Exhibit 10.9
 
PLEDGE AGREEMENT
by
SOLUTIA INC.
and
THE SUBSIDIARIES PARTY HERETO,
as Pledgors,
and
CITIBANK, N.A.,
as Collateral Agent
 
Dated as of February 28, 2008
 

 

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TABLE OF CONTENTS

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

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              Page  
SECTION 24. Intercreditor Agreement Governs
    13  
SECTION 25. Delivery of Collateral
    13  
SECTION 26. Conflicts
    13  

SCHEDULES

     
Schedule I Schedule II
  Subsidiary Guarantors
Pledged Stock and Debt Securities

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

 

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

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          TO HAVE AND TO HOLD the Securities Collateral, together with all
right, title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent for the benefit of the Secured
Parties; subject, however, to the terms, covenants and conditions hereinafter
set forth.
          SECTION 2. Delivery of the Securities Collateral. (a)  Each Pledgor
agrees to promptly deliver or cause to be delivered to the Collateral Agent any
and all Pledged Securities, and any and all certificates or other instruments or
documents representing the Securities Collateral, other than those Pledged
Securities to be held in a Securities Account which Securities Account will be
subject to a Control Agreement (as defined in the Security Agreement) pursuant
to the terms of the Security Agreement.
          (b) Each Pledgor will cause any Indebtedness for borrowed money owed
to such Pledgor by any Person to be evidenced by a duly executed promissory note
that is pledged to the Collateral Agent for the benefit of the Secured Parties
and delivered to the Collateral Agent pursuant to the terms hereof (provided
that this clause (b) shall not apply to any such Indebtedness in an aggregate
principal amount less than $500,000 owing by any Person that is not a
Subsidiary); provided, that, except with respect to promissory notes
representing, individually or in the aggregate, Indebtedness of more than
$1,000,000, such promissory notes shall be required to be delivered to the
Collateral Agent only on each date on which financial statements are required to
be delivered under Section 5.01(a) or (b) of the Credit Agreement; provided
further, that, to the extent that any such promissory note constitutes an
Intercompany Note and to the extent that any Pledgor is required hereunder to
deliver any such Intercompany Note to the Collateral Agent for purposes of
possession, such Pledgor’s obligations hereunder with respect to such delivery
shall be deemed satisfied by the delivery to the Collateral Agent of the Master
Intercompany Note.
          (c) If any Equity Interests now or hereafter acquired by any Pledgor
constituting Pledged Stock are uncertificated, such Pledgor shall comply with
its obligations under Section 3.05(c) of the Security Agreement.
          (d) Prior to the Discharge of Term Loan Obligations, to the extent any
Pledgor is required hereunder to deliver Fixed Asset Collateral to the
Collateral Agent for purposes of possession and is unable to do so as a result
of having previously delivered such Fixed Asset Collateral to any of the Term
Loan Agents in accordance with the terms of the Term Loan Security Documents,
such Pledgor’s obligations hereunder with respect to such delivery shall be
deemed satisfied by the delivery to such Term Loan Agents, acting as a
gratuitous bailee and/or sub-agent of the Collateral Agent in accordance with
the terms of the Intercreditor Agreement.
          SECTION 3. Representations, Warranties and Covenants. Each Pledgor
hereby represents, warrants and covenants, as to itself and the Securities
Collateral pledged by it hereunder, to and with the Collateral Agent that:
     (a) as of the date hereof the Pledged Stock represents that percentage as
set forth on Schedule II of the issued and outstanding shares of each class of
the capital stock or other Equity Interests of the issuer with respect thereto;
     (b) such Pledgor (i) is, as of the date hereof, the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule II,
(ii) holds the Pledged Securities free and clear of all Liens, other than the
Liens created hereunder and Liens permitted by Section 6.02(v),

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6.02(ix) and 6.02(xviii) of the Revolving Credit Agreement, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to exist
any security interest in or other Lien on, the Securities Collateral, except as
permitted by the Revolving Credit Agreement, and (iv) subject to Section 2 and
Section 5, will cause any and all Securities Collateral, whether for value paid
by such Pledgor or otherwise, to be promptly deposited with the Collateral Agent
and pledged or assigned hereunder;
     (c) as of the date hereof, except as set forth in the proviso to
Section 1(a)(i), the Pledged Stock and Pledged Securities set forth on
Schedule II constitute all of the shares of capital stock and other Equity
Interests and all debt securities owned by such Pledgor that are not included in
the definition of Collateral under the Security Agreement;
     (d) such Pledgor (i) has the power and authority to pledge the Securities
Collateral in the manner hereby done or contemplated and (ii) will defend its
title or interest thereto or therein against any and all Liens (other than the
Liens created by this Agreement or Liens permitted by Section 6.02(v), 6.02(ix)
and 6.02(xviii) of the Revolving Credit Agreement), however arising, of all
Persons whomsoever;
     (e) by virtue of (i) the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Securities Collateral are delivered to the
Collateral Agent in accordance with this Agreement or (ii) in the case of
uncertificated Equity Interests, the filing of a UCC financing statement in such
Pledgor’s jurisdiction of organization or formation, the Collateral Agent will
obtain a valid and perfected lien upon and first priority (subject in priority
only to Liens securing the “Obligations” (as defined in the Term Loan Credit
Agreement) under the Term Loan Credit Agreement) security interest in such
Pledged Securities as security for the payment and performance of the
Obligations, subject only to Liens securing the “Obligations” (as defined in the
Term Loan Credit Agreement) under the Term Loan Credit Agreement; provided,
however, that, for the avoidance of doubt, the representations set forth in this
clause (e) shall not be made with respect to, or construed in accordance with,
the laws of any jurisdiction other than the United States, any State thereof or
the District of Columbia;
     (f) all of the Pledged Stock issued by a corporation has been duly
authorized and validly issued and is fully paid and, to the extent applicable,
nonassessable;
     (g) all of the Pledged Debt Securities issued by any Pledgor have been duly
authorized, executed and delivered and are the enforceable obligations of the
issuer thereof subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforceability of creditors’ rights
generally and to general principles of equity, regardless of whether considered
in a proceeding in equity or at law; and
     (h) all information set forth herein relating to the Pledged Securities is
accurate and complete in all material respects as of the date hereof.
          SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent;
provided that the Collateral Agent shall only exercise such right to hold the
Pledged Securities in its own name as pledgee

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or the name of its nominee (as pledgee or as sub-agent) if an Event of Default
has occurred and is continuing. After the occurrence and during the continuance
of an Event of Default, each Pledgor will promptly provide the Collateral Agent
with copies of any written notices or other written communications received by
it with respect to Pledged Securities registered in the name of such Pledgor.
After the occurrence and during the continuance of any Event of Default, the
Collateral Agent shall at all times have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Agreement.
          SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
     (i) Each Pledgor shall have the right to exercise any and all voting and/or
other consensual rights and powers inuring to an owner of Pledged Securities or
any part thereof for any purpose not inconsistent with the terms of this
Agreement, the Revolving Credit Agreement and the other Loan Documents;
provided, however, that such Pledgor will not be entitled to exercise any such
right if the result thereof would reasonably be expected to materially and
adversely affect the rights and remedies of any of the Secured Parties under
this Agreement, the Revolving Credit Agreement or any other Loan Document or the
ability of the Collateral Agent or any other Secured Parties to exercise the
same;
     (ii) The Collateral Agent shall execute and deliver to each Pledgor, or
cause to be executed and delivered to each Pledgor, all such proxies, powers of
attorney and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting and/or consensual rights
and powers it is entitled to exercise pursuant to subparagraph (i) above and to
receive the cash dividends it is entitled to receive pursuant to subparagraph
(iii) below; and
     (iii) Subject to the next sentence, each Pledgor shall be entitled to
receive and retain any and all cash dividends, interest, principal and other
amounts paid on the Pledged Securities to the extent and only to the extent that
such cash dividends, interest, principal and other amounts are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Revolving
Credit Agreement, the other Loan Documents and applicable laws. All noncash
dividends, interest, principal and other amounts, and all dividends, interest,
principal and other amounts paid or payable in cash or otherwise in connection
with a partial or total liquidation or dissolution, return of capital, capital
surplus or paid-in surplus, and all other distributions (other than
distributions referred to in the preceding sentence) made on or in respect of
the Pledged Securities, whether paid or payable in cash or otherwise, whether
resulting from a subdivision, combination or reclassification of the outstanding
capital stock of the issuer of any Pledged Securities or re ceived in exchange
for Pledged Securities or any part thereof, or in redemption thereof, or as a
result of any merger, consolidation, acquisition or other exchange of assets to
which such issuer may be a party or otherwise, shall be and become part of the
Securities Collateral, and, if received by any Pledgor, shall be promptly
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement); provided that dividends, interest, principal and other
amounts paid in cash shall be required to be delivered to the Collateral Agent
only after the occurrence and during the continuance of any Event of Default.
          (b) Upon the occurrence and during the continuance of an Event of
Default all rights of any Pledgor to dividends, interest, principal or other
amounts that such Pledgor is authorized to receive pursuant to paragraph
(a)(iii) above shall cease, and all such rights shall thereupon become vested in
the

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Collateral Agent, which shall have the sole and exclusive right and authority to
receive and retain such dividends, interest, principal or other amounts. All
dividends, interest, principal or other amounts received by the Pledgor contrary
to the provisions of this Section 5 shall be received in trust for the benefit
of the Collateral Agent, shall be segregated from other property or funds of
such Pledgor and shall within five (5) Business Days after receipt thereof be
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received by the Collateral Agent pursuant to the provisions of this paragraph
(b) shall be applied in accordance with the provisions of Section 7. The
Collateral Agent shall be under no obligation with respect to the investment of
such cash dividends, interest or principal, including, for the avoidance of
doubt, any requirement to invest such cash dividends, interest or principal in
any class of investment, interest-bearing or otherwise.
          (c) Upon the occurrence and during the continuance of an Event of
Default and following written notice from the Collateral Agent to Pledgor, all
rights of any Pledgor to exercise the voting and consensual rights and powers it
is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the
obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5,
shall cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to exercise
such voting, managerial and consensual rights and powers; provided that any
failure by Collateral Agent to give such written notice to Pledgor shall not
limit or otherwise affect any of Collateral Agent’s rights and remedies
hereunder. After all Events of Default have been cured or waived, such Pledgor
will have the right to exercise the voting and consensual rights and powers that
it would otherwise be entitled to exercise pursuant to the terms of paragraph
(a)(i) above and receive the payments, proceeds, dividends, distributions,
monies, compensation, property, assets, instruments or rights, which it would be
authorized to receive and retain pursuant to the terms of paragraph (a)(iii)
above.
          SECTION 6. Remedies upon Event of Default. Upon the occurrence and
during the continuance of an Event of Default, subject to applicable regulatory
and legal requirements, the Collateral Agent may sell or otherwise dispose of
the Securities Collateral, or any part thereof, at public or private sale or at
any broker’s board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and, to the extent permitted by
applicable law, the Pledgors hereby waive all rights of redemption, stay,
valuation and appraisal any Pledgor now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.
          The Collateral Agent shall give a Pledgor 10 days’ prior written
notice (which each Pledgor agrees is reasonable notice within the meaning of
Section 9-611 of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions (the “UCC”)) of the Collateral
Agent’s intention to make any sale or other disposition of such Pledgor’s
Securities Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker’s board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Securities Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice of such sale. At any such sale, the Securities Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Securities Collateral if it shall deter-

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mine not to do so, regardless of the fact that notice of sale of such Securities
Collateral shall have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Securities Collateral is made on credit or for future delivery, the Securities
Collateral so sold may be retained by the Collateral Agent until the sale price
is paid in full by the purchaser or purchasers thereof, but the Collateral Agent
shall not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Securities Collateral so sold and, in case of
any such failure, such Securities Collateral may be sold again upon like notice.
At any public (or, to the extent permitted by applicable law, private) sale made
pursuant to this Section 6, any Secured Party may bid for or purchase, free from
any right of redemption, stay, valuation or appraisal on the part of any Pledgor
(all said rights being also hereby waived and released), the Securities
Collateral or any part thereof offered for sale and may make payment on account
thereof by using any Obligation then due and payable to such Secured Party from
any Pledgor as a credit against the purchase price, and such Secured Party may,
upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to any Pledgor therefor. For purposes
hereof, (a) a written agreement to purchase the Securities Collateral or any
portion thereof shall be treated as a sale thereof, (b) the Collateral Agent
shall be free to carry out such sale pursuant to such agreement and (c) no
Pledgor shall be entitled to the return of the Securities Collateral or any
portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Collateral Agent may
proceed by a suit or suits at law or in equity to foreclose upon the Securities
Collateral and to sell the Securities Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
          Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as now or hereafter in effect, or any
similar statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called the
“Federal Securities Laws”) and applicable state securities laws, the Collateral
Agent may be compelled, with respect to any sale of all or any part of the
Securities Collateral conducted without prior registration or qualification of
such Securities Collateral under the Federal Securities Laws and/or such state
securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Securities Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges that any such private sale may be at prices and on terms
less favorable than those obtainable through a public sale without such
restrictions (including a public offering made pursuant to a registration
statement under the Federal Securities Laws) and, notwithstanding such
circumstances, each Pledgor agrees that the fact that any such sale is conducted
as a private sale shall not, in and of itself, cause such sale to not be deemed
to have been made in a commercially reasonable manner and that the Collateral
Agent shall have no obligation to engage in public sales and no obligation to
delay the sale of any Securities Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale requiring
registration under the Federal Securities Laws or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
If the Collateral Agent determines to exercise its right to sell any or all of
the Securities Collateral, upon written request, each Pledgor shall and shall
cause each issuer of any Pledged Stock to be sold hereunder, each partnership
and each limited liability company, in each case, which is a Subsidiary of such
Pledgor, from time to time to furnish to the Collateral Agent all such
information as the Collateral Agent may request in order to determine the number
and nature of interest, shares or other instruments included in the Securities
Collateral which may be sold by

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the Collateral Agent in exempt transactions under the Federal Securities Laws
and the rules and regulations of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.
          SECTION 7. Application of Proceeds of Sale. The proceeds of any sale
of Securities Collateral pursuant to Section 6, as well as any Securities
Collateral consisting of cash, shall be applied by the Collateral Agent as
provided in the Security Agreement.
          SECTION 8. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem
reasonably necessary to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest, provided that the Collateral Agent
shall only take any action pursuant to such appointment upon the occurrence and
during the continuation of an Event of Default. Without limiting the generality
of the foregoing, the Collateral Agent shall have the right, upon the occurrence
and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent’s name or in the name of such
Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for
any and all moneys due or to become due under and by virtue of any Securities
Collateral, to endorse checks, drafts, orders and other instruments for the
payment of money payable to the Pledgor representing any interest or dividend or
other distribution payable in respect of the Securities Collateral or any part
thereof or on account thereof and to give full discharge for the same, to
settle, compromise, prosecute or defend any action, claim or proceeding with
respect thereto, and to sell, assign, endorse, pledge, transfer and to make any
agreement respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Securities
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence, willful misconduct or bad faith.
          SECTION 9. Waivers; Amendment. (a)  No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provisions of this Agreement or any other Loan Document or
consent to any departure by any Pledgor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on any Pledgor in any case
shall entitle such Pledgor or any other Pledgor to any other or further notice
or demand in similar or other circumstances.
          (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into in accordance with Section 9.08 of the Revolving Credit Agreement.

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          SECTION 10. Securities Act, etc. In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Federal Securities Laws or
equivalent legislation in any other jurisdiction with respect to any disposition
of the Pledged Securities permitted hereunder. Each Pledgor understands that
compliance with the Federal Securities Laws or equivalent legislation in any
other jurisdiction might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent was to attempt to dispose of all or any
part of the Pledged Securities, and might also limit the extent to which or the
manner in which any subsequent transferee of any Pledged Securities could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Collateral Agent in any attempt to dispose of all or
part of the Pledged Securities under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. Each Pledgor
recognizes that in light of such restrictions and limitations the Collateral
Agent may, with respect to any sale of the Pledged Securities, limit the
purchasers to those who will represent and agree, among other things, to acquire
such Pledged Securities for their own account for investment, and not with a
view to the distribution or resale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and deliver
to the purchaser or purchasers thereof the Securities Collateral so sold. Each
Pledgor acknowledges and agrees that any such sale might result in prices and
other terms less favorable to the seller than if such sale were a public sale
without such restrictions. In the event of any such sale, the Collateral Agent
shall incur no responsibility or liability for selling all or any part of the
Pledged Securities at a price that the Collateral Agent, in its sole and
absolute discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were a public sale or if more than a single purchaser
were approached. The provisions of this Section 10 will apply notwithstanding
the existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.
          SECTION 11. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the reasonable written re quest of the Collateral Agent, use its commercially
reasonable efforts to take or to cause the issuer of such Pledged Securities to
take such action and prepare, distribute, file and/or cause to become effective
such documents as are required or advisable in the reasonable opinion of counsel
for the Collateral Agent to permit the public sale of such Pledged Securities.
Each Pledgor further agrees to indemnify, defend and hold harmless the
Collateral Agent, each other Secured Party, any underwriter and their respective
officers, directors, affiliates and controlling Persons (collectively,
“indemnitees”) from and against all loss, liability, expenses, costs of counsel
(including, without limitation, reasonable fees and out-of-pocket expenses to
the Collateral Agent of legal counsel) and claims (including the reasonable
costs of investigation) that they may incur insofar as such loss, liability,
expense or claim arises out of or is based upon any alleged untrue statement of
a material fact contained in any prospectus (or any amendment or supplement
thereto) or in any notification or offering circular, or arises out of or is
based upon any alleged omission to state a material fact required to be stated
therein or necessary to make the statements in any thereof not misleading,
except insofar as the same may have been caused by any untrue statement or
omission based upon information furnished in writing to such Pledgor or the
issuer of such Pledged Securities by the Collateral Agent or any other Secured
Party expressly for use therein. Each Pledgor further agrees, upon such written
request referred to above, to use its reasonable best efforts to qualify, file
or register, or cause the issuer of such Pledged Securities to qualify, file or
register, any of the Pledged Securities under the Blue Sky or other securities
laws of such states as may be requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations. Each Pledgor will bear all reasonable costs and expenses of
carrying out its obli-

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gations under this Section 11. Each Pledgor acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section 11 and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements contained in this Section 11 may be
specifically enforced.
          SECTION 12. Termination or Release. (a) This Agreement and the
security interests granted hereby (i) shall automatically terminate when all the
Obligations (other than unasserted contingent indemnification obligations not
due and payable) have been paid in full (at which time the Collateral Agent
shall execute and deliver to each Pledgor, at such Pledgor’s expense, all UCC
termination statements or their equivalent in any other jurisdiction and other
documents which such Pledgor shall reasonably request to evidence such
termination) and (ii) shall continue to be effective or shall be reinstated, as
the case may be, if at any time any payment in respect of any Obligation is
rescinded or must otherwise be restored by any Secured Party upon any bankruptcy
or reorganization of any Pledgor or otherwise. Any execution and delivery of
termination statements or documents pursuant to this Section 12(a) shall be
without recourse to or warranty by the Collateral Agent. A Subsidiary Guarantor
shall automatically be released from its obligations hereunder and the Security
Interests in the Collateral of such Subsidiary Guarantor shall be automatically
released in the event that the Equity Interests of such Subsidiary Guarantor
shall be sold, transferred or otherwise disposed of pursuant to a transaction
permitted under the Revolving Credit Agreement to a Person that is not an
Affiliate of Borrower such that such Person is no longer a Restricted Subsidiary
of Borrower.
          (b) Upon any sale or other transfer by any Pledgor of any Securities
Collateral that is permitted under the Revolving Credit Agreement to any Person
that is not a Loan Party, or upon the effectiveness of any written consent to
the release of the security interests granted hereby in any Securities
Collateral pursuant to Section 9.08 of the Revolving Credit Agreement, the
security interests in such Securities Collateral shall be automatically
released.
          (c) In connection with any termination or release pursuant to
paragraph (a) or (b), the Collateral Agent shall execute and deliver to any
Pledgor, at such Pledgor’s expense, all documents, including the certificates
representing the applicable Pledged Securities that have been delivered to the
Collateral Agent or, in the event of any such certificate has been lost,
mutilated or destroyed, an affidavit of lost certificate, that such Pledgor
shall reasonably request to evidence such termination or release. Any execution
and delivery of documents pursuant to this Section 12 shall be without recourse
to or warranty by the Collateral Agent.
          SECTION 13. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Revolving Credit Agreement. All communications
and notices hereunder to any Subsidiary Guarantor shall be given to it c/o the
Borrower at the Borrower’s address as provided in Section 9.01 of the Revolving
Credit Agreement, with a copy to the Borrower.
          SECTION 14. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in writing in connection with the administration and
enforcement of this Agreement or with respect to the Securities Collateral or
any part thereof or in order to assure and confirm unto the Collateral Agent,
its rights and remedies hereunder.

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          SECTION 15. Binding Effect; Several Agreement. This Agreement shall be
binding upon each Pledgor and the Collateral Agent and their respective
successors and permitted assigns, and shall inure to the benefit of each
Pledgor, the Collateral Agent and the other Secured Parties and their respective
permitted successors and assigns, except that no Pledgor shall have the right to
assign or transfer its rights or obligations hereunder or any interest herein or
in the Securities Collateral (and any such assignment or transfer shall be void)
except as permitted by the Revolving Credit Agreement or any other Loan
Document. This Agreement shall be construed as a separate agreement with respect
to each Pledgor and may be amended, modified, supplemented, waived or released
with respect to any Pledgor without the approval of any other Pledgor and
without affecting the obligations of any other Pledgor hereunder.
          SECTION 16. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by any Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans, regardless of any
investigation made by the Secured Parties or on their behalf, and shall continue
in full force and effect until this Agreement shall terminate.
          (b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions. It is understood and agreed among the
parties that this Agreement shall create separate security interests in the
Securities Collateral securing the Obligations as provided in Section 1, and
that any determination by any court with jurisdiction that the security interest
securing any Obligation or class of Obligations is invalid for any reason shall
not in and of itself invalidate the Security Interests securing any other
Obligations hereunder.
          SECTION 17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
          SECTION 18. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute a single contract. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile or other
electronic transmission (e.g., “PDF” or “tif” via e-mail) shall be as effective
as delivery of a manually executed counterpart of this Agreement.
          SECTION 19. Rules of Interpretation. The rules of interpretation
specified in the Revolving Credit Agreement (including Section 1.03 thereof)
shall be applicable to this Agreement. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
          SECTION 20. Jurisdiction; Consent to Service of Process.
          (a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America for the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevoca-

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bly and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other Loan
Documents against any Pledgor or its properties in the courts of any
jurisdiction.
          (b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court referred to in
paragraph (a) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
          (c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.15 of the Revolving
Credit Agreement. Nothing in this Agreement will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
          SECTION 21. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
          SECTION 22. Additional Pledgors. To the extent any Subsidiary shall be
required to become a Pledgor pursuant to any Loan Document, upon execution and
delivery by the Collateral Agent and such Subsidiary of an instrument in the
form of Annex I attached to the Security Agreement, such Subsidiary shall become
a Pledgor hereunder with the same force and effect as if originally named as a
Pledgor herein. The execution and delivery of any such instrument shall not
require the consent of any other Pledgor hereunder. The rights and obligations
of each Pledgor hereunder shall remain in full force and effect notwithstanding
the addition of any new Pledgor as a party to this Agreement.
          SECTION 23. Financing Statements. Each Pledgor hereby irrevocably
authorizes the Collateral Agent at any time and from time to time to file in any
relevant jurisdiction any initial financing statements (including fixture
filings) and amendments thereto that contain the information required by
Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the
filing of any financing statement or amendment relating to the Securities
Collateral, including (i) whether such Pledgor is an organization, the type of
organization and any organizational identification number issued to such
Pledgor, and (ii) any financing or continuation statements or other documents
without the signature of such Pledgor where permitted by law, including the
filing of a financing statement describing the Securities Collateral as “all
personal property of the debtor whether now owned or hereafter acquired”(or
using words of similar import). Each Pledgor agrees to provide all information
described in the immediately preceding sentence to the Collateral Agent promptly
upon written request. Each Pledgor hereby ratifies its authorization for the
Collateral Agent to file in any relevant jurisdiction any financing statements
relating to the Collateral if filed prior to the date hereof.

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          SECTION 24. INTERCREDITOR AGREEMENT GOVERNS. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL
AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, PURSUANT TO THIS AGREEMENT AND
THE EXERCISE OF ANY RIGHT OR REMEDY BY THE COLLATERAL AGENT AND THE OTHER
SECURED PARTIES HEREUNDER ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR
AGREEMENT, AND SHALL HAVE THE RELATIVE PRIORITIES SET FORTH THEREIN. IN THE
EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT AND THIS AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR
AGREEMENT SHALL GOVERN AND CONTROL.
          SECTION 25. Delivery of Collateral. Prior to the Discharge of Term
Loan Obligations, to the extent any Grantor is required hereunder to deliver
Fixed Asset Collateral to the Collateral Agent for purposes of possession and
control and is unable to do so as a result of having previously delivered such
Collateral to any of the Term Loan Agents in accordance with the terms of the
Term Loan Security Documents, such Grantor’s obligations hereunder with respect
to such delivery shall be deemed satisfied by the delivery to such Term Loan
Agents, acting as a gratuitous bailee and/or sub-agent of the Collateral Agent
in accordance with the terms of the Intercreditor Agreement.
          SECTION 26. Conflicts. In the case of any conflict between this
Agreement and the Revolving Credit Agreement, the provisions of the Revolving
Credit Agreement shall govern.
[Signature Pages Follow]

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

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

S-1

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                  BEAMER ROAD MANAGEMENT COMPANY         CPFILMS INC.        
FLEXSYS AMERICA CO.         FLEXSYS AMERICA L.P.              by FLEXSYS AMERICA
CO.,              its general partner         MONCHEM INTERNATIONAL, INC.      
  SOLUTIA BUSINESS ENTERPRISES INC.         SOLUTIA GREATER CHINA, INC.        
SOLUTIA INTER-AMERICA, INC.         SOLUTIA OVERSEAS, INC.         SOLUTIA
SYSTEMS, INC.    
 
           
 
  By:   /s/James A. Tichenor
 
Name: James A. Tichenor    
 
      Title: Authorized Officer    

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

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