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                                                                  Exhibit 10.2

 

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

      THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made

by and between Solutia Inc., a Delaware corporation (the "Company"), and Jeffry

N. Quinn (the "Executive"), effective as of the 11th day of April, 2007 (the

"Effective Date"), and has been approved by the United States Bankruptcy Court

for the Southern District of New York (the "Bankruptcy Court").

 

      WHEREAS, the Company and the Executive are currently parties to an

Executive Employment Agreement originally dated as of the 19th day of July,

2004, and amended and restated as of the 21st day of April, 2005; and

 

      WHEREAS, the Board of Directors of the Company (the "Board") has

determined that it is in the best interests of the Company and its stakeholders

to assure that the Company will have the continued dedication of the Executive

until and for a period of time following the Emergence Date (as defined below).

To induce the Executive to continue to serve the Company through and beyond the

Emergence Date, the Company will provide the Executive with, among other things,

a special emergence bonus. It is the Board's judgment that such a special

emergence bonus arrangement is in the best interest of the Company and its

stakeholders, and is consistent with the desire of the Board to maximize the

value of the Company. Therefore, in order to accomplish these objectives, the

Board has caused the Company to enter into this Agreement.

 

      NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

      1. Special Emergence Bonus.

 

            At such time, if ever (the "Emergence Date"), at which the

Bankruptcy Court shall have confirmed a plan of reorganization of the Company

under Chapter 11 of the United States Bankruptcy Code (the "Chapter 11 Case")

and such plan shall have become effective, the Executive shall be entitled to

receive a special emergence bonus equal to 50% of the bonus pool as determined

pursuant to and in accordance with the terms of the Solutia Inc. Emergence

Incentive Bonus Program ("Emergence Bonus") as originally set forth and

previously agreed to in Executive's Employment Agreement dated July 19, 2004,

and amended and restated April 21, 2005. The Emergence Bonus Program is attached

hereto as Attachment I.

 

      2. Employment Period. The Company hereby agrees to continue the Executive

in its employ, and the Executive hereby agrees to remain in the employ of the

Company subject to the terms and conditions of this Agreement, for the period

commencing on the Effective Date and ending on the date that is the six month

anniversary of the Emergence Date (the "Initial Term") and shall thereafter

automatically renew for an additional three (3) year period (the "Initial

Renewal Term"), unless sooner terminated during the Initial Term or Initial

Renewal Term in accordance with this Agreement or written notice is given by one

party to the other at least 90 days prior to the expiration of the Initial Term

or the Initial Renewal Term, as applicable. Upon completion of the Initial

Renewal Term, this Agreement shall thereafter automatically renew for additional

12 month periods (each, a "Subsequent Renewal Term"), unless sooner terminated

in accordance with this Agreement or written notice is given by one party to the

other at least 90

 

 

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days prior to the expiration of the Initial Renewal Term or any Subsequent

Renewal Term, as applicable. The Initial Term, Initial Renewal Term and any

Subsequent Renewal Term are herein collectively referred to as the "Employment

Period."

 

      Where the context permits, all references to the Company shall include an

affiliate of the Company by which the Executive is employed. As used in this

Agreement, the term "affiliate" or "affiliated companies" shall include any

company controlled by, controlling or under common control with the Company. The

obligations of the Company and the Executive under this Agreement including,

without limitation, the obligations under Sections 1, 5, 6 and 7, shall survive

the termination of the Employment Period to the extent necessary to accomplish

the purposes thereof.

 

      3. Terms of Employment.

 

            (a)   Position and Duties.

 

                  (i) During the Employment Period, (A) the Executive shall

      continue to serve as Chairman of the Board, President and Chief Executive

      Officer of the Company, with such authority, duties, responsibilities and

      reporting requirements as may be reasonably assigned to him from time to

      time by the Board and (B) the Executive's services shall continue to be

      performed at the location where the Executive was employed immediately

      preceding the Effective Date or at any office or location of the Company

      not more than 50 miles from the Company's headquarters in St. Louis,

      Missouri.

 

                  (ii) During the Employment Period, the Executive shall serve

      the Company faithfully, diligently and to the best of his ability, and

      shall devote substantially all of his time and efforts during normal

      business hours to the business and affairs of the Company. During the

      Employment Period it shall not be a violation of this Agreement for the

      Executive to (A) deliver lectures, fulfill speaking engagements or teach

      at educational institutions, and (B) manage personal investments, so long

      as such activities described in clauses A and B do not interfere with the

      performance of the Executive's responsibilities as an employee of the

      Company in accordance with this Agreement, and (C) with the advance

      approval of the Board, serve on corporate, civic or charitable boards or

      committees.

 

            (b)   Compensation.

 

                  (i) Base Salary. During the Employment Period, the Executive

      shall receive an annual base salary ("Annual Base Salary") of not less

      than $825,000, which shall be paid in accordance with the Company's normal

      payroll practice and shall apply retroactively to January 1, 2007.

      Thereafter, the Board or the Executive Compensation and Development

      Committee of the Board ("ECDC") shall review annually Executive's

      compensation and may elect to increase his Annual Base Salary.

 

                  (ii) Annual Bonuses. In addition to Annual Base Salary, the

      Executive shall participate in the Company's Annual Incentive Program, or

      any successor annual bonus plan(s), with a target annual bonus opportunity

      of not less than 150% of his Annual

 

 

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      Base Salary. In addition, during the Employment Period, the Executive

      shall be entitled to participate in all long-term and other incentive

      plans, practices, policies and programs generally applicable to senior

      executive officers of the Company and its affiliated companies.

 

                  (iii) Equity Compensation. During the Employment Period, the

      Executive shall have the right to participate in an equity compensation

      arrangement to be established by the Board or the ECDC of the Board and

      subject to such terms and conditions as will be determined by the Board in

      its sole discretion.

 

                  (iv) Savings and Retirement Plans. During the Employment

      Period, the Executive shall be entitled to participate in all savings and

      retirement plans, practices, policies and programs generally applicable to

      senior executive officers of the Company and its affiliated companies,

      subject to the Board's authority to modify or terminate any such plans,

      practices, policies or programs on a Company-wide basis at any time.

 

                  (v) Welfare Benefit Plans. During the Employment Period, the

      Executive and/or the Executive's family, as the case may be, shall be

      eligible for participation in and shall receive all benefits under welfare

      benefit plans, practices, policies and programs provided by the Company

      and its affiliated companies (including, without limitation, medical,

      prescription drug, dental, disability, salary continuance, employee life,

      group life, accidental death and travel accident insurance plans and

      programs) to the extent generally applicable to senior executive officers

      of the Company and its affiliated companies, subject to the Board's

      authority to modify or terminate any such plans, practices, policies or

      programs on a Company-wide basis at any time.

 

                  (vi) Expenses. During the Employment Period, the Executive

      shall be entitled to receive prompt reimbursement, in accordance with

      Company policy, for all reasonable expenses incurred by the Executive in

      performing his duties hereunder.

 

                  (vii) Vacation. During the Employment Period, the Executive

      shall be entitled to paid vacation in accordance with the plans, policies,

      programs and practices of the Company and its affiliated companies as in

      effect from time to time.

 

      4.    Termination of Employment.

 

            (a) Death or Disability. The Executive's employment shall terminate

automatically upon the Executive's death during the Employment Period. If the

Company determines in good faith that the Disability of the Executive has

occurred during the Employment Period (pursuant to the definition of Disability

set forth below), it may give to the Executive written notice in accordance with

Section 9(b) of this Agreement of its intention to terminate the Executive's

employment. In such event, the Executive's employment with the Company shall

terminate effective on the 30th day after receipt of such notice by the

Executive (the "Disability Effective Date"), provided that, within the 30 days

after such receipt, the Executive shall not have returned to full-time

performance of the Executive's duties. For purposes of this Agreement,

"Disability" shall mean the Executive's long-term disability for

 

 

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purposes of any reasonable occupation as determined under the Company's

disability plan that is applicable to the Executive.

 

            (b) Cause. The Company may terminate the Executive's employment

during the Employment Period for Cause. For purposes of this Agreement, "Cause"

shall mean:

 

                  (i) the willful and continued failure of the Executive to

      perform substantially the Executive's duties with the Company or one of

      its affiliates (other than any such failure resulting from incapacity due

      to physical or mental illness), after a written demand for substantial

      performance is delivered to the Executive by the Board of the Company

      which specifically identifies the manner in which the Board believes that

      the Executive has not substantially performed the Executive's duties;

 

                  (ii) the willful engaging by the Executive in illegal conduct

      or gross misconduct which is materially and demonstrably injurious to the

      Company;

 

                  (iii) the Executive's conviction of, or plea of guilty or no

      contest to, a felony or any other crime involving moral turpitude, fraud,

      theft, embezzlement or dishonesty; or

 

                  (iv) the Executive's habitual drug or alcohol abuse.

 

For purposes of this provision, no act or failure to act, on the part of the

Executive, shall be considered "willful" unless it is done, or omitted to be

done, by the Executive in bad faith or without reasonable belief that the

Executive's action or omission was in the best interests of the Company. Any

act, or failure to act, based upon authority given pursuant to a resolution duly

adopted by the Board or based upon the advice of counsel for the Company shall

be conclusively presumed to be done, or omitted to be done, by the Executive in

good faith and in the best interests of the Company. The cessation of employment

of the Executive shall not be deemed to be for Cause unless and until there

shall have been delivered to the Executive a copy of a resolution duly adopted

by the affirmative vote of not less than a majority of the entire membership of

the Board at a meeting of the Board called and held for such purpose (after

reasonable notice is provided to the Executive and the Executive is given an

opportunity, together with counsel, in the case of conduct described in

subparagraph (i) or (ii) above, to be heard before the Board), finding that, in

the good faith opinion of the Board, the Executive is guilty of the conduct

described in subparagraph (i),(ii), (iii) or (iv) above, and specifying the

particulars thereof in detail.

 

            (c) Good Reason. The Executive's employment may be terminated by the

Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall

mean:

 

                  (i) a material failure by the Company to comply with any of

      the provisions of Section 3(b) of this Agreement relating to compensation,

      other than an isolated, insubstantial and inadvertent failure not

      occurring in bad faith and which is remedied by the Company promptly after

      receipt of notice thereof given by the Executive;

 

 

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                  (ii) the assignment to the Executive of any duties

      inconsistent in any respect with the Executive's position as Chairman of

      the Board, President and Chief Executive Officer and the authority, duties

      and responsibilities contemplated by Section 3(a) of this Agreement, or

      any other action by the Company, including a fundamental change to the

      nature and scope of the Company's business, which results in a material

      diminution in such position, authority, duties or responsibilities,

      excluding for this purpose an isolated, insubstantial and inadvertent

      action not taken in bad faith and which is remedied by the Company

      promptly after receipt of notice thereof given by the Executive;

 

                  (iii) the Company's requiring the Executive to be based at any

      office or location other than as provided in Section 3(a)(i)(B) hereof or

      the Company's requiring the Executive to travel on Company business to a

      substantially greater extent than required immediately prior to the

      Effective Date; provided, however, that the requirement that Executive

      undertake such additional travel away from St. Louis, Missouri as is

      reasonably required to enable him to fulfill his responsibilities in

      connection with the Chapter 11 case shall not constitute "Good Reason"; or

 

                  (iv) Executive's receipt of the Company's written notice not

      to renew the Agreement or the failure of the Company and the Executive to

      enter into a new employment agreement by no later than the last day of the

      Employment Period.

 

If the Executive terminates his employment for Good Reason pursuant to

subparagraph (ii) above as a result of a sale by the Company of substantially

all of its assets, then the Executive shall make himself available to the

Company as a paid independent consultant for such fee, at such times, over such

period of time and for such number of hours as the parties shall reasonably

agree, taking account of any new employment that the Executive may undertake.

 

            (d) Notice of Termination. Any termination by the Company for Cause,

or by the Executive for Good Reason, shall be communicated by Notice of

Termination to the other party hereto given in accordance with Section 9(b) of

this Agreement. For purposes of this Agreement, a "Notice of Termination" means

a written notice which (i) indicates the specific termination provision in this

Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable

detail the facts and circumstances claimed to provide a basis for termination of

the Executive's employment under the provision so indicated and (iii) if the

Date of Termination (as defined below) is other than the date of receipt of such

notice, specifies the termination date (which date shall be not more than thirty

days after the giving of such notice). The failure by the Executive or the

Company to set forth in the Notice of Termination any fact or circumstance which

contributes to a showing of Good Reason or Cause shall not waive any right of

the Executive or the Company, respectively, hereunder or preclude the Executive

or the Company, respectively, from asserting such fact or circumstance in

enforcing the Executive's or the Company's rights hereunder.

 

            (e) Date of Termination. "Date of Termination" means (i) if the

Executive's employment is terminated by the Company for Cause, or by the

Executive for Good Reason, the date of receipt of the Notice of Termination or

any later date specified therein, as the case may be, (ii) if the Executive's

employment is terminated by the Company other than for Cause or

 

 

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Disability, the Date of Termination shall be the date on which the Company

notifies the Executive of such termination and (iii) if the Executive's

employment is terminated by reason of death or Disability, the Date of

Termination shall be the date of death of the Executive or the Disability

Effective Date, as the case may be.

 

      5.    Obligations of the Company upon Termination.

 

            (a) Good Reason; Other Than for Cause. Except as provided in Section

5(b) below, if, during the Employment Period, the Company shall terminate the

Executive's employment other than for Cause or the Executive shall terminate

employment for Good Reason:

 

                  (i) the Company shall pay to the Executive in a lump sum in

      cash within ten days of the Date of Termination (or, solely with respect

      to any payment to be made pursuant to Section 5(a)(i)(D) below, such other

      time as specified therein), the aggregate of the following amounts:

 

                        A. the sum of (1) the Executive's accrued Annual Base

            Salary through the Date of Termination, (2) any unpaid annual bonus

            earned by the Executive with respect to the previous year, and (3)

            any accrued vacation pay, in each case to the extent not theretofore

            paid (the sum of the amounts described in clauses (1), (2) and (3)

            shall be hereinafter referred to as the "Accrued Obligations"); and

 

                        B. an amount equal to the payment the Executive would

            have received under the Company's Annual Incentive Program for the

            fiscal year of such termination in accordance with Section 3(b)(ii),

            multiplied by the number of days that have transpired during that

            fiscal year immediately prior to the Date of Termination, divided by

            365; and

 

                        C. an amount equal to 200% of the sum of (i) the

            Executive's Annual Base Salary immediately prior to the Date of

            Termination and (ii) the average annualized payment the Executive

            received for the 3 years (or such shorter period during which the

            Executive has served as President and CEO of the Company)

            immediately preceding the Date of Termination under the Company's

            Annual Incentive Program (the "Severance Payment"); and

 

                        D. any unpaid portion of the Emergence Bonus, if any, to

            be paid in the amount and in the manner defined herein in Attachment

            I.

 

                  (ii) subject to the provisions of Section 9(f) hereof, to the

      extent not theretofore paid or provided, the Company shall timely pay or

      provide to the Executive any other amounts or benefits, excluding any

      severance or separation pay or benefits, required to be paid or provided

      or which the Executive is eligible to receive under any plan, program,

      policy, practice, contract or agreement of the Company and its affiliated

      companies, including, without limitation, the vested benefit, if any, of

      the Executive under any qualified defined benefit or defined contribution

      retirement plan of the Company and its affiliated companies in which the

      Executive participates, in accordance

 

 

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      with the terms of such plan (such other amounts and benefits shall be

      hereinafter referred to as the "Other Benefits");

 

                  (iii) the Company shall continue to provide at its expense (on

      the same basis as at the Executive's Date of Termination) for the

      continued participation of the Executive and, to the extent applicable,

      his family, in the Company's medical, dental, vision and life insurance

      plans and programs, for a period of four months commencing with the Date

      of Termination; and

 

                  (iv) upon request of the Executive, the Company shall provide

      outplacement services to the Executive for up to twelve months and up to

      an aggregate cost of $25,000.

 

            (b) Change in Control. If the Company shall terminate the

Executive's employment other than for Cause or the Executive shall terminate

employment for Good Reason upon a Change in Control (pursuant to the definition

of Change in Control set forth below) or at any time within 24 months after the

Change in Control, then the Executive shall be entitled to receive (1) all

amounts as provided for in Section 5(a) hereof, provided, however, that the

Severance Payment under this Section 5(b) will be an amount equal to 250% of the

sum of (i) the Executive's Annual Base Salary immediately prior to the Date of

Termination and (ii) the average annualized payment the Executive received for

the 3 most recent years under the Company's Annual Incentive Program (or such

shorter period during which the Executive has served as President and CEO of the

Company), and (2) immediate vesting of all outstanding equity awards granted

pursuant to the Company's equity compensation plan as may be in effect from time

to time.

 

                  (i) For purposes of this Agreement, "Change in Control" shall

      be deemed to have occurred if:

 

                        A. Any "person" (as such term is used in Sections 13(d)

            and 14(d) of the Exchange Act) is or becomes a "beneficial owner"

            (as defined in Rule 13d-3 under the Exchange Act), directly or

            indirectly, of securities of the Company representing more than 50%

            of the voting power of the then outstanding securities of the

            Company, and such person owns more aggregate voting power of the

            Company's then outstanding securities entitled to vote generally in

            the election of directors than any other person;

 

                        B. The shareholders of the Company approve (or, if

            shareholder approval is not required, the Board approves) an

            agreement providing for (x) the merger or consolidation of the

            Company with another corporation where the shareholders of the

            Company, immediately prior to the merger or consolidation, will not

            beneficially own, immediately after the merger or consolidation,

            shares entitling such shareholders to 50% or more of all votes to

            which all shareholders of the surviving corporation would be

            entitled in the election of directors (without consideration of the

            rights of any class of stock to elect directors by a separate class

            vote), (y) the sale or other disposition of 50% or more of the

            Company's assets that it owns as of the Effective Date of this

 

 

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            Agreement, or (z) a liquidation or dissolution of the Company;

            provided, however, the effectiveness of a plan of reorganization

            pursuant to which a majority of the common stock of the reorganized

            Company is distributed (i) to Persons who are (a) holders of claims

            against the Company; (b) holders of equity interests in the Company;

            and/or (c) designated in the Company's plan of reorganization

            proposal dated December 8, 2006, to receive common stock of the

            reorganized Company; or (ii) to or for the benefit of Company

            management, shall not constitute a "Change in Control"; or

 

                        C. Directors are elected such that a majority of the

            members of the Board shall have been members of the Board for less

            than two years, unless the election or nomination for election of

            each new director who was not a director at the beginning of such

            two-year period was approved by a vote of at least two-thirds of the

            directors then still in office who were directors at the beginning

            of such period.

 

            (c) Death. If the Executive's employment is terminated by reason of

the Executive's death during the Employment Period, this Agreement shall

terminate without further obligations to the Executive's legal representatives

under this Agreement, other than for timely payment or provision of the

following:

 

                  (i)   Accrued Obligations;

 

                  (ii)  Other Benefits; and

 

                  (iii) if such termination occurs on or after the Emergence

      Date the entire amount, if any, to which Executive is entitled under the

      Solutia Inc. Emergence Incentive Bonus Program.

 

Accrued Obligations shall be paid to the Executive's estate or beneficiary, as

applicable, in a lump sum in cash within 30 days of the Date of Termination.

 

            (d) Disability. If the Executive's employment is terminated by

reason of the Executive's Disability during the Employment Period, this

Agreement shall terminate without further obligations to the Executive, other

than for timely payment or provision of the following:

 

                  (i)   Accrued Obligations;

 

                  (ii)  Other Benefits; and

 

                  (iii) if such termination occurs on or after the Emergence

      Date the entire amount, if any, to which Executive is entitled under the

      Solutia Inc. Emergence Incentive Bonus Program.

 

Accrued Obligations shall be paid to the Executive in a lump sum in cash within

30 days of the Date of Termination.

 

 

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            (e) Cause. If the Executive's employment shall be terminated for

Cause during the Employment Period this Agreement shall terminate without

further obligations to the Executive, other than for Accrued Obligations and the

timely payment or provision of Other Benefits. In such case, all Accrued

Obligations shall be paid to the Executive in a lump sum in cash within 30 days

of the Date of Termination.

 

            (f) Other than for Good Reason. If the Executive shall voluntarily

terminate employment after the Emergence Date, excluding a termination for Good

Reason, in addition to the Accrued Obligations Executive shall receive, to the

extent not already paid, the Emergence Bonus, if any, to which Executive is

entitled to under the Solutia Inc. Emergence Incentive Bonus Program.

 

      6. Full Settlement; Legal Fees. The Company's obligation to make the

payments provided for in this Agreement and otherwise to perform its obligations

hereunder shall not be affected by any set-off, counterclaim, recoupment,

defense or other claim, right or action which the Company may have against the

Executive or others. In no event shall the Executive be obligated to seek other

employment or take any other action by way of mitigation of the amounts payable

to the Executive under any of the provisions of this Agreement, and such amounts

shall not be reduced whether or not the Executive obtains other employment. The

Company agrees to pay, to the full extent permitted by law, all legal fees and

expenses which the Executive may reasonably incur as a result of any contest, in

which the Executive is the prevailing party, by the Company, the Executive or

others of the validity or enforceability of, or liability under, any provision

of this Agreement or any guarantee of performance thereof (whether such contest

is between the Company and the Executive or between either of them and any third

party, and including as a result of any contest by the Executive about the

amount of any payment pursuant to this Agreement), plus in each case interest on

any payment from the time at which the liability for the applicable legal fees

and expenses was incurred by Executive, at the applicable Federal rate provided

for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended

(the "Code").

 

      7. Confidential Information and Competitive Activity.

 

            (a) Confidential Information. As used herein, "Confidential

Information" means all technical and business information of the Company and its

affiliated companies, whether patentable or not, which is of a confidential,

trade secret and/or proprietary character and which is either developed by the

Executive (alone or with others) or to which the Executive has had access during

the Executive's employment. "Confidential Information" shall also include

confidential evaluations of, and the confidential use or non-use by the Company

or any affiliated company of, technical or business information in the public

domain.

 

      The Executive shall use the Executive's best efforts and diligence both

during and after employment by the Company to protect the confidential, trade

secret and/or proprietary character of all Confidential Information. The

Executive shall not, directly or indirectly, use (for the Executive or another)

or disclose any Confidential Information, for so long as it shall remain

proprietary or protectible as confidential or trade secret information, except

as may be necessary for the performance of the Executive's duties with the

Company.

 

 

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      The Executive shall deliver promptly to the Company, at the termination of

the Executive's employment, or at any other time at the Company's request,

without retaining any copies, all documents and other material in the

Executive's possession relating, directly or indirectly, to any Confidential

Information.

 

      Each of the Executive's obligations in this Section shall also apply to

the confidential, trade secret and proprietary information learned or acquired

by the Executive during the Executive's employment from others with whom the

Company or any affiliated company has a business relationship.

 

      The Executive understands that the Executive is not to disclose to the

Company or any affiliated company, or use for its benefit, any of the

confidential, trade secret or proprietary information of others, including any

of the Executive's former employers.

 

            (b) Competitive Activity; Nonsolicitation. In the event that, during

the Employment Period, Executive shall voluntarily terminate his employment

hereunder, be terminated by the Company without Cause, or terminate his

employment hereunder for Good Reason, then the Executive shall not, directly or

indirectly (whether as owner, partner, consultant, employee or otherwise), at

any time during the six months following termination of his employment with the

Company or any affiliate for any reason, engage in or contribute his knowledge

to any work or activity that involves a product, process, apparatus, service or

development which is then competitive with or similar to a product, process,

apparatus, service or development on which he worked or with respect to which he

had access to Confidential Information while employed by the Company or an

affiliate at any time during the period of five years immediately prior to his

Date of Termination ("Competitive Work"). However, the Executive shall be

permitted to engage in such proposed work or activity, and the Company shall

furnish him a written consent to that effect signed by an officer of the

Company, if the Executive shall have furnished to the Company clear and

convincing written evidence, including assurances from the Executive and his new

employer, that the fulfillment of his duties in such proposed work or activity

would not likely cause him to disclose, base judgment upon, or use any

Confidential Information. In addition, during his employment by the Company or

an affiliate and for a period of six months thereafter, the Executive shall not,

directly or indirectly, (i) induce or attempt to induce a salaried employee of

the Company or any of its affiliates to accept employment or affiliation

involving Competitive Work with another firm or corporation of which the

Executive is an employee, owner, partner or consultant, or (ii) induce or

attempt to induce any customer, supplier, licensee or other person having a

business relationship with the Company to cease doing business with the Company

or interfere materially with the relationship between the Company and any such

customer, supplier, licensee or other person having a business relationship with

the Company.

 

            (c) Injunctive Relief. Executive agrees that the restrictions

imposed upon him by this Section 7 are fair and reasonable considering the

nature of the Company's business and are reasonably required for the protection

of the Company. Executive also acknowledges that a breach of any of the

provisions of this Section 7 may result in continuing and irreparable damages to

the Company for which there may be no adequate remedy at law, and that the

Company, in addition to all other relief available to it, shall be entitled to

the issuance of a temporary restraining order, preliminary injunction and

permanent injunction restraining the

 

 

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Executive from committing or continuing to commit any breach of the provisions

of this Section 7.

 

            (d) Blue Pencil. If, at any time, the provisions of this Section 7

shall be determined to be invalid or unenforceable under any applicable law, by

reason of being vague or unreasonable as to area, duration or scope of activity,

this Agreement shall be considered divisible and shall become and be immediately

amended to only such area, duration and scope of activity as shall be determined

to be reasonable and enforceable by the court or other body having jurisdiction

over the matter and the Executive and the Company agree that this Agreement as

amended shall be valid and binding as though any invalid or unenforceable

provision had not been included herein.

 

      8.    Successors.

 

            (a) This Agreement is personal to the Executive and without the

prior written consent of the Company shall not be assignable by the Executive

otherwise than by will or the laws of descent and distribution. This Agreement

shall inure to the benefit of and be enforceable by the Executive's legal

representatives.

 

            (b) This Agreement shall inure to the benefit of and be binding upon

the Company and its successors and assigns.

 

      9.    Miscellaneous.

 

            (a) This Agreement shall be governed by and construed in accordance

with the laws of the State of Delaware, without reference to principles of

conflict of laws. The captions of this Agreement are not part of the provisions

hereof and shall have no force or effect. This Agreement may not be amended or

modified otherwise than by a written agreement executed by the parties hereto or

their respective successors and legal representatives.

 

            (b) All notices and other communications hereunder shall be in

writing and shall be given by hand delivery to the other party or by registered

or certified mail, return receipt requested, postage prepaid, addressed as

follows:

 

            If to the Executive:

 

            Jeffry N. Quinn

            [address]

 

            If to the Company:

 

            Paul H. Hatfield

            Lead Director of the Board

            Solutia Inc.

            P.O. Box 66760

            St. Louis, MO 63166-6760

 

 

                                       11

 

<PAGE>

<PAGE>

 

            With a copy to:

 

            Rosemary L. Klein, Esq.

            Senior Vice President, General Counsel and Corporate Secretary

            Solutia Inc.

            P.O. Box 66760

            St. Louis, MO 63166-6760

 

or to such other address as either party shall have furnished to the other in

writing in accordance herewith. Notice and communications shall be effective

when actually received by the addressee.

 

            (c) The invalidity or unenforceability of any one or more provisions

of this Agreement shall not affect the validity or enforceability of any other

provision of this Agreement, which shall remain in full force and effect.

 

            (d) The Company may withhold from any amounts payable under this

Agreement such Federal, state, local or foreign taxes as shall be required to be

withheld pursuant to any applicable law or regulation.

 

            (e) The Executive's or the Company's failure to insist upon strict

compliance with any provision of this Agreement or the failure to assert any

right the Executive or the Company may have hereunder shall not be deemed to be

a waiver of such provision or right or any other provision or right of this

Agreement.

 

            (f) This Agreement constitutes the entire agreement between the

parties with respect to the subject matter hereof and supersedes all prior

agreements, oral and written, between the parties hereto with respect to the

subject matter hereof. This Agreement also supersedes, without limitation, the

Employment Agreement dated as of February 26, 2003 between the Company and the

Executive (the "Change in Control Agreement"), the Agreement dated as of

December, 2003 between the Company and the Executive (the "Retention

Agreement"), the Amended and Restated Agreement between the Company and the

Executive originally dated July 19, 2004 and amended and restated as of April

21, 2005 (the "Amended Agreement") and any other prior employment agreement

between the Company and the Executive and the Executive waives all rights with

respect to such agreements, including, without limitation, any claims for

damages related to such agreements; provided, that this Agreement shall have no

effect on the Executive's rights under any plan, program, policy or practice

provided by the Company or any of its affiliated companies except that the

benefits and other payments provided for pursuant to Section 5 hereof shall be

in lieu of any severance or separation pay or benefits to which the Executive

might otherwise be entitled under any plan, program, policy or arrangement of

the Company and its affiliates. In consideration of the promises set forth in

the Agreement, and of the mutual releases set forth in this paragraph, each

party hereto relinquishes all rights, and releases the other from all promises,

liabilities and commitments that may have existed under the Change in Control

Agreement, the Retention Agreement, and any other employment agreements, which

shall be null and void and of no further effect.

 

 

                                       12

 

<PAGE>

<PAGE>

 

            (g) No amounts shall be payable pursuant to Section 5(a)(i)(B),

5(a)(i)(C), 5(a)(i)(D) or 5(b) of this Agreement unless and until the Executive

shall have executed and delivered a waiver and release of claims against the

Company substantially in the form attached hereto as Exhibit A.

 

            (h) Except as otherwise provided by Section 7(c), in the event of

any dispute, controversy or claim arising out of or relating to this Agreement

or Executive's employment or termination thereof, the parties hereby agree to

settle such dispute, controversy or claim in a binding arbitration by a single

arbitrator in accordance with the Commercial Arbitration Rules of the American

Arbitration Association, which arbitration shall be conducted in St. Louis,

Missouri. The parties agree that the arbitral award shall be final and

non-appealable and, except as otherwise provided by Section 7(c), shall be the

sole and exclusive remedy between the parties hereunder. The parties agree that

judgment on the arbitral award may be entered in any court having competent

jurisdiction over the parties or their assets.

 

      10. Code Section 409A Compliance. The arrangements under this Agreement

are not intended to create "deferred compensation" within the meaning of Section

409A of the Internal Revenue Code of 1986, as amended (the "Code") and any

rulings or regulations thereunder, including IRS Notice 2005-1, and all

provisions of this Agreement shall be interpreted consistently with such intent.

In the event that any amounts payable under this Agreement that would otherwise

be considered deferred compensation pursuant to Section 409A of the Code (or any

applicable regulations or guidance promulgated by the Secretary of the Treasury

in connection therewith) are paid within six (6) months following the date of

termination of employment, such amounts shall be paid at the earlier of the time

otherwise provided under this Agreement or the time that will prevent such

amounts from being considered deferred compensation under Section 409A of the

Code. Solely to the extent, if any, that this Agreement constitutes the grant of

an additional benefit under the Agreement that consists solely of a deferral of

additional compensation not otherwise provided under the Agreement as of October

3, 2004, it is intended that any such additional benefit be treated as a

material modification of the Agreement only as to such additional deferral of

compensation as provided in Q&A-18 of IRS Notice 2005-1. Further, in the event

that (a) the Company determines that there is an ambiguity with respect to any

provision of this Agreement that could cause such provision to result in an

obligation to pay deferred compensation subject to Section 409A of the Code,

such ambiguity shall be interpreted and resolved in the manner that the Company

deems necessary to either avoid the obligation to pay deferred compensation

within the meaning of Section 409A of the Code or to comply with timing and

payment provisions of Section 409A of the Code, and (b) the Company determines,

in good faith, that any amendment to this Agreement is necessary or appropriate

in order to comply with timing and payment provisions of Section 409A of the

Code or to avoid the obligation to pay deferred compensation within the meaning

of Section 409A of the Code, the Company shall have the right to make such

amendment, on a prospective or retroactive basis, in its sole discretion.

 

      11. Code Section 4999. If, as a result of payments provided for under or

pursuant to this Agreement together with all other payments in the nature of

compensation provided to or for the benefit of Executive, any state, local or

federal taxing authority imposes any taxes on Executive that would not be

imposed on such payments but for the occurrence of a change of control,

including any excise tax under Section 4999 of the Code, then, in addition to

any other

 

 

                                       13

 

<PAGE>

<PAGE>

 

benefits provided under or pursuant to this Agreement or otherwise, the Company

(including any successor to or assignee of the Company) shall pay to Executive

at the time any such payments are made under or pursuant to this Agreement or

the other agreements, an amount equal to the amount of any such taxes imposed or

to be imposed on Executive (the amount of any such payment, the "Tax

Reimbursement"). In addition, the Company (including any successor to or

assignee of the Company) shall "gross up" such Tax Reimbursement by paying to

Executive at the same time an additional amount equal to the aggregate amount of

any additional taxes (whether income taxes, excise taxes, special taxes,

employment taxes or otherwise) that are or will be payable by Executive as a

result of the Tax Reimbursement being paid or payable to Executive and/or as a

result of the additional amounts paid or payable to Executive pursuant to this

sentence, such that after payment of such additional taxes Executive shall have

been paid on a net after-tax basis an amount equal to the Tax Reimbursement. The

amount of any Tax Reimbursement and of any such gross-up amounts shall be

determined by the Company's independent auditing firm, whose determination,

absent manifest error, shall be treated as conclusive and binding absent a

binding determination by a governmental taxing authority that a greater amount

of taxes is payable by Executive.

 

      12. Counterparts. This Agreement may be executed in separate counterparts,

each of which is deemed to be an original and all of which taken together

constitute one and the same agreement and shall become effective when one or

more counterparts have been signed by each of the parties and delivered to the

other party in original or facsimile form.

 

                           [signature page to follow]

 

 

                                       14

 

<PAGE>

<PAGE>

 

      IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand

and, pursuant to the authorization from its Board of Directors, the Company has

caused these presents to be executed in its name on its behalf, all as of the

day and year first above written.

 

                                   -------------------------------

                                   Jeffry N. Quinn

 

 

 

                                   SOLUTIA INC.

 

                                   By:

                                      ----------------------------

                                      Rosemary L. Klein

                                      Senior Vice President, General Counsel and

                                         Corporate Secretary

 

 

                                       15

 

<PAGE>

<PAGE>

 

                                    Exhibit A

 

                               WAIVER AND RELEASE

 

      Reference is made to that Amended and Restated Agreement (the

"Agreement"), dated as of April 11, 2007, by and between Solutia, Inc., a

Delaware Corporation (the "Company"), and Jeffry N. Quinn (the "Executive").

This Waiver and Release (this "Waiver") is made as of the __ day of

____________, 200_, by the Executive pursuant to Section 9(g) of the Agreement.

 

                Release and Waiver of Claims Against the Company

 

      (a) The Executive, on behalf of himself, his agents, heirs, successors,

assigns, executors and administrators, in consideration for the payments and

other consideration provided for under the Agreement, hereby forever releases

and discharges the Company and its successors, their affiliated entities, and

their past and present directors, employees, agents, attorneys, accountants,

representatives, plan fiduciaries, successors and assigns from any and all known

and unknown causes of action, actions, judgments, liens, indebtedness, damages,

losses, claims, liabilities, and demands of whatsoever kind and character in any

manner whatsoever arising on or prior to the date of this Waiver, including but

not limited to (i) any claim for breach of contract, breach of implied covenant,

breach of oral or written promise, wrongful termination, intentional infliction

of emotional distress, defamation, interference with contract relations or

prospective economic advantage, negligence, misrepresentation or employment

discrimination, and including without limitation alleged violations of Title VII

of the Civil Rights Act of 1964, as amended, prohibiting discrimination based on

race, color, religion, sex or national origin; the Family and Medical Leave Act;

the Americans With Disabilities Act; the Age Discrimination in Employment Act;

other federal, state and local laws, ordinances and regulations; and any

unemployment or workers' compensation law, excepting only those obligations of

the Company expressly recited in the Agreement or this Waiver and any claims to

benefits under the Company's employee benefit plans as defined exclusively in

written plan documents; (ii) any and all liability that was or may have been

alleged against or imputed to the Company by the Executive or by anyone acting

on his behalf; (iii) all claims for wages, monetary or equitable relief,

employment or reemployment with the Company in any position, and any punitive,

compensatory or liquidated damages; and (iv) all rights to and claims for

attorneys' fees and costs except as otherwise provided herein or in the

Agreement.

 

      (b) The Executive shall not file or cause to be filed any action, suit,

claim, charge or proceeding with any federal, state or local court or agency

relating to any claim within the scope of this Waiver. In the event there is

presently pending any action, suit, claim, charge or proceeding within the scope

of this Waiver, or if such a proceeding is commenced in the future, the

Executive shall promptly withdraw it, with prejudice, to the extent he has the

power to do so. The Executive represents and warrants that he has not assigned

any claim released herein, or authorized any other person to assert any claim on

his behalf.

 

      (c) In the event any action, suit, claim, charge or proceeding within the

scope of this Waiver is brought by any government agency, putative class

representative or other third party to vindicate any alleged rights of the

Executive, (i) the Executive shall, except to the extent

 

 

<PAGE>

<PAGE>

 

required or compelled by law, legal process or subpoena, refrain from

participating, testifying or producing documents therein, and (ii) all damages,

inclusive of attorneys' fees, if any, required to be paid to the Executive by

the Company as a consequence of such action, suit, claim, charge or proceeding

shall be repaid to the Company by the Executive within ten (10) days of his

receipt thereof.

 

      (d) In the event of a breach of this Waiver by the Executive, the

Company's obligations pursuant to the Agreement shall cease as of the date of

such breach. Furthermore, the Executive understands that his breach of the

provisions of this Waiver will cause monetary damages to the Company. Thus,

should the Executive breach the provisions of this Waiver, he shall be required

to pay the Company, as liquidated damages, the amount of the consideration paid

by the Company to the Executive pursuant to the Agreement plus all costs and

expenses, including all attorneys' fees and expenses, that the Company incurs in

enforcing this Waiver. The Executive agrees that the foregoing amount of

liquidated damages is reasonable and necessary, and does not constitute a

penalty.

 

      Voluntary Execution of Waiver.

 

      BY HIS SIGNATURE BELOW, THE EXECUTIVE ACKNOWLEDGES THAT:

 

      (A) I HAVE RECEIVED A COPY OF THIS WAIVER AND WAS OFFERED A PERIOD OF

TWENTY-ONE (21) DAYS TO REVIEW AND CONSIDER IT;

 

      (B) IF I SIGN THIS WAIVER PRIOR TO THE EXPIRATION OF TWENTY-ONE (21) DAYS,

I KNOWINGLY AND VOLUNTARILY WAIVE AND GIVE UP THIS RIGHT OF REVIEW;

 

      (C) I HAVE THE RIGHT TO REVOKE THIS WAIVER FOR A PERIOD OF SEVEN (7) DAYS

AFTER I SIGN IT BY MAILING OR DELIVERING A WRITTEN NOTICE OF REVOCATION TO THE

COMPANY'S CHAIRMAN OF THE BOARD OR GENERAL COUNSEL, NO LATER THAN THE CLOSE OF

BUSINESS ON THE SEVENTH DAY AFTER THE DAY ON WHICH I SIGNED THIS WAIVER;

 

      (D) THIS WAIVER SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE SEVEN

DAY REVOCATION PERIOD HAS EXPIRED WITHOUT THE WAIVER HAVING BEEN REVOKED;

 

      (E) THIS WAIVER WILL BE FINAL AND BINDING AFTER THE EXPIRATION OF THE

REVOCATION PERIOD REFERRED TO IN (C). I AGREE NOT TO CHALLENGE ITS

ENFORCEABILITY;

 

      (F) I AM AWARE OF MY RIGHT TO CONSULT AN ATTORNEY, HAVE BEEN ADVISED IN

WRITING TO CONSULT WITH AN ATTORNEY, AND HAVE HAD THE OPPORTUNITY TO CONSULT

WITH AN ATTORNEY, IF DESIRED, PRIOR TO SIGNING THIS WAIVER;

 

 

                                       2

 

<PAGE>

<PAGE>

 

      (G) NO PROMISE OR INDUCEMENT FOR THIS WAIVER HAS BEEN MADE EXCEPT AS SET

FORTH IN THIS WAIVER;

 

      (H) I AM LEGALLY COMPETENT TO EXECUTE THIS WAIVER AND ACCEPT FULL

RESPONSIBILITY FOR IT; AND

 

      (I) I HAVE CAREFULLY READ THIS WAIVER, ACKNOWLEDGE THAT I HAVE NOT RELIED

ON ANY REPRESENTATION OR STATEMENT, WRITTEN OR ORAL, NOT SET FORTH IN THIS

DOCUMENT OR THE AGREEMENT, AND WARRANT AND REPRESENT THAT I AM SIGNING THIS

WAIVER KNOWINGLY AND VOLUNTARILY.

 

      Intending to be legally bound, I have signed this Waiver as of the date

first set forth above.

 

 

                                          -------------------------------

                                          Jeffry N. Quinn

 

 

                                       3

 

<PAGE>

<PAGE>

 

                                  ATTACHMENT I

 

                 Solutia Inc. Emergence Incentive Bonus Program

 

Participation

 

      Participation in the bonus pool established under the Solutia Inc.

Emergence Incentive Bonus Program shall be extended to those key senior

executives of the Company and in such percentages as shall be determined by the

Board of Directors.

 

Performance Measures

 

      The aggregate dollar value of the bonus pool shall be calculated by

reference to three metrics as follows:

 

      a. 25% allocation for achieving target EBITDA* for the 12-month period

      ending on the six-month anniversary of the day at which both (x) the

      United States Bankruptcy Court for the Southern District of New York shall

      have confirmed a plan of reorganization of the Company under Chapter 11 of

      the United States Bankruptcy Code, and (y) such confirmation shall have

      become non-appealable (the "Emergence Date");

 

      b. 25% allocation for achieving target Enterprise Value based on market

      value on six-month anniversary of the Emergence Date;** and

 

      c. 50% allocation for achieving target Unsecured Creditor Recoveries based

      on trading prices as of six-month anniversary of the Emergence Date.***

 

      The portion of the bonus pool allocated to each metric can exceed 100%,

but the aggregate pool cannot exceed $7.5 million. Thus, up to $2,343,750 can be

earned for the pool based on EBITDA, up to $2,250,000 based on enterprise value,

and up to $5,625,000 based on unsecured creditor recovery, provided the

aggregate does not exceed $7.5 million.

 

      The EBITDA, Enterprise Value and Creditor Recovery Metrics are as follows:

 

EBITDA

 

 

                          Performance Relative to Plan

<TABLE>

----------------------------------------------------------------------------------------------------------

<S>                               <C>   <C>   <C>   <C>    <C>   <C>   <C>    <C>    <C>     <C>    <C>

%Earned                           70%   75%   80%   85%    90%   95%   100%   105%   110%    115%   120%

----------------------------------------------------------------------------------------------------------

 

% of $1.875M Pool (25% of $7.5M)  0%    0%    0%    0%     0%    20%   30%    55%    75%     100%   125%

----------------------------------------------------------------------------------------------------------

</TABLE>

 

 

<PAGE>

<PAGE>

 

ENTERPRISE VALUE

 

 

                         Enterprise Value (in billions)

<TABLE>

----------------------------------------------------------------------------------------------------------------------

 

<S>                 <C>    <C>    <C>    <C>     <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>

% Earned            $1.20  $1.30  $1.40  $1.50   $1.60  $1.70  $1.80  $1.90  $2.00  $2.10  $2.20  $2.30  $2.40  $2.50

----------------------------------------------------------------------------------------------------------------------

 

% of $1.875M Pool

(25% of $7.5M)      0%     0%     10%    20%     30%    40%    50%    60%    70%    80%    90%    100%   110%   120%

----------------------------------------------------------------------------------------------------------------------

</TABLE>

 

UNSECURED CREDITOR RECOVERY

 

 

                         Unsecured Creditor Recovery (%)

<TABLE>

----------------------------------------------------------------------------------------------------------------------

<S>                    <C>   <C>   <C>    <C>   <C>   <C>   <C>    <C>   <C>   <C>   <C>   <C>    <C>    <C>    <C>

% Earned               30%   35%   40%    45%   50%   55%   60%    65%   70%   75%   80%   85%    90%    95%    100%

----------------------------------------------------------------------------------------------------------------------

 

% of $3.75 M UCR

Pool (50% of $7.5M)    0%    0%    0%     0%    20%   30%   40%    50%   60%   70%   80%   95%    110%   125%   150%

----------------------------------------------------------------------------------------------------------------------

</TABLE>

 

      The percentage of the bonus pool attributable to the EBITDA, enterprise

value or unsecured creditor recovery metric, as applicable, when performance

falls between data points in the tables above, shall be determined by using

straight line interpolation.

 

Payments Under Program

 

      The bonus pool shall be distributed as soon as practicable after the

six-month anniversary of the Emergence Date. The Executive shall be entitled to

his Emergence Bonus even if his employment is terminated (voluntarily or

involuntarily) on or after the Emergence Date, or if Executive is terminated

other than for Cause or the Executive shall terminate employment for Good Reason

(as those terms are defined in his employment agreement) prior to the Emergence

Date.

 

      The Board of Directors, in its discretion, may make such payment by

delivering to the participant common stock of the Company with a fair market

value equal to the bonus pool payment due to the participant, provided the

Company's common stock is actively traded on a recognized securities exchange.

If payment is made by delivering common stock, the participant shall have the

right to satisfy any withholding tax obligation by having the Company withhold

shares of stock with a fair market value equal to the applicable withholding

taxes, and the stock shall be valued both for purposes of withholding and for

determining the number of shares to be delivered to the participant, at the

average common stock trading price for the 20 trading days ending with the day

preceding the delivery of stock to the participant. No portion of the bonus pool

shall be payable to a participant whose employment by the Company was terminated

for Cause.

 

 

-------------

 

*    EBITDA metric should be measured on a trailing-twelve months basis as of

     six-months post-emergence relative to the Company's business plan presented

     to the Committee on April 14, 2004.

 

 

<PAGE>

<PAGE>

 

--------------------------------------------------------------------------------

 

     Pharmaceutical Services should be carved out for purposes of calculating

     the EBITDA Metric bonus

 

        > A sale of Pharmaceutical Services would require interim period

        adjustments to EBITDA and the benefits of a sale should be picked up in

        the Unsecured Creditor Recovery metric.

 

     Joint venture income should be included.

 

     Budgeted restructuring costs that are typically accounted for below the

     operating income line should be included.

 

     Assets sale adjustment mechanism needs to be established.

 

**   Enterprise value should be calculated 6 months post-emergence as follows:

 

     20 day average common stock trading price multiplied by the most recent

     common shares outstanding

 

     Plus: 20-day average trading price of preferred stock multiplied by the

     amount of preferred shares outstanding, if any

 

     Plus: Market value of debt securities

 

     Plus: Net proceeds from asset sales, if used to pay down debt.

 

***  The unsecured creditor recovery metric should be based on the 20-day

     average trading value of securities distributed to all unsecured creditors

     at 6-months post-emergence divided by the total amount of allowed unsecured

     claims (including Monsanto claims, if any) in the Company's confirmed Plan

     of Reorganization.

</TEXT>

</DOCUMENT>