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EXHIBIT 10.3

 
FIRST AMENDMENT TO CREDIT AGREEMENT

FIRST AMENDMENT (this “Amendment”), dated as of October 15, 2009, to the Credit
Agreement, dated as of February 28, 2008 (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among SOLUTIA INC., a Delaware corporation (“Borrower”), the
lending institutions party thereto (the “Lenders”), CITIBANK, N.A., as
administrative agent for the Lenders (in such capacity, the “Administrative
Agent”), and the other parties party thereto as agents.  Capitalized terms used
herein without definition shall have the meanings ascribed to them in the Credit
Agreement.
 
RECITALS
 
A.           Borrower, the Administrative Agent, the Lenders and other parties
thereto are party to the Credit Agreement.
 
B.           Borrower has requested that certain amendments be made to the
Credit Agreement as set forth herein.
 
C.           The Lenders signatory to an acknowledgement and consent in the form
attached hereto as Annex A (a “Lender Consent Letter”) and the Administrative
Agent have consented to this Amendment on the terms and subject to the
conditions set forth herein.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
 
1. Amendments to Credit Agreement.  As of the First Amendment Effective Date (as
defined below) and subject to the satisfaction of the conditions set forth in
Section 2 hereof, the Credit Agreement shall be amended as set forth below:
 
(a) Amendments to Section 1.01 – Defined Terms.  Section 1.01 of the Credit
Agreement is hereby amended by adding the following definitions to Section 1.01,
which shall be inserted in the proper alphabetical order.
 
“Acceptable Discount” has the meaning assigned to such term in Section
9.04(b)(ii)(B).
 
“Acceptance Date” has the meaning assigned to such term in Section
9.04(b)(ii)(A).
 
“Alternate First Lien Collateral” has the meaning assigned to such term in
Section 6.02(xxxi).
 
“Applicable Discount” has the meaning assigned to such term in Section
9.04(b)(ii)(B).
 
“Discount Range” has the meaning assigned to such term in Section
9.04(b)(ii)(A).
 
“FAS 5” means the Statement of Financial Accounting Standards No. 5 of The
Financial Accounting Standards Board.
 

 
 

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“First Amendment” means that certain First Amendment to Credit Agreement dated
as of October 15, 2009.
 
“First Amendment Effective Date” means October 15, 2009.
 
“First Lien Obligations” means the Obligations and the Permitted Other Debt
Obligations (other than any Permitted Other Debt Obligations that are unsecured
or secured by a Lien ranking junior to the Lien securing the Obligations),
collectively.
 
“Lender Participation Notice” has the meaning assigned to such term in Section
9.04(b)(ii)(B).
 
“Offered Loans” has the meaning assigned to such term in Section 9.04(b)(ii)(B).
 
“Permitted Loan Purchase” has the meaning assigned to such term in Section
9.04(b)(ii)(A).
 
“Permitted Loan Purchase Amount” has the meaning assigned to such term in
Section 9.04(b)(ii)(A).
 
“Permitted Loan Purchase Notice” has the meaning assigned to such term in
Section 9.04(b)(ii)(C).
 
“Permitted Other Debt” shall mean senior secured or unsecured notes or loans
(which in either case, if secured, may either have the same lien priority as the
Obligations or may be secured by a Lien ranking junior to the Lien securing the
Obligations), in either case issued by the Borrower or a Subsidiary Guarantor,
(a) the terms of which do not provide for any scheduled repayment, mandatory
redemption, mandatory prepayment or sinking fund obligations prior to, at the
time of incurrence, the Maturity Date (other than customary offers to repurchase
or mandatory prepayment provisions, as applicable, upon a change of control,
asset sale, debt issuance, sale of the company, excess cash flow or casualty or
condemnation event and customary acceleration rights after an event of default
and scheduled amortization payments not in excess of 1% of the original
principal amount of any such notes or loans constituting Permitted Other Debt
during any Fiscal Year; provided that (i) in the case of any mandatory
prepayment or offer to repurchase any such Indebtedness relating to excess cash
flow, the Borrower shall first prepay the Loans in the amount required under
Section 2.04(b)(iv) prior to making any such prepayment of or offer to
repurchase any such other Indebtedness, and (ii) in the case of any mandatory
prepayment of or offer to repurchase any such Indebtedness, the obligations of
the Borrower (if any) to repay or prepay the Loans in accordance with the terms
hereof (including, without limitation, as required pursuant to Section 2.04)
arising from such change of control, asset sale, debt issuance, sale of the
company, excess cash flow or casualty or condemnation event shall be satisfied
to the fullest extent required hereunder), (b) the covenants, events of default
and other terms of which (other than interest, fees, discount and other pricing
and economic provisions and redemption or prepayment provisions and call
protection and prepayment premiums), taken as a whole, are not more restrictive
to the Borrower and its Restricted Subsidiaries than those herein, (c) of which
no Subsidiary of the Borrower (other than a Subsidiary Guarantor) is an obligor,
(d) if secured, are not secured by any assets other than the Collateral or the
Alternate First Lien Collateral and (e) the Borrower shall deliver a certificate
of an Authorized Officer of the Borrower to the Administrative Agent at least
five Business Days (or such shorter period as the Administrative Agent may
reasonably agree) prior to the incurrence of such Indebtedness, together with a
reasonably detailed description of the material terms and conditions of such
Indebtedness or drafts of the documentation relating thereto, stating that the
Borrower has determined in good faith that such terms and conditions satisfy the
foregoing requirements.
 

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“Permitted Other Debt Documents” shall mean any document or instrument
(including any guarantee, security agreement or mortgage) issued or executed and
delivered with respect to any Permitted Other Debt by any Loan Party.
 
“Permitted Other Debt Obligations” shall mean, if any Permitted Other Debt is
issued, all advances to, and debts, liabilities, obligations, covenants and
duties of, any Loan Party arising under any Permitted Other Debt Document,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired and whether or not evidenced by any note, guaranty or other instrument
or for the payment of money, including all fees and interest (including interest
accruing after the maturity of such Permitted Other Debt and interest accruing
(or that would accrue but for the commencement of any bankruptcy, insolvency,
reorganization or like proceeding) after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding). Without limiting the generality of the foregoing,
the Permitted Other Debt Obligations of the applicable Loan Parties under the
Permitted Other Debt Documents include the obligation (including guarantee
obligations) to pay principal, interest, fees, premiums, charges, expenses,
attorneys’ fees and disbursements and other sums chargeable to any such Loan
Party under any Permitted Other Debt Document.
 
“Permitted Other Debt Secured Parties” shall mean the holders from time to time
of secured Permitted Other Debt Obligations, and any representative on their
behalf.
 
“Permitted Purchase Option Notice” has the meaning assigned to such term in
Section 9.04(b)(ii)(A).
 
“Qualified Unrestricted Subsidiary” means any Unrestricted Subsidiary designated
as a “Qualified Unrestricted Subsidiary” pursuant to a certificate of an
Authorized Officer of the Borrower delivered to the Administrative Agent and
otherwise in compliance with Section 5.18; provided that there shall be no more
than one Qualified Unrestricted Subsidiary.
 
“Qualifying Loans” has the meaning assigned to such term in Section
9.04(b)(ii)(C).
 
“Senior Notes” means the senior notes to be issued by the Borrower on or around
the First Amendment Effective Date, which such notes shall comply with the
definition of Permitted Other Debt (other than clause (b) of that definition,
unless such notes are secured) but shall be either unsecured or secured by Liens
ranking junior to the Liens securing the Obligations.
 
“Senior Notes Documents” means (i) an indenture, dated on or around the First
Amendment Effective Date, among the Borrower, certain subsidiaries of the
Borrower and the trustee named therein, and (ii) each other document and
instrument executed in respect thereto, which provisions of such indenture,
documents and instruments shall comply with the definition of Permitted Other
Debt (other than clause (b) of that definition, unless the notes issued
thereunder are secured) but shall be either unsecured or secured by Liens
ranking junior to the Liens securing the Obligations.
 
“Senior Notes Secured Parties” shall mean (i) the holders from time to time of
secured Senior Notes, (ii) the holders from time to time of any secured
Indebtedness permitted pursuant to Section 6.01(xxv)(y) and (iii) any
representative on behalf of any such holders.
 
“Specified Businesses” means the businesses described on Schedule 1.01(e).
 

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“Transferred Liability” means, in connection with any sale, transfer or other
disposition of assets by the Borrower or its Restricted Subsidiaries, any
liability (i) that would be recorded on a balance sheet of the Borrower or its
Restricted Subsidiaries in accordance with GAAP or identified under FAS 5, (ii)
that is related to the assets sold, transferred or otherwise disposed of by the
Borrower or its Restricted Subsidiaries, (iii) that is (x) expressly assumed by
the purchaser or transferee of such assets or (y) expunged by the holder of such
liability, and (iv) with respect to which the Borrower and its Restricted
Subsidiaries are fully and unconditionally released upon consummation of such
sale, transfer or other disposition.
 
(b) The definition of “Asset Sale Prepayment Event” in Section 1.01 of the
Credit Agreement is hereby amended by (x) replacing the parenthetical in clause
(a) with the parenthetical “(other than Sections 6.05 (viii), 6.05 (xii) and
6.05 (xvii) thereof)” and (y) amending clause (b) in its entirety to read as:
“Asset Sales permitted by Section 9.22; and”.
 
(c) The definition of “Consolidated EBITDA” in Section 1.01 of the Credit
Agreement is hereby amended by:
 
(i) amending clause (j) to read in its entirety as follows:
 
“for purposes of calculations pursuant to Section 6.12 and 6.13 only, one-time
cash charges associated with plant closures and other restructuring charges, in
all cases, (i) not exceeding $15.0 million for any Test Period ending on or
prior to the First Amendment Effective Date and (ii) not exceeding $75.0 million
in the aggregate from the First Amendment Effective Date to the Maturity Date
(excluding any such charges pursuant to the Transactions); provided that such
cash and other restructuring charges pursuant to this clause (j) shall in no
event exceed $75.0 million for any Test Period, and”
 
(ii) inserting the phrase “, but including any gains or income associated with
cancellation or extinguishment of Loans (including any gains, income or loss
from Permitted Loan Purchases)” immediately following the phrase “(y) the amount
attributable to minority interests” set forth in the parenthetical located in
clause (i) following the reference to “minus” contained therein; and
 
(iii) inserting the following at the end of such definition:
 
“For the avoidance of doubt, Consolidated EBITDA shall not be increased or
decreased as a result of any gains or income or losses associated with
cancellation or extinguishment of Loans (including any gains, income or loss
from Permitted Loan Purchases).”
 
(d) The definition of “Consolidated Interest Expense” in Section 1.01 of the
Credit Agreement is hereby amended by adding the words “issuance of Equity
Interests or Equity Rights” after the words “Permitted Acquisitions” in the last
paragraph thereof.
 
(e) The definition of “Excess Cash Flow” in Section 1.01 of the Credit Agreement
is hereby amended by:
 
(i) amending clause (a)(iii) by adding the following at the end thereof:
 
“provided that any impact of any change in the valuation of currency and any
one-time change in working capital arising directly from Permitted Acquisitions
or from Asset Sales permitted pursuant to Section 6.05(viii), (xii) or (xvii)
completed by the
 

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Borrower and its Restricted Subsidiaries during such Excess Cash Flow Period
shall, in each case, be excluded from the calculation of working capital;”;
 
(ii)           amending clauses (a)(v) by deleting the word “and” at the end of
such clause and inserting the following new clause (a)(vii):
 
“(vii)                      to the extent that cash payments in respect of
contributions to Pension Plans, any Foreign Plan, other post-employment benefits
and any payments made with respect to Environmental Liability during any Excess
Cash Flow Period are less than the amount of expenses for such items subtracted
in determining Consolidated EBITDA for such Excess Cash Flow Period, the excess
of such expenses over the amount of such cash payments;”
 
(ii) amending clause (b)(v) by adding the following at the end thereof:
 
“provided that any impact of any change in the valuation of currency and any
one-time change in working capital arising directly from Permitted Acquisitions
or from Asset Sales permitted pursuant to Section 6.05(viii), (xii) or (xvii)
completed by the Borrower and its Restricted Subsidiaries during such Excess
Cash Flow Period shall, in each case, be excluded from the calculation of
working capital;”;
 
(iii) amending clause (b)(vii) by replacing the parenthetical “(other than the
Loans)” with the parenthetical “(other than the Loans and any Indebtedness
pursuant to Sections 6.01(xiv), 6.01(xxiv) or 6.01(xxv));
 
(iv) deleting the word “and” at the end of clause (b)(ix), replacing the period
at the end of clause (b)(x) with a “; and” and inserting the following new
clause (b)(xi):
 
“(xi)           to the extent not deducted as an expense in determining
Consolidated EBITDA and to the extent made from internally generated funds of
the Borrower and its Restricted Subsidiaries (including any cash and Cash
Equivalents actually received by the Borrower or any of its Restricted
Subsidiaries as a return on Investments), any contribution to any Pension Plan,
any Foreign Plan, or other post-employment benefits and any payments made with
respect to any Environmental Liability during such Excess Cash Flow Period.”
 
(v) inserting the following at the end of such definition:
 
“For the avoidance of doubt, Excess Cash Flow shall not be reduced by any
Permitted Loan Purchase or the amount of any cash consideration paid in
connection therewith.”
 
(f) The definition of “Loans” in Section 1.01 of the Credit Agreement is hereby
amended in its entirety with the following:
 
““Loans” means the loans made pursuant to Section 2.01(a).”
 
(g) The definition of “Net Proceeds” in Section 1.01 of the Credit Agreement is
hereby amended by adding the following parenthetical after the words
“Indebtedness for borrowed money” in clause (b)(iii):
 

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“(other than any Indebtedness pursuant to Sections 6.01(xiv), 6.01(xxiv) or
6.01(xxv))”.
 
(h) The definition of “Permitted Acquisition” in Section 1.01 of the Credit
Agreement is hereby amended by:
 
(i) amending clause (d)(iv) by deleting the words “, and to be tested based on a
ratio 50 basis points tighter than the applicable ratio for such Test Period set
forth in Section 6.13” therefrom.
 
(ii)           amending clause (e) by adding the following words at the
beginning thereof:
 
“in the case of any acquisition or series of related acquisitions where the
Acquisition Consideration is greater than $10.0 million in the aggregate,”
 
(i) The definition of “Permitted Guarantor Factoring Transactions” in Section
1.01 of the Credit Agreement is hereby amended by replacing the words “$15.0
million” with the words “$30.0 million”.
 
(j) The definition of “Pro Forma Basis” in Section 1.01 of the Credit Agreement
is hereby amended by:
 
(i) adding the following words immediately after the words “Asset Sale” the
first time they appear in clause (ii):  “or designation of a Subsidiary as an
Unrestricted Subsidiary (or of an Unrestricted Subsidiary as a Restricted
Subsidiary) pursuant to Section 5.18”;
 
(ii) adding the following parenthetical immediately after the word “Investment”
where the term Investment appears in clause (ii)(a)(i):  “(including an
Investment resulting from an Unrestricted Subsidiary being designated as a
Restricted Subsidiary pursuant to Section 5.18)”; and
 
(iii) adding the following words immediately after the words “Restricted
Subsidiaries” in clause (ii)(a)(ii): “, or in the case of the designation of a
Subsidiary as an Unrestricted Subsidiary pursuant to Section 5.18.”
 
(k) The definition of “Senior Debt Repayments” in Section 1.01 of the Credit
Agreement is hereby amended by inserting the phrase “; provided, however, Senior
Debt Payments shall not include any Permitted Loan Purchases” immediately prior
to the period at the end thereof.
 
(l) Amendment to Section 2.04 – Optional and Mandatory Prepayments of Loans;
Repayments of Loans.  Clause (b)(i) of Section 2.04 of the Credit Agreement is
hereby amended in its entirety with the following:
 
“(b)           (i)           If the Borrower or any of its Restricted
Subsidiaries shall incur any Indebtedness (other than as permitted by Section
6.01(i) through (xxiii) and 6.01(xxvi), and any Permitted Refinancing permitted
hereunder of Indebtedness permitted by Section 6.01(xxiv) or (xxv)) (each, a
“Debt Incurrence”), 100% of the Net Proceeds thereof shall be applied within
three Business Days after receipt thereof toward the prepayment of the Loans in
accordance with Section 2.04(d) below; provided that in the case of Indebtedness
constituting the Senior Notes, the Borrower shall not be required to apply more
than an aggregate amount equal to the greater of (i) $200.0 million and (ii)
 

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the amount which is $100.0 million less than the aggregate original principal
amount of the Senior Notes, in each case to the prepayment of the principal
amount of the Loans in accordance with Section 2.04(d) below; provided further,
that in the case of Indebtedness constituting the Senior Notes or Permitted
Other Debt incurred pursuant to Section 6.01(xxiv) or Section 6.01(xxv), as
applicable, such prepayment shall be accompanied by a fee or prepayment premium,
as applicable, equal to (x) 2.00% of the principal amount prepaid or repaid if
such prepayment occurs on or after the first anniversary of the Effective Date
but prior to the second anniversary of the Effective Date or (y) 1.00% of the
principal amount prepaid or repaid if such prepayment occurs on or after the
second anniversary of the Effective Date but prior to the third anniversary of
the Effective Date.”
 
(m) Amendment to Section 5.01 – Financial Information, Reports, Notices,
etc.  Clause (a) of Section 5.01 of the Credit Agreement is hereby amended by
inserting the following language between “(a “Compliance Certificate”)” and
“containing” and replacing the same with the following:
 
“(i) setting forth the aggregate principal amount of all Permitted Loan
Purchases made during the applicable fiscal period and (ii);”
 
(n) Amendment to Section 6.01 – Indebtedness.
 
(i) Clause (xii) of Section 6.01 of the Credit Agreement is hereby amended in
its entirety as follows:
 
“(xii)                      Indebtedness of any Non-U.S. Restricted Subsidiary
that is a Non-Guarantor Restricted Subsidiary, and Guarantees by any Non-U.S.
Restricted Subsidiary that is a Non-Guarantor Restricted Subsidiary in respect
of such Indebtedness; provided that (A) no Default shall have occurred and be
continuing or would immediately result there-from and (B) the aggregate
principal amount of all such Indebtedness shall not exceed an aggregate of $75.0
million at any one time outstanding;”
 
(ii) Clause (xiv) of Section 6.01 of the Credit Agreement is hereby amended in
its entirety with the following
 
“(xiv)                      Indebtedness of the Borrower and the Subsidiary
Guarantors (other than the Senior Notes) in an aggregate principal amount not to
exceed $300.0 million at any one time outstanding that is either (x) unsecured
or (y) secured by a Lien ranking junior to the Lien securing the Obligations;
provided that, in each case, (A) such Indebtedness will not mature prior to the
date that is one year following the Maturity Date, (B) the terms of such
Indebtedness do not provide for any scheduled repayment, mandatory redemption,
mandatory prepayment or sinking fund obligations prior to the date that is one
year following the Maturity Date (other than customary offers to repurchase or
mandatory prepayment provisions, as applicable, upon a change of control, asset
sale, debt issuance, sale of the company, excess cash flow or casualty or
condemnation event and customary acceleration rights after an event of default
and scheduled amortization payments not in excess of 1% of the original
principal amount of any such Indebtedness during any Fiscal Year; provided that
(i) in the case of any mandatory prepayment or offer to repurchase any such
Indebtedness relating to excess cash flow, the Borrower shall first prepay the
Loans in the amount required under Section 2.04(b)(iv) prior to making any such
prepayment of or offer to repurchase any such other Indebtedness, and (ii) in
the case of any mandatory prepayment of or offer to repurchase any such
 
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 Indebtedness, the obligations of the Borrower (if any) to repay or prepay the
Loans in accordance with the terms hereof (including, without limitation, as
required pursuant to Section 2.04) arising from such change of control, asset
sale, debt issuance, sale of the company, excess cash flow or casualty or
condemnation event shall be satisfied to the fullest extent required hereunder),
(C) after giving effect to the incurrence of such Indebtedness on a Pro Forma
Basis, the Net Interest Expense Coverage Ratio shall be not less than 2.0:1.0 as
of the most recent Test Period (assuming that such incurrence of Indebtedness,
and each other incurrence of Indebtedness under this Section 6.01 consummated
since the first day of such Test Period, and the application of the proceeds
thereof, had occurred on the first day of such Test Period) and the Borrower
shall have delivered to the Administrative Agent a certificate of a Financial
Officer of the Borrower to such effect setting forth in reasonable detail the
computations necessary to determine such compliance (together with a reasonably
detailed description of the material terms and conditions of such Indebtedness
or drafts of the documentation relating thereto), (D) no Default shall have
occurred and be continuing or would immediately result therefrom, (E)
immediately after giving effect thereto, the Borrower and its Restricted
Subsidiaries are in compliance, on a Pro Forma Basis after giving effect to the
incurrence of such Indebtedness (and any other Indebtedness incurred since the
last day of the immediately preceding Test Period), and the application of the
proceeds thereof, with the covenants set forth in Section 6.12 and 6.13
recomputed as at the date of the last ended Test Period, as if all such
Indebtedness was incurred on the first day of the immediately preceding Test
Period, and (F) except in the case of Guarantees by Excluded Non-U.S. Restricted
Subsidiaries of such Indebtedness of Non-U.S. Restricted Subsidiaries, no
Restricted Subsidiary shall Guarantee any such Indebtedness unless such
Restricted Subsidiary is also a Subsidiary Guarantor under this Agreement and
the other Loan Documents; provided further that in the case of Indebtedness that
is secured pursuant to clause (y) above, (A) the covenants, events of default
and other terms of such Indebtedness (other than interest, fees, discount and
other pricing and economic provisions and redemption or prepayment provisions
and call protection and prepayment premiums), taken as a whole, shall not be
more restrictive to the Borrower and its Restricted Subsidiaries than those
herein, (B) no Subsidiary of the Borrower (other than a Subsidiary Guarantor)
shall be an obligor in respect of such Indebtedness, (C) such Indebtedness shall
not be secured by any assets other than the Collateral or the Alternate First
Lien Collateral, and (D) not less than five Business Days prior to the
incurrence of such Indebtedness, the Borrower shall have delivered a certificate
of an Authorized Officer of the Borrower to the Administrative Agent, together
with a reasonably detailed description of the material terms and conditions of
such Indebtedness or drafts of the documentation relating thereto, stating that
the Borrower has determined in good faith that such terms and conditions satisfy
the foregoing requirements;”
 
(iii) Section 6.01 of the Credit Agreement is hereby amended by deleting the
word “and” at the end of clause (xxii) thereof, replacing the period at the end
of clause (xxiii) with a semicolon and inserting the following new clauses
(xxiv), (xxv) and (xxvi):
 
“(xxiv)                      Indebtedness of the Borrower and the Subsidiary
Guarantors in respect of (x) Permitted Other Debt issued or incurred for cash to
the extent that the Net Proceeds therefrom are applied to the prepayment of the
Loans in accordance with Section 2.04(b)(i) and the payment of accrued interest
thereon and any prepayment premium set forth in Section 2.04(b)(i); provided
that, (A) no Default shall have occurred and be continuing or would immediately
result therefrom, and (B) immediately after giving effect thereto, the Borrower
and its Restricted Subsidiaries are in compliance, on a Pro
 

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Forma Basis after giving effect to the incurrence of such Indebtedness (and any
other Indebtedness incurred since the last day of the immediately preceding Test
Period), and the application of the proceeds thereof, with the covenants set
forth in Section 6.12 and 6.13 recomputed as at the date of the last ended Test
Period, as if all such Indebtedness was incurred on the first day of the
immediately preceding Test Period and (y) any Permitted Refinancing of any
Indebtedness specified in subclause (x) above; provided that such Indebtedness
pursuant to this Section 6.01(xxiv) otherwise complies with the definition of
Permitted Other Debt;
 
(xxv)                      Indebtedness of the Borrower and the Subsidiary
Guarantors in respect of (x) the Senior Notes to the extent that the Net
Proceeds therefrom are applied to the prepayment of the Loans in accordance
with, and to the extent required by, Section 2.04(b)(i), and the payment of
accrued interest thereon and the prepayment premium set forth in Section
2.04(b)(i); provided that, (A) no Default shall have occurred and be continuing
or would immediately result therefrom, and (B) immediately after giving effect
thereto, the Borrower and its Restricted Subsidiaries are in compliance, on a
Pro Forma Basis after giving effect to the incurrence of such Indebtedness (and
any other Indebtedness incurred since the last day of the immediately preceding
Test Period), and the application of the proceeds thereof, with the covenants
set forth in Section 6.12 and 6.13 recomputed as at the date of the last ended
Test Period, as if all such Indebtedness was incurred on the first day of the
immediately preceding Test Period and (y) any Permitted Refinancing of such
Senior Notes specified in subclause (x) above; provided that such Indebtedness
pursuant to this Section 6.01(xxv) otherwise complies with the definition of
Permitted Other Debt (other than clause (b) of that definition, unless such
Senior Notes are secured), but shall be either unsecured or secured by Liens
ranking junior to the Lien securing the Obligations; and
 
(xxvi)                      intercompany notes evidencing obligations relating
to Investments made pursuant to Section 6.04(xxiii) or asset transfers made
pursuant to Section 6.05(xviii); provided that (A) such intercompany notes are
pledged pursuant to the Pledge Agreement in accordance with Section 5.11 and (B)
the obligations of any obligor evidenced by such intercompany notes shall be
subordinated to the Obligations on terms reasonably satisfactory to the
Administrative Agent.”
 
(o) Amendment to Section 6.02 – Liens.
 
(i) Clause (xvi) of Section 6.02 of the Credit Agreement is hereby amended by
deleting the words “in the ordinary course of business of the Borrower and its
Restricted Subsidiaries”.
 
(ii) Section 6.02 of the Credit Agreement is hereby amended by deleting the word
“and” at the end of clause (xxix) thereof, replacing the period at the end of
clause (xxx) with “; and” and inserting the following new clauses (xxxi),
(xxxii), (xxxiii) and (xxxiv):
 
“(xxxi)                      Liens securing Indebtedness permitted to be
incurred under Section 6.01(xxiv); provided that (A) in the case of Liens
securing Permitted Other Debt Obligations that constitute First Lien Obligations
and (1) whose collateral package is identical to the Collateral (subject to
exceptions set forth in the Security Documents), (a) the applicable Permitted
Other Debt Secured Parties (or a representative thereof on behalf of such
holders) shall have delivered to the Collateral Agent and the Administrative
Agent an accession agreement to the Intercreditor Agreement, in form and
substance acceptable to the Collateral Agent and the Administrative Agent, and
security documents
 

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with terms and conditions not materially less favorable to the Lenders than the
terms and conditions of the Security Documents and (b) the Borrower shall have
complied with the other requirements with respect to such Permitted Other Debt
Obligations, if applicable, or (2) whose collateral package consists of less
collateral than the Collateral (subject to exceptions set forth in the Security
Documents) (such collateral package, “Alternate First Lien Collateral”), the
applicable Permitted Other Debt Secured Parties (or a representative thereof on
behalf of such holders) shall enter into security documents with terms and
conditions not materially less favorable to the Lenders than the terms and
conditions of the Security Documents and an intercreditor agreement reasonably
acceptable to the Collateral Agent and the Administrative Agent, and an
accession agreement to the Intercreditor Agreement, in form and substance
acceptable to the Collateral Agent and the Administrative Agent, and (B) in the
case of Liens securing Permitted Other Debt Obligations that do not constitute
First Lien Obligations, the applicable Permitted Other Debt Secured Parties (or
a representative thereof on behalf of such holders) shall have entered into an
intercreditor agreement providing that the Liens securing such Permitted Other
Debt Obligations shall rank junior to the Liens securing the Obligations and any
other First Lien Obligations, and which shall also provide, among other
provisions to be determined by the Borrower, the Administrative Agent, the
Collateral Agent and such Permitted Other Debt Secured Parties (or a
representative thereof on behalf of such holders), terms substantially similar
to those set forth on Exhibit O to this Agreement (with any changes thereto
being reasonably acceptable to the Administrative Agent and the Collateral
Agent). Without any further consent of the Lenders, the Administrative Agent and
the Collateral Agent shall be authorized to negotiate, execute and deliver on
behalf of the Secured Parties any intercreditor agreement (or an amendment to
the Intercreditor Agreement) contemplated by this Section 6.02(xxxi) and any
amendments to any Security Document required in connection therewith;
 
(xxxii)                      Liens securing Indebtedness permitted to be
incurred under Section 6.01(xiv); provided that the applicable secured parties
with respect to such Indebtedness (or a representative thereof on behalf of such
holders) shall have entered into an intercreditor agreement providing that the
Liens securing such Indebtedness shall rank junior to the Liens securing the
Obligations and any other First Lien Obligations, and which shall also provide,
among other provisions to be determined by the Borrower, the Administrative
Agent, the Collateral Agent and such secured parties (or a representative
thereof on behalf of such holders), terms substantially similar to those set
forth on Exhibit O to this Agreement (with any changes thereto being reasonably
acceptable to the Administrative Agent and the Collateral Agent). Without any
further consent of the Lenders, the Administrative Agent and the Collateral
Agent shall be authorized to negotiate, execute and deliver on behalf of the
Secured Parties any intercreditor agreement (or an amendment to the
Intercreditor Agreement) contemplated by this Section 6.02(xxxii) and any
amendments to any Security Document required in connection therewith;
 
(xxxiii) Liens securing Indebtedness permitted to be incurred under Section
6.01(xxv); provided that the Senior Notes Secured Parties (or a representative
thereof on behalf of such holders) shall have entered into an intercreditor
agreement providing that the Liens securing such Indebtedness shall rank junior
to the Liens securing the Obligations and any other First Lien Obligations, and
which shall also provide, among other provisions to be determined by the
Borrower, the Administrative Agent, the Collateral Agent and the Senior Notes
Secured Parties (or a representative thereof on
 

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behalf of such holders), terms substantially similar to those set forth on
Exhibit O to this Agreement (with any changes thereto being reasonably
acceptable to the Administrative Agent and the Collateral Agent). Without any
further consent of the Lenders, the Administrative Agent and the Collateral
Agent shall be authorized to negotiate, execute and deliver on behalf of the
Secured Parties any intercreditor agreement (or an amendment to the
Intercreditor Agreement) contemplated by this Section 6.02(xxxiii) and any
amendments to any Security Document required in connection therewith; and
 
(xxxiv)                      Liens securing intercompany notes pledged to the
Collateral Agent pursuant to the Pledge Agreement and issued by Restricted
Subsidiaries of the Borrower that are not Loan Parties in connection with an
Investment made pursuant to Section 6.04(xxiii) or an asset transfer made
pursuant to Section 6.05(xviii).”
 
(p) Amendment to Section 6.03 – Fundamental Changes; Line of Business.
 
(i) Clause (a) of Section 6.03 of the Credit Agreement is hereby amended in its
entirety with the following:
 
“(a)           The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with them,
or liquidate or dissolve, except that, if at the time thereof and immediately
after giving effect thereto no Default shall have occurred and be continuing,
(i) any Wholly Owned Subsidiary may merge into, consolidate or liquidate into
the Borrower in a transaction in which the Borrower is the surviving
corporation, and, in the case of a liquidation, all assets of such Wholly Owned
Subsidiary are distributed to the Borrower, (ii) any Subsidiary of the Borrower
may merge with or into, liquidate into or consolidate with any Restricted
Subsidiary in a transaction in which the surviving or resulting entity is a
Restricted Subsidiary (provided that if any party to such merger, liquidation or
consolidation is a Subsidiary Guarantor, the surviving or resulting entity shall
be a Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Borrower),
and (iii) Permitted Acquisitions as permitted by Section 6.04(vii) may be
consummated; provided that in connection with each of the foregoing, the
appropriate Loan Parties shall take all actions necessary or reasonably
requested by the Collateral Agent to maintain the perfection of or perfect, as
the case may be, protect and preserve the Liens on the Collateral granted to the
Collateral Agent pursuant to the Security Documents and otherwise comply with
the provisions of Sections 5.11, 5.12 and 5.15, in each case, on the terms set
forth therein and to the extent applicable.”
 
(ii) Clause (c) of Section 6.03 of the Credit Agreement is hereby amended by
adding the following prior to the period thereof:
 
“; provided, that for the avoidance of doubt, businesses related to the
manufacturing, sale or distribution of high performance chemical based products
and materials is permitted under this clause (c)”.
 
(q) Amendment to Section 6.04 – Investments.
 
(i) Clause (ii) of Section 6.04 of the Credit Agreement is hereby amended by
adding the following at the end thereof:
 

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“provided that to the extent any loan described on Schedule 6.04 that is owing
by a Subsidiary not a Loan Party to a Loan Party (the “Scheduled Loans”) (or any
additional Investments made by Loan Parties pursuant to this proviso) has been
repaid, then additional Investments may be made by Loan Parties in any
Restricted Subsidiaries that are not Loan Parties in an aggregate amount up to
the amount actually received by Loan Parties as payment in respect of such
Investments; provided further that in no event will the aggregate amount of
Scheduled Loans and additional Investments made by Loan Parties in Subsidiaries
that are not Loan Parties pursuant to the first proviso of this clause (ii)
exceed the aggregate original principal amount of the Scheduled Loans on the
Effective Date.”
 
(ii) Clause (iii)(C) of Section 6.04 of the Credit Agreement is hereby amended
by replacing the words “$75.0 million” with the words “$100.0 million”.
 
(iii) Clause (vii) of Section 6.04 of the Credit Agreement is hereby amended by
replacing the words “$100.0 million” with the words “$200.0 million”.
 
(iv) Clause (viii) of Section 6.04 of the Credit Agreement is hereby amended to
read in its entirety as follows:
 
“Investments in Joint Ventures (A) constituting or consisting of a contribution
of or other transfer or distribution of the assets (other than cash, except that
a de minimus cash amount directly related to such assets may be contributed,
transferred or otherwise distributed) or capital stock of the Specified
Businesses or (B) Investments in Joint Ventures not described in clause (A) in
an aggregate amount made under this clause (B) not to exceed $50.0 million at
any one time outstanding;”
 
(v) Clause (xv) of Section 6.04 of the Credit Agreement is hereby amended by
adding the words “any non-cash portion or” prior to the words “any deferred
portion”.
 
(vi) Section 6.04 of the Credit Agreement is hereby amended by deleting the word
“and” at the end of clause (xix) thereof, replacing the period at the end of
clause (xx) with “; and” and inserting the following new clauses (xxi), (xxii)
and (xxiii):
 
“(xxi)                      Investments in the Qualified Unrestricted Subsidiary
to be used solely to fund Permitted Loan Purchases; provided that, (A) both
before and after giving effect to such Investment, no Default shall have
occurred and be continuing and (B) immediately after giving effect to such
Investment, the Borrower shall be in compliance, on a Pro Forma Basis, with the
covenants set forth in Section 6.12 and Section 6.13 as at the date of the last
ended Test Period (it being understood that as a condition precedent to making
such Investment, the Borrower shall deliver to the Administrative Agent a
certificate of a Financial Officer of the Borrower setting forth in reasonable
detail the calculations demonstrating such compliance); provided further, that
notwithstanding anything in this Agreement or the Loan Documents to the
contrary, no Investments in the Qualified Unrestricted Subsidiary may be made
except the Investments permitted pursuant to this Section 6.04(xxi);
 
(xxii)                      intercompany receivables created by any distribution
or other transfer by a Subsidiary to a Loan Party of an intercompany receivable
issued by a Subsidiary that is not a Guarantor; provided that any Loan Party
shall pledge any note evidencing any such receivable that it receives as a
result of such distribution or other transfer; provided
 

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further, that no Loan Party shall transfer, or otherwise make any payment or
other Investment of, cash or cash equivalents in exchange for the receipt of
such intercompany receivables; and
 
(xxiii)                      any transfer of assets pursuant to Section
6.05(xviii) in the form of an Investment.”
 
(vii) The last paragraph of Section 6.04 of the Credit Agreement is hereby
amended in its entirety as follows:
 
“The aggregate amount of an Investment at any one time outstanding for purposes
of this Section 6.04 shall be deemed to be equal to (A) the aggregate amount of
cash, together with the aggregate fair market value of Property (net of any
Transferred Liability), loaned, advanced, contributed, transferred or otherwise
invested that gives rise to such Investment (without adjustment for subsequent
increases or decreases in the value of such Investment) minus (B) the aggregate
amount of dividends, distributions or other payments received in cash in respect
of such Investment (including by way of a sale or other disposition of such
Investment).  The amount of an Investment shall not in any event be reduced by
reason of any write-off of such Investment.”
 
(r) Amendment to Section 6.05 – Asset Sales.
 
(i) Clause (v) of Section 6.05 of the Credit Agreement is hereby amended by
adding the words “, transfer of assets” after the word “liquidations”.
 
(ii) Clause (viii) of Section 6.05 of the Credit Agreement is hereby amended by
(x) adding the word “other” at the beginning thereof, (y) deleting the words
“not otherwise permitted under this Section” and (z) amending clause (B) of the
proviso to read in its entirety as follows:
 
“(B) the aggregate fair market value of all assets (net of any Transferred
Liability) sold, transferred or otherwise disposed of in reliance upon this
Section 6.05(viii) from the First Amendment Effective Date through the date of
such sale, transfer or other disposition do not exceed the Asset Sale Cap (for
the avoidance of doubt, any subsequent decrease in the Asset Sale Cap shall not
constitute a Default or an Event of Default with respect to sales, transfers and
dispositions previously made as permitted by this Section 6.05(viii)),”.
 
(iii) Section 6.05 of the Credit Agreement hereby amended by deleting the word
“and” at the end of clause (xv), replacing the period at the end of clause (xvi)
with a semicolon and inserting the following new clauses (xvii) and (xviii):
 
“(xvii)                      any transfer or disposition of the assets or
capital stock of the Specified Businesses (any which disposition may be made as
part of a larger Asset Sale transaction, the remainder of which Asset Sale
transaction is permitted under the provisions of one or more other baskets in
this Section 6.05); provided that the Net Proceeds thereof are applied as
required by Section 2.04(b)(ii); and
 
(xviii)                      any transfer of assets by any Loan Party to a
Restricted Subsidiary that is not a Loan Party and any intercompany Indebtedness
owing to a Loan Party resulting therefrom; provided that (x) the aggregate
amount of such assets shall not exceed (A) in the case of transfers of assets
acquired after the First Amendment Effective Date by any
 

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Loan Party in a Permitted Acquisition in compliance with Section 6.04(vii) and
any intercompany Indebtedness owing to a Loan Party resulting therefrom, $200.0
million, and (B) in the case of all other transfer of assets under this Section
6.05(xviii), $50.0 million, (y) for each such transfer, the conditions set forth
on Schedule 6.05(xviii) have been satisfied, and (z) any such transfer shall be
made in exchange for an intercompany note which shall be pledged pursuant to the
Pledge Agreement or a Non-U.S. Pledge Agreement in accordance with Section
5.11.”
 
(iv) The proviso at the end of Section 6.05 of the Credit Agreement is hereby
amended in its entirety with the following:
 
“provided that all sales, transfers, leases and other dispositions permitted
hereby shall be made (a) for fair value and (b) other than in the case of sales,
transfers, leases and other dispositions permitted by Sections 6.05(ii),
6.05(v), 6.05(vii), 6.05(ix), 6.05(xiv), 6.05(xvi) and 6.05(xviii), for
consideration (which, for purposes of this proviso, shall not be deemed to
include any Transferred Liability (other than any liability owed or owing to the
purchaser or transferee of the assets sold, transferred or otherwise disposed of
or to any affiliates of such purchaser or transferee)) consisting of at least
75% cash and Cash Equivalents.”
 
(s) Amendment to Section 6.07 – Restricted Payments. Clause (ii) of Section 6.07
of the Credit Agreement is hereby amended by adding the words “, Equity Rights”
prior to the words “or other Equity Interests”.
 
(t) Amendment to Section 6.08 – Transactions with Affiliates.
 
(i) The introductory paragraph of Section 6.08 of the Credit Agreement is hereby
amended by deleting the words “are in the ordinary course of business of the
Borrower and its Restricted Subsidiaries” and replacing them with the words “are
in accordance with the reasonable requirements of the business of the Borrower
and its Restricted Subsidiaries (as determined by the Borrower in its reasonable
business judgment)”; and
 
(ii) Section 6.08 of the Credit Agreement is hereby amended by deleting the word
“and” at the end of clause (iii) thereof, replacing the period at the end of
clause (iv) with “: and” and inserting the following new clause (v);
 
“(v) Investments in Qualified Unrestricted Subsidiaries permitted by Section
6.04(xxi).”
 
(u) Amendment to Section 6.09 – Restrictive Agreements.
 
(i) Clause (i) of Section 6.09 of the Credit Agreement is hereby amended in its
entirety as follows:
 
“(i)           conditions or restrictions imposed by law or by any document
evidencing Indebtedness permitted to be incurred pursuant to Section 6.01(xiv),
any Loan Document, any Revolving Credit Loan Document, or any Permitted Other
Debt Documents (or Permitted Refinancings of Permitted Other Debt Documents) so
long as, in the case of any document evidencing Indebtedness permitted to be
incurred pursuant to Section 6.01(xiv) or Section 6.01(xxiv) or such Permitted
Refinancing, the conditions or
 

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restrictions imposed pursuant to such Permitted Refinancing are no more
restrictive, taken as a whole, than those conditions or restrictions contained
in the Loan Documents;”
 
(ii) Section 6.09 of the Credit Agreement is hereby amended by deleting the word
“and” at the end of clause (vii), replacing the period at the end of clause
(viii) with “; and” and inserting the following new clause (xix):
 
“(xix)                      any agreement with respect to Indebtedness permitted
under Section 6.01(xi), but only if such restrictions were not created in
contemplation of such Permitted Acquisition and the restrictions only apply to
the Person or assets being acquired.”
 
(v) Amendment to Section 6.13 – Total Leverage Ratio. The chart in Section 6.13
of the Credit Agreement is hereby amended to read in its entirety as follows:
 
“
 
Date
Ratio
June 30, 2008
5.50:1.00
September 30, 2008
5.25:1.00
December 31, 2008
5.00:1.00
March 31, 2009
4.75:1.00
June 30, 2009
4.50:1.00
September 30, 2009
4.50:1.00
December 31, 2009
4.50:1.00
March 31, 2010
4.50:1.00
June 30, 2010
4.50:1.00
September 30, 2010
4.50:1.00
December 31, 2010
4.50:1.00
March 31, 2011
4.25:1.00
June 30, 2011
4.00:1.00
September 30, 2011
3.75:1.00
December 31, 2011
3.50:1.00
March 31, 2012 and the last day of each Fiscal Quarter thereafter
3.00:1.00

”
 
(w) Amendment to Section 9.04 – Successors and Assigns.  Clause (b) of Section
9.04 of the Credit Agreement is hereby amended to read in its entirety as
follows:
 
“(b)           (i) Each Lender may assign to one or more assignees (other than a
natural person, the Borrower or any of the Borrower’s Affiliates or Subsidiaries
(other than a Qualified Unrestricted Subsidiary solely to the extent such
Qualified Unrestricted
 

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Subsidiary purchases Loans pursuant to a Permitted Loan Purchase and such Loans
are immediately cancelled upon such purchase pursuant to clause (b)(ii)(G)
below) or any Person engaged principally in the business of manufacture or sale
of high performance chemical based products that is a competitor of the Borrower
or any of its Subsidiaries) all or a portion of its interests, rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it); provided, however, that (A) except in
the case of an assignment to a Lender or a Lender Affiliate or in connection
with the initial syndication of the Commitments and Loans, the Borrower and the
Administrative Agent must give their prior written consent to such assignment
(which consents shall not be unreasonably withheld or delayed), (B) except in
the case of an assignment to a Lender, a Lender Affiliate or a Federal Reserve
Bank or in connection with the initial syndication of the Commitments and Loans,
the amount of the Commitment or Loans of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $1.0 million and increments of $1.0 million in excess thereof (or
(I) if the aggregate amount of the Commitment or Loans of the assigning Lender
is a lesser amount, the entire amount of such Commitment or Loans, or (II) in
any other case, such lesser amount as the Borrower and the Administrative Agent
otherwise agree), (C) except in the case of the assignment to an Affiliate of
such Lender or an assignment required to be made pursuant to Section 2.18, the
parties to each such assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation
fee of $3,500 (provided that only one such fee shall be payable in the event of
contemporaneous assignments to two or more Lender Affiliates by a Lender or by
two or more Lender Affiliates to a Lender and such fee shall not be payable by
the Borrower) and (D) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire; provided, further,
that any consent of the Borrower otherwise required under this paragraph shall
not be required if an Event of Default has occurred and is continuing.  Subject
to acceptance and recording pursuant to paragraph (e) of this Section 9.04, from
and after the effective date specified in each Assignment and Assumption, which
effective date shall be at least five Business Days after the execution thereof
(unless otherwise determined by the Administrative Agent), (I) the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and (II) the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Assumption, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13,
2.14, 2.15 and 9.05 with respect to facts and circumstances occurring prior to
the effective date of such assignment).  Any assignment or transfer by a Lender
of rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (f) of this Section.
 
(ii) (A) Notwithstanding any other provision in this Agreement or any other Loan
Document, so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Qualified Unrestricted Subsidiary may
at any time purchase Loans (each such purchase, a “Permitted Loan Purchase”)
pursuant to the procedures described in this Section 9.04(b)(ii).  In connection
with any Permitted Loan
 

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Purchase, the Qualified Unrestricted Subsidiary will provide written notice to
the Administrative Agent (each, a “Permitted Purchase Option Notice”) that the
Qualified Unrestricted Subsidiary desires to purchase Loans in an aggregate
principal amount specified by the Qualified Unrestricted Subsidiary (each, a
“Permitted Loan Purchase Amount”), which principal amount shall be not less than
$10.0 million in the aggregate, in each case at a discount as specified below;
provided that (I) each purchase shall be made solely with funds contributed to
the Qualified Unrestricted Subsidiary pursuant to Section 6.04(xxi), (II) at the
time of delivery of the Permitted Purchase Option Notice to the Administrative
Agent, no Default or Event of Default shall have occurred and be continuing or
would result therefrom, (III) prior to providing a Permitted Purchase Option
Notice, the Borrower shall have discussed same with each of S&P and Moody’s and,
based upon such discussions, shall reasonably believe that the proposed purchase
of Loans through such Permitted Loan Purchase shall not be deemed to be a
“distressed exchange”, (IV) at the time of consummation of each Permitted Loan
Purchase, neither S&P nor Moody’s shall have announced or communicated to the
Borrower that the proposed purchase of Loans through such Permitted Loan
Purchase shall be deemed to be a “distressed exchange”, and (V) at the time of
each Permitted Loan Purchase, the Borrower shall have delivered to the
Administrative Agent a certificate of an Authorized Officer of the Borrower
certifying as to compliance with preceding clauses (I) through (IV).  The
Permitted Purchase Option Notice shall further specify with respect to the
proposed Permitted Loan Purchase: (I) the Permitted Loan Purchase Amount, (II) a
discount range selected by the Qualified Unrestricted Subsidiary with respect to
such proposed Permitted Loan Purchase equal to a percentage of par of the
principal amount of the Loans (the “Discount Range”), which shall reflect a
discount to par of at least 5%, and (III) the date by which the Lenders are
required to indicate their election to participate in such proposed Permitted
Loan Purchase, which shall be no earlier than three Business Days and no later
than five Business Days following the date of the Permitted Purchase Option
Notice (“Acceptance Date”).  The failure of any Lender to indicate its election
to participate in such proposed Permitted Loan Purchase shall be deemed an
election by such Lender as an express election to not participate in such
proposed Permitted Loan Purchase.
 
(B) Upon receipt of any Permitted Purchase Option Notice, the Administrative
Agent shall promptly notify each Lender thereof.  On or prior to the Acceptance
Date, each Lender may (but shall not be required to) specify by written notice
substantially in the form of Exhibit N hereto (each, a “Lender Participation
Notice”) to the Administrative Agent (I) a discount to par (the “Acceptable
Discount”) within the Discount Range and (II) a principal amount (subject to
rounding requirements specified by the Administrative Agent) of Loans held by
such Lender that such Lender is willing to permit to be purchased pursuant to a
Permitted Loan Purchase (“Offered Loans”).  Based on the Acceptable Discounts
and principal amounts of Loans specified by the Lenders in the applicable Lender
Participation Notices, the Administrative Agent, in consultation with the
Qualified Unrestricted Subsidiary, will determine the clearing discount (the
“Applicable Discount”) for the Permitted Loan Purchase which will be the lowest
Acceptable Discount within the Discount Range at which the Qualified
Unrestricted Subsidiary can purchase the Permitted Loan Purchase Amount in full
(determined by adding the principal amounts of Offered Loans commencing with the
Offered Loans with the highest Acceptable Discount); provided, however, that if
such Permitted Loan Purchase Amount cannot be purchased in full at any
Acceptable Discount (determined by adding the principal amounts of Offered Loans
commencing with the Offered Loans with the highest Acceptable Discount), the
Applicable Discount shall be the highest
 

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Acceptable Discount specified by the Lenders that is within the Discount Range
specified by the Qualified Unrestricted Subsidiary.  The Applicable Discount
shall be applicable for all Lenders who have offered to participate in the
Permitted Loan Purchase and have Qualifying Loans (as defined below).
 
(C) The Qualified Unrestricted Subsidiary shall make a Permitted Loan Purchase
by purchasing those Loans (or the respective portions thereof) offered by the
Lenders that specify an Acceptable Discount that is equal to or higher than the
Applicable Discount (“Qualifying Loans”) at the Applicable Discount; provided
that (I) if the aggregate proceeds required to purchase Qualifying Loans
(disregarding any interest payable in connection with such Qualifying Loans)
would exceed the Permitted Loan Purchase Amount for such Permitted Loan
Purchase, the Qualified Unrestricted Subsidiary shall purchase such Qualifying
Loans at the Applicable Discount ratably based on the respective principal
amounts of such Qualifying Loans (subject to rounding requirements specified by
the Administrative Agent) and (II) in the event that the Qualifying Loans are
less than the Permitted Loan Purchase Amount, the Qualified Unrestricted
Subsidiary shall only be permitted to make a Permitted Loan Purchase to the
extent the principal amount of such Qualifying Loans equals or exceeds $10.0
million in the aggregate.  Each Permitted Loan Purchase shall be made within
five Business Days of the date of determination of the Applicable Discount,
without premium or penalty, upon irrevocable notice (each a “Permitted Loan
Purchase Notice”), delivered to the Administrative Agent no later than 2:00
p.m., New York City time, three Business Days prior to the date of such
Permitted Loan Purchase, which notice shall specify the date and amount of the
Permitted Loan Purchase and the Applicable Discount.  Upon receipt of any
Permitted Loan Purchase Notice the Administrative Agent shall promptly notify
each relevant Lender thereof.  If any Permitted Loan Purchase Notice is given,
the Qualified Unrestricted Subsidiary shall be obligated to purchase the Loans
subject thereto for the amount specified in such notice from the applicable
Lenders on the date specified therein, together with accrued interest (on the
par principal amount) to but not including such date on the amount purchased.
 
(D) To the extent not expressly provided for herein, each Permitted Loan
Purchase shall be consummated pursuant to the procedures established by the
Administrative Agent acting in its sole reasonable discretion.
 
(E) Prior to the delivery of a Permitted Loan Purchase Notice, upon written
notice to the Administrative Agent, (I) the Qualified Unrestricted Subsidiary
may withdraw its offer to make a Permitted Loan Purchase pursuant to any
Permitted Purchase Option Notice and (II) any Lender may withdraw its offer to
participate in a Permitted Loan Purchase pursuant to any Lender Participation
Notice.
 
(F) Any Loans purchased pursuant to a Permitted Loan Purchase shall be cancelled
and forgiven immediately upon the closing of such Permitted Loan Purchase for no
consideration (with the effect that such Loans and any related Obligation shall
for all purposes of this Agreement and the other Loan Documents no longer be
outstanding, and the Borrower and the Subsidiary Guarantors shall no longer have
any Obligations relating thereto, it being understood that such forgiveness and
cancellation shall result in the Borrower and Subsidiary Guarantors being
irrevocably and unconditionally released from all claims and liabilities
relating to such Obligations which have been so cancelled and forgiven, and the
Collateral shall cease to secure any such Obligations which have been so
cancelled and forgiven).  The documentation evidencing the forgiveness and
 

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cancellation of the Loans as provided above shall be reasonably satisfactory to
the Administrative Agent.  It is acknowledged and agreed that no Permitted Loan
Purchase shall constitute a prepayment of Loans for purposes of this Agreement.”
 
(x) Amendment to Section 9.15 – Jurisdiction:  Consent to Service of
Process.  Clause (a) of Section 9.15 of the Credit Agreement is hereby amended
by replacing the word “nonexclusive” with “exclusive” and replace the words “may
be heard and determined” with the words “shall be heard and determined
exclusively”.
 
(y) Amendment to Article IX – Miscellaneous.  Article IX is hereby amended by
adding the following new Section 9.22 at the end thereof:
 
“SECTION 9.22                                Permitted Intercompany
Transaction.  Notwithstanding any covenant, restriction or other provision
contained in Section 6.01, 6.03, 6.04, 6.05, 6.07 and 6.08 and any provision of
the Intercompany Note, the transfer by Monchem International, Inc., directly or
indirectly, of any of its Subsidiaries organized in Japan or Brazil
(collectively, the “Transferred Assets”) to Solutia Europe SPRL/BVBA (“Solutia
Europe”) in any transaction or a series of transactions, and the subsequent
transfer by Solutia Europe of such Transferred Assets to Flexsys Holdings B.V.
shall be permitted under this Agreement; provided that no Event of Default or
Default then exists or would immediately arise therefrom.”
 
(z) Amendment to Exhibits.
 
(i) The exhibits to the Credit Agreement are hereby amended by adding a new
Exhibit N (Form of Lender Participation Notice) attached hereto as Exhibit 1.
 
(ii) The exhibits to the Credit Agreement are hereby amended by adding a new
Exhibit O (Summary of Terms and Conditions of Junior Lien Intercreditor
Agreement) attached hereto as Exhibit 2.
 
(aa) Amendment to Schedules.
 
(i) The schedules to the Credit Agreement are hereby amended by adding a new
Schedule 1.01(e) (Specified Businesses) attached hereto as Exhibit 3.
 
(ii) The schedules to the Credit Agreement are hereby amended by adding a new
Schedule 6.05(xviii) (Non-Guarantor Restricted Subsidiary Investment Conditions)
attached hereto as Exhibit 4.
 
2. Effectiveness of this Amendment.  This Amendment shall become effective on
and as of the date (the “First Amendment Effective Date”) on which all of the
following conditions precedent have been satisfied:
 
(a) Amendment.  The Administrative Agent shall have received:
 
(i) this Amendment duly executed and delivered by Borrower;
 
(ii) an officer’s certificate signed on behalf of Borrower by a Financial
Officer of Borrower, certifying as of the date on which the Senior Notes price
(the “Pricing Date”) that: (A) the representations and warranties set forth in
Article III of the Credit Agreement and in the other
 

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Loan Documents are true and correct (or true and correct in all material
respects if not otherwise qualified by materiality or by a Material Adverse
Effect) with the same effect as if made on the First Amendment Effective Date
(unless expressly stated to relate to an earlier date, in which case such
representations and warranties shall be true and correct (or true and correct in
all material respects if not otherwise qualified by materiality or by a Material
Adverse Effect) as of such earlier date) and (B) the representations and
warranties of set forth in Section 3 herein are true and correct (or true and
correct in all material respects if not otherwise qualified by materiality or by
a Material Adverse Effect) on the Pricing Date;
 
(iii) executed Lender Consent Letters from the Requisite Lenders;
 
(iv) the attached Acknowledgement executed by Borrower and each Subsidiary
Guarantor; and
 
(v) from Kirkland & Ellis LLP, special counsel to the Loan Parties, a customary
written opinion addressed to each Agent and the Lenders, dated the First
Amendment Effective Date, customary in form, scope and substance.
 
 
(b) Costs and Expenses.  The Administrative Agent shall have received:
 
(i) for the account of each Lender that executes and delivers a Lender Consent
Letter to the Administrative Agent on or before 5:00 p.m., New York City time,
on October 1, 2009, an amendment fee equal to 0.25% of the outstanding principal
amount (calculated after giving effect to the prepayment required under Section
2(c) below) of such Lender’s Loans; and
 
(ii) all fees required to be paid, and all expenses required to be paid under
Section 6 of this Amendment for which invoices have been presented (including
the reasonable fees and expenses of legal counsel), in connection with this
Amendment (or Borrower shall have made arrangements for the payment thereof
satisfactory to the Administrative Agent).
 
(c) Loan Prepayment.  The Borrower shall have prepaid, from the Net Proceeds of
the Senior Notes, the Loans in an aggregate principal amount equal to the
greater of (i) $200.0 million and (ii) the amount which is $100.0 million less
than the aggregate original principal amount of the Senior Notes, in each case
plus accrued interest thereon and a prepayment premium equal to (x) 2.00% of the
principal amount of the Loans prepaid if the First Amendment Effective Date
occurs prior to the second anniversary of the Effective Date or (y) 1.00% of the
principal amount of the Loans prepaid if the First Amendment Effective Date
occurs on or after the second anniversary of the Effective Date but prior to the
third anniversary of the Effective Date.
 
(d) No Default. No Default or Event of Default shall have occurred and be
continuing or will result from the execution, delivery or effectiveness of this
Amendment.
 
3. Representations and Warranties.  Borrower represents and warrants as follows:
 
(a) Authority.  Borrower and each Subsidiary Guarantor has the requisite
corporate or other organizational power and authority to execute and deliver
this Amendment and the attached Acknowledgement, and to perform its obligations
hereunder and under the Loan Documents (as amended or modified hereby) to which
it is a party.  The execution, delivery and performance by such Person of this
Amendment and Acknowledgement have been duly approved by all necessary corporate
or other organizational action and no other corporate or other organizational
proceedings are necessary to consummate such transactions.
 

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(b) Enforceability.  This Amendment has been duly executed and delivered by
Borrower.  This Amendment and the Credit Agreement (as amended or modified
hereby) are the legal, valid and binding obligation of Borrower, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization and other similar laws
relating to or affecting creditors’ rights generally and general principles of
equity (whether considered in a proceeding in equity or law).
 
(c) No Conflict.  The execution, delivery and performance of this Amendment by
Borrower does not (i) contravene any applicable provision of any material
applicable law of any Governmental Authority, (ii) result in any breach of any
of the terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of such Person pursuant
to, (A) the terms of any material indenture, loan agreement, lease agreement,
mortgage or deed of trust, or (B) any other material contractual obligation, in
the case of either clause (i) and (ii) to which such Person is a party or by
which it or any of its property or assets is bound, (iii) violate any provision
of the Organizational Documents of such Person, except with respect to any
conflict, breach or contravention or default referred to in clauses (ii)(A) or
(ii)(B), to the extent that such conflict, breach, contravention or default
could not reasonably be expected to have a Material Adverse Effect or (iv)
conflict with or violate any provision of the Credit Agreement, the Loan
Documents, the Revolving Credit Agreement or the Revolving Credit Loan
Documents.
 
(d) No Default.  No event has occurred and is continuing or will result from the
execution and delivery of this Amendment that would constitute a Default or an
Event of Default.
 
4. Applicable Law.  THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
 
5. WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT OR
ANY DOCUMENT EXECUTED IN CONNECTION WITH THIS AMENDMENT.  EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AMENDMENT AND ANY DOCUMENT EXECUTED IN CONNECTION WITH THIS AMENDMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 5.
 
6. Expenses; Indemnity.  Without limiting Borrower’s obligations under Section
9.05(a) of the Credit Agreement, Borrower hereby agrees to reimburse the
Administrative Agent for reasonable and documented out-of-pocket expenses,
including the reasonable fees and disbursements of counsel, incurred in
connection with this Amendment and the Permitted Loan Purchases.  The provisions
of Section 9.05(b) of each of the Credit Agreement are hereby incorporated by
reference herein as if fully set forth and in full force and effect as if
written in full herein except that the term “Indemnitees” shall be deemed to
expressly include this Amendment and the documents executed in connection with
this Amendment.
 
7. Counterparts.
 

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(a) This Amendment may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original
but all of which when taken together shall constitute a single
contract.  Delivery of an executed signature page to this Amendment by facsimile
transmission or other electronic image scan transmission (e.g., “PDF” or “tif”
via e-mail) shall be as effective as delivery of a manually signed counterpart
of this Amendment.
 
(b) The execution and delivery of a Lender Consent Letter with respect to this
Amendment by any Lender shall be binding upon each of its successors and assigns
and binding in respect of all of its Loans, including any Loans acquired
subsequent to its execution and delivery hereof and prior to the effectiveness
hereof.
 
8. Reference to and Effect on the Loan Documents.
 
(a) Upon and after the effectiveness of this Amendment, each reference in the
Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to “the Credit Agreement”, “thereof” or words of like import referring
to the Credit Agreement, shall mean and be a reference to the Credit Agreement
as modified and amended hereby.
 
(b) Except as specifically amended above, the Credit Agreement and all other
Loan Documents, are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed and shall constitute the legal,
valid, binding and enforceable obligations of Borrower to the Agents and the
other Secured Parties, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization and other similar laws
relating to or affecting creditors’ rights generally and general principles of
equity (whether considered in a proceeding in equity or law).
 
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Agent or any other Secured Party under any of the Loan Documents,
nor constitute a waiver of any provision of any of the Loan Documents.
 
(d) To the extent that any terms and conditions in any of the Loan Documents
shall contradict or be in conflict with any terms or conditions of the Credit
Agreement, after giving effect to this Amendment, such terms and conditions are
hereby deemed modified or amended accordingly to reflect the terms and
conditions of the Credit Agreement as modified or amended hereby.
 
9. Integration.  This Amendment, together with the other Loan Documents,
incorporates all negotiations of the parties hereto with respect to the subject
matter hereof and is the final expression and agreement of the parties hereto
with respect to the subject matter hereof.
 
10. Severability.  In case any provision in this Amendment shall be invalid,
illegal or unenforceable, such provision shall be severable from the remainder
of this Amendment and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
 
[signature pages follow]

 
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.
 

 
SOLUTIA INC.,
a Delaware corporation
 
 
By:  /s/ James A. Tichenor
 
Name:  James A. Tichenor
 
Title:  Assistant Treasurer
 

 

 
 

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CITIBANK, N.A.,
as Administrative Agent
 
 
By:  /s/ David Jaffe
 
Name:  David Jaffe
 
Title:  Director/Vice President
 

  
 

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