Exhibit 10.6
 
PLEDGE AGREEMENT
by
SOLUTIA INC.
and
THE SUBSIDIARIES PARTY HERETO,
as Pledgors,
and
CITIBANK, N.A.,
as Collateral Agent
 
Dated as of February 28, 2008
 

 

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TABLE OF CONTENTS

              Page
SECTION 1. Pledge
    2  
SECTION 2. Delivery of the Securities Collateral
    3  
SECTION 3. Representations, Warranties and Covenants
    3  
SECTION 4. Registration in Nominee Name; Denominations
    4  
SECTION 5. Voting Rights; Dividends and Interest, etc.
    4  
SECTION 6. Remedies upon Event of Default
    6  
SECTION 7. Application of Proceeds of Sale
    7  
SECTION 8. Collateral Agent Appointed Attorney-in-Fact
    7  
SECTION 9. Waivers; Amendment
    8  
SECTION 10. Securities Act, etc.
    8  
SECTION 11. Registration, etc.
    9  
SECTION 12. Termination or Release
    9  
SECTION 13. Notices
    10  
SECTION 14. Further Assurances
    10  
SECTION 15. Binding Effect; Several Agreement
    10  
SECTION 16. Survival of Agreement; Severability
    10  
SECTION 17. GOVERNING LAW
    11  
SECTION 18. Counterparts
    11  
SECTION 19. Rules of Interpretation
    11  
SECTION 20. Jurisdiction; Consent to Service of Process
    11  
SECTION 21. WAIVER OF JURY TRIAL
    12  
SECTION 22. Additional Pledgors
    12  
SECTION 23. Financing Statements
    12  

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              Page
SECTION 24. Intercreditor Agreement Governs
    12  
SECTION 25. Conflicts
    12  

SCHEDULES

      Schedule I  
Subsidiary Guarantors
Schedule II  
Pledged Stock and Debt Securities

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This instrument, the rights and obligations evidenced hereby, and the liens
created hereunder, are subordinate in the manner and to the extent set forth in
the Intercreditor Agreement, dated as of February 28, 2008, by and among SOLUTIA
INC., a Delaware corporation (the “Company”), each of the Company’s Subsidiaries
party thereto from time to time and CITIBANK, N.A. (“Citi”), in its capacity as
administrative agent for the holders of the Term Loan Obligations (as defined in
such Intercreditor Agreement), and as collateral agent for the holders of the
Term Loan Obligations, Citi, in its capacity as administrative agent for the
holders of the Revolving Credit Obligations (as defined in such Intercreditor
Agreement), and as collateral agent for the holders of the Revolving Credit
Obligations, as amended from time to time; and each holder of this instrument,
by its acceptance hereof, irrevocably agrees to be bound by the provisions of
the Intercreditor Agreement.
PLEDGE AGREEMENT
     PLEDGE AGREEMENT (as amended, restated, amended and restated, supplemented
or otherwise modified from time to time, this “Agreement”) dated as of
February 28, 2008 among SOLUTIA INC., a Delaware corporation (the “Borrower”),
each Subsidiary of the Borrower listed on Schedule I hereto (collectively,
together with each Subsidiary that becomes a party hereto pursuant to Section 22
of this Agreement, the “Subsidiary Guarantors” and, together with the Borrower,
the “Pledgors”), and CITIBANK, N.A. (in such capacity, together with its
successors in such capacity, the “Collateral Agent”) as collateral agent for the
Secured Parties (as defined in the Credit Agreement referred to below).
R E C I T A L S
     A. The Borrower, the Collateral Agent, Citibank, N.A., as administrative
agent (in such capacity and together with any successors in such capacity, the
“Administrative Agent”) for the Lenders (as defined herein), the lending
institutions from time to time party thereto (the “Lenders”) and the other
agents party thereto have entered into that certain Credit Agreement, dated as
of the date hereof (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), providing for the
making of Loans to the Borrower pursuant to, and upon the terms and subject to
the conditions specified in, the Credit Agreement.
     B. Each Subsidiary Guarantor has, pursuant to the Guarantee Agreement,
dated as of the date hereof, among other things, agreed to unconditionally
guarantee the obligations of the Borrower under the Credit Agreement.
     C. The Borrower and each Subsidiary Guarantor will receive substantial
benefits from the execution, delivery and performance of the obligations of the
Borrower under the Credit Agreement and are, therefore, willing to enter into
this Agreement.
     D. Contemporaneously with the execution and delivery of this Agreement, the
Borrower and the Subsidiary Guarantors have executed and delivered to the
Collateral Agent a Security Agreement (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time, the “Security
Agreement”).
     E. This Agreement is given by each Pledgor in favor of the Collateral Agent
for the benefit of the Secured Parties to secure the payment and performance of
the Obligations.
     Capitalized terms used herein and not defined herein shall have meanings
assigned to such terms in the Credit Agreement.

 

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     NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Pledgor, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor hereby and the Collateral Agent hereby agree as
follows:
     SECTION 1. Pledge. (a) The following liens are hereby granted:
     (i) As collateral security for the payment and performance, in full of all
the Obligations, each Pledgor hereby pledges and grants to the Collateral Agent,
for the ratable benefit of Secured Parties, a lien on and security interest in
and to all of the right, title and interest of such Pledgor in, to and under
(a) all the shares of capital stock and other Equity Interests owned by it,
including those listed on Schedule II hereto and any shares of capital stock and
other Equity Interests obtained in the future by such Pledgor and the
certificates, if any, representing all such shares or interests (collectively,
the “Pledged Stock”); (b)(i) all debt securities owned by it listed opposite the
name of the Pledgor on Schedule II hereto, (ii) all debt securities in the
future issued to the Pledgor and (iii) all promissory notes and any other
instruments evidencing such debt securities (collectively, the “Pledged Debt
Securities” and together with the Pledged Stock, the “Pledged Securities”);
(c) all payments of principal or interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of, in exchange for or upon the conversion of the securities referred
to in clauses (a) and (b) above; (d) all rights and privileges of the Pledgor
with respect to the securities and other property referred to in clauses (a),
(b) and (c) above; and (e) all proceeds of any and all of the foregoing (all the
foregoing, collectively, the “Securities Collateral”); provided, however, that,
the term “Securities Collateral” shall not include (i) to the extent such pledge
would, in the good faith judgment of the Pledgor reasonably be expected to
result in material adverse tax consequences to the Borrower or its Restricted
Subsidiaries, more than 65% of the issued and outstanding shares of the Equity
Interests entitled to vote of any first tier Non-US Restricted Subsidiary;
(ii) the Equity Interests of any Excluded Subsidiary; (iii) the Equity Interests
of any Excluded Joint Venture and (iv) any Equity Interests or debt securities
owned by such Pledgor if and to the extent that the grant of the security
interest shall, after giving effect to Sections 9-406, 9-407, 9-408 or 9-409 of
the UCC (or any successor provision or provisions) or any other applicable law,
(A) constitute or result in the abandonment, invalidation or unenforceability of
any right, title or interest of such Pledgor therein, (B) constitute or result
in a breach or termination pursuant to the terms of, or a default under, any
such Equity Interest or debt securities, (C) be void or illegal under any
applicable governmental law, rule or regulation, or (D) be prohibited by (i) the
organizational documents of the issuer of such Equity Interests or debt
securities or (ii) agreements among the equity holders of the issuer of such
Equity Interests or debt securities, in each case, as in effect on the Closing
Date.
     (b) Upon delivery to the Collateral Agent, (a) any certificated Pledged
Securities now or hereafter included in the Securities Collateral shall be
accompanied by stock powers duly executed in blank or other similar instruments
of transfer reasonably satisfactory to the Collateral Agent and (b) all other
property comprising part of the Securities Collateral shall be accompanied by
proper instruments of assignment duly executed by the applicable Pledgor. Each
subsequent delivery of Pledged Securities shall be accompanied by a schedule
describing the securities then being pledged hereunder, which schedule shall be
attached hereto as a supplement to Schedule II and made a part hereof. Each
schedule so delivered shall supplement any prior schedules so delivered.
     TO HAVE AND TO HOLD the Securities Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or incidental
thereto, unto the Collateral Agent for the benefit of the Secured Parties;
subject, however, to the terms, covenants and conditions hereinafter set forth.

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     SECTION 2. Delivery of the Securities Collateral. (a)  Each Pledgor agrees
to promptly deliver or cause to be delivered to the Collateral Agent any and all
Pledged Securities, and any and all certificates or other instruments or
documents representing the Securities Collateral, other than those Pledged
Securities to be held in a Securities Account which Securities Account will be
subject to a Control Agreement (as defined in the Security Agreement) pursuant
to the terms of the Security Agreement.
     (a) Each Pledgor will cause any Indebtedness for borrowed money owed to
such Pledgor by any Person to be evidenced by a duly executed promissory note
that is pledged to the Collateral Agent for the benefit of the Secured Parties
and delivered to the Collateral Agent pursuant to the terms hereof (provided
that this clause (b) shall not apply to any such Indebtedness in an aggregate
principal amount less than $500,000 owing by any Person that is not a
Subsidiary); provided, that, except with respect to promissory notes
representing, individually or in the aggregate, Indebtedness of more than
$1,000,000, such promissory notes shall be required to be delivered to the
Collateral Agent only on each date on which financial statements are required to
be delivered under Section 5.01(a) or (b) of the Credit Agreement; provided
further, that, to the extent that any such promissory note constitutes an
Intercompany Note and to the extent that any Pledgor is required hereunder to
deliver any such Intercompany Note to the Collateral Agent for purposes of
possession, such Pledgor’s obligations hereunder with respect to such delivery
shall be deemed satisfied by the delivery to the Collateral Agent of the Master
Intercompany Note.
     (b) If any Equity Interests now or hereafter acquired by any Pledgor
constituting Pledged Stock are uncertificated, such Pledgor shall comply with
its obligations under Section 3.05(c) of the Security Agreement.
     SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Securities Collateral
pledged by it hereunder, to and with the Collateral Agent that:
     (a) as of the date hereof the Pledged Stock represents that percentage as
set forth on Schedule II of the issued and outstanding shares of each class of
the capital stock or other Equity Interests of the issuer with respect thereto;
     (b) such Pledgor (i) is, as of the date hereof, the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule II,
(ii) holds the Pledged Securities free and clear of all Liens, other than the
Liens created hereunder and Liens permitted by Section 6.02(v), 6.02(ix) and
6.02(xviii) of the Credit Agreement, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create or permit to exist any security interest
in or other Lien on, the Securities Collateral, except as permitted by the
Credit Agreement, and (iv) subject to Section 2 and Section 5, will cause any
and all Securities Collateral, whether for value paid by such Pled gor or
otherwise, to be promptly deposited with the Collateral Agent and pledged or
assigned hereunder;
     (c) as of the date hereof, except as set forth in the proviso to
Section 1(a)(i), the Pledged Stock and Pledged Securities set forth on
Schedule II constitute all of the shares of capital stock and other Equity
Interests and all debt securities owned by such Pledgor that are not included in
the definition of Collateral under the Security Agreement;
     (d) such Pledgor (i) has the power and authority to pledge the Securities
Collateral in the manner hereby done or contemplated and (ii) will defend its
title or interest thereto or therein

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against any and all Liens (other than the Liens created by this Agreement or
Liens permitted by Section 6.02(v), 6.02(ix) and 6.02(xviii) of the Credit
Agreement), however arising, of all Persons whomsoever;
     (e) by virtue of (i) the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Securities Collateral are delivered to the
Collateral Agent in accordance with this Agreement or (ii) in the case of
uncertificated Equity Interests, the filing of a UCC financing statement in such
Pledgor’s jurisdiction of organization or formation, the Collateral Agent will
obtain a valid and perfected lien upon and first priority security interest in
such Pledged Securities as security for the payment and performance of the
Obligations, subject only to Liens securing the “Obligations” (as defined in the
Revolving Credit Agreement) under the Revolving Credit Agreement; provided,
however, that, for the avoidance of doubt, the representations set forth in this
clause (e) shall not be made with respect to, or construed in accordance with,
the laws of any jurisdiction other than the United States, any State thereof or
the District of Columbia;
     (f) all of the Pledged Stock issued by a corporation has been duly
authorized and validly issued and is fully paid and, to the extent applicable,
nonassessable;
     (g) all of the Pledged Debt Securities issued by any Pledgor have been duly
authorized, executed and delivered and are the enforceable obligations of the
issuer thereof subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of creditors’ rights
generally and to general principles of equity, regardless of whether considered
in a proceeding in equity or at law; and
     (h) all information set forth herein relating to the Pledged Securities is
accurate and complete in all material respects as of the date hereof.
     SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent;
provided that the Collateral Agent shall only exercise such right to hold the
Pledged Securities in its own name as pledgee or the name of its nominee (as
pledgee or as sub-agent) if an Event of Default has occurred and is continuing.
After the occurrence and during the continuance of an Event of Default, each
Pledgor will promptly provide the Collateral Agent with copies of any written
notices or other written communications received by it with respect to Pledged
Securities registered in the name of such Pledgor. After the occurrence and
during the continuance of any Event of Default, the Collateral Agent shall at
all times have the right to exchange the certificates representing Pledged
Securities for certificates of smaller or larger denominations for any purpose
consistent with this Agreement.
     SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and until
an Event of Default shall have occurred and be continuing:
     (i) Each Pledgor shall have the right to exercise any and all voting and/or
other consensual rights and powers inuring to an owner of Pledged Securities or
any part thereof for any purpose not inconsistent with the terms of this
Agreement, the Credit Agreement and the other Loan Documents; provided, however,
that such Pledgor will not be entitled to exercise any such right if the result
thereof would reasonably be expected to materially and adversely affect the

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rights and remedies of any of the Secured Parties under this Agreement, the
Credit Agreement or any other Loan Document or the ability of the Collateral
Agent or any other Secured Parties to exercise the same;
     (ii) The Collateral Agent shall execute and deliver to each Pledgor, or
cause to be executed and delivered to each Pledgor, all such proxies, powers of
attorney and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting and/or consensual rights
and powers it is entitled to exercise pursuant to subparagraph (i) above and to
receive the cash dividends it is entitled to receive pursuant to subparagraph
(iii) below; and
     (iii) Subject to the next sentence, each Pledgor shall be entitled to
receive and retain any and all cash dividends, interest, principal and other
amounts paid on the Pledged Securities to the extent and only to the extent that
such cash dividends, interest, principal and other amounts are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws. All noncash dividends,
interest, principal and other amounts, and all dividends, interest, principal
and other amounts paid or payable in cash or otherwise in connection with a
partial or total liquidation or dissolution, return of capital, capital surplus
or paid-in surplus, and all other distributions (other than distributions
referred to in the preceding sentence) made on or in respect of the Pledged
Securities, whether paid or payable in cash or otherwise, whether resulting from
a subdivision, combination or reclassification of the outstanding capital stock
of the issuer of any Pledged Securities or received in exchange for Pledged
Securities or any part thereof, or in redemption thereof, or as a result of any
merger, consolidation, acquisition or other exchange of assets to which such
issuer may be a party or otherwise, shall be and become part of the Securities
Collateral, and, if received by any Pledgor, shall be promptly delivered to the
Collateral Agent in the same form as so received (with any necessary
endorsement); provided that dividends, interest, principal and other amounts
paid in cash shall be required to be delivered to the Collateral Agent only
after the occurrence and during the continuance of any Event of Default.
     (b) Upon the occurrence and during the continuance of an Event of Default
all rights of any Pledgor to dividends, interest, principal or other amounts
that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to receive
and retain such dividends, interest, principal or other amounts. All dividends,
interest, principal or other amounts re ceived by the Pledgor contrary to the
provisions of this Section 5 shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other property or funds of such
Pledgor and shall within five (5) Business Days after receipt thereof be
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received by the Collateral Agent pursuant to the provisions of this paragraph
(b) shall be applied in accordance with the provisions of Section 7. The
Collateral Agent shall be under no obligation with respect to the investment of
such cash dividends, interest or principal, including, for the avoidance of
doubt, any requirement to invest such cash dividends, interest or principal in
any class of investment, interest-bearing or otherwise.
     (c) Upon the occurrence and during the continuance of an Event of Default
and following written notice from the Collateral Agent to Pledgor, all rights of
any Pledgor to exercise the voting and consensual rights and powers it is
entitled to exercise pursuant to paragraph (a)(i) of this Section 5,

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and the obligations of the Collateral Agent under paragraph (a)(ii) of this
Section 5, shall cease, and all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority to
exercise such voting, managerial and consensual rights and powers; provided that
any failure by Collateral Agent to give such written notice to Pledgor shall not
limit or otherwise affect any of Collateral Agent’s rights and remedies
hereunder. After all Events of Default have been cured or waived, such Pledgor
will have the right to exercise the voting and consensual rights and powers that
it would otherwise be entitled to exercise pursuant to the terms of paragraph
(a)(i) above and receive the payments, proceeds, dividends, distributions,
monies, compensation, property, assets, instruments or rights, which it would be
authorized to receive and retain pursuant to the terms of paragraph (a)(iii)
above.
     SECTION 6. Remedies upon Event of Default. Upon the occurrence and during
the continuance of an Event of Default, subject to applicable regulatory and
legal requirements, the Collateral Agent may sell or otherwise dispose of the
Securities Collateral, or any part thereof, at public or private sale or at any
broker’s board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and, to the extent permitted by
applicable law, the Pledgors hereby waive all rights of redemption, stay,
valuation and appraisal any Pledgor now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.
     The Collateral Agent shall give a Pledgor 10 days’ prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions (the “UCC”)) of the Collateral
Agent’s intention to make any sale or other disposition of such Pledgor’s
Securities Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker’s board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Securities Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice of such sale. At any such sale, the Securities Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Securities Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Securities Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Securities Collateral is made on credit or for
future delivery, the Securities Collateral so sold may be retained by the
Collateral Agent until the sale price is paid in full by the purchaser or
purchasers thereof, but the Collateral Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Securities Collateral so sold and, in case of any such failure, such Securities
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay,
valuation or appraisal on the part of any Pledgor (all said rights being also
hereby waived and released), the Securities Collateral or any part thereof
offered for sale and may make payment on account thereof by using any Obligation
then due and payable to such Secured Party from any Pledgor as a credit against
the purchase price, and such Secured Party may, upon compliance with the terms
of sale, hold, retain and dispose of such property without fur-

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ther accountability to any Pledgor therefor. For purposes hereof, (a) a written
agreement to purchase the Securities Collateral or any portion thereof shall be
treated as a sale thereof, (b) the Collateral Agent shall be free to carry out
such sale pursuant to such agreement and (c) no Pledgor shall be entitled to the
return of the Securities Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose upon the Securities Collateral and to sell the
Securities Collateral or any portion thereof pursuant to a judgment or decree of
a court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
     Each Pledgor recognizes that, by reason of certain prohibitions contained
in the Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and any such
similar statute as from time to time in effect being called the “Federal
Securities Laws”) and applicable state securities laws, the Collateral Agent may
be compelled, with respect to any sale of all or any part of the Securities
Collateral conducted without prior registration or qualification of such
Securities Collateral under the Federal Securities Laws and/or such state
securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Securities Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges that any such private sale may be at prices and on terms
less favorable than those obtainable through a public sale without such
restrictions (including a public offering made pursuant to a registration
statement under the Federal Securities Laws) and, notwithstanding such
circumstances, each Pledgor agrees that the fact that any such sale is conducted
as a private sale shall not, in and of itself, cause such sale to not be deemed
to have been made in a commercially reasonable manner and that the Collateral
Agent shall have no obligation to engage in public sales and no obligation to
delay the sale of any Securities Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale requiring
registration under the Federal Securities Laws or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
If the Collateral Agent determines to exercise its right to sell any or all of
the Securities Collateral, upon written request, each Pledgor shall and shall
cause each issuer of any Pledged Stock to be sold hereunder, each partnership
and each limited liability company, in each case, which is a Subsidiary of such
Pledgor, from time to time to furnish to the Collateral Agent all such
information as the Collateral Agent may request in order to determine the number
and nature of interest, shares or other instruments included in the Securities
Collateral which may be sold by the Collateral Agent in exempt transactions
under the Federal Securities Laws and the rules and regulations of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.
     SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Securities Collateral pursuant to Section 6, as well as any Securities
Collateral consisting of cash, shall be applied by the Collateral Agent as
provided in the Security Agreement.
     SECTION 8. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby
appoints the Collateral Agent the attorney-in-fact of such Pledgor for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Collateral Agent may deem reasonably
necessary to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest, provided that the Collateral Agent shall only take
any action pursuant to such appointment upon the occurrence and during the
continuation of an Event of Default. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, upon the occurrence and
during the continuance of an Event of Default, with full power of substitution
either in the Collateral Agent’s name

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or in the name of such Pledgor, to ask for, demand, sue for, collect, receive
and give acquittance for any and all moneys due or to become due under and by
virtue of any Securities Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor representing any
interest or dividend or other distribution payable in respect of the Securities
Collateral or any part thereof or on account thereof and to give full discharge
for the same, to settle, compromise, prosecute or defend any action, claim or
proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer
and to make any agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or to take any action with respect to
the Securities Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby. The Collateral Agent and the
other Secured Parties shall be accountable only for amounts actually received as
a result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence, willful misconduct or bad faith.
     SECTION 9. Waivers; Amendment. (a)  No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or any other Loan Document or consent
to any departure by any Pledgor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) below, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Pledgor in any case shall entitle
such Pledgor or any other Pledgor to any other or further notice or demand in
similar or other circumstances.
     (b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into in accordance with Section 9.08 of the Credit Agreement.
     SECTION 10. Securities Act, etc. In view of the position of the Pledgors in
relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Federal Securities Laws or
equivalent legislation in any other jurisdiction with respect to any disposition
of the Pledged Securities permitted hereunder. Each Pledgor understands that
compliance with the Federal Securities Laws or equivalent legislation in any
other jurisdiction might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent was to attempt to dispose of all or any
part of the Pledged Securities, and might also limit the extent to which or the
manner in which any subsequent transferee of any Pledged Securities could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of all or
part of the Pledged Securities under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. Each Pledgor
recognizes that in light of such restrictions and limitations the Collateral
Agent may, with respect to any sale of the Pledged Securities, limit the
purchasers to those who will represent and agree, among other things, to acquire
such Pledged Securities for their own account for investment, and not with a
view to the distribution or resale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and deliver
to the purchaser or purchasers

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thereof the Securities Collateral so sold. Each Pledgor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Collateral Agent shall incur no responsibility or
liability for selling all or any part of the Pledged Securities at a price that
the Collateral Agent, in its sole and absolute discretion, may in good faith
deem reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were a public
sale or if more than a single purchaser were approached. The provisions of this
Section 10 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
     SECTION 11. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the reasonable written request of the Collateral Agent, use its commercially
reasonable efforts to take or to cause the issuer of such Pledged Securities to
take such action and prepare, distribute, file and/or cause to become effective
such documents as are required or advisable in the reasonable opinion of counsel
for the Collateral Agent to permit the public sale of such Pledged Securities.
Each Pledgor further agrees to indemnify, defend and hold harmless the
Collateral Agent, each other Secured Party, any underwriter and their respective
officers, directors, affiliates and controlling Persons (collectively,
“indemnitees”) from and against all loss, liability, expenses, costs of counsel
(including, without limitation, reasonable fees and out-of-pocket expenses to
the Collateral Agent of legal counsel) and claims (including the reasonable
costs of investigation) that they may incur insofar as such loss, liability,
expense or claim arises out of or is based upon any alleged untrue statement of
a material fact contained in any prospectus (or any amendment or supplement
thereto) or in any notification or offering circular, or arises out of or is
based upon any alleged omission to state a material fact required to be stated
therein or necessary to make the statements in any thereof not misleading,
except insofar as the same may have been caused by any untrue statement or
omission based upon information furnished in writing to such Pledgor or the
issuer of such Pledged Securities by the Collateral Agent or any other Secured
Party expressly for use therein. Each Pledgor further agrees, upon such written
request referred to above, to use its reasonable best efforts to qualify, file
or register, or cause the issuer of such Pledged Securities to qualify, file or
register, any of the Pledged Securities under the Blue Sky or other securities
laws of such states as may be requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations. Each Pledgor will bear all reasonable costs and expenses of
carrying out its obligations under this Section 11. Each Pledgor acknowledges
that there is no adequate remedy at law for failure by it to comply with the
provisions of this Section 11 and that such failure would not be adequately
compensable in damages, and therefore agrees that its agreements contained in
this Section 11 may be specifically enforced.
     SECTION 12. Termination or Release. (a) This Agreement and the security
interests granted hereby (i) shall automatically terminate when all the
Obligations (other than unasserted contingent indemnification obligations not
due and payable) have been paid in full (at which time the Collateral Agent
shall execute and deliver to each Pledgor, at such Pledgor’s expense, all UCC
termination statements or their equivalent in any other jurisdiction and other
documents which such Pledgor shall reasonably request to evidence such
termination) and (ii) shall continue to be effective or shall be reinstated, as
the case may be, if at any time any payment in respect of any Obligation is
rescinded or must otherwise be restored by any Secured Party upon any bankruptcy
or reorganization of any Pledgor or otherwise. Any execution and delivery of
termination statements or documents pursuant to this Section 12(a) shall be
without recourse to or warranty by the Collateral Agent. A Subsidiary Guarantor
shall automatically be

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released from its obligations hereunder and the Security Interests in the
Collateral of such Subsidiary Guarantor shall be automatically released in the
event that the Equity Interests of such Subsidiary Guarantor shall be sold,
transferred or otherwise disposed of pursuant to a transaction permitted under
the Credit Agreement to a Person that is not an Affiliate of Borrower such that
such Person is no longer a Restricted Subsidiary of Borrower.
     (b) Upon any sale or other transfer by any Pledgor of any Securities
Collateral that is permitted under the Credit Agreement to any Person that is
not a Loan Party, or upon the effectiveness of any written consent to the
release of the security interests granted hereby in any Securities Collateral
pursuant to Section 9.08 of the Credit Agreement, the security interests in such
Securities Collateral shall be automatically released.
     (c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at
such Pledgor’s expense, all documents, including the certificates representing
the applicable Pledged Securities that have been delivered to the Collateral
Agent or, in the event of any such certificate has been lost, mutilated or
destroyed, an affidavit of lost certificate, that such Pledgor shall reasonably
request to evidence such termination or release. Any execution and delivery of
documents pursuant to this Section 12 shall be without recourse to or warranty
by the Collateral Agent.
     SECTION 13. Notices. All communications and notices hereunder shall (except
as otherwise expressly permitted herein) be in writing and given as provided in
Section 9.01 of the Credit Agreement. All communications and notices hereunder
to any Subsidiary Guarantor shall be given to it c/o the Borrower at the
Borrower’s address as provided in Section 9.01 of the Credit Agreement, with a
copy to the Borrower.
     SECTION 14. Further Assurances. Each Pledgor agrees to do such further acts
and things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as the Collateral Agent may at any time reasonably
request in writing in connection with the administration and enforcement of this
Agreement or with respect to the Securities Collateral or any part thereof or in
order to assure and confirm unto the Collateral Agent, its rights and remedies
hereunder.
     SECTION 15. Binding Effect; Several Agreement. This Agreement shall be
binding upon each Pledgor and the Collateral Agent and their respective
successors and permitted assigns, and shall inure to the benefit of each
Pledgor, the Collateral Agent and the other Secured Parties and their respective
permitted successors and assigns, except that no Pledgor shall have the right to
assign or transfer its rights or obligations hereunder or any interest herein or
in the Securities Collateral (and any such assignment or transfer shall be void)
except as permitted by the Credit Agreement or any other Loan Document. This
Agreement shall be construed as a separate agreement with respect to each
Pledgor and may be amended, modified, supplemented, waived or released with
respect to any Pledgor without the approval of any other Pledgor and without
affecting the obligations of any other Pledgor hereunder.
     SECTION 16. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by any Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans, regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect until this Agreement shall terminate.

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     (b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions. It is understood and agreed among the
parties that this Agreement shall create separate security interests in the
Securities Collateral securing the Obligations as provided in Section 1, and
that any determination by any court with jurisdiction that the security interest
securing any Obligation or class of Obligations is invalid for any reason shall
not in and of itself invalidate the Security Interests securing any other
Obligations hereunder.
     SECTION 17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
     SECTION 18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile or other
electronic transmission (e.g., “PDF” or “tif” via e-mail) shall be as effective
as delivery of a manually executed counterpart of this Agreement.
     SECTION 19. Rules of Interpretation. The rules of interpretation specified
in the Credit Agreement (including Section 1.03 thereof) shall be applicable to
this Agreement. Section headings used herein are for convenience of reference
only, are not part of this Agreement and are not to affect the construction of,
or to be taken into consideration in interpreting, this Agreement.
     SECTION 20. Jurisdiction; Consent to Service of Process.
     (a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America for the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State court or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Collateral Agent or any other Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Pledgor or its properties in
the courts of any jurisdiction.
     (b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court referred to in
paragraph (a) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

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     (c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.15 of the Credit Agreement.
Nothing in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
     SECTION 21. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
     SECTION 22. Additional Pledgors. To the extent any Subsidiary shall be
required to become a Pledgor pursuant to any Loan Document, upon execution and
delivery by the Collateral Agent and such Subsidiary of an instrument in the
form of Annex I attached to the Security Agreement, such Subsidiary shall become
a Pledgor hereunder with the same force and effect as if originally named as a
Pledgor herein. The execution and delivery of any such instrument shall not
require the consent of any other Pledgor hereunder. The rights and obligations
of each Pledgor hereunder shall remain in full force and effect notwithstanding
the addition of any new Pledgor as a party to this Agreement.
     SECTION 23. Financing Statements. Each Pledgor hereby irrevocably
authorizes the Collateral Agent at any time and from time to time to file in any
relevant jurisdiction any initial financing statements (including fixture
filings) and amendments thereto that contain the information required by
Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the
filing of any financing statement or amendment relating to the Securities
Collateral, including (i) whether such Pledgor is an organization, the type of
organization and any organizational identification number issued to such Pledgor
and (ii) any financing or continuation statements or other documents without the
signature of such Pledgor where permitted by law, including the filing of a
financing statement describing the Securities Collateral as “all personal
property of the debtor whether now owned or hereafter acquired”(or using words
of similar import). Each Pledgor agrees to provide all information described in
the immediately preceding sentence to the Collateral Agent promptly upon written
request. Each Pledgor hereby ratifies its authorization for the Collateral Agent
to file in any relevant jurisdiction any financing statements relating to the
Collateral if filed prior to the date hereof.
     SECTION 24. INTERCREDITOR AGREEMENT GOVERNS. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL
AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, PURSUANT TO THIS AGREEMENT AND
THE EXERCISE OF ANY RIGHT OR REMEDY BY THE COLLATERAL AGENT AND THE OTHER
SECURED PARTIES HEREUNDER ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR
AGREEMENT, AND SHALL HAVE THE RELATIVE PRIORITIES SET FORTH THEREIN. IN THE
EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT AND THIS AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR
AGREEMENT SHALL GOVERN AND CONTROL.
     SECTION 25. Conflicts. In the case of any conflict between this Agreement
and the Credit Agreement, the provisions of the Credit Agreement shall govern.
[Signature Pages Follow]

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
SOLUTIA INC.
BEAMER ROAD MANAGEMENT COMPANY
CPFILMS INC.
FLEXSYS AMERICA CO.
FLEXSYS AMERICA L.P.
      by FLEXSYS AMERICA CO.,
      its general partner
MONCHEM INTERNATIONAL, INC.
SOLUTIA BUSINESS ENTERPRISES INC.
SOLUTIA GREATER CHINA, INC.
SOLUTIA INTER-AMERICA, INC.
SOLUTIA OVERSEAS, INC.
SOLUTIA SYSTEMS, INC.

                  By:   /s/ James A. Tichenor         Name:   James A. Tichenor 
      Title:   Authorized Officer   

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            CITIBANK, N.A.,
as Collateral Agent
      By:   /s/ Aaron Dannenberg         Name:   Aaron Dannenberg       
Title:   Vice President   

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