<PAGE>

                                                                Exhibit 10.1


                                (euro)200,000,000

                               FACILITY AGREEMENT

                                 dated 26 July 2006

                                       for

                SOLUTIA SERVICES INTERNATIONAL S.C.A./COMM. V.A.

                                   arranged by

                        CITIGROUP GLOBAL MARKETS LIMITED
                                   as Arranger

                                      with

                           CITIBANK INTERNATIONAL PLC
                                 acting as Agent

                                       and

                                 CITIBANK, N.A.
                            acting as Security Agent


                                   LINKLATERS
                                Ref: SBL/CIXT/ALW

<PAGE>

                                    CONTENTS

CLAUSE                                                                      PAGE

                                    SECTION 1
                                 INTERPRETATION

1.     Definitions and interpretation..........................................1

                                    SECTION 2
                                 THE FACILITIES

2.     The Facilities.........................................................28
3.     Purpose................................................................29
4.     Conditions of Utilisation..............................................29

                                    SECTION 3
                                   UTILISATION

5.     Utilisation............................................................31

                                    SECTION 4
                     REPAYMENT, PREPAYMENT AND CANCELLATION

6.     Repayment..............................................................32
7.     Prepayment and cancellation............................................32

                                    SECTION 5
                              COSTS OF UTILISATION

8.     Interest...............................................................40
9.     Interest Periods.......................................................42
10.    Changes to the calculation of interest.................................43
11.    Fees...................................................................44

                                    SECTION 6
                         ADDITIONAL PAYMENT OBLIGATIONS

12.    Tax gross-up and indemnities...........................................45
13.    Increased costs........................................................48
14.    Other indemnities......................................................49
15.    Mitigation by the Lenders..............................................50
16.    Costs and expenses.....................................................51

                                    SECTION 7
                             GUARANTEE AND SECURITY

17.    Guarantee and indemnity................................................52

                                    SECTION 8
               REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

18.    Representations........................................................57
19.    Information undertakings...............................................63
20.    Financial covenants....................................................71
21.    General undertakings...................................................77
22.    Events of Default......................................................84

                                    SECTION 9
                               CHANGES TO PARTIES

23.    Changes to the Lenders.................................................89
24.    Changes to the Obligors................................................93


26 Jul 2006                         - i -
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                                    SECTION 10
                               THE FINANCE PARTIES

25.    Role of the Agent and the Arranger.....................................95
26.    Conduct of business by the Finance Parties............................100
27.    Sharing among the Finance Parties.....................................100

                                   SECTION 11
                                 ADMINISTRATION

28.    Payment mechanics.....................................................102
29.    Set-off...............................................................104
30.    Notices...............................................................104
31.    Calculations and certificates.........................................106
32.    Partial invalidity....................................................106
33.    Remedies and waivers..................................................106
34.    Amendments and waivers................................................107
35.    Counterparts..........................................................108

                                   SECTION 12
                          GOVERNING LAW AND ENFORCEMENT

36.    Governing law.........................................................109
37.    Enforcement...........................................................109



26 Jul 2006                       - ii -
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THIS AGREEMENT is dated 26 July 2006 and made between:

(1)   SOLUTIA EUROPE SA/NV (the "COMPANY");

(2)   SOLUTIA SERVICES INTERNATIONAL S.C.A./COMM V.A. (the "BORROWER");

(3)   THE COMPANIES listed in Part I of Schedule 1 as original guarantors (the
      "ORIGINAL GUARANTORS");

(4)   CITIGROUP   GLOBAL   MARKETS   LIMITED  as  mandated  lead  arranger  (the
      "ARRANGER");

(5)   THE FINANCIAL INSTITUTIONS listed in Part II of Schedule 1 as lenders (the
      "ORIGINAL LENDERS");

(6)   CITIBANK  INTERNATIONAL  PLC as agent of the other  Finance  Parties  (the
      "AGENT"); and

(7)   CITIBANK.  N.A. as security  agent for the Secured  Parties (the "SECURITY
      AGENT").

IT IS AGREED as follows:

                                    SECTION 1
                                 INTERPRETATION

1. DEFINITIONS AND INTERPRETATION

1.1   DEFINITIONS

      In this Agreement:

      "ACCESSION  LETTER" means a document  substantially in the form set out in
      Schedule 6 (Form of Accession Letter).

      "ACCOUNTANTS  REPORT"  means the report by  PricewaterhouseCoopers  in the
      Agreed Form.

      "ACCOUNTING  MONTH" means each period of approximately  thirty days ending
      on the  last  day of each  calendar  month  in any  financial  year of the
      Company.

      "ACCOUNTING  QUARTER" means each period of three Accounting  Months ending
      on or about 31  March,  30  June,  30  September  and 31  December  in any
      financial year of the Company.

      "ADDITIONAL  COST  RATE"  has  the  meaning  given  to  it in  Schedule  4
      (Mandatory Cost formulae).

      "ADDITIONAL DEBT" means, in relation to any Intercompany  Debt, any money,
      debt or liability due, owing or incurred under or in connection with:

      (a)   any refinancing, deferral or extension of that Intercompany Debt;

      (b)   any further advance which may be made under any document,  agreement
            or instrument supplemental to any relevant Finance Document together
            with any related interest, fees and costs;

      (c)   any claim for damages or  restitution  in the event of rescission of
            the  Intercompany  Debt or otherwise in connection with any relevant
            Finance Document;

      (d)   any claim  against  any  Obligor  flowing  from any  recovery  by an
            Obligor or any liquidator, receiver,  administrator,  administrative
            receiver, compulsory manager or other similar


                                    - 1 -
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            officer of a payment or discharge in respect of that Intercompany
            Debt on the grounds of preference or otherwise; and

      (e)   any  amount  (such  as post  insolvency  interest)  which  would  be
            included in any of the above but for any discharge, non provability,
            unenforceability  or non  allowability of the same in any insolvency
            or other proceedings.

      "ADDITIONAL  GUARANTOR"  means  a  company  which  becomes  an  Additional
      Guarantor  in  accordance   with  Clause  24  (Changes  to  the  Obligors)
      (excluding for the avoidance of doubt any Original Guarantor).

      "AFFILIATE"  means, in relation to any person, a Subsidiary of that person
      or a  Holding  Company  of that  person or any  other  Subsidiary  of that
      Holding Company.

      "AGREED FORM" means, in relation to a document, that:

      (a)   it is in a form  initialled  by or on behalf of the  Company and the
            Agent on or before the signing of this Agreement for the purposes of
            identification; or

      (b)   if not  falling  within  paragraph  (a)  above,  it is in  form  and
            substance  satisfactory  to the Agent  (acting  reasonably)  and, in
            relation  to  any  document  which  is not a  documentary  condition
            precedent  falling within Clause 4.1,  initialled by or on behalf of
            the Agent for the  purposes of  identification,  or in relation to a
            documentary  condition  precedent  falling within Clause 4.1, notice
            has been given by the Agent thereunder.

      "AMCIS"  means  Carbogen  Amcis AG (formerly  Amcis AG),  incorporated  in
      Switzerland with registered number CH-280.3.916.120-1 and whose registered
      office is at Hauptstrasse 159, 4416 Bubendorf, Switzerland as such company
      exists at the date of this Agreement.

      "APPLICABLE  ACCOUNTING PRINCIPLES" means GAAP and practices and financial
      reference periods used in the Original Financial Statements.

      "AUTHORISATION"  means an authorisation,  consent,  approval,  resolution,
      licence, exemption, filing, notarisation or registration.

      "AVAILABLE  COMMITMENT"  means,  in  relation  to a  Facility,  a Lender's
      Commitment under that Facility minus:

      (a)   the  amount of its  participation  in any  outstanding  Utilisations
            under that Facility; and

      (b)   in  relation  to  any  proposed  Utilisation,   the  amount  of  its
            participation in any Utilisations that are due to be made under that
            Facility on or before the proposed Utilisation Date.

      "AVAILABLE  FACILITY" means, in relation to a Facility,  the aggregate for
      the time being of each  Lender's  Available  Commitment in respect of that
      Facility.

      "AVAILABILITY PERIOD" means the period from and including the date of this
      Agreement to and including 31 August 2006.

      "BANKRUPTCY  EMERGENCE"  means  the time at which any  direct or  indirect
      shareholders  of the  Company  who are or become  subject  to  proceedings
      pursuant  to Title 11 of the United  States Code (the  "Bankruptcy  Code")
      emerge from such  proceedings  (whether by the occurrence of the effective
      date of a chapter 11 plan of reorganisation, the dismissal of a case under
      chapter 7 or


                                    - 2 -
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      chapter  11 of the  Bankruptcy  Code,  or  otherwise)  and  are no  longer
      required to seek  bankruptcy  court approval for actions taken outside the
      ordinary course of business.

      "BREAK COSTS" means the amount (if any) by which:

      (a)   the interest  (excluding  the Margin and  Mandatory  Costs (if any))
            which a Lender  should have received for the period from the date of
            receipt of all or any part of its  participation in a Loan or Unpaid
            Sum to the last day of the  current  Interest  Period in  respect of
            that Loan or Unpaid  Sum,  had the  principal  amount or Unpaid  Sum
            received been paid on the last day of that Interest Period;

      exceeds:

      (b)   the amount  which that Lender  would be able to obtain by placing an
            amount equal to the principal amount or Unpaid Sum received by it on
            deposit with a leading bank in the Relevant  Interbank  Market for a
            period  starting on the Business Day  following  receipt or recovery
            and ending on the last day of the current Interest Period.

      "BUDGET"  means  the  Business  Plan and each  budget  supplied  under and
      complying with Clause 19.6 (Annual Budget).

      "BUSINESS  DAY"  means a day (other  than a  Saturday  or Sunday) on which
      banks are open for  general  business in London,  Brussels  and which is a
      TARGET Day.

      "BUSINESS  PLAN" means the business plan in relation to the Group prepared
      by the Company and in the Agreed Form.

      "CAPITAL  EXPENDITURE"  means any  expenditure  which should in accordance
      with  the   Applicable   Accounting   Principles  be  treated  as  capital
      expenditure in the audited consolidated financial statements of the Group.

      "CASH" means any credit balance on any deposit,  savings, current or other
      account, and any cash in hand, which is:

      (a)   freely withdrawable on demand;

      (b)   not subject to any  Security  (other than  pursuant to any  Security
            Document);

      (c)   denominated  and  payable  in any  freely  transferable  and  freely
            convertible currency; and

      (d)   capable of being remitted to an Obligor.

      "CASH EQUIVALENT INVESTMENTS" means:

      (a)   securities  with a maturity  of less than 12 Months from the date of
            acquisition  issued  or fully  guaranteed  or fully  insured  by the
            Government  of the United States or any member state of the European
            Union;

      (b)   commercial paper or other debt securities  issued by an issuer rated
            at least A-1 by  Standard & Poor's  Ratings  Group or P-1 by Moody's
            Investors   Service,   Inc.   or  a   comparable   rating   from  an
            internationally recognised rating agency and with a maturity of less
            than 12 Months; and

      (c)   any  other  instrument,  security  or  investment  approved  by  the
            Majority Lenders; or


                                    - 3 -
<PAGE>

      (d)   certificates  of deposit or time  deposits  of any  commercial  bank
            (which has  outstanding  debt  securities  rated as  referred  to in
            paragraph (b) above) and with a maturity of less than 12 Months,

      (e)   repurchase  agreements  having  maturities  of not more than 90 days
            from the date of acquisition which are entered into with major money
            centre banks which are members of the Federal Reserve System;

      (f)   money market accounts  maintained with mutual funds having assets in
            excess of USD$2,500,000,000;

      (g)   tax exempt  securities  rated A or better by Moody's or A+ or better
            by Standard & Poor's; or

      (h)   readily  marketable  direct  obligations  issued by any state of the
            United States of America or any political subdivision thereof having
            one of the two  highest  rating  categories  obtainable  from either
            Moody's or Standard & Poor's,

      in each case not  subject to any  Security or Quasi  Security  (other than
      pursuant to any Security Document),  denominated and payable in any freely
      transferable and freely convertible currency and the proceeds of which are
      capable of being remitted to an Obligor.

      "CASH  FLOW"  has  the  meaning  given  to  it  in  Clause  20  (Financial
      covenants).

      "CHANGE OF CONTROL" has the meaning given to it in Clause 8.5  (Adjustment
      of Margin).

      "CHARGED  ASSETS" means the assets over which  Security is expressed to be
      created pursuant to any Security Document.

      "CHARGOR" means any person  expressed to create  Security  pursuant to any
      Security Document.

      "CLOSING DATE" means the date falling one Business Day  immediately  after
      the first Utilisation.

      "COMMITMENT" means a Facility B1 Commitment or a Facility B2 Commitment.

      "COMMITMENT  LETTER" means the commitment  letter attaching the term sheet
      dated on or about 8 June 2006  between  the  Borrower,  the  Company,  the
      Arranger and the Agent.

      "COMPLIANCE CERTIFICATE" means a certificate substantially in the form set
      out in Schedule 7 (Form of Compliance Certificate).

      "CONFIDENTIALITY   UNDERTAKING"   means  a   confidentiality   undertaking
      substantially  in the form agreed  between the Company and the Arranger on
      or prior to the date of this Agreement or in any other form agreed between
      the Company and the Agent.

      "CURE  AMOUNT" has the meaning  given to it in Clause  20.3(e)  (Financial
      covenant calculations).

      "DEBT  SERVICE"  has the  meaning  given  to it in  Clause  20  (Financial
      covenants).

      "DEFAULT" means an Event of Default or any event or circumstance specified
      in Clause 22 (Events of Default)  which would (with the lapse of time, the
      giving of  notice,  the  making  of any  determination  under the  Finance
      Documents  or any  combination  of any of the  foregoing)  be an  Event of
      Default.

      "DISRUPTION EVENT" means either or both of:


                                    - 4 -
<PAGE>

      (a)   a material disruption to those payment or communications  systems or
            to those  financial  markets  which are,  in each case,  required to
            operate  in order for  payments  to be made in  connection  with the
            Facilities (or otherwise in order for the transactions  contemplated
            by the Finance  Documents to be carried out) which disruption is not
            caused by, and is beyond the control of, any of the Parties; or

      (b)   the  occurrence of any other event which results in a disruption (of
            a technical or  systems-related  nature) to the treasury or payments
            operations of a Party preventing that, or any other Party:

            (i)   from  performing  its  payment  obligations  under the Finance
                  Documents; or

            (ii)  from  communicating  with other Parties in accordance with the
                  terms of the Finance Documents,

      and which (in  either  such  case) is not  caused  by,  and is beyond  the
      control of, the Party whose operations are disrupted.

      "DIP FINANCING" means the facility agreement dated 16 January 2004 between
      Solutia Inc.,  Solutia  Business  Enterprises,  Inc.,  each  Guarantor (as
      defined  therein),  the DIP Lenders and Citicorp  USA,  Inc. as collateral
      agent,  administrative  agent and documentation agent as amended from time
      to time.

      "DIP LENDER" means a lender under the DIP Financing.

      "DUE  DILIGENCE  REPORT" means the legal due  diligence  report by Allen &
      Overy LLP in the Agreed Form.

      "EBITDA" has the meaning given to it in Clause 20 (Financial covenants).

      "ENVIRONMENT"  means living organisms  including the ecological systems of
      which they form part and the following media:

      (a)   air (including air within  natural or man-made  structures,  whether
            above or below ground);

      (b)   water (including territorial, coastal and inland waters, water under
            or within land and water in drains and sewers); and

      (c)   land (including land under water).

      "ENVIRONMENTAL  LAW"  means  all  laws  and  regulations  of any  relevant
      jurisdiction which:

      (a)   have as a purpose or effect the protection of, and/or  prevention of
            harm or damage to, the Environment;

      (b)   provide   remedies  or  compensation  for  harm  or  damage  to  the
            Environment; or

      (c)   relate to Hazardous Substances or health and safety matters.

      "ENVIRONMENTAL LICENCE" means any Authorisation required at any time under
      Environmental Law.

      "ENVIRONMENTAL   REPORT"  means  the  report  by   Environment   Resources
      Management in the Agreed Form.


                                      - 5 -
<PAGE>

      "ESCROW  AGREEMENT"  means the escrow agreement dated on or about the date
      of  this  Agreement  between,  among  others,  KBC  Bank  NV/SA,  Citibank
      International  plc,  Citibank  N.A., the Borrower,  the Company,  Carbogen
      Amcis AG and CP Films Vertriebs GmBH.

      "EURIBOR" means:

      (a)   the applicable Screen Rate; or

      (b)   (if no Screen  Rate is  available  for the  Interest  Period of that
            Loan),  the rate quoted by the Reference Bank or the arithmetic mean
            of the rates rounded upwards to four decimal places if there is more
            than one  Reference  Bank as  supplied  to the Agent at its  request
            quoted by the  Reference  Bank(s) to leading  banks in the  European
            interbank market,

      as of the Specified Time on the Quotation Day for the offering of deposits
      in euro for a period  comparable  to the  Interest  Period of the relevant
      Loan.

      "EURO NOTES" means the (euro)200,000,000 10% senior secured notes due 2008
      issued by the Company.

      "EVENT OF DEFAULT"  means any event or  circumstance  specified as such in
      Clause 22 (Events of Default).

      "EXCESS CASH FLOW" means, for any financial year of the Company, Cash Flow
      for that financial year, less:

      (a)   Debt Service for that financial year;

      (b)   prepayments  of any Loans in that  financial  year under Clause 7.11
            (Voluntary prepayment of Loans);

      (c)   any amount  included in Cash Flow for the Relevant  Period which the
            Company  is  permitted   to  retain  under  Clause  7.5   (Mandatory
            prepayment - Net Sale Proceeds); and

      (d)   the  amount  of  unspent  Capital  Expenditure  during  the  current
            financial  year  which is  permitted  to be  carried  forward to the
            following financial year under Clause 20.2 (Capital Expenditure).

      "EXCLUDED COMPANY" means:

      (a)   subject to paragraph (b) below, Flexsys and Amcis;

      (b)   Amcis will, from the date falling 65 days after the Closing Date, be
            included  as a member of the Group for all  purposes  (and  excluded
            from this definition) if it has not been sold to a third party buyer
            by way of share sale on arms' length terms on or before such date.

      "FACILITY" means Facility B1 or Facility B2.

      "FACILITY  B1" means the term loan  facility  made  available  under  this
      Agreement as described in paragraph (a) of Clause 2.1 (The Facilities).

      "FACILITY B1 COMMITMENT" means:

      (a)   in relation to an Original  Lender,  the amount in euro set opposite
            its name under the heading  "Facility B1  Commitment"  in Part II of
            Schedule  1 (The  Original  Lenders)  and the  amount  of any  other
            Facility B1 Commitment transferred to it under this Agreement;


                                      - 6 -
<PAGE>

      and

      (b)   in relation to any other Lender,  the amount in euro of any Facility
            B1 Commitment transferred to it under this Agreement,

      to the  extent not  cancelled,  reduced  or  transferred  by it under this
      Agreement.

      "FACILITY B1 LENDER" means:

      (a)   any Original Facility B1 Lender; and

      (b)   any bank, financial  institution,  trust, fund or other entity which
            has  become a  Facility  B1  Lender  in  accordance  with  Clause 23
            (Changes to the Lenders),

      which in each case has not ceased to be a Facility B1 Lender in accordance
      with this Agreement.

      "FACILITY  B1 LOAN"  means a loan made or to be made under  Facility B1 or
      the principal amount outstanding for the time being of that loan.

      "FACILITY  B2" means the term loan  facility  made  available  under  this
      Agreement as described in paragraph (b) of Clause 2.1 (The Facilities).

      "FACILITY B2 COMMITMENT" means:

      (a)   in relation to an Original  Lender,  the amount in euro set opposite
            its name under the heading  "Facility B2  Commitment"  in Part II of
            Schedule  1 (The  Original  Lenders)  and the  amount  of any  other
            Facility B2 Commitment transferred to it under this Agreement; and

      (b)   in relation to any other Lender,  the amount in euro of any Facility
            B2 Commitment transferred to it under this Agreement,

      to the  extent not  cancelled,  reduced  or  transferred  by it under this
      Agreement.

      "FACILITY B2 LENDER" means:

      (a)   any Original Facility B2 Lender; and

      (b)   any bank, financial  institution,  trust, fund or other entity which
            has  become a  Facility  B2  Lender  in  accordance  with  Clause 23
            (Changes to the Lenders),

      which in each case has not ceased to be a Facility B2 Lender in accordance
      with the terms of this Agreement.

      "FACILITY  B2 LOAN"  means a loan made or to be made under  Facility B2 or
      the principal amount outstanding for the time being of that loan.

      "FACILITY  OFFICE" means the office or offices notified by a Lender to the
      Agent in writing on or before the date it becomes a Lender (or,  following
      that date,  by not less than five Business  Days'  written  notice) as the
      office or offices through which it will perform its obligations under this
      Agreement.

      "FEE  LETTER"  means any letter or  letters  dated on or about the date of
      this Agreement  between,  as the case may be, the Arranger and the Company
      and/or the Borrower; or the Agent and the


                                      - 7 -
<PAGE>

      Company and/or the Borrower;  or the Security Agent and the Company and/or
      the Borrower; setting out any of the fees referred to in Clause 11 (Fees).

      "FINANCE  DOCUMENT"  means this  Agreement,  each  Accession  Letter,  the
      Commitment  Letter,  each Fee Letter,  any Hedging  Document,  the Hedging
      Letter, the Intercreditor  Agreement,  each Security Document,  the Escrow
      Agreement and any other  document  designated as such by the Agent and the
      Company.

      "FINANCE  PARTY" means the Agent,  the Arranger,  a Lender or the Security
      Agent.

      "FINANCIAL INDEBTEDNESS" means any indebtedness for or in respect of:

      (a)   moneys borrowed;

      (b)   any amount raised by acceptance under any acceptance credit facility
            or dematerialised equivalent;

      (c)   any amount  raised  pursuant  to any note  purchase  facility or the
            issue of bonds,  notes,  debentures,  loan stock or any similar debt
            instrument;

      (d)   the amount of any liability in respect of any lease or hire purchase
            contract which would, in accordance  with the Applicable  Accounting
            Principles, be treated as a finance or capital lease;

      (e)   receivables  sold or discounted  (other than any  receivables to the
            extent they are sold on a non-recourse basis and for these purposes,
            recourse will not include contractual damages for breach of warranty
            relating to the condition of the receivables sold);

      (f)   any amount raised under any other transaction (including any forward
            sale or  purchase  agreement)  having  the  commercial  effect  of a
            borrowing;

      (g)   any  derivative   transaction   entered  into  in  connection   with
            protection  against or benefit from fluctuation in any rate or price
            (and, when calculating the value of any derivative transaction, only
            the  marked to market  value  shall be taken into  account)  for all
            purposes other than for the purposes of Clause 22.5 (Cross  default)
            where only the relevant  unpaid  amount (if any) shall be taken into
            account;

      (h)   any   counter-indemnity   obligation  in  respect  of  a  guarantee,
            indemnity,  bond,  standby  or  documentary  letter of credit or any
            other instrument issued by a bank or financial institution;

      (i)   the amount of any  liability  in respect of any credit for goods and
            services  supplied  to the Group  raised in the  ordinary  course of
            trade outstanding for more than 150 days after its customary date of
            payment; and

      (j)   the amount of any  liability in respect of any  guarantee for any of
            the items referred to in paragraphs (a) to (i) above.

      "FLEXSYS"  means Flexsys  Holding BV whose address is 51010  Zutphenseweg,
      NL-7418 AJ Deventer,  The  Netherlands,  and whose  company  number at the
      Commercial Register is 38023104.


                                      - 8 -
<PAGE>

      "FUNDS FLOW MEMORANDUM" means the funds flow memorandum in the Agreed Form
      containing details of the flow of funds on the Closing Date.

      "GAAP" means principles, standards and practices in the United States.

      "GERMAN OBLIGOR" means an Obligor  incorporated in the Federal Republic of
      Germany.

      "GROUP"  means the Company and its  Subsidiaries  other than any  Excluded
      Company or Non-Recourse  Subsidiary for the time being.  For the avoidance
      of doubt, Flexsys does not fall with this definition.

      "GROUP  STRUCTURE  CHART"  means the group  structure  chart in the Agreed
      Form.

      "GUARANTOR" means an Original Guarantor or an Additional Guarantor.

      "HAZARDOUS  SUBSTANCE"  means any waste,  pollutant,  contaminant or other
      substance  (including  any liquid,  solid,  gas, ion,  living  organism or
      noise)  that  may  be  harmful  to  human  health  or  other  life  or the
      Environment  or a  nuisance  to any  person  or that  may  make the use or
      ownership of any affected land or property more costly.

      "HEDGING  BANK"  means a Lender (or an  Affiliate  of a Lender)  which has
      become  a  party  to the  Intercreditor  Agreement  as a  Hedging  Bank in
      accordance with the Intercreditor Agreement.

      "HEDGING  DOCUMENTS" means the documents  entered into between a member of
      the Group and a Hedging Bank for the purpose of  implementing  the hedging
      strategy required by the Hedging Letter.

      "HEDGING  LETTER"  means a  letter  dated  on or  about  the  date of this
      Agreement  between the  Arranger  and the Company  setting out the hedging
      strategy agreed in relation to the Facilities.

      "HOLDING  ACCOUNT" means the interest bearing account of the Borrower with
      Citibank N.A. with number 11648292.

      "HOLDING  COMPANY" means,  in relation to a company,  corporation or other
      legal  entity,  any other  company,  corporation  or other legal entity in
      respect of which it is a Subsidiary.

      "INCREASED  COSTS" has the meaning  given to it in Clause 13.1  (Increased
      Costs).

      "INFORMATION  MEMORANDUM"  means the document in the form  approved by the
      Company  concerning the Group which,  at the Company's  request and on its
      behalf, will be prepared in relation to Syndication and distributed by the
      Arranger to selected financial institutions.

      "INFORMATION PACKAGE" means the Budget, the Business Plan, the Reports and
      the Information Memorandum.

      "INSURANCE  PROCEEDS" has the meaning given to it in Clause 7.6 (Mandatory
      prepayment - Insurance Proceeds).

      "INTELLECTUAL PROPERTY" means all trade marks, service marks, trade names,
      domain  names,  logos,  get-up,   patents,   inventions,   registered  and
      unregistered  design  rights,  copyrights,   topography  rights,  database
      rights,  rights  in  confidential   information  and  know-how,   and  any
      associated or similar rights anywhere in the world, which it now or in the
      future owns or (to the extent of its  interest)  in which it now or in the
      future has an interest (in each case whether


                                      - 9 -
<PAGE>

      registered  or  unregistered   and  including  any  related  licences  and
      sub-licences of the same granted by it or to it,  applications  and rights
      to apply for the same).

      "INTERCOMPANY  DEBT"  means  all  present  and  future  moneys,  debts and
      liabilities  due,  owing or  incurred  by any  Intercompany  Borrower  (as
      defined in the  Intercreditor  Agreement) to any  Intercompany  Lender (as
      defined in the  Intercreditor  Agreement) (in each case,  whether alone or
      jointly, or jointly and severally, with any other person, whether actually
      or contingently  and whether as principal,  surety or otherwise)  together
      with any related Additional Debt.

      "INTERCREDITOR  AGREEMENT" means the intercreditor  agreement entered into
      or to be entered into between the Agent,  the Security Agent,  the Hedging
      Banks and the Obligors in the Agreed Form.

      "INTEREST  PERIOD" means, in relation to a Loan, each period determined in
      accordance with Clause 9 (Interest  Periods) and, in relation to an Unpaid
      Sum,  each  period  determined  in  accordance  with  Clause 8.3  (Default
      interest).

      "JOINT  VENTURE"  means  any joint  venture  entity,  whether  a  company,
      unincorporated firm, undertaking, joint venture, association,  partnership
      or any other entity.

      "LENDER" means a Facility B1 Lender or a Facility B2 Lender.

      "LIABILITIES" of a Chargor means all present and future moneys,  debts and
      liabilities  due, owing or incurred by it to any Secured Party under or in
      connection  with any  Secured  Document  (in each case,  whether  alone or
      jointly, or jointly and severally, with any other person, whether actually
      or contingently and whether as principal, surety or otherwise).

      "LOAN" means a Facility B1 Loan or a Facility B2 Loan.

      "MAJORITY LENDERS" means, at any time, a Lender or Lenders:

      (a)   whose share in the outstanding  Loans and whose undrawn  Commitments
            then aggregate more than 66.67 per cent. of the aggregate of all the
            outstanding Loans and the undrawn Commitments of all the Lenders;

      (b)   if there is no Loan then outstanding, whose undrawn Commitments then
            aggregate more than 66.67 per cent. of the Total Commitments; or

      (c)   if there is no Loan then outstanding and the Total  Commitments have
            been reduced to zero, whose  Commitments  aggregated more than 66.67
            per cent. of the Total Commitments immediately before the reduction.

      "MANDATORY  COST" means the  percentage  rate per annum  calculated by the
      Agent in accordance with Schedule 4 (Mandatory Cost formulae).

      "MARGIN"  means  2.75  per  cent.  per  annum  subject  to  adjustment  in
      accordance with Clause 8.5 (Adjustment of Margin).

      "MARGIN  ADJUSTMENT  DATE"  has the  meaning  given  to it in  Clause  8.5
      (Adjustment of Margin).

      "MARKET REPORT" means the report by CRA  International  Inc. in the Agreed
      Form.

      "MASTER OPERATING  AGREEMENT" means the master operating agreement entered
      into between Monsanto Company and Solutia,  Inc. dated 1 September 1997 as
      amended  from  time to time as  described  in  further  detail  in the Due
      Diligence Report.


                                     - 10 -
<PAGE>

      "MATERIAL  ADVERSE EFFECT" means a material  adverse effect on or material
      adverse change in:

      (a)   ability of the Obligors, taken as a whole to perform and comply with
            their payment obligations under any Finance Document; or

      (b)   the ability of any Obligor to perform and comply with the  financial
            covenants under the Facility Agreement; or

      (c)   the validity, legality or enforceability of any Finance Document.

      "MATERIAL SUBSIDIARY" means:

      (a)   a  Subsidiary  of the  Company  listed  in  the  lists  of  Material
            Subsidiaries  provided  to  the  Agent  under  Clause  4.1  (Initial
            conditions precedent);

      (b)   a Subsidiary of the Company, the total assets, EBITDA or total
            revenues of which (unconsolidated where that Subsidiary itself has
            Subsidiaries) as at the date at which its latest audited financial
            statements were prepared or, as the case may be, for the financial
            period to which those financial statements relate account for 5 per
            cent. or more of the consolidated total assets, EBITDA or total
            revenues of the Group (including for these purposes any Excluded
            Company) (all as calculated by reference to the latest audited
            consolidated financial statements of the Group);

      (c)   a  Subsidiary  of the  Company  which is a  Holding  Company  of any
            Subsidiary in paragraph (b) above; or

      (d)   a  Subsidiary  of the  Company  to  which  it has  been  transferred
            (whether  in a  single  transaction  or  a  series  of  transactions
            (whether  related or not)) the whole or  substantially  the whole of
            the  assets  of  a  Subsidiary  which   immediately  prior  to  such
            transaction(s) was a Material Subsidiary.

      For the purposes of this definition:

      (i)   if a Subsidiary  becomes a Material  Subsidiary  under paragraph (c)
            above,  the Material  Subsidiary by which the relevant  transfer was
            made shall,  subject to paragraph (b) above,  cease to be a Material
            Subsidiary; and

      (ii)  if a  Subsidiary  is acquired  by the  Company  after the end of the
            financial period to which the latest audited consolidated  financial
            statements of the Group relate,  those financial statements shall be
            adjusted as if that  Subsidiary  had been shown in them by reference
            to its  then  latest  audited  financial  statements  until  audited
            consolidated  financial  statements  of the Group for the  financial
            period in which the acquisition is made have been prepared.

      "MONTH" means a period  starting on one day in a calendar month and ending
      on the numerically  corresponding  day in the next calendar month,  except
      that:

      (a)   if the  numerically  corresponding  day is not a Business  Day, that
            period shall end on the next Business Day in that calendar  month in
            which that  period is to end if there is one, or if there is not, on
            the immediately preceding Business Day; and


                                     - 11 -
<PAGE>

      (b)   if there is no numerically  corresponding  day in the calendar month
            in which that period is to end,  that  period  shall end on the last
            Business Day in that calendar month.

      The above rules will only apply to the last Month of any period.

      "NON-CONSENTING  LENDER"  has  the  meaning  given  to it in  Clause  7.13
      (Replacement of a Non-Consenting Lender or Non-Funding Lender).

      "NON-FUNDING   LENDER"  has  the  meaning  given  to  it  in  Clause  7.13
      (Replacement of a Non-Consenting Lender or Non-Funding Lender).

      "NON-RECOURSE  SUBSIDIARY"  means a  Subsidiary  of the  Company  which is
      designated  in  writing  by  the  Company  to  the  Facility  Agent  as  a
      Non-Recourse Subsidiary and:

      (a)   is a single  purpose  company  whose  sole  business  comprises  the
            ownership,  creation,  development or exploitation of certain of its
            assets; and

      (b)   the  share  capital  or  other  ownership  interests  of  which are
            organised  such  that  liability  for  all  financial  and  other
            obligations  of  that subsidiary are limited to that subsidiary and
            its assets and without any further recourse (including the absence
            of  financial  support, comfort  or  other assistance obligations),
            whether as a  matter of law, regulation, contract or otherwise, to
            any other member of the Group other than (i) recourse falling within
            paragraph (q) of the definition of Permitted Security (ii) recourse
            falling  within  paragraph  (n)  of  the  definition  of Permitted
            Guarantee  or  any  (iii)  obligations  arising  under a commercial
            contract  otherwise  permitted  by  the  terms  of  this Agreement.

      "OBLIGOR" means the Company, the Borrower or a Guarantor.

      "ORIGINAL FACILITY B1 LENDER" means a Lender listed in Part II of Schedule
      1 (The Original Lenders) as having a Facility B1 Commitment.

      "ORIGINAL FACILITY B2 LENDER" means a Lender listed in Part II of Schedule
      1 (The Original Lenders) as having a Facility B2 Commitment.

      "ORIGINAL FINANCIAL STATEMENTS" means the unaudited consolidated financial
      statements of the Group for the financial  year ended  December 2005 filed
      by Solutia Inc. with the United States Securities and Exchange  Commission
      on a Form 8-K on 19 April  2006,  together  with such  statements  for the
      period  January to March 2006 filed by Solutia Inc. with the United States
      Securities and Exchange Commission on a Form 8-K on 30 May 2006.

      "ORIGINAL OBLIGOR" means the Borrower or an Original Guarantor.

      "PARTICIPATING  MEMBER  STATE"  means  any  member  state of the  European
      Communities  that adopts or has adopted the euro as its lawful currency in
      accordance with legislation of the European Community relating to Economic
      and Monetary Union.

      "PARTY" means a party to this Agreement.

      "PERFECTION   REQUIREMENTS"   means   the   making   of  the   appropriate
      registrations,  filings or  notifications  of the  Security  Documents  as
      specifically contemplated by the Security Principles.

      "PERFECTION  REQUIREMENTS LIST" means the list of Perfection  Requirements
      set out in paragraph 2(e) of part 1 of Schedule 2 of this Agreement.


                                     - 12 -
<PAGE>

      "PERMITTED ACQUISITION" means:

      (a)   the  acquisition  of, or investment in, any share or interest in any
            Permitted Non-Recourse Subsidiary;

      (b)   the acquisition by a member of the Group of any share or asset sold,
            leased,  transferred  or otherwise  disposed of by another member of
            the  Group  in  circumstances   constituting  a  Permitted  Disposal
            provided that the Security Agent,  acting  reasonably,  is satisfied
            that the Finance Parties will enjoy the same or equivalent  Security
            following completion of that acquisition;

      (c)   an  acquisition  by way of merger on a solvent  basis of any Obligor
            with any other  Obligor  provided  that the Security  Agent,  acting
            reasonably,  is  satisfied  that the Finance  parties will enjoy the
            same  or   equivalent   Security   following   completion   of  that
            acquisition; or

      (d)   acquisitions or investments where the consideration (when aggregated
            with the  consideration for each other acquisition or investment not
            otherwise  permitted  under  paragraph  (a) to (c)  above)  does not
            exceed (euro)5,000,000 in any financial year of the Group.

      "PERMITTED DISPOSAL" means the sale, lease,  transfer or other disposal(s)
      in each case on arms' length terms,  and, in the case of paragraphs (n) to
      (p),   provided  that  the  Facility  Agent  has  received  in  writing  a
      certification  of  the  directors  of  the  disposing   company  that  any
      apportionment  of disposal  proceeds  has been carried out on a fair value
      basis:

      (a)   by any member of the Group in the ordinary course of business of the
            disposing entity;

      (b)   as a result of any Permitted Security;

      (c)   of assets to a Permitted Non-Recourse Subsidiary at a price not less
            than full market value;

      (d)   of obsolete or redundant vehicles, plant and equipment and which, in
            the  reasonable  opinion of the member of the Group making the sale,
            transfer or disposal,  are not required for the efficient  operation
            of its business;

      (e)   of assets in exchange for other assets  comparable or superior as to
            type, value and quality;

      (f)   of assets by a Obligor to another  member of the Group provided that
            the Secured Parties will enjoy the same or equivalent  Security over
            those assets;

      (g)   of  assets  by a member  of the  Group  which is not an  Obligor  to
            another member of the Group which is not an Obligor;

      (h)   to another member of the Group as part of a Permitted Merger;

      (i)   made with the prior written consent of the Majority Lenders;

      (j)   of Cash for purposes not otherwise prohibited by this Agreement;

      (k)   pursuant to a Permitted Sale and Leaseback;


                                     - 13 -
<PAGE>

      (l)   of all or any part of the shares in or assets of CP Films  Vertriebs
            GmbH,   provided   that  the  Agent  has   received   in  writing  a
            certification of the directors of Solutia Europe S.A./N.V.  that all
            or any part of the  shares in or assets of CP Films  Vertriebs  GmbH
            have been disposed of at fair market value at the time of conclusion
            of a legally binding contract in respect of the disposal of CP Films
            Vertriebs GmbH;

      (m)   of Amcis;

      (n)   of  the  company   referred  to  in  paragraph  (a)  of  Schedule  8
            (Disposals);

      (o)   of  the  assets   referred  to  in  paragraph   (b)  of  Schedule  8
            (Disposals);

      (p)   of  the  assets   referred  to  in  paragraph   (c)  of  Schedule  8
            (Disposals); or

      (q)   of Cash Equivalent Investments:

            (i) for Cash; or

            (ii) in exchange for other Cash Equivalent Investments;

      (r) pursuant to any Permitted Merger;

      (w)   where the higher of the market  value and  consideration  receivable
            (when  aggregated  with  the  higher  of  the  market  value  and/or
            consideration  (as the case may be)  receivable  for any other sale,
            lease,  transfer or other  disposal,  other than any permitted under
            paragraphs (a) to (r) above,  does not exceed  (euro)15,000,000  (or
            its equivalent in another currency or currencies).

      "PERMITTED FINANCIAL INDEBTEDNESS" means:

      (a)   any Financial Indebtedness arising under any Finance Document;

      (b)   any  Financial  Indebtedness  arising  under a  Permitted  Loan or a
            Permitted Guarantee;

      (c)   any  Financial   Indebtedness  arising  under  a  Permitted  Hedging
            Transaction;

      (d)   any  Financial  Indebtedness  incurred by a  Permitted  Non-Recourse
            Subsidiary; and

      (e)   any  Financial  Indebtedness  under  finance  or  capital  leases of
            vehicles, plant, equipment or computers, where the aggregate capital
            value of all the items so leased by  members  of the Group  does not
            exceed (euro)2,500,000 or its equivalent at any time;

      (f)   any  Financial  Indebtedness  expressly  permitted  by the  Majority
            Lenders;

      (g)   any  Financial  Indebtedness  arising  under a  Permitted  Sale  and
            Leaseback;

      (h)   any Financial  Indebtedness arising from factoring  receivables on a
            recourse  basis  the  aggregate  amount  of which  does  not  exceed
            (euro)5,000,000 or its equivalent at any time;

      (i)   any Financial  Indebtedness  arising  under the Permitted  Revolving
            Credit Facility;

      (j)   any Financial  Indebtedness  under the intra-group  loans set out in
            Schedule 7 of the Due  Diligence  Report on the terms as at the date
            of this  Agreement  or any  refinancing  of those  loans  where  the
            principal  amount of such loans cannot be increased and the terms of
            such loans cannot be on terms more onerous than the existing loans;


                                     - 14 -
<PAGE>

      (k)   any Financial  Indebtedness  arising from the honouring by a bank or
            other financial institution of a cheque, draft or similar instrument
            inadvertently  (except  in the case of  daylight  overdrafts)  drawn
            against  insufficient  funds  in the  ordinary  course  of  business
            provided that such  Financial  Indebtedness  is discharged  within 3
            Business Days of occurrence; or

      (l)   any Financial  Indebtedness not falling within paragraphs (a) to (k)
            above  where the  aggregate  outstanding  principal  amount of which
            across the Group does not at any time exceed (euro)5,000,000 (or its
            equivalent in another currency or currencies).

      "PERMITTED GUARANTEE" means:

      (a)   any guarantee arising under the Finance Documents;

      (b)   any  guarantee  issued by an Obligor  in  respect  of the  Financial
            Indebtedness of another Obligor;

      (c)   any  guarantee  issued  by a  member  of the  Group  which is not an
            Obligor in respect of the Financial  Indebtedness  of another member
            of the Group which is not an Obligor;

      (d)   any  guarantee  issued  by a  member  of the  Group  which is not an
            Obligor in respect of the Financial Indebtedness of an Obligor;

      (e)   any  guarantee  issued by a member of the  Group in  respect  of the
            liabilities or obligations of a Permitted Non-Recourse Subsidiary;

      (f)   any guarantee  issued by a member of the Group on arm's length terms
            (including  any  counter-indemnity  obligation)  and in the ordinary
            course of its trading, not in respect of Financial Indebtedness;

      (g)   any  customary   indemnity  in  relation  to  a  Permitted   Hedging
            Transaction;

      (h)   in  respect  of  a  netting or set-off arrangement entered into by a
            member  of  the  Group  in  the  ordinary  course  of  its  banking
            arrangements  for  the  purpose of netting debit and credit balances
            for members of the Group,  provided  that  the arrangement does not
            permit credit balances of Obligors  to  be netted or set off against
            debit balances of members of the Group  which are not Obligors and
            the arrangement does  not  give  rise  to Security or Quasi Security
            over the assets of Obligors in support of liabilities of members of
            the Group which are not Obligors; or

      (i)   guarantees   by   Obligors   in  respect  of   Permitted   Financial
            Indebtedness of other Obligors;

      (j)   the endorsement of negotiable  instruments in the ordinary course of
            trade;

      (k)   the (euro)590,904  guarantee issued by the Company in favour of OVAM
            and any  amendment or increase to the amount  guaranteed as required
            by Belgian law;

      (l)   any  guarantee  issued by an Obligor in  relation  to the  Financial
            Indebtedness  of a  member  of the  Group  which  is not an  Obligor
            provided that the aggregate  principal amount guaranteed at any time
            does not, when aggregated with:

            (i)   the  amount of any loans  outstanding  at that time  which are
                  permitted  under  paragraph (g) of the definition of Permitted
                  Loans; and


                                     - 15 -
<PAGE>

            (ii)  the  amount  of any  shares  issued  at that  time  which  are
                  permitted  under  paragraph (b) of the definition of Permitted
                  Share   Transaction,   (when   aggregated   with  all  amounts
                  previously paid in respect of any such share issues),

            exceed (euro)5,000,000 (or its equivalent in another currency or
            currencies);

      (m)   any guarantee not falling  within  paragraphs (a) to (l) above where
            that  guarantee  is an  existing  guarantee  as set out in Part B of
            Schedule 7 of the Due  Diligence  Report on the terms as at the date
            of this Agreement or the  replacement or amendment of such guarantee
            where (A) the  principal  amount of such  guarantees  (as amended or
            replaced)  cannot be increased and (B) the terms of such  guarantees
            cannot be on more onerous terms than the existing guarantees;

      (n)   any guarantee not falling  within  paragraphs (a) to (m) above where
            the aggregate liability (whether actual or contingent) of members of
            the Group under all such  guarantees  does not, when aggregated with
            the aggregate principal amount of any loans outstanding at that time
            which  are  permitted  under  paragraph  (j)  of the  definition  of
            Permitted  Loan,  at  any  time  exceed   (euro)5,000,000   (or  its
            equivalent in another currency or currencies); or

      (o)   any guarantee  given in respect of the obligations of a Non-Recourse
            Subsidiary  given by its direct  Holding  Company  provided that the
            recourse  of the  beneficiary  in  respect  of  that  guarantee  (by
            contract,  law or  otherwise)  is  limited  to the  shares  in  that
            Non-Recourse Subsidiary.

      "PERMITTED HEDGING TRANSACTION" means:

      (a)   any  derivative  transaction  required  by the  Hedging  Letter  and
            documented by a Hedging  Document and any  replacement  or extension
            (on  similar  terms and up to the  maximum  amount of the  Financial
            Indebtedness under the Finance Documents);

      (b)   any unsecured  derivative  transaction  to hedge actual or projected
            interest  or forward  exposures  arising in the  ordinary  course of
            business of a member of the Group and not for speculative  purposes;
            or

      (c)   existing  unsecured currency hedging on the terms as at, and entered
            into prior to, the date hereof.

      "PERMITTED LOAN" means:

      (a)   any  trade  credit  extended  by  any  member  of the  Group  to its
            customers in the ordinary course of its trading activities requiring
            payment within 150 days;

      (b)   a loan to a Restricted Person provided that:

            (i) at the time such loan is made the aggregate of:

                  (A)   the   principal   available   amount  of  the  Permitted
                        Revolving  Credit  Facility  (if any) at the date it was
                        made available; and

                  (B)   the daily  average Cash on the  Company's  balance sheet
                        over the past 30 days  prior to the date of making  such
                        loan,

            is equal to or greater than (euro)25,000,000;


                                     - 16 -
<PAGE>

            (ii)  the principal  amount of all such loans does not exceed,  when
                  aggregated  with  all  aggregate   dividends  referred  to  in
                  paragraph  (b)(i) of the  definition  of Permitted  Payment an
                  amount equal to the aggregate of (A) the  principal  available
                  amount of the Permitted  Revolving Credit Facility (if any) at
                  the date it was made available,  (B)  (euro)10,000,000 (or its
                  equivalent in another currency or currencies) and (C) Retained
                  Cash (to the extent it has not been applied or committed to be
                  applied in accordance with this Agreement for another purpose)
                  provided that:

            (iii) any loan funded to the extent set out in paragraph  (b)(ii)(B)
                  above  is  made  to  a   Restricted   Person   to  which   the
                  circumstances contemplated in Clauses 22.6 (Insolvency) - 22.8
                  (Creditors' process) do not apply.

      (c) a loan made by an Obligor to another Obligor;

      (d)   a loan  made by a member  of the Group  which is not an  Obligor  to
            another member of the Group which is not an Obligor;

      (e)   a loan made by a member of the Group  which is not an  Obligor to an
            Obligor;

      (f)   a loan made to a Permitted Non-Recourse Subsidiary;

      (g)   a loan made by an Obligor to  another  member of the Group  which is
            not an Obligor  provided that the aggregate  principal amount of all
            such loans outstanding at any time does not, when aggregated with:

            (i)   the amount of any  guarantees  outstanding  at that time which
                  are  permitted  under  paragraph  (i)  of  the  definition  of
                  Permitted Guarantees; and

            (ii)  the  amount  of any  shares  issued  at that  time  which  are
                  permitted  under  paragraph (b) of the definition of Permitted
                  Share Transaction (when aggregated with all amounts previously
                  paid in respect of any such share issues),

            exceed (euro)5,000,000 (or its equivalent in another currency or
            currencies); or

      (h)   any  loan as set out in Part A of  Schedule  7 of the Due  Diligence
            Report  in the  form  as at the  date  of  this  Agreement  and  any
            amendment or refinancing  of such loan,  provided that the principal
            amount of such loan is not  increased and any amendment to the terms
            of the loan is no less favourable to the creditor.

      (i)   a loan from a member of the Group to its employees provided that the
            aggregate  amount of loans to  directors  or employees of members of
            the Group does not exceed (euro)10,000 at any time;

      (j)   any  loan  not  falling  within  paragraphs  (a)  to  (i) above the
            aggregate  principal  amount  of  which  at any time does not, when
            aggregated  with  the  aggregate  principal amount of the Financial
            Indebtedness  under  any  such  loans  and  the aggregate liability
            (whether actual or contingent) of any guarantees at that time which
            are permitted under paragraph (m)(ii) of the definition of Permitted
            Guarantee, exceed  (euro) 5,000,000  (or its equivalent in another
            currency or currencies).


                                     - 17 -
<PAGE>

      "PERMITTED MERGER" means:

      (a)   an acquisition by way of merger  provided that the  acquisition is a
            Permitted Acquisition; or

      (b)   an amalgamation,  demerger,  merger,  consolidation  or  corporate
            reconstruction  on  a  solvent  basis of a member of the Group (not
            involving the Company or the Borrower) where all of the business and
            assets of that member remain within the Group and, if that member of
            the Group  was  an  Obligor immediately prior to that amalgamation,
            demerger, merger, consolidation or corporate reconstruction, all of
            the business and assets of that member are retained by one or more
            other Obligors,

            and:

            (A)   at  that  time  no  Event  of  Default  has  occurred  and  is
                  continuing  or will  arise as a result  of such  amalgamation,
                  demerger, merger, consolidation or corporate reconstruction;

            (B)   the surviving entity of that amalgamation,  demerger,  merger,
                  consolidation  or corporate  reconstruction  is liable for the
                  obligations of the member of the Group is has merged with;

            (C)   the surviving entity of that amalgamation,  demerger,  merger,
                  consolidation or corporate  reconstruction  is incorporated in
                  the same jurisdiction as that member of the Group; and

            (D)   the Agent and the Security  Agent are given 30 Business  Days'
                  notice by the Company of that proposed amalgamation, demerger,
                  merger,  consolidation  or  corporate  reconstruction  and the
                  Security  Agent,  acting  reasonably,  is  satisfied  that the
                  Finance  Parties  will enjoy the same or  equivalent  Security
                  over the same assets and over that member of the Group and the
                  shares in it (or the shares of the surviving entity).

      (c)   Any other amalgamation, demerger, merger, consolidation or corporate
            reconstruction approved by the Majority Lenders.

      "PERMITTED NON-RECOURSE SUBSIDIARY" means a Non-Recourse Subsidiary:

      (a)   which  is  incorporated  or  established  after  the  date  of  this
            Agreement;

      (b)   where no Default is continuing on the date of the acquisition of, or
            investment  in, or  transfer or loan to, or  guarantee,  Security or
            Quasi Security for the obligations of, the  Non-Recourse  Subsidiary
            or would occur as a result of the  acquisition  of or investment in,
            or transfer or loan to, or guarantee, Security or Quasi Security for
            the obligations of, a Non- Recourse Subsidiary; and

      (c)   the amount  invested in or paid to acquire any share or interest in,
            or value of  assets  transferred  to,  or lent to or the  actual  or
            contingent   liability  under  any  guarantee,   Security  or  Quasi
            Security,  does not  exceed  in  aggregate  (euro)2,500,000  (or its
            equivalent in another currency or currencies).


                                     - 18 -
<PAGE>

      "PERMITTED PAYMENT" means:

      (a)   approximately  $9,000,000 (or its equivalent in another  currency or
            currencies) payment of an intercompany  receivable by the Company to
            Solutia Inc. immediately after the Closing Date; or

      (b)   any dividend:

            (i)   by the  Company  to its  shareholders  as at the  date of this
                  Agreement in an amount not exceeding, when aggregated with any
                  loans  referred  to in  paragraph  (b)  of the  definition  of
                  Permitted  Loan,  the maximum amount set out in that paragraph
                  and subject to the conditions set out in paragraph  (b)(i) and
                  (iii) of the definition of Permitted Loan;

            (ii)  to Solutia Inc. in its capacity as a minority  shareholder  in
                  certain  Subsidiaries of the Company to permit conformity with
                  Belgian law in an amount not exceeding,  when  aggregated with
                  all other such dividends,  (euro)500,000 (or its equivalent in
                  another  currency or  currencies) in any financial year of the
                  Company;

      (c)   any  payment,  investment,  dividend  or  distribution  of any  kind
            expressly permitted by the Majority Lenders;

      (d)   any payment in the ordinary course of trading in relation to licence
            fees for the use of Intellectual Property.

      "PERMITTED REVOLVING CREDIT FACILITY" means a revolving credit facility to
      be made  available  to the  Borrower  under the  Finance  Documents  which
      satisfies  all of the  following  terms and has been  approved  by the DIP
      Lenders or any other creditors in respect of Financial Indebtedness of any
      Restricted Person (to the extent required by the terms of any financing in
      relation thereto):

      (a)   it is  provided  to the  Obligors  by a  Finance  Party or a bank or
            financial institution which has a rating for its long term unsecured
            and  non-credit  enhanced  debt  obligations  of  BBB or  higher  by
            Standard  &  Poor's  or  Fitch  or Baa or  higher  by  Moody's  or a
            comparable rating from an  internationally  recognised credit rating
            agency (the "RCF LENDER");

      (b)   the aggregate  principal  amount of the commitments of that facility
            do not at any time exceed  (euro)20,000,000,  although  the facility
            may be drawn in other  currencies as agreed  between the Company and
            the RCF Lender;

      (c)   the  termination  date  of  the  facility  is no  earlier  than  the
            Termination Date;

      (d)   the margin is no greater than 2.25 per cent. per annum;

      (e)   the commitment  fees shall not exceed an annual rate equal to 50 per
            cent. of the margin of the facility;

      (f)   the facility  ranks pari passu as to payments and security  with the
            Facility;

      (g)   the  facility  must be paid  down to zero  (net of any Cash and Cash
            Equivalent  Investments  held by a member of the Group) for a period
            of 5 Business Days once in each financial year of the Company; and


                                     - 19 -
<PAGE>

      (h)   the facility is documented  within this Agreement in accordance with
            usual market practice.

      "PERMITTED  SALE AND  LEASEBACK"  means the sale and leaseback of the real
      estate  assets at Rue Laid Burniat 3, 1348,  Ottignies,  Louvain-la-Neuve,
      Belgium.

      "PERMITTED SECURITY" means:

      (a)   any  Security  or Quasi  Security  created  pursuant  to any Finance
            Document;

      (b)   any netting or set-off  arrangement  entered  into under a Permitted
            Hedging  Transaction  where  the  obligations  of  the  parties  are
            calculated by reference to net exposure under that Permitted Hedging
            Transaction;

      (c)   any Security or Quasi  Security over or affecting any asset acquired
            by a member of the Group after the date of this Agreement, if:

            (i)   the   Security   or  Quasi   Security   was  not   created  in
                  contemplation  of the acquisition of that asset by a member of
                  the Group;

            (ii)  the  principal  amount  secured  has  not  been  increased  in
                  contemplation  of or since the  acquisition of that asset by a
                  member of the Group; and

            (iii) the Security or Quasi Security is removed or discharged within
                  six Months of the date of acquisition of such asset;

      (d)   any  netting  or set-off arrangement entered into by a member of the
            Group  in  the  ordinary  course of its banking arrangements for the
            purpose  of  netting  debit and  credit  balances of members of the
            Group, provided that the arrangement does not permit credit balances
            of  Obligors  to  be  netted  or  set off against debit balances of
            members of the Group which are not Obligors and the arrangement does
            not give rise to other Security or Quasi Security over the assets of
            Obligors in support of liabilities of members of the Group which are
            not Obligors;

      (e)   any Quasi Security arising as a result of a sale,  transfer or other
            disposal which is a Permitted Disposal;

      (f)   any  lien  (or  in  relation to standard terms and conditions of any
            bank  in  Belgium or Germany, pledge) arising by operation of law or
            any  lien  or  retention  of title arrangement arising by a contract
            having  an  equivalent  effect  (including  those arising under the
            standard  terms  and conditions of any bank with which any member of
            the Group is permitted to have accounts under this Agreement) and in
            the  ordinary  course of business and not as a result of any default
            or  omission  by  any  member of the Group unless being contested in
            good  faith  and  adequate  reserves have been set aside for payment
            thereof in accordance with GAAP;

      (g)   any Security or Quasi Security  entered into in connection  with the
            Euro Notes  provided such  Security or Quasi  Security is removed or
            discharged on the Closing Date;

      (h)   any Security or Quasi Security:


                                     - 20 -
<PAGE>

            (i)   created  after  the  commencement of legal proceedings with a
                  view  to  preserving  the  status  quo  between the litigants
                  pending  the  outcome of those proceedings, provided that such
                  Security  or  Quasi  Security  does  not  secure  Financial
                  Indebtedness  exceeding  in  aggregate (euro)1,000,000 (or its
                  equivalent  in another currency or currencies) at any time and
                  is  released  forthwith  upon  final  determination  of  such
                  litigation; or

            (ii)  arising  pursuant  to  an  order  of  attachment,   distraint,
                  garnishee  or  injunction  restraining  disposal  of assets or
                  similar  legal  process   arising  in  connection  with  court
                  proceedings  being  contested  by the  relevant  member of the
                  Group in good faith,

            provided  that,  in the  case  of  both  sub-paragraphs  (i)(i)  and
            (i)(ii),  such Security or Quasi  Security shall be created or arise
            solely pursuant to a legal obligation or requirement;

      (i)   any  Security  or Quasi  Security  created  with the  prior  written
            consent of the Majority Lenders;

      (j)   any  Security or Quasi  Security  over goods,  documents of title to
            goods and related  documents and  insurances  and their  proceeds to
            secure liabilities of any member of the Group in respect of a letter
            of credit or other similar  instrument issued for all or part of the
            purchase price and costs of shipment, insurance and storage of goods
            acquired  by any  member  of the  Group in the  ordinary  course  of
            trading or business;

      (k)   any Security or Quasi Security securing the permitted refinancing of
            any Financial  Indebtedness allowed to be secured in accordance with
            paragraphs (a) and (c) above where the principal  amount secured has
            not been increased  above the then  outstanding  amount of Financial
            Indebtedness refinanced;

      (l)   any  lien for  taxes,  assessments  and  governmental  charges  with
            respect  of which  adequate  reserves  have  been set  aside for the
            payment  thereof in  accordance  with GAAP and with respect to which
            (i) such lien for taxes is not more than 30 days overdue, or (ii) if
            such lien is more than 30 days  overdue,  it is being  contested  in
            good faith and adequate reserves have been set aside for the payment
            thereof in accordance with GAAP;

      (m)   easements,  zoning  restrictions  and similar  encumbrances  on real
            property and minor  irregularities  in the title thereto that do not
            (i) secure  obligations  for the payment of money or (ii) materially
            impair  the value of such  property  or its use by any member of the
            Group in the ordinary course of business;

      (n)   any Security or Quasi Security arising under any retention of title,
            hire purchase or conditional sale arrangement or arrangements having
            similar effect in respect of goods supplied to a member of the Group
            in the  ordinary  course  of  business  and not as a  result  of any
            default or omission by any member of the Group;

      (o)   any  Quasi  Security  arising  as  a  result  of  any  factoring  of
            receivables  permitted  under  paragraph  (h) of the  definition  of
            Permitted Financial Indebtedness;


                                     - 21 -
<PAGE>

      (p)   any Security or Quasi  Security  created or subsisting to secure any
            obligations  incurred  in order to comply with the  requirements  of
            Section    8a    of    the    German    Partial    Retirement    Act
            (Altersteilzeitgesetz)    and/or    Section   7d   of   the   German
            Sozialgesetzbuch IV;

      (q)   any Security  created over the shares in a Non-Recourse  Subsidiary;
            and

      (r)   any Security or Quasi Security  securing  indebtedness the principal
            amount of which (when  aggregated  with the principal  amount of any
            other  indebtedness  which  has the  benefit  of  Security  or Quasi
            Security  given by any member of the Group other than any  permitted
            under  paragraphs  (a) to (q)  above)  does not at any  time  exceed
            (euro)1,500,000   (or  its   equivalent   in  another   currency  or
            currencies).

      "PERMITTED SHARE TRANSACTION" means:

      (a)   the reduction by the Company or any of its Subsidiaries of its share
            capital by way of incorporating previous losses or any capital
            increase by the Company or any of its subsidiaries by way of an
            incorporation of reserves with or without the issuance of new shares
            provided that in each case (i) there is no impact on cash available
            to such person as a result thereof, (ii) such reduction does not
            have a prejudicial effect on the Security granted pursuant to the
            Security Documents, (iii) prior written notice is given to the
            Agent; and (ii) there is no resulting or outstanding Event of
            Default; or

      (b)   the issue of  ordinary  and fully paid up shares,  provided  (in the
            case of a Subsidiary of the Company) those shares are:

            (i)   the subject of  Security  in favour of the Secured  Parties on
                  terms pursuant to the Security Documents; and

            (ii)  where such shares are issued by a member of the Group which is
                  not an Obligor to an Obligor,  the aggregate  principal amount
                  paid in respect of such shares, does not when aggregated with:

                  (A)   all amounts previously paid in respect of any such share
                        issues; and

                  (B)   the amount of any loans  outstanding  at that time which
                        are permitted  under  paragraph (g) of the definition of
                        Permitted Loans; and

                  (C)   the amount of any  guarantees  outstanding  at that time
                        which  are   permitted   under   paragraph  (i)  of  the
                        definition of Permitted Guarantees

                  exceed (euro)2,500,000 (or its equivalent in another currency
                  or currencies);

      (c) any issue of Shares authorised by the Majority Lenders in writing.

      "PHARMA BUSINESS" means Solutia,  Inc.'s pharmaceutical services business,
      owned  and  operated   primarily   by  Amcis,   which   provides   leading
      pharmaceutical   companies  with  pharmaceutical   development  expertise,
      including  process  research  and  manufacturing  services,  which  allows
      pharmaceutical  companies to bridge the gap from discovery of new drugs to
      the manufacturing of those drugs.

      "PREPAYMENT  ACCOUNT" means the interest  bearing  account of the Borrower
      with Citibank N.A. with account number 11648306.


                                     - 22 -
<PAGE>

      "PREPAYMENT  DATE" has the meaning  given to it in Clause 7.9  (Prepayment
      Account).

      "QUALIFYING LENDER" has the meaning given to it in Clause 12 (Tax gross-up
      and indemnities).

      "QUASI  SECURITY" means a transaction  under which any member of the Group
      will:

      (a)   sell,  transfer or  otherwise  dispose of any of its assets on terms
            whereby  they are or may be  leased to or  re-acquired  by any other
            member of the Group;

      (b)   sell,  transfer or otherwise  dispose of any of its  receivables  on
            recourse terms;

      (c)   enter into any  arrangement  under  which  money or the benefit of a
            bank or other  account may be applied,  set-off or made subject to a
            combination of accounts; or

      (d)   enter  into any  other  preferential  arrangement  having a  similar
            effect,

      in  circumstances  where the  arrangement  or  transaction is entered into
      primarily as a method of raising  Financial  Indebtedness  or of financing
      the acquisition of an asset.

      "QUOTATION  DAY"  means,  in  relation to any period for which an interest
      rate is to be  determined  two  TARGET  Days  before the first day of that
      period unless market practice differs in the Relevant Interbank Market for
      a currency,  in which case the  Quotation  Day for that  currency  will be
      determined by the Agent in accordance with market practice in the Relevant
      Interbank  Market (and if  quotations  for that  currency and period would
      normally be given by leading  banks in the  Relevant  Interbank  Market on
      more than one day, the Quotation Day will be the last of those days).

      "RECEIPT  DATE"  has the  meaning  given to it in Clause  7.9  (Prepayment
      Account).

      "REFERENCE  BANKS" means the principal  office of Citibank,  N.A., or such
      other  banks as may be  appointed  by the Agent in  consultation  with the
      Company.

      "REINVESTMENT  PREPAYMENT  DATE" has the meaning given to it in Clause 7.8
      (Holding Account).

      "REINVESTMENT  RECEIPT  DATE" has the  meaning  given to it in Clause  7.8
      (Holding Account).

      "RELATED  FUND"  means,  in  relation  to a trust,  fund or other  entity,
      another trust, fund or other entity which is:

      (a)   regularly  engaged  in or  established  for the  purpose  of making,
            purchasing  or investing  in loans,  securities  or other  financial
            assets; and

      (b)   has the same fund  manager or asset  manager or is owned by the same
            person as the first trust, fund or other entity.

      "RELEVANT INTERBANK MARKET" means the European interbank market.

      "RELEVANT JURISDICTION" means, in relation to an Obligor:

      (a)   its jurisdiction of incorporation; and

      (b)   the  jurisdiction  whose laws govern any of the  Security  Documents
            entered into by it.

      "RELEVANT   PERIOD"   has  the   meaning   given  to  it  in  Clause  20.4
      (Definitions).

      "REPEATING  REPRESENTATIONS"  means each of the representations set out in
      Clause 18.1 (Status), Clause 18.2 (Binding obligations), Clause 18.4
      (Power and authority) to Clause 18.6


                                     - 23 -
<PAGE>

      (Governing law and  enforcement),  Clause 18.12 (Financial  statements) to
      Clause 18.18 (Group structure),  Clause 18.20 (Shares) and Clause 18.21(a)
      and (b) (Intellectual property).

      "REPORTS" means the documents  listed in paragraph 5 of Part 1 of Schedule
      2 (Conditions Precedent).

      "RESERVATIONS"   means  any  general   principles   of  law  limiting  the
      obligations of any Obligor which are specifically referred to in any legal
      opinion  delivered  pursuant to Clause 4 (Conditions  of  Utilisation)  or
      Clause 24 (Changes to the Obligors).

      "RESTRICTED PERSON" means Solutia Inc. and any Subsidiary of Solutia Inc.
      which is not a member of the Group.

      "RETAINED  CASH"  means  any  Excess  Cash Flow  that the  Company  is not
      required to prepay  under Clause 7.7  (Mandatory  Prepayment - Excess Cash
      Flow) in relation to any  financial  year of the Company until it has been
      applied  or  committed  to be applied  in any of the way  contemplated  in
      paragraphs (a) to (f) below:

      (a)   in satisfaction of the purchase price of a Permitted Acquisition;

      (b)   in  payment  of  Capital  Expenditure  under  Clause  20.2  (Capital
            Expenditure);

      (c)   in or towards a Permitted Payment;

      (d)   in or towards a Permitted Non-Recourse Subsidiary;

      (e)   in making a loan falling  within  paragraph (b) of the definition of
            Permitted Loan; or

      (f)   any other  payment  permitted to be made under this  Agreement  from
            Retained Cash.

      "SALE" has the meaning given to it in Clause 7.2 (Sale).

      "SCREEN  RATE"  means  the  percentage  rate per annum  determined  by the
      Banking  Federation  of  the  European  Union  for  the  relevant  period,
      displayed on the appropriate  page of the Telerate  screen.  If the agreed
      page is replaced or service ceases to be available,  the Agent may specify
      another page or service displaying the appropriate rate after consultation
      with the Company and the Lenders.

      "SECURED DOCUMENTS" means the Finance Documents and the Hedging Documents.

      "SECURED PARTY" means a Finance Party or a Hedging Bank.

      "SECURITY"  means a  mortgage,  charge,  pledge,  lien or  other  security
      interest  securing  any  obligation  of any  person or any other  security
      interest.

      "SECURITY DOCUMENTS" means:

      (a)   the  documents  listed in paragraph 2 of Part I and  paragraph 13 of
            Part II of Schedule 2 (Conditions precedent); and

      (b)   any  other  security  document  that  may at any  time be  given  as
            security  for any of the  Liabilities  pursuant to or in  connection
            with any Secured Document.

      "SECURITY  PRINCIPLES"  means the principles in the Agreed Form set out in
      Schedule 9 (Security Principles).


                                     - 24 -
<PAGE>

      "SECURITY  PROPERTY"  has the  meaning  given  to it in the  Intercreditor
      Agreement.

      "SELECTION  NOTICE"  means a notice  substantially  in the form set out in
      Part II of  Schedule  3  (Requests)  given  in  accordance  with  Clause 9
      (Interest Periods) in relation to a Facility.

      "SOLUTIA INC."  means  Solutia  Inc. incorporated in Delaware with Federal
      Employer  ID  Number  43-1891797  and  whose  registered  office is at 575
      Maryville  Centre  Drive, P.O. Box 66760, St. Louis, MO 63166-7670, USA as
      such company exists at the date of this Agreement.

      "SPECIFIED  TIME" means a time  determined in  accordance  with Schedule 9
      (Timetables).

      "SUBSIDIARY" means in relation to any company,  corporation or other legal
      entity,  (a  "HOLDING  COMPANY"),  a company,  corporation  or other legal
      entity:

      (a)   which is controlled, directly or indirectly, by the holding company;

      (b)   more than half the issued  share  capital  of which is  beneficially
            owned, directly or indirectly, by the holding company; or

      (c)   which is a subsidiary of another Subsidiary of the holding company,

      and, for this purpose,  a company or corporation shall be treated as being
      controlled  by  another if that other  company or  corporation  is able to
      determine  the  composition  of the  majority of its board of directors or
      equivalent  body.  For the avoidance of doubt Flexsys does not fall within
      this definition.

      "SYNDICATION" means general syndication of the Facilities.

      "SYNDICATION DATE" means the earlier of:

      (a)   the  date 3 months  after  the  later  of the  date of the  Facility
            Agreement and the date of commencement of syndication  which will be
            commenced  as soon as possible  and no later than the Closing  Date;
            and

      (b)   the date (as determined by the Arranger and notified to the Company)
            on which Syndication has been completed and the additional syndicate
            members have become bound by this Agreement.

      "TARGET" means Trans-European Automated Real-time Gross Settlement Express
      Transfer payment system.

      "TARGET DAY" means any day on which TARGET is open for the  settlement  of
      payments in euro.

      "TAX" means any tax, levy, impost,  duty or other charge or withholding of
      a similar nature  (including any penalty or interest payable in connection
      with any failure to pay or any delay in paying any of the same).

      "TAXES ACT" means the Income and Corporation Taxes Act 1988.

      "TAX PAYMENT" has the meaning given to it in Clause 12.1 (Definitions).

      "TAX STATUS CERTIFICATE" means a certificate substantially in the form set
      out in Schedule 5 Part II (Form of Tax Status Certificate).


                                     - 25 -
<PAGE>

      "TERMINATION DATE" means the date which is 5 years after the Closing Date.

      "TOTAL   COMMITMENTS"  means  the  aggregate  of  the  Total  Facility  B1
      Commitments and the Total Facility B2 Commitments, being (euro)200,000,000
      at the date of this Agreement.

      "TOTAL  FACILITY B1  COMMITMENTS"  means the  aggregate of the Facility B1
      Commitments, being (euro)160,000,000 at the date of this Agreement.

      "TOTAL  FACILITY B2  COMMITMENTS"  means the  aggregate of the Facility B2
      Commitments, being (euro)40,000,000 at the date of this Agreement.

      "TRANSFER  CERTIFICATE" means a certificate  substantially in the form set
      out in Schedule 5 Part I (Form of Transfer  Certificate) or any other form
      agreed between the Agent and the Company.

      "TRANSFER DATE" means, in relation to a transfer, the later of:

      (a)   the proposed  Transfer Date  specified in the Transfer  Certificate;
            and

      (b)   the date on which the Agent executes the Transfer Certificate.

      "UNPAID SUM" means any sum due and payable but unpaid by an Obligor  under
      the Finance Documents.

      "UTILISATION" means a Loan.

      "UTILISATION  DATE" means the date on which a Utilisation is, or is to be,
      made.

      "UTILISATION  REQUEST" means a notice substantially in the form set out in
      Part I of Schedule 3 (Requests).

      "VAT" means  value  added tax as  provided  for in the Value Added Tax Act
      1994 and any other tax of a similar nature.

1.2   CONSTRUCTION

(a) Unless a contrary indication appears, any reference in this Agreement to:

      (i)     the "AGENT",  the "ARRANGER",  any "FINANCE  PARTY",  the "HEDGING
              BANK", any "LENDER",  any "OBLIGOR",  any "PARTY" or the "SECURITY
              AGENT"  shall be  construed  so as to include  its  successors  in
              title, permitted assigns and permitted transferees;

      (ii)    "ASSETS"  includes  present and future  properties,  revenues  and
              rights of every description;

      (iii)   "DOLLARS"  means the  lawful  currency  for the time  being of the
              United States of America.

      (iv)    "GUARANTEE" means any guarantee, letter of credit, bond, indemnity
              or similar  assurance  against loss, or any obligation,  direct or
              indirect,   actual  or  contingent,  to  purchase  or  assume  any
              indebtedness  of any person or to make an investment in or loan to
              any  person or to  purchase  assets of any person  where,  in each
              case,  such  obligation  is assumed in order to maintain or assist
              the ability of such person to meet its indebtedness;

      (v)     a "SECURED  DOCUMENT" or any other  agreement or  instrument  is a
              reference  to  that  Secured   Document  or  other   agreement  or
              instrument as amended, novated,  supplemented,  extended, restated
              (however fundamentally and whether or not more


                                     - 26 -
<PAGE>

              onerous) or replaced  and  includes  any change in the purpose of,
              any  extension  of or any increase in any facility or the addition
              of any new facility under that Secured Document or other agreement
              or instrument;

      (vi)    "INDEBTEDNESS"   includes  any  obligation  (whether  incurred  as
              principal  or as surety)  for the payment or  repayment  of money,
              whether present or future, actual or contingent;

      (vii)   a  "PERSON"  includes  any  person,  firm,  company,  corporation,
              government,  state or agency of a state or any association,  trust
              or partnership  (whether or not having separate legal personality)
              or two or more of the foregoing;

      (viii)  a "REGULATION" includes any regulation,  rule, official directive,
              request or guideline  (whether or not having the force of law but,
              if not having force of law, one that is customarily  complied with
              in   the    relevant    jurisdiction    of    any    governmental,
              intergovernmental  or supranational  body,  agency,  department or
              regulatory, self-regulatory or other authority or organisation;

      (ix)    "SHARES"  or  "SHARE  CAPITAL"   includes   equivalent   ownership
              interests  (and  "SHAREHOLDER"  and similar  expressions  shall be
              construed accordingly);

      (x)     a provision of law is a reference to that  provision as amended or
              re-enacted; and

      (xi)    a time of day is a reference to London time.

(b) Section, Clause and Schedule headings are for ease of reference only.

(c)   Unless a contrary  indication  appears,  a term used in any other  Finance
      Document or in any notice  given under or in  connection  with any Finance
      Document  has the same  meaning in that  Finance  Document or notice as in
      this Agreement.

(d)   A  Default  or an  Event of  Default  is  "CONTINUING"  if it has not been
      remedied or waived.

1.3   THIRD PARTY RIGHTS

      A person who is not a Party has no right  under the  Contracts  (Rights of
      Third  Parties) Act 1999 to enforce or to enjoy the benefit of any term of
      this Agreement.

1.4   INTERCREDITOR AGREEMENT

      This Agreement is subject to the Intercreditor  Agreement. In the event of
      any inconsistency between this Agreement and the Intercreditor  Agreement,
      the Intercreditor Agreement shall prevail.


                                     - 27 -
<PAGE>

                                    SECTION 2
                                 THE FACILITIES

2.    THE FACILITIES

2.1   THE FACILITIES

      Subject to the terms of this Agreement:

      (a)   the Lenders make  available to the Borrower a term loan  facility in
            an aggregate amount equal to the Facility B1 Commitments; and

      (b)   the Lenders make  available to the Borrower a term loan  facility in
            an aggregate amount equal to the Facility B2 Commitments.

2.2   FINANCE PARTIES' RIGHTS AND OBLIGATIONS

(a)   The  obligations  of each Finance  Party under the Finance  Documents  are
      several.  Failure by a Finance Party to perform its obligations  under the
      Finance Documents does not affect the obligations of any other Party under
      the Finance Documents. No Finance Party is responsible for the obligations
      of any other Finance Party under the Finance Documents.

(b)   The rights of each Finance Party under or in  connection  with the Finance
      Documents are separate and  independent  rights and any debt arising under
      the  Finance  Documents  to a Finance  Party  from an  Obligor  shall be a
      separate and independent debt.

(c)   A Finance Party may, except as otherwise stated in the Finance  Documents,
      separately enforce its rights under the Finance Documents.

2.3   OBLIGORS' AGENT

(a)   Each Obligor (other than the Company)  irrevocably appoints the Company to
      act on its behalf as its agent in relation to the  Finance  Documents  and
      irrevocably authorises:

      (i)   the  Company  on  its  behalf  to  supply all information concerning
            itself  contemplated by this Agreement to the Finance Parties and to
            give  and  receive all notices, consents and instructions (including
            Utilisation  Requests),  to  agree, accept and execute on its behalf
            all  documents  in  connection with the Finance Documents (including
            amendments  and  variations  of  and  consents  under  any  Finance
            Document)  and to execute any new Finance Document and to take such
            other action as may be necessary or desirable under or in connection
            with the Finance Documents; and

      (ii)  each Finance Party and each Hedging Bank to give any notice,  demand
            or other  communication  to that  Obligor  pursuant  to the  Finance
            Documents to the Company.

(b) Each Obligor (other than the Company) confirms that:

      (i)   it will be bound by any  action  taken  by the  Company  under or in
            connection with the Finance Document; and

      (ii)  each  Finance  Party and each  Hedging  Bank may rely on any  action
            purported to be taken by the Company on behalf of that Obligor.


                                     - 28 -
<PAGE>

2.4   ACTS OF THE COMPANY

(a)   The  respective  liabilities  of each of the  Obligors  under the  Finance
      Documents shall not be in any way affected by:

      (i)   any actual or purported  irregularity in any act done, or failure to
            act, by the Company;

      (ii)  the Company acting (or purporting to act) in any respect outside any
            authority conferred upon it by any Obligor; or

      (iii) any actual or purported  failure by, or inability of, the Company to
            inform any  Obligor of receipt by it of any  notification  under the
            Finance Documents.

(b)   In the event of any conflict  between any notices or other  communications
      of the Company and any other Obligor, those of the Company shall prevail.

3.    PURPOSE

3.1   PURPOSE

(a)   All amounts  borrowed under the Facilities  shall be applied  (directly or
      indirectly)  towards  refinancing the Euro Notes together with any related
      costs and fees, in each case in accordance  with the Funds Flow Memorandum
      (and the Borrower irrevocably authorises and directs the Agent to make the
      payments to the  relevant  recipients  on its behalf as  described  in the
      Funds Flow Memorandum).

(b)   No amount  borrowed  under the  Facilities  shall be applied in any manner
      that may be illegal or contravene  any applicable law or regulation in any
      jurisdiction   concerning  financial  assistance  by  a  company  for  the
      acquisition of or subscription  for shares or concerning the protection of
      shareholders' capital.

3.2   MONITORING

      No Finance  Party is bound to monitor  or verify  the  application  of any
      amount borrowed pursuant to this Agreement.

4.    CONDITIONS OF UTILISATION

4.1   INITIAL CONDITIONS PRECEDENT

      The  obligations  of each Finance Party to the Borrower  under the Finance
      Documents  are  subject  to the  condition  precedent  that the  Agent has
      received  all of the  documents  and  other  evidence  listed in Part I of
      Schedule 2 (Conditions  precedent) in the Agreed Form no later than midday
      one Business Day prior to the first proposed  Utilisation  Date. The Agent
      shall notify the Company and the Lenders promptly upon being so satisfied.

4.2   FURTHER CONDITIONS PRECEDENT

      The  Lenders  will only be obliged  to comply  with  Clause 5.4  (Lenders'
      participation)  if on the  date  of  the  Utilisation  Request  and on the
      proposed Utilisation Date:

      (a)   no Default is continuing or would result from the proposed Loan; and

      (b)   the   representations   and   warranties   set  out  in   Clause  18
            (Representations)  which are made or deemed to be made in accordance
            with Clause 18.27 (Times when representations made) are true.


                                     - 29 -
<PAGE>

4.3   MAXIMUM NUMBER OF UTILISATIONS

      The Borrower may not deliver a  Utilisation  Request if as a result of the
      proposed Loan more than 1 Facility B1 Loan and 1 Facility B2 Loan would be
      outstanding.


                                     - 30 -
<PAGE>

                                    SECTION 3
                                   UTILISATION

5.    UTILISATION

5.1   DELIVERY OF A UTILISATION REQUEST

      The  Borrower  may  utilise a Facility  by delivery to the Agent of a duly
      completed Utilisation Request not later than the Specified Time.

5.2   COMPLETION OF A UTILISATION REQUEST

(a)   Each  Utilisation  Request  for a Loan  is  irrevocable  and  will  not be
      regarded as having been duly completed unless:

      (i)   it specifies that it is for a Loan;

      (ii)  it identifies the Facility to be utilised;

      (iii) the  proposed   Utilisation  Date  is  a  Business  Day  within  the
            Availability Period;

      (iv)  the currency and amount of the Loan comply with Clause 5.3 (Currency
            and amount);

      (v)   the  proposed  Interest  Period  complies  with  Clause 9  (Interest
            Periods); and

      (vi)  it  specifies  the account and bank (which must be in the  principal
            financial  centre of the country of the currency of the  Utilisation
            or,  in the  case of  euro,  the  principal  financial  centre  of a
            Participating  Member  State in  which  banks  are open for  general
            business  on that day or London) to which the  proceeds  of the Loan
            are to be credited.

(b)   Only one Loan may be requested in each Utilisation Request.

5.3   CURRENCY AND AMOUNT

(a)   The currency specified in a Utilisation Request must be euro.

5.4   LENDERS' PARTICIPATION

(a)   If the  conditions  set out in this  Agreement  have been met, each Lender
      participating  in a  Facility  shall make its  participation  in each Loan
      under that Facility available by the Utilisation Date through its Facility
      Office.

(b)   The amount of each  Lender's  participation  in each Loan will be equal to
      the proportion borne by its Available Commitment to the Available Facility
      immediately prior to making the Loan.


                                     - 31 -
<PAGE>

                                    SECTION 4
                     REPAYMENT, PREPAYMENT AND CANCELLATION

6.    REPAYMENT

(a)   The Borrower shall repay each Loan on the Termination Date.

(b)   The Borrower may not reborrow any part of the Facility which is repaid.

7.    PREPAYMENT AND CANCELLATION

7.1   ILLEGALITY

      If it becomes  unlawful  in any  applicable  jurisdiction  for a Lender to
      perform any of its  obligations  as  contemplated  by this Agreement or to
      fund or maintain its participation in any Loan:

      (a)   that Lender shall  promptly  notify the Agent upon becoming aware of
            that event;

      (b)   upon the Agent  notifying the Borrower the Commitment of that Lender
            will be immediately cancelled; and

      (c)   the Borrower shall repay that Lender's participation in the Loans on
            the last day of the Interest Period for each  Utilisation  occurring
            after the Agent has notified  the Borrower or, if earlier,  the date
            specified by the Lender in the notice  delivered to the Agent (being
            no  earlier  than  the  last  day of  any  applicable  grace  period
            permitted by law).

7.2   SALE

(a)   In this Clause 7.2 "SALE" means a disposal of all or substantially  all of
      the assets of the Group  (whether in a single  transaction  or a series of
      related transactions).

(b)   If a Sale occurs:

      (i)   the Borrower shall promptly  notify the Agent upon becoming aware of
            that event;

      (ii)  a Lender shall not be obliged to fund a Loan; and

      (iii) the Facilities  shall  immediately be cancelled and all  outstanding
            Loans, together with accrued interest, and all other amounts accrued
            under  the  Finance  Documents  shall  become  immediately  due  and
            payable.

7.3   MANDATORY CANCELLATION

      Any Commitment which is not utilised on the earlier of:

      (i) the final day of the Availability Period;

      (ii) the close of business on the date of the first Utilisation;

      will be immediately and automatically cancelled.

7.4   VOLUNTARY CANCELLATION

(a)   The Borrower may, if it gives the Agent not less than 5 Business Days' (or
      such  shorter  period as the  Majority  Lenders may agree)  prior  notice,
      cancel the whole or any part (being a minimum amount of  (pound)5,000,000)
      of an Available  Facility.  Any  cancellation  under this Clause 7.4 shall
      reduce the Commitment of each Lender rateably under that Facility.


                                     - 32 -
<PAGE>

7.5   MANDATORY PREPAYMENT - NET SALE PROCEEDS

(a)   In this Clause 7.5:

      "NET SALE PROCEEDS" means the cash or cash equivalent  proceeds (including
      but not limited to, when received, the cash or cash equivalent proceeds of
      any deferred  consideration,  whether by way of adjustment to the purchase
      price  or  otherwise  and any  amount  received  in  consideration  of the
      assumption  of any debt)  received by a member of the Group in  connection
      with the sale, transfer or other disposal by any member of the Group of an
      asset after deducting:

      (i)   fees, transaction costs and any reserves and other sums in each case
            required  to  be  set  aside  under  the  contractual  terms of the
            applicable  sale  and  purchase  agreement  by  way  of  escrow  or
            segregation or otherwise for the sole purpose to cover the warranty
            claims  properly  incurred in connection with that sale, transfer or
            disposal  (provided  that to the extent such reserves and other sums
            are  no longer required to be set aside, such amounts shall at such
            time be designated Net Sales Proceeds); and

      (ii)  taxes paid or reasonably estimated by the Borrower to be payable (as
            certified  by the  Borrower  to the Agent) as a result of that sale,
            transfer or disposal.

      In the event of any sale,  transfer or other disposal by any member of the
      Group of an asset  where  such  asset is not  wholly  owned,  legally  and
      beneficially,  by such member of the Group, the  apportionment of Net Sale
      Proceeds  between the legal and  beneficial  owners of such asset shall be
      determined  by the directors of the Borrower on a fair value basis and the
      Borrower shall provide a certificate  signed by two directors to the Agent
      confirming its determination of such apportionment.

      "IMMEDIATE  PREPAYMENT  PROCEEDS"  means Net Sale Proceeds which relate to
      disposals  referred to in  paragraphs  (l),  (m),  (n), (o) and (p) of the
      definition  of Permitted  Disposal to the extent not excluded by virtue of
      paragraph (c) of Clause 7.5 (Mandatory Prepayment - Net Sale Proceeds).

      "PERMITTED  DISPOSAL PROCEEDS" means any Net Sale Proceeds which relate to
      the disposals referred to in paragraphs (a), (b), (e), (f), (g), (h), (j),
      (q) and (r) of the definition of Permitted Disposals.

      "RELEVANT   PROCEEDS"   means  Net  Sale  Proceeds  other  than  Immediate
      Prepayment Proceeds and Permitted Disposal Proceeds.

(b)   The  Company  shall  ensure that any Net Sale  Proceeds  are paid into the
      Prepayment   Account  for   application  in  accordance  with  Clause  7.9
      (Prepayment Account) and Clause 7.10 (Application of Proceeds).

(c)   Paragraph (b) above does not apply to any:

      (i)   Net Sale  Proceeds to the extent  that,  in the case of any Net Sale
            Proceeds which relate to the disposals referred to in paragraphs (m)
            of the definition of "Permitted Disposal",  the amount by which such
            Net Sale Proceeds exceed (euro)40,000,000;

      (ii)  Permitted Disposal Proceeds;


                                     - 33 -
<PAGE>

      (iii) Net Sale  Proceeds to the extent such Net Sale Proceeds are received
            by a member of the Group in  connection  with the sale,  transfer or
            other  disposal  by any  member  of the  Group  of an  asset  in the
            ordinary  course  of  business  (including,  without  limitation,  a
            disposal  under   paragraph  (a)  of  the  definition  of  Permitted
            Disposal);

      (iv)  Net Sale Proceeds in an amount equal to 50 per cent. of the Net Sale
            Proceeds  of  the  disposal  referred  to in  paragraph  (n)  of the
            definition of "Permitted Disposal";

      (v)   Net Sale Proceeds in an amount equal to 50 per cent. of the Net Sale
            Proceeds of the disposals  referred to in paragraphs  (o) and (p) of
            the definition of "Permitted Disposal"; and

      (vi)  Relevant Proceeds to the extent such Relevant Proceeds are paid into
            the  Holding  Account  and have  within six  months of receipt  been
            contractually  committed  to be  applied  and have  within  eighteen
            months of receipt  have been  applied  towards the purchase of other
            similar assets for use in the Group's  business and no part of those
            Relevant  Proceeds is withdrawn from the Holding  Account except for
            that purpose within that eighteen month period.

7.6   MANDATORY PREPAYMENT - INSURANCE PROCEEDS

(a)   In this Clause 7.6:

      "INSURANCE  PROCEEDS"  means any proceeds (other than in relation to third
      party liabilities that are actually applied to meet such liabilities or in
      relation to consequential loss policies that are actually applied to cover
      operating  losses,  loss of profits or  business  interruption)  exceeding
      (euro)3,000,000  (or its  equivalent  in another  currency or  currencies)
      received by any member of the Group  under or  pursuant  to any  insurance
      policy (or equivalent) after the date of this Agreement.

(b)   The Company  shall  ensure that any  Insurance  Proceeds are paid into the
      Prepayment   Account  for   application  in  accordance  with  Clause  7.9
      (Prepayment Account) and Clause 7.10 (Application of Proceeds).

(c)   Paragraph (b) above does not apply to any Insurance Proceeds to the extent
      that such  Insurance  Proceeds are paid into the Holding  Account and have
      within six Months of receipt  been  contractually  committed to be applied
      and have within eighteen Months of receipt been applied to replace, repair
      or reinstate the asset(s) to which those Insurance  Proceeds relate and no
      part of those  Insurance  Proceeds is withdrawn  from the Holding  Account
      except for that purpose within that eighteen Month period.

7.7   MANDATORY PREPAYMENT - EXCESS CASH FLOW

(a)   Within  five  Business  Days  of  delivery  to the Agent of the Company's
      audited  consolidated  financial  statements  for  any  financial  year,
      commencing with such financial statements for the financial year ending on
      31 December 2006, the Company shall ensure that an amount equal to 50 per
      cent. of the Excess Cash Flow for that financial year (or, in the case of
      the financial year ending on 31 December 2006, an amount equal to 50 per
      cent.  of  the  Excess  Cash Flow multiplied by the fraction equal to the
      number  of  days  for  the  period  from the date of this Agreement to 31
      December  2006  (inclusive)  divided  by  365) is paid into the Prepayment
      Account.


                                     - 34 -
<PAGE>

(b)   All amounts paid into the  Prepayment  Account  under  paragraph (a) above
      will be  applied in  prepayment  of the Loans as  described  in Clause 7.9
      (Prepayment  Account) and Clause 7.10  (Application  of  Proceeds),  as if
      those amounts were  "Proceeds" and the date of payment into the Prepayment
      Account were the "Receipt Date".

7.8   HOLDING ACCOUNT

(a)   In this  Clause  7.8,  Clause 7.9  (Prepayment  Account)  and Clause  7.10
      (Application of Proceeds):

      "PROCEEDS"  means,  Insurance  Proceeds,  Net Sale  Proceeds  (other  than
      Immediate  Prepayment  Proceeds)  and  amounts  paid  into the  Prepayment
      Account under Clause 7.7 (Mandatory Prepayment - Excess Cash Flow).

(b)   The Company  shall  ensure  that any  Insurance  Proceeds  which are to be
      applied to  replace,  repair or  reinstate  asset(s)  in  accordance  with
      paragraph (c) of Clause 7.6  (Mandatory  prepayment - Insurance  Proceeds)
      (or an equal  amount),  are paid directly into (or as soon as  practicable
      after receipt are transferred into) the Holding Account.

(c)   The  Company  shall  ensure  that any  Relevant  Proceeds  which are to be
      applied  towards  the  purchase  of other  similar  assets  for use in the
      Group's  business  in  accordance  with  paragraph  (c)(vi)  of Clause 7.5
      (Mandatory  Prepayment - Net Sale Proceeds) (or an equal amount), are paid
      directly into (or as soon as  practicable  after  receipt are  transferred
      into) the Holding Account.

(d)   Within five Business Days after the date (the "REINVESTMENT RECEIPT DATE")
      on which any such  Proceeds  have been received by any member of the Group
      (or have become  Proceeds),  the  Borrower  shall  notify the Agent of the
      Reinvestment Receipt Date and the amount in euro of those Proceeds.

(e)   No amount may be withdrawn or transferred from the Holding Account except:

      (i)   to purchase  other  similar  assets for use in the Group's  business
            under paragraph (c)(iv) of Clause 7.5 (Mandatory Prepayment Net Sale
            Proceeds);

      (ii)  to replace, repair or reinstate assets under paragraph (c) of Clause
            7.6 (Mandatory prepayment - Insurance Proceeds);

      (iii) to  make  the  prepayments  required  Clause  7.10  (Application  of
            Proceeds); or

      (iv)  with the prior consent of the Majority Lenders,

      provided  that,  upon an Event of  Default,  all  amounts  standing to the
      credit of the  Holding  Account  shall be  transferred  to the  Prepayment
      Account.

(f)   To  the  extent  that any amount in respect of any Proceeds falling within
      sub-paragraph  of  paragraph  (d)  above is not withdrawn from the Holding
      Account  in  accordance  with  paragraph  (c)(vi) of Clause 7.5 (Mandatory
      Prepayment - Net Sale Proceeds) and paragraph (c) of Clause 7.6 (Mandatory
      prepayment - Insurance Proceeds)  and  under  sub-paragraph (i) above, the
      Borrower  shall  notify  the Agent  of the proposed date of prepayment of
      those Proceeds (the "REINVESTMENT PREPAYMENT DATE") which must be at least
      five Business Days after the date of that notice.


                                     - 35 -
<PAGE>

(g)   The  Borrower  irrevocably  authorises  the Agent to withdraw  any amounts
      credited to the Holding  Account  which have not been  withdrawn  from the
      Holding Account under  sub-paragraphs  (i) and (ii) of paragraph (e) above
      and apply such amounts against cancellations and prepayments which are due
      under this  Agreement  in  accordance  with  Clause 7.10  (Application  of
      Proceeds).

(h)   Interest which has accrued on the Holding  Account may be withdrawn by the
      Borrower in accordance with the mandate  relating to the Holding  Account,
      provided that no such  withdrawal may be made while an Event of Default is
      outstanding  in respect of which notice has been served on the Borrower by
      the Agent.

7.9   PREPAYMENT ACCOUNT

(a)   The  Borrower  shall  ensure  that  all  Proceeds  (or  an  equal  amount)
      including, for the avoidance of doubt Immediate Prepayment Proceeds (other
      than,  subject  to Clause  7.8(e),  any  proceeds  paid  into the  Holding
      Account) are paid directly into (or as soon as  practicable  after receipt
      are transferred into) the Prepayment Account.

(b)   Within five Business Days after the date (the "RECEIPT DATE") on which any
      such  Proceeds  have  been  received  by any member of the Group (or have
      become Proceeds), the Company shall notify the Agent of the Receipt Date,
      the amount in euro of those Proceeds and the proposed date of prepayment
      of  those  Proceeds  (the "PREPAYMENT DATE") (which must be at least five
      Business Days after the date of that notice or as otherwise agreed between
      the Borrower and the Agent only in respect of such Proceeds which relate
      to the disposals referred to in paragraph (m) of the definition of
      Permitted Disposal).

(c)   No amount may be  withdrawn or  transferred  from the  Prepayment  Account
      except:

      (i)   to make the prepayments  required under Clause 7.10  (Application of
            Proceeds); or

      (ii) with the prior consent of the Majority Lenders.

(d)   The Borrower irrevocably authorises the Agent to withdraw amounts credited
      to the Prepayment Account and apply such amounts against cancellations and
      prepayments  which are due under this Agreement in accordance  with Clause
      7.10 (Application of Proceeds).

(e)   Interest which has accrued on the  Prepayment  Account may be withdrawn by
      the Borrower in  accordance  with the mandate  relating to the  Prepayment
      Account,  provided that no such  withdrawal  may be made while an Event of
      Default is  outstanding  in respect of which notice has been served on the
      Borrower by the Agent.

7.10  APPLICATION OF PROCEEDS

(a)   Any Proceeds in respect of which the Borrower has delivered a notice under
      paragraph  (e) of Clause 7.8 (Holding  Account) or paragraph (b) of Clause
      7.9 (Prepayment  Account) shall be applied in the following order, in each
      case until the relevant Loans or other  liabilities have been satisfied in
      full:

      (i)   in the case of any Net Sale  Proceeds  which  relate to any disposal
            referred  to in  paragraph  (m)  of  the  definition  of  "Permitted
            Disposal",  in prepayment of the outstanding  Facility B2 Loan only;
            and

      (ii) in the case of any other Proceeds:


                                     - 36 -
<PAGE>

            (A)   subject to paragraph (B) below, FIRST in prepayment of amounts
                  outstanding  under  Facility  B1 and SECOND in  prepayment  of
                  amounts outstanding under Facility B2; or

            (B)   from the  earlier of the date of any  disposal  referred to in
                  paragraphs  (m)  and  (n)  of  the  definition  of  "Permitted
                  Disposal"  and the date  which is 65 days  after  the  Closing
                  Date,  in  prepayment  pro rata of amounts  outstanding  under
                  Facility B1 and Facility B2.

(b)   Any Proceeds to be applied in prepayment  of any Loan under  paragraph (a)
      above shall be applied on the earlier of the Reinvestment  Prepayment Date
      or,  as the  case  may be,  the  Prepayment  Date  and the last day of the
      Interest Period relating to that Loan.

7.11  VOLUNTARY PREPAYMENT OF LOANS

(a)   The Borrower may, if it gives the Agent not less than five Business  Days'
      (or such shorter  period as the Majority  Lenders may agree) prior notice,
      prepay  the  whole or any part of any Loan but if in part by an  aggregate
      amount  that   reduces  the   relevant   Loan  by  a  minimum   amount  of
      (euro)5,000,000.

(b)   Any Loan may only be  voluntarily  prepaid  after 31 August  2006 (or,  if
      earlier, the day on which the Available Facility for the relevant Facility
      is zero).

7.12  RIGHT OF REPLACEMENT OF A SINGLE LENDER

      If:

      (a)   any sum  payable  to any  Lender by an  Obligor  is  required  to be
            increased under paragraph (c) of Clause 12.2 (Tax gross-up); or

      (b)   any Lender claims indemnification from the Company under Clause 12.3
            (Tax indemnity) or Clause 13.1 (Increased costs),

      (c)   an Obligor  is, or will be,  required  to pay to a Lender any amount
            under Schedule 4 (Mandatory Cost Formulae),

      the Borrower may, whilst the  circumstance  giving rise to the requirement
      or indemnification continues (and by not less than 15 Business Days' prior
      written notice):

      (i)   arrange  for the  transfer  of the whole (but not part only) of that
            Lender's  Commitment  and  participations  in the  Loans to a new or
            existing Lender or financial  institution  which is not a Restricted
            Person,  a member  of the  Group or an  Affiliate  of  either of the
            foregoing  willing to accept that  transfer  and  acceptable  to the
            Borrower; or

      (ii)  with the  prior  consent  of the  Majority  Lenders,  give the Agent
            notice of  cancellation  of the  Commitment  of that  Lender and its
            intention to procure the repayment of that Lender's participation in
            the Utilisations granted by that Lender, whereupon the Commitment of
            that Lender shall immediately be reduced to zero.

            On the  last  day of each  Interest  Period  which  ends  after  the
            Borrower has given notice under this paragraph (ii) (or, if earlier,
            the date  specified  by the Borrower in that  notice),  the Borrower
            shall repay that Lender's participation in that Utilisation.


                                     - 37 -
<PAGE>

7.13  REPLACEMENT OF A NON-CONSENTING LENDER OR NON-FUNDING LENDER

(a)   In this Clause 7.13 and in Clause 7.14 (Replacement of a Lender):

      (i)   "NON-CONSENTING  LENDER"  means any Lender which does not agree to a
            consent, waiver or amendment directly or by virtue of Clause 34.2(d)
            (Exceptions) if:

            (A)   the  Borrower or the Agent has  requested  a consent  under or
                  waiver or amendment of any provision of any Finance Document;

            (B)   that  consent,  waiver or amendment  requires the agreement of
                  all the Lenders; and

            (C)   a Lender or Lenders:

                  1.    whose share in the  outstanding  Loans and whose undrawn
                        Commitments  then  aggregate 80 per cent. or more of the
                        aggregate  of all  the  outstanding  Loans  and  undrawn
                        Commitments of all the Lenders;

                  2.    if  there is no Loan  then  outstanding,  whose  undrawn
                        Commitments  then  aggregate 80 per cent. or more of the
                        Total Commitments; or

                  3.    if  there  is a Loan  then  outstanding  and  the  Total
                        Commitments have been reduced to zero, whose Commitments
                        aggregated 80 per cent. or more of the Total Commitments
                        immediately before the reduction.

      (ii)  "NON-FUNDING LENDER" means:

            (A)   any  Lender  which has  failed to make or  participate  in any
                  Utilisation  as required by this  Agreement  and the Agent has
                  determined  that the  Lender  is not  likely to  advance  that
                  amount; or

            (B)   any Lender which has given notice to the Borrower or the Agent
                  that  it  does  not  intend  to  make  or  participate  in any
                  Utilisation  as required by this  Agreement or has  repudiated
                  its obligation to do so.

(b)   If:

      (i) any Lender becomes a Non-Consenting Lender; or

      (ii) any Lender becomes a Non-Funding Lender,

      the  Borrower  may, if it gives the Agent and that Lender not less than 15
      Business  Days' prior  notice,  arrange for the transfer of the whole (but
      not part only) of that Lender's Commitment and participations in the Loans
      to a new or  existing  Lender  or  financial  institution  which  is not a
      Restricted  Person, a member of the Group or an Affiliate of either of the
      foregoing willing to accept that transfer and acceptable to the Borrower.

7.14  REPLACEMENT OF A LENDER

(a)   The  replacement of a Lender pursuant to Clause 7.12 (Right of replacement
      of a single Lender) or Clause 7.13 (Replacement of a Non-Consenting Lender
      or Non-Funding Lender) shall be subject to the following conditions:

      (i)   no Finance  Party shall have any  obligation  to find a  replacement
            Lender;


                                     - 38 -
<PAGE>

      (ii)  any replacement of a Non-Consenting  Lender must take place no later
            than 60 days after the  earlier  of (A) the date the  Non-Consenting
            Lender  notified  the Agent of its refusal to agree to the  relevant
            consent,  waiver or amendment  and (B) the deadline  (being not less
            than 15 Business Days after the Lender  received the request for the
            relevant consent,  waiver or amendment) by which the  Non-Consenting
            Lender failed to reply to that request;

      (iii) any Lender replaced pursuant to Clause 7.12 (Right of replacement of
            a single  Lender) or Clause 7.13  (Replacement  of a  Non-Consenting
            Lender or Non-Funding Lender) shall not be required to refund, or to
            pay or  surrender  to any  other  Lender,  any of the  fees or other
            amounts received by that Lender under any Finance Document; and

      (iv)  any  replacement  pursuant to Clause 7.12 (Right of replacement of a
            single  Lender)  or Clause  7.13  (Replacement  of a  Non-Consenting
            Lender or  Non-Funding  Lender) of a Lender which is the Agent shall
            not affect its role as the Agent.

      (b)   The Borrower's right to replace a Non-Funding  Lender is in addition
            to all other rights and remedies  available to the Borrower  against
            the Non-Funding Lender.

7.15  RESTRICTIONS

(a)   Any notice of  cancellation  or  prepayment  given by any Party under this
      Clause 7 shall be irrevocable and, unless a contrary indication appears in
      this  Agreement,  specify  the  date or  dates  upon  which  the  relevant
      cancellation  or  prepayment  is  to  be  made  and  the  amount  of  that
      cancellation or prepayment.

(b)   Any prepayment  under this  Agreement  shall be made together with accrued
      interest on the amount  prepaid and,  subject to any Break Costs,  without
      premium or penalty.

(c)   The Borrower may not reborrow any part of a Facility which is prepaid.

(d)   The Borrower shall not repay or prepay all or any part of the Utilisations
      or cancel  all or any part of the  Commitments  except at the times and in
      the manner expressly provided for in this Agreement.

(e)   Unless a contrary  indication appears in this Agreement,  no amount of the
      Total  Commitments  cancelled  under this  Agreement  may be  subsequently
      reinstated.

(f)   If the Agent  receives  a notice  under  this  Clause 7 it shall  promptly
      forward a copy of that  notice  to either  the  Borrower  or the  affected
      Lender, as appropriate.


                                     - 39 -
<PAGE>

                                    SECTION 5
                              COSTS OF UTILISATION

8.    INTEREST

8.1   CALCULATION OF INTEREST

      The  rate of  interest  on each  Loan  for  each  Interest  Period  is the
      percentage rate per annum which is the aggregate of the applicable:

      (a) Margin;

      (b) EURIBOR; and

      (c) Mandatory Cost, if any.

8.2   PAYMENT OF INTEREST

      The  Borrower  shall pay accrued  interest on each Loan on the last day of
      each  Interest  Period  (and,  if the  Interest  Period is longer than six
      Months,  on the dates falling at six monthly intervals after the first day
      of the Interest Period).

8.3   DEFAULT INTEREST

(a)   If  an  Obligor  fails  to  pay  any  amount payable by it under a Finance
      Document on its due date, interest shall accrue on the overdue amount from
      the  due  date  up  to  the  date of actual payment (both before and after
      judgment)  at a rate which, subject to paragraph (b) below, is the sum of
      one per cent.  and  the  rate which would have been payable if the overdue
      amount had,  during  the period of non-payment, constituted a Loan in the
      currency of the overdue amount for successive Interest Periods, each of a
      duration selected by the Agent (acting reasonably) of up to three Months.
      Any interest accruing under this Clause 8.3 shall be immediately payable
      by the Obligor on demand by the Agent.

(b)   If any overdue  amount  consists of all or part of a Loan which became due
      on a day which was not the last day of an Interest Period relating to that
      Loan:

      (i)   the first  Interest  Period  for that  overdue  amount  shall have a
            duration  equal to the  unexpired  portion of the  current  Interest
            Period relating to that Loan; and

      (ii)  the rate of  interest  applying to the  overdue  amount  during that
            first Interest Period shall be the sum of one per cent. and the rate
            which would have applied if the overdue amount had not become due.

(c)   Default  interest  (if  unpaid)  arising  on an  overdue  amount  will  be
      compounded  with the  overdue  amount at the end of each  Interest  Period
      applicable  to that  overdue  amount but will remain  immediately  due and
      payable.

8.4   NOTIFICATION OF RATES OF INTEREST

      The Agent shall promptly  notify the relevant  Lenders and the Borrower of
      the determination of a rate of interest under this Agreement.

8.5   ADJUSTMENT OF MARGIN

      This Clause 8.5 sets out the mechanics of  adjustment of the Margin,  each
      provision of this Clause 8.5 operating cumulatively.


                                     - 40 -
<PAGE>

(a)   Subject to this Clause 8.5, in respect of each Interest Period commencing
      on or after the date which is 6 Months from the Closing Date the Margin
      applicable to each Utilisation shall be the rate per annum specified in
      the definition of Margin set out in Clause 1.1 (Definitions) adjusted, by
      reference to the ratio of Net Borrowings to EBITDA as shown in the then
      most recent Compliance Certificate (and the financial statements with
      which it is required by this Agreement to be delivered) received by the
      Agent, to equal the rate per annum specified opposite the relevant range
      set out in the following table in which the ratio of Net Borrowings to
      EBITDA falls:

<TABLE>
<CAPTION>
       -------------------------------------------------------------------------
                         RATIO                       MARGIN (% P.A.)
       -------------------------------------------------------------------------
<S>                                                        <C>
       Higher than 3:1                                     2.75
       -------------------------------------------------------------------------
       Equal to or lower than
       3:1 but higher than
       2.5:1                                               2.50
       -------------------------------------------------------------------------
       Equal to or lower than 2.5:1                        2.25
       -------------------------------------------------------------------------
</TABLE>

(b)   Any  adjustment to the Margin under  paragraph (a) above shall take effect
      on the date (the "Margin  Adjustment  Date")  falling five  Business  Days
      after receipt by the Agent of a Compliance  Certificate (and the financial
      statements with which it is required by this Agreement to be delivered) in
      accordance with Clause 19.4 (Compliance Certificate).

(c)   Until  such  a  resolution  as  referred  to in paragraph (d)(i) below is
      actually passed, if at any time, the Collateral Agent for the DIP Lenders
      declares by notice to the Administrative  Borrower  (as defined in the DIP
      Financing)  all  or  any  portion  of  the  Loans  (as defined in the DIP
      Financing) to  be due and payable pursuant to section 10.01(i) of the DIP
      Financing, the Margin shall be the sum of one per cent. per annum and the
      Margin which would otherwise have been applicable in accordance with this
      Clause 8.5.

(d)   If at any time it is no longer  necessary  to obtain a court  approval  to
      pass a  shareholder  resolution  of the  Company  by virtue of  Bankruptcy
      Emergence:

      (i)   the Company shall procure that such a shareholder  resolution of the
            Company is promptly passed which shall approve the adjustment to the
            Margin  applicable  on a Change of Control  as set out in  paragraph
            (ii) below; and

      (ii)  following  such  resolution  being  passed,  if a Change of  Control
            occurs the Margin  shall be the sum of one per cent.  and the Margin
            which would  otherwise have been  applicable in accordance with this
            Clause 8.5.

      In this paragraph (d):

      (i)   a "CHANGE OF CONTROL" will occur if:

            (A)   any person or group of persons acting in concert acquires:

                  (A)   more than 50 per cent.  of the issued  share  capital of
                        Solutia Inc.;

                  (B)   issued share capital  having the right to cast more than
                        50 per  cent.  of the  votes  capable  of being  cast in
                        general meetings of Solutia Inc.; or


                                     - 41 -
<PAGE>

                  (C)   the right to determine the  composition  of the majority
                        of the board of directors or equivalent  body of Solutia
                        Inc.,

                  but excluding any such acquisition made pursuant to the terms
                  of the plan of reorganization of Solutia Inc.; or

            (B)   Solutia Inc.  ceases to own,  directly or indirectly,  100% of
                  the issued share capital of the Company, or ceases to have the
                  right to  determine  the  composition  of the  majority of the
                  board of directors or equivalent body of the Company.

      (ii)  "ACTING IN CONCERT" has the meaning  given to it in the City Code on
            Takeovers and Mergers.

(e)   If any Security is created over the share  capital of the Company  (except
      for Security over such share capital as set out under paragraph  2.2(a)(v)
      of the Due Diligence Report as in existence at the date of this Agreement)
      the  Margin  shall be the sum of one per cent.  per  annum and the  Margin
      which would  otherwise have been applicable in accordance with this Clause
      8.5

(f)   If the Margin for a Loan is reduced for any period under this Clause 8.5
      but the annual audited financial statements of the Group (and the
      Compliance Certificate with which they are required by this Agreement to
      be delivered) subsequently received by the Agent do not confirm the basis
      for that reduction, that reduction shall be reversed with retrospective
      effect. In the event the Margin for that Loan shall be the rate per annum
      specified opposite the relevant range set out in the table above and the
      revised ratio of Net Borrowings to EBITDA calculated using the figures in
      that Compliance Certificate. The Company shall promptly pay to the Agent
      any amount necessary to put the Agent and Lenders in the position they
      would have been in had the appropriate rate of the Margin applied during
      that period.

(g)   While an Event of Default is  continuing,  the Margin  applicable  to each
      Utilisation shall,  subject to paragraphs (c) to (e) above,  revert to the
      rate specified in the definition of Margin in Clause 1.1 (Definitions).

9.    INTEREST PERIODS

9.1   SELECTION OF INTEREST PERIODS

(a)   The  Borrower  (or the  Company on behalf of the  Borrower)  may select an
      Interest Period for a Loan in the Utilisation Request for that Loan or (if
      the Loan has already been borrowed) in a Selection Notice.

(b)   Each Selection  Notice for a Loan is irrevocable  and must be delivered to
      the Agent by the  Borrower  (or the Company on behalf of the  Borrower) to
      which that Loan was made not later than the Specified Time.

(c)   If the Borrower (or the  Company)  fails to deliver a Selection  Notice to
      the Agent in accordance  with paragraph (b) above,  the relevant  Interest
      Period will be one Month.

(d)   Subject to this  Clause 9, the  Borrower  (or the  Company)  may select an
      Interest  Period of 1, 2, 3 or 6 Months or any other period agreed between
      the Company and the Agent (acting on the  instructions  of all the Lenders
      participating in the relevant Loan).


                                     - 42 -
<PAGE>

(e)   Until  the  Syndication  Date,  each  Interest  Period  shall be a maximum
      duration  of one Month or such  shorter  duration  as the  Company and the
      Agent may agree.

(f)   An  Interest  Period for a Loan shall not  extend  beyond the  Termination
      Date.

(g)   Each Interest Period for a Loan shall start on the Utilisation Date or (if
      already made) on the last day of its preceding Interest Period.

9.2   NON-BUSINESS DAYS

      If an Interest Period would otherwise end on a day which is not a Business
      Day,  that  Interest  Period will instead end on the next  Business Day in
      that calendar  month (if there is one) or the  preceding  Business Day (if
      there is not).

10. CHANGES TO THE CALCULATION OF INTEREST

10.1  ABSENCE OF QUOTATIONS

      Subject to Clause 10.2 (Market disruption), if EURIBOR is to be determined
      by reference to the Reference Banks but a Reference Bank does not supply a
      quotation by the  Specified  Time on the  Quotation  Day,  the  applicable
      EURIBOR  shall  be  determined  on  the  basis  of the  quotations  of the
      remaining Reference Banks.

10.2  MARKET DISRUPTION

(a)   The Agent will notify the Company if a Market  Disruption  Event occurs in
      relation to a Loan for any Interest  Period.  After such  notification the
      rate of  interest  on each  Lender's  share of that Loan for the  Interest
      Period shall be the percentage rate per annum which is the sum of:

      (i)   the Margin;

      (ii)  the rate notified to the Agent by that Lender as soon as practicable
            and in any event  before  interest  is due to be paid in  respect of
            that  Interest  Period,  to be that which  expresses as a percentage
            rate per annum the cost to that Lender of funding its  participation
            in that Loan from whatever source it may reasonably select; and

      (iii) the   Mandatory   Cost,   if  any,   applicable   to  that  Lender's
            participation in the Loan.

(b)   In this Agreement "MARKET DISRUPTION EVENT" means:

      (i)   at or about  noon on the  Quotation  Day for the  relevant  Interest
            Period the Screen Rate is not  available and none or only one of the
            Reference  Banks  supplies a rate to the Agent to determine  EURIBOR
            for the relevant currency and Interest Period; or

      (ii)  before  close of  business  in London on the  Quotation  Day for the
            relevant Interest Period,  the Agent receives  notifications  from a
            Lender or  Lenders  (whose  participations  in a Loan  exceed 35 per
            cent.  of that  Loan)  that  the  cost to it of  obtaining  matching
            deposits  in the  Relevant  Interbank  Market  would be in excess of
            EURIBOR for euro and the relevant Interest Period.

10.3  ALTERNATIVE BASIS OF INTEREST OR FUNDING

      (a)   If a Market  Disruption Event occurs and the Agent or the Company so
            requires,  the Agent and the Company  shall enter into  negotiations
            (for a period of not more than thirty  days) with a view to agreeing
            a substitute basis for determining the rate of interest.


                                     - 43 -
<PAGE>

(b)   Any alternative  basis agreed pursuant to paragraph (a) above shall,  with
      the prior  consent of all the Lenders and the  Company,  be binding on all
      Parties.

10.4  BREAK COSTS

(a)   The  Borrower  shall,  within three  Business  Days of demand by a Finance
      Party,  pay to that Finance Party its Break Costs  attributable  to all or
      any part of a Loan or Unpaid Sum being paid by the Borrower on a day other
      than the last day of an Interest Period for that Loan or Unpaid Sum.

(b)   Each Lender shall, as soon as reasonably practicable after a demand by the
      Agent, provide a certificate  confirming the amount of its Break Costs for
      any Interest Period in which they accrue.

11.   FEES

11.1  ARRANGEMENT FEE

      The Company or the Borrower shall pay to the Arranger an  arrangement  fee
      in the amount and at the times agreed in a Fee Letter.

11.2  AGENCY FEE

      The Company or the  Borrower  shall pay to the Agent (for its own account)
      an agency fee in the amount and at the times agreed in a Fee Letter.

11.3  SECURITY AGENCY FEE

      The Company or the Borrower  shall pay to the Security  Agent (for its own
      account) a security  agency fee in the amount and at the times agreed in a
      Fee Letter.


                                     - 44 -
<PAGE>

                                    SECTION 6
                         ADDITIONAL PAYMENT OBLIGATIONS

12.   TAX GROSS-UP AND INDEMNITIES

12.1  DEFINITIONS

(a)   In this Agreement:

      "PROTECTED PARTY" means a Finance Party which is or will be subject to any
      liability,  or required to make any  payment,  for or on account of Tax in
      relation  to a sum  received  or  receivable  (or any sum  deemed  for the
      purposes of Tax to be received or receivable) under a Finance Document.

      "QUALIFYING  LENDER"  means a Lender  which is  beneficially  entitled  to
      interest  payments  under this  Agreement and which is (i) a Belgian legal
      entity subject to Belgian  corporate income tax, (ii) a non-Belgian  legal
      entity or (iii) a  non-Belgian  entity  having a legal form similar to the
      legal form of a Belgian company.

      "TAX CREDIT" means a credit against, relief or remission for, or repayment
      of any Tax.

      "TAX DEDUCTION"  means a deduction or withholding for or on account of Tax
      from a payment under a Finance Document.

      "TAX PAYMENT" means either the increase in a payment made by an Obligor to
      a Finance Party under Clause 12.2 (Tax gross-up) or a payment under Clause
      12.3 (Tax indemnity).

(b)   Unless a contrary  indication  appears,  in this Clause 12 a reference  to
      "determines"  or "determined"  means a determination  made in the absolute
      discretion of the person making the determination.

12.2  TAX GROSS-UP

(a)   Each  Obligor  shall make all  payments  to be made by it without  any Tax
      Deduction, unless a Tax Deduction is required by law.

(b)   The Company shall promptly upon becoming aware that an Obligor must make a
      Tax  Deduction  (or that there is any change in the rate or the basis of a
      Tax Deduction)  notify the Agent  accordingly.  Similarly,  a Lender shall
      notify the Agent on becoming  so aware in respect of a payment  payable to
      that Lender.  If the Agent  receives  such  notification  from a Lender it
      shall notify the Company and that Obligor.

(c)   If a Tax Deduction is required by law to be made by an Obligor, the amount
      of the payment due from that Obligor shall be increased to an amount which
      (after  making any Tax  Deduction)  leaves an amount  equal to the payment
      which would have been due if no Tax Deduction had been required.

(d)   An Obligor is not required to make an increased  payment to a Lender under
      paragraph  (c) above for a Tax  Deduction  in respect of Tax  imposed on a
      payment of interest on a Loan if:

      (i)

            (A)   at any point in time between the date of the Agreement and the
                  date on which  the  payment  falls due or on the date on which
                  the payment falls due such Lender is


                                     - 45 -
<PAGE>

                  not or has ceased to be a  Qualifying  Lender  other than as a
                  result of any change  after the date he became a Lender  under
                  this Agreement in (or in the  interpretation,  administration,
                  or  application  of) any law,  or any  published  practice  or
                  concession of any relevant taxing authority; or

            (B)   such  Lender  has not  complied  with  its  obligations  under
                  paragraph  (g)  below or its  representation  (if  any)  under
                  paragraph (g) below is untrue; or

      (ii)  unless Qualifying Lender status of a Lender is not required in order
            to enable the Borrower to make all payments made by it to the
            Lenders without a Tax Deduction.

(e)   If an Obligor is required to make a Tax Deduction, that Obligor shall make
      that Tax  Deduction and any payment  required in connection  with that Tax
      Deduction  within the time allowed and in the minimum  amount  required by
      law.

(f)   Within  thirty  days of  making  either  a Tax  Deduction  or any  payment
      required in connection  with that Tax  Deduction,  the Obligor making that
      Tax Deduction shall deliver to the Agent for the Finance Party entitled to
      the payment an original  receipt (or certified  copy  thereof)  reasonably
      satisfactory to that Finance Party that the Tax Deduction has been made or
      (as  applicable)  any  appropriate  payment  paid to the  relevant  taxing
      authority.

(g)   Each  Original  Lender  shall  deliver  to the  Borrower  on or before the
      Closing Date a Tax Status Certificate duly executed by it with a copy sent
      to the Agent and  represents to the other parties hereto as at the date of
      the Tax Status  Certificate  that it is a  Qualifying  Lender.  Each other
      Lender  shall  comply  with  its   obligation  to  deliver  a  Tax  Status
      Certificate  to the extent  required  under Clause  23.2(f) and where such
      obligation  applies,  it represents to the other parties hereto that as at
      the date of the Tax Status Certificate that it is a Qualifying Lender.

(h)   Each Lender shall co-operate  directly with the Borrower in completing any
      procedural  formalities  or  requirements  necessary  for that  Obligor to
      obtain  authorisation  to  make  that  payment  without  a  Tax  Deduction
      (including  delivering  additional Tax Status  Certificates if the Belgian
      tax  authorities  inform  the  Obligor  that such  additional  Tax  Status
      Certificates are required).

12.3  TAX INDEMNITY

(a)   The Company shall (within three  Business Days of demand by the Agent) pay
      to a Protected Party an amount equal to the loss,  liability or cost which
      that  Protected  Party  determines  will  be  or  has  been  (directly  or
      indirectly)  suffered for or on account of Tax by that Protected  Party in
      respect of a Finance Document.

(b)   Paragraph (a) above shall not apply:

      (i)   with respect to any Tax assessed on a Finance Party:

            (A)   under the law of the  jurisdiction in which that Finance Party
                  is  incorporated  or,  if  different,   the  jurisdiction  (or
                  jurisdictions)  in which  that  Finance  Party is  treated  as
                  resident for tax purposes; or

            (B)   under  the  law of the  jurisdiction  in  which  that  Finance
                  Party's  Facility  Office is  located  in  respect  of amounts
                  received or receivable in that jurisdiction,


                                     - 46 -
<PAGE>

                  if that Tax is imposed on or  calculated  by  reference to the
                  net income  received or receivable  (but not any sum deemed to
                  be received or receivable) by that Finance Party; or

      (ii)  to the extent a loss, liability or cost:

            (A)   is compensated  for by an increased  payment under Clause 12.2
                  (Tax gross-up); or

            (B)   would have been compensated for by an increased  payment under
                  Clause 12.2 (Tax gross-up) but was not so  compensated  solely
                  because one of the  exclusions in paragraph (d) of Clause 12.2
                  (Tax gross-up) applied.

(c)   A Protected  Party making,  or intending to make, a claim under  paragraph
      (a) above shall promptly notify the Agent of the event which will give, or
      has given,  rise to the claim,  following which the Agent shall notify the
      Company.

(d)   A Protected Party shall, on receiving a payment from an Obligor under this
      Clause 12.3, notify the Agent.

12.4  TAX CREDIT

      If  an  Obligor  makes  a Tax  Payment  and  the  relevant  Finance  Party
      determines that:

      (a)   a Tax Credit is attributable either to an increased payment of which
            that Tax Payment forms part, or to that Tax Payment; and

      (b)   that Finance  Party has obtained,  utilised and fully  retained that
            Tax Credit on an affiliated group basis,

      the Finance  Party shall pay an amount to the Obligor  which that  Finance
      Party  determines will leave it (after that payment) in the same after-Tax
      position as it would have been in had the Tax Payment not been required to
      be made by the Obligor.

12.5  STAMP TAXES

      The Company shall pay and, within three Business Days of demand, indemnify
      each Finance Party against any cost,  loss or liability that Finance Party
      incurs in relation to all stamp  duty,  stamp duty land tax,  registration
      and other similar Taxes payable in respect of any Finance Document.

12.6  VALUE ADDED TAX

(a)   All amounts set out, or expressed to be payable  under a Finance  Document
      by any Party to a Finance Party which (in whole or in part) constitute the
      consideration  for VAT purposes shall be deemed to be exclusive of any VAT
      which is chargeable on such supply, and accordingly,  subject to paragraph
      (c) below, if VAT is chargeable on any supply made by any Finance Party to
      any Party  under a Finance  Document,  that Party shall pay to the Finance
      Party (in addition to and at the same time as paying the consideration) an
      amount  equal to the  amount  of the VAT (and  such  Finance  Party  shall
      promptly provide an appropriate VAT invoice to such Party).

(b)   If VAT is  chargeable  on any  supply  made  by  any  Finance  Party  (the
      "SUPPLIER") to any other Finance Party (the  "Recipient")  under a Finance
      Document, and any Party (the "RELEVANT PARTY") is required by the terms of
      any Finance Document to pay an amount equal to the


                                     - 47 -
<PAGE>

      consideration  for such supply to the Supplier (rather than being required
      to reimburse the Recipient in respect of that  consideration),  such Party
      shall also pay to the  Supplier  (in  addition  to and at the same time as
      paying  such  amount)  an amount  equal to the  amount  of such  VAT.  The
      Recipient  will promptly pay to the Relevant  Party an amount equal to any
      credit or repayment  from the relevant tax  authority  which it reasonably
      determines relates to the VAT chargeable on that supply.

(c)   Where a Finance  Document  requires any Party to reimburse a Finance Party
      for any costs or expenses,  that Party shall also at the same time pay and
      indemnify  the Finance Party against all VAT incurred by the Finance Party
      in respect of the costs or expenses  to the extent that the Finance  Party
      reasonably determines that neither it nor any other member of any group of
      which it is a member for VAT  purposes is entitled to credit or  repayment
      from the relevant tax authority in respect of the VAT.

13.   INCREASED COSTS

13.1  INCREASED COSTS

(a)   Subject to Clause  13.3  (Exceptions)  the  Company  shall,  within  three
      Business  Days of a demand by the Agent,  pay for the account of a Finance
      Party the amount of any Increased  Costs incurred by that Finance Party or
      any of its Affiliates as a result of (i) the introduction of or any change
      in (or in the interpretation, administration or application of) any law or
      regulation  made after the date of this Agreement or (ii)  compliance with
      any law or regulation made after the date of this Agreement.

(b)   In this Agreement "INCREASED COSTS" means:

      (i)   a  reduction  in the rate of return  from a Facility or on a Finance
            Party's (or its Affiliate's) overall capital;

      (ii)  an additional or increased cost; or

      (iii) a  reduction  of any  amount  due  and  payable  under  any  Finance
            Document,

      which is incurred or suffered by a Finance Party or any of its  Affiliates
      to the extent that it is attributable to that Finance Party having entered
      into its  Commitment or funding or performing  its  obligations  under any
      Finance Document.

13.2  INCREASED COST CLAIMS

(a)   A  Finance  Party  intending  to  make a claim  pursuant  to  Clause  13.1
      (Increased  Costs)  shall notify the Agent of the event giving rise to the
      claim, following which the Agent shall promptly notify the Company.

(b)   Each Finance  Party shall,  as soon as  practicable  after a demand by the
      Agent, provide a certificate confirming the amount of its Increased Costs.

13.3  EXCEPTIONS

(a)   Clause 13.1  (Increased  Costs) does not apply to the extent any Increased
      Cost is:

      (i)   attributable  to a Tax  Deduction  required  by law to be made by an
            Obligor;


                                     - 48 -
<PAGE>

      (ii)  compensated  for by Clause 12.3 (Tax  indemnity) (or would have been
            compensated  for under  Clause 12.3 (Tax  indemnity)  but was not so
            compensated solely because any of the exclusions in paragraph (b) of
            Clause 12.3 (Tax indemnity) applied);

      (iii) compensated for by the payment of the Mandatory Cost; or

      (iv)  attributable  to the wilful breach by the relevant  Finance Party or
            its Affiliates of any law or regulation.

(b)   In this Clause 13.3, a reference to a "TAX DEDUCTION" has the same meaning
      given to the term in Clause 12.1 (Definitions).

14.   OTHER INDEMNITIES

14.1  CURRENCY INDEMNITY

(a)   If any sum due from an Obligor under the Finance  Documents (a "SUM"),  or
      any order, judgment or award given or made in relation to a Sum, has to be
      converted  from the currency  (the "FIRST  CURRENCY") in which that Sum is
      payable into another currency (the "SECOND CURRENCY") for the purpose of:

      (i)   making or filing a claim or proof against that Obligor; or

      (ii)  obtaining or  enforcing  an order,  judgment or award in relation to
            any litigation or arbitration proceedings,

      that Obligor shall as an  independent  obligation,  within three  Business
      Days of  demand,  indemnify  each  Finance  Party to whom  that Sum is due
      against any cost,  loss or liability  arising out of or as a result of the
      conversion including any discrepancy between (A) the rate of exchange used
      to convert that Sum from the First  Currency into the Second  Currency and
      (B) the rate or rates of exchange  available to that person at the time of
      its receipt of that Sum.

(b)   Each Obligor waives any right it may have in any  jurisdiction  to pay any
      amount under the Finance  Documents  in a currency or currency  unit other
      than that in which it is expressed to be payable.

14.2  OTHER INDEMNITIES

      The Company  shall (or shall procure that an Obligor  will),  within three
      Business  Days of demand,  indemnify  each Finance Party against any cost,
      loss or liability incurred by that Finance Party as a result of:

      (a)   the occurrence of any Event of Default;

      (b)   a  failure  by an  Obligor  to pay any  amount  due  under a Finance
            Document on its due date,  including without  limitation,  any cost,
            loss or  liability  arising as a result of Clause 27 (Sharing  among
            the Finance Parties);

      (c)   funding,  or making  arrangements  to fund, its  participation  in a
            Utilisation  requested by the Borrower in a Utilisation  Request but
            not  made  by  reason  of the  operation  of any  one or more of the
            provisions  of this  Agreement  (other  than by reason of default or
            negligence by that Finance Party alone); or


                                     - 49 -
<PAGE>

      (d)   a  Utilisation  (or part of a  Utilisation)  not  being  prepaid  in
            accordance with a notice of prepayment  given by the Borrower or the
            Company or as required by this Agreement.

14.3  INDEMNITY TO THE AGENT

      The Company shall promptly  indemnify the Agent against any cost,  loss or
      liability incurred by the Agent (acting reasonably) as a result of:

      (a)   investigating  any event which it reasonably  believes is a Default;
            or

      (b)   acting or relying on any  notice,  request or  instruction  which it
            reasonably  believes  to  be  genuine,   correct  and  appropriately
            authorised.

14.4  THIRD PARTY INDEMNITY

(a)   The Company  hereby  indemnifies  and agrees to hold  harmless each of the
      Finance Parties and in each case each of its and their affiliates and each
      of their respective officers,  directors,  employees, agents, advisors and
      representatives (each an "INDEMNIFIED PARTY") from and against any and all
      claims, damages, losses,  liabilities,  costs, legal expenses and expenses
      (altogether  "LOSSES")  that may be  incurred  by or awarded  against  any
      Indemnified  Party,  in each case arising out of or in connection with any
      claim, investigation,  litigation or proceeding (or the preparation of any
      defence with respect  thereto)  commenced or threatened in relation to the
      Finance Documents (or the transactions contemplated thereby) or any use of
      the  proceeds  of the  Facility  whether or not such claim  investigation,
      litigation  or   proceeding  is  brought  by  the  Company,   any  of  its
      shareholders or creditors or Indemnified  Party or any other person, or an
      Indemnified Party is otherwise a party thereto,  except to the extent that
      such  Losses are found in a final  non-appealable  judgment  by a court of
      competent  jurisdiction  to have  resulted from such  Indemnified  Party's
      gross negligence,  wilful misconduct or breach of the Finance Documents by
      an Indemnified Party.

(b)   The  company  further  agrees  that no  Indemnified  Party  shall have any
      liability (whether direct or indirect, in contract,  tort or otherwise) to
      it or any of its  shareholders  or creditors for or in connection with the
      transactions  referred to above, except for direct (as opposed to indirect
      or consequential)  damages or losses to the extent such liability is found
      in a final non-appealable judgment by a court of competent jurisdiction to
      have  resulted from such  Indemnified  Party's  gross  negligence,  wilful
      misconduct or breach of the Finance Documents.

15.   MITIGATION BY THE LENDERS

15.1  MITIGATION

(a)   Each  Finance  Party shall,  in  consultation  with the Company,  take all
      reasonable steps to mitigate any circumstances which arise and which would
      result in any amount  becoming  payable under or pursuant to, or cancelled
      pursuant to, any of Clause 7.1  (Illegality),  Clause 12 (Tax gross-up and
      indemnities) or Clause 13 (Increased Costs) including (but not limited to)
      transferring  its rights and  obligations  under the Finance  Documents to
      another Affiliate or Facility Office.

(b)   Paragraph  (a)  above  does not in any way limit  the  obligations  of any
      Obligor under the Finance Documents.


                                     - 50 -
<PAGE>

15.2  LIMITATION OF LIABILITY

(a)   The Company shall  indemnify each Finance Party for all costs and expenses
      reasonably incurred by that Finance Party as a result of steps taken by it
      under Clause 15.1 (Mitigation).

(b)   A  Finance  Party is not  obliged  to take any  steps  under  Clause  15.1
      (Mitigation) if, in the opinion of that Finance Party (acting reasonably),
      to do so might be prejudicial to it.

16.   COSTS AND EXPENSES

16.1  TRANSACTION EXPENSES

      The Company shall promptly on demand pay the Agent, the Security Agent and
      the Arranger the amount of all  reasonable  costs and expenses  (including
      legal  fees and  subject to any agreed  caps)  incurred  by any of them in
      connection  with the  negotiation,  preparation,  printing,  execution and
      syndication of:

      (a)   this  Agreement  and  any  other  documents   referred  to  in  this
            Agreement; and

      (b)   any other  Finance  Document  (other  than a  Transfer  Certificate)
            executed after the date of this Agreement.

16.2  AMENDMENT COSTS

      If (a) an  Obligor  requests  an  amendment,  waiver or  consent or (b) an
      amendment is required  pursuant to Clause 28.9 (Change of  currency),  the
      Company shall,  within three Business Days of demand,  reimburse the Agent
      and the Security Agent for the amount of all costs and expenses (including
      legal  fees)  reasonably  incurred by the Agent or the  Security  Agent in
      responding to,  evaluating,  negotiating or complying with that request or
      requirement.

16.3  ENFORCEMENT COSTS

      The Company  shall,  within  three  Business  Days of demand,  pay to each
      Finance Party the amount of all costs and expenses  (including legal fees)
      properly incurred by that Finance Party in connection with the enforcement
      of, or the preservation of any rights under, any Finance Document.


                                     - 51 -
<PAGE>

                                    SECTION 7
                             GUARANTEE AND SECURITY

17.   GUARANTEE AND INDEMNITY

17.1  GUARANTEE AND INDEMNITY

      Each Guarantor irrevocably and unconditionally jointly and severally:

      (a)   guarantees   to  each  Finance   Party  and  Hedging  Bank  punctual
            performance by each other Obligor of all that Obligor's  obligations
            under the Finance Documents;

      (b)   undertakes with each Finance Party and Hedging Bank that whenever an
            Obligor does not pay any amount when due under or in connection with
            any Finance Document, that Guarantor shall immediately on demand pay
            that amount as if it was the principal obligor; and

      (c)   indemnifies  each  Finance  Party and Hedging  Bank  immediately  on
            demand against any cost, loss or liability  suffered by that Finance
            Party or Hedging Bank (i) if any  obligation  guaranteed by it is or
            becomes  unenforceable,  invalid or illegal; or (ii) by operation of
            law the amount of the cost,  loss or liability shall be equal to the
            amount which that Finance Party or Hedging Bank would otherwise have
            been entitled to recover.

17.2  CONTINUING GUARANTEE

      This  guarantee is a continuing  guarantee and will extend to the ultimate
      balance  of sums  payable  by any  Obligor  under the  Finance  Documents,
      regardless of any intermediate payment or discharge in whole or in part.

17.3  REINSTATEMENT

      If any payment by an Obligor or any discharge  given by a Finance Party or
      Hedging Bank (whether in respect of the  obligations of any Obligor or any
      security for those  obligations  or  otherwise) is avoided or reduced as a
      result of insolvency or any similar event:

      (a)   the  liability  of each  Obligor  shall  continue as if the payment,
            discharge, avoidance or reduction had not occurred; and

      (b)   each  Finance  Party  and  Hedging  Bank  (as  applicable)  shall be
            entitled to recover the value or amount of that  security or payment
            from  each  Obligor,  as if the  payment,  discharge,  avoidance  or
            reduction had not occurred.

17.4  WAIVER OF DEFENCES

      The  obligations  of each  Guarantor  under  this  Clause  17 will  not be
      affected by an act,  omission,  matter or thing which, but for this Clause
      17, would reduce,  release or prejudice any of its obligations  under this
      Clause  17  (without  limitation  and  whether  or not  known to it or any
      Secured Party) including:

      (a)   any time,  waiver or consent  granted to, or  composition  with, any
            Obligor or other person;

      (b)   the release of any other Obligor or any other person under the terms
            of any composition or arrangement with any creditor of any member of
            the Group or any other person;


                                     - 52 -
<PAGE>

      (c)   the taking, variation,  compromise, exchange, renewal or release of,
            or refusal or neglect to  perfect,  take up or  enforce,  any rights
            against,  or security over assets of, any Obligor or other person or
            any  non-presentation  or  non-observance  of any formality or other
            requirement  in respect of any  instrument or any failure to realise
            the full value of any security;

      (d)   any incapacity or lack of power,  authority or legal  personality of
            or  dissolution  or change in the members or status of an Obligor or
            any other person;

      (e)   any amendment, novation, supplement, extension, restatement (however
            fundamental  and whether or not more onerous) or  replacement of any
            Finance  Document or any other  document or security  including  any
            change in the purpose of, any  extension  of or any  increase in any
            facility  or the  addition  of any new  facility  under any  Finance
            Document or other document or security;

      (f)   any unenforceability,  illegality or invalidity of any obligation of
            any person  under any  Finance  Document  or any other  document  or
            security; or

      (g)   any insolvency or similar proceedings.

17.5  IMMEDIATE RECOURSE

      Each Guarantor waives any right it may have of first requiring any Finance
      Party or Hedging  Bank (or any  trustee or agent on its behalf) to proceed
      against or enforce any other rights or security or claim  payment from any
      person  before  claiming  from that  Guarantor  under this Clause 17. This
      waiver  applies  irrespective  of any law or any  provision  of a  Finance
      Document to the contrary.

17.6  APPROPRIATIONS

      Until all amounts which may be or become  payable by the Obligors under or
      in connection  with the Finance  Documents have been  irrevocably  paid in
      full,  each Finance Party and Hedging Bank (or any trustee or agent on its
      behalf) may:

      (a)   refrain from  applying or enforcing  any other  moneys,  security or
            rights held or received by that  Finance  Party or Hedging  Bank (or
            any trustee or agent on its behalf) in respect of those amounts,  or
            apply and  enforce  the same in such manner and order as it sees fit
            (whether  against those amounts or otherwise) and no Guarantor shall
            be entitled to the benefit of the same; and

      (b)   hold in an  interest-bearing  suspense  account any moneys  received
            from any Guarantor or on account of any Guarantor's  liability under
            this Clause 17.

17.7  DEFERRAL OF GUARANTORS' RIGHTS

      Until all amounts which may be or become  payable by the Obligors under or
      in connection  with the Finance  Documents have been  irrevocably  paid in
      full and  unless the Agent (or,  as the case may be, the  Security  Agent)
      otherwise directs, no Guarantor will exercise any rights which it may have
      by reason  of  performance  by it of its  obligations  under  the  Finance
      Documents:

      (a)   to be indemnified by an Obligor;


                                     - 53 -
<PAGE>

      (b)   to claim any contribution  from any other guarantor of any Obligor's
            obligations under the Finance Documents; and/or

      (c)   to take the  benefit  (in  whole or in part  and  whether  by way of
            subrogation  or otherwise)  of any rights of the Finance  Parties or
            Hedging Banks under the Finance  Documents or of any other guarantee
            or security  taken  pursuant to, or in connection  with, the Finance
            Documents by any Finance Party or Hedging Bank.

17.8  RELEASE OF GUARANTORS' RIGHT OF CONTRIBUTION

      If any  Guarantor  (a  "RETIRING  GUARANTOR")  ceases to be a Guarantor in
      accordance with the terms of the Finance  Documents for the purpose of any
      sale or other  disposal of that Retiring  Guarantor  then on the date such
      Retiring Guarantor ceases to be a Guarantor:

      (a)   that Retiring Guarantor is released by each other Guarantor from any
            liability  (whether  past,  present or future and whether  actual or
            contingent) to make a contribution to any other Guarantor arising by
            reason of the  performance by any other Guarantor of its obligations
            under the Finance Documents; and

      (b)   each other Guarantor  waives any rights it may have by reason of the
            performance of its obligations  under the Finance  Documents to take
            the benefit  (in whole or in part and whether by way of  subrogation
            or otherwise) of any rights of the Finance Parties under any Finance
            Document  or  of  any  other  security  taken  pursuant  to,  or  in
            connection  with, any Finance Document where such rights or security
            are  granted  by or in  relation  to  the  assets  of  the  Retiring
            Guarantor.

17.9  ADDITIONAL SECURITY

      This  guarantee is in addition to and is not in any way  prejudiced by any
      other guarantee or security now or subsequently  held by any Finance Party
      or Hedging Bank.

17.10 LIMITATIONS

      In relation to any Guarantor  incorporated  or  established in Germany the
      following shall apply:

(a)   The  enforcement of the guarantee and indemnity  granted under this Clause
      17  (the  "GUARANTEE")  shall  be,  at the  date  hereof  and at any  time
      thereafter, limited to an amount equal to the net assets of the Guarantor,
      which are calculated as such Guarantor's  total assets (the calculation of
      which shall take into account the  captions  reflected in sections 266 (2)
      A, B and C of the German  Commercial  Code  (Handelsgesetzbuch))  less its
      reserves  for  own  shares  (sections  266  (3) A  III.2.  of  the  German
      Commercial Code) less its liabilities (the calculation of which shall take
      into  account the  captions  reflected  in sections 266 (3) B, C, D of the
      German  Commercial Code) less its registered share capital  (Stammkapital)
      (the Net Assets).

(b)   For the  purposes of  calculating  Net Assets the  balance  sheet shall be
      adjusted in a way that (i) any amounts  which the  Guarantor  has received
      from any Loan which has been on-lent by the Borrower to the  Guarantor and
      is still outstanding at the time of the enforcement of the Guarantee shall
      be  disregarded  or (ii) the  amount of any  increase  of the  Guarantor's
      registered  share capital out of retained  earnings  (Kapitalerhohung  aus
      Gesellschaftsmittein)  after  the  date of the  Guarantee  that  has  been
      effected  without the prior written consent of the Agent shall be deducted
      from the Guarantor's registered share capital.


                                     - 54 -
<PAGE>

(c)   Furthermore, the Guarantor shall, in a situation where

      (i)   it does not have sufficient  assets to maintain its registered share
            capital; and

      (ii)  the Agent would (but for this  Clause) be entitled and is seeking to
            enforce the security granted under this Guarantee,

            (A)   realise  any and  all of its  assets  that  are  shown  in the
                  balance   sheet  with  a  book  value   (Buchwert)   which  is
                  significantly  lower  than the  market  value of such  assets,
                  provided  such  asset  is not  necessary  for the  Guarantor's
                  business (betriebsnotwendig).

(d)   For  the  purpose  of the  calculation  of the Net  Assets  and  thus  the
      enforceable  amount,  the Guarantor  will deliver  within 30 Business Days
      after his  notification by the Agent of an Event of Default,  to the Agent
      an up to  date  balance  sheet  drawn-up  by its  auditors  or  any  other
      reputable firm of auditors together with a determination of the Net Assets
      by the respective  auditors.  The balance sheet and  determination  of Net
      Assets shall be prepared in accordance with accounting principles pursuant
      to the German Commercial Code (Handelsgesetzbuch) and be based on the same
      principles that were applied when establishing the previous year's balance
      sheet.

(e)   Should  the   Guarantor   fail  to  deliver  such  balance   sheet  and/or
      determination of the Net Assets within the 30 Business Day period referred
      to above or if the Guarantor has generally ceased to make payments or upon
      filing of an application for insolvency proceedings by the Guarantor,  the
      Agent shall be entitled to enforce the Guarantee,  without the enforcement
      limitations  provided for above applying at the time of such  enforcement,
      but is obliged to retransfer  proceeds from such enforcement to the extent
      that the Guarantor  demonstrates in reasonable detail that the enforcement
      of this Guarantee  violated the rules on  preservation of the stated share
      capital  under  sections  30,31  GmbH-Act as set out in paragraph  (a)-(c)
      above by resulting  or enhancing  negative  assets  (Unterblilanz)  of the
      Guarantor.

(f)   This  Guarantee  shall  further  not be  enforced  to the extent  that the
      Guarantor  demonstrates in reasonable  detail that such enforcement  would
      lead to a breach of the Gebot der  Rucksichtnahme auf die Eigenbelange der
      Gesellschaft  (duty of care owing by the relevant  shareholders  vis-a-vis
      the  respective  company)  and of  the  Verbot  des  existenzvernichtenden
      Eingriffs (prohibition of insolvency-causing  intervention),  as developed
      by  the  recent  jurisdiction  (in  particular  BGH II ZR  178/99  "BREMER
      VULKAN",  BGH II ZR 196/00  and BGH II ZR 300/00  "KBV"),  of the  Federal
      Supreme  Court  (Bundesgerichtshof),  caused for  example,  as far as this
      would be within the scope of the cited court ruling,  if the entering into
      the   Guarantee   and  its   enforcement   results   in  the   illiquidity
      (Zahlungsunfahigkeit)  of the  Guarantor.  The Agent  shall be  obliged to
      retransfer proceeds from such enforcement to the extent that the Guarantor
      demonstrates  in reasonable  detail that the  enforcement of the Guarantee
      violated the rules of the cited Federal Supreme Court rulings.  Otherwise,
      any claim for damages to the Agent (excluding, for the avoidance of doubt,
      any  claim  relating  to  unjust   enrichment)   by  the  Guarantor,   any
      shareholders of the Guarantor or its managing directors shall be excluded.

(g)   The guarantee of any  Additional  Guarantor is subject to any  limitations
      relating to that  Additional  Guarantor set out in any relevant  Accession
      Letter  and in the  case  of each  Additional  Guarantor  incorporated  in
      Belgium (an "ADDITIONAL BELGIAN GUARANTOR") paragraph (c) will apply.


                                     - 55 -
<PAGE>

(h)   With respect to the  obligations of any Obligor,  the  Additional  Belgian
      Guarantor's liability under this Clause 17 (Guarantee and Indemnity) shall
      be  limited,  at any time,  to a  maximum  aggregate  amount  equal to the
      greater of:

      (i)   an amount equal to 90% of such  Additional  Belgian  Guarantor's net
            assets (as determined in accordance with the Belgian  Companies Code
            and accounting  principles  generally  accepted in Belgium,  but not
            taking  intra-groups  debts  into  account as debts) as shown by its
            then most recent audited annual financial statements; and

      (ii)  the  aggregate  of  (a)  the  principal   amount  borrowed  by  such
            Additional  Belgian Guarantor pursuant to this Agreement and (b) any
            intra-group  loans or  facilities  made to it by any other member of
            the Group (whether or not such  intra-group  loan is retained by the
            relevant  Guarantor for its own purposes or on-lent to another Group
            company) it being  understood that the amount of each loan will only
            be counted once when calculating the aggregate amount of all loans.


                                     - 56 -
<PAGE>

                                    SECTION 8
               REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

18.   REPRESENTATIONS

      Each  Obligor or (if it so states) the Company  makes the  representations
      and  warranties  set out in this  Clause 18 to each  Finance  Party on the
      dates set out in Clause  18.27 (Times when  representations  made) (in the
      case of any  Obligor  other than the  Company,  only in relation to itself
      and,  to the extent  expressed  to be  applicable  to them,  its  Material
      Subsidiaries and/or other Subsidiaries (if any)).

18.1  STATUS

(a)   It is a limited  liability  company or corporation,  duly incorporated and
      validly existing under the law of its jurisdiction of incorporation.

(b)   It has the  power to own its  assets  and carry on its  business  as it is
      being, and is proposed to be, conducted.

18.2  BINDING OBLIGATIONS

      The obligations  expressed to be assumed by it in each Finance Document to
      which it is or will be a party are legal, valid,  binding and enforceable,
      subject to:

      (a)   any applicable Reservations; or

      (b)   in the case of any  Security  Document,  any  applicable  Perfection
            Requirements.

18.3  NON-CONFLICT WITH OTHER OBLIGATIONS

      The entry into and performance by it of, and the transactions contemplated
      by, the Finance Document do not conflict with:

      (a)   any material law or regulation applicable to it;

      (b)   its or any of its Subsidiaries' constitutional documents; or

      (c)   any  agreement  or  instrument   binding  upon  it  or  any  of  its
            Subsidiaries  or any of its or any of its  Subsidiaries'  assets  or
            constitute a default or termination  event (however  described),  in
            each case to the extent that it would reasonably be expected to have
            a Material Adverse Effect.

18.4  POWER AND AUTHORITY

      It has the power to enter  into,  perform and  deliver,  and has taken all
      necessary action to authorise its entry into, performance and delivery of,
      the  Finance  Documents  to  which  it is  or  will  be a  party  and  the
      transactions contemplated by the Finance Documents.

18.5  VALIDITY AND ADMISSIBILITY IN EVIDENCE

      All necessary Authorisations required:

      (a)   to enable it lawfully to enter into,  exercise its rights and comply
            with its obligations in the Finance Documents to which it is a party
            and the transactions contemplated by the Finance Documents;


                                     - 57 -
<PAGE>

      (b)   to make the Finance Documents to which it or any of its Subsidiaries
            is a party  admissible  in  evidence in its  Relevant  Jurisdiction,
            subject to any applicable Reservations; and

      (c)   to enable it to create the Security purported to be created by it or
            any of its  Subsidiaries  pursuant  to any  Security  Document  and,
            subject to any applicable Reservations, to ensure that such Security
            has the priority and ranking it is expressed to have,

      have been obtained or effected and are in full force and effect,  save for
      complying with any applicable Perfection Requirements.

18.6  GOVERNING LAW AND ENFORCEMENT

      Subject to any applicable Reservations:

      (a)   the  choice  of  law  specified  in  each  Finance  Document  as the
            governing  law of  that  Finance  Document  will be  recognised  and
            enforced in its Relevant Jurisdiction; and

      (b)   any judgment  obtained in England in relation to a Finance  Document
            (or in  the  jurisdiction  of the  governing  law  of  that  Finance
            Document)   will  be   recognised   and  enforced  in  its  Relevant
            Jurisdiction  and, in relation to a Finance  Document  governed by a
            law other than English law, in the jurisdiction of the governing law
            of that Finance Document.

18.7  DEDUCTION OF TAX

      Provided  that each Lender is a  Qualifying  Lender it is not  required to
      make any  deduction  for or on account of Tax from any payment it may make
      under any Finance Document.

18.8  NO FILING OR STAMP TAXES

      Under the law of its Relevant  Jurisdiction  it is not necessary  that the
      Finance  Documents be filed,  recorded or enrolled with any court or other
      authority in that jurisdiction or that any stamp,  registration,  notarial
      or  similar  taxes  or  fees  be paid  on or in  relation  to the  Finance
      Documents or the transactions contemplated by the Finance Documents except
      for:

      (a)   in  each  case  for  complying   with  any   applicable   Perfection
            Requirements;

      (b)   Belgian  stamp  duties  of EUR 0.15  payable  on any loan or  credit
            agreement and any pledge agreement  drafted and executed in Belgium,
            subject to the conditions of the Belgian Stamp Duties Code (Code des
            droits de timbre/Wetboek  Zegelrechten) of 26 June 1947, as amended;
            and

      (c)   notarial fees payable in connection with the notarisation of certain
            Security Documents governed by German law.

18.9  NO DEFAULT

(a)   No Event of Default is  continuing  or would  reasonably  be  expected  to
      result from the making of any  Utilisation or the entry into,  performance
      of, or any transaction contemplated by, any Finance Document.

(b)   No other event or circumstance is outstanding  which constitutes (or which
      would,  with the lapse of time,  the giving of  notice,  the making of any
      determination  under  the  relevant  document  or any  combination  of the
      foregoing,  constitute) a default or termination event (however described)


                                     - 58 -
<PAGE>

      under any other  agreement or instrument  which is binding on it or any of
      its Subsidiaries or to which its (or any of its Subsidiaries')  assets are
      subject  which would  reasonably  be  expected to have a Material  Adverse
      Effect.

18.10 NO BREACH OF LAW

      It has  not  (and  none  of its  Subsidiaries  has)  breached  any  law or
      regulation  which breach has, or would  reasonably  be expected to have, a
      Material Adverse Effect.

18.11 INFORMATION PACKAGE

      In the case of the Company and the Borrower only:

      (i)   Any written factual  information in the Information Package was true
            and accurate in all material respects as at the date it was provided
            or as at the date (if any) at which it is stated.

      (ii)  Any  financial  projections  in the  Information  Package  have been
            prepared on the basis of recent  historical  information  and on the
            basis  of  assumptions  believed  by  the  Company  to be  fair  and
            reasonable at the time of such preparation.

      (iii) Any expressions of opinion or intention  provided by or on behalf of
            any member of the Group in connection with the Information  Package,
            were  made  after  due  and  careful   consideration  and  based  on
            reasonable grounds.

      (iv)  As at the  date of this  Agreement,  nothing  has  occurred  or been
            omitted from the  Information  Package and no  information  has been
            given or withheld that, if disclosed, would result in:

            (A)   any  factual  information  in the  Information  Package  being
                  untrue or misleading in any material respect; or

            (B)   any assumption or ground on which any financial  projection or
                  expression of opinion or intention in the Information  Package
                  is based being unreasonable.

18.12 FINANCIAL STATEMENTS

(a)   Its Original  Financial  Statements  were prepared in accordance  with the
      Applicable  Accounting  Principles except as disclosed in any notes to the
      Original Financial Statements.

(b)   Its Original Financial Statements fairly represent its financial condition
      and operations as at the end of and for the relevant financial year except
      as disclosed in any notes to the Original Financial Statements.

(c)   As at the  date of this  Agreement,  there  has been no  material  adverse
      change in its assets,  business or financial condition (or, in the case of
      the Company,  the assets,  business or  financial  condition of the Group)
      since 31 March 2006.

(d)   The financial year end of each member of the Group is 31 December.

(e)   The Business Plan was prepared in accordance  with  Applicable  Accounting
      Principles  except as otherwise  agreed  between the Company and the Agent
      and financial reference periods of the Company  consistently applied as at
      the date of this Agreement.


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<PAGE>

18.13 PARI PASSU RANKING

      Subject to any  applicable  Reservations,  without  limiting  Clause 18.15
      (Security) below, its payment obligations under the Finance Documents rank
      at least  pari  passu  with the  claims  of all its  other  unsecured  and
      unsubordinated creditors,  except for obligations mandatorily preferred by
      law applying to companies generally.

18.14 NO PROCEEDINGS PENDING OR THREATENED

(a)   No litigation,  arbitration or administrative proceedings of or before any
      court,   arbitral   body  or  agency   including,   but  not  limited  to,
      investigative  proceedings  (including  any  arising  from or  relating to
      Environmental  Law) which could  reasonably  be  expected to be  adversely
      determined and, if so determined,  would  reasonably be expected to have a
      Material Adverse Effect have been started or (to the best of its knowledge
      and belief) threatened in writing against it or any of its Subsidiaries.

18.15 SECURITY

(a)   Subject  to any  applicable  Perfection  Requirements  and any  applicable
      Reservations,  each Security Document creates (or, once entered into, will
      create)  in  favour  of the  Security  Agent,  the  Security  which  it is
      expressed to create fully  perfected  and with the ranking and priority it
      is expressed to have.

(b)   Subject to Clause 21.27 (Amendment to articles of association of CP Films)
      the  constitutional  documents of any member of the Group do not and would
      not  restrict  or inhibit in any manner any  transfer of any shares of any
      member of the Group  which are  expressed  to be (or are  required by this
      Agreement  to be or become)  subject to any  Security  under any  Security
      Document.

18.16 ASSETS

      It and each of its Subsidiaries has good and marketable title to, or valid
      leases or licences of, or is otherwise  entitled to use (in each case,  on
      arm's length terms),  all material assets necessary for the conduct of its
      business as it is being, and is proposed to be, conducted.

18.17 ENVIRONMENTAL LAWS AND LICENCES

      It and each of its Subsidiaries has:

      (a)   complied with all Environmental Laws to which it may be subject;

      (b)   all Environmental Licences required in connection with its business;
            and

      (c)   complied with the terms of those Environmental Licences,

      in each case where failure to do so would reasonably be expected to have a
      Material Adverse Effect.

18.18 GROUP STRUCTURE

(a)   The Group Structure Chart shows:

      (i)   each  member of the Group and any person in whose  shares any member
            of the Group has an interest (and the percentage of the issued share
            capital held, and whether legally or  beneficially,  by that member)
            as at the date of this Agreement;

      (ii)  the  jurisdiction of  incorporation  or establishment of each person
            shown in it; and


                                     - 60 -
<PAGE>

      (iii) the  status  of each  person  shown  in it  which  is not a  limited
            liability company or corporation.

(b)   Each  Obligor   other  than  the  Company  is  directly  or  indirectly  a
      wholly-owned Subsidiary of the Company.

(c)   The  Company  does not own any of the shares in Flexsys  other than 50% of
      the  preference  shares nor holds  voting  rights which would mean Flexsys
      would fall within the definition of being a subsidiary of the Company.

18.19 NO FINANCIAL INDEBTEDNESS, GUARANTEES OR SECURITY

(a)   No member of the Group has any Financial Indebtedness other than Permitted
      Financial Indebtedness.

(b)   No member of the Group has issued  any  guarantee  other than a  Permitted
      Guarantee.

(c)   No Security or Quasi Security exists over all or any of its (or any of its
      Subsidiaries') assets other than Permitted Security.

18.20 SHARES

(a)   The shares of any member of the Group  which are  expressed  to be (or are
      required by this Agreement to be or become)  subject to any Security under
      any Security Document are issued,  fully paid, freely  transferable  other
      than as  provided  in the  articles  of  association  of the  Borrower  as
      delivered  pursuant  to Clause  4.1  (Initial  conditions  precedent)  and
      subject to Clause 21.27 (Amendment to articles of association of CP Films)
      and constitute shares in the capital of limited liability  companies,  and
      there are no moneys or  liabilities  outstanding  or payable in respect of
      any such share.

(b)   No person has or is entitled to any conditional or  unconditional  option,
      warrant or other right to call for the issue or  allotment  of,  subscribe
      for (other than  pursuant to the existing  security over the shares in the
      Company  expressly  disclosed  in  paragraphs  2.2(a)(v),   2.2(b)(i)  and
      2.2(b)(ii) of the Due Diligence Report,  purchase or otherwise acquire any
      share  capital  of any  member  of  the  Group  (including  any  right  of
      pre-emption, conversion or exchange).

(c)   Except in connection  with any Permitted Share  Transaction,  there are no
      agreements in force or corporate  resolutions  passed which require or are
      reasonably expected to require the present or future issue or allotment of
      any  share  capital  of any  Obligor  (including  any  option  or right of
      pre-emption, conversion or exchange).

(d)   The shares of any member of the Group  which are  expressed  to be (or are
      required by this Agreement to be or become)  subject to any Security under
      any Security  Document  constitute  all the share  capital of the relevant
      member of the Group except for one share in the Borrower which is owned by
      Solutia, Inc..

18.21 INTELLECTUAL PROPERTY

(a)   Each  member  of the  Group  owns or has  valid  license  to all  material
      Intellectual  Property  necessary for the conduct of its business as it is
      being, and is proposed to be, conducted.


                                     - 61 -
<PAGE>

(b)   Each member of the Group has paid all necessary  fees and is in compliance
      with all  material  terms of any such  licence to the extent  necessary to
      preserve its ability to use and enforce all such Intellectual Property.

(c)   No member of the Group has infringed any material Intellectual Property of
      any third party in any material respect.

(d)   To the best of the  Company's  knowledge  and  belief,  there  has been no
      material  infringement  or  threatened  or  suspected  infringement  of or
      challenge  to  the  validity  of any  Intellectual  Property  owned  by or
      licensed to any member of the Group.

18.22 SOLVENCY

      No Event of  Default  set out in Clause  22.6  (Insolvency),  Clause  22.7
      (Insolvency  proceedings) or Clause 22.8 (Creditors  process) has occurred
      and is continuing.

18.23 TAXES

(a)   Each  member of the Group  has paid all  Taxes  required  to be paid by it
      within the time period allowed for payment without incurring any penalties
      for non payment other than any Taxes:

      (i)   being  contested  by it in good  faith  and in  accordance  with the
            relevant procedures;

      (ii)  which have been  disclosed to the  Arranger  and for which  adequate
            reserves are being maintained in accordance with GAAP; and

      (iii) where  payment can be lawfully  withheld  and will not result in the
            imposition of any penalty nor in any Security  (other than paragraph
            (l) of the definition of Permitted  Security) ranking in priority to
            the claims of any Finance Party under any Finance Document or to any
            Security created under any Security Document.

      For the avoidance of doubt, this does not include any payment or penalties
      incurred  prior  to  the  date  of  this  Agreement  to the  extent  those
      liabilities have been discharged and there is no longer a dispute with the
      relevant taxation authority.

(b)   No  Finance  Party  is or will be  deemed  to be  resident,  domiciled  or
      carrying on business in its  Relevant  Jurisdiction  by reason only of the
      execution,  performance  and/or  enforcement  of any  Finance  Document or
      Hedging Document.

18.24 PENSIONS

(a)   No member  of the  Group has any  material  liability  in  respect  of any
      pension  scheme and there are no  circumstances  which  would give rise to
      such a  liability  which would  reasonably  be expected to have a Material
      Adverse Effect.

(b)   No  member  of the Group is in  breach  of any  applicable  material  laws
      relating to and the governing provisions of the pension schemes maintained
      by or for  the  benefit  of any  member  of the  Group  and/or  any of its
      employees  which would  reasonably be expected to have a Material  Adverse
      Effect.

18.25 INSURANCES

(a)   The insurances  required by Clause 21.22 (Insurance) are in full force and
      effect as required by this Agreement.


                                     - 62 -
<PAGE>

(b)   To  the  best  of  the  Company's  knowledge  and  belief  (following  all
      reasonable  enquiries),  no event or circumstance has occurred,  and there
      has been no failure to disclose a fact, which would entitle any insurer to
      reduce or avoid its liability  under any such insurance  where such event,
      circumstance  or failure  would  reasonably be expected to have a Material
      Adverse Effect.

18.26 MASTER OPERATING AGREEMENT

      The Security  created  pursuant to any Security  Document does not violate
      the  terms and  conditions  of the  Master  Operating  Agreement  it being
      understood  that the Belgian  floating  charge  agreement and any floating
      charge granted upon exercise of the Belgian  floating charge mandate shall
      not include a pledge of the  Company's  rights under the Master  Operating
      Agreement,  to the extent such pledge would  violate the Master  Operating
      Agreement.

18.27 TIMES WHEN REPRESENTATIONS MADE

(a)   The  representations  and warranties set out in this Clause 18 (except for
      Clause 18.11 (Information Package) are:

      (i)   made by each Original Obligor on the date of this Agreement;

      (ii)  deemed to be made by each  Obligor on the Closing  Date by reference
            to the facts  and  circumstances  then  existing  (unless  otherwise
            stated).

(b)   The  representations  and warranties set out in Clause 18.11  (Information
      Package) are deemed to be made by each Obligor:

      (i)   with respect to the Information Memorandum, on the date on which the
            Information   Memorandum   is   approved  by  the  Company  and  the
            Syndication Date;

      (ii)  with respect to the Reports, on the Closing Date and the Syndication
            Date;

      (iii) with respect to the Business Plan, the date of this  Agreement,  the
            Closing Date and the Syndication Date; and

      (iv)  with respect to each Budget (other than the Business Plan), the date
            on which it is approved by the Company,

      in each case by reference to the facts and circumstances then existing.

(c)   The  Repeating  Representations  (and, in the case of  sub-paragraph  (ii)
      below, the representations and warranties set out in Clause 18.8 (Validity
      and admissibility in evidence) and Clause 18.7 (No filing or stamp taxes))
      are deemed to be made by each Obligor on:

      (i)   the  date of each  Utilisation  Request  and the  first  day of each
            Interest Period; and

      (ii)  in the case of an Additional Guarantor, the day on which the company
            becomes (or it is proposed  that the company  becomes) an Additional
            Guarantor,

      in each case by reference to the facts and circumstances then existing.

19.   INFORMATION UNDERTAKINGS

      The  undertakings  in this Clause 19 remain in force from the date of this
      Agreement  for so long as any  amount is  outstanding  under  the  Finance
      Documents or any Commitment is in force.


                                     - 63 -
<PAGE>

19.1  ANNUAL FINANCIAL STATEMENTS

      The Company  shall  supply to the Agent in  sufficient  copies for all the
      Lenders as soon as the same become available, but in any event:

      (a)   within 120 days after the end of its  financial  years,  its audited
            consolidated   financial   statements   for  that   financial   year
            (commencing with the financial year ended 31 December 2006); and

      (b)   within 150 days after the end of each of its  financial  years,  the
            audited financial statements of each Obligor for that financial year
            if  requested  by  the  Agent  (acting  on the  instructions  of any
            Lender).

19.2  QUARTERLY FINANCIAL STATEMENTS

(a)   The Company  shall  supply to the Agent in  sufficient  copies for all the
      Lenders as soon as the same become  available its  consolidated  financial
      statements:

      (i)   within 45 days of the end of the  Accounting  Quarters  ending on or
            about 31 March, 30 June and 30 September in any financial year; and

      (ii)  within  60 days of the end of the  Accounting  Quarter  ending on or
            about 31 December in any financial year.

(b)   Each set of quarterly financial statements delivered pursuant to paragraph
      (a) above shall include:

      (i)   a  consolidated  cash flow statement and profit and loss account for
            the relevant Accounting Quarter and for the financial year to date;

      (ii)  a  consolidated  balance  sheet  as  at  the  end  of  the  relevant
            Accounting Quarter;

      (iii) a comparison with the corresponding Accounting Quarter, and the year
            to date performance, in the previous year; and

      (iv)  management commentary on the Group's performance during the relevant
            Accounting  Quarter  and  any  material  developments  or  proposals
            affecting the Group or its business.

19.3  MONTHLY FINANCIAL STATEMENTS

(a)   Commencing  from and  including the third Month after the Closing Date and
      for so long as and at any time that,  the  Company  delivers a  Compliance
      Certificate in accordance with the terms of this Agreement which shows the
      ratio of Net  Borrowings  to EBITDA to be greater  than or equal to 2.5:1,
      the Company  shall  supply to the Agent in  sufficient  copies for all the
      Lenders as soon as the same become  available,  but in any event within 30
      days  after  the  end  of  each  Accounting  Month  its  monthly  internal
      management information for that Accounting Month.

(b)   Each set of monthly internal management  information delivered pursuant to
      paragraph  (a) above shall be in a format  agreed with the Facility  Agent
      prior to the Closing Date.

19.4  COMPLIANCE CERTIFICATE

(a)   The  Company  shall  supply  to the  Agent,  with  each  set of  financial
      statements  delivered  pursuant to  paragraph  (a) of Clause 19.1  (Annual
      financial  statements) or Clause 19.2 (Quarterly  financial  statements) a
      Compliance Certificate which shall:


                                     - 64 -
<PAGE>

      (i)   set out (in reasonable  detail)  computations  as to compliance with
            Clause 20  (Financial  covenants)  and Clause  21.20  (Security  and
            guarantees)  as at,  or,  as the  case  may be,  in  respect  of the
            Relevant  Period  ending  on the  date as at which  those  financial
            statements were drawn up; and

      (ii)  confirm  that  no  Default  is  continuing   (or  if  a  Default  is
            continuing,  specify the Default and the steps being taken to remedy
            it).

(b)   If  required  to be  delivered  with the  financial  statements  delivered
      pursuant to paragraph  (a) of Clause 19.1 (Annual  financial  statements),
      the Compliance Certificate shall also:

      (i)   set out (in reasonable  detail) the  computation of Excess Cash Flow
            and  Retained  Cash  (noting  to the  extent it has been  applied or
            committed  to be applied in  accordance  with this  Agreement  for a
            specific purpose) for that financial year;

      (ii)  set out (in reasonable  detail)  computations  as to compliance with
            Clause 20.2 (Capital Expenditure) during that financial year;

      (iii) include a reconciliation of the audited financial  statements of the
            Group for that  financial  year and the  management  accounts of the
            Group as at the end of that financial year; and

      (iv)  set  out  the  Material  Subsidiaries  and  (in  reasonable  detail)
            computations for the determination of which members of the Group are
            Material Subsidiaries.

(c)   Each  Compliance  Certificate  shall be  signed  by two  directors  of the
      Company and, if required to be  delivered  with the  financial  statements
      delivered  pursuant  to  paragraph  (a) of Clause 19.1  (Annual  financial
      statements),  shall be reported on by the Company's auditors in the Agreed
      Form.

19.5  REQUIREMENTS AS TO FINANCIAL STATEMENTS

(a)   Each set of  financial  statements  delivered  by the Company  pursuant to
      Clause  19.1  (Annual  financial   statements),   Clause  19.2  (Quarterly
      financial  statements) or Clause 19.3 (Monthly financial statements) shall
      be certified by a director of the relevant company as fairly  representing
      its (or, as the case may be, its  consolidated)  financial  condition  and
      operations  as at the end of and for the period in relation to which those
      financial statements were drawn up.

(b)   The Company  shall  procure  that each set of financial  statements  of an
      Obligor delivered  pursuant to Clause 19.1 (Annual financial  statements),
      Clause 19.2  (Quarterly  financial  statements)  or Clause  19.3  (Monthly
      financial statements) is prepared  deconsolidating  Permitted Non-Recourse
      Subsidiaries.

(c)   The Company  shall  procure  that each set of financial  statements  of an
      Obligor delivered  pursuant to Clause 19.1 (Annual financial  statements),
      Clause 19.2  (Quarterly  financial  statements)  or Clause  19.3  (Monthly
      financial  statements)  is prepared using GAAP,  accounting  practices and
      financial  reference  periods in each case  consistent with the Applicable
      Accounting  Principles  unless,  in  relation  to  any  set  of  financial
      statements,  it  notifies  the Agent that there has been a change in GAAP,
      the  accounting  practices  or reference  periods or its auditors  (or, if
      appropriate, the auditors of the Obligor) deliver to the Agent:


                                     - 65 -
<PAGE>

      (i)   a description  of any change  necessary  for the relevant  financial
            statements to reflect the Applicable Accounting Principles; and

      (ii)  sufficient  information,  in form and substance as may be reasonably
            required by the Agent,  to enable the Lenders to  determine  whether
            Clause 20 (Financial covenants) has been complied with, to calculate
            the Excess Cash Flow, to determine any other relevant  matter and/or
            to  make an  accurate  comparison  between  the  financial  position
            indicated in those financial  statements and that Obligor's Original
            Financial Statements.

      Any reference in this  Agreement to those  financial  statements  shall be
      construed  as a reference  to those  financial  statements  as adjusted to
      reflect the Applicable Accounting Principles.

(d)   If the Company notifies the Agent of a change in accordance with paragraph
      (b) of this  Clause  19.6 the  Company  and the  Agent  shall  enter  into
      negotiations  in good faith with a view to agreeing any amendments to this
      Agreement  which are  necessary  as a result of the change.  To the extent
      practicable  these  amendments  will be such as to ensure  that the change
      does not result in any material alteration in the commercial effect of the
      obligations  in this  Agreement.  If any  amendments are agreed they shall
      take effect and be binding on each of the Parties in accordance with their
      terms.

19.6  ANNUAL BUDGET

(a)   The Company  shall  supply to the Agent in  sufficient  copies for all the
      Lenders as soon as the same becomes  available,  but in any event no later
      than the start of each of its financial years, a Budget in respect of that
      next financial year in the Agreed Form.

(b)   Each Budget shall include:

      (i)   a projected  consolidated  cash flow  statement  and profit and loss
            account of the Group for that financial year; and;

      (ii)  a management commentary on:

            (A)   the  proposed   activities  of  the  Group  during  that  year
                  (including   material   Capital    Expenditure    investments,
                  acquisitions and disposals proposed during that year);

            (B)   the principal  assumptions  underlying the projections in that
                  Budget; and

            (C)   any material variations to the Base Case during that year.

(c)   The Company  shall  supply to the Agent in  sufficient  copies for all the
      Lenders an updated  Budget  promptly upon  becoming  aware of any material
      change to the projections in the then most recent Budget.

19.7  PRESENTATIONS

(a)   If  requested  by the Agent  (acting on the  instructions  of the Majority
      Lenders),  the directors of the Company shall give a  presentation  to the
      Lenders, at such time and place as the Agent may reasonably request, about
      the business,  financial  performance and prospects of the Group, and such
      other  matters as any Finance  Party  (through  the Agent) may  reasonably
      request.  The Agent (acting on the  instructions of the Majority  Lenders)
      may not request more than one  presentation in any financial year,  unless
      an Event of Default is continuing.


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19.8  INFORMATION: MISCELLANEOUS

      The Company  shall supply to the Agent (in  sufficient  copies for all the
      Lenders, if the Agent so requests):

      (a)   at the same time as they are  dispatched,  copies  of all  documents
            dispatched by the Company to its shareholders,  in their capacity as
            shareholders  generally  (or any  class of  them)  or its  creditors
            generally (or any class of them);

      (b)   promptly upon becoming aware of them, the details of any litigation,
            arbitrations  or  administrative   proceedings  which  are  current,
            threatened in writing or pending  against any member of the Group or
            any  Restricted  Person,  which could  reasonably  be expected to be
            adversely  determined and which, if so determined,  would reasonably
            be expected to have a Material Adverse Effect;

      (c)   promptly upon becoming aware of them, the details of any litigation,
            arbitration or administrative proceedings which are current, pending
            or threatened, and any claim, notice or other communication received
            by it in respect of any actual or alleged breach or liability or any
            notice of acceleration,  enforcement or similar steps, which relates
            to the Security in Belgium granted in respect of the Euro Notes.

      (d)   promptly upon becoming aware of them, the details of any litigation,
            arbitration or administrative proceedings which are current, pending
            or   threatened  in  writing,   and  any  claim,   notice  or  other
            communication  in  respect  of  any  actual  or  alleged  breach  or
            liability,  relating to the DIP Financing (or any replacement to the
            DIP Financing);

      (e)   promptly  upon becoming  aware of them,  the details of any material
            labour  dispute  affecting  any  member  of the  Group  which  could
            reasonably be expected to be adversely  determined and which,  if so
            determined,  would reasonably be expected to have a Material Adverse
            Effect;

      (f)   promptly  upon  becoming  aware of them,  the  details of any claim,
            notice or other written  communication  received by it in respect of
            any actual or alleged  breach of or  liability  under  Environmental
            Law, or any event or  circumstance  which is likely to result in any
            such claim or notice,  which  could  reasonably  be  expected  to be
            substantiated  and which,  if  substantiated,  would  reasonably  be
            expected to have a Material Adverse Effect;

      (g)   promptly upon becoming aware of them, any change in the structure of
            the Group from that set out in the Group Structure Chart which is or
            would  reasonably  be expected to be adverse to the interests of the
            Finance Parties;

      (h)   promptly  upon  becoming  aware of them,  the  details  of any claim
            and/or  potential  claim for an amount in excess of  (euro)3,000,000
            (or its  equivalent in another  currency or currencies) in aggregate
            made by or on behalf of any member of the Group under any  insurance
            policy;

      (i)   promptly such further information  regarding the financial condition
            or the  business  of any  member of the Group as any  Finance  Party
            (through the Agent) may reasonably request.


                                     - 67 -
<PAGE>

19.9  NOTIFICATION OF EVENT OF DEFAULT

(a)   Each  Obligor  shall  notify  the Agent of any Event of  Default  (and the
      steps,  if any,  being taken to remedy it) promptly upon becoming aware of
      its  occurrence  (unless  that  Obligor is aware that a  notification  has
      already been provided by another Obligor).

(b)   Promptly  upon a request by the Agent,  the  Company  shall  supply to the
      Agent  a  certificate  signed  by  two  of its  directors  on  its  behalf
      certifying  that no  Event of  Default  is  continuing  (or if an Event of
      Default is continuing,  specifying the Event of Default and the steps,  if
      any, being taken to remedy it).

19.10 INSPECTION OF BOOKS AND RECORDS

(a)   Each Obligor  shall (and the Company  shall ensure that each member of the
      Group will):

      (i)   keep books and  records  which  accurately  reflect in all  material
            respects all of its business, affairs and transactions; and

      (ii)  following the occurrence of an Event of Default and upon  reasonable
            notice,  permit any Finance Party to visit any of its offices during
            normal working hours, to inspect any of its books and records and to
            discuss its financial  matters with its officers and  auditors.  The
            cost and expense of each such visit shall be borne by the Company.

(b)   If requested by the Agent,  each Obligor  shall  authorise  and/or (as the
      case may be) engage its  auditors  and/or any of the firms which  prepared
      the Reports to discuss any matter with any of the Finance Parties on terms
      and conditions acceptable to the Agent (acting reasonably).

19.11 AUDITORS

(a)   Subject  to  paragraph  (b),  the  Company  shall  ensure  that  the  same
      internationally  recognised "big four" firm of accountants is appointed as
      its auditors and the auditors of each other member of the Group,  with the
      exception of CPFilms Vertriebs GmbH which may continue to use its existing
      firm of accountants as auditors.

(b)   No Obligor shall (and the Company shall ensure that no other member of the
      Group  will)  change its  auditors  without  the  consent of the  Majority
      Lenders.

(c)   The Company shall ensure that the financial year end of the Group and each
      member of the Group is 31 December.

(d)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will)  change its  financial  year end or the end of its  Accounting
      Quarter or Accounting Month without the consent of the Majority Lenders.

19.12 INVESTIGATIONS

(a)   The Agent (acting  reasonably) may (no more than once in any calendar year
      or at any time  following  the  occurrence of an Event of Default which is
      continuing)  require the Company to instruct  the  auditors of the Company
      (or such other  internationally  recognised "big four" firm of accountants
      as the Agent selects) to investigate the affairs, financial performance or
      accounting and other reporting procedures and standards of the Group.

      The cost and expense of each such  investigation  or report shall be borne
      by the Company.


                                     - 68 -
<PAGE>

(b)   Each Obligor shall (and the Company shall ensure that each other member of
      the  Group  will)  co-operate  fully  with  any  person  carrying  out  an
      investigation or preparing a report pursuant to paragraph (a) above.

19.13 USE OF WEBSITES

(a)   The Company may satisfy its obligation under this Agreement to deliver any
      information  in relation to those  Lenders  (the  "WEBSITE  LENDERS")  who
      accept this method of  communication  by posting this  information onto an
      electronic   website   designated  by  the  Company  and  the  Agent  (the
      "DESIGNATED WEBSITE") if:

      (i)   the Agent  expressly  agrees  (after  consultation  with each of the
            Lenders) that it will accept  communication  of the  information  by
            this method;

      (ii)  both the  Company  and the Agent are aware of the address of and any
            relevant password specifications for the Designated Website; and

      (iii) the information is in a format previously agreed between the Company
            and the Agent.

      If any Lender (a "PAPER FORM  LENDER")  does not agree to the  delivery of
      information  electronically  then  the  Agent  shall  notify  the  Company
      accordingly  and the Company shall supply the information to the Agent (in
      sufficient  copies for each Paper Form Lender) in paper form. In any event
      the Company shall supply the Agent with at least one copy in paper form of
      any information required to be provided by it.

(b)   The Agent  shall  supply each  Website  Lender with the address of and any
      relevant  password  specifications  for the Designated  Website  following
      designation of that website by the Company and the Agent.

(c)   The Company shall promptly upon becoming  aware of its  occurrence  notify
      the Agent if:

      (i)   the Designated Website cannot be accessed due to technical failure;

      (ii)  the password specifications for the Designated Website change;

      (iii) any new  information  which is required  to be  provided  under this
            Agreement is posted onto the Designated Website;

      (iv)  any  existing   information  which  has  been  provided  under  this
            Agreement and posted onto the Designated Website is amended; or

      (v)   the  Company  becomes  aware  that  the  Designated  Website  or any
            information  posted  onto  the  Designated  Website  is or has  been
            infected by any electronic virus or similar software.

      If the Company notifies the Agent under sub-paragraph (i) or sub-paragraph
      (v) above,  all  information  to be  provided  by the  Company  under this
      Agreement  after the date of that  notice  shall be supplied in paper form
      unless and until the Agent and each Website  Lender is satisfied  that the
      circumstances giving rise to the notification are no longer continuing.

(d)   Any Website Lender may request,  through the Agent,  one paper copy of any
      information  required to be provided under this Agreement  which is posted
      onto the  Designated  Website.  The  Company  shall  comply  with any such
      request within ten Business Days.


                                     - 69 -
<PAGE>

19.14 "KNOW YOUR CUSTOMER" CHECKS

(a)   If:

      (i)   the  introduction  of or any  change  in (or in the  interpretation,
            administration  or application  of) any law or regulation made after
            the date of this Agreement;

      (ii)  any  change  in the  status  of an  Obligor  after  the date of this
            Agreement; or

      (iii) a proposed  assignment  or transfer by a Lender of any of its rights
            and obligations under this Agreement to a party that is not a Lender
            prior to such assignment or transfer,

      obliges the Agent or any Lender (or,  in the case of  sub-paragraph  (iii)
      above,  any prospective new Lender) to comply with "know your customer" or
      similar  identification  procedures in  circumstances  where the necessary
      information  is not already  available to it, each Obligor shall  promptly
      upon the request of the Agent or any Lender supply,  or procure the supply
      of, such  documentation  and other evidence as is reasonably  requested by
      the Agent  (for  itself or on behalf of any  Lender)  or any  Lender  (for
      itself  or,  in the case of the event  described  in  sub-paragraph  (iii)
      above,  on behalf of any  prospective  new Lender) in order for the Agent,
      such Lender or, in the case of the event described in sub-paragraph  (iii)
      above,  any  prospective  new Lender to carry out and be  satisfied it has
      complied with all necessary  "know your  customer" or other similar checks
      under all applicable  laws and  regulations  pursuant to the  transactions
      contemplated in the Finance Documents.

(b)   Each  Lender  shall  promptly  upon the  request of the Agent  supply,  or
      procure  the  supply  of,  such  documentation  and other  evidence  as is
      reasonably  requested  by the Agent (for itself) in order for the Agent to
      carry out and be satisfied it has complied with all  necessary  "know your
      customer"  or  other  similar  checks  under  all   applicable   laws  and
      regulations  pursuant  to the  transactions  contemplated  in the  Finance
      Documents.

(c)   The Company shall, by not less than 10 Business Days' prior written notice
      to the Agent,  notify the Agent (which shall promptly  notify the Lenders)
      of its  intention  to  request  that one of its  Subsidiaries  becomes  an
      Additional Obligor pursuant to Clause 24 (Changes to the Obligors).

(d)   Following the giving of any notice pursuant to paragraph (c) above, if the
      accession of such  Additional  Obligor  obliges the Agent or any Lender to
      comply with "know your customer" or similar  identification  procedures in
      circumstances where the necessary  information is not already available to
      it, the Company shall promptly upon the request of the Agent or any Lender
      supply, or procure the supply of, such documentation and other evidence as
      is  reasonably  requested  by the  Agent  (for  itself or on behalf of any
      Lender)  or any Lender  (for  itself or on behalf of any  prospective  new
      Lender)  in order for the  Agent or such  Lender  or any  prospective  new
      Lender to carry out and be satisfied it has  complied  with all  necessary
      "know your customer" or other similar checks under all applicable laws and
      regulations pursuant to the accession of such Subsidiary to this Agreement
      as an Additional Obligor.

19.15 NO PERSONAL LIABILITY

      No director, officer or employee of the Company or any other member of the
      Group  shall be  personally  liable  for any  statement  made by it in any
      certificate or other document as required to be delivered  pursuant to any
      Finance Party pursuant to the Finance Documents.


                                     - 70 -
<PAGE>

20.   FINANCIAL COVENANTS

20.1  FINANCIAL CONDITION

      Commencing in and including the Relevant  Period to 31 December  2006, the
      Company shall ensure that:

      (a)   the ratio of EBITDA to Net Interest Expense for each Relevant Period
            ending on a  Relevant  Date set out in the table  below  will not be
            less  than the  ratio  set out in the  relevant  column in the table
            below opposite that Relevant Date;

      (b)   the ratio of Net  Borrowings  on each  Relevant  Date set out in the
            table  below  to  EBITDA  for the  Relevant  Period  ending  on that
            Relevant  Date will not  exceed  the  ratio set out in the  relevant
            column in the table below opposite that Relevant Date;

      (c)   the  ratio of Cash Flow to Debt  Service  for each  Relevant  Period
            ending on a  Relevant  Date set out in the table  below  will not be
            less than 1:1.

<TABLE>
<CAPTION>
             ---------------------------------------------------------------------------------
               RELEVANT DATE         NET BORROWINGS / EBITDA    EBITDA / NET INTEREST EXPENSE
             ---------------------------------------------------------------------------------
<S>                                          <C>                           <C>
             31 December 2006                3.10 : 1                      3.90 : 1
               31 March 2007                 3.10 : 1                      3.90 : 1
               30 June 2007                  3.10 : 1                      3.90 : 1
             30 September 2007               3.10 : 1                      3.90 : 1
             31 December 2007                2.65 : 1                      3.95 : 1
               31 March 2008                 2.65 : 1                      3.95 : 1
               30 June 2008                  2.65 : 1                      3.95 : 1
             30 September 2008               2.65 : 1                      3.95 : 1
             31 December 2008                2.00 : 1                      4.30 : 1
               31 March 2009                 2.00 : 1                      4.30 : 1
               30 June 2009                  2.00 : 1                      4.30 : 1
             30 September 2009               2.00 : 1                      4.30 : 1
             31 December 2009                2.00 : 1                      4.95 : 1
               31 March 2010                 2.00 : 1                      4.95 : 1
               30 June 2010                  2.00 : 1                      4.95 : 1
             30 September 2010               2.00 : 1                      4.95 : 1
             31 December 2010                2.00 : 1                      5.00 : 1
               31 March 2011                 2.00 : 1                      5.00 : 1
               30 June 2011                  2.00 : 1                      5.00 : 1
             30 September 2011               2.00 : 1                      5.00 : 1
             31 December 2011                2.00 : 1                      5.00 : 1
             ---------------------------------------------------------------------------------
</TABLE>


                                     - 71 -
<PAGE>

20.2  CAPITAL EXPENDITURE

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group  will) in any  financial  year of the  Company set out in column (1)
      below incur Capital  Expenditure  if as a result the  aggregate  amount of
      Capital  Expenditure  of the Group in that financial year would exceed the
      aggregate  of (i) the  amount set out in column  (2) below  opposite  that
      financial  year and  (ii) any  Retained  Cash  (to the  extent  it has not
      already been applied or  committed to be applied in  accordance  with this
      Agreement for another purpose) for that financial year.

<TABLE>
                  (1)                                        (2)

                  FINANCIAL YEAR TO                          AMOUNT IN (EURO)
<S>               <C>                                        <C>
                  31 December 2007                           13,300,000

                  31 December 2008                           7,500,000

                  31 December 2009                           6,000,000

                  31 December 2010                           24,900,000

                  31 December 2011                           12,500,000
</TABLE>

(b)   If the Capital  Expenditure  incurred in any financial year of the Company
      set out in column (1) in  paragraph  (a) above is less than the amount set
      out in column (2) in paragraph (a) above opposite that financial  year, to
      the extent that the shortfall  could have been incurred in that  financial
      year without  breaching  any term of this  Agreement  then 50 per cent. of
      that shortfall may be carried forward to the subsequent  financial year of
      the Company only and added to the maximum  Capital  Expenditure set out in
      column (2) in paragraph (a) above for that subsequent financial year.

(c)   If any shortfall is carried forward to any subsequent financial year under
      paragraph  (b)  above,  in that  subsequent  financial  year  any  Capital
      Expenditure  incurred up to the amount set out in column (2) in  paragraph
      (a) above opposite that financial year shall be treated as incurred before
      any Capital Expenditure incurred up to the amount of any such shortfall.

(d)   If any shortfall  carried  forward to any subsequent  financial year under
      paragraph  (c) above is not  spent in that  subsequent  financial  year it
      shall cease to be available.

20.3  FINANCIAL COVENANT CALCULATIONS

(a)   Capital Expenditure,  Cash Flow, Debt Service,  EBITDA,  Interest Expense,
      Net Borrowings, Net Interest Expense, Total Borrowings and Working Capital
      shall be calculated and interpreted on a consolidated  basis in accordance
      with the Applicable Accounting Principles and shall be expressed in euro.

(b)   Subject to paragraph (c) below,  Capital  Expenditure,  Cash Flow, EBITDA,
      Interest  Expense,  Net  Interest  Expense  and Working  Capital  shall be
      determined  (except as needed to reflect the


                                     - 72 -
<PAGE>

      terms of this Clause 20) from the  financial  statements  of the Group and
      Compliance  Certificates  delivered  under Clause 19.1  (Annual  financial
      statements), Clause 19.2 (Quarterly financial statements), and Clause 19.4
      (Compliance Certificate).

(c)   In respect of the Relevant  Periods ending on each of 31 December 2006, 31
      March 2007 and 30 June 2007,  Interest  Expense and Net  Interest  Expense
      shall each be calculated on a pro forma basis to the extent  applicable as
      if the Facilities had been utilised in full on the date of commencement of
      each such Relevant Period with the exception that Interest Expense and Net
      Interest  Expense  shall not be  calculated  on a pro forma  basis for the
      purpose of calculating Excess Cash Flow.

(d)   For the  purpose of this  Clause 20, no item shall be included or excluded
      more than once in any calculation.

(e)   If any requirement set out in paragraphs (a) to (c) Clause 20.1 (Financial
      condition)  is not, or may not be,  complied  with at any time the Company
      may,  no later  than the date of  delivering  to the Agent the  Compliance
      Certificate  setting  out  that   non-compliance,   procure  that  Monchem
      International Inc. or Solutia  Investments LLC provides further investment
      in the  shares  of the  Company,  or makes a capital  contribution  to the
      Company  or  makes a  shareholder  loan to the  Company  (which  shall  be
      subordinated  to the Facilities on terms  satisfactory to the Agent) which
      does not exceed on any occasion  (euro)10,000,000  (the "CURE AMOUNT"), in
      an amount  sufficient to ensure  compliance with the relevant  requirement
      immediately  after that investment or capital  contribution or shareholder
      loan  and  any  applicable  breach  or  default  of  the  requirements  of
      paragraphs (a) to (c) of Clause 20.1 (Financial  condition) referred to in
      this  paragraph  shall be deemed  cured for all  purposes  of the  Finance
      Documents.

      This right may only be  exercised  once in any period of four  consecutive
      Accounting  Quarters and no more than twice in the period from the date of
      the Facility Agreement to the Termination Date.

      If any such investment or capital contribution or shareholder loan is made
      in any Relevant Period to ensure compliance with the relevant  requirement
      in the immediately  preceding Relevant Period,  that investment or capital
      contribution or shareholder  loan shall be deemed to have been made on the
      last day of that immediately  preceding Relevant Period and to be added to
      EBITDA for that Relevant Period (and all subsequent  Relevant Periods) for
      the purpose of this Clause 20.

20.4  DEFINITIONS

      In this Clause 20:

      "CASH FLOW"  means,  in relation to any Relevant  Period,  EBITDA for that
      Relevant Period adjusted (without double-counting):

      (a)   by deducting any increase or adding any decrease in Working  Capital
            during that Relevant Period;

      (b)   by deducting amounts paid during the Relevant Period by the Group in
            respect of Capital Expenditure other than Capital Expenditure to the
            extent  funded from Net Sale Proceeds or Insurance  Proceeds,  other
            than the  proceeds of any  insurance  policy in relation to business
            interruption  loss  which are added  back to the total  consolidated
            operating  profit


                                     - 73 -
<PAGE>

            of  the  Group  in  accordance   with  the   Applicable   Accounting
            Principles,  permitted  to be applied  for that  purpose  under this
            Agreement;

      (c)   by deducting amounts paid during the Relevant Period by the Group in
            cash in respect of Tax;

      (d)   by  excluding  any  other  non-cash  items  taken  into  account  in
            calculating  EBITDA  (other  than to the extent  already  taken into
            account in movements in Working Capital);

      (e)   for the cash effect of extraordinary  and exceptional  items, to the
            extent  that cash was  actually  received  or  expended  during  the
            Relevant Period;

      (f)   by deducting any fees,  expenses or charges paid in cash in relation
            to any equity  offering,  investment,  acquisition  or  indebtedness
            permitted  to be  incurred  under  this  Agreement  (whether  or not
            successful) to the extent not deducted from EBITDA;

      (g)   by deducting the aggregate  amount of any payments made as permitted
            under  paragraph  (c) of the  definition  of Permitted  Non-Recourse
            Subsidiary or paragraph (f) of the definition of Permitted Loan;

      (h)   by adding the aggregate  amount  received during the Relevant Period
            by the Group in cash in respect of any rebate of Tax;

      (i)   by deducting the cost of  acquisition of any shares or businesses to
            the extent not included in EBITDA;

      (j)   by adding the net  proceeds  of any sale,  lease,  transfer or other
            disposal of assets  received during that Relevant Period (other than
            any such proceeds received in relation to a sale, lease, transfer or
            other disposal  permitted  under  paragraph (a) of the definition of
            Permitted  Disposal) after deducting the amount of any such proceeds
            required to be applied in  prepayment  under  Clause 7.5  (Mandatory
            prepayment - Net Sale Proceeds);

      (k)   by adding the amount of any dividends or other profit  distributions
            (net of Tax)  received  by any  member of the Group  from any person
            which is not a member of the Group during that Relevant Period;

      (l)   by   deducting   the  amount  of  any   dividends  or  other  profit
            distributions  paid in  cash by the  Company  during  that  Relevant
            Period;

      (m)   by deducting the amount of any prepayment  premium arising under the
            Euro Notes incurred as a result of early redemption;

      (n)   to the extent not taken into account in any other  paragraph in this
            definition,  by adding all cash credits and release provisions,  and
            deducting all cash debits and other cash charges and  provisions not
            included in establishing EBITDA for such period; and

      (o)   to the extent not taken into account in any other  paragraph in this
            definition,  by  deducting  all  non-cash  credits  and  release  of
            provisions and adding all non-cash debits and other non-cash charges
            and provisions included in establishing EBITDA for such period.

      "DEBT SERVICE"  means, in relation to any Relevant  Period,  the aggregate
      of:


                                     - 74 -
<PAGE>

      (a)   Net Interest Expense for that Relevant Period; and

      (b)   scheduled repayments, and any other scheduled payments in the nature
            of  principal,  payable  by the  Group in that  Relevant  Period  in
            respect of Financial Indebtedness:

            (i)   including all capital  payments falling due in relation to any
                  lease  that  would be  treated  as a capital  lease  under the
                  Applicable Accounting Principles; and

            (ii)  excluding   any  amounts   falling  due  under  the  Permitted
                  Revolving   Credit   Facility   which   were   available   for
                  simultaneous  redrawing and any Financial Indebtedness between
                  any members of the Group,

            in each case adjusted to reflect the assumption or repayment of debt
            relating to any member of the Group or  business or assets  acquired
            or sold during the Relevant Period.

      "EBITDA" means, in relation to any Relevant Period, the total consolidated
      operating  profit of the Group on continuing  operations for that Relevant
      Period:

      (a)   including the net  pre-taxation  profits of a member of the Group or
            business or assets acquired during that Relevant Period for the part
            of that Relevant period when it was not a member of the Group and/or
            the business or assets were not owned by a member of the Group; but

      (b)   excluding the net pre-taxation profits attributable to any member of
            the Group or to any  business or assets  sold  during that  Relevant
            Period.

      but:

      (i)   before taking into account:

            (A)   Net Interest Expense;

            (B)   Tax;

            (C)   Non-operational  profits  (or  losses) and profits (or losses)
                  attributable to minority interests in any member of the Group;

            (D)   any  share  of  the  profit  of  any  associated   company  or
                  undertaking,    except   for   dividends   or   other   profit
                  distributions  (net of Tax)  received in cash by any member of
                  the Group;

            (E)   all extraordinary and exceptional items;

            (F)   exchange   rate  gains  (or   losses)   arising   due  to  the
                  re-translation  of  balance  sheet  items  and  mark-to-market
                  adjustments on currency swaps; and

            (G)   excluding non-operating gains or losses;

      (ii)  after excluding (to the extent  included) any gains or losses on the
            disposal or revaluation of assets (other than in the ordinary course
            of trading);

      (iii) after  adding  any  business  interruption  loss  incurred  which is
            covered  by  insurance  and  which is not  added  back to the  total
            consolidated  operating  profit of the Group in accordance  with the
            Applicable Accounting Principles; and


                                     - 75 -
<PAGE>

      (iv)  after  adding  back  all  amounts   provided  for  depreciation  and
            amortisation  (including  acquisition  goodwill) and any Cure Amount
            provided  that the right to provide any such Cure Amount may only be
            exercised once in any period of four consecutive Accounting Quarters
            and no more than twice in the period  from the date of the  Facility
            Agreement to the Termination Date.

      "INTEREST  EXPENSE"  means,  in  relation  to  any  Relevant  Period,  the
      aggregate amount of interest and any other finance charges (whether or not
      paid or payable)  accrued by the Group in that Relevant  Period in respect
      of Total Borrowings including:

      (a)   the interest element of leasing and hire purchase payments;

      (b)   commitment fees, regular periodic finance charges,  arrangement fees
            and guarantee fees; and

      (c)   prepayment fees,

            with each of (a), (b) and (c) above adjusted by:

            (i)   adding  back the net  amount  payable  (or  deducting  the net
                  amount  receivable) by members of the Group in respect of that
                  Relevant  Period  under any interest or (so far as they relate
                  to interest) currency hedging arrangements;

            (ii)  excluding any arrangement fees in respect of the Facility; and

            (iii) excluding non-operational items.

      "NET  BORROWINGS"  means, as at any particular time, Total Borrowings less
      Cash and Cash Equivalent Investments at that time.

      "NET INTEREST EXPENSE" means, in relation to any Relevant Period, Interest
      Expense  for that  Relevant  Period less  interest  income of the Group in
      respect of that  Relevant  Period to the extent  received by an Obligor in
      cash in each case adjusted to reflect the  assumption or repayment of debt
      relating to any member of the Group or business or assets acquired or sold
      during the Relevant Period.

      "RELEVANT DATE" means the last date of each Accounting Quarter.

      "RELEVANT  PERIOD"  means  each  period  of  four  consecutive  Accounting
      Quarters ending on a Relevant Date.

      "TOTAL  BORROWINGS"  means,  as at  any  particular  time,  the  aggregate
      outstanding principal, capital or nominal amount (and any fixed or minimum
      premium payable on prepayment or redemption) of the Financial Indebtedness
      of members  of the Group  excluding  paragraph  (g) of the  definition  of
      Financial Indebtedness.

      For this purpose,  any amount outstanding or repayable in a currency other
      than euro shall on that day be taken into  account in its euro  equivalent
      at the  rate  of  exchange  that  would  have  been  used  had an  audited
      consolidated  balance  sheet of the Group been  prepared as at that day in
      accordance with the Applicable Accounting Principles.


                                     - 76 -
<PAGE>

      "WORKING  CAPITAL"  means,  at any time,  the current  assets of the Group
      being  realisable  within one year  (other  than Cash and Cash  Equivalent
      Investments)  less  current  liabilities  due within one year  (other than
      Financial Indebtedness).

21.   GENERAL UNDERTAKINGS

      The  undertakings  in this Clause 21 remain in force from the date of this
      Agreement  for so long as any  amount is  outstanding  under  the  Finance
      Documents or any Commitment is in force.

      AUTHORISATIONS AND COMPLIANCE WITH LAWS

21.1  AUTHORISATIONS

(a)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group will) promptly obtain,  comply with and do all that is necessary
      to maintain in full force and effect (and supply  certified  copies to the
      Agent of) any necessary Authorisation required under any applicable law or
      regulation of its Relevant Jurisdiction to:

      (i)   enable it to perform its obligations under the Finance Documents;

      (ii)  subject to the Reservations and any Perfection Requirements,  ensure
            the legality, validity,  enforceability or admissibility in evidence
            in the Relevant Jurisdiction of any Finance Documents; and

      (iii) enable it to carry on its  business  as it is being  conducted  from
            time to time if failure to obtain,  comply with or maintain any such
            Authorisation  would  reasonably  be  expected  to  have a  Material
            Adverse Effect.

(b)   The Company  shall ensure that the  Perfection  Requirements  are complied
      with  promptly  and in any  event  before  the  final  date on which it is
      necessary to carry out any such Perfection Requirement in order to achieve
      the relevant perfection, protection or priority of any Security Document.

21.2  COMPLIANCE WITH LAWS

      Each Obligor shall (and the Company shall ensure that each other member of
      the Group will)  comply in all  respects  with all laws to which it may be
      subject,  if failure so to comply would  reasonably  be expected to have a
      Material Adverse Effect.

21.3  ENVIRONMENTAL LAWS AND LICENCES

(a)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group will):

      (i)   comply with all Environmental Laws to which it may be subject;

      (ii)  obtain all  Environmental  Licences  required in connection with its
            business; and

      (iii) comply with the terms of those Environmental Licences,

      in each case where failure to do so would reasonably be expected to have a
      Material Adverse Effect.


                                     - 77 -
<PAGE>

21.4  TAXES

(a)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group  will) pay all Taxes  required  to be paid by it within the time
      period  allowed  for  payment  without  incurring  any  penalties  for non
      payment.

(b)   Paragraph (a) above does not apply to any Taxes:

      (i)   being  contested by the  relevant  member of the Group in good faith
            and in accordance with the relevant procedures;

      (ii)  which have been disclosed in its financial  statements and for which
            adequate reserves are being maintained in accordance with GAAP; and

      (iii) where  payment can be lawfully  withheld  and will not result in the
            imposition of any penalty nor in any Security  (other than paragraph
            (l) of the definition of Permitted  Security) ranking in priority to
            the claims of any Finance Party under any Finance Document or to any
            Security created under any Security Document.

(c)   No member of the Group may change its residence for Tax purposes.

      RESTRICTIONS ON BUSINESS FOCUS

21.5  MERGER

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group  will)  enter  into  any  amalgamation,  demerger,  merger,  sale or
      contribution    of   all   assets   and    liabilities    of   a   company
      ("universalite/algemeenheid") or of a branch of activities,  consolidation
      or corporate reconstruction.

(b)   Paragraph (a) above does not apply to any amalgamation,  demerger, merger,
      sale  or   contribution  of  all  assets  and  liabilities  of  a  company
      ("universalite/algemeenheid") or of a branch of activities,  consolidation
      or corporate reconstruction which is a Permitted Merger.

21.6  CHANGE OF BUSINESS

      The Company shall ensure that no substantial change is made to the general
      nature of the business of the Company or the Group or the  Obligors  taken
      as a whole from that carried on at the date of this Agreement.

21.7  JOINT VENTURES

(a)   Without the prior consent of the Majority  Banks no Obligor shall (and the
      Company shall ensure that no member of the Group will):

      (i)   invest in or acquire  (or agree to invest in or  acquire)  any share
            in, or any  security  issued by, any Joint  Venture or any  interest
            therein; or

      (ii)  transfer any assets or lend to or give a  guarantee,  or Security or
            Quasi Security (other than Permitted Security),  for the obligations
            of a Joint Venture (or agree to do any of the foregoing).

(b)   Paragraph  (a) above does not apply to any  investment  in, or transfer or
      loan to, or guarantee for the  obligations  of the company  referred to in
      paragraph  (a) of  Schedule  8  (Disposals)  other  than prior to the date
      hereof.


                                     - 78 -
<PAGE>

21.8  ACQUISITIONS AND INVESTMENTS

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will):

      (i)   invest in or acquire  any share in, or any  security  issued by, any
            person,  or any interest therein or in the capital of any person, or
            make any capital  contribution  to any person (or agree to do any of
            the foregoing); or

      (ii)  invest in or acquire any business or going concern,  or the whole or
            substantially  the whole of the assets or business of any person, or
            any assets  that  constitute  a division  or  operating  unit of the
            business of any person (or agree to do any of the foregoing).

(b)   Paragraph (a) above does not apply to any acquisition or investment  which
      is a Permitted Acquisition.

21.9  NON-RECOURSE SUBSIDIARIES

(a)   No  Obligors  shall (and the  Company  shall  ensure that no member of the
      Group will ) without the consent of the Majority Lenders:

      (i)   invest in or acquire  (or agree to invest in or  acquire)  any share
            in, or any security  issued by, any  Non-Recourse  Subsidiary or any
            interest therein; or

      (ii)  transfer any assets or lend to or give a  guarantee,  or Security or
            Quasi  Security,  other than for the  obligations  of a Non-Recourse
            Subsidiary (or agree to do any of the foregoing).

(b)   Paragraph (a) above does not apply to any acquisition of or investment in,
      or transfer or loan to, or  guarantee,  Security or Quasi  Security  other
      than for the obligations of, a Permitted Non-Recourse Subsidiary.

      RESTRICTIONS ON DEALING WITH ASSETS AND SECURITY

21.10 ASSETS

      Each Obligor shall (and the Company shall ensure that each other member of
      the Group  will)  maintain to a standard  of repair  consistent  with that
      maintained by companies  carrying on businesses similar to that carried on
      by the Group  (ordinary  wear and tear  excepted) all its physical  assets
      necessary  for the conduct of its business as conducted  from time to time
      except where  failure to so maintain  could not  reasonably be expected to
      have a Material Adverse Effect.

21.11 PARI PASSU

      Each Obligor shall ensure that its obligations under the Finance Documents
      rank at all times at least pari  passu in right of  priority  and  payment
      with the claims of all its other unsecured and  unsubordinated  creditors,
      except for obligations  mandatorily preferred by law applying to companies
      generally.

21.12 NEGATIVE PLEDGE

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group  will)  create or permit to subsist any  Security or Quasi  Security
      over any of its assets.

(b)   Paragraph (a) above does not apply to any Security or Quasi Security which
      is Permitted Security.


                                     - 79 -
<PAGE>

21.13 DISPOSALS

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) enter into a single  transaction  or a series of  transactions
      (whether  related or not and whether  voluntary or  involuntary)  to sell,
      lease, transfer or otherwise dispose of any asset.

(b)   Paragraph (a) above does not apply to any sale,  lease,  transfer or other
      disposal which is a Permitted Disposal.

21.14 ARM'S LENGTH TERMS

      No Obligor shall (and the Company shall ensure that no other member of the
      Group will) enter into any material  contract or  arrangement  with or for
      the  benefit of any  Restricted  Person  (including  any  disposal to that
      person) other than:

      (a)   in the case of a  transaction  other than in the ordinary  course of
            business, for full market value and on arm's length terms; or

      (b)   in the case of a transaction in the ordinary course of business,  on
            arm's length terms to the extent consistent with previous practice.

21.15 LOANS OR CREDIT

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) be a creditor in respect of any Financial Indebtedness.

(b)   Paragraph (a) above does not apply to a Permitted Loan.

21.16 GUARANTEES

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) issue or allow to remain  outstanding any guarantee in respect
      of any liability or obligation of any person.

(b)   Paragraph (a) above does not apply to a Permitted Guarantee.

21.17 RESTRICTED PAYMENTS

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will):

      (i)   pay, repay or prepay any  principal,  interest or other amount on or
            in  respect  of, or  redeem,  purchase  or  defease,  any  Financial
            Indebtedness owing to any Restricted Person; or

      (ii)  make any  investment in, or pay any fee or make any advance or other
            kind of payment to any Restricted  Person other than in the ordinary
            course of business, on arm's length terms and at full market value.

(b)   The Company shall not:

      (i)   declare,  pay or make any dividend or other payment or  distribution
            of any kind on or in respect of any of its shares; and

      (ii)  reduce, return, purchase, repay, cancel or redeem any of its shares.

(c)   Paragraphs  (a) and  (b)  above  do not  apply  to a  payment  which  is a
      Permitted Payment.

      MOVEMENT OF CASH - CASH IN


                                     - 80 -
<PAGE>

21.18 FINANCIAL INDEBTEDNESS

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) incur (or agree to incur) or allow to remain  outstanding  any
      Financial Indebtedness.

(b)   Paragraph  (a) above  does not  apply to  Financial  Indebtedness  that is
      Permitted Financial Indebtedness.

21.19 ISSUE OF SHARES

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will):

      (i)   issue any share to any person; or

      (ii)  grant to any person any conditional or unconditional option, warrant
            or other right to call for the issue or allotment of, subscribe for,
            purchase or  otherwise  acquire any share of any member of the Group
            (including  any right of  pre-emption,  conversion or exchange),  or
            alter any right  attaching to any share capital of any member of the
            Group.

(b)   Paragraph (a) above does not apply to a Permitted Share Transaction.

      MISCELLANEOUS

21.20 SECURITY AND GUARANTEES

(a)   The Company shall:

      (i)   promptly notify the Agent if:

            (A)   any new member of the Group is incorporated;

            (B)   any member of the Group becomes a Material Subsidiary; or

            (C)   any  business  or asset that is material in the context of the
                  business  of  the  member  of the  Group  that  acquires  that
                  business or asset is acquired; and

      (ii)  at any time within 30 days of request by the Agent, ensure,  subject
            to the Security  Principles,  that the relevant  member of the Group
            will:

            (A)   become an Additional Guarantor; and

            (B)   provide  Security in form and  substance  satisfactory  to the
                  Security Agent, in favour of the Secured Parties to secure all
                  of  the   obligations   of  the  Obligors  under  the  Secured
                  Documents.

(b)   The  Company  shall  ensure  that  members of the Group shall at all times
      grant security in accordance with the Security Principles.

(c)   The Company shall ensure that all perfection  requirements  set out in the
      Perfection  Requirements List are satisfied within the time period set out
      in that list to the extent  these are  required  to be  satisfied  by such
      specified time following the Closing Date.

(d)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group will), at its own expense,  promptly take all such action as the
      Agent or the  Security  Agent may require  acting in  accordance  with the
      Security Principles:


                                     - 81 -
<PAGE>

      (i)   for the  purpose of  perfecting  or  protecting  any of the  Secured
            Parties'  rights under,  and preserving the Security  intended to be
            created or evidenced by, any of the Finance Documents; and

      (ii)  for the  purpose  of  facilitating  the  realisation  of any of that
            Security,

      including  the  execution  of  any  transfer,  conveyance,  assignment  or
      assurance  of any asset and the giving of any notice,  order or  direction
      and the making of any  registration  which the Agent or the Security Agent
      may reasonably require.

(e)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) do, or consent to the doing of, anything which might prejudice
      the validity,  enforceability  or priority of any of the Security  created
      pursuant to the Security Documents.

(f)   The  Company  shall  ensure  that  at all  times  after  the  date of this
      Agreement:

      (i)   the  aggregate of the  unconsolidated  total assets  (excluding  any
            intragroup  loans) of the Guarantors  (without  double  counting and
            excluding any interests in any  Subsidiaries  which are  Guarantors)
            exceeds 80 per cent. of the consolidated  total assets of the Group;
            and

      (ii)  the  aggregate  of the  unconsolidated  revenues  and  EBITDA of the
            Guarantors  (without  double counting and excluding any dividends or
            other  distributions from Subsidiaries which are Guarantors) exceeds
            80 per cent. of the consolidated revenues and EBITDA of the Group,

      in  each  case   calculated   by   reference   to  the  then  most  recent
      unconsolidated  financial  statements of each  Guarantor and the then most
      recent consolidated financial statements of the Group.

21.21 INTERCOMPANY DEBT

      The Company  shall  ensure that (i) each  Obligor and (ii)  members of the
      Group (other than  Obligors)  which are or become  creditors in respect of
      Financial  Indebtedness  of Obligors to the extent such  aggregate  amount
      exceeds   (euro)5,000,000  (or  its  equivalent  in  another  currency  or
      currencies)  accedes to the  Intercreditor  Agreement  as an  Intercompany
      Borrower (as defined in the Intercreditor  Agreement) and, as the case may
      be, an Intercompany Lender (as defined in the Intercreditor Agreement), in
      accordance with the Intercreditor Agreement.

21.22 INSURANCE

(a)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group will) maintain  insurances  (including as to self  insurance) on
      and in relation to its  business  and assets  with  reputable  independent
      underwriters or insurance companies:

      (i)   against those risks,  and to the extent,  usually insured against by
            prudent  companies  located  in the same or a similar  location  and
            carrying on a similar business; and

      (ii)  against those risks,  and to the extent,  required by applicable law
            or by contract.

(b)   Without limiting  paragraph (a) above, each Obligor shall (and the Company
      shall ensure that each other member of the Group will) maintain  insurance
      on all of its assets of an insurable nature against loss or damage by fire
      and other risks normally  insured against by persons


                                     - 82 -
<PAGE>

      carrying  on a similar  business  in a sum or sums at least equal to their
      replacement  value  (meaning  the  total  cost  of  entirely   rebuilding,
      reinstating or replacing  those assets if completely  destroyed,  together
      with architects', surveyors' and other professional fees).

(c)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group will)  promptly  pay  premiums  and do all things  necessary  to
      maintain insurances required of it by paragraphs (a) and (b) above.

21.23 PENSIONS

      The Company shall ensure that all pension  schemes  maintained or operated
      by or for  the  benefit  of any  member  of the  Group  and/or  any of its
      employees:

      (a)   are maintained  and operated in all material  respects in accordance
            with  all  applicable   laws  and  contracts  and  their   governing
            provisions; and

      (b)   are funded substantially in accordance with the governing provisions
            of the scheme with any funding  shortfall  advised by  actuaries  of
            recognised   standing  being  rectified  in  accordance  with  those
            governing provisions

      except where failure to maintain or fund could not  reasonably be expected
      to have a Material Adverse Effect.

      The Company shall promptly  notify the Agent of any material change in the
      rate of  contributions to any pension schemes referred to in paragraph (a)
      above paid or  recommended  to be paid  (whether by the scheme  actuary or
      otherwise) or required (by law or otherwise).

21.24 INTELLECTUAL PROPERTY

      Each Obligor shall (and the Company shall ensure that each other member of
      the Group will):

      (a)   take all reasonable  action to obtain,  safeguard,  maintain in full
            force  and  effect  and   preserve   its   ability  to  enforce  all
            Intellectual  Property  necessary for the conduct of its business as
            conducted from time to time, and not discontinue the use of any such
            Intellectual Property, including:

            (i)   paying all  applicable  renewal  fees,  licence fees and other
                  outgoings; and

            (ii)  performing  and complying  with all material laws and material
                  obligations  to which it is subject as registered  proprietor,
                  beneficial  owner,  user,  licensor  or  licensee  of any such
                  necessary Intellectual Property; and

      (b)   promptly notify the Agent of any material infringement or threatened
            or  suspected  material  infringement  of or  any  challenge  to the
            validity of any such  necessary  Intellectual  Property  owned by or
            licensed  to it which may come to its  notice,  supply the Agent (if
            requested) with all information in its possession relating thereto;

      (c)   take all necessary steps permitted under the relevant licence to the
            extent  consistent with normal business  practice to ensure that the
            licensor  of  the  Intellectual   Property  prevents  third  parties
            infringing any such necessary Intellectual Property; and

      (d)   take all necessary steps permitted under the relevant licence to the
            extent  consistent with normal business  practice to ensure that the
            licensor of the Intellectual  Property


                                     - 83 -
<PAGE>

            enforces the confidentiality of and prevents any improper use of any
            trade secret which is Intellectual Property.

21.25 HEDGING

(a)   The Company shall ensure that the hedging  required by the Hedging  Letter
      is effected  within 6 Months after the Closing Date (and is  maintained in
      effect) in accordance with the terms of the Hedging Letter.

(b)   At or before the time that any member of the Group enters into any Hedging
      Document  with  a  Hedging  Bank,   the  Company  shall  ensure  that  the
      counterparty accedes as a Hedging Bank to the Intercreditor Agreement.

(c)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) enter (or agree to enter) into any derivative transaction.

(d)   Paragraph (c) above does not apply to any derivative  transaction which is
      a Permitted Hedging Transaction.

21.26 BANK ACCOUNTS

(a)   No Obligor shall (and the Company shall ensure that no other member of the
      Group will) open or maintain any account with any bank or other  financial
      institution  unless if the  account is subject to any  Permitted  Security
      under paragraph (f) of that  definition,  provided that such member of the
      Group uses its  reasonable  commercial  endeavours to have such  Permitted
      Security   released,   subordinated  or  waived,  in  form  and  substance
      satisfactory  to the Security  Agent,  in favour of the Secured Parties to
      secure all of the obligations of the Obligors under the Secured Documents.

(b)   Each Obligor shall (and the Company shall ensure that each other member of
      the Group will) pay all sums received by it into a bank account  permitted
      by paragraph (f) above.

21.27 AMENDMENT TO ARTICLES OF ASSOCIATION OF CPFILMS

      The  Company  shall  ensure  that  within  90  days  of the  date  of this
      Agreement,  CPFilms Vertriebs GmbH delivers to the Agent a certified copy
      of its  articles of  association  (Gesellschaftsvertrag)  together  with a
      certified extract from the commercial  register  (Handelsregister)  of the
      local court (Amtsgericht) of Bielefeld evidencing that the restrictions on
      transferring  and  encumbering  the Shares  (formerly  No. 8 (Transfer  of
      shares encumbrances) of the articles of association) have been removed.

22.   EVENTS OF DEFAULT

      Each of the events or circumstances  set out in this Clause 22 is an Event
      of Default.

22.1  NON-PAYMENT

      An Obligor does not pay on the due date any amount  payable  pursuant to a
      Finance  Document  at the  place  at and in the  currency  in  which it is
      expressed to be payable unless:

      (a)   its failure to pay is caused by  administrative  or technical error;
            and

      (b)   payment is made within 3 Business Days of its due date.


                                     - 84 -
<PAGE>

22.2  FINANCIAL COVENANTS

      Any requirement of Clause 20 (Financial covenants) is not satisfied.

22.3  OTHER OBLIGATIONS

(a)   Any Obligor does not comply with any  provision  of the Finance  Documents
      (other than those  referred to in Clause 22.1  (Non-payment),  Clause 22.2
      (Financial  covenants)  above)  unless the failure to comply is capable of
      remedy and is remedied  within 15 Business Days of the Agent giving notice
      to the Company or the Company becoming aware of the failure to comply.

22.4  MISREPRESENTATION

      Any representation or statement made or deemed to be made by an Obligor in
      the Finance  Documents or any other document  delivered by or on behalf of
      any Obligor under any Finance Document is or proves to have been incorrect
      or  misleading  in any  material  respect  when  made or deemed to be made
      unless the facts or  circumstances  underlying the  misrepresentation  are
      capable of remedy and are  remedied  within 15 Business  Days of the Agent
      giving  notice  to  the  Company  or the  Company  becoming  aware  of the
      misrepresentation.

22.5  CROSS DEFAULT

(a)   Any Financial Indebtedness of any member of the Group is not paid when due
      nor within any originally applicable grace period.

(b)   Any Financial Indebtedness of any member of the Group is declared to be or
      otherwise  becomes due and payable  prior to its  specified  maturity as a
      result of an event of default (however described).

(c)   Any commitment for any Financial  Indebtedness  of any member of the Group
      is  cancelled  or  suspended by a creditor of any member of the Group as a
      result of an event of default (however described).

(d)   Any  creditor of any member of the Group  becomes  entitled to declare any
      Financial Indebtedness of any member of the Group due and payable prior to
      its  specified  maturity  as a  result  of an event  of  default  (however
      described).

(e)   No Event of Default will occur under this Clause 22.5 if:

      (i)   the aggregate  amount of Financial  Indebtedness  or commitment  for
            Financial Indebtedness falling within paragraphs (a) to (d) above is
            less than (euro)10,000,000 (or its equivalent in another currency or
            currencies); and

      (ii)  where the Financial  Indebtedness  falling within  paragraphs (a) to
            (d) above  comprises an overdraft or other  uncommitted or on demand
            facility, such event is remedied within 5 Business Days of the Agent
            giving  notice to the Company or the Company  becoming  aware of the
            relevant event.

22.6  INSOLVENCY

(a)   Any Obligor or Material  Subsidiary  is unable on a  persistent  basis (op
      duurzame  wiize/de  maniere  persistante)  (in  relation  to  any  Belgian
      Obligors and Material  Subsidiaries)  or admits inability to pay its debts
      as they fall due,  suspends,  or threatens to suspend,  making payments on
      any  of  its  debts  (or  any  class  of  them)  including   cessation  de
      paiements/stakring van


                                     - 85 -
<PAGE>

      betalingen, or, by reason of actual or anticipated financial difficulties,
      commences  negotiations with one or more of its creditors (or any class of
      them)  (other than the  Lenders)  with a view to  rescheduling  any of its
      indebtedness.

(b)   The value of the assets of any Obligor or Material Subsidiary is less than
      its   liabilities   (taking  into  account   contingent  and   prospective
      liabilities).

(c)   A moratorium is declared in respect of any  indebtedness of any Obligor or
      Material Subsidiary.

(d)   Any procedure or step is taken in any  jurisdiction of an Obligor which is
      analogous to those provisions in (a) to (c) above.

22.7  INSOLVENCY PROCEEDINGS

(a)   Any corporate  action,  legal  proceedings  or other  procedure or step is
      taken in relation to:

      (i)   the  suspension  of  payments,  a  moratorium  of  any  indebtedness
            (including  concordat  judiciaire/gerechtelijk  akkoord) winding-up,
            dissolution,       administration,       bankruptcy       (including
            faillite/faillissement),  or  reorganisation  (by  way of  voluntary
            arrangement,  scheme of  arrangement or otherwise) of any Obligor or
            Material Subsidiary;

      (ii)  a  composition,  compromise,  assignment  or  arrangement  with  any
            creditor of any Obligor or  Material  Subsidiary.  In relation to an
            Obligor  incorporated  in  Belgium,  these  concepts  shall  mean  a
            "minnelijk akkoord met alle schuldeisers" /'accord amiable avec tous
            les creanciers";

      (iii) the appointment of a liquidator, receiver,  administrative receiver,
            administrator, an administrateur judiciaire/gerechtelijk bestuurder,
            a   commissaire   special/speciaal    commissaris,    administrateur
            provisoire/voorlopige  bewindvoerder,  compulsory  manager  or other
            similar officer in respect of any Obligor or Material  Subsidiary or
            any of its assets; or

      (iv)  the  enforcement  of any Security  over any assets of any Obligor or
            Material   Subsidiary   where  such   Security   secures   Financial
            Indebtedness  in excess of  (euro)2,500,000  (or its  equivalent  in
            another currency or currencies),

      or any  analogous  procedure  or step is  taken  in any  jurisdiction,  in
      particular  (in  relation  to a German  Obligor or a  Material  Subsidiary
      incorporated in Germany):

      (i)   a  petition  for  insolvency  proceedings  in  respect of its assets
            (Antrag auf  Eroffnung  eines  Insolvenzverfahrens)  is filed or any
            event occurs which  constitutes a mandatory cause for the initiation
            of insolvency  proceedings  (Eroffnungsgrund) as set out in sections
            17 and 19 of the German Insolvency Code (Insolvenzordnung) or;

      (ii)  actions are taken  pursuant  to section 21 of the German  Insolvency
            Code by the competent court.

      Paragraph (a) above shall not apply to:

      (iii) any corporate  action,  legal proceedings or other procedure or step
            which is part of a solvent reorganisation of any Obligor or Material
            Subsidiary permitted under this Agreement; or


                                     - 86 -
<PAGE>

      (iv)  any  winding-up  petition  which is frivolous  or  vexatious  and is
            discharged,  stayed or dismissed  within 30 days of commencement and
            prior to its advertisement.

22.8  CREDITORS' PROCESS

      Any  expropriation,   conservatory  or  executory   seizure,   attachment,
      sequestration,  distress  or  execution  or any  analogous  process in any
      jurisdiction  affects  any  asset  or  assets  of a  Obligor  or  Material
      Subsidiary and is not discharged within 90 days.

22.9  OWNERSHIP

      Any Obligor or  Material  Subsidiary  (other  than the  Company) is not or
      ceases to be a  wholly-owned  Subsidiary of the Company  unless  expressly
      permitted under the terms of this Agreement.

22.10 UNLAWFULNESS

      It  is or  becomes  unlawful  for  any  Obligor  to  perform  any  of  its
      obligations under the Finance Documents.

22.11 REPUDIATION

      Any Obligor  repudiates  a Finance  Document or  evidences an intention to
      repudiate a Finance Document.

22.12 CONSTITUTIONAL DOCUMENTS

      Any constitutional  document of any member of the Group is terminated,  or
      is amended in a way,  or any  consent or waiver is given in respect of any
      such document,  which would be materially  detrimental in the interests of
      the Secured Parties under the Security Documents.

22.13 CESSATION OF BUSINESS

      Any Obligor or Material  Subsidiary  suspends or ceases (or  threatens  to
      suspend or cease) to carry on all or a material  part of its business as a
      going  concern  except  as  part  of a  Permitted  Merger  or a  Permitted
      Disposal.

22.14 NATIONALISATION

      Any step is taken by any  person  with a view to the  seizure,  compulsory
      acquisition, expropriation or nationalisation of all or any of the shares,
      or all or any  substantial  part of the assets of any  Obligor or Material
      Subsidiary.

22.15 MATERIAL ADVERSE CHANGE

      Any event or series of events occurs which the Majority Lenders  determine
      is reasonably likely to have a Material Adverse Effect.

22.16 ACCELERATION

(a)   On and at any time after the  occurrence  of an Event of Default the Agent
      may,  and shall if so directed by the Majority  Lenders,  by notice to the
      Company:

      (i)   cancel the Total  Commitments  whereupon  they shall  immediately be
            cancelled;

      (ii)  declare that all or part of the Utilisations,  together with accrued
            interest,  and all other amounts  accrued or  outstanding  under the
            Finance  Documents be  immediately  due and payable,  whereupon they
            shall become immediately due and payable; and/or


                                     - 87 -
<PAGE>

      (iii) declare that all or part of the  Utilisations  be payable on demand,
            whereupon  they shall  immediately  become  payable on demand by the
            Agent on the instructions of the Majority Lenders.


                                     - 88 -
<PAGE>

                                    SECTION 9
                               CHANGES TO PARTIES

23.   CHANGES TO THE LENDERS

23.1  ASSIGNMENTS  AND  TRANSFERS  BY THE  LENDERS

      Subject to this Clause 23, a  Lender (the "EXISTING LENDER") may:

      (a)   assign any of its rights; or

      (b)   transfer by novation any of its rights and obligations,

      to another  bank or  financial  institution  or to a trust,  fund or other
      entity which is  regularly  engaged in or  established  for the purpose of
      making,  purchasing or investing in loans,  securities or other  financial
      assets (the "NEW LENDER").

23.2  CONDITIONS OF ASSIGNMENT OR TRANSFER

(a)   The consent of neither the Company nor any other  Obligor is required  for
      an assignment or transfer by an Existing Lender.

(b)   An assignment will only be effective on:

      (i)   receipt by the Agent of written confirmation from the New Lender (in
            form and  substance  satisfactory  to the Agent) that the New Lender
            will assume the same  obligations to the other Finance Parties as it
            would have been under if it was an Original Lender;

      (ii)  the New Lender acceding to the Intercreditor Agreement in accordance
            with the Intercreditor Agreement; and

      (iii) the  performance by the Agent of all necessary  "know your customer"
            or other similar checks under all applicable laws and regulations in
            relation to such assignment to a New Lender, the completion of which
            the Agent shall promptly  notify to the Existing  Lender and the New
            Lender.

(c)   A  transfer  will  only be  effective  if the New  Lender  accedes  to the
      Intercreditor Agreement in accordance with the Intercreditor Agreement and
      the procedure set out in Clause 23.5  (Procedure for transfer) is complied
      with.

(d)   If:

      (i)   a Lender assigns or transfers any of its rights or obligations under
            the Finance Documents or changes its Facility Office; and

      (ii)  as a result of  circumstances  existing at the date the  assignment,
            transfer  or change  occurs,  an Obligor  would be obliged to make a
            payment to the New Lender or Lender acting  through its new Facility
            Office under Clause 12 (Tax gross-up and  indemnities)  or Clause 13
            (Increased Costs),

      then the New Lender or Lender  acting  through its new Facility  Office is
      only entitled to receive payment under those Clauses to the same extent as
      the Existing Lender or Lender acting through its previous  Facility Office
      would have been if the assignment, transfer or change had not occurred.


                                     - 89 -
<PAGE>

(e)   If a Lender  assigns  or  transfers  part but not all of its  share in the
      Facilities to a person other than one of its Affiliates, another Lender or
      a Related  Fund,  the  amount of such  assignment  or  transfer  must be a
      minimum of (euro)1,000,000 and in integral multiples of (euro)1,000,000.

(f)   A transfer  or  assignment  will only be  effective  if the New Lender has
      delivered to the Company and copied to the Agent a Tax Status  Certificate
      duly completed and executed by it:

      (i)   in the case of an assignment,  together with or prior to its written
            confirmation as required by Clause 23.2(b)(i); or

      (ii)  in the case of a transfer, together with or prior to the delivery of
            the  Transfer  Certificate  to  the  Agent  contemplated  in  Clause
            23.5(a),

      but only if (A) such Tax Status  Certificate  is  required at such time in
      order  to  enable  the  Borrower  to make all  payments  made by it to the
      Lenders without a Tax Deduction;  and (B) such New Lender is not a Belgian
      legal entity subject to Belgian corporate income tax.

23.3  ASSIGNMENT OR TRANSFER FEE

      The New Lender  shall,  on the date upon which an  assignment  or transfer
      takes effect, pay to the Agent (for its own account) a fee of (euro)2,000.

23.4  LIMITATION OF RESPONSIBILITY OF EXISTING LENDERS

(a)   Unless  expressly  agreed to the  contrary,  an Existing  Lender  makes no
      representation  or warranty and assumes no  responsibility to a New Lender
      for:

      (i)   the legality, validity, effectiveness, adequacy or enforceability of
            the Finance Documents or any other documents;

      (ii)  the financial condition of any Obligor or other person;

      (iii) the performance and observance by any Obligor or other person of its
            obligations under the Finance Documents or any other documents; or

      (iv)  the accuracy of any statements  (whether written or oral) made in or
            in connection with any Finance Document or any other document,

      and any representations or warranties implied by law are excluded.

(b)   Each New Lender  confirms  to the  Existing  Lender and the other  Finance
      Parties that it:

      (i)   has  made  (and  shall   continue  to  make)  its  own   independent
            investigation and assessment of the financial  condition and affairs
            of each  Obligor and its related  entities  in  connection  with its
            participation  in this  Agreement and has not relied  exclusively on
            any  information  provided to it by the Existing Lender or any other
            Finance Party in connection with any Secured Document; and

      (ii)  will  continue  to  make  its  own  independent   appraisal  of  the
            creditworthiness  of each  Obligor and its related  entities and any
            other person  whilst any amount is or may be  outstanding  under the
            Finance Documents or any Commitment is in force.

(c)   Nothing in any Finance Document obliges an Existing Lender to:


                                     - 90 -
<PAGE>

      (i)   accept a  re-transfer  from a New  Lender of any of the  rights  and
            obligations assigned or transferred under this Clause 23; or

      (ii)  support any losses directly or indirectly incurred by the New Lender
            by reason of the  non-performance  by any Obligor or other person of
            its obligations under the Finance Documents or otherwise.

23.5  PROCEDURE FOR TRANSFER

(a)   Subject to the conditions set out in this Clause 23 a transfer is effected
      in  accordance  with  paragraph  (c)  below  when the  Agent  executes  an
      otherwise  duly  completed  Transfer  Certificate  delivered  to it by the
      Existing  Lender  and the  New  Lender  and a duly  completed  Tax  Status
      Certificate.  The Agent shall,  subject to paragraph (b) below, as soon as
      reasonably  practicable  after receipt by it of a duly completed  Transfer
      Certificate  appearing  on its  face to  comply  with  the  terms  of this
      Agreement and delivered in  accordance  with the terms of this  Agreement,
      execute that Transfer Certificate.

(b)   The  Agent  shall  only be  obliged  to  execute  a  Transfer  Certificate
      delivered  to it by the  Existing  Lender  and the New  Lender  once it is
      satisfied it has complied with all necessary "know your customer" or other
      similar  checks under all applicable  laws and  regulations in relation to
      the transfer to such New Lender.

(c)   On the Transfer Date:

      (i)   to the extent that in the Transfer  Certificate  the Existing Lender
            seeks to transfer by novation its rights and  obligations  under the
            Finance Documents each of the Obligors and the Existing Lender shall
            be released from further  obligations  towards one another under the
            Finance  Documents and their  respective  rights against one another
            under  the  Finance   Documents   shall  be  cancelled   (being  the
            "DISCHARGED RIGHTS AND OBLIGATIONS");

      (ii)  each of the Obligors  and the New Lender  shall  assume  obligations
            towards one another  and/or acquire rights against one another which
            differ from the Discharged  Rights and  Obligations  only insofar as
            that  Obligor and the New Lender have  assumed  and/or  acquired the
            same in place of that Obligor and the Existing Lender;

      (iii) the Agent, the Arranger,  the Security Agent, the New Lender and the
            other  Lenders  shall  acquire  the same  rights and assume the same
            obligations  between  themselves  as they  would have  acquired  and
            assumed had the New Lender  been an Original  Lender with the rights
            and/or  obligations  acquired  or  assumed  by it as a result of the
            transfer and to that extent the Agent,  the  Arranger,  the Security
            Agent and the Existing  Lender  shall each be released  from further
            obligations to each other under the Finance Documents; and

      (iv)  the New Lender shall become a Party as a "Lender".

(d)   For the  avoidance of doubt,  the Parties agree that in case of a transfer
      effected in accordance  with this Clause 23 (whether by way of novation or
      otherwise),  with respect to Security  Documents  governed by Belgian law,
      all rights  (including  in relation to  Security)  of the Finance


                                     - 91 -
<PAGE>

      Parties shall be maintained and  preserved,  including for the purposes of
      Article 1278 of the Belgian Civil Code.

23.6  COPY OF TRANSFER CERTIFICATE TO COMPANY

      The Agent shall, as soon as reasonably practicable after it has executed a
      Transfer  Certificate,  send  to the  Company  a  copy  of  that  Transfer
      Certificate.

23.7  DISCLOSURE OF INFORMATION

      Any Lender may disclose to any of its Affiliates and:

      (a)   any  other  person  to (or  through)  whom that  Lender  assigns  or
            transfers (or may potentially  assign or transfer) all or any of its
            rights and obligations under this Agreement;

      (b)   any other person with (or through)  whom that Lender enters into (or
            may potentially enter into) any sub-participation in relation to, or
            any  other  transaction  under  which  payments  are to be  made  by
            reference to, this Agreement or any Obligor;

      (c)   any other  person to whom,  and to the extent that,  information  is
            required to be disclosed by any applicable law or regulation; or

      (d)   any rating agency or, with the prior written consent of the Company,
            any other person,

      any  information  about any Obligor,  the Group,  any other person and the
      Finance  Documents  as that  Lender  shall  consider  appropriate  if,  in
      relation  to  paragraphs  (a) and  (b)  above,  the  person  to  whom  the
      information is to be given has entered into a Confidentiality Undertaking.
      This  Clause  23.7  supersedes  any  previous  agreement  relating  to the
      confidentiality of this information.

23.8  HEDGING BANKS

(a)   A Lender (or an Affiliate of a Lender)  which becomes a Hedging Bank shall
      accede to this Agreement and to the Intercreditor Agreement by delivery to
      the Security  Agent of a duly  completed and signed  accession deed in the
      form required under the Intercreditor  Agreement and by the Security Agent
      executing that accession deed.

(b)   Where this Agreement or any other Finance  Document  imposes an obligation
      on a Hedging  Bank and the  relevant  Hedging  Bank is an  Affiliate  of a
      Lender and is not a party to that  document,  the  relevant  Lender  shall
      ensure that the obligation is performed by its Affiliate.

23.9  ASSIGNMENT BY WAY OF SECURITY

      In  addition to the other  rights  provided in this Clause 23, each Lender
      may,  without the consent of any Obligor,  at any time  charge,  assign or
      otherwise  create  Security in or over  (whether by way of  collateral  or
      otherwise)  all or any of its rights under any Finance  Document to secure
      the obligations of that Lender, including:

      (a)   any charge,  assignment or other Security to secure obligations to a
            federal reserve or central bank; and

      (b)   in the case of any Lender which is a fund, any charge, assignment or
            other Security granted to any holders (or trustee or representatives
            of holders) of  obligations  owed,  or  securities  issued,  by that
            Lender as Security for those obligations or securities,


                                     - 92 -
<PAGE>

      except that no such charge, assignment or Security shall:

      (i)   release  a Lender  from any of its  obligations  under  the  Finance
            Documents or  substitute  the  beneficiary  of the relevant  charge,
            assignment  or  Security  for the  Lender  as a party  to any of the
            Finance Documents; or

      (ii)  require any payments to be made by an Obligor or grant to any person
            any more extensive  rights than those required to be made or granted
            to the relevant Lender under the Finance Documents.

23.10 SUB-PARTICIPATIONS

      Any  Lender  may,  without  the  consent  of  any  Obligor,  at  any  time
      sub-participate or sub-contract any of its rights or obligations under the
      Finance Documents.

24.   CHANGES TO THE OBLIGORS

24.1  ASSIGNMENTS AND TRANSFER BY OBLIGORS

      No Obligor may assign any of its rights or  transfer  any of its rights or
      obligations under the Finance Documents.

24.2  ADDITIONAL GUARANTORS

(a)   Subject to compliance  with the  provisions  of paragraphs  (c) and (d) of
      Clause 19.14 ("Know your customer"  checks),  the Company may request that
      any of its wholly owned Subsidiaries becomes an Additional Guarantor. That
      Subsidiary,  and/or any Subsidiary  which is required by this Agreement to
      become an Additional Guarantor, shall become an Additional Guarantor if:

      (i)   the Company  delivers  to the Agent a duly  completed  and  executed
            Accession Letter; and

      (ii)  the Agent  has  received  all of the  documents  and other  evidence
            listed in Part II of Schedule 2  (Conditions  precedent) in relation
            to  that   Additional   Guarantor,   each  in  form  and   substance
            satisfactory to the Agent.

(b)   The Agent shall  notify the Company  and the Lenders  promptly  upon being
      satisfied that it has received (in form and substance  satisfactory to it)
      all the  documents  and other  evidence  listed in Part II of  Schedule  2
      (Conditions precedent).

24.3  REPETITION OF REPRESENTATIONS

      Delivery of an Accession Letter  constitutes  confirmation by the relevant
      Subsidiary  that  the   representations  and  warranties  referred  to  in
      paragraph (c) of Clause 18.27 (Times when  representations  made) are true
      and  correct in  relation  to it as at the date of  delivery as if made by
      reference to the facts and circumstances then existing.

24.4  RELEASE OF GUARANTORS

(a)   If a Guarantor  ceases to be a member of the Group in accordance with this
      Agreement,  that  Guarantor  shall  cease to be a  Guarantor  and shall be
      released from its rights and obligations  under the Finance  Documents and
      the Hedging Documents.

(b)   The Security Agent shall, at the request and cost of the Company,  execute
      such  documents as may be required to release that  Guarantor  pursuant to
      paragraph (a) above.


                                     - 93 -
<PAGE>

24.5  RESIGNATION OF GUARANTOR AND RELEASE OF SECURITY ON DISPOSAL

      If a Guarantor is or is proposed to be the subject of a Permitted Disposal
      then:

      (a)   where  that  Guarantor  created  Security  over any of its assets or
            business in favour of the Security  Agent,  or Security in favour of
            the Security  Agent was created over the shares (or  equivalent)  of
            that Guarantor,  the Security Agent shall promptly,  at the cost and
            request of the Company release those assets,  business or shares (or
            equivalent) and issue certificates of non-crystallisation;

      (b)   the  resignation of that  Guarantor and related  release of Security
            referred to in paragraph (a) above shall not become  effective until
            the date of that disposal; and

      (c)   if the  disposal  of that  Guarantor  is not made,  the  resignation
            letter  of  that  Guarantor  and the  related  release  of  Security
            referred  to in  paragraph  (a) above  shall  have no effect and the
            obligations of the Guarantor and the Security created or intended to
            be created by or over that  Guarantor  shall  continue in full force
            and effect.

24.6  RELEASE OF SECURITY ON DISPOSAL

      If an Obligor makes a Permitted Disposal then:

      (a)   where  Security  has been  taken over the  assets or  business  (the
            subject of the Permitted  Disposal) in favour of the Security Agent,
            the Security  Agent shall  promptly,  at the cost and request of the
            Company  release those assets or business and issue  certificates of
            non-crystallisation; and

      (b)   the release of Security referred to in paragraph (a) above shall not
            become effective until the date of that disposal.


                                     - 94 -
<PAGE>

                                   SECTION 10
                               THE FINANCE PARTIES

25.   ROLE OF THE AGENT AND THE ARRANGER

25.1  APPOINTMENT OF THE AGENT

(a)   Each other Finance Party  appoints the Agent to act as its agent under and
      in connection with the Finance Documents.

(b)   Each other  Finance  Party  authorises  the Agent to exercise  the rights,
      powers,  authorities and discretions specifically given to the Agent under
      or in  connection  with the  Finance  Documents  together  with any  other
      incidental rights, powers, authorities and discretions.

(c)   Each other Finance Party  authorises each of the Agent and the Arranger to
      agree,  accept  and  sign on its  behalf  the  terms  of any  reliance  or
      engagement  letter in relation to any Report or any other report or letter
      provided by any person in  connection  with the Finance  Documents  or the
      transactions contemplated in them.

25.2  DUTIES OF THE AGENT

(a)   The Agent shall promptly  forward to a Party the original or a copy of any
      document  which is  delivered  to the  Agent  for that  Party by any other
      Party.

(b)   Except where a Finance Document specifically provides otherwise, the Agent
      is not obliged to review or check the adequacy,  accuracy or  completeness
      of any document it forwards to another Party.

(c)   If the Agent  receives  notice from a Party  referring to this  Agreement,
      describing  a Default and stating  that the  circumstance  described  is a
      Default, it shall promptly notify the Finance Parties.

(d)   If the  Agent is  aware of the  non-payment  of any  principal,  interest,
      commitment  fee or other fee  payable to a Finance  Party  (other than the
      Agent or the Arranger) under this Agreement,  it shall promptly notify the
      other Finance Parties.

(e)   The Agent's duties under the Finance  Documents are solely  mechanical and
      administrative in nature.

25.3  ROLE OF THE ARRANGER

      Except as specifically provided in the Finance Documents, the Arranger has
      no obligations of any kind to any other Party under or in connection  with
      any Finance Document.

25.4  NO FIDUCIARY DUTIES

(a)   Nothing in this  Agreement  constitutes  the Agent,  or the  Arranger as a
      trustee or fiduciary of any other person.

(b)   Neither  the  Agent,  nor the  Arranger  shall be bound to  account to any
      Lender for any sum or the profit element of any sum received by it for its
      own account.

25.5  BUSINESS WITH THE GROUP

      The Agent and the Arranger  may accept  deposits  from,  lend money to and
      generally  engage in any kind of banking or other business with any member
      of the Group or any other person.


                                     - 95 -
<PAGE>

25.6  RIGHTS AND DISCRETIONS OF THE AGENT

(a)   The Agent may rely on:

      (i)   any representation, notice or document believed by it to be genuine,
            correct and appropriately authorised; and

      (ii)  any statement made by a director,  authorised  signatory or employee
            of any person  regarding any matters which may reasonably be assumed
            to be within his knowledge or within his power to verify.

(b)   The Agent may assume, unless it has received notice to the contrary in its
      capacity as agent for the Lenders, that:

      (i)   no Default has occurred (unless it has actual knowledge of a Default
            arising under Clause 22.1 (Non-payment));

      (ii)  any right, power, authority or discretion vested in any Party or any
            group of Lenders has not been exercised; and

      (iii) any notice or request made by the Company  (other than a Utilisation
            Request  or  Selection  Notice)  is made on  behalf  of and with the
            consent and knowledge of all the Obligors.

(c)   The Agent may  engage,  pay for and rely on the advice or  services of any
      lawyers, accountants, surveyors or other experts.

(d)   The  Agent  may act in  relation  to the  Finance  Documents  through  its
      personnel and agents.

(e)   The Agent may disclose to any other Party any  information  it  reasonably
      believes it has received as agent under this Agreement.

(f)   Notwithstanding  any  other  provision  of  any  Finance  Document  to the
      contrary,  neither the Agent, nor the Arranger is obliged to do or omit to
      do anything if it would or might in its  reasonable  opinion  constitute a
      breach of any law or regulation or a breach of a fiduciary duty or duty of
      confidentiality.

25.7  MAJORITY LENDERS' INSTRUCTIONS

(a)   Unless a  contrary  indication  appears in a Finance  Document,  the Agent
      shall (i) exercise any right, power,  authority or discretion vested in it
      as Agent in accordance with any  instructions  given to it by the Majority
      Lenders  (or, if so  instructed  by the  Majority  Lenders,  refrain  from
      exercising  any right,  power,  authority  or  discretion  vested in it as
      Agent)  and (ii) not be liable  for any act (or  omission)  if it acts (or
      refrains from taking any action) in accordance  with an instruction of the
      Majority Lenders.

(b)   Unless  a  contrary   indication  appears  in  a  Finance  Document,   any
      instructions  given by the  Majority  Lenders  will be  binding on all the
      Finance Parties.

(c)   The Agent may refrain from acting in accordance  with the  instructions of
      the  Majority  Lenders  (or, if  appropriate,  the  Lenders)  until it has
      received such  security as it may require for any cost,  loss or liability
      (together  with any  associated  VAT) which it may incur in complying with
      the instructions.


                                     - 96 -
<PAGE>

(d)   In  the  absence  of  instructions  from  the  Majority  Lenders  (or,  if
      appropriate,  the  Lenders),  the Agent may act (or  refrain  from  taking
      action) as it considers to be in the best interest of the Lenders.

(e)   The Agent is not  authorised to act on behalf of a Lender  (without  first
      obtaining that Lender's  consent) in any legal or arbitration  proceedings
      relating to any Finance Document.

25.8  RESPONSIBILITY FOR DOCUMENTATION

      Neither the Agent, nor the Arranger:

      (a)   is responsible for the adequacy, accuracy and/or completeness of any
            information  (whether  oral or written)  supplied by the Agent,  the
            Arranger,  an Obligor or any other person given in or in  connection
            with any Finance Document or any of the Information Package; or

      (b)   is responsible for the legality, validity,  effectiveness,  adequacy
            or  enforceability  of any Finance  Document or any other agreement,
            arrangement   or  document   entered  into,   made  or  executed  in
            anticipation of or in connection with any Finance Document.

25.9  EXCLUSION OF LIABILITY

(a)   Without  limiting  paragraph  (b)  below  (and  without  prejudice  to the
      provisions of paragraph (e) of Clause 28.10 (Disruption to Payment Systems
      etc)),  the Agent  will not be liable  including  without  limitation  for
      negligence or any other  category of liability  whatsoever  for any action
      taken by it under or in  connection  with  any  Finance  Document,  unless
      directly caused by its gross negligence or wilful misconduct.

(b)   No Party  (other  than the Agent)  may take any  proceedings  against  any
      officer,  employee  or agent of the Agent in respect of any claim it might
      have against the Agent or in respect of any act or omission of any kind by
      that  officer,  employee or agent in relation to any Finance  Document and
      any officer, employee or agent of the Agent may rely on this Clause 25.9.

(c)   The Agent will not be liable for any delay (or any  related  consequences)
      in  crediting  an  account  with an  amount  required  under  the  Finance
      Documents  to be paid by the Agent if the  Agent  has taken all  necessary
      steps as soon as reasonably  practicable to comply with the regulations or
      operating  procedures of any recognised clearing or settlement system used
      by the Agent for that purpose.

(d)   Nothing in this Agreement  shall oblige the Agent or the Arranger to carry
      out any "know your  customer" or other checks in relation to any person on
      behalf  of any  Lender  and each  Lender  confirms  to the  Agent  and the
      Arranger that it is solely  responsible for any such checks it is required
      to carry out and that it may not rely on any statement in relation to such
      checks made by the Agent or the Arranger.

25.10 LENDERS' INDEMNITY TO THE AGENT

(a)   Subject to paragraph  (b) below,  each Lender shall (in  proportion to its
      Available  Commitments and participations in the Loans then outstanding to
      the Available  Facilities and all the Loans)  indemnify the Agent,  within
      three  Business  Days of  demand,  against  any  cost,  loss or  liability
      including  without  limitation  for  negligence  or any other  category of
      liability  whatsoever  incurred by the Agent  (otherwise than by reason of
      its gross  negligence or wilful  misconduct)  (or in the


                                     - 97 -
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      case of any cost, loss or liability  pursuant to Clause 28.10  (Disruption
      to Payment  Systems etc)  notwithstanding  the Agent's  negligence,  gross
      negligence or any other category of liability whatsoever but not including
      any claim  based on the fraud of the  Agent) in acting as Agent  under the
      Finance Documents (unless it has been reimbursed by an Obligor pursuant to
      a Finance Document).

(b)   If the Available  Facilities are then zero, each Lender's  indemnity under
      paragraph (a) above shall be in proportion to its Available Commitments to
      the Available  Facilities  immediately  prior to their  reduction to zero,
      unless there are then any Utilisations outstanding, in which case it shall
      be  in  proportion  to  its   participations   in  the  Utilisations  then
      outstanding to all the Utilisations.

25.11 RESIGNATION OF THE AGENT

(a)   The Agent may resign and appoint one of its  Affiliates  acting through an
      office in the United  Kingdom as successor  by giving  notice to the other
      Finance Parties and the Company.

(b)   Alternatively  the Agent may resign by giving  notice to the other Finance
      Parties  and the  Company,  in which  case  the  Majority  Lenders  (after
      consultation with the Company) may appoint a successor Agent.

(c)   If the Majority Lenders have not appointed a successor Agent in accordance
      with  paragraph (b) above within 30 days after notice of  resignation  was
      given,  the Agent  (after  consultation  with the  Company)  may appoint a
      successor Agent (acting through an office in the United Kingdom).

(d)   The retiring Agent shall, at its own cost, make available to the successor
      Agent such  documents  and  records  and provide  such  assistance  as the
      successor Agent may reasonably  request for the purposes of performing its
      functions as Agent under the Finance Documents.

(e)   The Agent's resignation notice shall only take effect upon the appointment
      of a successor.

(f)   Upon  the  appointment  of  a  successor,  the  retiring  Agent  shall  be
      discharged from any further obligation in respect of the Finance Documents
      but shall remain  entitled to the benefit of this Clause 25. Its successor
      and each of the other Parties  shall have the same rights and  obligations
      amongst  themselves  as they would have had if such  successor had been an
      original Party.

(g)   After  consultation with the Company,  the Majority Lenders may, by notice
      to the Agent, require it to resign in accordance with paragraph (b) above.
      In this event,  the Agent shall resign in  accordance  with  paragraph (b)
      above.

25.12 CO-SECURITY AGENT

(a)   The Facility Agent may appoint or delegate to a separate  security  agent,
      delegate security agent or a co-security agent in any jurisdiction outside
      England and Wales:

      (i)   if the Facility  Agent  considers that without the  appointment  the
            interests  of the  Lenders  under  the  Finance  Documents  might be
            materially and adversely affected;

      (ii)  for the  purpose  of  complying  with any law,  regulation  or other
            condition in any jurisdiction; or

      (iii) for the purpose of  obtaining  or  enforcing a judgment or enforcing
            any Finance Document in any jurisdiction.


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<PAGE>

(b)   Any appointment or delegation  under this Subclause will only be effective
      if the  security  agent,  delegate  security  agent or  co-security  agent
      confirms  to the  Facility  Agent and the  Company  in form and  substance
      satisfactory  to the Facility  Agent that it is bound by the terms of this
      Agreement as if it were the Facility Agent.

(c)   The Facility  Agent may remove any  security  agent or  co-security  agent
      appointed by it and may appoint a new security agent or co-security  agent
      in its place.

25.13 CONFIDENTIALITY

(a)   In acting as agent for the Finance Parties, the Agent shall be regarded as
      acting  through its agency  division  which shall be treated as a separate
      entity from any other of its divisions or departments.

(b)   If information is received by another division or department of the Agent,
      it may be treated as  confidential  to that division or department and the
      Agent shall not be deemed to have notice of it.

25.14 RELATIONSHIP WITH THE LENDERS

(a)   The Agent may treat each Lender as a Lender,  entitled  to payments  under
      this  Agreement  and acting  through  its  Facility  Office  unless it has
      received not less than five  Business  Days' prior notice from that Lender
      to the contrary in accordance with the terms of this Agreement.

(b)   Each Lender  shall supply the Agent with any  information  required by the
      Agent in order to calculate the Mandatory Cost in accordance with Schedule
      4 (Mandatory Cost formulae).

25.15 CREDIT APPRAISAL BY THE LENDERS

      Without  affecting  the  responsibility  of any  Obligor  for  information
      supplied by it or on its behalf in connection  with any Finance  Document,
      each Lender  confirms to the Agent and the Arranger that it has been,  and
      will continue to be,  solely  responsible  for making its own  independent
      appraisal  and  investigation  of all risks arising under or in connection
      with any Finance Document including but not limited to:

      (a)   the  financial  condition,  status and nature of each  member of the
            Group;

      (b)   the legality, validity, effectiveness, adequacy or enforceability of
            any Finance Document and any other agreement,  Security, arrangement
            or document entered into, made or executed in anticipation of, under
            or in connection with any Finance Document;

      (c)   whether that Lender has recourse,  and the nature and extent of that
            recourse, against any Party or any of its respective assets under or
            in  connection   with  any  Finance   Document,   the   transactions
            contemplated  by  the  Finance  Documents  or any  other  agreement,
            Security,  arrangement or document entered into, made or executed in
            anticipation  of, under or in connection with any Finance  Document;
            and

      (d)   the  adequacy,  accuracy  and/or  completeness  of  the  Information
            Package and any other  information  provided by the Agent, any Party
            or by any  other  person  under or in  connection  with any  Finance
            Document, the transactions  contemplated by the Finance Documents or
            any other agreement, Security, arrangement or document entered into,
            made or executed in anticipation of, under or in connection with any
            Finance Document.


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25.16 REFERENCE BANKS

      If a Reference Bank (or, if a Reference  Bank is not a Lender,  the Lender
      of which it is an  Affiliate)  ceases to be a Lender,  the Agent shall (in
      consultation with the Company) appoint another Lender or an Affiliate of a
      Lender to replace that Reference Bank.

25.17 MANAGEMENT TIME OF THE AGENT

      On the occurrence of an Event of Default which is  continuing,  any amount
      payable to the Agent under Clause 14.3 (Indemnity to the Agent), Clause 16
      (Costs and  expenses) and Clause 25.10  (Lenders'  indemnity to the Agent)
      shall include the cost of utilising the Agent's  management  time or other
      resources and will be calculated on the basis of such reasonable  daily or
      hourly  rates as may be agreed  between  the Agent and the  Company  (each
      acting  reasonably)  and notified to the Lenders and is in addition to any
      fee paid or payable to the Agent under Clause 11 (Fees).

25.18 DEDUCTION FROM AMOUNTS PAYABLE BY THE AGENT

      If any Party owes an amount to the Agent under the Finance Documents,  the
      Agent  may,  after  giving  notice to that  Party,  deduct  an amount  not
      exceeding that amount from any payment to that Party which the Agent would
      otherwise  be obliged to make under the  Finance  Documents  and apply the
      amount  deducted in or towards  satisfaction  of the amount owed.  For the
      purposes of the Finance  Documents  that Party shall be regarded as having
      received any amount so deducted.

26.   CONDUCT OF BUSINESS BY THE FINANCE PARTIES

      No provision of this Agreement will:

      (a)   interfere with the right of any Finance Party to arrange its affairs
            (tax or otherwise) in whatever manner it thinks fit;

      (b)   oblige any Finance Party to investigate or claim any credit, relief,
            remission  or  repayment  available  to it or the extent,  order and
            manner of any claim; or

      (c)   oblige any Finance Party to disclose any information relating to its
            affairs (tax or otherwise) or any computations in respect of Tax.

27.   SHARING AMONG THE FINANCE PARTIES

27.1  PAYMENTS TO FINANCE PARTIES

      If a Finance Party (a "RECOVERING FINANCE PARTY") receives or recovers any
      amount from an Obligor  other than in  accordance  with Clause 28 (Payment
      mechanics)  and  applies  that  amount to a payment  due under the Finance
      Documents then:

      (a)   the  Recovering  Finance Party shall,  within three  Business  Days,
            notify details of the receipt or recovery to the Agent;

      (b)   the Agent  shall  determine  whether  the  receipt or recovery is in
            excess of the amount the  Recovering  Finance  Party would have been
            paid had the receipt or recovery  been received or made by the Agent
            and  distributed in accordance  with Clause 28 (Payment  mechanics),
            without  taking  account  of any Tax which  would be  imposed on the
            Agent in relation to the receipt, recovery or distribution; and


                                     - 100 -
<PAGE>

      (c)   the  Recovering  Finance Party shall,  within three Business Days of
            demand  by the  Agent,  pay to the  Agent an  amount  (the  "SHARING
            PAYMENT")  equal to such  receipt or recovery  less any amount which
            the Agent determines may be retained by the Recovering Finance Party
            as its share of any payment to be made,  in  accordance  with Clause
            28.5 (Partial payments).

27.2  REDISTRIBUTION OF PAYMENTS

      The Agent shall  treat the  Sharing  Payment as if it had been paid by the
      relevant Obligor and distribute it between the Finance Parties (other than
      the  Recovering  Finance  Party) in  accordance  with Clause 28.5 (Partial
      payments).

27.3  RECOVERING FINANCE PARTY'S RIGHTS

(a)   On a  distribution  by the Agent  under  Clause  27.2  (Redistribution  of
      payments),  the Recovering  Finance Party will be subrogated to the rights
      of the Finance Parties which have shared in the redistribution.

(b)   If and to the extent that the Recovering Finance Party is not able to rely
      on its rights under  paragraph  (a) above,  the relevant  Obligor shall be
      liable to the  Recovering  Finance  Party for a debt equal to the  Sharing
      Payment which is immediately due and payable.

27.4  REVERSAL OF REDISTRIBUTION

      If any part of the Sharing  Payment  received or recovered by a Recovering
      Finance Party becomes  repayable and is repaid by that Recovering  Finance
      Party, then:

      (a)   each  Finance  Party  which  has  received  a share of the  relevant
            Sharing Payment pursuant to Clause 27.2 (Redistribution of payments)
            shall,  upon  request of the Agent,  pay to the Agent for account of
            that  Recovering  Finance  Party an amount equal to the  appropriate
            part of its share of the Sharing Payment (together with an amount as
            is necessary  to reimburse  that  Recovering  Finance  Party for its
            proportion  of  any  interest  on the  Sharing  Payment  which  that
            Recovering Finance Party is required to pay); and

      (b)   that Recovering  Finance Party's rights of subrogation in respect of
            any  reimbursement  shall be cancelled and the relevant Obligor will
            be  liable  to the  reimbursing  Finance  Party  for the  amount  so
            reimbursed.

27.5  EXCEPTIONS

(a)   This Clause 27 shall not apply to the extent that the  Recovering  Finance
      Party would not, after making any payment pursuant to this Clause 27, have
      a valid and enforceable claim against the relevant Obligor.

(b)   A Recovering  Finance Party is not obliged to share with any other Finance
      Party any  amount  which the  Recovering  Finance  Party has  received  or
      recovered as a result of taking legal or arbitration proceedings, if:

      (i)   it notified  that other  Finance  Party of the legal or  arbitration
            proceedings; and

      (ii)  that other Finance Party had an  opportunity to participate in those
            legal  or  arbitration  proceedings  but  did  not do so as  soon as
            reasonably  practicable  having  received  notice  and did not  take
            separate legal or arbitration proceedings.


                                     - 101 -
<PAGE>

                                   SECTION 11
                                 ADMINISTRATION

28.   PAYMENT MECHANICS

28.1  PAYMENTS TO THE AGENT

(a)   On each date on which an Obligor or a Lender is required to make a payment
      under a Finance  Document,  that  Obligor  or Lender  shall  make the same
      available to the Agent (unless a contrary  indication appears in a Finance
      Document)  for  value  on the due  date  at the  time  and in  such  funds
      specified by the Agent as being  customary at the time for  settlement  of
      transactions in the relevant currency in the place of payment.

(b)   Payment shall be made to such account in the principal financial centre of
      the country of that  currency  (or, in relation to euro,  in the principal
      financial centre in a Participating Member State or London) with such bank
      as the Agent specifies.

28.2  DISTRIBUTIONS BY THE AGENT

      Each payment received by the Agent under the Finance Documents for another
      Party  shall,  subject to Clause 28.3  (Distributions  to an Obligor)  and
      Clause  28.4  (Clawback),  be  made  available  by the  Agent  as  soon as
      practicable  after  receipt to the Party  entitled  to receive  payment in
      accordance  with this Agreement (in the case of a Lender,  for the account
      of its Facility  Office),  to such account as that Party may notify to the
      Agent by not less  than  five  Business  Days'  notice  with a bank in the
      principal  financial  centre  of the  country  of that  currency  (or,  in
      relation to euro, in the  principal  financial  centre of a  Participating
      Member State or London).

28.3  DISTRIBUTIONS TO AN OBLIGOR

      The Agent may (with the  consent  of the  Obligor  or in  accordance  with
      Clause 29 (Set-off))  apply any amount  received by it for that Obligor in
      or towards  payment (on the date and in the currency and funds of receipt)
      of any amount due from that Obligor  under the Finance  Documents or in or
      towards the purchase of any amount of any currency to be so applied.

28.4  CLAWBACK

(a)   Where a sum is to be paid to the Agent  under the  Finance  Documents  for
      another  Party,  the Agent is not  obliged  to pay that sum to that  other
      Party (or to enter into or perform any related exchange contract) until it
      has  been  able to  establish  to its  satisfaction  that it has  actually
      received that sum.

(b)   If the Agent pays an amount to another  Party and it proves to be the case
      that it had not actually received that amount, then the Party to whom that
      amount (or the proceeds of any related exchange  contract) was paid by the
      Agent shall on demand refund the same to the Agent  together with interest
      on that  amount  from the date of  payment  to the date of  receipt by the
      Agent, calculated by it to reflect its cost of funds.

28.5  PARTIAL PAYMENTS

(a)   If the Agent receives a payment that is  insufficient to discharge all the
      amounts  then due and payable by an Obligor  under the Finance  Documents,
      the Agent shall apply that payment towards the obligations of that Obligor
      under the Finance Documents in the following order:


                                     - 102 -
<PAGE>

      (i)   FIRST, in or towards payment pro rata of any unpaid fees,  costs and
            expenses of the Agent, the Security Agent, or the Arranger under the
            Finance Documents;

      (ii)  SECONDLY,  in or towards  payment pro rata of any accrued  interest,
            fee or commission due but unpaid under this Agreement;

      (iii) THIRDLY,  in or towards  payment pro rata of any  principal  due but
            unpaid under this Agreement; and

      (iv)  FOURTHLY,  in or towards  payment  pro rata of any other sum due but
            unpaid under the Finance Documents.

(b)   The Agent shall, if so directed by the Majority Lenders vary the order set
      out in paragraphs (a)(ii) to (iii) above.

(c)   Paragraphs  (a) and (b) above will override any  appropriation  made by an
      Obligor.

28.6  NO SET-OFF BY OBLIGORS

      All payments to be made by an Obligor under the Finance Documents shall be
      calculated  and be made without (and free and clear of any deduction  for)
      set-off or counterclaim.

28.7  BUSINESS DAYS

(a)   Any  payment  which is due to be made on a day that is not a Business  Day
      shall be made on the next  Business  Day in the same  calendar  Month  (if
      there is one) or the preceding Business Day (if there is not).

(b)   During any  extension  of the due date for payment of any  principal or an
      Unpaid Sum under this  Agreement  interest is payable on the  principal or
      Unpaid Sum at the rate payable on the original due date.

28.8  CURRENCY OF ACCOUNT

(a)   Subject  to  paragraph  (b) below,  euro is the  currency  of account  and
      payment for any sum due from an Obligor under any Finance Document.

(b)   Each  payment in respect of costs,  expenses or Taxes shall be made in the
      currency in which the costs, expenses or Taxes are incurred.

28.9  CHANGE OF CURRENCY

(a)   Unless otherwise  prohibited by law, if more than one currency or currency
      unit are at the same time recognised by the central bank of any country as
      the lawful currency of that country, then:

      (i)   any  reference  in the  Finance  Documents  to, and any  obligations
            arising under the Finance Documents in, the currency of that country
            shall be translated  into, or paid in, the currency or currency unit
            of that country designated by the Agent (after consultation with the
            Company); and

      (ii)  any translation  from one currency or currency unit to another shall
            be at the official  rate of exchange  recognised by the central bank
            for the conversion of that currency or currency unit into the other,
            rounded up or down by the Agent (acting reasonably).

(b)   If a change in any currency of a country  occurs,  this Agreement will, to
      the extent the Agent (acting  reasonably and after  consultation  with the
      Company)  specifies  to be  necessary,  be


                                     - 103 -
<PAGE>

      amended  to comply  with any  generally  accepted  conventions  and market
      practice in the  Relevant  Interbank  Market and  otherwise to reflect the
      change in currency.

28.10 DISRUPTION TO PAYMENT SYSTEMS ETC.

      If either the Agent determines (in its discretion) that a Disruption Event
      has  occurred or the Agent is notified  by the Company  that a  Disruption
      Event has occurred:

      (a)   Agent may, and shall if  requested to do so by the Company,  consult
            with the  Company  with a view to  agreeing  with the  Company  such
            changes to the operation or  administration of the Facilities as the
            Agent may deem necessary in the circumstances;

      (b)   the Agent  shall not be  obliged  to  consult  with the  Company  in
            relation to any changes  mentioned in paragraph (a) above if, in its
            opinion, it is not practicable to do so in the circumstances and, in
            any event, shall have no obligation to agree to such changes;

      (c)   the Agent may consult  with the  Finance  Parties in relation to any
            changes mentioned in paragraph (a) above but shall not be obliged to
            do so if,  in its  opinion,  it is not  practicable  to do so in the
            circumstances;

      (d)   any such  changes  agreed  upon by the Agent and the  Company  shall
            (whether or not it is finally determined that a Disruption Event has
            occurred) be binding upon the Parties as an amendment to (or, as the
            case  may  be,  waiver  of)  the  terms  of  the  Finance  Documents
            notwithstanding   the  provisions  of  Clause  34  (Amendments   and
            Waivers);

      (e)   the  Agent  shall  not be liable  for any  damages,  costs or losses
            whatsoever  (including,  without  limitation for  negligence,  gross
            negligence  or any other  category of liability  whatsoever  but not
            including  any claim  based on the fraud of the Agent)  arising as a
            result of its taking, or failing to take, any actions pursuant to or
            in connection with this Clause 28.10; and

      (f)   the Agent  shall  notify the Finance  Parties of all changes  agreed
            pursuant to paragraph (d) above.

29.   SET-OFF

      A Finance  Party may set off any  matured  obligation  due from an Obligor
      under the  Finance  Documents  (to the extent  beneficially  owned by that
      Finance Party) against any matured  obligation  owed by that Finance Party
      to that  Obligor,  regardless of the place of payment,  booking  branch or
      currency  of  either  obligation.  If the  obligations  are  in  different
      currencies,  the Finance Party may convert  either  obligation at a market
      rate of  exchange in its usual  course of business  for the purpose of the
      set-off.

30.   NOTICES

30.1  COMMUNICATIONS IN WRITING

      Any  communication  to be made  under or in  connection  with the  Finance
      Documents shall be made in writing and, unless  otherwise  stated,  may be
      made by fax or letter.


                                     - 104 -
<PAGE>

30.2  ADDRESSES

      The address and fax number (and the  department  or officer,  if any,  for
      whose  attention  the  communication  is to be made) of each Party for any
      communication  or document to be made or delivered  under or in connection
      with the Finance Documents is:

      (a)   in the case of the Company, that identified with its name below;

      (b)   in the case of each  Lender  or any  other  Original  Obligor,  that
            notified in writing to the Agent on or prior to the date on which it
            becomes a Party; and

      (c)   in the case of the Agent or the Security Agent, that identified with
            its name below,

      or any  substitute  address,  fax number or  department  or officer as the
      Party may  notify  to the  Agent  (or the  Agent  may  notify to the other
      Parties,  if a change is made by the Agent) by not less than five Business
      Days' notice.

30.3  DELIVERY

(a)   Any  communication  or document made or delivered by one person to another
      under or in connection with the Finance Documents will only be effective:

      (i)   if by way of fax, when received in legible form; or

      (ii)  if by way of letter,  when it has been left at the relevant  address
            or five  Business  Days after being  deposited  in the post  postage
            prepaid in an envelope addressed to it at that address,

      and, if a  particular  department  or officer is  specified as part of its
      address details  provided under Clause 30.2  (Addresses),  if addressed to
      that department or officer.

(b)   Any  communication or document to be made or delivered to the Agent or the
      Security  Agent will be effective  only when  actually  received by it and
      then only if it is expressly marked for the attention of the department or
      officer identified with its signature below (or any substitute  department
      or officer as it shall specify for this purpose).

(c)   All notices from or to an Obligor shall be sent through the Agent.

(d)   Any  communication  or  document  made  or  delivered  to the  Company  in
      accordance  with  this  Clause  30.3  will be  deemed to have been made or
      delivered to each of the Obligors.

30.4  NOTIFICATION OF ADDRESS AND FAX NUMBER

      Promptly  upon  receipt of  notification  of an address  and fax number or
      change of address or fax number  pursuant  to Clause 30.2  (Addresses)  or
      changing  its own address or fax number,  the Agent shall notify the other
      Parties.

30.5  ELECTRONIC COMMUNICATION

(a)   Any  communication  to be made  between the Agent and a Lender under or in
      connection  with the Finance  Documents may be made by electronic  mail or
      other electronic means, if the Agent and the relevant Lender:

      (i)   agree that, unless and until notified to the contrary, this is to be
            an accepted form of communication;


                                     - 105 -
<PAGE>

      (ii)  notify each other in writing of their electronic mail address and/or
            any other information  required to enable the sending and receipt of
            information by that means; and

      (iii) notify  each other of any change to their  address or any other such
            information supplied by them.

(b)   Any electronic  communication  made between the Agent and a Lender will be
      effective only when actually  received in readable form and in the case of
      any electronic  communication  made by a Lender to the Agent only if it is
      addressed in such a manner as the Agent shall specify for this purpose.

30.6  ENGLISH LANGUAGE

(a)   Any notice given under or in connection with any Finance  Document must be
      in English.

(b)   All other  documents  provided  under or in  connection  with any  Finance
      Document must be:

      (i)   in English; or

      (ii)  if not in English, and if so required by the Agent, accompanied by a
            certified  English  translation  and,  in  this  case,  the  English
            translation  will prevail  unless the document is a  constitutional,
            statutory or other official document or a Security Document.

31.   CALCULATIONS AND CERTIFICATES

31.1  ACCOUNTS

      In  any  litigation  or  arbitration  proceedings  arising  out  of  or in
      connection  with a Finance  Document,  the  entries  made in the  accounts
      maintained by a Finance  Party are prima facie  evidence of the matters to
      which they relate.

31.2  CERTIFICATES AND DETERMINATIONS

      Any  certification or determination by a Finance Party of a rate or amount
      under  any  Finance  Document  is,  in  the  absence  of  manifest  error,
      conclusive evidence of the matters to which it relates.

31.3  DAY COUNT CONVENTION

      Any  interest,  commission or fee accruing  under a Finance  Document will
      accrue from day to day and is calculated on the basis of the actual number
      of days  elapsed and a year of 360 days or, in any case where the practice
      in the Relevant  Interbank Market differs,  in accordance with that market
      practice.

32.   PARTIAL INVALIDITY

      If, at any time,  any  provision  of the Finance  Documents  is or becomes
      illegal,  invalid or  unenforceable  in any  respect  under any law of any
      jurisdiction,  neither the  legality,  validity or  enforceability  of the
      remaining provisions nor the legality,  validity or enforceability of such
      provision  under  the  law of any  other  jurisdiction  will in any way be
      affected or impaired.

33.   REMEDIES AND WAIVERS

      No failure to exercise,  nor any delay in  exercising,  on the part of any
      Finance  Party,  any right or remedy  under the  Finance  Documents  shall
      operate as a waiver, nor shall any single or partial


                                     - 106 -
<PAGE>

      exercise of any right or remedy  prevent any further or other  exercise or
      the  exercise  of any other  right or  remedy.  The  rights  and  remedies
      provided in this  Agreement are cumulative and not exclusive of any rights
      or remedies provided by law.

34.   AMENDMENTS AND WAIVERS

34.1  REQUIRED CONSENTS

(a)   Subject to Clause 34.2  (Exceptions) any term of the Finance Documents may
      be amended or waived only with the consent of the Majority Lenders and the
      Company and any such amendment or waiver will be binding on all Parties.

(b)   The Agent may effect,  on behalf of any Finance  Party,  any  amendment or
      waiver permitted by this Clause 34.

(c)   Each  Obligor  acknowledges  that  its  consent  is not  required  for any
      amendment or waiver  permitted by this Clause 34 which is agreed to by the
      Company.

34.2  EXCEPTIONS

(a)   An  amendment  or waiver that has the effect of changing or which  relates
      to:

      (i)     the definition of "Majority Lenders" in Clause 1.1 (Definitions);

      (ii)    an  extension  to the date of  payment  of any  amount  under  the
              Finance Documents;

      (iii)   a  reduction  in the  Margin or a  reduction  in the amount of any
              payment of principal, interest, fees or commission payable;

      (iv)    an increase in or an extension of any Commitment;

      (v)     a change to the Borrowers or  Guarantors  other than in accordance
              with Clause 24 (Changes to the Obligors);

      (vi)    any  provision  which  expressly  requires  the consent of all the
              Lenders;

      (vii)   Clause 2.2 (Finance Parties' rights and  obligations),  Clause 7.2
              (Sale), Clause 7.3 (Mandatory cancellation), Clause 7.5 (Mandatory
              prepayment  - Net Sale  Proceeds) to Clause 7.10  (Application  of
              Proceeds),  Clause 23 (Changes to the Lenders), Clause 27 (Sharing
              among the Finance Parties) or this Clause 34;

      (viii)  the  release of any  Security  created  pursuant  to any  Security
              Document; or

      (ix)    the ranking or subordination under the Intercreditor Agreement.

      shall not be made without the prior consent of all the Lenders.

(b)   An amendment or waiver which relates to the rights or  obligations  of the
      Agent,  the Security Agent or the Arranger may not be effected without its
      consent.

(c)   An  amendment  or  waiver  which  relates  to  Clause  17  (Guarantee  and
      indemnity) may not be effected without the consent of the Guarantors.

(d)   If any Lender has failed to respond to any consent, waiver or amendment of
      any provision of any Finance  Document within 15 Business Days of delivery
      of the request for such consent, waiver or amendment by the Company or the
      Agent in  accordance  with  the  terms of this  Agreement,  the


                                     - 107 -
<PAGE>

      Available  Commitments  and  participations  in the  Utilisations  of such
      Lender  shall be  excluded  for the  purposes of  determining  whether the
      consent  of the  Majority  Lenders or all  Lenders  has been  obtained  in
      respect of such consent, waiver or amendment.

(e)   No further  consent is required  from any Finance  Party in respect of the
      Permitted  Revolving  Credit  Facility  (documented  within this Agreement
      following  amendments  hereto).  Each  Finance  Party  agrees  to  execute
      amendments to the Finance  Documents,  including without  limitation,  any
      Security Documents,  as required by the Agent to provide for the Permitted
      Revolving  Credit Facility to be made available,  and secured,  under such
      documents  so  long  as  the  RCF  Lender  accedes  to  the  terms  of the
      Intercreditor  Agreement.  The  existing  terms  hereof  shall  apply  the
      Permitted  Revolving  Credit  Facility  and shall be  amended  only to the
      extent  they  relate  to the  mechanics  and  economics  of the  Permitted
      Revolving Credit Facility.

(f)   Notwithstanding  paragraph (e) above, the terms of the Permitted Revolving
      Credit  Facility  shall  be  approved  and  agreed  by the  Agent  (acting
      reasonably).

35.   COUNTERPARTS

      Each Finance Document may be executed in any number of  counterparts,  and
      this has the same effect as if the signatures on the counterparts  were on
      a single copy of the Finance Document.


                                     - 108 -
<PAGE>

                                   SECTION 12
                          GOVERNING LAW AND ENFORCEMENT

36.   GOVERNING LAW

      This Agreement is governed by English law.

37.   ENFORCEMENT

37.1  JURISDICTION

(a)   The courts of England have  exclusive  jurisdiction  to settle any dispute
      arising out of or in connection  with this Agreement  (including a dispute
      regarding the existence,  validity or  termination  of this  Agreement) (a
      "DISPUTE").

(b)   The Parties agree that the courts of England are the most  appropriate and
      convenient  courts to settle  Disputes and accordingly no Party will argue
      to the contrary.

(c)   This  Clause 37.1 is for the benefit of the  Finance  Parties  only.  As a
      result,  no Finance  Party  shall be  prevented  from  taking  proceedings
      relating to a Dispute in any other courts with jurisdiction. To the extent
      allowed by law, the Finance Parties may take concurrent proceedings in any
      number of jurisdictions.

37.2  SERVICE OF PROCESS

      Without  prejudice to any other mode of service allowed under any relevant
      law,  each  Obligor  (other  than an Obligor  incorporated  in England and
      Wales):

      (a)   irrevocably  appoints Solutia UK Limited as its agent for service of
            process in relation to any proceedings  before the English courts in
            connection with any Finance Document; and

      (b)   agrees  that  failure  by a  process  agent to notify  the  relevant
            Obligor  of  the  process  will  not  invalidate   the   proceedings
            concerned.

37.3  WAIVER OF CONSEQUENTIAL DAMAGES

      In no event shall any Finance  Party be liable on any theory of  liability
      for any  special,  indirect,  consequential  or  punitive  damages and the
      Company  hereby  waives,  releases and agrees (for itself and on behalf of
      its  Subsidiaries)  not to sue upon any such  claim for any such  damages,
      whether or not accrued and whether or not known or  suspected  to exist in
      its favour.

THIS AGREEMENT HAS BEEN ENTERED INTO ON THE DATE STATED AT THE BEGINNING OF THIS
AGREEMENT.


                                     - 109 -
<PAGE>

THE COMPANY

SOLUTIA EUROPE SA/NV

Address:        Parc Scientifique

                Fleming, Rue Laid Burniat 3, 1348

                Louvain-la-Neuve, Belgium

Fax No:         32 10 48 12 24

Attention:      Legal Counsel


By:    /s/ VEERLE HENDRICKX

       Managing Director


                                     - 137 -
<PAGE>

THE BORROWER

SOLUTIA SERVICES INTERNATIONAL SCA/COMM V.A.


Address:        Parc Scientifique

                Fleming, Rue Laid Burniat 3, 1348

                Louvain-la-Neuve, Belgium

Fax No:         32 10 48 12 24

Attention:      Legal Counsel


By:    /s/ KRISTEL DEROOVER

       Ad-hoc proxy-holder


By:


By:


                                     - 138 -
<PAGE>

THE ORIGINAL GUARANTORS

SOLUTIA EUROPE SA/NV


Address:        Parc Scientifique

                Fleming, Rue Laid Burniat 3, 1348

                Louvain-la-Neuve, Belgium

Fax No:         32 10 48 12 24

Attention:      Legal Counsel




By:    /s/ VEERLE HENDRICKX

       Managing Director




CPFILMS VERTRIEBS GMBH


Address:        Herforderstrasse 119-131, 33609

                Bielefeld, Germany

Fax No:         49 521 93 24 828

Attention:      Managing Director




By:    /s/ ARTHUR BOWYER

       Managing Director


                                     - 139 -
<PAGE>

THE ARRANGER

CITIGROUP GLOBAL MARKETS LIMITED

Address:

Fax No:

Attention:




By:   /s/ SOREN CHRISTENSEN


                                     - 140 -
<PAGE>

THE ORIGINAL LENDERS

CITIBANK, N.A.

Address:        Citigroup Centre

                Canary Wharf

                London, E14 5LB

Fax No:         44 20 7500 5278

Attention:      Agency and Trust


By:    /s/ SOREN CHRISTENSEN


                                     - 141 -
<PAGE>

THE AGENT

CITIBANK INTERNATIONAL PLC

Address:        Citigroup Centre

                Canary Wharf

                London, E14 5LB

Fax No:         44 20 8636 3824

Attention:


By:    /s/ CASILDA CLOVIS




By:    /s/ CHARLES MILLER


                                     - 142 -
<PAGE>

THE SECURITY AGENT

CITIBANK, N.A.

Address:        Citigroup Centre

                Canary Wharf

                London, E14 5LB

Fax No:         44 20 7500 5278

Attention:      Agency and Trust


By:    /s/ VIOLA JAPAUL

       Director


                                     - 143 -