsibilities under this
subsection the trustees may rely on information furnished
to them by (or under procedures established by) the
committee.
(d) Number of Shares. For all purposes of this subsection 5.8,
the number of shares of common stock held in a
participant's before-tax savings account, after-tax
savings account, or rollover account which are invested in
the Pharmacia & Upjohn Stock Fund shall be the number of
shares of common stock represented by the number of units
held in such accounts after reducing such number of units
by the number of units in such accounts which represent
cash.
(e) Insider Restrictions. With respect to participants subject
to Section 16 of the Securities Exchange Act of 1934 (the
`Exchange Act'), the Plan Administrator shall apply any
requirements or restrictions required for the Plan to
obtain the protections of Rule 16b-3 under the Exchange
Act or any successor Rule or regulation intended to
replace Rule 16b-3."
6. A new subsection 8.4 is added to the end of Section 8 to read, in its
entirety, as follows:
4
<PAGE>
"(e) Partial Distributions and Deemed Distributions. Partial
distributions of a participant's account under this
subsection 8.1 and deemed distributions under subsection
8.3(e)(ii) shall be made from the Pharmacia & Upjohn Stock
Fund only after all of the funds held in all other
investment funds comprising such account have been
distributed."
7. Subsection 9.7(c) is amended and restated to read, in its entirety, as
follows:
"(c) Distribution of Cash or Shares. Distribution of a
participant's employer matching account, before-tax
savings account, after-tax savings account, or rollover
account shall be made in cash, except that, if the
participant so elects, the committee may distribute part
or all of the participant's employer matching account,
before-tax savings account, after-tax savings account, or
rollover account in the form of shares of company stock
held in the Pharmacia & Upjohn Stock Fund (the number of
shares to be distributed being determined on the basis of
the closing price as of the valuation date as of which
distribution is to be made). A participant's ESOP account
balances shall be distributed in common stock of Pharmacia
& Upjohn, Inc. or converted to and distributed in cash, as
the participant elects. With respect to preferred stock in
a participant's ESOP stock account, the committee shall
direct the ESOP trustee to sell such shares to Pharmacia &
Upjohn, Inc. (at not less than fair market value) or to
convert such shares to common stock."
8. This Amendment 1999-1 is effective as of April 1, 1999.
To record the adoption of this Amendment 1999-1, the Company has caused its
authorized officer to affix its corporate name this _____ day of ______ , 1999.
ATTEST: Pharmacia & Upjohn Company
- ------------------------------ ----------------------------
5
