Exhibit 10.1
Execution Version
 
TRANSACTION AGREEMENT
BY AND AMONG
SOLUTIA INC.,
NYCO LLC,
SK CAPITAL PARTNERS II, L.P.
AND
SK TITAN HOLDINGS LLC
MARCH 31, 2009
 

 

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TABLE OF CONTENTS

              Page
Article I Definitions
    2  
Section 1.1 Definitions
    2  
Section 1.2 Interpretations
    21  
 
       
Article II Formation of Holdings
    22  
Section 2.1 Contribution of Assets to Newco
    22  
Section 2.2 Assumed Liabilities
    22  
Section 2.3 Treatment of Intercompany Accounts
    22  
Section 2.4 Newco Formation Contribution Consideration
    22  
Section 2.5 Contribution of Newco Units and Cash to Holdings
    23  
Section 2.6 Holdings Formation Contribution Consideration
    23  
Section 2.7 Closing
    23  
Section 2.8 Deliveries at Closing
    24  
Section 2.9 Working Capital Payments
    27  
Section 2.10 Non-Transferability
    30  
Section 2.11 Intellectual Property License
    31  
Section 2.12 Contribution to Newco Subsidiaries
    31  
Section 2.13 Excluded Liabilities
    31  
Section 2.14 Additional Consideration Payable After the Closing
    32  
 
       
Article III Seller’s Representations and Warranties
    32  
Section 3.1 Organization of Sellers and Newco; Good Standing
    32  
Section 3.2 Authorization of Transaction
    33  
Section 3.3 Noncontravention
    33  
Section 3.4 Title to Contributed Assets
    33  
Section 3.5 Sufficiency of Assets
    34  
Section 3.6 Financial Statements
    34  
Section 3.7 Events Subsequent to Most Recent Fiscal Quarter End
    34  
Section 3.8 Real Property
    35  
Section 3.9 Furnishings and Equipment
    36  
Section 3.10 Inventory and Current Assets and Current Liabilities
    36  
Section 3.11 Material Contracts
    37  
Section 3.12 Intellectual Property
    38  
Section 3.13 Tax Matters
    39  
Section 3.14 Legal Compliance
    40  
Section 3.15 Litigation
    41  
Section 3.16 Product Warranty
    41  
Section 3.17 Product Liability
    41  
Section 3.18 Affiliate Transactions
    41  
Section 3.19 Customers and Suppliers
    41  
Section 3.20 Insurance
    41  
Section 3.21 Environmental, Health or Safety Matters
    42  
Section 3.22 Labor Relations
    43  
Section 3.23 Employee Benefit Plans and Employees
    44  

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              Page
Section 3.24 Brokers’ Fees
    45  
Section 3.25 Newco
    45  
Section 3.26 Title to Newco Units
    45  
Section 3.27 Newco Capitalization
    45  
Section 3.28 Solvency
    46  
Section 3.29 No Undisclosed Liabilities
    46  
Section 3.30 Seller Information
    46  
Section 3.31 Disclaimer of Other Representations and Warranties
    46  
 
       
Article IV Buyer’s and SK’s Representations and Warranties
    47  
Section 4.1 Organization of Buyer and SK; Good Standing
    47  
Section 4.2 Authorization of Transaction
    47  
Section 4.3 Noncontravention
    47  
Section 4.4 Legal Compliance
    48  
Section 4.5 Litigation
    48  
Section 4.6 Brokers’ Fees
    48  
Section 4.7 Financing; Sufficient Funds
    48  
Section 4.8 SK Information
    49  
Section 4.9 Acquiring Person; HSR Act
    49  
Section 4.10 Disclaimer of Other Representations and Warranties
    49  
 
       
Article V Pre-Closing Covenants
    49  
Section 5.1 Reasonable Best Efforts; Cooperation
    49  
Section 5.2 Regulatory Approvals
    49  
Section 5.3 Notices and Consents
    50  
Section 5.4 Cooperation Regarding Holdings and Newco Formation
    51  
Section 5.5 Preservation of Business
    53  
Section 5.6 Notice of Developments
    53  
Section 5.7 Notice of Supplemental Disclosure
    53  
Section 5.8 Access; No Contact; Confidentiality
    53  
Section 5.9 Press Releases and Public Announcements
    54  
Section 5.10 Bulk Transfer Laws
    54  
Section 5.11 Buyer Financing
    54  
Section 5.12 SK Guarantee
    56  
Section 5.13 Seller Guarantee
    56  
Section 5.14 Newco Capitalization and Organizational Documents
    56  
Section 5.15 Investment Acknowledgements
    56  
Section 5.16 Solicitation of Alternative Transactions
    57  
 
       
Article VI Other Covenants
    58  
Section 6.1 Cooperation
    58  
Section 6.2 Further Assurances; Inadvertent Transfers of Assets
    58  
Section 6.3 Litigation Support
    59  
Section 6.4 Run-Off
    59  
Section 6.5 Access; Enforcement; Record Retention
    60  
Section 6.6 Non-Competition
    60  
Section 6.7 Non-Solicitation of Employees
    61  
Section 6.8 Covered Employees
    62  

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              Page
Section 6.9 Recording of Intellectual Property Assignments
    68  
Section 6.10 Transfer Taxes
    69  
Section 6.11 Insurance Matters
    69  
Section 6.12 Business Pension Plan Arrangements
    69  
Section 6.13 Replacement Bonding Requirements
    72  
Section 6.14 Equistar Arrangements
    72  
Section 6.15 Tax Matters
    74  
Section 6.16 Implementation by Holdings
    75  
Section 6.17 Acknowledgements
    75  
 
       
Article VII Conditions to Obligation to Close
    76  
Section 7.1 Conditions to Buyer’s Obligations
    76  
Section 7.2 Conditions to Seller’s Obligation
    77  
Section 7.3 No Frustration of Closing Conditions
    78  
 
       
Article VIII Indemnification
    78  
Section 8.1 No Survival of Representations and Warranties
    78  
Section 8.2 Indemnification Provisions for Buyer’s Benefit
    79  
Section 8.3 Indemnification Provisions for Seller’s Benefit
    79  
Section 8.4 Limitations on Indemnification; Calculation of Damages
    80  
Section 8.5 Matters Involving Third Parties
    82  
Section 8.6 Claims and Payment; Treatment of Payments
    83  
Section 8.7 Guest Operations
    83  
Section 8.8 Exclusive Remedy
    85  
 
       
Article IX Termination
    85  
Section 9.1 Termination of Agreement
    85  
Section 9.2 Termination Fees
    86  
Section 9.3 Effect of Termination
    87  
Section 9.4 Maximum Recovery
    87  
 
       
Article X Miscellaneous
    88  
Section 10.1 Expenses
    88  
Section 10.2 Entire Agreement
    88  
Section 10.3 Incorporation of Annexes, Exhibits and Disclosure Schedule
    88  
Section 10.4 Amendments and Waivers
    88  
Section 10.5 Succession and Assignment
    89  
Section 10.6 Notices
    89  
Section 10.7 Governing Law; Governing Language
    90  
Section 10.8 Submission to Jurisdiction; Service of Process
    90  
Section 10.9 Waivers of Jury Trial
    91  
Section 10.10 Specific Performance
    91  
Section 10.11 Severability
    91  
Section 10.12 No Third Party Beneficiaries
    91  
Section 10.13 Mutual Drafting
    92  
Section 10.14 Disclosure Schedule
    92  
Section 10.15 Headings; Table of Contents
    92  
Section 10.16 Counterparts; Facsimile and Electronic Signatures
    92  

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Exhibit A — {Intentionally Omitted}
Exhibit B — Form of Bill of Sale
Exhibit C — Form of Assignment and Assumption Agreement
Exhibit D — Form of Transition Services Agreement
Exhibit E — Form of Intellectual Property Assignments
Exhibit F — Form of DPO Operating Agreement
Exhibit G — Form of DME Supply Agreement
Exhibit H — Form of China Asset Transfer Agreement
Exhibit I — Form of Equistar Lease and Subcontract Agreement
Exhibit J — Form of Louvain-La-Neuve Lease
Exhibit K — Form of Securityholders Agreement
Exhibit L — Form of Holdings Certificate of Incorporation
Exhibit M — Form of Holdings Bylaws
Annex A — Select Transferred Contracts
Annex B — Select Contributed Assets
Annex C — Select Covered Employees
Annex D — Select Excluded Assets
Annex E — Illustrative Net Working Capital Determination
Annex F — Select Products
Annex G — Business Financial Statements
Annex H — Debt Letter of Interest
Annex I — Equity Commitment Letter
Disclosure Schedule

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TRANSACTION AGREEMENT
     This TRANSACTION AGREEMENT (this “Agreement”) is entered into as of
March 31, 2009 by and among Solutia Inc., a corporation formed under the laws of
the State of Delaware (“Solutia” or “Seller” and together with the Other Sellers
(as defined below), “Sellers”), NyCo LLC, a limited liability company formed
under the laws of the State of Delaware and a direct, wholly-owned subsidiary of
Solutia (“Newco”), SK Capital Partners II, L.P., a limited partnership formed
under the laws of Delaware (“SK”), and SK Titan Holdings LLC, a limited
liability company formed under the laws of the State of Delaware and a direct,
wholly-owned subsidiary of SK (“Buyer”). Seller, Newco, SK and Buyer are
referred to collectively herein as the “Parties”.
WITNESSETH
     WHEREAS, Solutia, through an unincorporated division thereof and through
the Other Sellers, engages in a business operation that manufactures and markets
nylon intermediate chemicals and nylon products, including the Products (as
defined below) (the “Business”), as well as other business operations unrelated
to the Business;
     WHEREAS, Solutia wishes to transfer, and Buyer wishes to acquire, a
majority interest in the Business, on the terms and subject to the conditions
set forth herein;
     WHEREAS, the transfer of the majority interest in the Business will be
effected through (i) the contribution by Solutia and the Other Sellers to Newco
or a designated Newco Subsidiary of certain assets held by Sellers and used
primarily in the operation of the Business in exchange for equity interests of
Newco and, (ii) thereafter, (x) the contribution by Solutia to a corporation
formed under the laws of the State of Delaware to be formed by the Parties and
named “NyCo Holdings, Inc.” or any other name as mutually agreed upon by Buyer
and Seller (“Holdings”) of all of the then-outstanding equity interests of Newco
for cash and shares of the capital stock of Holdings as specified herein, and
(y) the contribution by Buyer to Holdings of the cash amount specified herein
for the shares of the capital stock of Holdings specified herein so that, after
giving effect to the transactions contemplated hereby, Buyer shall hold a
majority of the outstanding capital stock of Holdings, in each case on the terms
and subject to the conditions set forth herein; and
     WHEREAS, it is the intention of the Parties that the contributions to
Holdings by Solutia of all of the equity interests of Newco in exchange for cash
and shares of the capital stock of Holdings, on the one hand, and by Buyer of
cash in exchange for shares of the capital stock of Holdings, on the other hand,
together be treated as a tax-free contribution pursuant to Section 351 of the
IRC (as defined below).
     NOW, THEREFORE, in consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained,
the Parties agree as follows.

 

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ARTICLE I
DEFINITIONS
     Section 1.1 Definitions. For purposes of this Agreement:
     “ABL” means an asset backed loan facility providing available borrowing to
Holdings on commercially reasonable terms and conditions.
     “Accounts Receivable” means all accounts receivable of the Business
outstanding on the Closing Date and all claims, refunds and credits with respect
thereto.
     “Acquisition Proposal” means any inquiry regarding, or a proposal or offer
to enter into, a Covered Transaction from any Person or group of Persons other
than SK, Buyer or any of their Affiliates.
     “Adjustment Determination Effective Time” has the meaning set forth in
Section 2.9(a).
     “Affiliate” has the meaning set forth in Rule 12b-2 promulgated under the
Exchange Act.
     “Aggregate Reserved Capacity” means the total Committed Reserved Capacity
for all existing Users.
     “Agreement” has the meaning set forth in the preamble.
     “Antitrust Law” means the Sherman Act, the Clayton Act, the HSR Act, the
Federal Trade Commission Act, and all other laws and orders that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition, whether in the United States or elsewhere.
     “Applicable Guest Agreement” has the meaning set forth in Section 8.7.
     “Assignment and Assumption Agreement” has the meaning set forth in Section
2.8(a)(ii).
     “Assumed Liabilities” means all Liabilities of any Seller related to the
Business as of the Closing Date or arising from and after the date thereof,
including:
     (a) all Liabilities reflected on the Conclusive Net Working Capital
Statement;
     (b) all Liabilities relating to or arising out of the Transferred
Contracts;
     (c) to the extent not assumed pursuant to any other clause of this
definition, (i) all Liabilities set forth on the Most Recent Balance Sheet to
the extent not reduced, discharged or released prior to Closing, but not
including any Excluded Liabilities set forth thereon, and (ii) all Liabilities
of Sellers that are of the same type and nature of the Liabilities identified on
the Most Recent Balance Sheet relating to the Business which have arisen after
the date of the Most Recent Balance Sheet Date in the ordinary course

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of business which would appear on a balance sheet prepared in accordance with
GAAP consistently applied with the Most Recent Balance Sheet, but not including
any Excluded Liabilities which would appear thereon;
     (d) all Liabilities for product returns or replacements or relating to or
arising under any product warranties, claims of product liability, obligations
to indemnify or similar claims related to the Business at any time;
     (e) other than the Excluded Environmental Liabilities, all Liabilities
relating to or arising out of the ownership or operation of the Facilities or
otherwise relating to or arising out of the past, current or future conduct of
the Business with respect to environmental, health or safety matters, including
all such Liabilities arising pursuant to Environmental, Health or Safety
Requirements;
     (f) all Liabilities of the Business for unpaid Taxes with respect to
taxable periods or portions thereof ending on or prior to the Closing Date
(other than Liabilities for Income Taxes of any Seller);
     (g) any Liability relating to or arising out of any claim or threatened
claim that the use of the Intellectual Property acquired hereunder infringed,
misappropriated or otherwise violated the Intellectual Property or any right of
any Person;
     (h) all Liabilities related to or arising out of any claims, causes of
action, lawsuits, or any other legal proceedings, whether in tort, contract or
otherwise, relating to or arising out of the Business or any Contributed Asset
at any time (other than the Retained Litigation Matters);
     (i) for the avoidance of doubt, all Liabilities relating to or arising out
of the ownership or operation of the Business or any Contributed Asset from and
after the Closing Date;
     (j) all Liabilities to be assumed by Holdings, Newco or Buyer (or any of
their respective Subsidiaries) in accordance with the provisions of Section 6.8;
and
     (k) all Liabilities to be assumed by Holdings, Newco or Buyer (or any of
their respective Subsidiaries) in accordance with the provisions of
Section 6.12.
provided, however, that, notwithstanding the above, the Assumed Liabilities
shall not include (i) any Liability of any Other Seller organized under the laws
of China related to the Business as of the Closing Date; or (ii) any other
Excluded Liabilities.
     “Basket” has the meaning set forth in Section 8.4(g).
     “Bill of Sale” has the meaning set forth in Section 2.8(a)(i).
     “Bonding Requirements” means standby letters of credit, guarantees,
indemnity bonds and other financial commitment credit support instruments issued
by third parties on behalf of any Seller or any of its respective Subsidiaries
regarding the Business.

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     “Business” has the meaning set forth in the recitals.
     “Business Day” means any day other than a Saturday, a Sunday or a day on
which banks located in New York, New York shall be authorized or required by law
to close.
     “Buyer” has the meaning set forth in the preamble.
     “Buyer Counterparty” has the meaning set forth in Section 8.7(a).
     “Buyer Indemnified Party” has the meaning set forth in Section 8.2.
     “Buyer Termination Fee” has the meaning set forth in Section 9.2(a).
     “Cap” has the meaning set forth in Section 8.4(i).
     “Cash” means cash, cash equivalents and liquid investments.
     “Cash Amount” means Fifty Million Dollars ($50,000,000).
     “China” means the People’s Republic of China, but excluding the Special
Administrative Region of Hong Kong, the Special Administrative Region of Macao,
and Taiwan Province.
     “China Asset Transfer Agreement” has the meaning set forth in Section
2.8(a)(vii).
     “China Asset Transfer Closing” means the closing of the transactions
contemplated by the China Asset Transfer Agreement.
     “China Assumed Liabilities” means any Liability of any Other Seller
organized under the laws of China that (a) would be an Assumed Liability but for
clause (i) of the proviso to the definition of Assumed Liabilities or (b) is
otherwise to be assumed by Newco or any Newco Subsidiary pursuant to the China
Asset Transfer Agreement.
     “China Business Assets” means any asset of any Other Seller organized under
the laws of China, including any rights of any such Other Seller under any
Contracts, that would be a Contributed Asset but for clause (i) of the proviso
to the definition of Contributed Assets.
     “Chocolate Bayou Plant” means Seller’s Chocolate Bayou plant located in
Alvin, Texas.
     “Closing” has the meaning set forth in Section 2.7.
     “Closing Date” has the meaning set forth in Section 2.7.
     “COBRA” has the meaning set forth in Section 6.8(g).
     “Committed Reserved Capacity” means, with respect to each User, the
Reserved Capacity that is reserved for, and committed to by, such User as of the
date hereof.
     “Conclusive Net Working Capital Statement” has the meaning set forth in
Section 2.9(c).

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     “Conclusive Quarterly Statement” has the meaning set forth in Section
6.14(b)(iii).
     “Confidentiality Agreement” means the letter agreement, dated as of
July 30, 2008, by and between Solutia and Valence Group, regarding the terms and
conditions on which Solutia would make available to Valence Group and its
Representatives (solely for such purposes, as defined therein) certain
information relating to the Business.
     “Contract” means any agreement, contract, lease, sublease, indenture,
mortgage, instrument, guaranty, loan or credit agreement, note, bond, customer
order, purchase order, franchise, dealer and distributorship agreement, supply
agreement, development agreement, joint venture agreement, license agreement,
promotion agreement, partnership agreement or other binding arrangement,
understanding, permission or commitment, whether written or oral and including
any right or obligation under any of the foregoing.
     “Contract Rejection Effective Date” means the effective date of Equistar’s
rejection, pursuant to 11 U.S.C. s. 365, of the Equistar U&S Agreement and the
Equistar Land Lease, as such effective date is established by the Order
Authorizing the (i) Long-Term Idling of the Chocolate Bayou Olefins Facility;
(ii) Reduction of the Workforce at the Facility; and (iii) Rejection of Certain
Executory Contracts and Unexpired Leases Related to the Facility, entered in the
Equistar Chapter 11 Case on March 13, 2009, as such order or the effective date
set forth therein for rejection of the Equistar U&S Agreement and the Equistar
Land Lease may be modified by any later order entered in the Equistar Chapter 11
Case.
     “Contributed Assets” means all of Sellers’ right, title, and interest in
and to all of the following assets of Sellers used or held for use primarily in
the operation of the Business as of the Closing Date:
     (a) Inventory;
     (b) Furnishings and Equipment;
     (c) Records;
     (d) Intellectual Property (subject to the license set forth in
Section 2.11);
     (e) Owned Real Property;
     (f) all rights under Contracts primarily relating to (x) the Business or
(y) any asset included in the definition of Contributed Assets, including those
Contracts listed on Annex A hereto other than those that expire or that are
terminated prior to the Closing, but, in each case, excluding this Agreement,
any Related Agreement or any Contracts primarily related to any Excluded Asset
and any Seller’s rights under any such excluded Contracts (all Contracts
contemplated by this clause (f), the “Transferred Contracts”);
     (g) all Current Assets, including Accounts Receivable (excluding the
Equistar Accounts Receivable), reflected on the Conclusive Net Working Capital
Statement;

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     (h) all claims, deposits, pre-payments, refunds, causes of action, rights
of set-off and rights of recoupment (including any such item relating to the
payment of Taxes (other than such items relating to Income Taxes of Sellers))
primarily related to any Contributed Asset (and in no event related to or
arising out of any Excluded Equistar Asset);
     (i) all transferable Permits primarily relating to the Business, but
excluding Permits primarily related to any Excluded Asset (all Permits
contemplated by this clause (i), the “Transferred Permits”);
     (j) all assets to be acquired by Holdings or Newco in accordance with the
provisions of Section 6.8;
     (k) all assets to be acquired by Holdings or Newco in accordance with the
provisions of Section 6.12; and
     (l) all other assets used primarily in the ordinary course of business of
the Business, including all long term assets reflected on the balance sheet for
the Most Recent Fiscal Year End other than those assets used, disposed of,
consumed or transferred, to the extent contemplated by Section 3.7 or in the
ordinary course of business from and after the date hereof;
provided, however, notwithstanding anything to the contrary set forth in this
definition, the Contributed Assets shall not include (i) any asset of any Other
Seller organized under the laws of China, including any rights of any such
Subsidiary under any Contracts, or (ii) any other Excluded Assets. For the
avoidance of doubt, the Contributed Assets shall include all of Sellers’ right,
title, and interest in and to all the assets of Sellers set forth on Annex B
hereto.
     “Conversion Rate” means, as of any date and for any currency conversion,
the exchange rate for the conversion of such currencies as reported as of the
last Business Day prior to such date in The Wall Street Journal or if not
available, any other internationally recognized financial publication.
     “Covered China Employee” means any Covered Employee who is based in China.
     “Covered Employee” means an employee of Solutia or any of its Subsidiaries
who is either (i) named on Annex C hereto or (ii) hired from and after the date
hereof or, if the date of preparation of Annex C hereto is indicated thereon,
the date of preparation thereof, in either case contemplated by this clause
(ii), whose duties relate primarily to the operations of the Business, and in
the case of either of clause (i) or (ii), if such employee is still actively
employed by Solutia or any of its Subsidiaries as of immediately prior to the
Closing regardless of the company payroll on which such individuals are listed.
     “Covered EU Employee” means any Covered Employee who is based in the
European Union.
     “Covered Foreign Employee” means any Covered Employee who is not a Covered
U.S. Employee.

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     “Covered Period” has the meaning set forth in Section 6.14(b).
     “Covered Transaction” means a transaction for the sale of any of the
Facilities that are Owned Real Property or all of, or a majority interest in,
the Business through (i) the issuance or sale of capital stock or other
securities of any Subsidiary of Seller holding assets of the Business (but in no
event including capital stock or securities of Seller itself) or (ii) the sale
of the assets of the Business other than any sale of (x) assets typically sold
in the ordinary course of business (including inventory) or (y) assets of the
Business together with all or substantially all of Seller’s other assets.
     “Covered U.S. Employee” means any Covered Employee who is based in the
United States of America.
     “Current Assets” has the meaning set forth in the definition of Net Working
Capital.
     “Current Liabilities” has the meaning set forth in the definition of Net
Working Capital.
     “Damages” has the meaning set forth in Section 8.2.
     “Debt Financing” has the meaning set forth in Section 4.7(a).
     “Debt Letter of Interest” has the meaning set forth in Section 4.7(a).
     “Decree” means any judgment, decree, ruling, injunction, assessment,
attachment, undertaking, award, charge, writ, executive order, administrative
order, consent order or any other order of any Governmental Authority.
     “Disclosure Schedule” has the meaning set forth in Article III.
     “Disclosure Supplement” has the meaning set forth in Section 5.7.
     “Disputed Items” has the meaning set forth in Section 2.9(c).
     “DME Supply Agreement” has the meaning set forth in Section 2.8(a)(vi).
     “DPO Operating Agreement” has the meaning set forth in Section 2.8(a)(v).
     “Employee Benefit Plan” means any “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) covered by ERISA and any other material
employee benefit plan, program or arrangement of any kind established,
maintained, sponsored or contributed to (or with respect to which an obligation
to contribute has been undertaken) by any Seller on behalf of any Covered
Employee or any similar employee benefit plan governed by the laws of any
foreign jurisdiction.
     “Environmental, Health or Safety Requirements” means all federal, state,
local and foreign statutes, regulations, rules, common law, codes, and all
legally binding judicial and administrative orders, Decrees, and determinations,
in each case, concerning worker health and safety, pollution or protection of
the environment, or the handling, use, generation, treatment,

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storage, transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of, threatened Release of, or exposure, to
Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C.
§ 7401 et seq.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. § 9601 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. § 1251 et seq.; the Hazardous Material Transportation Act
49 U.S.C. § 1801 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act
7 U.S.C. § 136 et seq.; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. § 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et
seq.; the Occupational Safety & Health Act of 1970, 29 U.S.C. § 651 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the European Union
Registration, Evaluation, Authorization and Restriction of Chemical Substances
Act, EC 1907/2006 et seq.; and the state analogies thereto, all as amended or
superseded from time to time.
     “Environmental Permits” has the meaning set forth in Section 3.21(a).
     “Equistar” means Equistar Chemicals, L.P.
     “Equistar Accounts Payable” means all accounts payable of the Business to
Equistar outstanding on the Closing Date.
     “Equistar Accounts Receivable” means all accounts receivable of the
Business from Equistar outstanding on the Closing Date and all claims, refunds
and credits with respect thereto.
     “Equistar Chapter 11 Case” means the case commenced under chapter 11 of
title 11 of the United States Code for Equistar Chemicals, L.P. on January 6,
2009 in the United States Bankruptcy Court for the Southern District of New
York, which case has been consolidated for procedural purposes with that of
Lyondell Chemical Company and is being jointly administered therewith under
docket number 09-10023 (REG), together with all adversary proceedings, appeals
and other ancillary proceedings to which Equistar Chemicals, L.P. is a party.
     “Equistar Land Lease” means the Sublease Agreement dated June 9, 1987,
between Seller (as successor in interest thereto to E. I. du Pont de Nemours and
Company) and Equistar (as successor in interest thereto to Cain Chemical Inc.).
     “Equistar Lease and Subcontract Agreement” has the meaning set forth in
Section 2.8(a)(viii).
     “Equistar Residual Costs” means, with respect to each calendar quarter
(prorated for any partial calendar quarter) during the Covered Period, the
amount, if any, by which the amount of Newco’s User Cost Allocation for such
calendar quarter exceeds the amount that Newco’s User Cost Allocation would have
been for such calendar quarter without giving effect to the contract rejection
contemplated to occur at the Contract Rejection Effective Date.
     “Equistar Resolution Period” has the meaning set forth in Section
6.14(b)(iii).
     “Equistar U&S Agreement” means the Amended and Restated Utilities and
Services Agreement, dated as of September 30, 1999, as amended by Amendment No.1
dated September 30, 1999, by and between Seller and Equistar.

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     “Equity Commitment Letter” has the meaning set forth in Section 4.7(a).
     “Equity Financing” has the meaning set forth in Section 4.7(a).
     “ERISA” means the Employee Retirement Income Security Act of 1974.
     “ERISA Affiliate” means any entity that would be deemed a “single employer”
with Sellers under Section 414(b), (c), (m) or (o) of the IRC or Section 4001 of
ERISA.
     “Estimated Net Working Capital Amount” has the meaning set forth in Section
2.9(a).
     “Estimated Net Working Capital Statement” has the meaning set forth in
Section 2.9(a).
     “Estimated Tax Basis Balance Sheets” has the meaning set forth in Section
3.13(g).
     “EU” means the European Union.
     “EU Employer’s Obligations” means all obligations or requirements related
to the employment of personnel that an employer needs to comply with in its
relation with employees, former employees, employee representatives, trade
unions, public authorities, pension funds and insurance companies), whether
statutory, regulatory, contractual or otherwise, including any obligation to
discharge remuneration, benefits, bonus and incentive payments, holiday pay,
termination indemnities, insurance premiums, pension fund contributions, tax and
social security contributions.
     “EU Transfer Regulations” means the legislation, regulation, enactment,
agreement or other instrument implementing the provisions of EC Directive
No. 2001/23 dated March 12, 2001, which for Belgium means, in particular
Collective Bargaining Agreement nr. 32bis, as amended, and Collective Bargaining
Agreement nr. 9, as amended.
     “Exchange Act” means the Securities Exchange Act of 1934.
     “Excluded Assets” means all assets of any Seller as of the Closing that are
not Contributed Assets, including:
     (a) any asset of any Seller that is (x) not used primarily in the Business
or (y) used primarily in the Business but inseparable from any other business of
Solutia or any of its Affiliates and, in the case of (y), set forth on
Section 1.1(a)(i) of the Disclosure Schedule, in each case, including:
(i) certificates of incorporation or organizational documents, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, stock certificates and other
documents relating to the organization, maintenance and existence of such Seller
as a corporation or any other entity (other than Newco or any Newco Subsidiary);
(ii) Records related to Taxes paid or payable by any Seller; (iii) any Income
Tax asset of or with respect to any Seller; (iv) any assets not customarily
based or located at the Facilities or at the homes of Covered Employees who work
out of their homes and are not assigned a permanent office at a Facility; and
(v) the name “Solutia” and any name or trademark,

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service mark, trade name, logo, trade dress, Internet domain name or other
indicia of origin that includes or relates to such name, or any related
derivatives, abbreviations, acronyms or other formatives based on such name,
whether alone or in combination with any other words, phrases, or designs, and
all registrations, applications and renewals thereof and all rights and goodwill
associated therewith and any name or trademark, service mark, trade name, logo,
Internet domain name or other indicia of origin that is confusingly similar
thereto or derived therefrom, including the marks set forth on Section
1.1(a)(ii) of the Disclosure Schedule (collectively, the “Solutia Marks”);
     (b) capital stock of any of Solutia’s Subsidiaries (other than capital
stock of any of Newco’s Subsidiaries), including any Newco Units;
     (c) Cash or securities;
     (d) all Excluded Equistar Assets;
     (e) except as provided in Section 6.8, all rights and assets under or
related to any Employee Benefit Plan;
     (f) all Permits other than Transferred Permits;
     (g) all insurance policies and binders and all claims, refunds and credits
from insurance policies or binders due or to become due with respect to such
policies or binders;
     (h) all rights, claims and counterclaims with respect to the Retained
Litigation Matters;
     (i) any Seller’s rights under this Agreement or any Related Agreement;
     (j) any Seller’s rights under any Contracts primarily related to any
Excluded Asset;
     (k) the China Business Assets; and
     (l) without limiting the generality of the foregoing, all assets listed on
Annex D hereto.
     “Excluded Environmental Liabilities” means any and all Liabilities relating
to environmental, health or safety matters, including all such Liabilities
relating to or arising pursuant to Environmental, Health or Safety Requirements,
in each case to the extent relating to or arising from: (a) any and all
facilities and real property, other than the Facilities, currently or formerly
owned, operated, leased or occupied by the Business, Sellers or their respective
Affiliates or predecessors prior to the Closing Date (including any Releases of
Hazardous Materials therefrom); or (b) the transportation, treatment, storage or
disposal of Hazardous Materials or the arrangement for such activities prior to
the Closing Date, by, on behalf of, or in connection with: (i) Sellers, (ii) the
Business, (iii) any predecessors or Affiliates of Sellers or (iv) any entities
previously owned by

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Sellers, in each case, at or to any off-site location (for the avoidance of
doubt excluding any such disposal or arrangement for disposal at or beneath the
Facilities but including any such Hazardous Materials produced or generated for
off-site treatment, storage or disposal on or prior to the Closing Date in
connection with operations at the Facilities).
     “Excluded Equistar Assets” means (i) all Equistar Accounts Receivable;
(ii) all rights of any Seller under Contracts with Equistar and any Seller’s
rights under any such Contracts (“Excluded Equistar Contracts”); and
(iii) claims, deposits, pre-payments, refunds, causes of action, rights of
set-off and rights of recoupment primarily related to any other Excluded
Equistar Asset.
     “Excluded Equistar Contracts” has the meaning set forth in the definition
of Excluded Equistar Assets.
     “Excluded Equistar Liabilities” means (i) all Equistar Accounts Payable;
(ii) all Liabilities related to or arising out of the Excluded Equistar
Contracts; (iii) claims, deposits, pre payments, refunds, causes of action,
rights of set-off and rights of recoupment primarily related to any other
Excluded Equistar Asset; and (iv) all portions of the working fund liability
relating to Equistar.
     “Excluded Liabilities” means the following Liabilities of Sellers:
     (a) any Liability not relating to or arising out of the Business, including
any Liability primarily relating to or primarily arising out of the Excluded
Assets or Seller corporate overhead or administrative and operational functions
associated with operating the Business historically provided by Seller (except
as provided for in the Transition Services Agreement);
     (b) any Liability for the Retained Litigation Matters;
     (c) any Liability of Sellers for Income Taxes with respect to the Business
or otherwise;
     (d) except for such Liabilities to be assumed by Holdings, Newco or Buyer
(or any of their respective Subsidiaries) in accordance with Section 6.8 or
Section 6.12, all Liabilities relating to employees of Sellers in connection
with withheld payroll Taxes, payroll, workman’s compensation benefits and
accounts payable employee withholding, in each case, accrued prior to the
Closing (other than any such Liabilities set forth on the Conclusive Net Working
Capital Statement);
     (e) all Liabilities of Sellers or, for obligations to be performed prior to
the Closing, Newco under this Agreement or any Related Agreement and the
transactions contemplated hereby or thereby;
     (f) except for such Liabilities to be assumed by Holdings, Newco or Buyer
(or any of their respective Subsidiaries) in accordance with Section 6.8 or
Section 6.12, all Liabilities of Sellers or any ERISA Affiliate with respect to
any Employee Benefit Plan;

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     (g) the China Assumed Liabilities (to the extent relating to clause (a) of
the definition thereof);
     (h) all Excluded Equistar Liabilities;
     (i) all Liabilities of Sellers to HSBC Securities (USA) Inc. in connection
with its engagement by Solutia as a financial advisor in connection with the
transactions contemplated hereby;
     (j) all Excluded Environmental Liabilities;
     (k) any indebtedness for borrowed money (for the avoidance of doubt, other
than any Liabilities included under Bonding Requirements);
     (l) the payable obligations pursuant to the prepayment letter, dated
March 4, 2009, by and between Seller and Monsanto Company, relating to the
Chocolate Bayou agreements with Solutia; and
     (m) any Liability for severance, compensation or benefits for any employee
who is not a Covered Employee;
provided, however, that, notwithstanding the above, the Excluded Liabilities
shall not include any Liability reflected on the Conclusive Net Working Capital
Statement.
     “Existing Grandfathered Business” has the meaning set forth in Section 6.6.
     “Expense Reimbursement Letter Agreement” has the meaning set forth in
Section 10.2.
     “Facilities” means the Owned Real Property and the Leased Real Property.
     “Factory Indirect Expense” or “FIE” has the meaning set forth in the
Equistar U&S Agreement, computed in compliance with the Equistar U&S Agreement
and otherwise on a basis that is consistent with the methodologies used to
calculate FIE prior to Closing.
     “FIE Allocation” means, with respect to each User, the allocated share of
FIE for FIE Services received by such User, computed in compliance with the
Equistar U&S Agreement and otherwise on a basis that is consistent with the
methodologies used to calculate the FIE Allocation prior to Closing.
     “FIE Services” means those services for which an FIE account is
established.
     “Financial Statements” has the meaning set forth in Section 3.6.
     “Financing” has the meaning set forth in Section 4.7(a).
     “Financing Agreements” has the meaning set forth in Section 5.11(a).
     “Financing Commitments” has the meaning set forth in Section 4.7(a).

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     “Fixed Costs” means the Fixed Costs (as defined in the Equistar U&S
Agreement) actually incurred to provide Utilities and Services, computed in
compliance with the Equistar U&S Agreement and otherwise on a basis that is
consistent with the methodologies used to calculate Fixed Costs prior to
Closing.
     “Fixed Costs Allocation” means, with respect to a User, an amount equal to
such User’s Fixed Costs Percentage multiplied by the total Fixed Costs for the
Chocolate Bayou Plant.
     “Fixed Costs Percentage” means, with respect to each User, the ratio of
such User’s Committed Reserved Capacity to the Aggregate Reserved Capacity,
stated as a percentage.
     “Foreign Benefit Plan” means any Employee Benefit Plan maintained primarily
for the benefit of Covered Foreign Employees except plans, programs or
arrangements that Sellers are required to maintain or contribute to in order to
be in compliance with non-United States laws.
     “Furnishings and Equipment” means tangible personal property (other than
Inventory and Intellectual Property), including machinery, equipment, computers,
furniture, automobiles, trucks, railcars, tractors and trailers.
     “GAAP” means United States generally accepted accounting principles
consistently applied.
     “Governmental Authority” means any federal, state, local or foreign
governmental or regulatory authority, agency, commission, court, body or other
governmental entity.
     “Guest Agreement” has the meaning set forth in Section 3.11(a)(i).
     “Guest Occurrence” has the meaning set forth in Section 8.7(a).
     “Hazardous Material” means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, mold, lead or lead-containing materials, polychlorinated
biphenyls; and any other chemicals, materials, substances or wastes in any
amount or concentration which are regulated under or for which liability can be
imposed under any Environmental, Health or Safety Requirements.
     “Holdings” has the meaning set forth in the recitals.
     “Holdings Common Stock” means common stock, par value $0.01 per share, of
Holdings.
     “Holdings Contribution Shares” has the meaning set forth in Section 2.6.
     “Holdings Formation Contribution” means the contribution of the assets to
Holdings in exchange for the Holdings Contribution Shares as contemplated by
Section 2.5 and Section 2.6.
     “Holdings Pension Plan” has the meaning set forth in Section 6.12(b)(i).

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     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
     “Income Taxes” means any Tax based on or measured by reference to net
income, including any interest, penalty or addition thereto, whether disputed or
not.
     “Indemnified Party” means any Buyer Indemnified Party or Seller Indemnified
Party, as appropriate.
     “Indemnifying Party” has the meaning set forth in Section 8.4(c).
     “Intellectual Property” means (a) all issued patents and patent
applications, together with all reissuances, continuations,
continuations-in-part, divisionals, extensions and reexaminations thereof;
(b) all trademarks, service marks, trade dress, logos, trade names and Internet
domain names, together with all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (c) all
copyright registrations and applications for registration therefor and renewals
in connection therewith and copyrightable materials; (d) all trade secrets,
know-how, technology, improvements and inventions; and (e) all computer software
(including data and databases).
     “Intellectual Property Assignments” has the meaning set forth in Section
2.8(a)(iv).
     “Inventory” means inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods.
     “IRC” means the Internal Revenue Code of 1986.
     “Knowledge” of a Person (and other words of similar import) means the
actual knowledge of (i) with respect to Seller, Merlin Belnap, Dale Borths,
Robert T. DeBolt, James T. Strehl, James R. Voss, Angela Wilson, Nadim Qureshi,
Gary Lanser, James Sullivan, D. John Srivisal and Tim Spihlman, or (ii) with
respect to Buyer or SK, Barry Siadat, Jamshid Keynejad, Mark N. Delevie, Fred
Poses, Brad Cerepak, Peter D’Aloia and Gene Kenyon.
     “Leased Real Property” means any land, buildings, structures, improvements,
fixtures or other interest in real property leased by a Seller pursuant to any
of the Leases used exclusively in the Business.
     “Leases” means all leases, subleases, licenses, concessions and other
agreements (written or oral) pursuant to which any Seller holds any leasehold or
subleasehold estates and other rights to use or occupy any Leased Real Property.
     “Liability” means any liability or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due) regardless of when arising, including any
liability for Taxes.
     “Lien” means any mortgage, pledge, lien, charge, security interest, option,
right of first refusal, easement, security agreement or other encumbrance or
restriction on the use or transfer

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of any property; provided, however, that “Lien” shall not be deemed to include
any license of Intellectual Property.
     “Litigation” means any action, suit, claim, investigation, audit, demand,
hearing or proceeding, whether civil, criminal, administrative or arbitral,
whether at law or in equity and whether before any Governmental Authority.
     “Louvain-La-Neuve Lease” has the meaning set forth in Section 2.8(a)(ix).
     “Maintenance Costs” has the meaning set forth in Section 2.10.
     “Material Adverse Effect” means, when used with respect to a Person or the
Business, any effect or change that (i) would be materially adverse to the
business, assets, financial condition, operating results or operations of the
Person and its Subsidiaries (taken as a whole) or the Business as presently
conducted, as applicable; provided, however, that no effects or changes arising
from or related to any of the following shall be deemed to constitute a Material
Adverse Effect: (a) general business or economic conditions in North America,
Europe, the Middle East, Africa or Asia; (b) general business or economic
conditions affecting the industry in which such Person or the Business, as
applicable, operates; (c) national or international political or social
conditions, including the engagement by any country in North America, Europe,
the Middle East, Africa or Asia in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon any country in North America, Europe, the Middle East,
Africa or Asia, or any of its territories, possessions or diplomatic or consular
offices or upon any military installation, equipment or personnel of any country
in North America, Europe, the Middle East, Africa or Asia; (d) financial,
banking or securities markets (including any disruption thereof or any decline
in the price of securities generally or any market or index); (e) commodities
prices; (f) changes in law or changes in generally accepted accounting
principles applicable to the financial statements of such Person or the
Business; (g) the taking of any action contemplated by this Agreement or any
Related Agreement; (h) changes as a result of the announcement or pendency of
this Agreement or any Related Agreement; or (i) the failure of the Business to
meet any full or partial 2009 projections of earnings, revenues or any other
financial measure (regardless of whether such projections were made by Seller or
independent third parties); provided, however, that the underlying causes for
such failure may, except as otherwise provided herein, be considered for
purposes of determining the occurrence of a Material Adverse Effect or
(ii) would materially adversely affect the ability of such Person or its
Affiliates to consummate the transactions contemplated by this Agreement or the
Related Agreements on a timely basis, in the case of either clause (i) or (ii),
excluding any effects or changes arising from or related to the breach of the
Agreement by Buyer or SK.
     “Material Contract” has the meaning set forth in Section 3.11(a).
     “Maximum Net Contribution” has the meaning set forth in Section 2.9(e).
     “Minimum Claim Amount” has the meaning set forth in Section 8.4(h).
     “Mitigation Actions” has the meaning set forth in Section 6.14(b)(i).

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     “Most Recent Balance Sheet” means the balance sheet for the Most Recent
Fiscal Quarter End.
     “Most Recent Financial Statements” has the meaning set forth in
Section 3.6.
     “Most Recent Fiscal Quarter End” has the meaning set forth in Section 3.6.
     “Most Recent Fiscal Year” means the fiscal year ending on the Most Recent
Fiscal Year End.
     “Most Recent Fiscal Year End” has the meaning set forth in Section 3.6.
     “Multiemployer Plans” has the meaning set forth in Sections 3(37) and
4001(a)(3) of ERISA.
     “Multiple Employer Plan” means a “Single Employer Plan” as defined in
Section 4001(a)(15) of ERISA that is subject to Title IV of ERISA and that is
maintained for Covered Employees and employees of at least one person other than
Seller and its ERISA Affiliates.
     “Net Working Capital” means the (A) current assets of the Business
(excluding Cash and all Equistar Accounts Receivables) (the “Current Assets”)
less (B) current liabilities of the Business (excluding all Equistar Accounts
Payables) (the “Current Liabilities”), in either case as determined in
accordance with GAAP and the other methods used in preparing the illustrative
determination of the Net Working Capital attached as Annex E hereto (including
as indicated thereon) and assuming solely for such purposes that the China
Business Assets were Contributed Assets and the China Assumed Liabilities (other
than those Liabilities contemplated by clause (b) of the definition thereof
arising from and after the Closing) were Assumed Liabilities; provided, however,
that all intercompany accounts receivable and intercompany accounts payable (or,
in either case, credits therefor) shall be disregarded for purposes of
determining the Net Working Capital. Any amount of resin inventory in excess of
Ninety Million (90,000,000) pounds shall be excluded from the valuation of
Inventory included in Current Assets if the Closing occurs at or following
April 30, 2009.
     “Neutral Arbitrator” has the meaning set forth in Section 2.9(c).
     “New Pension Plan” has the meaning set forth in Section 6.8(l)(v)(A).
     “Newco” has the meaning set forth in the preamble.
     “Newco’s Flex Plan” has the meaning set forth in Section 6.8(h).
     “Newco Formation Contribution” means the contribution of the Contributed
Assets by Seller to Newco contemplated by Section 2.1 and the assumption of the
Assumed Liabilities by Newco contemplated by Section 2.2, in exchange for the
Newco Formation Contribution Units.
     “Newco Formation Contribution Units” has the meaning set forth in
Section 2.4.
     “Newco Subsidiary” means any Subsidiary of Newco.

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     “Newco Units” means all capital stock of Newco, which shall be comprised as
of the Closing of (x) all equity units of Newco owned by Solutia as of the date
hereof and (y) the Newco Formation Contribution Units.
     “Objectionable Items” has the meaning set forth in Section 6.14(b)(iii).
     “Objection Notice” has the meaning set forth in Section 6.14(b)(iii).
     “Only Representative” has the meaning set forth in Section 5.4(c).
     “Other Sellers” means each of those Subsidiaries of Solutia that as of the
Closing or, as applicable solely to the China Business Assets, the China Asset
Transfer Closing (A) holds or held any asset primarily related to the Business,
(B) is or has been party to any Contract primarily related to the Business,
(C) conducts or has conducted any activity primarily related to the Business, or
(D) is or has been subject to any Liability primarily related to the Business;
provided, however, that neither Newco nor any Newco Subsidiary shall be deemed
to be an Other Seller.
     “Outside Date” has the meaning set forth in Section 9.1(b)(i).
     “Owned Real Property” means all land owned by Sellers used primarily with
respect to the Business, together with any and all buildings, fixtures,
structures and improvements located thereon and all rights, privileges,
easements, licenses, hereditaments and other appurtenances relating thereto.
     “Party” has the meaning set forth in the preamble.
     “Pension Target Amount” has the meaning set forth in Section 6.12(c).
     “Permit” means any franchise, approval, permit, license, order,
registration, certificate, variance or similar right obtained from any
government or governmental agency.
     “Permitted Lien” means (a) Liens for Taxes or mechanic’s, workmen’s,
repairmen’s, warehousemen’s, carrier’s or other similar Liens, including all
statutory liens, arising or incurred in the ordinary course of business, in each
case that are not yet delinquent, due or payable, or which are being contested
in good faith by appropriate proceedings; (b) with respect to leased or licensed
personal property, the terms and conditions of the lease or license applicable
thereto; (c) with respect to real property, zoning, building codes and other
land use laws regulating the use or occupancy of such real property or the
activities conducted thereon which are imposed by any Governmental Authority
having jurisdiction over such real property which are not violated by the
current use or occupancy of such real property or the operation of the Business,
except where any such violation would not reasonably be expected to individually
or in the aggregate materially impair the use or operation of the affected
property or the conduct of the Business thereon as it is currently being
conducted; (d) Liens for any financing secured by an asset, where the financing
obligation is an Assumed Liability and such asset is a Contributed Asset;
(e) easements, covenants, conditions, restrictions, leases and other similar
matters affecting title to real property and other encroachments and title and
survey defects that do not or would not, individually or in the aggregate,
materially impair the use or occupancy of such real property in

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the operation of the Business taken as a whole as it is currently conducted;
(f) matters set forth on the disclosed survey of the real property; (g) other
Liens set forth on Section 3.8 of the Disclosure Schedule; and (h) other Liens
that, individually or in the aggregate, do not materially impair the use or
operations of the affected property or the conduct of the Business therewith as
it is currently being used and conducted.
     “Person” means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any other entity, including any
Governmental Authority or any group of any of the foregoing.
     “Post-Closing Net Working Capital Statement” has the meaning set forth in
Section 2.9(b).
     “Products” means the products manufactured and/or marketed by the Business
listed on Annex F hereto.
     “Quarterly Invoice” has the meaning set forth in Section 6.14(b)(ii).
     “Quarterly Statement” has the meaning set forth in Section 6.14(b)(ii).
     “Records” means the books, records, ledgers, invoices, documents,
correspondence, lists (including customer lists and supplier lists), plans,
drawings, designs, specifications, advertising and promotional materials,
reports, data and other printed materials.
     “REACH” means Regulation (EC) No 1907/2006 of the European Parliament and
of the Council of December 18, 2006 concerning the Registration, Evaluation,
Authorization and Restriction of Chemicals.
     “Related Agreements” means the Bill of Sale, the Assignment and Assumption
Agreement, the Transition Services Agreement, the Intellectual Property
Assignments, the DPO Operating Agreement, the DME Supply Agreement, the China
Asset Transfer Agreement, the Louvain-La-Neuve Lease, the Securityholders
Agreement, the Equistar Lease and Subcontract Agreement, and all other
Contracts, schedules, certificates or other documents being delivered pursuant
to or in connection with this Agreement, the Bill of Sale, the Assignment and
Assumption Agreement, the Transition Services Agreement, the Intellectual
Property Assignments, the DPO Operating Agreement, the DME Supply Agreement, the
China Asset Transfer Agreement, the Louvain-La-Neuve Lease, the Securityholders
Agreement or the Equistar Lease and Subcontract Agreement.
     “Representative” means, when used with respect to a Person, the Person’s
controlled Affiliates (including Subsidiaries) and such Person’s and any of the
foregoing Persons’ respective officers, directors, managers, members,
shareholders, partners, employees, agents, representatives, advisors (including
financial advisors, bankers, consultants, legal counsel and accountants) and
financing sources.
     “Reserved Capacity” means, with respect to each User, the total capacity
for each U&S cost center that is required to support the User’s operation based
on usage at capacity rates, plus any additional U&S capacity reserved by such
User for future use.

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     “Resolution Period” has the meaning set forth in Section 2.9(c).
     “Retained Litigation Matters” means the Litigation matters listed on
Section 1.1(b) of the Disclosure Schedule.
     “Scheduled Intellectual Property” has the meaning set forth in
Section 3.12.
     “Securities Act” means the Securities Act of 1933.
     “Securityholders Agreement” has the meaning set forth in Section 2.8(c)(i).
     “Seller” has the meaning set forth in the preamble.
     “Seller Advanced Expenses” has the meaning set forth in Section 10.1.
     “Seller Indemnified Party” has the meaning set forth in Section 8.3.
     “Seller Pension Plan” has the meaning set forth in Section 6.12(b).
     “Seller Termination Fee” has the meaning set forth in Section 9.2(b).
     “Seller’s Cafeteria Plan” has the meaning set forth in Section 6.8(h).
     “Sellers” has the meaning set forth in the preamble.
     “SK” has the meaning set forth in the preamble.
     “Solicited Acquisition Proposal” means any Acquisition Proposal other than
an Unsolicited Acquisition Proposal.
     “Solutia” has the meaning set forth in the preamble.
     “Solutia Marks” has the meaning set forth in the definition of Excluded
Assets.
     “Spun Off Plan” has the meaning set forth in Section 6.12(b).
     “Subject Securities” has the meaning set forth in Section 5.15(a).
     “Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which,
directly or indirectly, (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity (other than a corporation), a majority of partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof and for this purpose, a Person or Persons owns a majority
ownership interest in such a business entity (other than a corporation) if such
Person or Persons shall be allocated a majority of such

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business entity’s gains or losses or shall be or control any managing director
or general partner of such business entity (other than a corporation).
     “Target Net Working Capital Amount” has the meaning set forth in Section
2.9(a).
     “Tax” or “Taxes” means any United States federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the IRC), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, whether computed on a
separate or consolidated, unitary or combined basis or in any other manner,
including any interest, penalty or addition thereto, whether disputed or not.
     “Tax Return” means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
     “Third Party Claim” has the meaning set forth in Section 8.5(a).
     “Termination Fee” means either the Buyer Termination Fee or the Seller
Termination Fee, as appropriate.
     “Transfer Tax” has the meaning set forth in Section 6.10.
     “Transferred Contracts” has the meaning set forth in the definition of
Contributed Assets.
     “Transferred Participant” means each Covered U.S. Employee with an accrued
benefit under the Seller Pension Plan.
     “Transferred Permits” has the meaning set forth in the definition of
Contributed Assets.
     “Transition Services Agreement” has the meaning set forth in Section
2.8(a)(iii).
     “Treasury Regulations” means the treasury regulations promulgated under the
IRC.
     “Underfunded Amount” has the meaning set forth in Section 6.12(c).
     “Underfunded Dispute Notice” has the meaning set forth in
Section 6.12(c)(i).
     “Unsolicited Acquisition Proposal” means any Acquisition Proposal made
other than as a result of a material breach of Section 5.16(a)(i) by Seller.
     “User” means any user of Utilities and Services including Newco and any
third parties that have entered into a Guest Agreement.
     “User Cost Allocation” means, with respect to each User, the sum of the
Fixed Costs Allocation and the FIE Allocation which are charged to such User.

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     “User Costs” means, collectively, Fixed Costs and FIE.
     “Utilities and Services” or “U&S” means the utilities and services used by
Newco and other third parties at the Chocolate Bayou Plant, including the
Utilities and Services (as defined in the Equistar U&S Agreement) which Equistar
is entitled to under the Equistar U&S Agreement.
     “Valence Group” means The Valence Group, LLC, a party of which SK is a
Representative (solely for such purposes, as defined in the Confidentiality
Agreement).
     “WARN Act” means the Worker Adjustment and Retraining Notification Act of
1988.
     “Working Capital Allocation Amount” has the meaning set forth in
Section 2.9(e).
     “4044 Allocation” has the meaning set forth in Section 6.12(b)(i).
     Section 1.2 Interpretations. Unless otherwise indicated herein to the
contrary:
          (a) When a reference is made in this Agreement to an Article, Section,
Annex, Exhibit, Schedule, clause or subclause, such reference shall be to an
Article, Section, Annex, Exhibit, Schedule, clause or subclause of this
Agreement.
          (b) The words “include,” “includes” or “including” and other words or
phrases of similar import, when used in this Agreement, shall be deemed to be
followed by the words “without limitation.”
          (c) The words “hereof,” “herein” and “hereunder” and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not
to any particular provision of this Agreement.
          (d) The word “if” and other words of similar import shall be deemed,
in each case, to be followed by the phrase “and only if.”
          (e) The use of “or” or “any” herein is not intended to be exclusive.
          (f) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice versa.
          (g) All terms defined in this Agreement have their defined meanings
when used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein.
          (h) Any reference herein to law or to a legal requirement (or, with
respect to any statute, ordinance, code, rule or regulation, any provision
thereof) shall be deemed to include

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reference to all laws and or to such legal requirement and any legal requirement
promulgated thereunder (or provision thereof, as applicable), including any
successor thereto, respectively, in each case, as may be amended.
          (i) References herein to a Person are also deemed to include its
permitted successors and assigns. Any reference herein to a Governmental
Authority shall be deemed to include reference to any successor thereto.
          (j) Any reference herein to “Dollars” or “$”means United States
dollars.
          (k) A reference to a Contract includes supplements and amendments.
          (l) All amounts payable hereunder shall be paid in Dollars. Any amount
to be paid or computed hereunder expressed in any currency other than Dollars
shall be paid and/or computed in Dollars by using the Conversion Rate as of the
Business Day immediately prior to any such payment or computation.
ARTICLE II
FORMATION OF HOLDINGS
     Section 2.1 Contribution of Assets to Newco. At or prior to the Closing,
but in any event prior to the Holdings Formation Contribution, subject to the
operation of Section 2.10, and on the terms and subject to the conditions set
forth in this Agreement, Seller shall, and shall cause the Other Sellers to,
contribute, sell, transfer, assign, convey and deliver to Newco or, as
contemplated by Section 2.12 or Section 5.4(d), a designated Newco Subsidiary,
and Newco and such Newco Subsidiaries, as applicable, will accept and purchase
from Sellers, all of the Contributed Assets in exchange for the consideration
specified in Section 2.4.
     Section 2.2 Assumed Liabilities. At or prior to the Closing, but in any
event prior to the Holdings Formation Contribution, on the terms and subject to
the conditions set forth in this Agreement, Newco will assume and become
responsible for the Assumed Liabilities. Newco shall pay, perform, honor and
discharge, or cause to be paid, performed, honored and discharged, all Assumed
Liabilities in a timely manner in accordance with the terms thereof from and
after the Closing.
     Section 2.3 Treatment of Intercompany Accounts. Other than as expressly
contemplated by any Related Agreement or Annex E hereof, all intercompany
accounts receivable, intercompany accounts payable and other obligations due and
owing between any Seller and any of its Affiliates shall be disregarded for
purposes of the transactions contemplated hereby and shall not be treated as
Assumed Liabilities, Contributed Assets, Excluded Assets or Excluded
Liabilities.
     Section 2.4 Newco Formation Contribution Consideration. On or prior to the
Closing, as consideration for the Newco Formation Contribution, in addition to
the other representations, warranties, covenants and agreements of the Parties
hereunder, Newco shall issue to Seller, or such Other Seller as Seller shall
direct, One Thousand (1,000) newly issued, duly authorized, validly issued,
fully paid and non-assessable common units of Newco upon consummation of the
Newco Formation Contribution (the “Newco Formation Contribution Units”).

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     Section 2.5 Contribution of Newco Units and Cash to Holdings. At the
Closing, immediately following the Newco Formation Contribution, on the terms
and subject to the conditions of this Agreement:
          (a) Seller shall, or shall cause any Other Seller holding any Newco
Units to, contribute, sell, transfer, assign, convey and deliver to Holdings all
of the Newco Units;
          (b) Buyer shall contribute, transfer, assign, convey and deliver to
Holdings an amount of cash equal to the Cash Amount by wire transfer or other
immediately available funds to an account or accounts of Holdings; and
          (c) the Parties shall cause Holdings to accept and purchase from
Seller and Buyer, at the Closing, all of the assets to be contributed pursuant
to Section 2.5(a) and Section 2.5(b) for the consideration specified in
Section 2.6 and Section 2.14.
     Section 2.6 Holdings Formation Contribution Consideration. At the Closing,
as consideration for the Holdings Formation Contribution, in addition to the
other representations, warranties, covenants and agreements of the Parties
hereunder, the Parties shall cause Holdings to (a) issue Two Hundred Thousand
(200,000) newly issued, duly authorized, validly issued, fully paid and
non-assessable shares of Holdings Common Stock to Seller; (b) pay to Seller cash
in an amount equal to the Cash Amount, paid by wire transfer or other
immediately available funds to an account or accounts designated by Seller; and
(c) issue Nine Million Eight Hundred Thousand (9,800,000) newly issued, duly
authorized, validly issued, fully paid and non-assessable shares of Holdings
Common Stock to Buyer (the shares to be issued pursuant to clause (a) and clause
(c) collectively, the “Holdings Contribution Shares”), in each case upon
consummation of the Holdings Formation Contribution. Buyer and Seller
acknowledge their intent to establish an employee equity compensation plan
following the Closing authorizing issuance of shares of Holdings Common Stock up
to twelve percent (12%) of the aggregate fully diluted outstanding shares of
Holdings Common Stock.
     Section 2.7 Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place in the order set forth in this
Article II at the offices of Kirkland & Ellis LLP located at 153 East 53rd
Street, New York, New York (or such other location as shall be mutually agreed
upon by Seller and Buyer) commencing at 10:00 a.m. local time on a date (the
“Closing Date”) that is the later of (a) April 30, 2009 or (b) if all of the
conditions to the obligations of Seller and Buyer to consummate the transactions
contemplated hereby set forth in Article VII (other than conditions with respect
to actions the Parties will take at the Closing itself) are not satisfied or
waived as of such date, the tenth (10th) calendar day following the first date
upon which all of the conditions to the obligations of Seller and Buyer to
consummate the transactions contemplated hereby set forth in Article VII (other
than conditions with respect to actions the Parties will take at the Closing
itself, but subject to the satisfaction or waiver of those conditions) have been
satisfied or waived (or, in the event such calendar day is not a Business Day,
on the next Business Day thereafter), or on such other date as shall be mutually
agreed upon by Seller and Buyer prior thereto.

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     Section 2.8 Deliveries at Closing.
          (a) At or prior to the Closing, in connection with the Newco Formation
Contribution and in any event prior to the issuance of the Holdings Contribution
Shares contemplated by Section 2.6, Seller shall, or shall cause the Other
Sellers to, deliver to Newco or any Newco Subsidiary, as appropriate, the
following duly executed documents and other items:
               (i) a Bill of Sale substantially in the form of Exhibit B hereto
(the “Bill of Sale”);
               (ii) an Assignment and Assumption Agreement substantially in the
form of Exhibit C hereto (the “Assignment and Assumption Agreement”);
               (iii) a Transition Services Agreement substantially in the form
of Exhibit D hereto (the “Transition Services Agreement”);
               (iv) instruments of assignment substantially in the form of
Exhibit E hereto for each issued patent, registered trademark, and registered
copyright, and for each pending application therefore, that is included in the
Contributed Assets (collectively, the “Intellectual Property Assignments”);
               (v) a DPO Operating Agreement substantially in the form of
Exhibit F hereto (the “DPO Operating Agreement”);
               (vi) a DME Supply Agreement substantially in the form of
Exhibit G hereto (the “DME Supply Agreement”);
               (vii) a China Asset Transfer Agreement substantially in the form
of Exhibit H hereto providing for, among other things, payment by Newco or a
Newco Subsidiary to a Subsidiary of Seller of an amount of cash expected to be
equal to Three Hundred Thousand Dollars ($300,000) at the China Asset Transfer
Closing (the “China Asset Transfer Agreement”);
               (viii) a Lease and Subcontract Agreement substantially in the
form of Exhibit I hereto (the “Equistar Lease and Subcontract Agreement”);
               (ix) a Louvain-La-Neuve Lease substantially in the form of
Exhibit J hereto (the “Louvain-La-Neuve Lease”); and
               (x) a special or limited warranty deed, as customary in the
applicable jurisdiction, with respect to each parcel of Owned Real Property.
          (b) At or prior to the Closing, in connection with the Newco Formation
Contribution and in any event prior to the issuance of the Holdings Contribution
Shares contemplated by Section 2.6, Newco shall, or shall cause an applicable
Newco Subsidiary to, deliver to Seller and the Other Sellers (as applicable) the
following duly executed documents and other items:
               (i) the Bill of Sale;

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               (ii) the Assignment and Assumption Agreement;
               (iii) the Transition Services Agreement;
               (iv) the Intellectual Property Assignments;
               (v) the DPO Operating Agreement;
               (vi) the DME Supply Agreement;
               (vii) the China Asset Transfer Agreement;
               (viii) the Equistar Lease and Subcontract Agreement;
               (ix) the Louvain-La-Neuve Lease; and
               (x) certificates representing all of the Newco Formation
Contribution Units, if such Newco Formation Contribution Units are in
certificated form.
          (c) At the Closing, in connection with the Holdings Formation
Contribution, Seller shall deliver to Holdings and, in the case of clauses (i),
(ii) and (iv) below, to Buyer, the following duly executed documents and other
items:
               (i) a Securityholders Agreement substantially in the form of
Exhibit K hereto, with such changes thereto as requested by equity co-investors
of Buyer that are reasonably acceptable to Seller, consent to which shall not be
unreasonably withheld (the “Securityholders Agreement”);
               (ii) an officer’s certificate to the effect that (A) each of the
conditions specified in Section 7.1(a) and Section 7.1(b) is satisfied; (B) the
resolutions adopted by the board of directors of Seller (or a duly authorized
committee thereof) authorizing the execution, delivery and performance of this
Agreement and the Related Agreements, as attached to the certificate, were duly
adopted at a duly convened meeting of such board or committee, at which a quorum
was present and acting throughout or by unanimous written consent, remain in
full force and effect, and have not been amended, rescinded or modified, except
to the extent attached thereto; and (C) each of Seller’s officers executing this
Agreement, each of the Related Agreements and each of the other documents
necessary for consummation of the transactions contemplated herein, is an
incumbent officer, and each specimen signature on such certificate is a genuine
signature;
               (iii) a non-foreign affidavit for Seller, dated as of the Closing
Date, sworn under penalty of perjury and in form and substance required under
Treasury Regulations issued pursuant to Section 1445 of the IRC stating that
Seller is not a “foreign person” as defined in Section 1445 of the IRC;
               (iv) evidence of the receipt of all third party consents or
sublicenses from third parties and notices to or from third parties that are
required to be delivered or obtained pursuant to Section 7.1(c) and delivered by
Seller;

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               (v) certificates representing all of the Newco Units, duly
endorsed or accompanied by stock transfer powers, if such Newco Units in
certificated form;
               (vi) duly executed letters of resignation from each member of the
board of managers of Newco and any Newco Subsidiary as well as duly executed
letters of resignation from each branch manager of any foreign Newco Subsidiary
(with the exception of the branch managers in Korea);
               (vii) a good standing certificate in respect of Newco certified
by the Secretary of State of the State of Delaware, dated as of a date not more
than ten (10) calendar days prior to the Closing Date; and
               (viii) an acknowledgement of the receipt of the Cash Amount in
cash.
          (d) At the Closing, in connection with the Holdings Formation
Contribution, Buyer shall deliver to Holdings and, in the case of clauses (i),
(ii) and (iii) below, to Seller, the following duly executed documents and other
items:
               (i) the Securityholders Agreement;
               (ii) an officer’s certificate to the effect that: (A) each of the
conditions specified in Section 7.2(a) and Section 7.2(b) are satisfied; (B) the
resolutions adopted by the board of managers of Buyer (or a duly authorized
committee thereof) authorizing the execution, delivery and performance of this
Agreement and the Related Agreements, as attached to the certificate, were duly
adopted at a duly convened meeting of such board or committee, at which a quorum
was present and acting throughout or by unanimous written consent, remain in
full force and effect, and have not been amended, rescinded or modified, except
to the extent attached thereto; and (C) each of Buyer’s officers executing this
Agreement, each of the Related Agreements and each of the other documents
necessary for consummation of the transactions contemplated herein, is an
incumbent officer, and each specimen signature on such certificate is a genuine
signature;
               (iii) evidence of the receipt of all third party consents or
sublicenses from third parties and notices to or from third parties that are
required to be delivered or obtained pursuant to Section 7.2(c) and delivered by
Buyer; and
               (iv) cash in the amount contemplated by Section 2.5(b).
          (e) At the Closing, in connection with the Holdings Formation
Contribution, the Parties shall cause Holdings to deliver to Seller the
following duly executed documents and other items:
               (i) the Securityholders Agreement;
               (ii) an acknowledgement of the receipt of the Newco Units;

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               (iii) (A) certificates representing all of the Holdings
Contribution Shares to be issued to Seller pursuant to Section 2.6(a); and
(B) cash in an amount equal to the Cash Amount; and
               (iv) a good standing certificate in respect of Holdings certified
by the Secretary of State of the State of Delaware, dated as of a date not more
than ten (10) calendar days prior to the Closing Date.
          (f) At the Closing, in connection with the Holdings Formation
Contribution, the Parties shall cause Holdings to deliver to Buyer the following
duly executed documents and other items:
               (i) the Securityholders Agreement;
               (ii) an acknowledgement of the receipt of cash in the amount of
the Cash Amount;
               (iii) certificates representing all of the Holdings Contribution
Shares to be issued to Buyer pursuant to Section 2.6(c); and
               (iv) a good standing certificate in respect of Holdings certified
by the Secretary of State of the State of Delaware, dated as of a date not more
than ten (10) calendar days prior to the Closing Date.
     Section 2.9 Working Capital Payments.
          (a) Pre-Closing Payment. No less than five (5) Business Days prior to
the Closing Date, Seller shall cause to be prepared and delivered to Buyer a
statement setting forth an estimate of the Net Working Capital as of 12:01 a.m.
(Greenwich mean time) on the Closing Date (the “Adjustment Determination
Effective Time”) after giving effect to the transactions contemplated hereby
(the “Estimated Net Working Capital Amount”) and the components and calculation
thereof (the “Estimated Net Working Capital Statement”). The Estimated Net
Working Capital Statement shall be subject to the review of Buyer, and Buyer and
Seller shall cooperate and negotiate in good faith to resolve any dispute
regarding the Estimated Net Working Capital Statement prior to the Closing (the
results of any such resolution to be reflected on a new Estimated Net Working
Capital Statement, which shall be considered the Estimated Net Working Capital
Statement for all further purposes); provided, however, that if any item of
dispute regarding the Estimated Net Working Capital Statement is not resolved by
agreement in writing between Buyer and Seller not less than two (2) Business
Days prior to the Closing, then for purposes of the Closing, the Estimated Net
Working Capital Amount shall be deemed to be equal to the Target Net Working
Capital Amount. To the extent that the Estimated Net Working Capital Amount set
forth on the Estimated Net Working Capital Statement exceeds Two Hundred
Forty-Two Million Two Hundred Thousand Dollars ($242,200,000) (the “Target Net
Working Capital Amount”), at the Closing, Newco shall, and Buyer shall cause
Holdings to cause Newco to, pay to Seller the amount of the excess. To the
extent that the Target Net Working Capital Amount exceeds the Estimated Net
Working Capital Amount set forth on the Estimated Net Working Capital Statement,
at the Closing, Seller shall pay to Newco the amount of the excess; provided,
however, that if the Estimated Net Working Capital Amount as

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otherwise determined in accordance with this Section 2.9(a) is not less than Two
Hundred Thirty-Seven Million Two Hundred Thousand Dollars ($237,200,000) nor
more than Two Hundred Forty-Seven Million Two Hundred Thousand Dollars
($247,200,000), for purposes of this Section 2.9(a) the Estimated Net Working
Capital Amount shall be deemed to be equal to the Target Net Working Capital
Amount.
          (b) Post-Closing Net Working Capital Statement. Within thirty
(30) calendar days after the Closing Date, Seller shall cause to be prepared and
delivered to Newco a statement setting forth the Net Working Capital, after
giving effect to the transactions contemplated hereby, as of the Adjustment
Determination Effective Time, and the components and calculation thereof (the
“Post-Closing Net Working Capital Statement”). During such time (and, if
applicable, during the Resolution Period), without limiting Section 6.5, Buyer
shall cause Holdings and Newco to give Seller and its Representatives access to
all Records, facilities and personnel of Buyer, Holdings, Newco and their
respective Representatives as reasonably necessary to undertake the preparation
of the Post-Closing Net Working Capital Statement.
          (c) Determination of Conclusive Net Working Capital. Newco shall have
forty-five (45) calendar days following the receipt of the Post-Closing Net
Working Capital Statement to review the Post-Closing Net Working Capital
Statement. During such time, Newco may dispute any items set forth on the
Post-Closing Net Working Capital Statement (or specific calculations or methods
contemplated thereby). Unless Newco delivers written notice to Seller of dispute
thereof on or prior to the forty-fifth (45th) calendar day after Newco’s receipt
of the Post-Closing Net Working Capital Statement, Newco shall be deemed to have
accepted and agreed to the Post-Closing Net Working Capital Statement and such
statement (and the specific calculations or methods contemplated thereby) shall
be final, binding and conclusive. If Newco notifies Seller in writing of
disputed items contained in the Post-Closing Net Working Capital Statement (or
specific calculations or methods contemplated thereby) (the “Disputed Items”)
within such forty-five (45) calendar day period, for thirty (30) calendar days
following delivery of such notice by Newco to Seller (the “Resolution Period”),
Newco and Seller shall attempt in good faith to resolve their differences with
respect to the Disputed Items. Upon delivery of any such notice of Disputed
Items by Newco, Newco shall be deemed to have accepted and agreed to all items
on the Post-Closing Net Working Capital Statement (and the specific calculations
or methods contemplated thereby) other than the Disputed Items, and such items
(and the specific calculations or methods contemplated thereby) other than the
Disputed Items shall be final, binding and conclusive. Any resolution by Newco
and Seller during the Resolution Period as to any Disputed Items shall be set
forth in writing and will be final, binding and conclusive. If Newco and Seller
do not resolve all Disputed Items by the end of the Resolution Period, then all
Disputed Items remaining in dispute shall be submitted by either one of the
Parties within thirty (30) calendar days after the expiration of the Resolution
Period to Ernst & Young or such other national independent accounting firm
mutually acceptable to Newco and Seller (the “Neutral Arbitrator”). The Neutral
Arbitrator shall act as an arbitrator to determine only those Disputed Items
remaining in dispute as of the end of the Resolution Period. In resolving such
Disputed Items, the Neutral Arbitrator may not assign a value to any Disputed
Item greater than the greatest value for such Disputed Item claimed by any Party
or less than the lowest value for such Disputed Item claimed by any Party. All
fees and expenses relating to the work, if any, to be performed by the Neutral
Arbitrator shall be allocated and borne between Newco and Seller in the same
proportion that the aggregate amount of the Disputed Items so submitted to the
Neutral

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Arbitrator that is unsuccessfully disputed by each such Party (as finally
determined by the Neutral Arbitrator) bears to the total amount of such Disputed
Items so submitted. In addition, without limiting Section 6.5, Buyer shall, and
shall cause Holdings and Newco to, and Seller shall give the Neutral Arbitrator
access to all Records, facilities and personnel of such Party and its Affiliates
and Representatives as is reasonably necessary to perform its function as
arbitrator. Newco and Seller shall use their commercially reasonable efforts to
cause the Neutral Arbitrator to deliver to Newco and Seller a written
determination (such determination to include an explanation in reasonable detail
of the reasons for such determination and a work sheet setting forth all
material calculations and methods used in arriving at such determination) of the
Disputed Items submitted to the Neutral Arbitrator and the resulting effect
thereof on the Post-Closing Net Working Capital Statement within thirty
(30) calendar days of receipt of such Disputed Items, which determination will
be final, binding and conclusive and upon which judgment may be entered. The
final, binding and conclusive Post-Closing Net Working Capital Statement based
either upon agreement or deemed agreement by Newco and Seller or the written
determination delivered by the Neutral Arbitrator in accordance with this
Section 2.9(c) will be the “Conclusive Net Working Capital Statement.”
          (d) Post-Closing Payment. If the amount of the Net Working Capital set
forth on the Conclusive Net Working Capital Statement exceeds the Estimated Net
Working Capital Amount set forth on the Estimated Net Working Capital Statement,
Newco shall, and Buyer shall cause Holdings to cause Newco to, pay to Seller the
amount of the excess. If the Estimated Net Working Capital Amount set forth on
the Estimated Net Working Capital Statement exceeds the amount of the Net
Working Capital set forth on the Conclusive Net Working Capital Statement,
Seller shall pay to Newco the amount of the excess. All payments to be made
pursuant to this Section 2.9(d) shall be made in immediately available funds no
later than the second (2nd) Business Day following the date on which Newco and
Seller agree, or are deemed to have agreed to, or the Neutral Arbitrator
delivers, the Conclusive Net Working Capital Statement.
          (e) Maximum Payment. Notwithstanding anything to the contrary set
forth in this Section 2.9, the maximum net amount that Seller or Newco shall be
required to pay to Newco or Seller, respectively, pursuant to this Section 2.9
when giving effect to the payments contemplated by Section 2.9(a) and
Section 2.9(d) shall be an amount equal to Forty-Nine Million Dollars
($49,000,000) (the “Maximum Net Contribution”). If any amount to be paid by
Seller or Newco pursuant to this Section 2.9, when taken together with all other
such payments, shall exceed the Maximum Net Contribution, such payment
obligation shall be deemed satisfied in full by the payment of the Maximum Net
Contribution; provided, however, that if any amount to be paid by Seller
pursuant to this Section 2.9, net of (and when taken together with) all other
such payments, is greater than Thirty-Four Million Dollars ($34,000,000),
(i) the Maximum Net Contribution for purposes of this Section 2.9(e) shall be
the sum of (x) Thirty-Four Million Dollars ($34,000,000) plus (y) the product of
(x) 0.75 multiplied by (y) the amount by which the amount to be paid by Seller
pursuant to this Section 2.9 as determined without giving effect to this proviso
(but in no event greater than the Maximum Net Contribution as determined without
giving effect to this proviso) exceeds Thirty-Four Million Dollars ($34,000,000)
(such excess amount, “Working Capital Allocation Amount”) (for avoidance of
doubt, with the Maximum Net Contribution so calculated being Forty-Five Million
Two Hundred Fifty Thousand Dollars ($45,250,000)), and (ii) the aggregate
payments contemplated by Section 2.14, shall be reduced by an amount equal to
the product of (x) 0.25 multiplied by (y) the Working Capital Allocation

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Amount (for avoidance of doubt, with the maximum amount of such reduction being
Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000)), with the
reduction allocated to the first such scheduled payment (after giving effect to
any reduction thereof as contemplated by the proviso in Section 2.14, if
applicable) up to the amount thereof and thereafter to subsequent payments until
the full reduction has been allocated.
     Section 2.10 Non-Transferability. Nothing contained herein shall be deemed
by any Seller, Newco or Buyer to constitute an agreement of any Seller to assign
or transfer (including, if applicable, solely for purposes of this Section 2.10,
an assignment by operation of a change of control or event giving rise to any
successor liability of any Person, or purported change of control or event
giving rise to any successor liability of any Person) any Transferred Contract
or other Contributed Asset to Newco or any Newco Subsidiary or thereafter to
Holdings in connection with the transactions contemplated hereby if an attempted
assignment or transfer thereof without the consent of or notice to a third party
thereto would constitute a breach or default thereof, cause or permit the
acceleration or termination thereof or in any way adversely affect the rights of
any Seller (as such rights would have existed prior to the attempted assignment
or transfer) or Buyer, Holdings, Newco or any Newco Subsidiary (as such rights
would have existed following the attempted assignment or transfer if this
Section 2.10 did not apply to the assignment or transfer) thereunder unless such
consent has been delivered and/or such notice has been properly made. In the
event that any Transferred Contract or Contributed Asset that would otherwise be
or be deemed to have been assigned or transferred to Newco or any Newco
Subsidiary pursuant to Section 2.1 or to Holdings pursuant to Section 2.5(a)
cannot be or could not have been deemed to have been assigned or transferred or
a third party shall not provide or have provided its necessary consent to, or
receive or have received its notice of, such assignment or transfer, at the
Closing, and without any changes to the amounts payable pursuant to any other
provision of this Article II, the applicable Seller party to the Transferred
Contract or owning such Contributed Asset, as appropriate, shall assign and
transfer to Newco or Holdings, as appropriate, to the extent legally possible
and without causing any of the consequences to assignment or transfer in the
immediately preceding sentence to occur, all of such Seller’s right and title to
and interests in and to each such Transferred Contract or Contributed Asset and,
where necessary or appropriate, such Seller shall be deemed to be Newco’s or
Holdings’ duly appointed agent for the purpose of completing, fulfilling and
discharging all of Newco’s or Holdings’ rights and Liabilities arising after the
Closing Date with respect to each such Transferred Contract or Contributed
Asset. In that event, subject to Section 5.3, Seller shall, and shall cause any
applicable Other Seller to, at Newco’s sole cost and expense: (i) provide Newco
and Holdings with the benefit in all material respects of each such Transferred
Contract or Contributed Asset, including (A) enforcing any rights with respect
to any such Transferred Contract or Contributed Asset (including the right to
terminate in accordance with the terms thereof upon the request of Newco or
Holdings), and (B) permitting Newco or Holdings to enforce any rights as if such
Transferred Contract or Contributed Asset had been assigned or transferred to
Newco or Holdings, and (ii) to the extent a Seller shall have failed to obtain
the consent of all parties or to deliver notice to all parties prior to the
Closing with respect to such Transferred Contract or other Contributed Asset
necessary to permit the assignment or transfer to Newco or Holdings of each such
Transferred Contract or other Contributed Asset without causing any of the
consequences to assignment in the first sentence of this Section 2.10 to occur,
when all such consents shall have been obtained or notices have been delivered,
assign and transfer such Transferred Contract or Contributed Asset to Newco.
Subject to Section 5.3, any

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Seller shall be entitled to retain from or set-off against amounts due to, or
otherwise charge and collect from, Newco or Holdings for all reasonable
incremental costs associated with the retention, maintenance and enforcement of
rights of any Transferred Contract or other Contributed Asset and all
Liabilities arising thereunder to the extent related to the ownership, use or
operation thereof from and after the Closing Date contemplated by this
Section 2.10 (“Maintenance Costs”), and Buyer will, and will cause Holdings and
Newco to, indemnify each Seller Indemnified Party for any Damages resulting from
or arising out of any such activities. Notwithstanding anything to the contrary
set forth in this Section 2.10, no Seller shall have any obligation whatsoever
to directly or indirectly retain any portion of its assets or businesses other
than any specific individual Transferred Contract or other Contributed Asset
contemplated by this Section 2.10 (but only until such time as the transfer
thereof may be effected in accordance with this Agreement) as a result of this
Section 2.10 in order to perform or maintain such Transferred Contract or other
Contributed Asset.
     Section 2.11 Intellectual Property License. Newco hereby grants to Solutia
and to each of Solutia’s Affiliates a worldwide, royalty-free, fully paid-up,
non-exclusive, fully transferable, irrevocable and perpetual right and license
to use the Intellectual Property set forth on Section 2.11 of the Disclosure
Schedule and any other Intellectual Property, excluding trademarks, which is
included in the Contributed Assets and identified by Solutia or any of its
Affiliates in writing to Newco within nine (9) months after the Closing Date
(without any right to grant sublicenses other than in connection with products,
processes or services, or other Intellectual Property, owned or controlled by
Solutia or any of its Affiliates) in connection with the respective businesses
of Solutia and its Affiliates as such businesses are currently conducted and
proposed to be conducted as of the Closing Date; provided, however, that (x)
such license shall be effective only upon the occurrence of the Closing Date,
and (y) such license shall be subject to Section 6.6.
     Section 2.12 Contribution to Newco Subsidiaries. The Parties hereto shall
use commercially reasonable efforts to cooperate with any other Party hereto to
determine whether, in lieu of any contribution of the Contributed Assets to
Newco, certain Contributed Assets should be contributed directly to certain
Newco Subsidiaries. Seller shall, and shall cause the Other Sellers, to transfer
any such Contributed Assets to a Newco Subsidiary as Buyer shall reasonably
request promptly following the date hereof and in any event, no later than
April 7, 2009; provided, however, that in no event shall any Seller be obligated
to contribute any Contributed Assets to any Newco Subsidiary in lieu of to Newco
(except as contemplated by Section 5.4(d)) if doing so could reasonably be
expected to (i) prevent or delay the consummation of any transactions
contemplated hereby; (ii) adversely affect the rights or benefits of any Seller;
or (iii) adversely affect the Tax treatment of any Seller. Upon any such
determination to so contribute Contributed Assets to any Newco Subsidiary, if
either Party shall request prior to the Closing, the Parties shall prepare an
intercompany agreement between Newco and any such Newco Subsidiaries and such
other agreements reasonably requested by a Party to effectuate such
contributions, which shall, in each case, be in form and substance reasonably
acceptable to Seller.
     Section 2.13 Excluded Liabilities. Seller shall pay, perform, honor and
discharge, or cause to be paid, performed, honored and discharged, all Excluded
Liabilities relating to, or

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arising from, the Business in a timely manner in accordance with the terms
thereof from and after the Closing.
     Section 2.14 Additional Consideration Payable After the Closing. As
additional consideration for the Holdings Formation Contribution, except as the
following payments shall be reduced pursuant to Section 2.9(e), Buyer shall, or
shall cause Holdings or Newco to, pay to Seller cash in an amount equal to One
Million Dollars ($1,000,000) on each of September 1, 2011, September 1, 2012,
September 1, 2013 and September 1, 2014 for aggregate additional payments under
this Section 2.14 of Four Million Dollars ($4,000,000); provided, however, that
the payment to be made on September 1, 2011 shall be reduced by the amount by
which the consideration actually paid to Solutia International Trading
(Shanghai) Co., Ltd. pursuant to Section 2.3(a)(i) of the China Asset Transfer
Agreement, if applicable, exceeded Three Hundred Thousand Dollars ($300,000).
Such payments shall be paid by wire transfer or other immediately available
funds to an account or accounts designated by Seller. Such payments shall not be
subject to any right of set-off and shall not be conditioned upon any matter,
including the occurrence of any events or any results of operations of the
Business.
ARTICLE III
SELLER’S REPRESENTATIONS AND WARRANTIES
     Solutia represents and warrants to Buyer that the statements contained in
this Article III are true and correct as of the date of this Agreement, except
as set forth in the disclosure schedule accompanying this Agreement (the
“Disclosure Schedule”). The Disclosure Schedule has been arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Agreement for the convenience of the Parties.
     Section 3.1 Organization of Sellers and Newco; Good Standing.
          (a) Solutia is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate or similar power and authority to own, lease and operate its assets
and to carry on its business as now being conducted.
          (b) Newco is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and operate its assets and to
carry on its business as now being conducted.
          (c) Each of the Other Sellers is duly formed or organized and validly
existing under the laws of the jurisdiction of its incorporation or formation
and has all requisite corporate or similar power and authority to own, lease and
operate its assets and to carry on its business as now being conducted.
          (d) Each of Solutia and Newco is qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified
with respect to the Business. Section 3.1 of the Disclosure Schedule sets forth
a list of jurisdictions where Solutia or Newco is registered to do business by
reason of registration with the applicable Secretary of State with respect to
the Business.

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     Section 3.2 Authorization of Transaction.
          (a) Each of Solutia and Newco has, and as of the Closing, each Other
Seller will have, full power and authority (including full corporate or other
entity power and authority) to execute and deliver (x) in the case of Solutia
and Newco, this Agreement and (y) in the case of all Sellers and Newco, all
other agreements contemplated hereby to which it is a party (excluding those
related to the Financing) and to perform its respective obligations hereunder
and thereunder.
          (b) The execution, delivery and performance of (x) in the case of
Solutia and Newco, this Agreement and (y) in the case of all Sellers and Newco,
all other agreements contemplated hereby to which a Seller or Newco is a party
(excluding those related to the Financing), have been duly authorized by such
Seller and Newco, as the case may be.
          (c) This Agreement has been duly executed and delivered by Seller and
Newco and constitutes, and as of the Closing the Related Agreements (excluding
those related to the Financing) will have been duly executed and delivered by
each Seller and/or Newco party thereto and will constitute, the valid and
legally binding obligation of such Seller and/or Newco, enforceable against such
Seller and/or Newco in accordance with its terms and conditions, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors’ rights and general principles of equity.
     Section 3.3 Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the transactions referred to in Article II), will: (i) conflict with
or result in a breach of the certificate of incorporation or bylaws, or other
organizational documents, of any Seller or Newco; (ii) violate any law or Decree
to which any Seller or Newco is, or its respective assets or properties are,
subject in respect of the Business; or (iii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under any Material Contract to which a Seller is a party or by which it
is bound in respect of the Business or to which any of the Contributed Assets is
subject, except, in the case of either clause (ii) or (iii), for such conflicts,
violations, breaches, defaults, accelerations, rights or failures to give notice
as would not, individually or in the aggregate, have a Material Adverse Effect
on the Business. Other than filings required under the Exchange Act or
applicable laws of China, neither Sellers nor Newco is required to give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any Governmental Authority in order for the Parties to consummate
the transactions contemplated by this Agreement or any Related Agreement, except
where the failure to give notice, file or obtain such authorization, consent or
approval would not, individually or in the aggregate, have a Material Adverse
Effect on the Business.
     Section 3.4 Title to Contributed Assets. At the Closing and prior to the
Newco Formation Contribution, Sellers will have good and valid title to, or the
right to use, the Contributed Assets, and Sellers will convey to Newco at the
Closing in the Newco Formation Contribution, subject to the operation of
Section 2.10, good and valid title to, or Sellers’ right to use, all of the
Contributed Assets, free and clear of all Liens (other than Permitted Liens and,
with respect to Intellectual Property owned by the Sellers outside the United
States, to Seller’s

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Knowledge; provided that it is understood and agreed that, if Newco or Buyer
notifies Seller in writing at any time after the Closing of any security
interest or other Lien filed or recorded with any Governmental Authority
(including any patent or trademark office) outside the United States as of the
Closing with respect to Intellectual Property owned by Sellers and included in
the Contributed Assets, Seller shall use commercially reasonable efforts to
obtain a release of any such security interest or other Lien, at Seller’s sole
cost and expense, and provide Newco and Buyer a letter confirming that any such
security interest or other Lien has been released).
     Section 3.5 Sufficiency of Assets Except as contemplated by this Agreement
or by any Related Agreements and except for the China Business Assets, as of the
Closing, the Contributed Assets are all of the assets necessary for Newco to
operate the Business in a manner substantially equivalent in all material
respects to the manner in which Sellers have operated the Business since the
Most Recent Fiscal Year End.
     Section 3.6 Financial Statements. Attached hereto as Annex G are the
following financial statements (collectively the “Financial Statements”):
unaudited consolidated balance sheets, statements of income and statements of
cash flow for the Business (the “Most Recent Financial Statements”) as of and
for the fiscal year ended December 31, 2008 (the “Most Recent Fiscal Year End”
and the “Most Recent Fiscal Quarter End”). The Financial Statements present
fairly in all material respects the financial condition of the Business as of
such dates and the results of operations of the Business for such periods, are
correct and complete in all material respects and are consistent in all material
respects with the books and records of the Business and Sellers, except as
adjusted as disclosed thereon; provided, however, that the Most Recent Financial
Statements are subject to normal-year end adjustments and lack of footnotes and
other presentation items; the effect of which are not expected to have a
Material Adverse Effect on the Business.
     Section 3.7 Events Subsequent to Most Recent Fiscal Quarter End. Except for
actions or events arising in connection with the transactions contemplated
hereby, including contribution of the Contributed Assets to, and assumption of
the Assumed Liabilities by, Newco, and as set forth on Section 3.7 of the
Disclosure Schedule, since January 1, 2009:
          (a) Sellers have not sold, leased, transferred or assigned any
material assets of the Business outside the ordinary course of business;
          (b) other than with respect to Covered Employees (which matters are
covered below), Sellers have not entered into any Material Contract outside the
ordinary course of business which will be a Transferred Contract;
          (c) other than with respect to Covered Employees (which matters are
covered below), Sellers have not accelerated, terminated, modified or cancelled
any Material Contract outside the ordinary course of business which would
otherwise have been a Transferred Contract;
          (d) Sellers have not experienced any material damage, destruction or
loss outside the ordinary course of business that is not covered by insurance to
its property exclusively related to the Business;

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          (e) Sellers have not entered into any material agreement outside the
ordinary course of business assigning any material Intellectual Property
exclusively related to the Business;
          (f) Sellers have not granted or agreed to grant any increase in any
rate or rates of salaries or compensation to any officer or employee of the
Business for 2009, or made or agreed to any bonus payment, fringe benefit,
retention or severance arrangement with any such officer or employee for 2009;
except for (x) raises of salary or wages upon promotions or progression
increases made in the ordinary course of business, (y) as required by law or
(z) changes of de minimis amounts;
          (g) Sellers have not entered into any employment contract related to
any of the Covered U.S. Employees, written or oral, or modified the terms of any
existing such contract (except for modifications contemplated by clauses (x),
(y) or (z) of Section 3.7(f));
          (h) Sellers have not entered into any collective bargaining agreement
related to any of the Covered U.S. Employees, written or oral, or modified the
terms of any existing such agreement;
          (i) Sellers have not adopted any new Employee Benefit Plan or provided
any material increases in any material benefits under such Employee Benefit
Plans with respect to such Covered Employees except in accordance with the terms
of such plans or as required under applicable law;
          (j) Sellers have not incurred, assumed or guaranteed any indebtedness
for borrowed money with respect to the Business other than in the ordinary
course of business;
          (k) none of the Sellers has made any loan, advance or capital
contribution to, or investment in, any Person with respect to the Business other
than expense advances in the ordinary course of business consistent with past
practice;
          (l) none of the Sellers has changed its policy or practice with
respect to the methodology for accounting, including with respect to the
classification of its Inventory;
          (m) none of the Sellers has made any Tax election, changed its method
of Tax accounting or settled any claim for Taxes;
          (n) there has not been any event or occurrence that individually or in
the aggregate has had a Material Adverse Effect on the Business; and
          (o) Sellers have not agreed, whether in writing or otherwise, to do
any of the foregoing.
     Section 3.8 Real Property.
          (a) Section 3.8(a) of the Disclosure Schedule sets forth a description
of each Owned Real Property. Seller has marketable fee simple title to all Owned
Real Property, free and clear of any Liens except for Permitted Liens.

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          (b) Section 3.8(b) of the Disclosure Schedule sets forth the address
of each Leased Real Property, and a list of all Leases. Seller holds a valid
leasehold interest in or a valid right to use or occupy each of the Leased Real
Property, in each case free and clear of any Liens other than Permitted Liens.
          (c) Seller has not received any written notice from any Governmental
Authority or Person of any pending or threatened condemnations, planned public
improvements, annexation, special assessments, zoning, or subdivision changes
directly affecting the Facilities.
          (d) Other than pursuant to the Guest Agreements and Permitted Liens,
no third party is in possession of any of the Facilities or any portion thereof
and there are no leases, subleases, licenses, concessions or other contracts
granting to any third party the right of use or occupancy of any portion of the
Facilities.
          (e) Seller is not a party to any outstanding options or rights of
first refusal or other similar contracts or rights to purchase any real property
or interest therein relating to, or intended to be used in the operation of, the
Business.
     Section 3.9 Furnishings and Equipment. The Furnishings and Equipment
presently used in connection with the conduct of the Business as presently
conducted by Sellers are free from material defects, have been maintained in
accordance with normal industry practice, are in operating condition and repair
(subject to normal wear and tear) and are in an operating condition sufficient
to conduct the Business as presently conducted by Sellers.
     Section 3.10 Inventory and Current Assets and Current Liabilities. 
          (a) The Inventory of the Business is merchantable and fit for the
purpose for which it was procured or manufactured in all material respects,
except as set forth or reflected in the Conclusive Net Working Capital
Statement. The Inventory of the Business does not include any slow-moving,
obsolete, damaged or defective items other than as carried on the books and
records of the Business in accordance with past custom and practice of the
Business. Such Inventory is accounted for under GAAP, consistently applied, and
is valued on a FIFO basis, at the lower of cost or market (as defined by GAAP).
          (b) The Sellers’ accounts payable for the purchase of goods and
services appearing on the Most Recent Balance Sheet and all accounts payable for
the purchase of goods and services created since the Most Recent Fiscal Quarter
End represented valid obligations actually made in bona fide arms’-length
transactions entered into in the ordinary course of business and consistent with
past practices and policies, including with regard to the timing of payment.
          (c) The Sellers’ accounts receivable for the sale of Inventory
appearing on the Most Recent Balance Sheet and all accounts receivable for the
sale of Inventory created since the Most Recent Fiscal Quarter End represented
valid obligations actually made in bona fide arms’-length transactions entered
into in the ordinary course of business and consistent with past practices and
policies, including with regard to the timing of payment.

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     Section 3.11 Material Contracts.
          (a) Section 3.11 of the Disclosure Schedule lists the following
Contracts to which a Seller is a party as of the date hereof with respect to the
Business that would constitute a Transferred Contract as of the date hereof:
               (i) any utilities and services agreement or lease and operating
agreement in either case providing for a third party guest or host arrangement
at the Owned Real Property (a “Guest Agreement”);
               (ii) other than any Guest Agreement, any Contract for the lease
of personal property to or from any Person providing for lease payments to be
unpaid as of the Closing Date in excess of One Million Dollars ($1,000,000) per
annum;
               (iii) other than any Guest Agreement, any Contract for the
purchase by the Business of raw materials, commodities or supplies with any
supplier to whom the Business paid in excess of Twenty-Six Million Dollars
($26,000,000) during the Most Recent Fiscal Year and for which the performance
of such Contract will extend over a period of more than one year after the
Closing Date, which, when taken together with all Contracts with such suppliers
set forth on Section 3.11 of the Disclosure Schedule and all such suppliers for
which no such Contract exists, constitute the suppliers to whom the Business
paid no less than sixty-six percent (66%) of the aggregate payments to suppliers
during such period;
               (iv) other than any Guest Agreement, any Contract for the sale by
the Business of products (for avoidance of doubt, not including purchase orders)
to a customer from whom the Business received consideration in excess of
Seventeen Million Three Hundred Thirteen Thousand Dollars ($17,313,000) during
the Most Recent Fiscal Year and for which the performance of such Contract will
extend over a period of more than one year after the Closing Date, which, when
taken together with all Contracts with such customers set forth on Section 3.11
of the Disclosure Schedule and all such customers for which no such Contract
exists, constitute the customers from which the Business received no less than
fifty-seven percent (57%) of the aggregate consideration from customers during
such period;
               (v) any Contract pursuant to which the Business sells any
products providing for any “most favored nation” pricing pursuant to which a
Seller is obligated to sell Products to a customer from whom the Business
received consideration in excess of Two Million Dollars ($2,000,000) during the
Most Recent Fiscal Year at a price that is no less favorable than a price
offered to any other customer for such Product;
               (vi) any Contract providing for a partnership or joint venture;
               (vii) any Contract under which it has created, incurred, assumed
or guaranteed any indebtedness for borrowed money to be outstanding as of the
Closing Date in excess of One Million Dollars ($1,000,000);
               (viii) any Contract expressly restricting the ability of such
Seller from competing in any geographic region or with respect to any product;

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               (ix) any material license relating to Intellectual Property used
primarily in the operation of the Business (other than, if applicable,
off-the-shelf computer software with an annual license fee of less than Fifty
Thousand Dollars ($50,000));
               (x) any collective bargaining agreement covering the Covered U.S.
Employees;
               (xi) any settlement, conciliation or similar agreement, the
performance of which will involve payment after the Closing Date by Buyer of
consideration in excess of One Million Dollars ($1,000,000);
               (xii) any employment, severance or termination agreement with any
Covered U.S. Employee or any individual consultant of the Business pursuant to
which Seller is required to make payment in excess of Two Hundred Thousand
Dollars ($200,000) in 2008 or any year thereafter (excluding the standard
severance policy of the Business) for which the Liability is an Assumed
Liability;
               (xiii) any agreement that provides for the future disposition or
acquisition of any product line or business of the Business, other than
dispositions or acquisitions in the ordinary or usual course of business; or
               (xiv) any agreement that grants to any Person any right of first
offer or right of first refusal to purchase all or part of the Facilities.
The Contracts required to be listed on Section 3.11 of the Disclosure Schedule
are referred to as the “Material Contracts.”
          (b) With respect to each Material Contract: (i) such Contract
constitutes the valid and legally binding obligation of the Seller(s) party
thereto and, to Seller’s Knowledge, the counterparty thereto, enforceable
against such Seller(s) and, to Seller’s Knowledge, the counterparty thereto in
accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors’ rights and
general principles of equity; and (ii) neither the Seller(s) party thereto nor,
to Seller’s Knowledge, the counterparty thereto is in material breach or default
that presently would permit or give rise to a right of termination, modification
or acceleration thereunder or for which the counterparty thereto has made a
claim against such Seller for contract damages in excess of Five Hundred
Thousand Dollars ($500,000) as a result thereof.
     Section 3.12 Intellectual Property. Section 3.12 of the Disclosure Schedule
lists all issued patents and pending patent applications, and all registrations
and pending applications for registration of copyrights, trademarks and service
marks, and all registrations of Internet domain names, owned by Sellers that are
exclusively used in or are necessary in all material respects for the operation
of the Business as currently conducted and included in the Contributed Assets
(“Scheduled Intellectual Property”). All of the Scheduled Intellectual Property
is valid, subsisting and, to Seller’s Knowledge, in full force and effect
(except for any Scheduled Intellectual Property that expires at the end of its
statutory term or is unable to be renewed or is not material to the Business).
To Seller’s Knowledge, (a) no use of any Intellectual Property included in the
Contributed Assets in the conduct of the Business as currently conducted

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infringes the Intellectual Property of any Person in any material respect, and
(b) no third party is infringing any material Intellectual Property included in
the Contributed Assets. There are no suits, actions or proceedings presently
pending or, to Seller’s Knowledge, threatened in writing against any Seller that
asserts that the conduct of the Business infringes any third party’s
Intellectual Property rights, except as would not have a Material Adverse Effect
on the Business. To Seller’s Knowledge, all Material Contracts relating to
Intellectual Property primarily used in the Business under which any Seller is a
licensee are valid and enforceable against it and the other parties thereto in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered a
proceeding in equity or at law). Sellers have made reasonable efforts to protect
and maintain the proprietary nature of the Intellectual Property primarily
related to the Business owned by Sellers.
     Section 3.13 Tax Matters.
          (a) Sellers have duly and timely filed all material Tax Returns that
they were required to file in connection with the ownership or operation of the
Business. All such Tax Returns were correct and complete with respect to the
ownership or operation of the Business in all material respects. All material
Taxes owed by Sellers, whether or not shown on such Tax Returns, have been paid
to the extent due and payable. Sellers have withheld and paid all material Taxes
required to have been withheld with respect to the ownership or operation of the
Business, and all Forms W-2 and 1099 required with respect thereto have been
properly completed and timely filed.
          (b) There are no (i) agreements or consents currently in effect for
the extension or waiver of the time for assessment or collection of any Taxes of
any Seller; (ii) there is no action, suit, proceeding, investigation, audit or
claim currently pending, or to Seller’s Knowledge, threatened, regarding any
Taxes relating to any Seller; (iii) during the last five (5) years or, to
Seller’s Knowledge, prior thereto, there has not been (w) any ruling expressly
addressed to any Seller by any Tax authority that relates to or was obtained in
connection with the ownership or operation of the Business, (x) any audit or
other examination of the Taxes of any Seller by any Tax authority, (y) any
closing agreement entered into by any Seller pursuant to Section 7121 of the IRC
or any similar provision of any other applicable Tax law that was entered into
in connection with or relates to the ownership or operation of the Business, or
(z) any approval received or agreed to or pending with any Tax authority for a
change in accounting method with respect to the Taxes of any Seller that would
require any form or specific notice in a Tax Return (and which, in the case of
any such change more than five (5) years previous to the date hereof is not
reflected in the Tax Returns of Seller during the last five (5) years); and
(iv) Seller is not a party to any Tax sharing or Tax reimbursement agreement or
arrangement (other than property tax escalation clauses in property leases) that
relate to the ownership or operation of the Business.
          (c) The unpaid Taxes of Sellers related to the ownership or operation
of the Business (i) did not, as of the Most Recent Fiscal Quarter End, exceed by
any material amount the reserves for Tax liability (rather than any reserve for
deferred Taxes established to reflect the timing difference between book and tax
income) set forth on the face of the Most Recent Balance

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Sheet (rather than in the notes thereto); and (ii) as of the Closing, will not
exceed by any material amount the reserves as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of Sellers.
          (d) Neither Newco nor Buyer will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any:
(i) change in method of accounting for a taxable period ending on or prior to
the Closing Date; (ii) “closing agreement” as described in IRC Section 7121 (or
any corresponding or similar provision of state, local or foreign income Tax
law) executed on or prior to the Closing Date; (iii) intercompany transactions
or any excess loss account described in Treasury Regulations under IRC
Section 1502 (or any corresponding or similar provision of state, local or
foreign Income Tax law); (iv) installment sale or open transaction disposition
made on or prior to the Closing Date; or (v) prepaid amount received on or prior
to the Closing Date.
          (e) Newco has not elected to be treated as a corporation for U.S.
federal Income Tax purposes.
          (f) Seller does not have any liability with respect to the Business or
the Contributed Assets under applicable abandoned property, escheat or similar
Laws.
          (g) Section 3.13(g) of the Disclosure Schedule provides certain
estimated Tax basis information with respect to the Business as of December 31,
2008, including adjusted tax basis, classification and remaining depreciable
life (the “Estimated Tax Basis Balance Sheets”). The Estimated Tax Basis Balance
Sheets were compiled by Seller’s employees using the best information available
to Seller at the time such Estimated Tax Basis Balance Sheets were prepared.
          (h) Notwithstanding anything to the contrary set forth herein, all
references to Taxes in this Section 3.13 are limited to Taxes relating to the
Business, or Taxes for which Buyer or Newco could become liable as successor to
or transferee of the Business or which could become a charge against or Lien on
any of the Contributed Assets, and all references to Tax Returns are limited to
returns of such Taxes. Notwithstanding anything to the contrary set forth
herein, the representations and warranties set forth in this Section 3.13 are
the exclusive representations and warranties of Seller regarding Tax matters.
     Section 3.14 Legal Compliance. (a) Sellers are in compliance with all
applicable laws relating to the Business (other than Tax matters, environmental,
health or safety matters, labor matters and employee and Employee Benefit Plan
matters, which are exclusively governed by Section 3.13, Section 3.21,
Section 3.22 and Section 3.23, respectively), including, as applicable, laws
with respect to approvals, permits and licenses required by Sellers in
connection with the conduct of the Business, except for such noncompliance which
would not result in any Material Adverse Effect on the Business, and (b) no
Litigation has been filed, commenced or, to Seller’s Knowledge, threatened in
writing by any Governmental Authority primarily relating to the Business during
the two (2) years prior to the date hereof against any of them alleging any
failure so to comply which would be reasonably likely to result in any Material
Adverse Effect on the Business.

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     Section 3.15 Litigation. Section 3.15 of the Disclosure Schedule sets forth
each instance in which Sellers (a) are subject to any outstanding Decree or
(b) are a party or, to Seller’s Knowledge, are threatened in writing to be made
a party to any Litigation (other than any action filed, commenced or threatened
in writing by a Governmental Authority), except for such Decrees or Litigation
that are not expected to involve future payment of an amount greater than One
Million Dollars ($1,000,000) individually or Two Million Five Hundred Thousand
Dollars ($2,500,000) in the aggregate.
     Section 3.16 Product Warranty. No Seller has received any claim in writing
with respect to the Business that remains pending from any customer (a) alleging
that any of the Products manufactured, sold, leased or delivered by the Business
during the one (1) year prior to the date hereof has not conformed in all
material respects with applicable contractual commitments or express and implied
warranties, or (b) that would be reasonably likely to give rise to a Liability
for replacement or repair thereof or other damages in connection therewith, in
either case that would be a material Liability of the Business, other than the
reserve for product warranty claims set forth on the Most Recent Balance Sheet,
as adjusted for operations and transactions since the Most Recent Fiscal Quarter
End in accordance with the past custom and practice of the Business.
     Section 3.17 Product Liability. Sellers do not have any material Liability
arising out of any injury to individuals or property as a result of the
ownership, possession or use of any product manufactured, sold, leased or
delivered by the Business during the three (3) years prior to the date hereof
not reflected on the Most Recent Balance Sheet.
     Section 3.18 Affiliate Transactions. Except for any transactions
contemplated hereby (including transactions involving Newco or any Newco
Subsidiary), to Seller’s Knowledge, no officer or director of Seller or any of
its Subsidiaries (nor any ancestor, sibling, descendant or spouse of any of such
Person, or any trust, partnership or corporation in which any of such Persons
has an economic interest in excess of five percent (5%) of the ownership
interests therein), (i) is or was a party to any Contract, commitment or
transaction with any of Sellers relating to the Business since January 1, 2007
(other than in his or her capacity as an officer or director of Seller or any of
its Subsidiaries), or (ii) has any interest in any Contributed Asset, other than
indirectly, as a stockholder of Seller.
     Section 3.19 Customers and Suppliers. Section 3.19 of the Disclosure
Schedule lists (i) the ten (10) largest customers (by revenue) of the Business
during the Most Recent Fiscal Year and (ii) the ten (10) largest suppliers (by
cost) of the Business during the Most Recent Fiscal Year. No such supplier or
customer has canceled or otherwise terminated, or, to Seller’s Knowledge,
threatened in writing to cancel or otherwise terminate, its relationship with
Seller or to decrease materially the quantity of products purchased from or sold
to, respectively, the Business outside of the ordinary course of business
expressly as a result of the transactions contemplated hereby or otherwise since
the Most Recent Fiscal Year End.
     Section 3.20 Insurance. The insurance coverage provided by the insurance
policies maintained by Sellers with respect to the Business: (a) is on such
terms, (b) covers such categories of risk, (c) contains such deductibles and
retentions, and (d) is in such amounts as, with respect to each of the criteria
set forth in the foregoing clauses (a) through (d), is suitable

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and customary for the Business in all material respects. Section 3.20 of the
Disclosure Schedule sets forth a list of all insurance policies of Seller in
effect as of the date hereof covering the Business or the Contributed Assets and
the applicable deductible and minimum limits on each such policy.
     Section 3.21 Environmental, Health or Safety Matters.
          (a) (i) Sellers have obtained, have held and hold all material Permits
required pursuant to Environmental, Health or Safety Requirements
(“Environmental Permits”) required to be obtained and held by them in connection
with the ownership and operation of the Business, the Facilities and the
Contributed Assets; and (ii) each such Environmental Permit as of the date
hereof is identified on Section 3.21(a) of the Disclosure Schedule.
          (b) Sellers are and have been: (i) in material compliance with all
required Environmental Permits, and (ii) in material compliance with all
Environmental, Health or Safety Requirements presently or previously in effect,
except for such noncompliance that has either (a) been fully and finally
resolved and for which no material Liability remains or (b) would not reasonably
be expected to result in any Material Adverse Effect on the Business.
          (c) There are no (i) Decrees which could reasonably be expected to
have a Material Adverse Effect on the Business, or (ii) material Litigations in
each case issued, pending or, to Seller’s Knowledge, threatened against Sellers
or with respect to which Sellers have entered into or are subject, that relate
to the Facilities, the Business or the Contributed Assets, under or relating to
the Environmental, Health or Safety Requirements.
          (d) (i) No Release of Hazardous Materials has occurred and no Person
has been exposed to any Hazardous Materials at, from, in, to, on or under any of
the Facilities; and (ii) no Hazardous Materials are present in, on or migrating
to or from any of the Facilities, in the case of either clause (i) or
(ii) hereof, that is reasonably likely to give rise to a Liability or Litigation
under Environmental, Health or Safety Requirements to Sellers or Newco except
for any Liability or Litigation that would not reasonably be expected to have a
Material Adverse Effect on the Business.
          (e) None of the Facilities is listed or, to Seller’s Knowledge,
proposed for listing on the National Priorities List (as defined in
Comprehensive Environmental Response, Compensation and Liability Act of 1980) or
on any similar list of sites requiring investigation or clean up under any
Environmental, Health or Safety Requirements, which listing would reasonably be
expected to have a Material Adverse Effect on the Business.
          (f) There is no (i) asbestos-containing materials,
(ii) polychlorinated biphenyl-containing equipment or materials, or
(iii) underground storage tanks on or under any of the Facilities, in any of
cases (i) — (iii) above, that would reasonably be expected to have a Material
Adverse Effect on the Business.
          (g) Seller has made available to Buyer such material environmental
reports, documents, studies, analyses, investigations, audits and reviews in any
Sellers’ (or their respective representatives or advisors) possession or control
as reasonably necessary to disclose material environmental, health and safety
liability issues to Seller’s Knowledge.

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          (h) Neither the execution of this Agreement nor any of the Related
Agreements nor the consummation of the transactions contemplated hereby or
thereby will require any notification to or the consent of any Governmental
Authority (other than such notifications as may be required in connection with
the transfer or reissuance of any Environmental Permits) or the undertaking of
any investigation or remedial actions pursuant to Environmental, Health or
Safety Requirements other than those which the failure to comply with would not
reasonably be expected to have a Material Adverse Effect on the Business.
          (i) Sellers have not contractually assumed responsibility for or
agreed to indemnify or hold harmless any Person for any Liability arising under
or relating to any Environmental, Health or Safety Requirements which Liability
relating to the Contributed Assets, Facilities or the Business that would
reasonably be expected to have a Material Adverse Effect on the Business.
          (j) Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.21 and Section 3.3,
Section 3.6, Section 3.7, Section 3.11, Section 3.20, and Section 3.28 are the
exclusive representations and warranties of Seller relating to environmental,
health and safety matters, including any matters arising under Environmental,
Health or Safety Requirements.
     Section 3.22 Labor Relations.
          (a) Except as would not reasonably be likely to have a Material
Adverse Effect on the Business, each Seller is in material compliance with all
laws relating to the employment of labor, including those laws relating to wages
and hours, collective bargaining, equal opportunity, discrimination, affirmative
action, workplace safety, layoffs, vacation, immigration, and the withholding
and payment of all employment-related Taxes and other withholdings.
          (b) No Seller is a party to or bound by any collective bargaining
agreement covering the Covered U.S. Employees, nor has any of them experienced
any strike or material grievance, claim of unfair labor practices or other
material labor dispute with respect to the Business within the two (2) years
prior to the date hereof. No unfair labor practice charge or complaint of sex,
race, or other discrimination claim has been brought since January 1, 2004
against any Seller with respect to the conduct of the Business before the
National Labor Relations Board, the Equal Employment Opportunity Commission or
any other Governmental Authority that would reasonably be expected to result in
any material liability.
          (c) No Seller is a party to any Contract with its Covered Employees
(or any Person on their behalf) which prohibits Seller from relocating, closing
or terminating any of its operations or facilities or any portion thereof. Since
the Most Recent Fiscal Quarter End, none of the Sellers has effectuated any
plant closings or other employee lay offs in violation of the WARN Act.
          (d) Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.22 are the exclusive
representations and warranties of Seller relating to labor matters.

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     Section 3.23 Employee Benefit Plans and Employees. 
          (a) Each of the employees listed on Annex C hereto (including all
Covered EU Employees and Covered Foreign Employees) has responsibilities as of
the date hereof primarily related to the Business except as indicated on Annex
C.
          (b) Section 3.23(b) of the Disclosure Schedule lists each Employee
Benefit Plan (with specific notations for Foreign Benefit Plans). With respect
to each such Employee Benefit Plan:
               (i) Such plan, if intended to meet the requirements of a
“qualified plan” under Section 401(a) of the IRC, has received a determination
letter (or the prototype form plan document on which such plan is based has
received an opinion letter or advisory letter) from the Internal Revenue Service
regarding its qualified status under the IRC and, to Seller’s Knowledge, no
circumstances exist that would reasonably be expected to adversely affect such
qualified status.
               (ii) Seller has made available to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the associated Forms
5500 annual returns/reports and the most recent determination letter received
from the Internal Revenue Service, as applicable, for each Employee Benefit
Plan.
          (c) Each Employee Benefit Plan has been maintained and administered in
accordance with its terms and applicable law in all material respects.
          (d) Seller does not have, and does not expect to have, any obligation
to make any contribution to any Multiemployer Plans or any Multiple Employer
Plans.
          (e) All contributions required by law to have been made under any of
the Employee Benefit Plans that are defined benefit plans or money purchase
pension plans (without regard to any waivers granted under Section 412 of the
IRC) to any funds or trusts established thereunder or in connection therewith
have been made in all material respects by the due date thereof (including any
valid extension), except any of the Employee Benefit Plans that are defined
benefit plans or money purchase pension plans which are either fully funded or
for which any estimated underfunding is set forth on Section 3.23(e) of the
Disclosure Schedule.
          (f) Neither Seller nor any ERISA Affiliate currently, or in the past
six (6) years, has sponsored, maintained, or contributed to an “employee pension
benefit plan” (within the meaning of Section 3(2) of ERISA) that is subject to
Title IV of ERISA or to the minimum funding requirements of Section 412 of the
IRC or Part 3 of Subtitle B of Title I of ERISA. Neither Seller nor any ERISA
Affiliate has taken any action or failed to take any action, nor has any event
occurred to Seller’s Knowledge, with respect to a plan other than an Employee
Benefit Plan, which has resulted or would reasonably be expected to result in
Seller becoming subject to liability under Title IV of ERISA or the minimum
funding requirements of Section 412 of the IRC or Part 3 of Subtitle B of Title
I of ERISA, or to any excise taxes under IRC Sections 4971, 4977 or 4980B.

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          (g) There is no pending Litigation that has been asserted or
instituted, or to Seller’s Knowledge, threatened against any of the Employee
Benefit Plans, the assets of any of the trusts under such plans or the plan
sponsor or the plan administrator, or against any fiduciary of any of the
Employee Benefit Plans with respect to the operation of such plans (other than
routine benefit claims) pursuant to which Buyer would have material liability.
          (h) None of the Employee Benefit Plans is a “welfare benefit plan”
within the meaning of Section 3(1) of ERISA that provides for continuing
benefits or coverage after termination of employment for any participant or any
beneficiary of any participant, except as may be required under COBRA and at the
expense of the participant or the participant’s beneficiary.
          (i) Section 3.23(i) of the Disclosure Schedule lists all change of
control or retention plans or agreements that would be triggered by the
transactions contemplated by this Agreement.
          (j) Sellers have made all payments to Covered Employees under any
employment, severance, termination, bonus plan or other similar agreement or
arrangement that are due and payable and outstanding.
          (k) Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.23 are the exclusive
representations and warranties of Seller regarding employee and Employee Benefit
Plan matters.
     Section 3.24 Brokers’ Fees. Other than the fees and expenses payable to
HSBC Securities (USA) Inc. in connection with the transactions contemplated
hereby, which shall be borne by Solutia, no Seller has entered into any Contract
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated hereby for which Buyer could become liable or
obligated to pay.
     Section 3.25 Newco.
          (a) Newco was formed for the purpose of effecting the transactions
contemplated hereby and has not conducted any activities other than in
connection with the Business and transactions contemplated hereby.
          (b) Seller has heretofore furnished to Buyer a complete and correct
copy of the limited liability company agreement, as amended to date, of Newco.
     Section 3.26 Title to Newco Units. At the Closing, Seller will have good
and valid title to Newco Units, and Seller will convey at the Closing good and
valid title to all of the Newco Units, free and clear of all Liens (other than
Permitted Liens) to Holdings pursuant to the contribution of the Newco Units
contemplated by Section 2.5(a).
     Section 3.27 Newco Capitalization.
          (a) As of the date hereof, there is one common unit of Newco issued
and outstanding. Other than as contemplated by this Agreement or any Related
Agreement, there are

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no existing preemptive rights, outstanding subscriptions, options, rights,
warrants, convertible or exchangeable securities, calls, rights of exchange,
plans or other agreements, commitments or claims or other similar rights
relating to any equity units or other equity security of Newco of any character
providing for the transfer, purchase, issuance or sale of any equity units of
Newco, other than as contemplated by this Agreement or any Related Agreement.
          (b) The equity units of Newco have been duly authorized and are
validly issued, fully paid, and non-assessable. Other than as contemplated by
this Agreement or any Related Agreement, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other Contracts that would require Newco to issue, sell, or
otherwise cause to become outstanding any of its equity units. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Newco.
     Section 3.28 Solvency. Immediately after giving effect to the consummation
of the transactions contemplated by this Agreement and the Related Agreements,
at the Closing (a) each of the Sellers will be able to pay its debts as they
mature and have sufficient capital (and not unreasonably small capital) to carry
on its business consistent with its past practices, and (b) the assets and
properties of each of the Sellers at a fair valuation will be greater than its
debts and other liabilities.
     Section 3.29 No Undisclosed Liabilities. With respect to the Business,
Solutia does not have any Liability that would be an Assumed Liability that
would be required by GAAP, as in effect on the date thereof, to be reflected on
a consolidated balance sheet of the Business except for: (i) liabilities as
reflected or reserved for in the Most Recent Financial Statements;
(ii) liabilities incurred in the ordinary course of business since the date of
the Most Recent Financial Statements; (iii) liabilities to be reflected on the
Conclusive Net Working Capital Statement; (iv) liabilities that arose under, or
were incurred in connection with, the transactions contemplated by this
Agreement or any Related Agreement; (v) liabilities which have been discharged
or paid in full; (vi) liabilities set forth on Section 3.29 of the Disclosure
Schedule; and (vii) any liability that is not material to the Business.
     Section 3.30 Seller Information. As of the date hereof, Seller has provided
to Buyer true, correct and complete information relating to the businesses and
sales of Seller and its Subsidiaries and joint ventures upon which Buyer can
reasonably determine whether any objections to the transactions contemplated
hereby may be credibly asserted under any Antitrust Law.
     Section 3.31 Disclaimer of Other Representations and Warranties. Except for
the representations and warranties contained in this Article III or expressly
contained in any Related Agreement, neither Seller nor any other Person shall be
deemed to have made any representation or warranty, express or implied,
including as to the accuracy or completeness of any information regarding any
Seller, Newco, Holdings, the Business, any Contributed Assets, any Assumed
Liabilities, the Holdings Contribution Shares, the Newco Units or any other
matter.

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ARTICLE IV
BUYER’S AND SK’S REPRESENTATIONS AND WARRANTIES
     Buyer and SK, jointly and severally, represent and warrant to Seller that
the statements contained in this Article IV are true and correct as of the date
of this Agreement.
     Section 4.1 Organization of Buyer and SK; Good Standing.
          (a) SK is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate or similar power and authority to own, lease and operate its assets
and to carry on its business as now being conducted.
          (b) Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate or similar power and authority to own, lease and operate
its assets and to carry on its business as now being conducted.
     Section 4.2 Authorization of Transaction.
          (a) Each of SK and Buyer has full power and authority (including full
corporate or other entity power and authority) to execute and deliver this
Agreement and all other agreements contemplated hereby to which it is a party,
including pursuant to the Financing, and to perform its obligations hereunder
and thereunder.
          (b) The execution, delivery and performance of this Agreement and all
other agreements contemplated hereby to which SK or Buyer is a party, including
pursuant to the Financing, have been duly authorized by SK and Buyer,
respectively.
          (c) This Agreement has been duly executed and delivered by SK and
Buyer and constitutes the valid and legally binding obligation of SK and Buyer,
enforceable against SK and Buyer in accordance with its terms and conditions,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors’ rights and general principles of equity.
     Section 4.3 Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the transactions referred to in Article II), including pursuant to
the Financing, will: (i) conflict with or result in a breach of the certificate
of incorporation or bylaws, or other organizational documents, of SK or Buyer;
(ii) violate any law or Decree to which SK or Buyer is, or its respective assets
or properties are, subject, or (iii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any Contract to which SK or Buyer is a party or by which it is bound,
except, in the case of either clause (ii) or (iii), for such conflicts,
breaches, defaults, accelerations, rights or failures to give notice as would
not, individually or in the aggregate, have a Material Adverse Effect on Buyer.
Other than the filings required under the applicable laws of China, neither SK
nor Buyer is required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Governmental Authority in order for
the Parties to

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consummate the transactions contemplated by this Agreement or any Related
Agreement, except where the failure to give notice, file or obtain such
authorization, consent or approval would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer.
     Section 4.4 Legal Compliance. (a) SK and Buyer are in compliance with all
applicable laws, except for such noncompliance which would not result in any
Material Adverse Effect on Buyer, and (b) no Litigation has been filed,
commenced or, to Buyer’s Knowledge, threatened in writing by any Governmental
Authority primarily relating to SK or Buyer against any of them alleging any
failure so to comply which would be reasonably likely to result in any Material
Adverse Effect on Buyer.
     Section 4.5 Litigation. Neither SK nor Buyer, nor any of their respective
Subsidiaries, (a) is subject to any outstanding Decree or (b) is a party or, to
Buyer’s Knowledge, is threatened in writing to be made a party to any Litigation
(other than any action filed, commenced or threatened in writing by a
Governmental Authority), except for such Decrees or Litigation which would not
have a Material Adverse Effect on Buyer.
     Section 4.6 Brokers’ Fees. Neither SK nor Buyer has entered into any
Contract to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Seller or
any of its Affiliates could become liable or obligated to pay.
     Section 4.7 Financing; Sufficient Funds.
          (a) SK and Buyer have delivered to Seller a true, accurate and
complete copy of a letter of interest from a senior lender (the “Debt Letter of
Interest”), which Debt Letter of Interest is attached hereto as Annex H hereto,
pursuant to which, and subject to the terms and conditions thereof, the lender
parties thereto have indicated an interest to lend the amounts set forth therein
to Buyer for the purpose of funding the transactions contemplated by this
Agreement (the “Debt Financing”). SK and Buyer have delivered to Seller a true,
accurate and complete copy of an executed commitment letter from SK (the “Equity
Commitment Letter” and together with the Debt Letter of Interest, the “Financing
Commitments”), pursuant to which SK has committed to invest the amounts set
forth therein (the “Equity Financing” and together with the Debt Financing, the
“Financing”), which Equity Commitment Letter is attached hereto as Annex I
hereto. The aggregate proceeds from the Financing constitute all of the
financing required to be provided to Buyer for the consummation of the
transactions contemplated hereby, and are sufficient for the satisfaction of all
of SK’s and Buyer’s obligations under this Agreement and the Related Agreements,
including the payment of the Cash Amount. The Equity Financing Commitment and
the Debt Letter of Interest contain all of the conditions precedent to the
obligations of the parties thereunder to make the Financing available to SK or
Buyer on the terms therein. There are no other agreements, side letters or
arrangements relating to the Financing except as set forth in the Equity
Commitment Letter.
          (b) The Equity Commitment Letter is in full force and effect and has
not been withdrawn or terminated or otherwise amended or modified in any
respect. The Equity Commitment Letter, in the form so delivered, is a legal,
valid and binding obligation of SK and Buyer and the other parties thereto.
There are no other agreements, side letters or arrangements

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relating to the Equity Commitment Letter that could affect the availability of
the Equity Financing. No event has occurred which, with or without notice, lapse
of time or both, would constitute a default or breach on the part of SK or Buyer
under any term or condition of the Equity Commitment Letter, and neither SK nor
Buyer has reason to believe that it will be unable to satisfy on a timely basis
any term or condition of closing to be satisfied by it contained in the Equity
Commitment Letter. SK and/or Buyer have fully paid any and all commitment fees
or other fees required by the Equity Commitment Letter to be paid on or before
the date of this Agreement and the Deposit (as defined in the Debt Letter of
Interest).
     Section 4.8 SK Information. As of the date hereof, Buyer and SK have
disclosed to Seller any and all potential issues under any Antitrust Law that
may be credibly raised about the transactions contemplated hereby. As of the
date hereof, Buyer and SK have provided to Seller true, correct and complete
information relating to the businesses and sales of SK and its Subsidiaries and
joint ventures upon which Seller can reasonably determine whether any objections
to the transactions contemplated hereby may be credibly asserted under any
Antitrust Law.
     Section 4.9 Acquiring Person; HSR Act. None of SK, Buyer or any other
Affiliate of either of the foregoing who would be considered an acquiring person
(as such term is used in the HSR Act) satisfies the size-of-person test under
the HSR Act.
     Section 4.10 Disclaimer of Other Representations and Warranties. Except for
the representations and warranties contained in this Article IV or expressly
contained in any Related Agreement, neither SK, Buyer or any other Person shall
be deemed to have made any representation or warranty, express or implied,
including as to the accuracy or completeness of any information regarding SK,
Buyer, the Financing or any other matter.
ARTICLE V
PRE-CLOSING COVENANTS
     The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing (except as otherwise expressly
stated to apply to a different period):
     Section 5.1 Reasonable Best Efforts; Cooperation. Upon the terms and
subject to the conditions set forth in this Agreement, each of the Parties shall
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other Parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated hereby. Without limiting the generality of the foregoing,
(i) Seller shall use its reasonable best efforts to cause the conditions set
forth in Section 7.1 to be satisfied or fulfilled, and (ii) SK and Buyer shall
each use its reasonable best efforts to cause the conditions set forth in
Section 7.2 to be satisfied or fulfilled.
     Section 5.2 Regulatory Approvals. Without limiting the generality of
Section 5.1:
          (a) Subject to the terms and conditions of this Agreement, each Party
shall use its reasonable best efforts to: (i) file any filing or notification
required pursuant to any Antitrust Law with respect to the transactions
contemplated hereby within ten (10) Business Days after the

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date hereof; (ii) supply as promptly as practicable any additional information
and documentary material that may be requested or required pursuant to any
Antitrust Law; and (iii) cause the expiration or termination of the applicable
waiting periods under any Antitrust Law as soon as practicable.
          (b) In connection with the efforts referenced in Section 5.1 and this
Section 5.2 to obtain all requisite approvals and authorizations for the
transactions contemplated by this Agreement under any Antitrust Law, or any
state law, each of the Parties shall use reasonable best efforts to:
(i) cooperate with each other in connection with any filing or submission and in
connection with any investigation or other inquiry, including any proceeding
initiated by a private party; (ii) keep the other Parties informed in all
material respects of any material communication received by such Party from, or
given by such Party to, any Governmental Authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case, regarding any of the transactions contemplated hereby; and
(iii) permit the other Party to review any material communication given to it
by, and consult with each other in advance of any meeting or conference with any
Governmental Authority, including in connection with any proceeding by a private
party. The foregoing obligations in this Section 5.2(b) shall be subject to the
Confidentiality Agreement and any attorney-client, work product or other
privilege.
          (c) Without limiting the generality of Section 5.2(b), if any
objections are asserted with respect to the transactions contemplated hereby
under any Antitrust Law or if any suit is instituted by any Governmental
Authority or any private party challenging any of the transactions contemplated
hereby as violative of any Antitrust Law or if a filing pursuant to Section
5.2(a) is reasonably likely to be rejected or conditioned by a Governmental
Authority, each of the Parties shall use reasonable best efforts to resolve such
objections or challenges as such Governmental Authority or private party may
have to such transactions, including to vacate, lift, reverse or overturn any
order, whether temporary, preliminary or permanent, so as to permit consummation
of the transactions contemplated by this Agreement as soon as practicable and in
any event on or prior to the Outside Date.
          (d) Without limiting the generality of Section 5.2(c), if necessary to
obtain any regulatory actions or non-actions, orders, waivers, consents,
clearances, extensions and approvals necessary to consummate the transactions
contemplated by this Agreement, or if any suit or other action is threatened or
instituted by any Person challenging the transactions contemplated by this
Agreement or any Related Agreement as violative of any applicable law, upon the
request of Seller, SK and Buyer shall, and shall cause their respective
Subsidiaries (including, if applicable, from and after the Closing, Newco) to,
hold separate or dispose of any portion of their assets or businesses or
otherwise conduct their businesses or any portion of their businesses in a
specified manner as soon as practicable and in any event on or prior to the
Outside Date or take any other actions unless such actions, in the aggregate,
would result in a Material Adverse Effect on SK (after giving effect to the
consummation of the transactions contemplated hereby).
     Section 5.3 Notices and Consents. Prior to the Closing and as necessary
following the Closing:

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          (a) Seller will, or will cause the Other Sellers to, give any notices
to third parties, and each of the Parties will use its reasonable best efforts
to obtain any third party consents or sublicenses and transfer all Permits (or
apply for new Permits in the name of Newco) with respect to the Permits that are
not transferable) as are necessary and appropriate to consummate the
transactions contemplated hereby, including in connection with the matters
referred to in Section 5.3(a) of the Disclosure Schedule; provided, however,
that: (i) Seller shall, in consultation with Buyer, control all correspondence
and negotiations with third parties regarding any such matters; provided,
further, that Seller shall periodically update Buyer, at Buyer’s request, on the
status of such negotiation and, upon request, provide Buyer copies of written
requests delivered to such third parties; (ii) Buyer shall bear any reasonable
effects as a result of amendments or modifications to any Transferred Contract
(including granting reasonable security interests in related property or rights
of entry or easements to related Facilities), including any Maintenance Costs,
as is necessary to obtain such consent or sublicense; (iii) Seller and Buyer
shall each pay one-half of the reasonable costs incurred to obtain such consent
or sublicense; and (iv) solely as to any Environmental Permit set forth on
Section 5.3(a) of the Disclosure Schedule which cannot be transferred or
reissued prior to Closing despite the Parties’ reasonable best efforts and
mutual cooperation, in order to satisfy the condition set forth in
Section 7.1(c) and absent an objection by the relevant Governmental Authority to
the following arrangement, the Parties agree to enter into an arrangement by
which Newco may operate on an interim basis pursuant to Sellers’ Environmental
Permit pending transfer or re-issuance, and to apprise the relevant Governmental
Authority of such arrangement. Each Party, at the request of any other Party,
shall, and shall cause any Subsidiary thereof to, use reasonable best efforts to
obtain, or to cause to be obtained, any consent, substitution, or amendment
required for any third party to novate any Transferred Contract or to obtain in
writing the unconditional release of such third party to such arrangements, so
that, in any case, as between Buyer, Newco and such third party, Newco will be
solely responsible for performance under such Contracts.
          (b) Without limiting Section 5.2, each of the Parties will give any
notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities in
connection with the matters referred to in Section 5.3(b) of the Disclosure
Schedule or as are otherwise necessary and appropriate to consummate the
transactions contemplated hereby.
     Section 5.4 Cooperation Regarding Holdings and Newco Formation. Without
limiting the generality of Section 5.1, Section 5.2 or Section 5.3:
          (a) Prior to the Closing, the Parties shall cooperate with each other
Party regarding the formation of Holdings, shall incorporate Holdings and shall
cause Holdings to have the certificate of incorporation of Holdings as of and
immediately following the Closing be substantially in the form of Exhibit L
hereto and the bylaws of Holdings as of and immediately following the Closing be
substantially in the form of Exhibit M hereto. Each of the Parties will take
actions so that, as of the Closing, (i) Holdings has full power and authority
(including full corporate or other entity power and authority) to execute and
deliver all agreements contemplated hereby to which it is, or is to be, a party
and to perform its respective obligations hereunder and thereunder, (ii) the
execution, delivery and performance of all agreements contemplated hereby to
which Holdings is to be a party have been duly authorized by Holdings,

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and (iii) all agreements contemplated hereby to which Holdings is, or is to be,
a party have been duly executed and delivered by Holdings and will constitute
the valid and legally binding obligation of Holdings, enforceable against
Holdings in accordance with its terms and conditions, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors’
rights and general principles of equity, and promptly following the Closing, the
Parties shall take all actions reasonably necessary to ratify all actions
contemplated hereby to be taken by Holdings in connection with the consummation
of the transactions contemplated hereby at or prior to such date of
ratification, and (iv) to elect the Board of Directors of Holdings effective as
of Closing as set forth in the Securityholders Agreement. From the date hereof
until the Closing, except as expressly contemplated hereby, the Parties shall
not permit or take any action to permit, or enter into or permit Holdings to
enter into any agreement to issue any capital stock of Holdings or any security
convertible or exchangeable into any such capital stock other than as
contemplated by this Agreement or any Related Agreement.
          (b) Prior to the Closing, each of the Parties shall cooperate with
each other Party and shall each use its reasonable best efforts to assist each
other Party in the contribution by Solutia and the Other Sellers to Newco or any
Newco Subsidiary of the Contributed Assets and the assumption of Newco of the
Assumed Liabilities and the contribution by Seller of the Newco Units to
Holdings so that from and after the Closing, the Business will continue to
operate without interruption, including to seek to obtain all material permits
and registrations which are not Contributed Assets, to seek to form or obtain
qualifications to conduct business of Holdings, Newco, or any Newco Subsidiary,
to seek to appoint new managers of any Newco Subsidiary to be appointed upon
proposal by Buyer with effect as from the Closing, to seek to register Holdings,
Newco or any Newco Subsidiary as a foreign branch office, including the
appointment of branch managers to be appointed upon proposal by Buyer with
effect as from the Closing, and to make copies of, and obtain consent to
transfer, or obtain new licenses for, the software listed on Section 1.1(a)(i)
of the Disclosure Schedule as inseparable assets (it being understood that the
process and costs of such copies, consents or new licenses shall be treated in
the same manner as contemplated by Section 5.3(a)). Section 5.4(b) of the
Disclosure Schedule sets forth a list of the foreign branch office registrations
that Seller intends to cause Newco or a Newco Subsidiary to file prior to the
Closing.
          (c) Prior to the Closing, each of the Parties shall cooperate with
each other Party and shall each use its reasonable best efforts to: (i) transfer
the benefit of the previously filed pre-registrations of chemical substances
manufactured, imported or exported by the Business pursuant to EU chemical
regulations (including, the EU Registration, Evaluation, Authorization and
Restriction of Chemical Substances Act) to Newco or Holdings (as the case may
be) or file new pre-registrations to the extent necessary or appropriate;
(ii) disengage the Belgian Limited Liability Company Solutia Europe sprl/bvba as
“Only Representative” (as such term is used or defined in REACH); and
(iii) cause Holdings or Newco to appoint an EU-based “Only Representative” for
complying with EU chemicals rules from and after the Closing and whereby Solutia
Europe sprl/bvba is released from any and all Liability in relation to its
acting as such an Only Representative.
          (d) Prior to the Closing, Solutia shall, or shall cause the Other
Sellers, to take the actions contemplated by Section 5.4(d) of the Disclosure
Schedule to effect the transfer of

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Contributed Assets (but in no event including the China Business Assets) located
outside of the United States of America.
          (e) Buyer and Solutia shall each pay one-half of the costs and
expenses (excluding legal fees, except to the extent covered by Section 10.1)
incurred by Seller, Holdings, Newco or Buyer in connection with the actions
contemplated by this Section 5.4 promptly following request therefor.
     Section 5.5 Preservation of Business. Except as otherwise contemplated
hereby or as required by law, Seller will, and will cause the Other Sellers to,
use commercially reasonable efforts to keep the Business as conducted as of the
date hereof substantially intact in all material respects, including maintaining
its present operations, physical facilities, working conditions and
relationships with suppliers, customers and employees.
     Section 5.6 Notice of Developments. Each of Seller and Buyer will give
prompt written notice to the other Party of: (i) the existence of any fact or
circumstance, or the occurrence of any event, of which it has Knowledge which
would reasonably be likely to cause a condition to a Party’s obligations to
consummate the transactions contemplated hereby set forth in Article VII not to
be satisfied as of a reasonably foreseeable Closing Date; or (ii) the receipt of
any notice or other communication from any Governmental Authority or any
securities market or securities regulator in connection with the transactions
contemplated by this Agreement; provided, however, that the delivery of any such
notice pursuant to this Section 5.6 shall not be deemed to amend or supplement
this Agreement and the failure to deliver any such notice shall not constitute a
waiver of any right or condition to the consummation of the transactions
contemplated hereby by any Party.
     Section 5.7 Notice of Supplemental Disclosure. Without limiting the
obligations of Seller contemplated by Section 5.6, from and after the date
hereof but prior to the fifth (5th) Business Day prior to the Closing Date,
Seller may inform Buyer pursuant to this Section 5.7 that any representation or
warranty of Seller was, may have been or may have been deemed to have been
inaccurate when made and provide a proposed supplement to the Disclosure
Schedule delivered as of the date hereof to correct such actual or potential
inaccuracy as if set forth on the Disclosure Statement as of the date hereof (a
“Disclosure Supplement”). If the inaccuracies contemplated by such Disclosure
Supplement are sufficiently material to prevent, after a reasonable period in
which to cure such inaccuracy, the satisfaction of the condition set forth in
Section 7.1(a), Buyer may terminate this Agreement prior to the Closing and in
no event later than ten (10) Business Days after receipt by Buyer of such
Disclosure Supplement. If Buyer shall not have exercised such right of
termination by such date, the Disclosure Schedule shall be deemed to have been
amended (effective as of the date of this Agreement) to add such Disclosure
Supplement. Prior to the Closing, Seller will deliver to Buyer financial
statements for the most recent fiscal quarter end prior to the Closing (if the
Closing shall be within forty-five (45) calendar days thereafter).
     Section 5.8 Access; No Contact; Confidentiality.
          (a) Upon the reasonable request of Buyer, Seller will, and will cause
the Other Sellers to, permit Buyer and its Representatives to have reasonable
access during normal

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business hours, and in a manner so as not to interfere unreasonably with the
normal business operations of Sellers, to all premises, properties (including
the Facilities for the purposes of conducting Phase I environmental assessments
or environmental compliance reviews (but not for the purposes of conducting
intrusive investigations of the sort generally referred to as “Phase II”
assessments or investigations)), personnel, Records and Contracts of or related
to the Business; provided, however, that, for the avoidance of doubt, the
foregoing shall not require any Person to waive, or take any action with the
affect of waiving, its attorney-client privilege with respect thereto.
          (b) Except in response to a request contemplated by Section 5.8(a),
during the period from the date hereof and ending on the Closing Date, Buyer
shall not, and shall cause its Representatives not to, contact any employees,
customers, suppliers or licensors of the Business in connection with or
pertaining to any subject matter of this Agreement except with the prior written
notice to and consent of Seller, which shall not be unreasonably withheld,
conditioned or delayed.
          (c) All information obtained pursuant to Section 5.2 or this
Section 5.8 shall be Evaluation Material (as such term is defined in the
Confidentiality Agreement) subject to the terms and conditions of the
Confidentiality Agreement.
     Section 5.9 Press Releases and Public Announcements. The Parties have
agreed prior to execution of this Agreement on the initial forms of press
release. Hereafter, no Party shall issue any press release or make any public
announcement relating to the existence or subject matter of this Agreement
without the prior written approval of the other Party; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the disclosure
to the extent practicable and permissible under applicable law); and provided
further that each of the Parties may make internal announcements to their
respective employees that are not inconsistent in any material respects with the
Parties’ prior public disclosures regarding the transactions contemplated by
this Agreement.
     Section 5.10 Bulk Transfer Laws. SK, Buyer and Newco acknowledge that none
of Sellers, Holdings, Newco or any Newco Subsidiary will comply with the
provisions of any bulk transfer laws or similar laws of any jurisdiction in
connection with the transactions contemplated by this Agreement, including the
United Nations Convention on the Sale of Goods, and SK, Buyer and Newco each
hereby waive all claims related to the non-compliance therewith.
     Section 5.11 Buyer Financing.
          (a) SK and Buyer shall each use its reasonable best efforts to
(i) arrange the Financing, (ii) enter into definitive agreements with respect
thereto, in accordance with the terms set forth in the Financing Commitments,
which agreements shall be in effect no later than the Closing, and (iii)
consummate the Financing at the Closing. In the event that any portion of the
Financing becomes unavailable, (x) Buyer shall notify Seller thereof promptly
and in any event within one (1) Business Day, and (y) SK and Buyer shall use
their reasonable best efforts to arrange to obtain any such portion from
alternative sources, on terms that are no more adverse to

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Seller or Newco, as promptly as practicable following the occurrence of such
event, including entering into definitive agreements with respect thereto (such
definitive agreements entered into pursuant to the first or second sentence of
this Section 5.11(a) being referred to as the “Financing Agreements”). SK and
Buyer shall, and shall cause their respective Representatives to, comply with
the terms, and satisfy on a timely basis the conditions, of the Equity Financing
Letter, the Debt Letter of Interest, any alternative financing commitments, and
any related fee and engagement letters. SK and Buyer shall not, and shall not
permit any of their respective Affiliates to, without the prior written consent
of Seller, take or fail to take any action or enter into any transaction, that
could reasonably be expected to materially impair, delay or prevent consummation
of the Financings. Neither SK nor Buyer shall amend or alter, or agree to amend
or alter, the Equity Financing Commitment or any alternative equity financing
commitments, without the prior written consent of Seller. Any breach of the
Equity Financing Commitment or any alternative financing commitment by SK or
Buyer shall be deemed a breach by Buyer of this Section 5.11.
          (b) SK and Buyer shall keep Seller informed with respect to all
material activity concerning the status of the Financing contemplated by the
Financing Commitments or any alternative financing and shall give Seller prompt
notice of any material adverse change with respect thereto. Without limiting the
generality of the foregoing, SK and Buyer shall give Seller notice promptly (and
in any event no later than two (2) Business Days) following any of the
following: (i) any breach by any party of any of the Financing Commitments, any
alternative financing commitment or the Financing Agreements of which SK or
Buyer becomes aware or any actual or purported expiration or termination
thereof; (ii) any notice to SK or Buyer from a financing source that is a party
to a Financing Commitment that such source no longer intends to provide
financing to Buyer on the terms set forth therein; or (iii) if for any reason SK
or Buyer no longer believes in good faith that it will be able to obtain all or
any portion of the Financing contemplated by the Financing Commitments on the
terms described therein. Buyer shall furnish complete, correct and executed
copies of the Financing Agreements promptly upon their execution.
          (c) Seller shall, and shall cause its Subsidiaries and Newco to
reasonably cooperate in connection with the arrangement of the Financing as may
be reasonably requested by Buyer (provided that such requested cooperation does
not unreasonably interfere with the ongoing operations of Seller or its
Subsidiaries and Buyer shall pay any out-of-pocket expenses in connection with
such cooperation), including, at the reasonable request of Buyer, entering into
such agreements to be effective as of the Closing, and to use reasonable best
efforts to deliver officer’s certificates as of the Closing, in each case as are
customary in financings of such type and as are, in the good faith determination
of the Persons executing such officer’s certificates, accurate. Furthermore,
prior to the Closing, Seller shall use its commercially reasonable efforts to
obtain a written opinion from Seller’s counsel, in Seller’s counsel’s customary
form, as of the closing of the Debt Financing, with respect to the matters set
forth on Section 5.11(c) of the Disclosure Schedule. Notwithstanding anything to
the contrary set forth in this Agreement, neither Seller nor any of its
Representatives (including Newco) shall be required to pay any commitment or
other similar fee or incur any other Liability in connection with the Debt
Financing or the Equity Financing.

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          (d) SK and Buyer agree that none of Seller, any of its Subsidiaries or
any of its or their Representatives shall have any obligation under, or shall be
bound by, the Debt Letter of Interest (notwithstanding anything to the contrary
set forth in the Debt Letter of Interest purporting to obligate or bind any such
Person) and shall not purport to obligate or bind any such Person without such
Person’s prior written consent.
     Section 5.12 SK Guarantee. SK hereby irrevocably and unconditionally
guarantees to Sellers the due and punctual observance and performance of each
and every obligation of Buyer contemplated by this Agreement or any the Related
Agreement to be performed prior to the Closing, including the payment of the
amounts to be contributed pursuant to Section 2.5(b), all upon the terms and
subject to the conditions set forth herein and therein, provided that Seller’s
sole remedy with regard to SK’s guarantee is collection of the amount of the
Buyer Termination Fee.
     Section 5.13 Seller Guarantee. Seller hereby irrevocably and
unconditionally guarantees to Buyer the due and punctual observance and
performance of each and every obligation of Newco contemplated by this Agreement
or any Related Agreement to be performed prior to the Closing, provided that
Buyer’s sole remedy with regard to Seller’s guarantee is collection of the
amount of the Seller Termination Fee.
     Section 5.14 Newco Capitalization and Organizational Documents. From the
date hereof until the Closing, except as expressly contemplated hereby, Newco
shall not, or enter into any agreement to: (a) issue any membership interests or
any security convertible or exchangeable into any such membership interests
other than as contemplated by this Agreement or any Related Agreement; (b) cause
any stock split, reverse stock split, stock dividend, reorganization,
recapitalization, reclassification, combination, exchange of shares or other
like change with respect to any of its outstanding membership interests; or
(c) amend its limited liability company agreement.
     Section 5.15 Investment Acknowledgements. Each of Seller and Buyer hereby
acknowledge, for the benefit of each other and Holdings, that:
          (a) Investment Intent. It is acquiring (x) in the case of Holdings,
the Newco Formation Contribution Units or (y) in the case of Seller and Buyer,
the Holdings Contribution Shares (as applicable, the “Subject Securities”), for
investment and is not acquiring such Subject Securities with a view to or for
sale in connection with any distribution thereof within the meaning of the
Securities Act. It will not distribute its applicable Subject Securities in
violation of the Securities Act or the applicable securities laws of any state.
          (b) Subject Securities Not Registered. It understands that the
applicable Subject Securities that it will acquire hereunder have not been
registered under the Securities Act or the securities laws of any state and must
be held indefinitely unless subsequently registered under the Securities Act and
any applicable state securities laws or unless an exemption from such
registration is or becomes available.
          (c) Independent Investment Decision. In formulating a decision to
enter into this Agreement, it has relied solely upon: (a) the provisions of this
Agreement; (b) an

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independent investigation of the Business; and (c) consultations with its legal
and financial advisors and other advisors with respect to this Agreement and the
nature of its investment; and that in entering into this Agreement no reliance
was placed by it upon any representations or warranties other than those
contained in this Agreement.
          (d) Ability to Hold Investment. It is financially able to hold the
Subject Securities it will acquire hereunder for long-term investment, believes
that the nature and amount of the Subject Securities it will acquire are
consistent with its overall investment program and financial position and
recognizes that there are substantial risks involved in the acquisition of the
Subject Securities.
          (e) Knowledge and Experience in Financial Matters. It confirms that:
(a) it is familiar with the Business; (b) it has had the opportunity to ask
questions of the officers, directors and employees of Seller and Newco and to
obtain (and that it has received to its satisfaction) such information about the
business and financial condition of the Business as it has reasonably requested;
and (c) it, either alone or with a representative (as defined in Rule 501(h)
promulgated under the Securities Act), has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the prospective investment in the Subject Securities.
          (f) Accredited Investor. It is an “accredited investor” within the
meaning of Rule 501(a) of Regulation D under the Securities Act.
     Section 5.16 Solicitation of Alternative Transactions.
          (a) Except as otherwise contemplated by this Section 5.16, from the
date hereof until the Closing, Seller agrees that it shall not, nor shall it
direct or cause any of the Other Sellers, any of its or their respective
officers or directors or advisors to, directly or indirectly:
               (i) initiate, solicit or knowingly and intentionally encourage or
knowingly and intentionally facilitate any inquiries with respect to, or the
making of, an Acquisition Proposal;
               (ii) participate or engage in any discussions of a Solicited
Acquisition Proposal or negotiations with, or furnish or disclose any material
non-public information relating to the Business to, any Person in connection
with a Solicited Acquisition Proposal;
               (iii) approve, endorse or recommend any Solicited Acquisition
Proposal; or
               (iv) enter into any letter of intent, agreement in principle,
merger agreement, acquisition agreement, option agreement or other similar
agreement relating to a Solicited Acquisition Proposal.
          (b) Seller shall, and shall cause each of the Other Sellers and its
and their respective officers, directors and advisors to, immediately cease any
existing solicitations, discussions or negotiations with any Person (other than
the Parties hereto) regarding any

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Acquisition Proposal that exists as of the date hereof except as may become
permitted pursuant to Section 5.16(d).
          (c) In the event that Seller or any of its Subsidiaries or its or
their respective Representatives receives an Acquisition Proposal or request for
non-public information relating to the Business with respect to a Covered
Transaction from the date hereof until the Closing (including any renewal or
revision of any Acquisition Proposal or request made prior to the date hereof),
Seller shall inform Buyer of such Acquisition Proposal or request within two
(2) Business Days following the date on which a senior executive of Seller
becomes aware of the receipt thereof.
          (d) Notwithstanding anything to the contrary set forth in this
Agreement (including Section 5.16(a) or Section 5.16(c)), if Seller or any of
its Subsidiaries or any of its or their respective Representatives receives an
Unsolicited Acquisition Proposal or request for non-public information relating
to the Business with respect to a Covered Transaction from the date hereof until
the Closing (including any renewal or revision of any Acquisition Proposal or
request made prior to the date hereof), any Seller or any of its respective
Representatives may take any action that might otherwise be restricted by clause
(i) through (iv) of Section 5.16(a) with respect thereto, including responding
to such Acquisition Proposals or requests, furnishing any non-public information
relating to the Business to, engaging in negotiations or discussions with, the
Person making such Acquisition Proposal or request and/or terminating this
Agreement as and to the extent contemplated by Section 9.1(c)(iv).
ARTICLE VI
OTHER COVENANTS
     The Parties agree as follows with respect to the period from and after the
Closing:
     Section 6.1 Cooperation. The Parties shall cooperate with each other, and
shall use their commercially reasonable efforts to cause their respective
Representatives to cooperate with each other, to provide an orderly transition
of the Business from Sellers to Newco and Holdings and to minimize the
disruption to the Business and Seller’s and its Subsidiaries’ other businesses
resulting from the transactions contemplated hereby as requested by any Party
and at the requesting Party’s sole cost and expense (and without liability of
any kind to the other Party cooperating with such request in providing such
requested actions other than arising from the cooperating Party’s gross
negligence, willful misconduct or bad faith in connection therewith).
     Section 6.2 Further Assurances; Inadvertent Transfers of Assets.
          (a) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement or any
Related Agreement, at any Party’s request and sole cost and expense, each Party
shall take such further action (including the execution and delivery to any
other Party of such other reasonable instruments of sale, transfer, conveyance,
assignment, assumption and confirmation, providing materials and information) as
another Party may reasonably request as shall be reasonably deemed necessary to
transfer, convey and assign to Newco or a Newco Subsidiary all of the
Contributed Assets and the China

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Business Assets and to confirm Newco’s or a Newco Subsidiary’s assumption of the
Assumed Liabilities and the China Assumed Liabilities.
          (b) Without limiting the provisions of Section 6.2(a), to the extent
that either Buyer or Seller discovers any additional assets or properties,
including any Intellectual Property, which should have been transferred or
assigned to Newco as the Contributed Assets or the China Business Assets but
were not so transferred or assigned, Buyer, Seller and Newco shall cooperate and
execute and deliver any instruments of transfer or assignment reasonably
necessary to transfer and assign such asset or property to Newco or a Newco
Subsidiary. Without limiting the provisions of Section 6.2(a), to the extent
that either Buyer, Seller or Newco discovers any assets or properties, including
any Intellectual Property, which is an Excluded Asset which was inadvertently or
otherwise mistakenly transferred or assigned to Newco or any Newco Subsidiary,
Buyer, Seller and Newco shall cooperate and execute and deliver any instruments
of transfer or assignment reasonably necessary to transfer and assign such asset
or property back to the applicable Seller.
     Section 6.3 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any Litigation commenced by any
third party with respect to (i) any transaction contemplated by this Agreement
or any Related Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction involving the Business, the other Party will
cooperate with the contesting or defending Party and its and its Subsidiaries’
counsel in the contest or defense, make available its and its Subsidiaries’
personnel and provide such testimony and access to its and its Subsidiaries’
books and records as shall be reasonably necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor pursuant to Article VIII); provided, however, that, for
the avoidance of doubt, the foregoing shall not require any Party to take any
such action if it (x) may result in a waiver or breach of any attorney/client
privilege, (y) could reasonably be expected to result in violation of applicable
law, or (z) providing such access or information would be reasonably expected to
be unreasonably disruptive to its operations.
     Section 6.4 Run-Off.
          (a) Referrals. From and after the Closing Date and until one (1) year
following the date thereof, Seller shall, and shall cause the Other Sellers to,
use commercially reasonable efforts to refer all customer or supplier inquiries
received by Sellers relating to the Business to Holdings.
          (b) Use of Name. From and after the Closing Date, Buyer will, and will
cause Holdings to: (i) use its commercially reasonable efforts to remove any and
all Solutia Marks from all Contributed Assets, and (ii) cease all use of such
Solutia Marks in each case as promptly as commercially practicable after the
Closing Date and in no event later than one hundred eighty (180) calendar days
following the date thereof. Notwithstanding the foregoing, from and after the
Closing Date, Buyer shall not, and Buyer shall ensure that none of Holdings,
Newco or any Newco Subsidiary shall use existing marketing and sales material
bearing any Solutia Marks unless appropriately stickered by Holdings, Newco or a
Newco Subsidiary to reflect the

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consummation of the transactions contemplated hereby in a form reasonably
satisfactory to Seller.
          (c) Websites. As soon as commercially practicable after the Closing
Date, but in no event more than one hundred eighty (180) calendar days
thereafter, Buyer shall, or shall cause Holdings, Newco or a Newco Subsidiary
to, remove any content, images and links on any of their Internet pages or
websites to the extent related to any Seller or any of its respective
businesses.
          (d) Affiliation. Buyer shall, and shall cause each of its Affiliates
(including Holdings, Newco and any Newco Subsidiary) to, cease to hold itself
out as having any affiliation with any Seller or any of its respective
Affiliates.
          (e) Phone Numbers. From and after the Closing Date, Seller shall use
its commercially reasonable efforts to transfer Seller’s phone numbers at which
customers or suppliers contact employees primarily related to the Business to
the account of Newco, but in no event including Seller’s phone numbers currently
in use at Solutia’s headquarters in St. Louis, Missouri.
     Section 6.5 Access; Enforcement; Record Retention. From and after the
Closing, and without limiting Section 5.11(c), upon request by any Party, each
other Party will permit the requesting Party and its Representatives to have
reasonable access during normal business hours, and in a manner so as not to
interfere unreasonably with the normal business operations of the other Party
(and in the case of Buyer, Holdings), to all premises, properties, personnel,
Records and Contracts of or related to the Business, the Contributed Assets, the
China Business Assets, the Assumed Liabilities, the China Assumed Liabilities,
Holdings, Newco or any Newco Subsidiary; provided, however, that, for the
avoidance of doubt, the foregoing shall not require any Person to take any such
action if it (x) may result in a waiver or breach of any attorney/client
privilege, (y) could reasonably be expected to result in violation of applicable
law, or (z) providing such access or information would be reasonably expected to
be unreasonably disruptive to its operations. Without limiting the generality of
the immediately preceding sentence, such reasonable access may be for the
purposes of (i) monitoring or enforcing rights or obligations of any Party under
this Agreement or any of the Related Agreements, or (ii) complying with the
requirements of any Governmental Authority. Each Party agrees to maintain, and
cause its Subsidiaries to maintain, the files or records which are contemplated
by the first sentence of this Section 6.5 in a manner consistent in all material
respects with its document retention and destruction policies, as in effect from
time to time, for six (6) years following the Closing.
     Section 6.6 Non-Competition. For a period of three (3) years following the
Closing, Seller shall not, and shall ensure that none of its Subsidiaries will,
directly or indirectly (including as a stockholder, consultant, member or
partner), engage in the Business as conducted during the one (1) year prior to
the Closing, including any development, design, manufacture, sale or promotion
for sale of any Product developed, designed, manufactured, sold or promoted for
sale by the Business during the one (1) year prior to the Closing in those
countries in which the Business has active operations as of the Closing;
provided, however, that for avoidance of doubt, the foregoing shall not restrict
Seller or any of its Subsidiaries from in any way

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conducting any business or operation of any such Person other than the Business
as of the date hereof (any such business or operation, an “Existing
Grandfathered Business”), including Solutia’s plastic products business or any
business that may consume, use, contain, depend upon, any product developed,
designed, manufactured, sold or promoted for sale by the Business; and provided
further that, for such purposes, (x) no owner of less than five percent (5%) of
the outstanding equity or voting interests of any Person and (y) no director (or
other equivalent position on an equivalent governing body) of any Person (other
than those Persons listed in the definition of Knowledge with respect to Seller
who continues to be employed by Seller or any of its Affiliates), and
(z) without limiting clause (x) hereof, no pension plan, savings plan or other
similar employee benefit plan owning any equity or other interests in a Person
for passive investment purposes only, in any such case shall be deemed to be
engaged in the business of such Person solely as a result of ownership of such
equity or voting interests or such directorship. For the avoidance of doubt,
nothing in this Section 6.6 shall (x) require Seller or any of its Subsidiaries
from taking or refraining to take any action with respect to Holdings or any of
its Subsidiaries incident or relating to Solutia’s equity interest in Holdings,
(y) restrict Seller or any of its Subsidiaries from taking any action required
to be taken by it pursuant to any Related Agreement, including the
Securityholders Agreement or the Transition Services Agreement, or (z) limit any
rights of Seller granted pursuant to Section 8.7 or Section 6.14. If a court of
competent jurisdiction declares in a final judgment that any term or provision
of this Section 6.6 is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration or area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
     Section 6.7 Non-Solicitation of Employees. For a period of two (2) years
following the Closing, Seller shall not, and shall ensure that none of its
Subsidiaries will, directly or indirectly, solicit the employment of or employ
any Covered Employee as of the Closing Date who is offered employment in
accordance with Section 6.8; provided, however, that the foregoing provision
shall not prevent Seller or any of its respective Subsidiaries from
(x) soliciting any such Covered Employee by a public advertisement placed by it
or by a search firm retained by it (provided that the search firm was not
instructed or encouraged to target or focus on such Covered Employees) or hiring
any Covered Employee responding thereto or (y) soliciting or hiring any Covered
Employee whose employment with the Business has been terminated for at least
three (3) months. If a court of competent jurisdiction declares in a final
judgment that any term or provision of this Section 6.7 is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.

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     Section 6.8 Covered Employees.
          (a) Offer of Employment. Prior to the Closing Date, Newco shall make
an offer of employment, effective as of the Closing Date, to each of the Covered
Employees (initially at the same location and on the same terms and conditions
of employment as in effect immediately prior to the Closing); provided, however,
that any offer of employment shall be contingent upon the Closing actually
occurring; and provided, further, that Newco shall, or shall cause a Newco
Subsidiary to, make an offer of employment, effective as of the China Asset
Transfer Closing, to each of the Covered China Employees (determined as of such
time) in accordance with the China Asset Transfer Agreement. Notwithstanding the
foregoing, nothing herein shall be construed as to prevent Newco from
terminating the employment of any Covered Employee at any time on or following
the Closing Date for any reason (or no reason) provided that such termination is
permitted under applicable law and approved by Government Authorities, if
applicable. Seller shall not transfer any employee to Newco who is not a Covered
Employee and Seller shall be solely responsible for all severance or other
compensation for any employee of the Business who is not a Covered Employee.
          (b) Compensation and Benefits.
               (i) Commencing on the Closing Date and continuing until
December 31, 2009, Newco or a Newco Subsidiary shall provide or cause to be
provided to the Covered Employees (other than, until the China Asset Transfer
Closing, any Covered China Employees) compensation and employee benefits that
are no less favorable in the aggregate than the compensation, benefits, plans,
programs, policies and arrangements (including base salary, incentive bonus
opportunities and incentive equity) and employee benefits provided by any Seller
or Newco to such Covered Employees immediately prior to the Closing. For
clarity, no retiree health benefits shall be required to be provided to Covered
Employees.
               (ii) Seller shall pay all Liabilities with respect to the Covered
Employees under the Seller’s incentive bonus plans that relate to performance
periods ending prior to the Closing Date, other than those Liabilities set forth
on the Conclusive Net Working Capital Statement. Seller has represented to Buyer
that there it has not established broad-based incentive plan to which the
Covered Employees participate for any period ending after the Closing Date.
Newco shall, at the times prescribed by, and in accordance with the terms of,
the Seller’s employee agreements as in effect as of the Closing Date, make
payments to the Covered Employees with respect to achievement of any performance
goals therein. In addition, Newco shall provide each Covered Employee with the
severance, retention and transaction bonus benefits arising following the
Closing that are set forth on Section 6.8(b)(ii)(A) of the Disclosure Schedule
applicable to each Covered Employee (other than Covered Employees on furlough or
temporary leave as of March 1, 2009, who are set forth on Section 6.8(b)(ii)(B)
of the Disclosure Schedule, who are not rehired, returned to active status or
otherwise re-employed by Newco in 2009) in accordance with the applicable
underlying plans or agreements as in effect immediately prior to the Closing
Date. Notwithstanding the preceding sentence, so long as Buyer, Newco or a Newco
Subsidiary rehires, returns to active service or otherwise re-employs or
continues to employ the Covered Employees specifically listed on
Section 6.8(b)(ii)(C) of the Disclosure Schedule for a period of at least sixty
(60) calendar days following the Closing, Seller shall be responsible for all
costs, including severance benefits that may become payable to such specified

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individuals in the event of their subsequent termination of employment on or
prior to December 31, 2009.
               (iii) Newco or a Newco Subsidiary shall honor and assume, and
cause Newco’s Affiliates to honor and assume, in accordance with their current
terms, each employment, severance, termination or other similar agreement or
arrangement between Seller or any of its Affiliates (including Newco), on the
one hand, and any Covered Employee, on the other hand.
          (c) Service Credit. Each Covered Employee shall be given credit for
all service with any Seller or Newco or the Business and their respective
predecessors (including Monsanto Company) under any employee benefit plans or
arrangements of Buyer and its Affiliates, including any such plans providing
vacation, sick pay, severance and retirement benefits maintained by Buyer,
Holdings or Newco or any of their respective Subsidiaries in which such Covered
Employees participate for purposes of eligibility, vesting and entitlement to
benefits, including for severance benefits and vacation entitlement (but not for
accrual of pension benefits). Notwithstanding the foregoing, nothing in this
Section 6.8(c) shall be construed to require crediting of service that would
result in a duplication of benefits.
          (d) Waiver of Pre-Existing Conditions; Crediting of Deductibles. No
later than the Closing Date, Holdings or Newco or any of their respective
Subsidiaries shall establish or cause to be established, at such Person’s own
expense, benefit plans that provide life insurance, health care, dental care,
accidental death and dismemberment insurance, disability and other group welfare
benefits for Covered Employees. Holdings or Newco or any of their respective
Subsidiaries shall cause (i) the waiver of all limitations as to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Covered Employees under any such welfare
benefit plans to the extent that such conditions, exclusions or waiting periods
would not apply under the Employee Benefit Plans, and (ii) for the plan year in
which the Closing Date occurs (or, if later, in the calendar year in which
Covered Employees and their dependents commence participation in the applicable
welfare plans), the crediting of each Covered Employee with any co-payments and
deductibles paid prior to participation in such welfare plans in satisfying any
applicable deductible or out-of-pocket requirements thereunder.
          (e) 401(k) Plan Rollovers. Holdings or Newco or any of their
respective Subsidiaries shall cause Holdings’ or Newco’s 401(k) plan to accept a
“direct rollover” to Holdings’ or Newco’s 401(k) plan of each Covered Employee’s
account balances (including promissory notes evidencing all outstanding loans)
under the Sellers’ 401(k) plans if such rollover is elected in accordance with
applicable law by such Covered Employee. Buyer further agrees to cause Holdings
or Newco to take all actions as may be necessary to cause each Covered Employee
that participates in Holdings’ or Newco’s 401(k) plan following the Closing Date
to receive full and immediate vesting of all employer contributions made by
Holdings or Newco or its Affiliates to the Holdings’ or Newco’s 401(k) plan
following the Closing Date. Seller shall take all actions as may be necessary to
cause each Covered Employee that participates in the Sellers’ 401(k) plans prior
to the Closing Date to receive full and immediate vesting of all employer
contributions made by Sellers or their Affiliates to the Sellers’ 401(k)

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plans prior to the Closing Date. Nothing herein shall require any future
employer contributions to be made by Holdings or Newco or its Affiliates to any
Holdings’ or Newco’s 401(k) plan.
          (f) Accrued Vacation. Buyer shall cause Holdings or Newco or any of
their respective Subsidiaries to provide each Covered Employee with credit for
the same number of vacation and sickness benefit days such Covered Employee has
accrued but not used in the calendar year in which the Closing Date occurs,
provided that, to the extent required by applicable law, such amount shall be
paid by Buyer, Holdings or Newco in cash.
          (g) Welfare Benefit Claims; COBRA. Seller shall be responsible in
accordance with its applicable welfare plans (and the applicable welfare plans
of its Affiliates) in effect prior to the Closing Date for all reimbursement
claims (such as medical and dental claims) for expenses incurred, and for all
non-reimbursement claims (such as life insurance claims) incurred, under such
plans prior to the Closing Date by the Covered Employees and their dependents.
Holdings or Newco shall be responsible in accordance with the applicable welfare
plans of Holdings or Newco and its Affiliates for all reimbursement claims (such
as medical and dental claims) for expenses incurred, and for all
non-reimbursement claims (such as life insurance claims) incurred, on or after
the Closing Date (or the date of commencement of employment with Newco or a
Newco Subsidiary, if later) by Covered Employees and their dependents. For
purposes of this Section 6.8(g), a claim shall be deemed to have been incurred
for all purposes on the date of rendition of the initial service to which such
claim relates (including the first day of any inpatient stay), except with
respect to life, disability or accidental death and dismemberment and business
travel accident insurance benefits, in which case the claim is expressly
incurred upon the death, disability or accident giving rise to such benefits.
Seller and its affiliates shall remain obligated under the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“COBRA”) with respect to events occurring on
or prior to the Closing Date; provided, however, that to the extent that a
dependent of an active Covered Employee is receiving continuation coverage under
COBRA as of the Closing Date, Holdings or Newco or a Newco Subsidiary shall
continue to provide COBRA continuation coverage to such dependent on and
following the Closing Date for the period required under applicable law.
          (h) Flexible Spending Accounts. Holdings’ or Newco’s or any of their
respective Subsidiaries’ flexible spending reimbursement account plan (“Newco’s
Flex Plan”) shall accept a spin-off of the flexible spending reimbursement
accounts from the Seller’s flexible spending reimbursement account plan
(“Seller’s Cafeteria Plan”) and to honor and continue through the end of the
calendar year in which the Closing Date occurs the elections made by each
Covered Employee under the Seller’s Cafeteria Plan in respect of the flexible
spending reimbursement accounts that are in effect immediately prior to the
Closing Date. As soon as practicable following the Closing Date, Seller shall
cause to be transferred from the Seller’s Cafeteria Plan to Newco’s Flex Plan
the excess of the aggregate accumulated contributions to the flexible spending
reimbursement accounts made prior to the Closing Date during the year in which
the Closing Date occurs by Covered Employees over the aggregate reimbursement
payouts made prior to the Closing Date for such year from such accounts prior to
the Closing Date to the Covered Employees. If the aggregate reimbursement
payouts from the flexible spending reimbursement accounts made prior to the
Closing Date during the year in which the Closing Date occurs made to Covered
Employees exceed the aggregate accumulated contributions to such accounts prior
to the Closing Date for such year by the Covered

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Employees, Holdings or Newco shall cause such excess to be transferred to Seller
as soon as practicable following the Closing Date. On and after the Closing
Date, Holdings or Newco shall assume and be solely responsible for all claims
for reimbursement by Covered Employees under the flexible spending reimbursement
accounts of Seller’s Cafeteria Plan, whether incurred prior to, on or after the
Closing Date, that have not been paid in full as of the Closing Date.
          (i) Liabilities. Buyer, Holdings and Newco shall be solely responsible
for all employment and employee benefits related Liabilities (including any
severance payments) that are incurred or arise as a result of events that
occurred on or after the Closing Date and relate to any Covered Employee (or any
dependent or beneficiary of any Covered Employee) or in respect of any Employee
Benefit Plan and no Seller shall have any responsibility for any such Liability.
Except to the extent such Liability is an Assumed Liability (including any
Liability set forth on the Conclusive Net Working Capital Statement) or as
otherwise provided in this Agreement (including this Section 6.8 and
Section 6.12), Seller shall be solely responsible for all employment and
employee benefits-related Liabilities that are incurred or arise as a result of
events that occurred prior to the Closing Date in respect of Covered Employees
(or any dependent or beneficiary thereof) or, to the extent such Liability is
not an Assumed Liability, in respect of any Employee Benefit Plan.
          (j) WARN Act. Provided that on or before the Closing Date Sellers have
supplied Buyer with a list of all employee layoffs, by date and location,
implemented by Sellers or their Affiliates in the ninety- (90-) calendar day
period preceding the Closing Date, Buyer shall indemnify and hold harmless
Sellers and their respective Affiliates and Representatives with respect to any
Liability under the WARN Act with respect to Covered Employees or any employee
of any Seller or any of their respective Affiliates arising from the actions of
Buyer from and after the Closing Date. Provided that Buyer supplies Seller with
a list of all employee layoffs following the Closing, by date and location,
implemented by Holdings or their Affiliates promptly following any such layoffs,
Seller shall indemnify and hold harmless Holdings and its Affiliates and
Representatives with respect to any Liability under the WARN Act with respect to
Covered Employees or any employee of any Seller or any of their respective
Affiliates arising from the actions of Seller from and after the Closing Date.
          (k) Tax Reporting. Newco shall adopt the “alternate procedure” for
preparing and filing Internal Revenue Service Forms W-2 (Wage and Tax
Statements), as described in Revenue Procedure 2004-53. Under this procedure,
Newco as the successor employer shall provide Forms W-2 to Covered Employees
reflecting all wages paid and taxes withheld with respect to such Covered
Employees for the calendar year in which the Closing Date occurs. Sellers as the
predecessor employers shall have no employment tax reporting responsibilities
for the Covered Employees following the Closing Date. Newco shall also adopt the
“alternate procedure” of Revenue Procedure 2004-53 for purposes of Internal
Revenue Service Forms W-4 (Employee’s Withholding Allowance Certificate) and W-5
(Earned Income Credit Advance Payment Certificate).

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          (l) Covered EU Employees.
               (i) Notwithstanding anything to the contrary in Section 6.8(a),
each contract of employment of each of the Covered EU Employees shall
automatically transfer to Newco in accordance with the EU Transfer Regulations
with effect upon the Closing Date.
               (ii) The Parties agree that each Covered EU Employee shall be
employed by the Affiliates of Newco that have been organized or established in
accordance with applicable local law in a manner that will allow such Affiliates
to be able to employ such Covered EU Employees in jurisdictions where the
relevant Covered EU Employees are currently employed without causing adverse tax
consequences to such Covered EU Employees as a result of such transfer.
               (iii) In the event that the employment of any Covered EU
Employees does not transfer automatically to Newco or its Affiliates with effect
from the Closing in accordance with the foregoing or any Covered EU Employees
otherwise allege that that is the case, Buyer shall, or shall cause one of Newco
or one of Buyer’s other Affiliates to, within five (5) Business Days of
receiving a written request from Seller, offer to employ the applicable Covered
EU Employees as of the Closing on similar terms and conditions as per the above
(and with continuity of service preserved) and shall use all reasonable
endeavors to encourage the individuals to accept such offers.
               (iv) In all circumstances, Buyer shall be responsible for the
Covered Employees as of the date of Closing. Consequently, if a Covered EU
Employee refuses to enter the employ of Newco or its Affiliates and makes claims
for employment and continued payment of his salary and other emoluments at
Seller, Buyer will indemnify Seller against all claims submitted by or with
regard to Covered EU Employees including any claims for severance payments. Such
indemnity shall extend to all damage and costs incurred by Seller relating to
the foregoing sentence, within the framework of legal action taken by the
Covered EU Employees and otherwise.
               (v) Notwithstanding anything to the contrary in
Section 6.8(b)(i), Newco shall recognize for any and all purposes full past
service of the Covered EU Employees at any Seller or its respective predecessors
(including Monsanto Company) and shall observe and maintain similar terms and
conditions of employment that are no less favorable in the aggregate, including
any benefits and occupational pensions, and including the benefits provided for
in any Employee Benefit Plan, which the Covered EU Employees enjoy while
employed by a Seller as of the Closing Date.
               (vi)
                    (A) With respect to Covered EU Employees employed in
Belgium, Seller shall procure that these employees will cease to participate as
an active member in any occupational pension plan from Seller with effect from
the date of Closing. The Parties agree that, in any event and irrespective of
Buyer’s option selected as contemplated below, Seller shall bear no liability
with regard to such Covered EU Employees in excess of the accrued benefit
obligations as calculated at the date of Closing in accordance with applicable
law for

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each individual concerned (i.e. excluding the impact of any future salary
increase). Buyer will, or will cause Holdings or Newco to, at its option, either
(i) set up a new pension scheme as at the date of Closing that will provide
benefits to the Covered EU Employees employed in Belgium that are at least
equivalent to the benefits provided under the corresponding Seller occupational
pension plan immediately before the date of Closing (the “New Pension Plan”), or
(ii) join the existing multi-employer Seller pension plan. Buyer will inform
Seller of the option selected by Buyer no later than April 7, 2009. If these
employees request that their accrued benefits be transferred from the applicable
pension plan of which the Covered EU Employee was a member while employed with
Seller or any of its Affiliates to a pension plan of Buyer or any of its
Affiliates (including Newco or Holdings or any of such Person’s respective
Affiliate) as applicable, such sums will be calculated on an accrued benefit
obligation basis in accordance with the applicable laws at the date of the
Closing and Seller shall procure that such benefits be transferred in accordance
with the applicable law, with no further Liability on the part of Seller or any
of its Affiliates. In any event and irrespective of Buyer’s option selected as
contemplated above, and in addition to the above, Buyer will procure that a
Newco, either directly or through its Belgium Subsidiary, will bear any and all
Liability related to occupational pension schemes and will therefore hold any of
the Sellers harmless without any limitation (in time or otherwise) with regard
to any liability related to any occupational pension scheme as from the date of
Closing.
                    (B) Buyer shall procure that a Belgian Newco Subsidiary will
comply with its obligations under the occupational pension scheme it will set up
as from the date of Closing onwards. These obligations include all obligations
or requirement related to the employment of personnel that an employer needs to
comply with in its relation with employees, former employees, employee
representatives, trade unions, public authorities, pension funds and insurance
companies, whether statutory, regulatory, contractual or otherwise. Buyer shall
cause any costs or indemnity charged by the multi-employer Seller pension plan
relating to the above to be borne by Buyer, Newco or a Newco Subsidiary.
               (vii) With respect to Covered EU Employees employed in Germany,
Buyer shall, or will cause Holdings or Newco or any of such Person’s respective
Affiliate to, take over and continue any pension promise granted by Seller or
its respective Affiliate, including pension expectancies related to past
service. Buyer shall indemnify Seller against all damages and costs in relation
to or arising from disputes with the Covered EU Employees that arise from both
past and future pension obligations.
               (viii) Except as otherwise set forth in this Section 6.8,
(x) Seller shall perform and discharge all of its EU Employer’s Obligations in
respect of the Covered EU Employees in respect of all periods up to the Closing
Date, and (y) Buyer, Holdings or Newco shall be responsible for performing and
discharging all of its EU Employer’s Obligations in respect of the Covered EU
Employees in respect of all periods from and after the Closing Date.
               (ix) Any claims from Covered EU Employees made against any
Seller, Buyer, Holdings or Newco or any of such Person’s respective Affiliate
against more than one of the foregoing from and after the Closing Date or in

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relation to the transfer shall be for the account and risk of Buyer, Holdings
and Newco or any of such Person’s respective Affiliate. Buyer shall, or will
cause Holdings or Newco to, assume all Liabilities, costs and expenses in
relation to or arising from disputes with the Covered EU Employees that arise
from any employment agreement.
               (x) Nothing in this Section 6.8(l) shall limit in any way any
obligations of Buyer pursuant to any other provision of this Section 6.8 that
may apply with respect to any Covered EU Employee.
          (m) Covered Foreign Employees.
               (i) Without limiting the generality of any other provision of
this Section 6.8, Buyer shall, or shall cause Holdings or Newco or any of its
respective Subsidiaries to, provide the Covered Foreign Employees with
compensation and employee benefits consistent with the provisions of this
Section 6.8, as applicable to Covered Foreign Employees (or such greater
compensation and employee benefits as may be required by applicable law) and to
observe the employment terms and conditions (including the benefits provided for
in any Employee Benefit Plan) of the Covered Foreign Employees as in effect
immediately prior to the Closing Date or as otherwise enhanced by applicable
law.
               (ii) To the extent applicable and as the case may be, Buyer or an
Affiliate of Buyer shall, at its cost and in jurisdictions where the relevant
Covered Foreign Employees are employed immediately prior to the Closing, or the
China Asset Transfer Closing with respect to the Covered China Employees, ensure
that it has an entity or affiliate, which are fully established and operational
in accordance with local law, capable of fully employing such Covered Foreign
Employees in the respective jurisdictions.
               (iii) With respect to Covered Foreign employees employed in
Korea, Buyer or its respective Affiliate shall take over and continue any
retirement pension plan (i.e. severance pay) granted by Seller or its respective
Affiliate, including pension expectancies for the period of employment with
Seller. Buyer shall indemnify Seller against all damages and costs in relation
to or arising from disputes with the Covered Foreign Employees that arise from
both past and future pension obligations.
          (n) Covered China Employees. For purposes of this Section 6.8, with
respect to the Covered China Employees, the term “Closing” means “China Asset
Transfer Closing” and the terms “Closing Date” means “Completion” (as defined in
the China Asset Transfer Agreement).
          (o) No Third Party Beneficiary Rights. The Parties agree that nothing
in this Section 6.8, whether express or implied, is intended to create any third
party beneficiary rights in any Covered Employee or to amend any employee
benefit plan in any respect.
     Section 6.9 Recording of Intellectual Property Assignments. All of the
Intellectual Property Assignments shall be recorded and filed by Buyer, Holdings
or Newco with the appropriate Governmental Authorities as promptly as
practicable following the Closing, with one-half of the costs and expenses of
such recording and filing to be borne by each of Buyer and Seller.

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     Section 6.10 Transfer Taxes. Buyer and Seller shall each pay one-half of
any stamp, documentary, registration, use, transfer (including real estate
transfer), value added (to the extent not recoverable within one (1) year of the
Closing Date) or other non-income Tax (a “Transfer Tax”) imposed under
applicable law in connection with the transactions contemplated hereby. Seller,
Buyer and Newco shall cooperate, and Buyer and Seller shall cause Holdings to
cooperate, to prepare and timely file any Tax Returns required to be filed in
connection with Transfer Taxes described in the immediately preceding sentence.
     Section 6.11 Insurance Matters. Buyer and Newco acknowledge that, upon
Closing, all insurance coverage provided in relation to Sellers, Newco and the
Business that is maintained by Seller or its Affiliates (whether such policies
are maintained with third party insurers or with Seller or its Affiliates) shall
cease to provide any coverage to Holdings, Newco, Buyer or the Business and no
further coverage shall be available to Holdings, Newco, Buyer or the Business
following the Closing under any such policies. Notwithstanding the foregoing,
from and after the Closing, if Seller receives any insurance proceeds from a
third party insurance policy maintained by Seller prior to the Closing in
respect of any Damages arising out of any pending Litigation (x) set forth on
Section 3.15 of the Disclosure Schedule (other than the Retained Litigation
Matters) or (y) required to have been set forth on Section 3.15 of the
Disclosure Schedule with respect to which notice of a claim for recovery of
Damages in respect of such Litigation has been made to Seller’s insurance
carrier prior to the Closing, Seller will remit to Newco the amount, if any, by
which such third party insurance proceeds (net of any deductible or self insured
retention under such third party insurance policy) exceeds the amount of the
Damages of any Seller Indemnified Party incurred or reasonably expected to be
incurred in respect of such pending Litigation. Upon request of Newco from and
after the Closing but subject to the last sentence of this Section 6.11, Seller
shall use commercially reasonable efforts to notify Seller’s insurance carrier
of any available claims for recovery of Damages in respect of pending Litigation
required to be listed on Section 3.15 of the Disclosure Schedule which was not
so listed and for which notice of a claim in respect of any Damages has not been
made to Seller’s insurance carrier prior to the Closing, and Seller will remit
to Newco any insurance proceeds which Seller is required by the immediately
preceding sentence to remit with respect to such claims made pursuant to this
sentence, on the terms and subject to the conditions set forth in the
immediately preceding sentence. Nothing herein shall require any Seller to
maintain any insurance policy or any part thereof at any time, or to make any
claim under any insurance policy not already made by Seller as of the Closing in
respect of Damages, or shall confer on any Buyer Indemnified Party any rights,
interests or claims under any third party insurance policy maintained by Seller.
     Section 6.12 Business Pension Plan Arrangements.
          (a) Except as provided in this Section 6.12, Seller shall retain all
assets and liabilities relating to the retirement plans of Seller.
          (b) Seller shall cause assets and liabilities associated with the
Transferred Participants under the defined benefit pension plan maintained by
Seller (the “Seller Pension Plan”) to be spun off from the Seller Pension Plan
(the “Spun Off Plan”). Each person considered a Transferred Participant for
purposes of this Section 6.12 is set forth on Section

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6.12(b)(i) of the Disclosure Schedule. On December 31, 2008, Seller filed Form
5310-A with the Internal Revenue Service with respect to the proposed spin off
from the Seller Pension Plan.
               (i) Effective as of February 28, 2009, Seller caused the assets
and liabilities associated with the Transferred Participants under the Seller
Pension Plan to be spun off from the Seller Pension Plan to the Spun Off Plan.
The assets of the Spun Off Plan will be segregated into a separate trust within
thirty (30) calendar days following the Closing Date. The amount of assets to be
segregated will be determined on a termination basis using the applicable
interest and mortality assumptions prescribed by the Pension Benefit Guaranty
Corporation (the “4044 Allocation”) as provided under Treas. Reg. Section.
1.414(1) 1(b)(5). As soon as practicable after the segregation of assets as
described in the preceding two sentences, Buyer shall either (i) cause Holdings
to assume the Spun Off Plan, (ii) cause the Spun Off Plan to be merged with and
into a defined benefit plan qualified under Section 401(a) of the IRC for the
benefit of Transferred Participants (the assumed Spun Off Plan or the new plan
established by Holdings, as the case may be, the “Holdings Pension Plan”),
including credit for past service with Seller or the Business and their
respective predecessors (including Monsanto Company) for early retirement and
benefit accrual previously recognized under the Seller Pension Plan, or
(iii) cause the Holdings Pension Plan to be merged with and into the Spun Off
Plan. If the Spun Off Plan is later merged with a pension plan of Holdings
instead of being assumed by Holdings, another Form 5310-A shall be filed with
respect to such merger at least thirty (30) calendar days prior to the merger.
In the case of such a merger as described herein, Buyer shall cause Holdings to,
or Seller shall, as appropriate, file a Form 5310-A with the Internal Revenue
Service describing the proposed merger of the Holding Pension Plan into the Spun
Off Plan or the proposed merger of the Spun Off Plan into the Holdings Pension
Plan.
               (ii) All assets transferred under this Section 6.12 shall be in
cash. From and after the Closing Date until the assumption of the Spun Off Plan
by Holdings or the merger of the Spun Off Plan with and into the Holdings
Pension Plan or the merger of the Holdings Pension Plan with and into the Spun
Off Plan, any benefits that would otherwise be payable to Transferred
Participants under the Holding Pension Plan shall be paid or continue to be paid
out of the Seller Pension Plan, and the amounts to be transferred to the Spun
Off Plan shall be reduced by the amount of such payments. After the assumption
or merger of the Spun Off Plan, any pension benefits that accrued under the
Seller Pension Plan that would have otherwise been payable to the Transferred
Participants under the Seller Pension Plan shall instead be payable to such
Transferred Participants under the Holdings Pension Plan.
               (iii) The Holdings Pension Plan shall be liable for benefits with
respect to service recognized under the Seller Pension Plan prior to the Closing
Date solely with respect to Transferred Participants, contingent upon the spin
off from the Seller Pension Plan and the assumption by Holdings or the merger of
the Spun Off Plan with the Holding Pension Plan as provided in Section 6.12.
Buyer, on its own behalf and on behalf of Holdings and Newco from and after the
Closing, agrees that neither Seller nor the Seller Pension Plan shall have any
further responsibility with respect to the assets and liabilities that are spun
off from the Seller Pension Plan to the Spun Off Plan following the assumption
of the Spun Off Plan by Holdings or the merger of the Spun Off Plan with the
Holdings Pension Plan. Seller agrees that neither Buyer, Holdings or Newco shall
have any further responsibility with respect to the assets and liabilities of
the Seller Plan.

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          (c) The Spun Off Plan was spun off from the Seller Pension Plan
effective February 28, 2009. The term “Underfunded Amount” means the amount by
which the present value of the liabilities of the Spun Off Plan determined as of
February 28, 2009 exceed the pension assets to be transferred from the Seller
Pension Plan to the Spun Off Plan determined as of February 28, 2009, with the
assumption that an additional contribution of One Million Five Hundred Thousand
Dollars ($1,500,000) will be made on April 15, 2009, thus reducing the
Underfunded Amount by One Million Five Hundred Thousand Dollars ($1,500,000),
and otherwise determined in accordance with the actuarial assumptions set forth
on Section 6.12(c) of the Disclosure Schedule. Seller’s actuary will determine
the Underfunded Amount in accordance with its normal procedures and practices in
preparing Seller’s actuarial report and such determination will be reviewed by
the actuary for the Holdings Pension Plan. If the Underfunded Amount exceeds
Eighty Million Dollars ($80,000,000) (“Pension Target Amount”), determined as of
February 28, 2009, Seller will pay to Holdings the difference between the
Underfunded Amount and the Pension Target Amount, in cash, within five
(5) Business Days of the final determination of such excess amount.
               (i) If the difference between the Underfunded Amount determined
by Seller’s actuary and the Underfunded Amount determined by Buyer’s or
Holdings’ actuary is less than two percent (2%) of the Underfunded Amount
determined by Seller’s actuary, then Seller’s determination of the Underfunded
Amount shall be conclusive; provided, however, that Seller shall provide Buyer
and Holdings with the material factors, methods and assumptions used in its
determination and, to the extent such factors, methods and assumptions are
materially incorrect or unreasonable and inconsistent with the assumptions and
methods set forth on Section 6.12(c) of the Disclosure Schedule, Seller and
Holdings shall cooperate in good faith to minimize the difference between the
Underfunded Amount as determined by Seller’s actuary and by Buyer’s or Holdings’
actuary. If such difference is greater than two percent (2%), then the actuaries
retained by Seller and Buyer or Holdings shall attempt in good faith to reach
agreement to resolve the difference. Unless Buyer or Holdings delivers written
notice to Seller of dispute hereunder on or prior to the forty-fifth (45th)
calendar day after the delivery to Buyer’s or Holdings’ actuary of Seller’
determination (the “Underfunded Dispute Notice”), Buyer and Holdings shall be
deemed to have accepted and agreed to the Underfunded Amount as determined by
Seller’ actuary and such determination shall be final, binding and conclusive.
If Buyer or Holdings notifies Seller in writing of disputed items contained in
the determination of the Seller’s actuary within such forty-five (45) calendar
day period, for thirty (30) calendar days following delivery of such notice by
Buyer or Holdings to Seller, Buyer’s or Holdings’ actuary and Seller’s actuary
shall attempt in good faith to resolve their differences.
               (ii) If the actuaries retained by Seller and Buyer or Holdings
cannot resolve all disputes with respect to a determination within such period
and the disputes involve more than two percent (2%) of the Underfunded Amount as
determined by Seller, Seller and Buyer or Holdings will appoint a third actuary
from a nationally recognized actuarial firm to resolve their differences (the
costs of the third actuary will be shared equally by Seller and Holdings). The
third actuary’s determination of any dispute will be final. In reaching such
resolution, the third actuary will consider only the issues of disagreement
between the first two actuaries, it being understood that the third actuary will
not be retained to conduct its own independent review but rather will be
retained to resolve specific differences between Buyer’s or Holdings actuary and
Seller’s actuary as set forth in the Underfunded Dispute Notice. The

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actuarial assumptions and methods used by Seller’s actuary in determining the
Underfunded Amount will not be subject to dispute unless such assumptions and
methods are materially incorrect or unreasonable and inconsistent with the
assumptions and methods set forth on Section 6.12(c) of the Disclosure Schedule.
     Section 6.13 Replacement Bonding Requirements. On or prior to the Closing
Date, Buyer shall, or shall cause Holdings to, use reasonable best efforts to
provide replacement guarantees, standby letters of credit or other assurances of
payment with respect to all Bonding Requirements, in form and substance
satisfactory to Seller and any banks, financial institutions or other
counterparty thereto (including, if necessary, through posting cash collateral
to obtain such guarantees, letters of credit or other assurances), and to
terminate the then existing Bonding Requirements and obtain a release in form
and substance reasonably satisfactory to Seller and any bank or other financial
institution issuing such Bonding Requirements. To the extent Buyer is unable to
make such arrangements with respect to any Bonding Requirements prior to the
Closing, with Seller’s consent in lieu thereof, Buyer shall, or shall cause
Holdings to, deliver to Seller (or, at Seller’s request, the bank or financial
institution currently issuing the Bonding Requirements) either, at Seller’s
option, but in either case, in form and substance reasonably satisfactory to
such bank or financial institution: (x) an irrevocable, unconditional standby
letter of credit in favor of Seller (or such bank or financial institution) in
an amount equal to the amount of such Bonding Requirements, issued by a bank
rated “A” or better by Standard and Poor’s, in form and substance reasonably
satisfactory to Seller (or such bank or financial institution), or (y) cash
collateral, in an amount equal to the amount of such Bonding Requirements, and,
in each case, enter into reimbursement agreements, letter of credit agreements,
cash collateral agreements, and any related documentation with respect to all
Bonding Requirements with such bank or financial institution, and provide any
such bank or financial institution with any required information in connection
therewith, until all such arrangements for replacements and termination can be
made from and after the Closing; provided, however, that Buyer shall, or shall
cause Holdings to, use reasonable best efforts to make such arrangements in
order to terminate the Bonding Requirements within one hundred eighty
(180) calendar days after the Closing, but, in any event, no later than
December 31, 2009. Upon termination of each of the Bonding Requirements, the
amount of any cash collateral delivered in respect of such Bonding Requirement
pursuant to the preceding sentence shall be released pursuant to mechanics to be
agreed upon by Seller and Buyer and such bank or financial institution that have
the effect of returning (x) the amount of cash collateral that may have been
provided by Seller in excess of the amount of such Bonding Requirement to Seller
and (y) the amount of cash collateral that has been provided by Buyer in respect
of the amount of such Bonding Requirement to Buyer. Seller shall be solely
responsible for any fees charged by Seller’s existing bank or financial
institution and Holdings shall be solely responsible for any fees charged by
Buyer’s bank or financial institution, in either case, in connection with the
Bonding Requirements and the transition of the Bonding Requirements.
     Section 6.14 Equistar Arrangements.
          (a) At the Closing, Seller and Buyer will enter into the Equistar
Lease and Subcontract Agreement under which Buyer will lease back to Seller the
Leased Premises (as defined in the Equistar Land Lease) and will agree to
continue providing, as a subcontractor of

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Solutia, Utilities and Services (as such term is defined in the Equistar U&S
Agreement) to Equistar on the terms and conditions set forth in the Equistar U&S
Agreement.
          (b) On the terms and subject to the conditions set forth in this
Section 6.14(b), Seller agrees to reimburse Newco for any Equistar Residual
Costs during the period commencing on the Contract Rejection Effective Date and
ending on December 31, 2010 (the “Covered Period”).
               (i) Newco shall use its best efforts to reduce and minimize the
amount of Equistar Residual Costs, including taking the following actions (each,
a “Mitigation Action”): (A) perform all of its obligations under the Equistar
Lease and Subcontract Agreement, (B) effective in the first month of the Covered
Period reallocate to the Users other than Equistar, the User Cost Allocation
that would have been charged to Equistar prior to the Covered Period, and (C) as
soon as reasonably practicable after the Contract Rejection Effective Date,
implement headcount reductions and related restructuring actions, including
those actions described in Section 6.14(b) of the Disclosure Schedule. The
calculation of the User Costs that are eliminated by a Mitigation Action will be
exclusive of the costs and expenses incurred by Newco to complete such
Mitigation Action. Upon the request of Seller from time to time but no more
frequently than monthly, Newco shall provide a written progress report to Seller
describing in reasonable detail the status of the implementation of the
Mitigation Actions including an explanation of the steps that will be taken to
overcome any actual or reasonably foreseeable delays.
               (ii) Within ten (10) Business Days after the end of each calendar
quarter during the Covered Period in which Newco incurs any Equistar Residual
Costs, Newco shall prepare and deliver to Seller an invoice for the amount of
Equistar Residual Costs incurred by Newco for the immediately preceding calendar
quarter, prorated for any partial calendar quarter (the “Quarterly Invoice”),
together with a written statement setting forth in good faith and in reasonable
detail the calculation of and the basis for such Equistar Residual Costs (the
“Quarterly Statement”). The payment terms for the Quarterly Invoice shall be net
forty-five (45) days receipt of invoice, except as may otherwise be provided for
disputed invoices under Section 6.14(b)(iii). Newco shall maintain and furnish
to Seller together with the Quarterly Statement, information and documents
sufficient to permit Seller to independently calculate and verify the amount of
and the basis for such Equistar Residual Costs, and Newco shall provide to
Seller and its representatives and accountants reasonable access to any
additional information and documents and to the facilities and personnel of
Newco reasonably requested by Seller in connection with its review of such
Equistar Residual Costs.
               (iii) If Seller notifies Newco of its objection to any items (the
“Objection Notice”) contained in the Quarterly Statement (or specific
calculations contained therein) within forty-five (45) days following its
receipt of the Quarterly Statement, Seller and Newco shall, within twenty
(20) days after Seller’s delivery of the Objection Notice (the “Equistar
Resolution Period”), attempt in good faith to resolve their differences with
respect to the disputed items (or calculations) specified in the Objection
Notice (the “Objectionable Items”). Any resolution by Seller and Newco during
the Equistar Resolution Period as to any Objectionable Items shall be final,
binding and conclusive on Seller and Newco and shall be documented in a written
acknowledgment signed by both parties. If Seller and Newco do not

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resolve all Objectionable Items by the end of the Equistar Resolution Period,
then all Objectionable Items remaining in dispute will be submitted with twenty
(20) calendar days after the expiration of the Equistar Resolution Period to the
Neutral Arbitrator. The Neutral Arbitrator shall act as an arbitrator to
determine only those Objectionable Items remaining in dispute, and shall request
a statement from Seller and Newco regarding such Objectionable Items. In
resolving Objectionable Items, the Neutral Arbitrator may not assign a value to
any Objectionable Item greater than the greatest value for such Objectionable
Item claimed by any party or less than the lowest value for such Objectionable
Item claimed by any party. All fees and expenses relating to the work, if any,
to be performed by the Neutral Arbitrator will be allocated between Seller and
Newco in the same proportion that the aggregate amount of the Objectionable
Items so submitted to the Neutral Arbitrator that is unsuccessfully disputed by
each such party (as finally determined by the Neutral Arbitrator) bears to the
total amount of such Objectionable Items so submitted. In addition, Seller and
Newco shall provide to the Neutral Arbitrator any and all information and
documents in the possession and control of such party reasonably necessary to
enable the Neutral Arbitrator to perform its function as arbitrator. If either
Seller or Newco fails to submit a statement regarding any Objectionable Item
submitted to the Neutral Arbitrator or otherwise fails to provide to the Neutral
Arbitrator any information or documents referred to in the preceding sentence,
in each case within the time determined by the Neutral Arbitrator, then the
Neutral Arbitrator shall render a decision based solely on the statement and
other information and documents timely submitted. The Neutral Arbitrator will
deliver to Seller and Newco a written determination (such determination to
include a work sheet setting forth all material calculations used in arriving at
such determination and to be based solely on information timely provided to the
Neutral Arbitrator by Seller and Newco) of the Objectionable Items submitted to
the Neutral Arbitrator within thirty (30) calendar days of receipt of such
Objectionable Items, which determination will be final, binding and conclusive
and judgment may be entered on the award. The final, binding and conclusive
Quarterly Statement for any quarter, based either upon agreement between Seller
and Newco or the written determination delivered by the Neutral Arbitrator in
accordance with this Section, will be the “Conclusive Quarterly Statement.”
Seller shall pay the amount set forth in the Conclusive Quarterly Statement
within five (5) Business Days of such Quarterly Statement becoming final,
binding and conclusive.
     Section 6.15 Tax Matters.
          (a) Cooperation. Buyer, Seller and Newco shall cooperate fully, and
Buyer and Seller shall cause Holdings to cooperate fully, as and to the extent
reasonably requested by any other Party, in connection with the filing of any
Tax Returns and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other Party’s
request) the provision of records and information that are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any materials provided hereunder. Seller, Holdings and Newco agree to retain
all books and records with respect to Tax matters pertinent to Holdings, Newco
and the Business relating to any taxable period beginning prior to the Closing
Date until the expiration of the applicable statute of limitations (and, if
notified by Buyer, Seller, Holdings or Newco, any extensions thereof), and to
abide by all record retention agreements entered into with any taxing authority.
The Parties agree to give each other Party reasonable written notice prior to
transferring, destroying or discarding any such books and

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records, and if another Party so requests, to give such other Party possession
of such books and records. In addition, Seller agrees to provide to Buyer, Newco
and Holdings information regarding the adjusted Tax basis, classification and
remaining depreciable life of the Contributed Assets as of the Closing Date.
          (b) Section 351 Contribution and Exchange. Each of the Parties intends
that the transactions contemplated by the Holdings Formation Contribution shall
be treated for the United States federal Income Tax purposes as part of an
exchange of property for stock of Holdings described in IRC Section 351(a), and
that (i) the Holdings Contribution Shares issued to Seller and Buyer pursuant to
Section 2.6 constitute stock issued as part of such exchange; (ii) each of
Seller and Buyer is a transferor of property to Holdings in such exchange; and
(iii) each of Seller and Buyer is part of the group of holders of shares of
Holdings Common Stock that “control” (within the meaning of IRC Section 368(c))
Holdings immediately after the consummation of the transactions contemplated by
this Agreement. Each of the Parties shall, to the extent permitted by applicable
law, file all Tax Returns in a manner consistent with such treatment, and each
such Party shall provide the information required under Treasury Regulations
Section 1.351-3 in such Party’s United States federal income Tax Return for such
Party’s taxable year that includes the Closing Date. Each of Seller and Buyer
represents and warrants as to itself that, as of the date hereof and at all
times from the date hereof through and including the Closing Date, it has, and
shall have, no plan or intention to sell, convey, assign, transfer, or otherwise
dispose of any of the shares of Holdings Common Stock. Each of Seller, Buyer and
Holdings shall make (i) an irrevocable election under IRC Section 362(e)(2) so
that IRC Section 362(e)(2)(A) does not apply to the property contributed
pursuant to Section 2.5 and, if permitted by law, so that each of Seller and
Buyer has an initial tax basis in the Holdings Contribution Shares issued to it
hereunder in an amount not exceeding the fair market value of such Holdings
Contribution Shares on the Closing Date; (ii) a protective election under
Treasury Regulations Section 1.1502-36(e)(5)(viii), made in the manner provided
under Treasury Regulations Section 1.1502-36(d)(6); and (iii) such other
elections or filings as may be reasonably requested by Buyer or Seller so as to
achieve the tax characterization described in this Section 6.15(b).
     Section 6.16 Implementation by Holdings. From and after the Closing, Buyer
shall take all actions necessary to cause Holdings to comply with observance and
performance of each and every obligation of Holdings contemplated by this
Agreement or any Related Agreement to be performed from and after the Closing.
     Section 6.17 Acknowledgements.
          (a) Each of SK and Buyer acknowledges that it has received or may
receive from Seller certain projections, forecasts and prospective or third
party information relating to Sellers, Newco, Holdings, the Business, the
Contributed Assets, the Assumed Liabilities, the Newco Units, the Holdings
Contribution Shares and/or other related topics. Without limiting the generality
of Section 3.31 each of SK and Buyer acknowledges that neither any Seller nor
any other Person makes any representations or warranties with respect to such
projections, forecasts or information.

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          (b) Without limiting any representation, warranty or covenant of
Seller expressly set forth herein, each of SK and Buyer acknowledges that it has
waived and hereby waives as a condition to the Closing any further due diligence
reviews, inspections or examinations with respect to any Seller, Newco,
Holdings, the Business, the Contributed Assets, the Assumed Liabilities, the
Newco Units, the Holdings Contribution Shares or any other matter, including
with respect to engineering, environmental, title, survey, financial,
operational, regulatory and legal compliance matters.
ARTICLE VII
CONDITIONS TO OBLIGATION TO CLOSE
     Section 7.1 Conditions to Buyer’s Obligations. Buyer’s obligation to
consummate the transactions contemplated hereby in connection with the Closing
is subject to satisfaction or waiver of the following conditions:
          (a) (i) the representations and warranties set forth in Section 3.2
(Authorization of Transaction), Section 3.3 (Noncontravention), Section 3.5
(Sufficiency of Assets), Section 3.6 (Financial Statements), Section 3.11(a)
(Material Contracts), Section 3.14 (Legal Compliance), Section 3.15 (Litigation)
and Section 3.17 (Product Liability) shall have been true and correct on the
date hereof and shall be true and correct in all material respects at and as of
the Closing Date as if made at and as of such time (in either case except to the
extent expressly made as of an earlier date, in which case as of such date as if
made at and as of such date); and (ii) the other representations and warranties
set forth in Article III shall have been true and correct on the date hereof and
shall be true and correct at and as of the Closing Date as if made at and as of
such time (in either case except to the extent expressly made as of an earlier
date, in which case as of such date as if made at and as of such date), in
either case contemplated by this clause (ii) except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to “material” or “Material Adverse Effect” set forth
therein) has not resulted in a Material Adverse Effect on the Business;
          (b) Seller and Newco shall have performed and complied with their
covenants hereunder through the Closing in all material respects;
          (c) (i) all notices to third parties contemplated by Section 5.3(a) of
the Disclosure Schedule to have been delivered on or prior to the Closing shall
have been delivered, and all third party consents or sublicenses or permits
contemplated by Section 5.3(a) of the Disclosure Schedule to have been received
on or prior to the Closing shall have been received, except where the failure to
deliver such notices or to receive such consents or sublicenses or permits does
not have a material adverse impact on the Business or result in a material
liability to Buyer, Newco or Holdings, and (ii) Buyer shall have received
evidence of each of the foregoing reasonably satisfactory to it;
          (d) (i) all applicable waiting periods (and any extensions thereof)
under any Antitrust Law shall have expired or otherwise been terminated and
Sellers, Holdings, Newco and Buyer shall have received all other authorizations,
consents, clearances and approvals of Governmental Authorities contemplated by
Section 5.3(b) of the Disclosure Schedule to have been received on or prior to
the Closing, where the failure to have received such other

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authorizations, consents, clearances and approvals would have a Material Adverse
Effect on the Business or Buyer, and (ii) Buyer shall have received evidence of
each of the foregoing reasonably satisfactory to it;
          (e) no Decree shall be in effect which (i) prohibits consummation of
any of the transactions contemplated by this Agreement, or (ii) would be
reasonably expected to result in any of the transactions contemplated by this
Agreement being rescinded following consummation thereof;
          (f) each delivery contemplated by Section 2.8 to be delivered by
Seller, Newco or Holdings to Buyer, Newco or Holdings shall have been delivered;
          (g) Buyer shall have received the aggregate proceeds from the Equity
Financing pursuant to the terms of the Equity Financing Commitment and borrowing
available pursuant to the Debt Financing of at least Seventy-Five Million
Dollars ($75,000,000) under the ABL; and
          (h) Buyer shall have received evidence of the release of the Liens
(i) under the security documents contemplated by the credit agreements of
Solutia and certain of its Subsidiaries, dated February 28, 2008, with respect
to any Contributed Assets or any Newco Units and (ii) under the caption
“Intellectual Property Liens” set forth in Section 3.4 of the Disclosure
Schedules, but only to the extent such Liens contemplated by this clause
(ii) are material to the Business.
     Section 7.2 Conditions to Seller’s Obligation. Seller’s obligation to
consummate the transactions contemplated hereby in connection with the Closing
are subject to satisfaction or waiver of the following conditions:
          (a) the representations and warranties set forth in Article IV shall
have been true and correct on the date hereof and shall be true and correct at
and as of the Closing Date as if made at and as of such time in either case (in
either case except to the extent expressly made as of an earlier date, in which
case as of such date as if made at and as of such date), in either case except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to “material” or “Material
Adverse Effect” set forth therein) has not resulted in a Material Adverse Effect
on Buyer or diminution of the benefits of Seller hereunder;
          (b) SK and Buyer shall have performed and complied with their
covenants hereunder through the Closing in all material respects;
          (c) (i) all notices to third parties contemplated by Section 5.3(a) of
the Disclosure Schedule to have been delivered on or prior to the Closing shall
have been delivered, and all third party consents or sublicenses or permits
contemplated by Section 5.3(a) of the Disclosure Schedule to have been received
on or prior to the Closing shall have been received, except where the failure to
deliver such notices or to receive such consents or sublicenses or permits does
not have a material adverse impact on the Business or result in a material
liability to Sellers, and (ii) Seller shall have received evidence of each of
the foregoing reasonably satisfactory to it;

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          (d) (i) all applicable waiting periods (and any extensions thereof)
under any Antitrust Law shall have expired or otherwise been terminated and
Sellers, Holdings, Newco and Buyer shall have received all other authorizations,
consents, clearances and approvals of Governmental Authorities contemplated by
Section 5.3(b) of the Disclosure Schedule to have been received on or prior to
the Closing, where the failure to have received such other authorizations,
consents, clearances and approvals would have a Material Adverse Effect on the
Business or Seller, and (ii) Seller shall have received evidence of each of the
foregoing reasonably satisfactory to it;
          (e) no Decree shall be in effect which (i) prohibits consummation of
any of the transactions contemplated by this Agreement, or (ii) would be
reasonably expected to result in any of the transactions contemplated by this
Agreement being rescinded following consummation thereof;
          (f) with respect to each Bonding Requirement, at the Closing, Buyer or
Holdings shall have delivered to Seller either (x) an irrevocable, unconditional
standby letter of credit or (y) cash collateral, in compliance with the
requirements in Section 6.13, and, in each case, shall have entered into
reimbursement agreements with respect to all Bonding Requirements with such bank
or financial institution in accordance with Section 6.13;
          (g) Seller shall have received evidence of the release of the Liens
under the security documents contemplated by the credit agreements of Solutia
and certain of its Subsidiaries, dated February 28, 2008, with respect to any
Contributed Assets or any Newco Units; and
          (h) each delivery contemplated by Section 2.8 to be delivered by
Buyer, Newco or Holdings to Seller, Newco or Holdings shall have been delivered.
     Section 7.3 No Frustration of Closing Conditions. Neither Buyer nor Seller
may rely on the failure of any condition to its obligation to consummate the
transactions contemplated hereby set forth in Section 7.1 or Section 7.2, as the
case may be, to be satisfied if such failure was caused by such Party’s or its
Affiliates’ failure to use its reasonable best efforts (or best efforts or
commercially reasonable efforts, as applicable) to satisfy the conditions to the
consummation of the transactions contemplated hereby or by any other breach of a
representation, warranty or covenant hereunder.
ARTICLE VIII
INDEMNIFICATION
     Section 8.1 No Survival of Representations and Warranties. Except as
otherwise expressly set forth in any Related Agreement and except that the
disclaimers set forth in Section 3.31 and Section 4.10 shall survive the
Closing, none of the representations and warranties of the Parties set forth in,
or deemed made pursuant to, this Agreement or any Related Agreement (other than
the Transition

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Services Agreement, the DPO Operating Agreement, the DME Supply Agreement, the
Securityholders Agreement, the Louvain-La-Neuve Lease, the Equistar Lease and
Subcontract Agreement, the China Asset Transfer Agreement (but surviving only
through the China Asset Transfer Closing) or any other Related Agreement arising
under the Transition Services Agreement, the DPO Operating Agreement, the DME
Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease, the
Equistar Lease and Subcontract Agreement or the China Asset Transfer Agreement)
will survive the Closing, and from and after the Closing, such representations
and warranties shall be of no further force or effect and no claim for
indemnification or otherwise may be made with respect to breaches thereof. Each
Party acknowledges that it expressly intends to shorten the statute of
limitations for claims or causes of action based upon, directly or indirectly,
any of such representations and warranties as provided in this Section 8.1.
     Section 8.2 Indemnification Provisions for Buyer’s Benefit. Subject to the
limitations set forth in this Article VIII, from and after the Closing, Seller
shall defend and hold Buyer, its Affiliates and its and their respective
officers, directors, stockholders, employees, agents and other Representatives
(each, a “Buyer Indemnified Party”) harmless from and against any and all actual
losses, claims, liabilities, debts, damages, fines, penalties, costs (in each
case, including reasonable actual out-of-pocket expenses (including reasonable
actual fees and expenses of counsel) (collectively, “Damages”) incurred by a
Buyer Indemnified Party as a result of:
          (a) any failure to perform any covenant or agreement of Seller or,
solely with respect to covenants and agreements to be performed prior to the
Closing, Newco set forth in this Agreement or any Related Agreement (other than
the Transition Services Agreement, the DPO Operating Agreement, the DME Supply
Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease or the
Equistar Lease and Subcontract Agreement or any other Related Agreement arising
under the Transition Services Agreement, the DPO Operating Agreement, the DME
Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease or
the Equistar Lease and Subcontract Agreement);
          (b) any of the Excluded Liabilities (other than, from and after the
China Asset Transfer Closing, any of the China Assumed Liabilities); or
          (c) any material Liability, whether or not required by GAAP to be
reflected on a consolidated balance sheet of the Business, (i) that is actually
Known by any of the Seller Knowledge designees as of the date hereof, (ii) that
is required to be disclosed in the Disclosure Schedules based on the
representations and warranties of Seller made under Article III as of the date
hereof, (iii) that is not disclosed or described on any Disclosure Schedule or
the Financial Statements, and (iv) for which the existence thereof would not
reasonably be inferred to exist from information otherwise provided to Buyer.
     Section 8.3 Indemnification Provisions for Seller’s Benefit. Subject to the
limitations set forth in this Article VIII, from and after the Closing, Buyer
shall defend and hold each Seller, its respective Affiliates and its and their
respective officers, directors, stockholders, employees, agents and other
Representatives (each, a “Seller Indemnified Party”) harmless from and against
any and all Damages incurred by a Seller Indemnified Party as a result of:
          (a) any failure to perform any covenant or agreement of SK, Buyer or,
solely with respect to covenants and agreements to be performed at or following
the Closing, Holdings or Newco set forth in this Agreement or any Related
Agreement (other than the Transition Services Agreement, the DPO Operating
Agreement, the DME Supply Agreement, the

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Securityholders Agreement, the Louvain-La-Neuve Lease or the Equistar Lease and
Subcontract Agreement or any other Related Agreement arising under the
Transition Services Agreement, the DPO Operating Agreement, the DME Supply
Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease or the
Equistar Lease and Subcontract Agreement), including any failure to perform any
Transferred Contract; or
          (b) any of the Assumed Liabilities and, from and after the China Asset
Transfer Closing, any of the China Assumed Liabilities.
     Section 8.4 Limitations on Indemnification; Calculation of Damages.
Notwithstanding anything to the contrary set forth in this Article VIII:
          (a) The Buyer Indemnified Parties and the Seller Indemnified Parties
shall not be entitled to recover from Seller or Buyer, respectively, Damages
that are punitive Damages, Damages for lost profits or diminution in value or
consequential, exemplary or special Damages, other than consequential damages
that a third party is seeking to recover pursuant to any Third Party Claim.
          (b) The Buyer Indemnified Parties shall not be entitled to recover
from Seller Damages to the extent reflected as a Liability on the Conclusive Net
Working Capital Statement.
          (c) The amount of any Damages for which indemnification is provided
under this Article VIII shall be computed net of any (x) net Tax benefit
realized by the Indemnified Party and (y) third party insurance proceeds and
recoveries in respect of third party indemnification obligations actually
received by the Indemnified Party in connection with such Damages. Each
Indemnified Party agrees to use its commercially reasonable efforts to obtain
recovery in respect of any Damages from any third party insurance or third party
indemnity which is available in respect of Damages. If an Indemnified Party
receives such insurance proceeds or indemnification recoveries in connection
with Damages for which it has been indemnified hereunder, the Indemnified Party
shall notify the Seller or Buyer who has provided or is providing such
indemnification hereunder, as appropriate (the “Indemnifying Party”), and refund
to the Indemnifying Party the amount of such insurance proceeds or
indemnification recoveries when received, up to the amount for which
indemnification was paid hereunder.
          (d) Each Indemnified Party shall take all reasonable steps to mitigate
any Damages in respect of which a claim could be made under this Article VIII.
The amount of any Damages pursuant to which an Indemnified Party shall be
entitled to seek indemnification hereunder shall be deemed reduced by the amount
of the Damages resulting from any failure to mitigate such Damages.
          (e) No Buyer Indemnified Party may seek indemnification pursuant to
this Article VIII with respect to any Damages of any Buyer Indemnified Party who
is or was an officer or director of Seller or any of its Subsidiaries resulting
from any right of contribution, indemnification or other similar right against
Seller or such Subsidiary that such Buyer Indemnified Party may have by virtue
of his or her status as an officer or director of Seller or such Subsidiary,
whether arising from any breach of any representation, warranty or covenant set
forth in this Agreement or any Related Agreement or otherwise. Buyer, on behalf
of each Buyer

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Indemnified Party, agrees that no Buyer Indemnified Party shall make any such
claim for contribution or indemnification or make a claim for recovery against
any directors’ and officers’ liability insurance policy of Seller or any of its
Affiliates with respect to matters covered by the foregoing matters.
          (f) For the avoidance of doubt, if Buyer or any other Buyer
Indemnified Party other than Holdings or Newco, any of their respective
Subsidiaries or their or their respective officers, directors, stockholders,
employees, agents or other Representatives (in such capacity) seeks to be
indemnified pursuant to this Article VIII for any Damages of Holdings, Newco or
any of their respective Subsidiaries, Buyer or such other Buyer Indemnified
Party shall only be entitled to seek indemnification pursuant to this
Article VIII for and recover Damages equal to the product of (x) the amount of
the Damage incurred by such Person multiplied by (y) a fraction, the numerator
of which is the number of shares of Holdings Common Stock owned by such
Indemnified Party immediately following the Closing and the denominator of which
is the total number of shares of Holdings Common Stock outstanding immediately
following the Closing.
          (g) No Buyer Indemnified Party shall be entitled to recover from
Seller for any claim for indemnity in respect of Damages arising under
Section 8.2(c) unless and until, and then only to the extent that, the total of
all such claims against Buyer in respect of such Damages exceeds One Million
Dollars ($1,000,000) (the “Basket”), and in such event only for the amount of
such excess.
          (h) No Buyer Indemnified Party shall be entitled to recover from
Seller, or include for purposes of determining if Damages have met or exceeded
the Basket, any claim for indemnity under Section 8.2(c) in respect of any
individual Damage arising unless and until the indemnity claim against Seller in
respect of such Damage exceeds Two Hundred Thousand Dollars ($200,000) (the
“Minimum Claim Amount”).
          (i) The Buyer Indemnified Parties shall not be entitled to recover
from Seller any Damages based on indemnity claims under Section 8.2(c) in excess
of Ten Million Dollars ($10,000,000) in the aggregate (the “Cap”).
          (j) The Buyer Indemnified Parties shall not be entitled to recover
from Seller Damages arising under Section 8.2(c) to the extent the breach of the
representation or warranty, or the fact giving rise to such breach, that is the
basis for the indemnity claim was actually known by Buyer or any of its officers
as of the Closing Date or otherwise provided to Buyer or any of its
Representatives (including placement in the electronic data room to the extent
such fact would reasonably be inferred from such information).
          (k) No Buyer Indemnified Party shall be entitled to make a claim for
indemnification under Section 8.2(c) from and after December 31, 2010.
          (l) Notwithstanding anything herein to the contrary, the Buyer
Indemnified Parties shall not be entitled to recover from Seller any Damages
arising under Section 8.2(c) to the extent such Damages relate to or arise out
of the ownership or operation of the Facilities or otherwise relate to or arise
out of the past, current or future conduct of the Business with respect

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to environmental, health or safety matters, including any Liabilities arising
pursuant to Environmental, Health or Safety Requirements.
     Section 8.5 Matters Involving Third Parties.
          (a) If any third party shall notify any Indemnified Party of any third
party claim, demand, assessment or the commencement of any Litigation (each, a
“Third Party Claim”) which may give rise to a claim for indemnification pursuant
to this Article VIII, the Indemnified Party shall promptly (and in any event
within ten (10) Business Days after receiving notice of the Third Party Claim or
the commencement of Litigation with respect thereto) notify the Indemnifying
Party thereof in writing stating that the Third Party Claim may give rise to a
claim for indemnification against the Indemnifying Party and specifying the
facts constituting the basis for such claim and the amount, to the extent known,
of the claim asserted; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
          (b) The Indemnifying Party will have the right at any time to assume
the defense of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party and control the defense of such Third
Party Claim so long as the Indemnifying Party conducts such defense in a
reasonably diligent manner.
          (c) From and after the date that the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance with
Section 8.5(b), (i) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in, but not control, the defense of the
Third Party Claim; (ii) the Indemnifying Party and the Indemnified Party shall
cooperate fully with each other and their respective counsel in connection with
the defense, negotiation or settlement of any such Third Party Claim, including
providing access to any relevant books and records, properties, employees and
Representatives; provided, however, that, for the avoidance of doubt, the
foregoing shall not require any Party to waive, or take any action which has the
affect of waiving, its attorney-client privilege with respect thereto; (iii) the
Indemnifying Party will not consent to the entry of, or intentionally permit a
default leading to, any judgment on or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the Indemnified Party
(which shall not be unreasonably withheld, conditioned or delayed) unless the
judgment or proposed settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to the Indemnified Party of a release from
all liability in respect of such claim or litigation; and (iv) the Indemnified
Party will not consent to the entry of, or intentionally permit a default
leading to, any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld, conditioned or delayed).
          (d) In the event that the Indemnifying Party has not assumed the
defense of the Third Party Claim after notice thereof, (i) the Indemnified Party
may defend against the Third Party Claim in any manner it reasonably may deem
appropriate; (ii) the Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys’ fees and expenses actually incurred) to
the

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extent such costs are Damages for which the Indemnified Party is actually
entitled to indemnification hereunder; and (iii) the Indemnifying Party will
remain responsible for any costs the Indemnified Party may incur resulting from
the Third Party Claim to the extent such costs are Damages for which the
Indemnified Party is actually entitled to indemnification hereunder.
          (e) Notwithstanding anything to the contrary in this Section 8.5, the
Parties agree that from and after Closing, (i) Seller shall assume and control
the defense of the Retained Litigation Matters without the need for any written
notice to Buyer of such Third Party Claims; and (ii) Newco shall assume and
control the defense of the Litigation of the Business other than the Retained
Litigation Matters, without the need for any written notice to Seller of such
Third Party Claims.
     Section 8.6 Claims and Payment; Treatment of Payments. On each occasion
that any Indemnified Party shall be entitled to indemnification under this
Article VIII, the Indemnifying Party shall, at each such time, promptly pay the
amount of such indemnification following the receipt of notice of a claim
therefor. All notices of claims for indemnification hereunder by any Indemnified
Party shall be made with reasonable particularity and shall state the amount of
Damages sought thereunder. Any indemnification payments made pursuant to this
Agreement shall be treated for tax purposes as an adjustment to the
consideration contributed to Holdings in the Holdings Formation Contribution
pursuant to Section 2.5, unless otherwise required by applicable law. At the
time at which any payment pursuant to Section 2.14 is required to be made,
Seller has (x) received notice of a claim from a Buyer Indemnified Party, (y) at
such time, Seller has agreed with the Buyer Indemnified Party that amounts are
due and payable by Seller thereunder (and in no event including contingent
obligations) for which neither the validity nor amounts thereof are in dispute
or at such time as such dispute has been decided by a court of competent
jurisdiction, and (z) Seller has failed to promptly pay such amounts, Buyer may
withhold payment of, and set-off such indemnification claims against, the
payment required to be paid pursuant to Section 2.14 upon notice to Seller for
up to the undisputed amount due and payable as of such time in lieu of payment
for such unpaid indemnification claim.
     Section 8.7 Guest Operations. Notwithstanding anything to the contrary in
the Securityholders Agreement or in this Agreement, including under Section 8.4,
Section 8.5, Section 6.6 or the proviso in the first sentence of Section 6.5,
and in addition to Seller’s rights under Section 6.5, Seller shall have the
rights and remedies set forth in this Section 8.7 with respect to any Guest
Agreements for which a novation or an unconditional release of Seller thereunder
has not been obtained as contemplated by the last sentence of Section 5.3(a)
(each, an “Applicable Guest Agreement”).
          (a) At any time and from time to time, if Seller reasonably believes
that (i) Holdings, Newco or any Newco Subsidiary (or any of their respective
successors) or any assignee or transferee thereof under an Applicable Guest
Agreement (each, a “Buyer Counterparty”) is failing or refusing, or is
reasonably likely to fail or refuse, to perform its obligations under any
Applicable Guest Agreement, and (ii) as a result thereof any Seller Indemnified
Party has incurred, is incurring, or is reasonably likely to incur, Damages with
respect to such Applicable Guest Agreement (the satisfaction of both of the
conditions in clauses (i) and (ii) hereinafter referred to as a “Guest
Occurrence”), then Seller may deliver written notice to Buyer of such Guest
Occurrence. The Buyer Counterparty shall have five (5) Business

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Days following delivery of the foregoing notice to cure such Guest Occurrence to
the reasonable satisfaction of Seller, or if such Guest Occurrence cannot be
cured within such time, then such additional time as may be necessary if, within
such five (5) Business Days, the Buyer Counterparty has commenced and is
diligently pursuing the remedies necessary to cure such Guest Occurrence to the
reasonable satisfaction of Seller.
          (b) In the event that, and for so long as, the Guest Occurrence
continues beyond the applicable cure period in Section 8.7(a), then (i) upon
written notice to Buyer, Holdings or Newco, without the execution of any further
instruments on the part of Seller, Buyer or any Buyer Counterparty, Seller shall
have the right, but not the obligation, such right exercisable in Seller’s sole
and absolute discretion, and Buyer, Holdings and Newco each hereby expressly
authorizes Seller as attorney-in-fact for the applicable Buyer Counterparty, to
take any and all reasonable actions, in the name and on behalf of such Buyer
Counterparty, as Seller may deem appropriate in its reasonable discretion to
avert or mitigate any Damages under Section 8.7(a)(ii), including enforcing any
obligations and curing the nonperformance of such Buyer Counterparty, inter
alia, by contacting and meeting with the counterparty to the relevant Applicable
Guest Agreement, entering the applicable Facility, directing operations at all
or a portion of such Facility, and using Seller’s or the applicable Buyer
Counterparty’s personnel to inspect, maintain, repair or operate all or a
portion of such Facility; and (ii) Buyer, Holdings and Newco shall, and shall
cause the applicable Buyer Counterparty and its employees to, permit Seller to
take any action contemplated by clause (i) and to comply with the instructions
of Seller in the exercise of its rights hereunder. If Seller shall exercise its
rights contemplated by this Section 8.7(b), Seller shall keep Buyer, Holdings
and Newco reasonably informed of the actions taken thereunder and upon request
of Buyer, Holdings or Newco, consult with Buyer, Holdings or Newco with respect
to the applicable matter giving rise to such rights.
          (c) For the avoidance of doubt, Seller’s exercise of its rights under
this Section 8.7 shall be without prejudice to its right to indemnification
under Section 8.3, and all Liabilities relating to or arising out of the
Applicable Guest Agreements from and after the Closing Date shall constitute
Assumed Liabilities, and any and all losses, claims, liabilities, debts,
damages, fines, penalties, costs, in each case, including reasonable actual
out-of-pocket expenses (including reasonable attorneys’ fees and expenses)
incurred by Seller in exercising its rights under this Section 8.7 shall
constitute Damages for which Seller is entitled to indemnification from Buyer
under Section 8.3. Seller shall be entitled to retain from or set-off against
amounts due to, or otherwise charge and collect from, Buyer, Newco or Holdings
(or any of their respective successors) all Damages incurred by Seller in the
exercise of the rights contemplated by this Section 8.7.
          (d) The Parties intend to create, and are hereby creating, an
equitable remedy of Seller under this Section 8.7. Buyer shall not, nor shall it
permit any other Buyer Counterparty to, enter into or amend any Contract or
otherwise take any action that purports to restrict, limit or impair the right
of Seller to exercise its rights under this Section 8.7. The rights of Seller
under this Section 8.7 shall not be affected by any act, omission, matter or
thing which, but for this provision, might operate to modify, restrict, limit or
otherwise impair Seller’s rights and remedies hereunder.

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     Section 8.8 Exclusive Remedy. From and after the Closing, the remedies set
forth in this Article VIII shall be the sole and exclusive remedy of the
Indemnified Parties for Damages relating to the subject matter hereof (other
than the Transition Services Agreement, the DPO Operating Agreement, the DME
Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease or
the Equistar Lease and Subcontract Agreement or any other Related Agreement
arising under the Transition Services Agreement, the DPO Operating Agreement,
the DME Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve
Lease or the Equistar Lease and Subcontract Agreement). Without limiting the
generality of the foregoing, Buyer and Seller hereby waive any statutory,
equitable or common law rights or remedies relating to any environmental, health
or safety matters relating to the subject matter hereof, including any such
matters arising under the Comprehensive Environmental Response, Compensation and
Liability Act or any other Environmental, Health or Safety Requirements.
ARTICLE IX
TERMINATION
     Section 9.1 Termination of Agreement. The Parties may terminate this
Agreement at any time prior to the Closing as provided below:
          (a) Buyer and Seller may terminate this Agreement by mutual written
consent;
          (b) Buyer may terminate this Agreement by giving written notice to
Seller:
               (i) if the Closing shall not have occurred prior to June 30, 2009
(the “Outside Date”);
               (ii) if any event, circumstance, condition, fact or effect has
occurred or exists which (A) would result in a failure of a condition to Buyer’s
obligations to consummate the transactions contemplated hereby set forth in
Section 7.1 (unless the failure results primarily from SK or Buyer itself
breaching any representation, warranty or covenant set forth in this Agreement),
and (B) cannot reasonably be cured prior to the Outside Date; provided, however,
that Buyer shall have given Seller written notice, delivered at least ten
(10) Business Days prior to such termination stating its intention to terminate
this Agreement pursuant to this Section 9.1(b)(ii) and the basis for such
termination with reasonable particularity and provided the opportunity to cure
any breach giving rise to the effects set forth in clauses (A) and (B) above
during such time; or
               (iii) as and to the extent Buyer has a right of termination
pursuant to Section 5.7;
          (c) Seller may terminate this Agreement by giving written notice to
Buyer:
               (i) if the Closing shall not have occurred prior to the Outside
Date;
               (ii) if any event, circumstance, condition, fact or effect has
occurred or exists which (A) would result in a failure of a condition to
Seller’s obligations to consummate the transactions contemplated hereby set
forth in Section 7.2 (unless the failure results primarily

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from Seller itself breaching any representation, warranty or covenant set forth
in this Agreement), and (B) cannot reasonably be cured prior to the Outside
Date; provided, however, that Seller shall have given Buyer written notice
thereof, delivered at least ten (10) Business Days prior to such termination
stating its intention to terminate this Agreement pursuant to this
Section 9.1(c)(ii) and the basis for such termination with reasonable
particularity and provided the opportunity to cure any breach giving rise to the
effects set forth in clauses (A) and (B) above during such time;
               (iii) without limiting the generality of Section 9.1(c)(i), if
(A) the conditions to Buyer’s obligations to consummate the transactions
contemplated hereby set forth in Section 7.1 (other than those conditions that
by their terms are to be satisfied at Closing or that have been waived by Buyer)
have been satisfied and Buyer has failed to consummate the transactions
contemplated hereby within five (5) Business Days after the date on which Seller
notifies Buyer that all such conditions have been satisfied, or (B) the Equity
Commitment Letter is actually or is purported to be terminated, modified or
amended (whether or not permissible under the terms thereof or this Agreement)
without Seller’s prior written consent; or
               (iv) if the board of directors of Seller has determined to
terminate this Agreement to enter into a transaction contemplated by an
Unsolicited Acquisition Proposal.
     Section 9.2 Termination Fees.
          (a) In the event that this Agreement is terminated (i) by Seller
pursuant to Section 9.1(c)(ii) based on the failure of the condition to Seller’s
obligations to consummate the transactions contemplated hereby set forth in
Section 7.2(a) (other than the failure of such condition relating to any untruth
or inaccuracy of any representation or warranty as of any date deemed made other
than the date hereof) or Section 7.2(b) to reasonably be cured prior to the
Outside Date or (ii) by Seller pursuant to Section 9.1(c)(iii), then in such
event, Buyer shall pay Seller a termination fee in an aggregate amount of Five
Million Dollars ($5,000,000) (the “Buyer Termination Fee”). Upon any termination
of this Agreement giving rise to the payment of the Buyer Termination Fee,
within one (1) Business Day following such termination, Buyer shall pay the
Buyer Termination Fee to Seller. Upon the payment of the Buyer Termination Fee,
neither SK nor Buyer shall have any further Liability relating to or arising out
of this Agreement, any other Contract contemplated hereby or the transactions
contemplated hereby or thereby, whether at law or equity, in contract, in tort
or otherwise. For the avoidance of doubt, in no event shall Buyer be obligated
to pay, or cause to be paid, the Buyer Termination Fee on more than one
occasion.
          (b) In the event that this Agreement is terminated (i) by Buyer
pursuant to Section 9.1(b)(ii) based on the failure of the condition to Buyer’s
obligations to consummate the transactions contemplated hereby set forth in
Section 7.1(a) (other than the failure of such condition relating to any untruth
or inaccuracy of any representation or warranty as of any date deemed made other
than the date hereof) or Section 7.1(b) to reasonably be cured prior to the
Outside Date, or (ii) by Seller pursuant to Section 9.1(c)(iv), then in such
event, Seller shall pay Buyer a termination fee in an aggregate amount of Five
Million Dollars ($5,000,000) (the “Seller Termination Fee”). Upon any
termination of this Agreement giving rise to the payment of the Seller
Termination Fee, within one (1) Business Day following such termination (in the
case of clause (i) above) or simultaneously with such termination (in the case
of

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clause (ii) above), Seller shall pay the Seller Termination Fee to Buyer. Upon
the payment of the Seller Termination Fee, neither Seller nor any of its
Subsidiaries (including Newco) shall have any further Liability relating to or
arising out of this Agreement, any other Contract contemplated hereby or the
transactions contemplated hereby or thereby, whether at law or equity, in
contract, in tort or otherwise. For the avoidance of doubt, in no event shall
Seller be obligated to pay, or cause to be paid, the Seller Termination Fee on
more than one occasion.
     Section 9.3 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.1, all rights and obligations of the Parties hereunder
shall terminate upon such termination and shall become null and void (except
that Article I (Definitions), Section 3.31 (Disclaimer of Other Representations
and Warranties), Section 4.10 (Disclaimer of Other Representations and
Warranties), Section 5.8(c) (Access; No Contact; Confidentiality), Section 5.12
(SK Guarantee), Section 5.13 (Seller Guarantee), Section 6.17
(Acknowledgements), Section 9.2 (Termination Fees), Section 9.4 (Maximum
Recovery), Article X (Miscellaneous) and this Section 9.3 (Effect of
Termination) shall survive any such termination) and, for the avoidance of
doubt, the Confidentiality Agreement shall survive any such termination) and no
Party shall have any Liability to the other Party hereunder; provided, however,
that, subject to the limitation of remedies and liability set forth in
Section 9.2 and Section 9.4, nothing in this Section 9.3 shall relieve any Party
from Liability for any breach occurring prior to any such termination of any of
the representations and warranties (but solely to the extent such breach would
result in a failure of the condition set forth in Section 7.1(a) or Section
7.2(a), as appropriate) or covenants (but solely to the extent such breach would
result in a failure of the condition set forth in Section 7.1(b), or
Section 7.2(b), as appropriate) set forth in this Agreement. The Parties hereby
agree to cause the China Asset Transfer Agreement to be terminated concurrently
with the termination of this Agreement.
     Section 9.4 Maximum Recovery. Notwithstanding anything to the contrary in
this Agreement or any other Contract contemplated hereby:
          (a) prior to the Closing (including from and after the termination of
this Agreement), the aggregate Liability of Seller and its Subsidiaries
(including Newco) to SK and Buyer and the aggregate Liability of SK and Buyer to
Seller and Newco, in either case relating to or arising out of this Agreement,
any other Contract contemplated hereby or the transactions contemplated hereby
(including any Liability to pay any Termination Fee), shall in each case be Five
Million Dollars ($5,000,000); and no such Party shall have any further or other
Liability to any other Parties relating to or arising out of any such matter,
whether at law or equity, in contract, in tort or otherwise; and
          (b) other than Seller, Newco, SK and Buyer (and for such Parties,
subject to Section 9.4(a)), none of such Party’s respective Affiliates, nor any
former, current or future direct or indirect equity holders, controlling
persons, directors, officers, employees, agents, members, managers, assignees,
successors or other Representatives of such Parties shall have any Liability
relating to or arising out of this Agreement, any other Contract contemplated
hereby, whether at law or equity, in contract, in tort or otherwise.

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ARTICLE X
MISCELLANEOUS
     Section 10.1 Expenses. Except as otherwise expressly set forth herein or in
the Securityholders Agreement, each Party will bear its own costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including all fees of law firms, commercial banks, investment banks,
accountants, public relations firms, experts and consultants. Notwithstanding
the foregoing, within five (5) Business Days following the presentment of
documentation thereof from and after the date hereof, Seller shall pay to SK the
amount of the reasonable, documented out-of pocket expenses incurred by SK from
March 6, 2009 through and including March 18, 2009 contemplated to be reimbursed
pursuant to the Expense Reimbursement Letter Agreement (the “Seller Advanced
Expenses”); provided, however, that the maximum amount of the Seller Advanced
Expenses shall be Seven Hundred Thousand Dollars ($700,000); and provided
further that at the Closing, SK shall reimburse Seller for the amount of the
Seller Advanced Expenses paid to SK pursuant to this sentence, for which SK
shall thereafter be entitled to collect the Seller Advanced Expenses from Newco
as and to the extent provided for in the Securityholders Agreement.
     Section 10.2 Entire Agreement. This Agreement, the Related Agreements and
the Confidentiality Agreement constitute the entire agreement between the
Parties and supersede any prior understandings, agreements or representations
(whether written or oral) by or between the Parties, written or oral, to the
extent they relate in any way to the subject matter hereof. For the avoidance of
doubt, except as provided in Section 10.1, none of (i) the letter agreement
dated as of December 5, 2008 by and between Seller and SK, (ii) the letter
agreement dated as of March 18, 2009 by and between Seller and SK (the “Expense
Reimbursement Letter Agreement”), and (iii) any agreement to reimburse expenses
deemed to exist by virtue of the term sheet exchanged between Seller and SK on
March 5, 2009, in any such case shall be of any further force and effect as of
the execution and delivery of this Agreement, and the Parties agree that no
payment is or ever shall become due thereunder. To the extent there is any
conflict between this Agreement and the China Asset Transfer Agreement, this
Agreement shall prevail.
     Section 10.3 Incorporation of Annexes, Exhibits and Disclosure Schedule.
The Annexes and Exhibits to this Agreement and the Disclosure Schedule are
incorporated herein by reference and made a part hereof.
     Section 10.4 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
Party except as expressly provided herein. No waiver of any breach of this
Agreement shall be construed as an implied amendment or agreement to amend or
modify any provision of this Agreement. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver, nor shall such waiver be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent default, misrepresentation or breach of warranty or
covenant. No conditions, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless this Agreement is amended
or modified in writing pursuant to

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the first sentence of this Section 10.4 except as expressly provided herein.
Except where a specific period for action or inaction is provided herein, no
delay on the part of any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
     Section 10.5 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written consent of
the other Parties.
     Section 10.6 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing except as expressly provided
herein. Any notice, request, demand, claim or other communication hereunder
shall be deemed duly given (i) when delivered personally to the recipient;
(ii) one (1) Business Day after being sent to the recipient by reputable
overnight courier service (charges prepaid); (iii) upon receipt of confirmation
of receipt if sent by facsimile transmission; or (iv) three (3) Business Days
after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid, and addressed to the intended recipient
as set forth below:

         
 
  If to Seller:   Solutia Inc.
575 Maryville Centre Drive
P.O. Box 66760
St. Louis, Missouri 63166
Attention: General Counsel
Facsimile: (314) 674-5469
 
       
 
      With a copy (which shall not constitute notice to Seller) to:
 
       
 
      Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, P.C., Esq.
                 Andrew E. Nagel, Esq.
                 William B. Sorabella, Esq.
Facsimile: (212) 446-6460
 
            If to Newco prior to the Closing:
 
      NyCo LLC
c/o Solutia Inc.
575 Maryville Centre Drive
P.O. Box 66760
St. Louis, Missouri 63166
Attention: General Counsel
Facsimile: (314) 674-5469

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      With a copy (which shall not constitute notice to Newco) to:
 
       
 
      Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, P.C., Esq.
                  Andrew E. Nagel, Esq.
                 William B. Sorabella, Esq.
Facsimile: (212) 446-6460
 
            If to SK, Buyer or, following the Closing, Newco:
 
       
 
      SK Capital Partners II, L.P.
400 Park Avenue, Suite 810
New York, New York 10022
Attention: General Counsel
Facsimile: (212) 867-4525
 
       
 
      With a copy (which shall not constitute notice to SK, Buyer or Newco) to:
 
       
 
      Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, New Jersey 08540
Attention: Steven M. Cohen, Esq.
Facsimile: (609) 919-6701

Any Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner set forth in this Section 10.6.
     Section 10.7 Governing Law; Governing Language.
          (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
          (b) Notwithstanding anything to the contrary herein or in any Related
Agreement, the English language version of any Related Agreement shall govern
the interpretation of any Related Agreement.
     Section 10.8 Submission to Jurisdiction; Service of Process. Each of the
Parties irrevocably and unconditionally submits to the exclusive jurisdiction of
any state or federal court

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sitting in New York, New York in any Litigation arising out of or relating to
this Agreement or any Related Agreement and agrees that all claims in respect of
such Litigation may be heard and determined in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating to this
Agreement or any Related Agreement other than the China Asset Transfer Agreement
in any other court. Each of the Parties irrevocably and unconditionally waives
any objection to the laying of venue in, and any defense of inconvenient forum
to the maintenance of, any Litigation so brought and waives any bond, surety or
other security that might be required of any other Party with respect thereto.
Any Party may make service on any other Party by sending or delivering a copy of
the process to the Party to be served at the address and in the manner provided
for the giving of notices in Section 10.6; provided, however, that nothing in
this Section 10.8 shall affect the right of any Party to serve legal process in
any other manner permitted by law or in equity. Each Party agrees that a final
judgment in any Litigation so brought shall be conclusive and may be enforced by
Litigation or in any other manner provided by law or in equity. The Parties
intend that all foreign jurisdictions will enforce any Decree of any state or
federal court sitting in New York, New York in any Litigation arising out of or
relating to this Agreement or any Related Agreement other than the China Asset
Transfer Agreement.
     Section 10.9 Waivers of Jury Trial. EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES 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 THE TRANSACTIONS CONTEMPLATED HEREBY.
     Section 10.10 Specific Performance. Each Party acknowledges and agrees that
the other Parties would be damaged irreparably in the event any provision of
this Agreement is not performed in accordance with its specific terms or
otherwise breached, so that, in addition to any other remedy that a Party may
have under law or equity, a Party shall be entitled to injunctive relief to
prevent breaches of the provisions of this Agreement applicable to the Parties
from and after Closing or termination of this Agreement, including Section 9.2
and Section 9.4, and to enforce specifically such provisions of this Agreement
and the terms and provisions thereof. No Party shall be entitled to injunctive
relief to prevent breaches of the provisions of this Agreement applicable to the
Parties at or prior to the Closing or prior to the termination of this Agreement
or to enforce specifically such provisions of this Agreement or the terms and
provisions thereof.
     Section 10.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement. In the event that any of the provisions
of this Agreement shall be held by a court or other tribunal of competent
jurisdiction to be illegal, invalid or unenforceable, such provisions shall be
limited or eliminated only to the minimum extent necessary so that this
Agreement shall otherwise remain in full force and effect.
     Section 10.12 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, the Other Sellers
and the respective successors and permitted assigns of the foregoing.

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     Section 10.13 Mutual Drafting. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
     Section 10.14 Disclosure Schedule. All capitalized terms not defined in the
Disclosure Schedule shall have the meanings ascribed to them in this Agreement.
Each representation and warranty of Seller in this Agreement is made and given,
and the covenants are agreed to, subject to the disclosures and exceptions set
forth on the Disclosure Schedule. The disclosure of any matter in any section of
the Disclosure Schedule shall be deemed to be a disclosure for all purposes of
this Agreement and all other sections of the Disclosure Schedule to which such
disclosure reasonably would be inferred. The listing of any matter shall
expressly not be deemed to constitute an admission by any Seller, or to
otherwise imply, that any such matter is material, is required to be disclosed
under this Agreement or falls within relevant minimum thresholds or materiality
standards set forth in this Agreement. No disclosure in the Disclosure Schedule
relating to any possible breach or violation of any Contract or law shall be
construed as an admission or indication that any such breach or violation exists
or has actually occurred. In no event shall the listing of any matter in the
Disclosure Schedule be deemed or interpreted to expand the scope of Seller’s
representations, warranties and/or covenants set forth in this Agreement. All
attachments to the Disclosure Schedule are incorporated by reference into the
Disclosure Schedule in which they are directly or indirectly referenced. The
information contained in the Disclosure Schedule is in all events provided
subject to the Confidentiality Agreement.
     Section 10.15 Headings; Table of Contents. The section headings and the
table of contents contained in this Agreement and the Disclosure Schedule are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
     Section 10.16 Counterparts; Facsimile and Electronic Signatures. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one and the same
instrument. This Agreement or any counterpart may be executed and delivered by
facsimile copies or delivered by electronic communications by portable document
format (.pdf), each of which shall be deemed an original.
{Remainder of page intentionally left blank.}

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     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

                  SOLUTIA INC.    
 
           
 
  By:   /s/ Jeffry N. Quinn
 
Name: Jeffry N. Quinn    
 
      Title: President and CEO    

                  NYCO LLC    
 
           
 
  By:   /s/ Paul J. Berra, III
 
Name: Paul J. Berra, III    
 
      Title: Senior Vice President, General Counsel and Chief Administrative
Officer    

                  SK CAPITAL PARTNERS II, L.P.    
 
           
 
  By:   SK Capital Investment II, LLC
its General Partner    
 
           
 
  By:   /s/ Barry B. Siadat
 
Name: Barry B. Siadat    
 
      Title: President    

                  SK TITAN HOLDINGS LLC    
 
           
 
  By:   /s/ Barry B. Siadat
 
Name: Barry B. Siadat    
 
      Title: President    

{Signature Page to Transaction Agreement}

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