exv10w1






Exhibit 10.1




Execution Version




 





TRANSACTION AGREEMENT




BY AND AMONG




SOLUTIA INC.,




NYCO LLC,




SK CAPITAL PARTNERS II, L.P.




AND




SK TITAN HOLDINGS LLC




MARCH 31, 2009




 






 









 








TABLE OF CONTENTS






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






i 









 






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






ii 









 






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






iii 









 






Exhibit A — {Intentionally Omitted}

Exhibit B — Form of Bill of Sale

Exhibit C — Form of Assignment and Assumption Agreement

Exhibit D — Form of Transition Services Agreement

Exhibit E — Form of Intellectual Property Assignments

Exhibit F — Form of DPO Operating Agreement

Exhibit G — Form of DME Supply Agreement

Exhibit H — Form of China Asset Transfer Agreement

Exhibit I — Form of Equistar Lease and Subcontract Agreement

Exhibit J — Form of Louvain-La-Neuve Lease

Exhibit K — Form of Securityholders Agreement

Exhibit L — Form of Holdings Certificate of Incorporation

Exhibit M — Form of Holdings Bylaws




Annex A — Select Transferred Contracts

Annex B — Select Contributed Assets

Annex C — Select Covered Employees

Annex D — Select Excluded Assets

Annex E — Illustrative Net Working Capital Determination

Annex F — Select Products

Annex G — Business Financial Statements

Annex H — Debt Letter of Interest

Annex I — Equity Commitment Letter




Disclosure Schedule





iv 









 








TRANSACTION AGREEMENT




     This TRANSACTION AGREEMENT (this “Agreement”) is entered into as of March 31, 2009 by
and among Solutia Inc., a corporation formed under the laws of the State of Delaware
(“Solutia” or “Seller” and together with the Other Sellers (as defined below),
“Sellers”), NyCo LLC, a limited liability company formed under the laws of the State of
Delaware and a direct, wholly-owned subsidiary of Solutia (“Newco”), SK Capital Partners
II, L.P., a limited partnership formed under the laws of Delaware (“SK”), and SK Titan
Holdings LLC, a limited liability company formed under the laws of the State of Delaware and a
direct, wholly-owned subsidiary of SK (“Buyer”). Seller, Newco, SK and Buyer are referred
to collectively herein as the “Parties”.



WITNESSETH




     WHEREAS, Solutia, through an unincorporated division thereof and through the Other Sellers,
engages in a business operation that manufactures and markets nylon intermediate chemicals and
nylon products, including the Products (as defined below) (the “Business”), as well as
other business operations unrelated to the Business;



     WHEREAS, Solutia wishes to transfer, and Buyer wishes to acquire, a majority interest in the
Business, on the terms and subject to the conditions set forth herein;



     WHEREAS, the transfer of the majority interest in the Business will be effected through
(i) the contribution by Solutia and the Other Sellers to Newco or a designated Newco Subsidiary of
certain assets held by Sellers and used primarily in the operation of the Business in exchange for
equity interests of Newco and, (ii) thereafter, (x) the contribution by Solutia to a corporation
formed under the laws of the State of Delaware to be formed by the Parties and named “NyCo
Holdings, Inc.” or any other name as mutually agreed upon by Buyer and Seller (“Holdings”)
of all of the then-outstanding equity interests of Newco for cash and shares of the capital stock
of Holdings as specified herein, and (y) the contribution by Buyer to Holdings of the cash amount
specified herein for the shares of the capital stock of Holdings specified herein so that, after
giving effect to the transactions contemplated hereby, Buyer shall hold a majority of the
outstanding capital stock of Holdings, in each case on the terms and subject to the conditions set
forth herein; and



     WHEREAS, it is the intention of the Parties that the contributions to Holdings by Solutia of
all of the equity interests of Newco in exchange for cash and shares of the capital stock of
Holdings, on the one hand, and by Buyer of cash in exchange for shares of the capital stock of
Holdings, on the other hand, together be treated as a tax-free contribution pursuant to Section 351
of the IRC (as defined below).



     NOW, THEREFORE, in consideration of the mutual promises herein made, and in consideration of
the representations, warranties and covenants herein contained, the Parties agree as follows.



 









 





ARTICLE I

DEFINITIONS




     Section 1.1 Definitions. For purposes of this Agreement:



     “ABL” means an asset backed loan facility providing available borrowing to Holdings on
commercially reasonable terms and conditions.



     “Accounts Receivable” means all accounts receivable of the Business outstanding on the
Closing Date and all claims, refunds and credits with respect thereto.



     “Acquisition Proposal” means any inquiry regarding, or a proposal or offer to enter
into, a Covered Transaction from any Person or group of Persons other than SK, Buyer or any of
their Affiliates.



     “Adjustment Determination Effective Time” has the meaning set forth in Section
2.9(a).



     “Affiliate” has the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act.



     “Aggregate Reserved Capacity” means the total Committed Reserved Capacity for all
existing Users.



     “Agreement” has the meaning set forth in the preamble.



     “Antitrust Law” means the Sherman Act, the Clayton Act, the HSR Act, the Federal Trade
Commission Act, and all other laws and orders that are designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition, whether in the United States or elsewhere.



     “Applicable Guest Agreement” has the meaning set forth in Section 8.7.



     “Assignment and Assumption Agreement” has the meaning set forth in Section
2.8(a)(ii).



     “Assumed Liabilities” means all Liabilities of any Seller related to the Business as
of the Closing Date or arising from and after the date thereof, including:




     (a) all Liabilities reflected on the Conclusive Net Working Capital Statement;




     (b) all Liabilities relating to or arising out of the Transferred Contracts;




     (c) to the extent not assumed pursuant to any other clause of this definition, (i) all
Liabilities set forth on the Most Recent Balance Sheet to the extent not reduced, discharged
or released prior to Closing, but not including any Excluded Liabilities set forth thereon,
and (ii) all Liabilities of Sellers that are of the same type and nature of the Liabilities
identified on the Most Recent Balance Sheet relating to the Business which have arisen after
the date of the Most Recent Balance Sheet Date in the ordinary course



2









 







of business which would appear on a balance sheet prepared in accordance with GAAP
consistently applied with the Most Recent Balance Sheet, but not including any Excluded
Liabilities which would appear thereon;




     (d) all Liabilities for product returns or replacements or relating to or arising under
any product warranties, claims of product liability, obligations to indemnify or similar
claims related to the Business at any time;




     (e) other than the Excluded Environmental Liabilities, all Liabilities relating to or
arising out of the ownership or operation of the Facilities or otherwise relating to or
arising out of the past, current or future conduct of the Business with respect to
environmental, health or safety matters, including all such Liabilities arising pursuant to
Environmental, Health or Safety Requirements;




     (f) all Liabilities of the Business for unpaid Taxes with respect to taxable periods or
portions thereof ending on or prior to the Closing Date (other than Liabilities for Income
Taxes of any Seller);




     (g) any Liability relating to or arising out of any claim or threatened claim that the
use of the Intellectual Property acquired hereunder infringed, misappropriated or otherwise
violated the Intellectual Property or any right of any Person;




     (h) all Liabilities related to or arising out of any claims, causes of action,
lawsuits, or any other legal proceedings, whether in tort, contract or otherwise, relating
to or arising out of the Business or any Contributed Asset at any time (other than the
Retained Litigation Matters);




     (i) for the avoidance of doubt, all Liabilities relating to or arising out of the
ownership or operation of the Business or any Contributed Asset from and after the Closing
Date;




     (j) all Liabilities to be assumed by Holdings, Newco or Buyer (or any of their
respective Subsidiaries) in accordance with the provisions of Section 6.8; and




     (k) all Liabilities to be assumed by Holdings, Newco or Buyer (or any of their
respective Subsidiaries) in accordance with the provisions of Section 6.12.


provided, however, that, notwithstanding the above, the Assumed Liabilities shall
not include (i) any Liability of any Other Seller organized under the laws of China related to the
Business as of the Closing Date; or (ii) any other Excluded Liabilities.




     “Basket” has the meaning set forth in Section 8.4(g).



     “Bill of Sale” has the meaning set forth in Section 2.8(a)(i).



     “Bonding Requirements” means standby letters of credit, guarantees, indemnity bonds
and other financial commitment credit support instruments issued by third parties on behalf of any
Seller or any of its respective Subsidiaries regarding the Business.



3









 





     “Business” has the meaning set forth in the recitals.



     “Business Day” means any day other than a Saturday, a Sunday or a day on which banks
located in New York, New York shall be authorized or required by law to close.



     “Buyer” has the meaning set forth in the preamble.



     “Buyer Counterparty” has the meaning set forth in Section 8.7(a).



     “Buyer Indemnified Party” has the meaning set forth in Section 8.2.



     “Buyer Termination Fee” has the meaning set forth in Section 9.2(a).



     “Cap” has the meaning set forth in Section 8.4(i).



     “Cash” means cash, cash equivalents and liquid investments.



     “Cash Amount” means Fifty Million Dollars ($50,000,000).



     “China” means the People’s Republic of China, but excluding the Special Administrative
Region of Hong Kong, the Special Administrative Region of Macao, and Taiwan Province.



     “China Asset Transfer Agreement” has the meaning set forth in Section
2.8(a)(vii).



     “China Asset Transfer Closing” means the closing of the transactions contemplated by
the China Asset Transfer Agreement.



     “China Assumed Liabilities” means any Liability of any Other Seller organized under
the laws of China that (a) would be an Assumed Liability but for clause (i) of the proviso to the
definition of Assumed Liabilities or (b) is otherwise to be assumed by Newco or any Newco
Subsidiary pursuant to the China Asset Transfer Agreement.



     “China Business Assets” means any asset of any Other Seller organized under the laws
of China, including any rights of any such Other Seller under any Contracts, that would be a
Contributed Asset but for clause (i) of the proviso to the definition of Contributed Assets.



     “Chocolate Bayou Plant” means Seller’s Chocolate Bayou plant located in Alvin, Texas.



     “Closing” has the meaning set forth in Section 2.7.



     “Closing Date” has the meaning set forth in Section 2.7.



     “COBRA” has the meaning set forth in Section 6.8(g).



     “Committed Reserved Capacity” means, with respect to each User, the Reserved Capacity
that is reserved for, and committed to by, such User as of the date hereof.



     “Conclusive Net Working Capital Statement” has the meaning set forth in Section
2.9(c).



4









 





     “Conclusive Quarterly Statement” has the meaning set forth in Section
6.14(b)(iii).



     “Confidentiality Agreement” means the letter agreement, dated as of July 30, 2008, by
and between Solutia and Valence Group, regarding the terms and conditions on which Solutia would
make available to Valence Group and its Representatives (solely for such purposes, as defined
therein) certain information relating to the Business.



     “Contract” means any agreement, contract, lease, sublease, indenture, mortgage,
instrument, guaranty, loan or credit agreement, note, bond, customer order, purchase order,
franchise, dealer and distributorship agreement, supply agreement, development agreement, joint
venture agreement, license agreement, promotion agreement, partnership agreement or other binding
arrangement, understanding, permission or commitment, whether written or oral and including any
right or obligation under any of the foregoing.



     “Contract Rejection Effective Date” means the effective date of Equistar’s rejection,
pursuant to 11 U.S.C. s. 365, of the Equistar U&S Agreement and the Equistar Land Lease, as such
effective date is established by the Order Authorizing the (i) Long-Term Idling of the Chocolate
Bayou Olefins Facility; (ii) Reduction of the Workforce at the Facility; and (iii) Rejection of
Certain Executory Contracts and Unexpired Leases Related to the Facility, entered in the Equistar
Chapter 11 Case on March 13, 2009, as such order or the effective date set forth therein for
rejection of the Equistar U&S Agreement and the Equistar Land Lease may be modified by any later
order entered in the Equistar Chapter 11 Case.



     “Contributed Assets” means all of Sellers’ right, title, and interest in and to all of
the following assets of Sellers used or held for use primarily in the operation of the Business as
of the Closing Date:




     (a) Inventory;




     (b) Furnishings and Equipment;




     (c) Records;




     (d) Intellectual Property (subject to the license set forth in Section 2.11);




     (e) Owned Real Property;




     (f) all rights under Contracts primarily relating to (x) the Business or (y) any asset
included in the definition of Contributed Assets, including those Contracts listed on
Annex A hereto other than those that expire or that are terminated prior to the
Closing, but, in each case, excluding this Agreement, any Related Agreement or any Contracts
primarily related to any Excluded Asset and any Seller’s rights under any such excluded
Contracts (all Contracts contemplated by this clause (f), the “Transferred
Contracts”);




     (g) all Current Assets, including Accounts Receivable (excluding the Equistar Accounts
Receivable), reflected on the Conclusive Net Working Capital Statement;



5









 






     (h) all claims, deposits, pre-payments, refunds, causes of action, rights of set-off
and rights of recoupment (including any such item relating to the payment of Taxes (other
than such items relating to Income Taxes of Sellers)) primarily related to any Contributed
Asset (and in no event related to or arising out of any Excluded Equistar Asset);




     (i) all transferable Permits primarily relating to the Business, but excluding Permits
primarily related to any Excluded Asset (all Permits contemplated by this clause (i), the
“Transferred Permits”);




     (j) all assets to be acquired by Holdings or Newco in accordance with the provisions of
Section 6.8;




     (k) all assets to be acquired by Holdings or Newco in accordance with the provisions of
Section 6.12; and




     (l) all other assets used primarily in the ordinary course of business of the Business,
including all long term assets reflected on the balance sheet for the Most Recent Fiscal
Year End other than those assets used, disposed of, consumed or transferred, to the extent
contemplated by Section 3.7 or in the ordinary course of business from and after the
date hereof;


provided, however, notwithstanding anything to the contrary set forth in this
definition, the Contributed Assets shall not include (i) any asset of any Other Seller organized
under the laws of China, including any rights of any such Subsidiary under any Contracts, or (ii)
any other Excluded Assets. For the avoidance of doubt, the Contributed Assets shall include all of
Sellers’ right, title, and interest in and to all the assets of Sellers set forth on Annex
B hereto.




     “Conversion Rate” means, as of any date and for any currency conversion, the exchange
rate for the conversion of such currencies as reported as of the last Business Day prior to such
date in The Wall Street Journal or if not available, any other internationally recognized financial
publication.



     “Covered China Employee” means any Covered Employee who is based in China.



     “Covered Employee” means an employee of Solutia or any of its Subsidiaries who is
either (i) named on Annex C hereto or (ii) hired from and after the date hereof or, if the
date of preparation of Annex C hereto is indicated thereon, the date of preparation
thereof, in either case contemplated by this clause (ii), whose duties relate primarily to the
operations of the Business, and in the case of either of clause (i) or (ii), if such employee is
still actively employed by Solutia or any of its Subsidiaries as of immediately prior to the
Closing regardless of the company payroll on which such individuals are listed.



     “Covered EU Employee” means any Covered Employee who is based in the European Union.



     “Covered Foreign Employee” means any Covered Employee who is not a Covered U.S.
Employee.



6









 





     “Covered Period” has the meaning set forth in Section 6.14(b).



     “Covered Transaction” means a transaction for the sale of any of the Facilities that
are Owned Real Property or all of, or a majority interest in, the Business through (i) the issuance
or sale of capital stock or other securities of any Subsidiary of Seller holding assets of the
Business (but in no event including capital stock or securities of Seller itself) or (ii) the sale
of the assets of the Business other than any sale of (x) assets typically sold in the ordinary
course of business (including inventory) or (y) assets of the Business together with all or
substantially all of Seller’s other assets.



     “Covered U.S. Employee” means any Covered Employee who is based in the United States
of America.



     “Current Assets” has the meaning set forth in the definition of Net Working Capital.



     “Current Liabilities” has the meaning set forth in the definition of Net Working
Capital.



     “Damages” has the meaning set forth in Section 8.2.



     “Debt Financing” has the meaning set forth in Section 4.7(a).



     “Debt Letter of Interest” has the meaning set forth in Section 4.7(a).



     “Decree” means any judgment, decree, ruling, injunction, assessment, attachment,
undertaking, award, charge, writ, executive order, administrative order, consent order or any other
order of any Governmental Authority.



     “Disclosure Schedule” has the meaning set forth in Article III.



     “Disclosure Supplement” has the meaning set forth in Section 5.7.



     “Disputed Items” has the meaning set forth in Section 2.9(c).



     “DME Supply Agreement” has the meaning set forth in Section 2.8(a)(vi).



     “DPO Operating Agreement” has the meaning set forth in Section 2.8(a)(v).



     “Employee Benefit Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) covered by ERISA and any other material employee benefit plan, program or
arrangement of any kind established, maintained, sponsored or contributed to (or with respect to
which an obligation to contribute has been undertaken) by any Seller on behalf of any Covered
Employee or any similar employee benefit plan governed by the laws of any foreign jurisdiction.



     “Environmental, Health or Safety Requirements” means all federal, state, local and
foreign statutes, regulations, rules, common law, codes, and all legally binding judicial and
administrative orders, Decrees, and determinations, in each case, concerning worker health and
safety, pollution or protection of the environment, or the handling, use, generation, treatment,



7









 







storage, transportation, disposal, manufacture, distribution, formulation, packaging,
labeling, or Release of, threatened Release of, or exposure, to Hazardous Materials, including but
not limited to: the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq.; the Federal Water
Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Hazardous Material Transportation Act 49
U.S.C. § 1801 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. § 136 et
seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq.; the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq.; the Occupational Safety & Health Act of 1970, 29
U.S.C. § 651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the European Union
Registration, Evaluation, Authorization and Restriction of Chemical Substances Act, EC 1907/2006 et
seq.; and the state analogies thereto, all as amended or superseded from time to time.



     “Environmental Permits” has the meaning set forth in Section 3.21(a).



     “Equistar” means Equistar Chemicals, L.P.



     “Equistar Accounts Payable” means all accounts payable of the Business to Equistar
outstanding on the Closing Date.



     “Equistar Accounts Receivable” means all accounts receivable of the Business from
Equistar outstanding on the Closing Date and all claims, refunds and credits with respect thereto.



     “Equistar Chapter 11 Case” means the case commenced under chapter 11 of title 11 of
the United States Code for Equistar Chemicals, L.P. on January 6, 2009 in the United States
Bankruptcy Court for the Southern District of New York, which case has been consolidated for
procedural purposes with that of Lyondell Chemical Company and is being jointly administered
therewith under docket number 09-10023 (REG), together with all adversary proceedings, appeals and
other ancillary proceedings to which Equistar Chemicals, L.P. is a party.



     “Equistar Land Lease” means the Sublease Agreement dated June 9, 1987, between Seller
(as successor in interest thereto to E. I. du Pont de Nemours and Company) and Equistar (as
successor in interest thereto to Cain Chemical Inc.).



     “Equistar Lease and Subcontract Agreement” has the meaning set forth in Section
2.8(a)(viii).



     “Equistar Residual Costs” means, with respect to each calendar quarter (prorated for
any partial calendar quarter) during the Covered Period, the amount, if any, by which the amount of
Newco’s User Cost Allocation for such calendar quarter exceeds the amount that Newco’s User Cost
Allocation would have been for such calendar quarter without giving effect to the contract
rejection contemplated to occur at the Contract Rejection Effective Date.



     “Equistar Resolution Period” has the meaning set forth in Section
6.14(b)(iii).



     “Equistar U&S Agreement” means the Amended and Restated Utilities and Services
Agreement, dated as of September 30, 1999, as amended by Amendment No.1 dated September 30, 1999,
by and between Seller and Equistar.



8









 





     “Equity Commitment Letter” has the meaning set forth in Section 4.7(a).



     “Equity Financing” has the meaning set forth in Section 4.7(a).



     “ERISA” means the Employee Retirement Income Security Act of 1974.



     “ERISA Affiliate” means any entity that would be deemed a “single employer” with
Sellers under Section 414(b), (c), (m) or (o) of the IRC or Section 4001 of ERISA.



     “Estimated Net Working Capital Amount” has the meaning set forth in Section
2.9(a).



     “Estimated Net Working Capital Statement” has the meaning set forth in Section
2.9(a).



     “Estimated Tax Basis Balance Sheets” has the meaning set forth in Section
3.13(g).



     “EU” means the European Union.



     “EU Employer’s Obligations” means all obligations or requirements related to the
employment of personnel that an employer needs to comply with in its relation with employees,
former employees, employee representatives, trade unions, public authorities, pension funds and
insurance companies), whether statutory, regulatory, contractual or otherwise, including any
obligation to discharge remuneration, benefits, bonus and incentive payments, holiday pay,
termination indemnities, insurance premiums, pension fund contributions, tax and social security
contributions.



     “EU Transfer Regulations” means the legislation, regulation, enactment, agreement or
other instrument implementing the provisions of EC Directive No. 2001/23 dated March 12, 2001,
which for Belgium means, in particular Collective Bargaining Agreement nr. 32bis, as amended, and
Collective Bargaining Agreement nr. 9, as amended.



     “Exchange Act” means the Securities Exchange Act of 1934.



     “Excluded Assets” means all assets of any Seller as of the Closing that are not
Contributed Assets, including:




     (a) any asset of any Seller that is (x) not used primarily in the Business or (y) used
primarily in the Business but inseparable from any other business of Solutia or any of its
Affiliates and, in the case of (y), set forth on Section 1.1(a)(i) of the Disclosure
Schedule, in each case, including: (i) certificates of incorporation or organizational
documents, qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, stock certificates and other documents
relating to the organization, maintenance and existence of such Seller as a corporation or
any other entity (other than Newco or any Newco Subsidiary); (ii) Records related to Taxes
paid or payable by any Seller; (iii) any Income Tax asset of or with respect to any Seller;
(iv) any assets not customarily based or located at the Facilities or at the homes of
Covered Employees who work out of their homes and are not assigned a permanent office at a
Facility; and (v) the name “Solutia” and any name or trademark,



9









 







service mark, trade name, logo, trade dress, Internet domain name or other indicia of
origin that includes or relates to such name, or any related derivatives, abbreviations,
acronyms or other formatives based on such name, whether alone or in combination with any
other words, phrases, or designs, and all registrations, applications and renewals thereof
and all rights and goodwill associated therewith and any name or trademark, service mark,
trade name, logo, Internet domain name or other indicia of origin that is confusingly
similar thereto or derived therefrom, including the marks set forth on Section
1.1(a)(ii) of the Disclosure Schedule (collectively, the “Solutia Marks”);




     (b) capital stock of any of Solutia’s Subsidiaries (other than capital stock of any of
Newco’s Subsidiaries), including any Newco Units;




     (c) Cash or securities;




     (d) all Excluded Equistar Assets;




     (e) except as provided in Section 6.8, all rights and assets under or related
to any Employee Benefit Plan;




     (f) all Permits other than Transferred Permits;




     (g) all insurance policies and binders and all claims, refunds and credits from
insurance policies or binders due or to become due with respect to such policies or binders;




     (h) all rights, claims and counterclaims with respect to the Retained Litigation
Matters;




     (i) any Seller’s rights under this Agreement or any Related Agreement;




     (j) any Seller’s rights under any Contracts primarily related to any Excluded Asset;




     (k) the China Business Assets; and




     (l) without limiting the generality of the foregoing, all assets listed on Annex
D hereto.




     “Excluded Environmental Liabilities” means any and all Liabilities relating to
environmental, health or safety matters, including all such Liabilities relating to or
arising pursuant to Environmental, Health or Safety Requirements, in each case to the extent
relating to or arising from: (a) any and all facilities and real property, other than the
Facilities, currently or formerly owned, operated, leased or occupied by the Business,
Sellers or their respective Affiliates or predecessors prior to the Closing Date (including
any Releases of Hazardous Materials therefrom); or (b) the transportation, treatment,
storage or disposal of Hazardous Materials or the arrangement for such activities prior to
the Closing Date, by, on behalf of, or in connection with: (i) Sellers, (ii) the Business,
(iii) any predecessors or Affiliates of Sellers or (iv) any entities previously owned by



10









 







Sellers, in each case, at or to any off-site location (for the avoidance of doubt
excluding any such disposal or arrangement for disposal at or beneath the Facilities but
including any such Hazardous Materials produced or generated for off-site treatment, storage
or disposal on or prior to the Closing Date in connection with operations at the
Facilities).




     “Excluded Equistar Assets” means (i) all Equistar Accounts Receivable; (ii) all
rights of any Seller under Contracts with Equistar and any Seller’s rights under any such
Contracts (“Excluded Equistar Contracts”); and (iii) claims, deposits, pre-payments,
refunds, causes of action, rights of set-off and rights of recoupment primarily related to
any other Excluded Equistar Asset.




     “Excluded Equistar Contracts” has the meaning set forth in the definition of
Excluded Equistar Assets.




     “Excluded Equistar Liabilities” means (i) all Equistar Accounts Payable; (ii)
all Liabilities related to or arising out of the Excluded Equistar Contracts; (iii) claims,
deposits, pre payments, refunds, causes of action, rights of set-off and rights of
recoupment primarily related to any other Excluded Equistar Asset; and (iv) all portions of
the working fund liability relating to Equistar.




     “Excluded Liabilities” means the following Liabilities of Sellers:




     (a) any Liability not relating to or arising out of the Business, including any
Liability primarily relating to or primarily arising out of the Excluded Assets or Seller
corporate overhead or administrative and operational functions associated with operating the
Business historically provided by Seller (except as provided for in the Transition Services
Agreement);




     (b) any Liability for the Retained Litigation Matters;




     (c) any Liability of Sellers for Income Taxes with respect to the Business or
otherwise;




     (d) except for such Liabilities to be assumed by Holdings, Newco or Buyer (or any of
their respective Subsidiaries) in accordance with Section 6.8 or Section
6.12, all Liabilities relating to employees of Sellers in connection with withheld
payroll Taxes, payroll, workman’s compensation benefits and accounts payable employee
withholding, in each case, accrued prior to the Closing (other than any such Liabilities set
forth on the Conclusive Net Working Capital Statement);




     (e) all Liabilities of Sellers or, for obligations to be performed prior to the
Closing, Newco under this Agreement or any Related Agreement and the transactions
contemplated hereby or thereby;




     (f) except for such Liabilities to be assumed by Holdings, Newco or Buyer (or any of
their respective Subsidiaries) in accordance with Section 6.8 or Section
6.12, all Liabilities of Sellers or any ERISA Affiliate with respect to any Employee
Benefit Plan;



11









 






     (g) the China Assumed Liabilities (to the extent relating to clause (a) of the
definition thereof);




     (h) all Excluded Equistar Liabilities;




     (i) all Liabilities of Sellers to HSBC Securities (USA) Inc. in connection with its
engagement by Solutia as a financial advisor in connection with the transactions
contemplated hereby;




     (j) all Excluded Environmental Liabilities;




     (k) any indebtedness for borrowed money (for the avoidance of doubt, other than any
Liabilities included under Bonding Requirements);




     (l) the payable obligations pursuant to the prepayment letter, dated March 4, 2009, by
and between Seller and Monsanto Company, relating to the Chocolate Bayou agreements with
Solutia; and




     (m) any Liability for severance, compensation or benefits for any employee who is not a
Covered Employee;


provided, however, that, notwithstanding the above, the Excluded Liabilities shall
not include any Liability reflected on the Conclusive Net Working Capital Statement.




     “Existing Grandfathered Business” has the meaning set forth in Section 6.6.



     “Expense Reimbursement Letter Agreement” has the meaning set forth in Section
10.2.



     “Facilities” means the Owned Real Property and the Leased Real Property.



     “Factory Indirect Expense” or “FIE” has the meaning set forth in the Equistar
U&S Agreement, computed in compliance with the Equistar U&S Agreement and otherwise on a basis that
is consistent with the methodologies used to calculate FIE prior to Closing.



     “FIE Allocation” means, with respect to each User, the allocated share of FIE for FIE
Services received by such User, computed in compliance with the Equistar U&S Agreement and
otherwise on a basis that is consistent with the methodologies used to calculate the FIE Allocation
prior to Closing.



     “FIE Services” means those services for which an FIE account is established.



     “Financial Statements” has the meaning set forth in Section 3.6.



     “Financing” has the meaning set forth in Section 4.7(a).



     “Financing Agreements” has the meaning set forth in Section 5.11(a).



     “Financing Commitments” has the meaning set forth in Section 4.7(a).



12









 





     “Fixed Costs” means the Fixed Costs (as defined in the Equistar U&S Agreement)
actually incurred to provide Utilities and Services, computed in compliance with the Equistar U&S
Agreement and otherwise on a basis that is consistent with the methodologies used to calculate
Fixed Costs prior to Closing.



     “Fixed Costs Allocation” means, with respect to a User, an amount equal to such User’s
Fixed Costs Percentage multiplied by the total Fixed Costs for the Chocolate Bayou Plant.



     “Fixed Costs Percentage” means, with respect to each User, the ratio of such User’s
Committed Reserved Capacity to the Aggregate Reserved Capacity, stated as a percentage.



     “Foreign Benefit Plan” means any Employee Benefit Plan maintained primarily for the
benefit of Covered Foreign Employees except plans, programs or arrangements that Sellers are
required to maintain or contribute to in order to be in compliance with non-United States laws.



     “Furnishings and Equipment” means tangible personal property (other than Inventory and
Intellectual Property), including machinery, equipment, computers, furniture, automobiles, trucks,
railcars, tractors and trailers.



     “GAAP” means United States generally accepted accounting principles consistently
applied.



     “Governmental Authority” means any federal, state, local or foreign governmental or
regulatory authority, agency, commission, court, body or other governmental entity.



     “Guest Agreement” has the meaning set forth in Section 3.11(a)(i).



     “Guest Occurrence” has the meaning set forth in Section 8.7(a).



     “Hazardous Material” means petroleum, petroleum hydrocarbons or petroleum products,
petroleum by-products, radioactive materials, asbestos or asbestos-containing materials, gasoline,
diesel fuel, pesticides, radon, urea formaldehyde, mold, lead or lead-containing materials,
polychlorinated biphenyls; and any other chemicals, materials, substances or wastes in any amount
or concentration which are regulated under or for which liability can be imposed under any
Environmental, Health or Safety Requirements.



     “Holdings” has the meaning set forth in the recitals.



     “Holdings Common Stock” means common stock, par value $0.01 per share, of Holdings.



     “Holdings Contribution Shares” has the meaning set forth in Section 2.6.



     “Holdings Formation Contribution” means the contribution of the assets to Holdings in
exchange for the Holdings Contribution Shares as contemplated by Section 2.5 and
Section 2.6.



     “Holdings Pension Plan” has the meaning set forth in Section 6.12(b)(i).



13









 





     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.



     “Income Taxes” means any Tax based on or measured by reference to net income,
including any interest, penalty or addition thereto, whether disputed or not.



     “Indemnified Party” means any Buyer Indemnified Party or Seller Indemnified Party, as
appropriate.



     “Indemnifying Party” has the meaning set forth in Section 8.4(c).



     “Intellectual Property” means (a) all issued patents and patent applications, together
with all reissuances, continuations, continuations-in-part, divisionals, extensions and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos, trade names and
Internet domain names, together with all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (c) all copyright registrations and
applications for registration therefor and renewals in connection therewith and copyrightable
materials; (d) all trade secrets, know-how, technology, improvements and inventions; and (e) all
computer software (including data and databases).



     “Intellectual Property Assignments” has the meaning set forth in Section
2.8(a)(iv).



     “Inventory” means inventories of raw materials and supplies, manufactured and
purchased parts, goods in process and finished goods.



     “IRC” means the Internal Revenue Code of 1986.



     “Knowledge” of a Person (and other words of similar import) means the actual knowledge
of (i) with respect to Seller, Merlin Belnap, Dale Borths, Robert T. DeBolt, James T. Strehl, James
R. Voss, Angela Wilson, Nadim Qureshi, Gary Lanser, James Sullivan, D. John Srivisal and Tim
Spihlman, or (ii) with respect to Buyer or SK, Barry Siadat, Jamshid Keynejad, Mark N. Delevie,
Fred Poses, Brad Cerepak, Peter D’Aloia and Gene Kenyon.



     “Leased Real Property” means any land, buildings, structures, improvements, fixtures
or other interest in real property leased by a Seller pursuant to any of the Leases used
exclusively in the Business.



     “Leases” means all leases, subleases, licenses, concessions and other agreements
(written or oral) pursuant to which any Seller holds any leasehold or subleasehold estates and
other rights to use or occupy any Leased Real Property.



     “Liability” means any liability or obligation of whatever kind or nature (whether
known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated and whether due or to become due) regardless of
when arising, including any liability for Taxes.



     “Lien” means any mortgage, pledge, lien, charge, security interest, option, right of
first refusal, easement, security agreement or other encumbrance or restriction on the use or
transfer



14









 




of any property; provided, however, that “Lien” shall not be deemed to include
any license of Intellectual Property.




     “Litigation” means any action, suit, claim, investigation, audit, demand, hearing or
proceeding, whether civil, criminal, administrative or arbitral, whether at law or in equity and
whether before any Governmental Authority.



     “Louvain-La-Neuve Lease” has the meaning set forth in Section 2.8(a)(ix).



     “Maintenance Costs” has the meaning set forth in Section 2.10.



     “Material Adverse Effect” means, when used with respect to a Person or the Business,
any effect or change that (i) would be materially adverse to the business, assets, financial
condition, operating results or operations of the Person and its Subsidiaries (taken as a whole) or
the Business as presently conducted, as applicable; provided, however, that no
effects or changes arising from or related to any of the following shall be deemed to constitute a
Material Adverse Effect: (a) general business or economic conditions in North America, Europe, the
Middle East, Africa or Asia; (b) general business or economic conditions affecting the industry in
which such Person or the Business, as applicable, operates; (c) national or international political
or social conditions, including the engagement by any country in North America, Europe, the Middle
East, Africa or Asia in hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack upon any country in North
America, Europe, the Middle East, Africa or Asia, or any of its territories, possessions or
diplomatic or consular offices or upon any military installation, equipment or personnel of any
country in North America, Europe, the Middle East, Africa or Asia; (d) financial, banking or
securities markets (including any disruption thereof or any decline in the price of securities
generally or any market or index); (e) commodities prices; (f) changes in law or changes in
generally accepted accounting principles applicable to the financial statements of such Person or
the Business; (g) the taking of any action contemplated by this Agreement or any Related Agreement;
(h) changes as a result of the announcement or pendency of this Agreement or any Related Agreement;
or (i) the failure of the Business to meet any full or partial 2009 projections of earnings,
revenues or any other financial measure (regardless of whether such projections were made by Seller
or independent third parties); provided, however, that the underlying causes for
such failure may, except as otherwise provided herein, be considered for purposes of determining
the occurrence of a Material Adverse Effect or (ii) would materially adversely affect the ability
of such Person or its Affiliates to consummate the transactions contemplated by this Agreement or
the Related Agreements on a timely basis, in the case of either clause (i) or (ii), excluding any
effects or changes arising from or related to the breach of the Agreement by Buyer or SK.



     “Material Contract” has the meaning set forth in Section 3.11(a).



     “Maximum Net Contribution” has the meaning set forth in Section 2.9(e).



     “Minimum Claim Amount” has the meaning set forth in Section 8.4(h).



     “Mitigation Actions” has the meaning set forth in Section 6.14(b)(i).



15









 





     “Most Recent Balance Sheet” means the balance sheet for the Most Recent Fiscal Quarter
End.



     “Most Recent Financial Statements” has the meaning set forth in Section 3.6.



     “Most Recent Fiscal Quarter End” has the meaning set forth in Section 3.6.



     “Most Recent Fiscal Year” means the fiscal year ending on the Most Recent Fiscal Year
End.



     “Most Recent Fiscal Year End” has the meaning set forth in Section 3.6.



     “Multiemployer Plans” has the meaning set forth in Sections 3(37) and 4001(a)(3) of
ERISA.



     “Multiple Employer Plan” means a “Single Employer Plan” as defined in Section
4001(a)(15) of ERISA that is subject to Title IV of ERISA and that is maintained for Covered
Employees and employees of at least one person other than Seller and its ERISA Affiliates.



     “Net Working Capital” means the (A) current assets of the Business (excluding Cash and
all Equistar Accounts Receivables) (the “Current Assets”) less (B) current liabilities of
the Business (excluding all Equistar Accounts Payables) (the “Current Liabilities”), in
either case as determined in accordance with GAAP and the other methods used in preparing the
illustrative determination of the Net Working Capital attached as Annex E hereto (including
as indicated thereon) and assuming solely for such purposes that the China Business Assets were
Contributed Assets and the China Assumed Liabilities (other than those Liabilities contemplated by
clause (b) of the definition thereof arising from and after the Closing) were Assumed Liabilities;
provided, however, that all intercompany accounts receivable and intercompany
accounts payable (or, in either case, credits therefor) shall be disregarded for purposes of
determining the Net Working Capital. Any amount of resin inventory in excess of Ninety Million
(90,000,000) pounds shall be excluded from the valuation of Inventory included in Current Assets if
the Closing occurs at or following April 30, 2009.



     “Neutral Arbitrator” has the meaning set forth in Section 2.9(c).



     “New Pension Plan” has the meaning set forth in Section 6.8(l)(v)(A).



     “Newco” has the meaning set forth in the preamble.



     “Newco’s Flex Plan” has the meaning set forth in Section 6.8(h).



     “Newco Formation Contribution” means the contribution of the Contributed Assets by
Seller to Newco contemplated by Section 2.1 and the assumption of the Assumed Liabilities
by Newco contemplated by Section 2.2, in exchange for the Newco Formation Contribution
Units.



     “Newco Formation Contribution Units” has the meaning set forth in Section 2.4.



     “Newco Subsidiary” means any Subsidiary of Newco.



16









 





     “Newco Units” means all capital stock of Newco, which shall be comprised as of the
Closing of (x) all equity units of Newco owned by Solutia as of the date hereof and (y) the Newco
Formation Contribution Units.



     “Objectionable Items” has the meaning set forth in Section 6.14(b)(iii).



     “Objection Notice” has the meaning set forth in Section 6.14(b)(iii).



     “Only Representative” has the meaning set forth in Section 5.4(c).



     “Other Sellers” means each of those Subsidiaries of Solutia that as of the Closing or,
as applicable solely to the China Business Assets, the China Asset Transfer Closing (A) holds or
held any asset primarily related to the Business, (B) is or has been party to any Contract
primarily related to the Business, (C) conducts or has conducted any activity primarily related to
the Business, or (D) is or has been subject to any Liability primarily related to the Business;
provided, however, that neither Newco nor any Newco Subsidiary shall be deemed to
be an Other Seller.



     “Outside Date” has the meaning set forth in Section 9.1(b)(i).



     “Owned Real Property” means all land owned by Sellers used primarily with respect to
the Business, together with any and all buildings, fixtures, structures and improvements located
thereon and all rights, privileges, easements, licenses, hereditaments and other appurtenances
relating thereto.



     “Party” has the meaning set forth in the preamble.



     “Pension Target Amount” has the meaning set forth in Section 6.12(c).



     “Permit” means any franchise, approval, permit, license, order, registration,
certificate, variance or similar right obtained from any government or governmental agency.



     “Permitted Lien” means (a) Liens for Taxes or mechanic’s, workmen’s, repairmen’s,
warehousemen’s, carrier’s or other similar Liens, including all statutory liens, arising or
incurred in the ordinary course of business, in each case that are not yet delinquent, due or
payable, or which are being contested in good faith by appropriate proceedings; (b) with respect to
leased or licensed personal property, the terms and conditions of the lease or license applicable
thereto; (c) with respect to real property, zoning, building codes and other land use laws
regulating the use or occupancy of such real property or the activities conducted thereon which are
imposed by any Governmental Authority having jurisdiction over such real property which are not
violated by the current use or occupancy of such real property or the operation of the Business,
except where any such violation would not reasonably be expected to individually or in the
aggregate materially impair the use or operation of the affected property or the conduct of the
Business thereon as it is currently being conducted; (d) Liens for any financing secured by an
asset, where the financing obligation is an Assumed Liability and such asset is a Contributed
Asset; (e) easements, covenants, conditions, restrictions, leases and other similar matters
affecting title to real property and other encroachments and title and survey defects that do not
or would not, individually or in the aggregate, materially impair the use or occupancy of such real
property in



17









 







the operation of the Business taken as a whole as it is currently conducted; (f) matters set
forth on the disclosed survey of the real property; (g) other Liens set forth on Section 3.8 of
the Disclosure Schedule; and (h) other Liens that, individually or in the aggregate, do not
materially impair the use or operations of the affected property or the conduct of the Business
therewith as it is currently being used and conducted.



     “Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization or any other entity, including any Governmental Authority or any group of any of the
foregoing.



     “Post-Closing Net Working Capital Statement” has the meaning set forth in Section
2.9(b).



     “Products” means the products manufactured and/or marketed by the Business listed on
Annex F hereto.



     “Quarterly Invoice” has the meaning set forth in Section 6.14(b)(ii).



     “Quarterly Statement” has the meaning set forth in Section 6.14(b)(ii).



     “Records” means the books, records, ledgers, invoices, documents, correspondence,
lists (including customer lists and supplier lists), plans, drawings, designs, specifications,
advertising and promotional materials, reports, data and other printed materials.



     “REACH” means Regulation (EC) No 1907/2006 of the European Parliament and of the
Council of December 18, 2006 concerning the Registration, Evaluation, Authorization and Restriction
of Chemicals.



     “Related Agreements” means the Bill of Sale, the Assignment and Assumption Agreement,
the Transition Services Agreement, the Intellectual Property Assignments, the DPO Operating
Agreement, the DME Supply Agreement, the China Asset Transfer Agreement, the Louvain-La-Neuve
Lease, the Securityholders Agreement, the Equistar Lease and Subcontract Agreement, and all other
Contracts, schedules, certificates or other documents being delivered pursuant to or in connection
with this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Transition
Services Agreement, the Intellectual Property Assignments, the DPO Operating Agreement, the DME
Supply Agreement, the China Asset Transfer Agreement, the Louvain-La-Neuve Lease, the
Securityholders Agreement or the Equistar Lease and Subcontract Agreement.



     “Representative” means, when used with respect to a Person, the Person’s controlled
Affiliates (including Subsidiaries) and such Person’s and any of the foregoing Persons’ respective
officers, directors, managers, members, shareholders, partners, employees, agents, representatives,
advisors (including financial advisors, bankers, consultants, legal counsel and accountants) and
financing sources.



     “Reserved Capacity” means, with respect to each User, the total capacity for each U&S
cost center that is required to support the User’s operation based on usage at capacity rates, plus
any additional U&S capacity reserved by such User for future use.



18









 





     “Resolution Period” has the meaning set forth in Section 2.9(c).



     “Retained Litigation Matters” means the Litigation matters listed on Section
1.1(b) of the Disclosure Schedule.



     “Scheduled Intellectual Property” has the meaning set forth in Section 3.12.



     “Securities Act” means the Securities Act of 1933.



     “Securityholders Agreement” has the meaning set forth in Section 2.8(c)(i).



     “Seller” has the meaning set forth in the preamble.



     “Seller Advanced Expenses” has the meaning set forth in Section 10.1.



     “Seller Indemnified Party” has the meaning set forth in Section 8.3.



     “Seller Pension Plan” has the meaning set forth in Section 6.12(b).



     “Seller Termination Fee” has the meaning set forth in Section 9.2(b).



     “Seller’s Cafeteria Plan” has the meaning set forth in Section 6.8(h).



     “Sellers” has the meaning set forth in the preamble.



     “SK” has the meaning set forth in the preamble.



     “Solicited Acquisition Proposal” means any Acquisition Proposal other than an
Unsolicited Acquisition Proposal.



     “Solutia” has the meaning set forth in the preamble.



     “Solutia Marks” has the meaning set forth in the definition of Excluded Assets.



     “Spun Off Plan” has the meaning set forth in Section 6.12(b).



     “Subject Securities” has the meaning set forth in Section 5.15(a).



     “Subsidiary” means, with respect to any Person, any corporation, limited liability
company, partnership, association or other business entity of which, directly or indirectly, (i) if
a corporation, a majority of the total voting power of shares of stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability
company, partnership, association or other business entity (other than a corporation), a majority
of partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination
thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a
business entity (other than a corporation) if such Person or Persons shall be allocated a majority
of such



19









 







business entity’s gains or losses or shall be or control any managing director or general
partner of such business entity (other than a corporation).



     “Target Net Working Capital Amount” has the meaning set forth in Section
2.9(a).



     “Tax” or “Taxes” means any United States federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A of the IRC), customs duties, capital
stock, franchise, profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated or other tax of any kind whatsoever, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, including any interest, penalty or
addition thereto, whether disputed or not.



     “Tax Return” means any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.



     “Third Party Claim” has the meaning set forth in Section 8.5(a).



     “Termination Fee” means either the Buyer Termination Fee or the Seller Termination
Fee, as appropriate.



     “Transfer Tax” has the meaning set forth in Section 6.10.



     “Transferred Contracts” has the meaning set forth in the definition of Contributed
Assets.



     “Transferred Participant” means each Covered U.S. Employee with an accrued benefit
under the Seller Pension Plan.



     “Transferred Permits” has the meaning set forth in the definition of Contributed
Assets.



     “Transition Services Agreement” has the meaning set forth in Section
2.8(a)(iii).



     “Treasury Regulations” means the treasury regulations promulgated under the IRC.



     “Underfunded Amount” has the meaning set forth in Section 6.12(c).



     “Underfunded Dispute Notice” has the meaning set forth in Section 6.12(c)(i).



     “Unsolicited Acquisition Proposal” means any Acquisition Proposal made other than as a
result of a material breach of Section 5.16(a)(i) by Seller.



     “User” means any user of Utilities and Services including Newco and any third parties
that have entered into a Guest Agreement.



     “User Cost Allocation” means, with respect to each User, the sum of the Fixed Costs
Allocation and the FIE Allocation which are charged to such User.



20









 





     “User Costs” means, collectively, Fixed Costs and FIE.



     “Utilities and Services” or “U&S” means the utilities and services used by
Newco and other third parties at the Chocolate Bayou Plant, including the Utilities and Services
(as defined in the Equistar U&S Agreement) which Equistar is entitled to under the Equistar U&S
Agreement.



     “Valence Group” means The Valence Group, LLC, a party of which SK is a Representative
(solely for such purposes, as defined in the Confidentiality Agreement).



     “WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988.



     “Working Capital Allocation Amount” has the meaning set forth in Section 2.9(e).



     “4044 Allocation” has the meaning set forth in Section 6.12(b)(i).



     Section 1.2 Interpretations. Unless otherwise indicated herein to the contrary:



          (a) When a reference is made in this Agreement to an Article, Section, Annex, Exhibit,
Schedule, clause or subclause, such reference shall be to an Article, Section, Annex, Exhibit,
Schedule, clause or subclause of this Agreement.




          (b) The words “include,” “includes” or “including” and other words or phrases of similar
import, when used in this Agreement, shall be deemed to be followed by the words “without
limitation.”




          (c) The words “hereof,” “herein” and “hereunder” and words of similar import, when used in
this Agreement, refer to this Agreement as a whole and not to any particular provision of this
Agreement.




          (d) The word “if” and other words of similar import shall be deemed, in each case, to be
followed by the phrase “and only if.”




          (e) The use of “or” or “any” herein is not intended to be exclusive.




          (f) The definitions contained in this Agreement are applicable to the singular as well as the
plural forms of such terms. Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular form of names and
pronouns shall include the plural and vice versa.




          (g) All terms defined in this Agreement have their defined meanings when used in any
certificate or other document made or delivered pursuant hereto, unless otherwise defined therein.




          (h) Any reference herein to law or to a legal requirement (or, with respect to any statute,
ordinance, code, rule or regulation, any provision thereof) shall be deemed to include




21









 





reference to all laws and or to such legal requirement and any legal requirement promulgated
thereunder (or provision thereof, as applicable), including any successor thereto, respectively, in
each case, as may be amended.




          (i) References herein to a Person are also deemed to include its permitted successors and
assigns. Any reference herein to a Governmental Authority shall be deemed to include reference to
any successor thereto.




          (j) Any reference herein to “Dollars” or “$”means United States dollars.




          (k) A reference to a Contract includes supplements and amendments.




          (l) All amounts payable hereunder shall be paid in Dollars. Any amount to be paid or computed
hereunder expressed in any currency other than Dollars shall be paid and/or computed in Dollars by
using the Conversion Rate as of the Business Day immediately prior to any such payment or
computation.




ARTICLE II

FORMATION OF HOLDINGS




     Section 2.1 Contribution of Assets to Newco. At or prior to the Closing, but in any
event prior to the Holdings Formation Contribution, subject to the operation of Section
2.10, and on the terms and subject to the conditions set forth in this Agreement, Seller shall,
and shall cause the Other Sellers to, contribute, sell, transfer, assign, convey and deliver to
Newco or, as contemplated by Section 2.12 or Section 5.4(d), a designated Newco
Subsidiary, and Newco and such Newco Subsidiaries, as applicable, will accept and purchase from
Sellers, all of the Contributed Assets in exchange for the consideration specified in Section
2.4.



     Section 2.2 Assumed Liabilities. At or prior to the Closing, but in any event prior
to the Holdings Formation Contribution, on the terms and subject to the conditions set forth in
this Agreement, Newco will assume and become responsible for the Assumed Liabilities. Newco shall
pay, perform, honor and discharge, or cause to be paid, performed, honored and discharged, all
Assumed Liabilities in a timely manner in accordance with the terms thereof from and after the
Closing.



     Section 2.3 Treatment of Intercompany Accounts. Other than as expressly contemplated
by any Related Agreement or Annex E hereof, all intercompany accounts receivable,
intercompany accounts payable and other obligations due and owing between any Seller and any of its
Affiliates shall be disregarded for purposes of the transactions contemplated hereby and shall not
be treated as Assumed Liabilities, Contributed Assets, Excluded Assets or Excluded Liabilities.



     Section 2.4 Newco Formation Contribution Consideration. On or prior to the Closing, as consideration for the Newco Formation Contribution, in
addition to the other representations, warranties, covenants and agreements of the Parties
hereunder, Newco shall issue to Seller, or such Other Seller as Seller shall direct, One Thousand
(1,000) newly issued, duly authorized, validly issued, fully paid and non-assessable common units
of Newco upon consummation of the Newco Formation Contribution (the “Newco Formation
Contribution Units”).



22









 





     Section 2.5 Contribution of Newco Units and Cash to Holdings. At the Closing,
immediately following the Newco Formation Contribution, on the terms and subject to the conditions
of this Agreement:



          (a) Seller shall, or shall cause any Other Seller holding any Newco Units to, contribute,
sell, transfer, assign, convey and deliver to Holdings all of the Newco Units;




          (b) Buyer shall contribute, transfer, assign, convey and deliver to Holdings an amount of cash
equal to the Cash Amount by wire transfer or other immediately available funds to an account or
accounts of Holdings; and




          (c) the Parties shall cause Holdings to accept and purchase from Seller and Buyer, at the
Closing, all of the assets to be contributed pursuant to Section 2.5(a) and Section
2.5(b) for the consideration specified in Section 2.6 and Section 2.14.




     Section 2.6 Holdings Formation Contribution Consideration. At the Closing, as
consideration for the Holdings Formation Contribution, in addition to the other representations,
warranties, covenants and agreements of the Parties hereunder, the Parties shall cause Holdings to
(a) issue Two Hundred Thousand (200,000) newly issued, duly authorized, validly issued, fully paid
and non-assessable shares of Holdings Common Stock to Seller; (b) pay to Seller cash in an amount
equal to the Cash Amount, paid by wire transfer or other immediately available funds to an account
or accounts designated by Seller; and (c) issue Nine Million Eight Hundred Thousand (9,800,000)
newly issued, duly authorized, validly issued, fully paid and non-assessable shares of Holdings
Common Stock to Buyer (the shares to be issued pursuant to clause (a) and clause (c) collectively,
the “Holdings Contribution Shares”), in each case upon consummation of the Holdings
Formation Contribution. Buyer and Seller acknowledge their intent to establish an employee equity
compensation plan following the Closing authorizing issuance of shares of Holdings Common Stock up
to twelve percent (12%) of the aggregate fully diluted outstanding shares of Holdings Common Stock.



     Section 2.7 Closing. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place in the order set forth in this Article II at the
offices of Kirkland & Ellis LLP located at 153 East 53rd Street, New York, New York (or such other
location as shall be mutually agreed upon by Seller and Buyer) commencing at 10:00 a.m. local time
on a date (the “Closing Date”) that is the later of (a) April 30, 2009 or (b) if all of
the conditions to the obligations of Seller and Buyer to consummate the transactions contemplated
hereby set forth in Article VII (other than conditions with respect to actions the Parties
will take at the Closing itself) are not satisfied or
waived as of such date, the tenth (10th) calendar day following the first date upon which all
of the conditions to the obligations of Seller and Buyer to consummate the transactions
contemplated hereby set forth in Article VII (other than conditions with respect to actions
the Parties will take at the Closing itself, but subject to the satisfaction or waiver of those
conditions) have been satisfied or waived (or, in the event such calendar day is not a Business
Day, on the next Business Day thereafter), or on such other date as shall be mutually agreed upon
by Seller and Buyer prior thereto.



23









 





     Section 2.8 Deliveries at Closing.



          (a) At or prior to the Closing, in connection with the Newco Formation Contribution and in any
event prior to the issuance of the Holdings Contribution Shares contemplated by Section
2.6, Seller shall, or shall cause the Other Sellers to, deliver to Newco or any Newco
Subsidiary, as appropriate, the following duly executed documents and other items:




               (i) a Bill of Sale substantially in the form of Exhibit B hereto (the “Bill of
Sale”);



               (ii) an Assignment and Assumption Agreement substantially in the form of Exhibit C
hereto (the “Assignment and Assumption Agreement”);



               (iii) a Transition Services Agreement substantially in the form of Exhibit D hereto
(the “Transition Services Agreement”);



               (iv) instruments of assignment substantially in the form of Exhibit E hereto for each
issued patent, registered trademark, and registered copyright, and for each pending application
therefore, that is included in the Contributed Assets (collectively, the “Intellectual Property
Assignments”);



               (v) a DPO Operating Agreement substantially in the form of Exhibit F hereto (the
“DPO Operating Agreement”);



               (vi) a DME Supply Agreement substantially in the form of Exhibit G hereto (the
“DME Supply Agreement”);



               (vii) a China Asset Transfer Agreement substantially in the form of Exhibit H hereto
providing for, among other things, payment by Newco or a Newco Subsidiary to a Subsidiary of Seller
of an amount of cash expected to be equal to Three Hundred Thousand Dollars ($300,000) at the China
Asset Transfer Closing (the “China Asset Transfer Agreement”);



               (viii) a Lease and Subcontract Agreement substantially in the form of Exhibit I hereto
(the “Equistar Lease and Subcontract Agreement”);



               (ix) a Louvain-La-Neuve Lease substantially in the form of Exhibit J hereto (the
“Louvain-La-Neuve Lease”); and



               (x) a special or limited warranty deed, as customary in the applicable jurisdiction, with
respect to each parcel of Owned Real Property.



          (b) At or prior to the Closing, in connection with the Newco Formation Contribution and in any
event prior to the issuance of the Holdings Contribution Shares contemplated by Section
2.6, Newco shall, or shall cause an applicable Newco Subsidiary to, deliver to Seller and the
Other Sellers (as applicable) the following duly executed documents and other items:




               (i) the Bill of Sale;



24









 





               (ii) the Assignment and Assumption Agreement;



               (iii) the Transition Services Agreement;



               (iv) the Intellectual Property Assignments;



               (v) the DPO Operating Agreement;



               (vi) the DME Supply Agreement;



               (vii) the China Asset Transfer Agreement;



               (viii) the Equistar Lease and Subcontract Agreement;



               (ix) the Louvain-La-Neuve Lease; and



               (x) certificates representing all of the Newco Formation Contribution Units, if such Newco
Formation Contribution Units are in certificated form.




          (c) At the Closing, in connection with the Holdings Formation Contribution, Seller shall
deliver to Holdings and, in the case of clauses (i), (ii) and (iv) below, to Buyer, the following
duly executed documents and other items:




               (i) a Securityholders Agreement substantially in the form of Exhibit K hereto, with
such changes thereto as requested by equity co-investors of Buyer that are reasonably acceptable to
Seller, consent to which shall not be unreasonably withheld (the “Securityholders
Agreement”);



               (ii) an officer’s certificate to the effect that (A) each of the conditions specified in
Section 7.1(a) and Section 7.1(b) is satisfied; (B) the resolutions adopted by the
board of directors of Seller (or a duly authorized committee thereof) authorizing the execution,
delivery and performance of this Agreement and the Related Agreements, as attached to the
certificate, were duly adopted at a duly convened meeting of such board or committee, at which a
quorum was present and acting throughout or by unanimous written consent, remain in full force and
effect, and have not been amended, rescinded or modified, except to the extent attached thereto;
and (C) each of Seller’s officers executing this Agreement, each of the Related Agreements and each
of the other documents necessary for consummation of the transactions
contemplated herein, is an incumbent officer, and each specimen signature on such certificate
is a genuine signature;



               (iii) a non-foreign affidavit for Seller, dated as of the Closing Date, sworn under penalty of
perjury and in form and substance required under Treasury Regulations issued pursuant to Section
1445 of the IRC stating that Seller is not a “foreign person” as defined in Section 1445 of the
IRC;



               (iv) evidence of the receipt of all third party consents or sublicenses from third parties and
notices to or from third parties that are required to be delivered or obtained pursuant to
Section 7.1(c) and delivered by Seller;



25









 





               (v) certificates representing all of the Newco Units, duly endorsed or accompanied by stock
transfer powers, if such Newco Units in certificated form;



               (vi) duly executed letters of resignation from each member of the board of managers of Newco
and any Newco Subsidiary as well as duly executed letters of resignation from each branch manager
of any foreign Newco Subsidiary (with the exception of the branch managers in Korea);



               (vii) a good standing certificate in respect of Newco certified by the Secretary of State of
the State of Delaware, dated as of a date not more than ten (10) calendar days prior to the Closing
Date; and



               (viii) an acknowledgement of the receipt of the Cash Amount in cash.



          (d) At the Closing, in connection with the Holdings Formation Contribution, Buyer shall
deliver to Holdings and, in the case of clauses (i), (ii) and (iii) below, to Seller, the following
duly executed documents and other items:




               (i) the Securityholders Agreement;



               (ii) an officer’s certificate to the effect that: (A) each of the conditions specified in
Section 7.2(a) and Section 7.2(b) are satisfied; (B) the resolutions adopted by the
board of managers of Buyer (or a duly authorized committee thereof) authorizing the execution,
delivery and performance of this Agreement and the Related Agreements, as attached to the
certificate, were duly adopted at a duly convened meeting of such board or committee, at which a
quorum was present and acting throughout or by unanimous written consent, remain in full force and
effect, and have not been amended, rescinded or modified, except to the extent attached thereto;
and (C) each of Buyer’s officers executing this Agreement, each of the Related Agreements and each
of the other documents necessary for consummation of the transactions contemplated herein, is an
incumbent officer, and each specimen signature on such certificate is a genuine signature;



               (iii) evidence of the receipt of all third party consents or sublicenses from third parties
and notices to or from third parties that are required to be delivered or obtained pursuant to
Section 7.2(c) and delivered by Buyer; and



               (iv) cash in the amount contemplated by Section 2.5(b).



          (e) At the Closing, in connection with the Holdings Formation Contribution, the Parties shall
cause Holdings to deliver to Seller the following duly executed documents and other items:




               (i) the Securityholders Agreement;



               (ii) an acknowledgement of the receipt of the Newco Units;



26









 





               (iii) (A) certificates representing all of the Holdings Contribution Shares to be issued to
Seller pursuant to Section 2.6(a); and (B) cash in an amount equal to the Cash Amount; and



               (iv) a good standing certificate in respect of Holdings certified by the Secretary of State of
the State of Delaware, dated as of a date not more than ten (10) calendar days prior to the Closing
Date.



          (f) At the Closing, in connection with the Holdings Formation Contribution, the Parties shall
cause Holdings to deliver to Buyer the following duly executed documents and other items:




               (i) the Securityholders Agreement;



               (ii) an acknowledgement of the receipt of cash in the amount of the Cash Amount;



               (iii) certificates representing all of the Holdings Contribution Shares to be issued to Buyer
pursuant to Section 2.6(c); and



               (iv) a good standing certificate in respect of Holdings certified by the Secretary of State of
the State of Delaware, dated as of a date not more than ten (10) calendar days prior to the Closing
Date.



     Section 2.9 Working Capital Payments.



          (a) Pre-Closing Payment. No less than five (5) Business Days prior to the Closing
Date, Seller shall cause to be prepared and delivered to Buyer a statement setting forth an
estimate of the Net Working Capital as of 12:01 a.m. (Greenwich mean time) on the Closing Date (the
“Adjustment Determination Effective Time”) after giving effect to the transactions
contemplated hereby (the “Estimated Net Working Capital Amount”) and the components and
calculation thereof (the “Estimated Net Working Capital Statement”). The Estimated Net
Working Capital Statement shall be subject to the review of Buyer, and Buyer and Seller shall
cooperate and negotiate in good faith to resolve any dispute regarding the Estimated Net Working
Capital Statement prior to the Closing (the results of any such resolution to be reflected on a new
Estimated Net Working Capital Statement, which shall be considered the Estimated
Net Working Capital Statement for all further purposes); provided, however,
that if any item of dispute regarding the Estimated Net Working Capital Statement is not resolved
by agreement in writing between Buyer and Seller not less than two (2) Business Days prior to the
Closing, then for purposes of the Closing, the Estimated Net Working Capital Amount shall be deemed
to be equal to the Target Net Working Capital Amount. To the extent that the Estimated Net Working
Capital Amount set forth on the Estimated Net Working Capital Statement exceeds Two Hundred
Forty-Two Million Two Hundred Thousand Dollars ($242,200,000) (the “Target Net Working Capital
Amount”), at the Closing, Newco shall, and Buyer shall cause Holdings to cause Newco to, pay to
Seller the amount of the excess. To the extent that the Target Net Working Capital Amount exceeds
the Estimated Net Working Capital Amount set forth on the Estimated Net Working Capital Statement,
at the Closing, Seller shall pay to Newco the amount of the excess; provided,
however, that if the Estimated Net Working Capital Amount as



27









 






otherwise determined in
accordance with this Section 2.9(a) is not less than Two Hundred Thirty-Seven Million Two
Hundred Thousand Dollars ($237,200,000) nor more than Two Hundred Forty-Seven Million Two Hundred
Thousand Dollars ($247,200,000), for purposes of this Section 2.9(a) the Estimated Net
Working Capital Amount shall be deemed to be equal to the Target Net Working Capital Amount.




          (b) Post-Closing Net Working Capital Statement. Within thirty (30) calendar days
after the Closing Date, Seller shall cause to be prepared and delivered to Newco a statement
setting forth the Net Working Capital, after giving effect to the transactions contemplated hereby,
as of the Adjustment Determination Effective Time, and the components and calculation thereof (the
“Post-Closing Net Working Capital Statement”). During such time (and, if applicable,
during the Resolution Period), without limiting Section 6.5, Buyer shall cause Holdings and
Newco to give Seller and its Representatives access to all Records, facilities and personnel of
Buyer, Holdings, Newco and their respective Representatives as reasonably necessary to undertake
the preparation of the Post-Closing Net Working Capital Statement.




          (c) Determination of Conclusive Net Working Capital. Newco shall have forty-five (45)
calendar days following the receipt of the Post-Closing Net Working Capital Statement to review the
Post-Closing Net Working Capital Statement. During such time, Newco may dispute any items set
forth on the Post-Closing Net Working Capital Statement (or specific calculations or methods
contemplated thereby). Unless Newco delivers written notice to Seller of dispute thereof on or
prior to the forty-fifth (45th) calendar day after Newco’s receipt of the Post-Closing
Net Working Capital Statement, Newco shall be deemed to have accepted and agreed to the
Post-Closing Net Working Capital Statement and such statement (and the specific calculations or
methods contemplated thereby) shall be final, binding and conclusive. If Newco notifies Seller in
writing of disputed items contained in the Post-Closing Net Working Capital Statement (or specific
calculations or methods contemplated thereby) (the “Disputed Items”) within such forty-five
(45) calendar day period, for thirty (30) calendar days following delivery of such notice by Newco
to Seller (the “Resolution Period”), Newco and Seller shall attempt in good faith to
resolve their differences with respect to the Disputed Items. Upon delivery of any such notice of
Disputed Items by Newco, Newco shall be deemed to have accepted and agreed to all items on the
Post-Closing Net Working Capital Statement (and the specific calculations or methods contemplated
thereby) other than the Disputed Items, and such items (and the specific calculations or methods
contemplated thereby) other than the Disputed Items shall be final, binding and conclusive. Any
resolution by Newco and Seller during the Resolution Period as to
any Disputed Items shall be set forth in writing and will be final, binding and conclusive.
If Newco and Seller do not resolve all Disputed Items by the end of the Resolution Period, then all
Disputed Items remaining in dispute shall be submitted by either one of the Parties within thirty
(30) calendar days after the expiration of the Resolution Period to Ernst & Young or such other
national independent accounting firm mutually acceptable to Newco and Seller (the “Neutral
Arbitrator”). The Neutral Arbitrator shall act as an arbitrator to determine only those
Disputed Items remaining in dispute as of the end of the Resolution Period. In resolving such
Disputed Items, the Neutral Arbitrator may not assign a value to any Disputed Item greater than the
greatest value for such Disputed Item claimed by any Party or less than the lowest value for such
Disputed Item claimed by any Party. All fees and expenses relating to the work, if any, to be
performed by the Neutral Arbitrator shall be allocated and borne between Newco and Seller in the
same proportion that the aggregate amount of the Disputed Items so submitted to the Neutral



28









 






Arbitrator that is unsuccessfully disputed by each such Party (as finally determined by the Neutral
Arbitrator) bears to the total amount of such Disputed Items so submitted. In addition, without
limiting Section 6.5, Buyer shall, and shall cause Holdings and Newco to, and Seller shall
give the Neutral Arbitrator access to all Records, facilities and personnel of such Party and its
Affiliates and Representatives as is reasonably necessary to perform its function as arbitrator.
Newco and Seller shall use their commercially reasonable efforts to cause the Neutral Arbitrator to
deliver to Newco and Seller a written determination (such determination to include an explanation
in reasonable detail of the reasons for such determination and a work sheet setting forth all
material calculations and methods used in arriving at such determination) of the Disputed Items
submitted to the Neutral Arbitrator and the resulting effect thereof on the Post-Closing Net
Working Capital Statement within thirty (30) calendar days of receipt of such Disputed Items, which
determination will be final, binding and conclusive and upon which judgment may be entered. The
final, binding and conclusive Post-Closing Net Working Capital Statement based either upon
agreement or deemed agreement by Newco and Seller or the written determination delivered by the
Neutral Arbitrator in accordance with this Section 2.9(c) will be the “Conclusive Net
Working Capital Statement.”




          (d) Post-Closing Payment. If the amount of the Net Working Capital set forth on the
Conclusive Net Working Capital Statement exceeds the Estimated Net Working Capital Amount set forth
on the Estimated Net Working Capital Statement, Newco shall, and Buyer shall cause Holdings to
cause Newco to, pay to Seller the amount of the excess. If the Estimated Net Working Capital
Amount set forth on the Estimated Net Working Capital Statement exceeds the amount of the Net
Working Capital set forth on the Conclusive Net Working Capital Statement, Seller shall pay to
Newco the amount of the excess. All payments to be made pursuant to this Section 2.9(d)
shall be made in immediately available funds no later than the second (2nd) Business Day
following the date on which Newco and Seller agree, or are deemed to have agreed to, or the Neutral
Arbitrator delivers, the Conclusive Net Working Capital Statement.




          (e) Maximum Payment. Notwithstanding anything to the contrary set forth in this
Section 2.9, the maximum net amount that Seller or Newco shall be required to pay to Newco
or Seller, respectively, pursuant to this Section 2.9 when giving effect to the payments
contemplated by Section 2.9(a) and Section 2.9(d) shall be an amount equal to
Forty-Nine Million Dollars ($49,000,000) (the “Maximum Net Contribution”). If any amount
to be paid by Seller or Newco pursuant to this Section 2.9, when taken together with all
other such payments, shall exceed the Maximum Net Contribution, such payment obligation shall be
deemed satisfied
in full by the payment of the Maximum Net Contribution; provided, however,
that if any amount to be paid by Seller pursuant to this Section 2.9, net of (and when
taken together with) all other such payments, is greater than Thirty-Four Million Dollars
($34,000,000), (i) the Maximum Net Contribution for purposes of this Section 2.9(e) shall
be the sum of (x) Thirty-Four Million Dollars ($34,000,000) plus (y) the product of (x) 0.75
multiplied by (y) the amount by which the amount to be paid by Seller pursuant to this Section
2.9 as determined without giving effect to this proviso (but in no event greater than the
Maximum Net Contribution as determined without giving effect to this proviso) exceeds Thirty-Four
Million Dollars ($34,000,000) (such excess amount, “Working Capital Allocation Amount”)
(for avoidance of doubt, with the Maximum Net Contribution so calculated being Forty-Five Million
Two Hundred Fifty Thousand Dollars ($45,250,000)), and (ii) the aggregate payments contemplated by
Section 2.14, shall be reduced by an amount equal to the product of (x) 0.25 multiplied by
(y) the Working Capital Allocation



29









 






Amount (for avoidance of doubt, with the maximum amount of such
reduction being Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000)), with the
reduction allocated to the first such scheduled payment (after giving effect to any reduction
thereof as contemplated by the proviso in Section 2.14, if applicable) up to the amount
thereof and thereafter to subsequent payments until the full reduction has been allocated.




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



30









 




Seller shall be entitled to retain from or set-off against
amounts due to, or otherwise charge and collect from, Newco or Holdings for all reasonable
incremental costs associated with the retention, maintenance and enforcement of rights of any
Transferred Contract or other Contributed Asset and all Liabilities arising thereunder to the
extent related to the ownership, use or operation thereof from and after the Closing Date
contemplated by this Section 2.10 (“Maintenance Costs”), and Buyer will, and will
cause Holdings and Newco to, indemnify each Seller Indemnified Party for any Damages resulting from
or arising out of any such activities. Notwithstanding anything to the contrary set forth in this
Section 2.10, no Seller shall have any obligation whatsoever to directly or indirectly
retain any portion of its assets or businesses other than any specific individual Transferred
Contract or other Contributed Asset contemplated by this Section 2.10 (but only until such
time as the transfer thereof may be effected in accordance with this Agreement) as a result of this
Section 2.10 in order to perform or maintain such Transferred Contract or other Contributed
Asset.




     Section 2.11 Intellectual Property License. Newco hereby grants to Solutia and to
each of Solutia’s Affiliates a worldwide, royalty-free, fully paid-up, non-exclusive, fully
transferable, irrevocable and perpetual right and license to use the Intellectual Property set
forth on Section 2.11 of the Disclosure Schedule and any other Intellectual Property,
excluding trademarks, which is included in the Contributed Assets and identified by Solutia or any
of its Affiliates in writing to Newco within nine (9) months after the Closing Date (without any
right to grant sublicenses other than in connection with products, processes or services, or other
Intellectual Property, owned or controlled by Solutia or any of its Affiliates) in connection with
the respective businesses of Solutia and its Affiliates as such businesses are currently conducted
and proposed to be conducted as of the Closing Date; provided, however, that (x)
such license shall be effective only upon the occurrence of the Closing Date, and (y) such license
shall be subject to Section 6.6.



     Section 2.12 Contribution to Newco Subsidiaries. The Parties hereto shall use
commercially reasonable efforts to cooperate with any other Party hereto to determine whether, in
lieu of any contribution of the Contributed Assets to Newco, certain Contributed Assets should be
contributed directly to certain Newco Subsidiaries. Seller shall, and shall cause the Other
Sellers, to transfer any such Contributed Assets to a
Newco Subsidiary as Buyer shall reasonably request promptly following the date hereof and in
any event, no later than April 7, 2009; provided, however, that in no event shall
any Seller be obligated to contribute any Contributed Assets to any Newco Subsidiary in lieu of to
Newco (except as contemplated by Section 5.4(d)) if doing so could reasonably be expected
to (i) prevent or delay the consummation of any transactions contemplated hereby; (ii) adversely
affect the rights or benefits of any Seller; or (iii) adversely affect the Tax treatment of any
Seller. Upon any such determination to so contribute Contributed Assets to any Newco Subsidiary,
if either Party shall request prior to the Closing, the Parties shall prepare an intercompany
agreement between Newco and any such Newco Subsidiaries and such other agreements reasonably
requested by a Party to effectuate such contributions, which shall, in each case, be in form and
substance reasonably acceptable to Seller.



     Section 2.13 Excluded Liabilities. Seller shall pay, perform, honor and discharge, or
cause to be paid, performed, honored and discharged, all Excluded Liabilities relating to, or



31









 







arising from, the Business in a timely manner in accordance with the terms thereof from and after
the Closing.



     Section 2.14 Additional Consideration Payable After the Closing. As additional
consideration for the Holdings Formation Contribution, except as the following payments shall be
reduced pursuant to Section 2.9(e), Buyer shall, or shall cause Holdings or Newco to, pay
to Seller cash in an amount equal to One Million Dollars ($1,000,000) on each of September 1, 2011,
September 1, 2012, September 1, 2013 and September 1, 2014 for aggregate additional payments under
this Section 2.14 of Four Million Dollars ($4,000,000); provided, however,
that the payment to be made on September 1, 2011 shall be reduced by the amount by which the
consideration actually paid to Solutia International Trading (Shanghai) Co., Ltd. pursuant to
Section 2.3(a)(i) of the China Asset Transfer Agreement, if applicable, exceeded Three Hundred
Thousand Dollars ($300,000). Such payments shall be paid by wire transfer or other immediately
available funds to an account or accounts designated by Seller. Such payments shall not be subject
to any right of set-off and shall not be conditioned upon any matter, including the occurrence of
any events or any results of operations of the Business.



ARTICLE III

SELLER’S REPRESENTATIONS AND WARRANTIES




     Solutia represents and warrants to Buyer that the statements contained in this Article III
are true and correct as of the date of this Agreement, except as set forth in the disclosure
schedule accompanying this Agreement (the “Disclosure Schedule”). The Disclosure Schedule
has been arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in
this Agreement for the convenience of the Parties.



     Section 3.1 Organization of Sellers and Newco; Good Standing.



          (a) Solutia is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate or similar power and authority to
own, lease and operate its assets and to carry on its business as now being conducted.




          (b) Newco is a limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and authority to own, lease and
operate its assets and to carry on its business as now being conducted.




          (c) Each of the Other Sellers is duly formed or organized and validly existing under the laws
of the jurisdiction of its incorporation or formation and has all requisite corporate or similar
power and authority to own, lease and operate its assets and to carry on its business as now being
conducted.




          (d) Each of Solutia and Newco is qualified to do business in each jurisdiction in which the
nature of its business requires it to be so qualified with respect to the Business. Section
3.1 of the Disclosure Schedule sets forth a list of jurisdictions where Solutia or Newco is
registered to do business by reason of registration with the applicable Secretary of State with
respect to the Business.



32









 







     Section 3.2 Authorization of Transaction.



          (a) Each of Solutia and Newco has, and as of the Closing, each Other Seller will have, full
power and authority (including full corporate or other entity power and authority) to execute and
deliver (x) in the case of Solutia and Newco, this Agreement and (y) in the case of all Sellers and
Newco, all other agreements contemplated hereby to which it is a party (excluding those related to
the Financing) and to perform its respective obligations hereunder and thereunder.




          (b) The execution, delivery and performance of (x) in the case of Solutia and Newco, this
Agreement and (y) in the case of all Sellers and Newco, all other agreements contemplated hereby to
which a Seller or Newco is a party (excluding those related to the Financing), have been duly
authorized by such Seller and Newco, as the case may be.




          (c) This Agreement has been duly executed and delivered by Seller and Newco and constitutes,
and as of the Closing the Related Agreements (excluding those related to the Financing) will have
been duly executed and delivered by each Seller and/or Newco party thereto and will constitute, the
valid and legally binding obligation of such Seller and/or Newco, enforceable against such Seller
and/or Newco in accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors’ rights and general principles
of equity.




     Section 3.3 Noncontravention. Neither the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the transactions referred to in Article II),
will: (i) conflict with or result in a breach of the certificate of incorporation or bylaws, or
other organizational documents, of any Seller or Newco; (ii) violate any law or Decree to which any
Seller or Newco is, or its respective assets or properties are, subject in respect of the Business;
or (iii) conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any Material Contract to which a Seller is a party or by which it is bound
in respect of the Business or to which any of the Contributed Assets is subject, except, in the
case of either clause (ii) or (iii), for such conflicts, violations, breaches, defaults,
accelerations, rights or failures to give notice as would not, individually or in the aggregate,
have a Material Adverse Effect on the Business. Other than filings required under the Exchange Act
or applicable laws of China, neither Sellers nor Newco is required to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any Governmental Authority in
order for the Parties to consummate the transactions contemplated by this Agreement or any Related
Agreement, except where the failure to give notice, file or obtain such authorization, consent or
approval would not, individually or in the aggregate, have a Material Adverse Effect on the
Business.



     Section 3.4 Title to Contributed Assets. At the Closing and prior to the Newco
Formation Contribution, Sellers will have good and valid title to, or the right to use, the
Contributed Assets, and Sellers will convey to Newco at the Closing in the Newco Formation
Contribution, subject to the operation of Section 2.10, good and valid title to, or
Sellers’ right to use, all of the Contributed Assets, free and clear of all Liens (other than
Permitted Liens and, with respect to Intellectual Property owned by the Sellers outside the United
States, to Seller’s



33









 




Knowledge; provided that it is understood and agreed that, if Newco or
Buyer notifies Seller in writing at any time after the Closing of any security interest or other
Lien filed or recorded with any Governmental Authority (including any patent or trademark office)
outside the United States as of the Closing with respect to Intellectual Property owned by Sellers
and included in the Contributed Assets, Seller shall use commercially reasonable efforts to obtain
a release of any such security interest or other Lien, at Seller’s sole cost and expense, and
provide Newco and Buyer a letter confirming that any such security interest or other Lien has been
released).




     Section 3.5 Sufficiency of Assets Except as contemplated by this Agreement or by any
Related Agreements and except for the China Business Assets, as of the Closing, the Contributed
Assets are all of the assets necessary for Newco to operate the Business in a manner substantially
equivalent in all material respects to the manner in which Sellers have operated the Business since
the Most Recent Fiscal Year End.



     Section 3.6 Financial Statements. Attached hereto as Annex G are the
following financial statements (collectively the “Financial Statements”): unaudited
consolidated balance sheets, statements of income and statements of cash flow for the Business (the
“Most Recent Financial Statements”) as of and for
the fiscal year ended December 31, 2008 (the “Most Recent Fiscal Year End” and the
“Most Recent Fiscal Quarter End”). The Financial Statements present fairly in all material
respects the financial condition of the Business as of such dates and the results of operations of
the Business for such periods, are correct and complete in all material respects and are consistent
in all material respects with the books and records of the Business and Sellers, except as adjusted
as disclosed thereon; provided, however, that the Most Recent Financial Statements
are subject to normal-year end adjustments and lack of footnotes and other presentation items; the
effect of which are not expected to have a Material Adverse Effect on the Business.



     Section 3.7 Events Subsequent to Most Recent Fiscal Quarter End. Except for actions
or events arising in connection with the transactions contemplated hereby, including contribution
of the Contributed Assets to, and assumption of the Assumed Liabilities by, Newco, and as set forth
on Section 3.7 of the Disclosure Schedule, since January 1, 2009:



          (a) Sellers have not sold, leased, transferred or assigned any material assets of the Business
outside the ordinary course of business;




          (b) other than with respect to Covered Employees (which matters are covered below), Sellers
have not entered into any Material Contract outside the ordinary course of business which will be a
Transferred Contract;




          (c) other than with respect to Covered Employees (which matters are covered below), Sellers
have not accelerated, terminated, modified or cancelled any Material Contract outside the ordinary
course of business which would otherwise have been a Transferred Contract;




          (d) Sellers have not experienced any material damage, destruction or loss outside the ordinary
course of business that is not covered by insurance to its property exclusively related to the
Business;




34









 








          (e) Sellers have not entered into any material agreement outside the ordinary course of
business assigning any material Intellectual Property exclusively related to the Business;




          (f) Sellers have not granted or agreed to grant any increase in any rate or rates of salaries
or compensation to any officer or employee of the Business for 2009, or made or agreed to any bonus
payment, fringe benefit, retention or severance arrangement with any such officer or employee for
2009; except for (x) raises of salary or wages upon promotions or progression increases made in the
ordinary course of business, (y) as required by law or (z) changes of de minimis amounts;




          (g) Sellers have not entered into any employment contract related to any of the Covered U.S.
Employees, written or oral, or modified the terms of any existing such contract (except for
modifications contemplated by clauses (x), (y) or (z) of Section 3.7(f));




          (h) Sellers have not entered into any collective bargaining agreement related to any of the
Covered U.S. Employees, written or oral, or modified the terms of any existing such agreement;




          (i) Sellers have not adopted any new Employee Benefit Plan or provided any material increases
in any material benefits under such Employee Benefit Plans with respect to such Covered Employees
except in accordance with the terms of such plans or as required under applicable law;




          (j) Sellers have not incurred, assumed or guaranteed any indebtedness for borrowed money with
respect to the Business other than in the ordinary course of business;




          (k) none of the Sellers has made any loan, advance or capital contribution to, or investment
in, any Person with respect to the Business other than expense advances in the ordinary course of
business consistent with past practice;




          (l) none of the Sellers has changed its policy or practice with respect to the methodology for
accounting, including with respect to the classification of its Inventory;




          (m) none of the Sellers has made any Tax election, changed its method of Tax accounting or
settled any claim for Taxes;




          (n) there has not been any event or occurrence that individually or in the aggregate has had a
Material Adverse Effect on the Business; and




          (o) Sellers have not agreed, whether in writing or otherwise, to do any of the foregoing.




     Section 3.8 Real Property.



          (a) Section 3.8(a) of the Disclosure Schedule sets forth a description of each Owned
Real Property. Seller has marketable fee simple title to all Owned Real Property, free and clear
of any Liens except for Permitted Liens.




35









 








          (b) Section 3.8(b) of the Disclosure Schedule sets forth the address of each Leased
Real Property, and a list of all Leases. Seller holds a valid leasehold interest in or a valid
right to use or occupy each of the Leased Real Property, in each case free and clear of any Liens
other than Permitted Liens.




          (c) Seller has not received any written notice from any Governmental Authority or Person of
any pending or threatened condemnations, planned public improvements, annexation, special
assessments, zoning, or subdivision changes directly affecting the Facilities.




          (d) Other than pursuant to the Guest Agreements and Permitted Liens, no third party is in
possession of any of the Facilities or any portion thereof and there are no leases,
subleases, licenses, concessions or other contracts granting to any third party the right of
use or occupancy of any portion of the Facilities.




          (e) Seller is not a party to any outstanding options or rights of first refusal or other
similar contracts or rights to purchase any real property or interest therein relating to, or
intended to be used in the operation of, the Business.




     Section 3.9 Furnishings and Equipment. The Furnishings and Equipment presently used
in connection with the conduct of the Business as presently conducted by Sellers are free from
material defects, have been maintained in accordance with normal industry practice, are in
operating condition and repair (subject to normal wear and tear) and are in an operating condition
sufficient to conduct the Business as presently conducted by Sellers.



     Section 3.10 Inventory and Current Assets and Current Liabilities. 



          (a) The Inventory of the Business is merchantable and fit for the purpose for which it was
procured or manufactured in all material respects, except as set forth or reflected in the
Conclusive Net Working Capital Statement. The Inventory of the Business does not include any
slow-moving, obsolete, damaged or defective items other than as carried on the books and records of
the Business in accordance with past custom and practice of the Business. Such Inventory is
accounted for under GAAP, consistently applied, and is valued on a FIFO basis, at the lower of cost
or market (as defined by GAAP).




          (b) The Sellers’ accounts payable for the purchase of goods and services appearing on the Most
Recent Balance Sheet and all accounts payable for the purchase of goods and services created since
the Most Recent Fiscal Quarter End represented valid obligations actually made in bona fide
arms’-length transactions entered into in the ordinary course of business and consistent with past
practices and policies, including with regard to the timing of payment.




          (c) The Sellers’ accounts receivable for the sale of Inventory appearing on the Most Recent
Balance Sheet and all accounts receivable for the sale of Inventory created since the Most Recent
Fiscal Quarter End represented valid obligations actually made in bona fide arms’-length
transactions entered into in the ordinary course of business and consistent with past practices and
policies, including with regard to the timing of payment.



36









 







     Section 3.11 Material Contracts.



          (a) Section 3.11 of the Disclosure Schedule lists the following Contracts to which a
Seller is a party as of the date hereof with respect to the Business that would constitute a
Transferred Contract as of the date hereof:




               (i) any utilities and services agreement or lease and operating agreement in either case
providing for a third party guest or host arrangement at the Owned Real Property (a “Guest
Agreement”);



               (ii) other than any Guest Agreement, any Contract for the lease of personal property to or
from any Person providing for lease payments to be unpaid as of the Closing Date in excess of One
Million Dollars ($1,000,000) per annum;



               (iii) other than any Guest Agreement, any Contract for the purchase by the Business of raw
materials, commodities or supplies with any supplier to whom the Business paid in excess of
Twenty-Six Million Dollars ($26,000,000) during the Most Recent Fiscal Year and for which the
performance of such Contract will extend over a period of more than one year after the Closing
Date, which, when taken together with all Contracts with such suppliers set forth on Section
3.11 of the Disclosure Schedule and all such suppliers for which no such Contract exists,
constitute the suppliers to whom the Business paid no less than sixty-six percent (66%) of the
aggregate payments to suppliers during such period;



               (iv) other than any Guest Agreement, any Contract for the sale by the Business of products
(for avoidance of doubt, not including purchase orders) to a customer from whom the Business
received consideration in excess of Seventeen Million Three Hundred Thirteen Thousand Dollars
($17,313,000) during the Most Recent Fiscal Year and for which the performance of such Contract
will extend over a period of more than one year after the Closing Date, which, when taken together
with all Contracts with such customers set forth on Section 3.11 of the Disclosure Schedule
and all such customers for which no such Contract exists, constitute the customers from which the
Business received no less than fifty-seven percent (57%) of the aggregate consideration from
customers during such period;



               (v) any Contract pursuant to which the Business sells any products providing for any “most
favored nation” pricing pursuant to which a Seller is obligated to sell Products to a customer from
whom the Business received consideration in excess of Two Million Dollars ($2,000,000) during the
Most Recent Fiscal Year at a price that is no less favorable than a price offered to any other
customer for such Product;



               (vi) any Contract providing for a partnership or joint venture;



               (vii) any Contract under which it has created, incurred, assumed or guaranteed any
indebtedness for borrowed money to be outstanding as of the Closing Date in excess of One Million
Dollars ($1,000,000);



               (viii) any Contract expressly restricting the ability of such Seller from competing in any
geographic region or with respect to any product;



37









 





               (ix) any material license relating to Intellectual Property used primarily in the operation of
the Business (other than, if applicable, off-the-shelf computer software with an annual license fee
of less than Fifty Thousand Dollars ($50,000));



               (x) any collective bargaining agreement covering the Covered U.S. Employees;



               (xi) any settlement, conciliation or similar agreement, the performance of which will involve
payment after the Closing Date by Buyer of consideration in excess of One Million Dollars
($1,000,000);



               (xii) any employment, severance or termination agreement with any Covered U.S. Employee or any
individual consultant of the Business pursuant to which Seller is required to make payment in
excess of Two Hundred Thousand Dollars ($200,000) in 2008 or any year thereafter (excluding the
standard severance policy of the Business) for which the Liability is an Assumed Liability;



               (xiii) any agreement that provides for the future disposition or acquisition of any product
line or business of the Business, other than dispositions or acquisitions in the ordinary or usual
course of business; or



               (xiv) any agreement that grants to any Person any right of first offer or right of first
refusal to purchase all or part of the Facilities.


The Contracts required to be listed on Section 3.11 of the Disclosure Schedule are referred
to as the “Material Contracts.”




          (b) With respect to each Material Contract: (i) such Contract constitutes the valid and
legally binding obligation of the Seller(s) party thereto and, to Seller’s Knowledge, the
counterparty thereto, enforceable against such Seller(s) and, to Seller’s Knowledge, the
counterparty thereto in accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors’ rights and general principles
of equity; and (ii) neither the Seller(s) party thereto nor, to Seller’s Knowledge, the
counterparty thereto is in material breach or default that presently would permit or give rise to a
right of termination, modification or acceleration thereunder or for which the counterparty thereto
has made a claim against such Seller for contract damages in excess of Five Hundred Thousand
Dollars ($500,000) as a result thereof.




     Section 3.12 Intellectual Property. Section 3.12 of the Disclosure Schedule
lists all issued patents and pending patent applications, and all registrations and pending
applications for registration of copyrights, trademarks and service marks, and all registrations of
Internet domain names, owned by Sellers that are exclusively used in or are necessary in all
material respects for the operation of the Business as currently conducted and included in the
Contributed Assets (“Scheduled Intellectual Property”). All of the Scheduled Intellectual
Property is valid, subsisting and, to Seller’s Knowledge, in full force and effect (except for any
Scheduled Intellectual Property that expires at the end of its statutory term or is unable to be
renewed or is not material to the Business). To Seller’s Knowledge, (a) no use of any Intellectual
Property included in the Contributed Assets in the conduct of the Business as currently conducted



38









 







infringes the Intellectual Property of any Person in any material respect, and (b) no third party
is infringing any material Intellectual Property included in the Contributed Assets. There are no
suits, actions or proceedings presently pending or, to Seller’s Knowledge, threatened in writing
against any Seller that asserts that the conduct of the Business infringes any third party’s
Intellectual Property rights, except as would
not have a Material Adverse Effect on the Business. To Seller’s Knowledge, all Material
Contracts relating to Intellectual Property primarily used in the Business under which any Seller
is a licensee are valid and enforceable against it and the other parties thereto in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights in general and
subject to general principles of equity (regardless of whether such enforceability is considered a
proceeding in equity or at law). Sellers have made reasonable efforts to protect and maintain the
proprietary nature of the Intellectual Property primarily related to the Business owned by Sellers.



     Section 3.13 Tax Matters.



          (a) Sellers have duly and timely filed all material Tax Returns that they were required to
file in connection with the ownership or operation of the Business. All such Tax Returns were
correct and complete with respect to the ownership or operation of the Business in all material
respects. All material Taxes owed by Sellers, whether or not shown on such Tax Returns, have been
paid to the extent due and payable. Sellers have withheld and paid all material Taxes required to
have been withheld with respect to the ownership or operation of the Business, and all Forms W-2
and 1099 required with respect thereto have been properly completed and timely filed.




          (b) There are no (i) agreements or consents currently in effect for the extension or waiver of
the time for assessment or collection of any Taxes of any Seller; (ii) there is no action, suit,
proceeding, investigation, audit or claim currently pending, or to Seller’s Knowledge, threatened,
regarding any Taxes relating to any Seller; (iii) during the last five (5) years or, to Seller’s
Knowledge, prior thereto, there has not been (w) any ruling expressly addressed to any Seller by
any Tax authority that relates to or was obtained in connection with the ownership or operation of
the Business, (x) any audit or other examination of the Taxes of any Seller by any Tax authority,
(y) any closing agreement entered into by any Seller pursuant to Section 7121 of the IRC or any
similar provision of any other applicable Tax law that was entered into in connection with or
relates to the ownership or operation of the Business, or (z) any approval received or agreed to or
pending with any Tax authority for a change in accounting method with respect to the Taxes of any
Seller that would require any form or specific notice in a Tax Return (and which, in the case of
any such change more than five (5) years previous to the date hereof is not reflected in the Tax
Returns of Seller during the last five (5) years); and (iv) Seller is not a party to any Tax
sharing or Tax reimbursement agreement or arrangement (other than property tax escalation clauses
in property leases) that relate to the ownership or operation of the Business.




          (c) The unpaid Taxes of Sellers related to the ownership or operation of the Business (i) did
not, as of the Most Recent Fiscal Quarter End, exceed by any material amount the reserves for Tax
liability (rather than any reserve for deferred Taxes established to reflect the timing difference
between book and tax income) set forth on the face of the Most Recent Balance



39









 






Sheet (rather than in
the notes thereto); and (ii) as of the Closing, will not exceed by any material amount the reserves
as adjusted for operations and transactions through the Closing Date in accordance with the past
custom and practice of Sellers.




          (d) Neither Newco nor Buyer will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on
or prior to the Closing Date; (ii) “closing agreement” as described in IRC Section 7121 (or any
corresponding or similar provision of state, local or foreign income Tax law) executed on or prior
to the Closing Date; (iii) intercompany transactions or any excess loss account described in
Treasury Regulations under IRC Section 1502 (or any corresponding or similar provision of state,
local or foreign Income Tax law); (iv) installment sale or open transaction disposition made on or
prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date.




          (e) Newco has not elected to be treated as a corporation for U.S. federal Income Tax purposes.




          (f) Seller does not have any liability with respect to the Business or the Contributed Assets
under applicable abandoned property, escheat or similar Laws.




          (g) Section 3.13(g) of the Disclosure Schedule provides certain estimated Tax basis
information with respect to the Business as of December 31, 2008, including adjusted tax basis,
classification and remaining depreciable life (the “Estimated Tax Basis Balance Sheets”).
The Estimated Tax Basis Balance Sheets were compiled by Seller’s employees using the best
information available to Seller at the time such Estimated Tax Basis Balance Sheets were prepared.




          (h) Notwithstanding anything to the contrary set forth herein, all references to Taxes in this
Section 3.13 are limited to Taxes relating to the Business, or Taxes for which Buyer or
Newco could become liable as successor to or transferee of the Business or which could become a
charge against or Lien on any of the Contributed Assets, and all references to Tax Returns are
limited to returns of such Taxes. Notwithstanding anything to the contrary set forth herein, the
representations and warranties set forth in this Section 3.13 are the exclusive
representations and warranties of Seller regarding Tax matters. 




     Section 3.14 Legal Compliance. (a) Sellers are in compliance with all applicable laws
relating to the Business (other than Tax matters, environmental, health or safety matters, labor
matters and employee and Employee Benefit Plan matters, which are exclusively governed by
Section 3.13, Section 3.21, Section 3.22 and Section 3.23,
respectively), including, as applicable, laws with respect to approvals, permits and licenses
required by Sellers in connection with the conduct of the Business, except for such noncompliance
which would not result in any Material Adverse Effect on the Business, and (b) no Litigation has
been filed, commenced or, to Seller’s Knowledge, threatened in writing by any Governmental
Authority primarily relating to the Business during the two (2) years prior to the date hereof
against any of them alleging any failure so to comply which would be reasonably likely to result in
any Material Adverse Effect on the Business.



40









 





     Section 3.15 Litigation. Section 3.15 of the Disclosure Schedule sets forth each instance in which Sellers
(a) are subject to any outstanding Decree or (b) are a party or, to Seller’s Knowledge, are
threatened in writing to be made a party to any Litigation (other than any action filed, commenced
or threatened in writing by a Governmental Authority), except for such Decrees or Litigation that
are not expected to involve future payment of an amount greater than One Million Dollars
($1,000,000) individually or Two Million Five Hundred Thousand Dollars ($2,500,000) in the
aggregate.



     Section 3.16 Product Warranty. No Seller has received any claim in writing with
respect to the Business that remains pending from any customer (a) alleging that any of the
Products manufactured, sold, leased or delivered by the Business during the one (1) year prior to
the date hereof has not conformed in all material respects with applicable contractual commitments
or express and implied warranties, or (b) that would be reasonably likely to give rise to a
Liability for replacement or repair thereof or other damages in connection therewith, in either
case that would be a material Liability of the Business, other than the reserve for product
warranty claims set forth on the Most Recent Balance Sheet, as adjusted for operations and
transactions since the Most Recent Fiscal Quarter End in accordance with the past custom and
practice of the Business.



     Section 3.17 Product Liability. Sellers do not have any material Liability arising
out of any injury to individuals or property as a result of the ownership, possession or use of any
product manufactured, sold, leased or delivered by the Business during the three (3) years prior to
the date hereof not reflected on the Most Recent Balance Sheet.



     Section 3.18 Affiliate Transactions. Except for any transactions contemplated hereby
(including transactions involving Newco or any Newco Subsidiary), to Seller’s Knowledge, no officer
or director of Seller or any of its Subsidiaries (nor any ancestor, sibling, descendant or spouse
of any of such Person, or any trust, partnership or corporation in which any of such Persons has an
economic interest in excess of five percent (5%) of the ownership interests therein), (i) is or was
a party to any Contract, commitment or transaction with any of Sellers relating to the Business
since January 1, 2007 (other than in his or her capacity as an officer or director of Seller or any
of its Subsidiaries), or (ii) has any interest in any Contributed Asset, other than indirectly, as
a stockholder of Seller.



     Section 3.19 Customers and Suppliers. Section 3.19 of the Disclosure Schedule
lists (i) the ten (10) largest customers (by revenue) of the Business during the Most Recent Fiscal
Year and (ii) the ten (10) largest suppliers (by cost) of the Business during the Most Recent
Fiscal Year. No such supplier or customer has canceled or otherwise terminated, or, to Seller’s
Knowledge, threatened in writing to cancel or otherwise terminate, its relationship with Seller or
to decrease materially the quantity of products purchased from or sold to, respectively, the
Business outside of the ordinary course of business expressly as a result of the transactions
contemplated hereby or otherwise since the Most Recent Fiscal Year End.



     Section 3.20 Insurance. The insurance coverage provided by the insurance policies
maintained by Sellers with respect to the Business: (a) is on such terms, (b) covers such
categories of risk, (c) contains such deductibles and retentions, and (d) is in such amounts as,
with respect to each of the criteria set forth in the foregoing clauses (a) through (d), is
suitable



41









 




and customary for the Business in all material respects. Section 3.20 of the
Disclosure Schedule sets forth a list of all insurance policies of Seller in effect as of the
date hereof covering the Business or the Contributed Assets and the applicable deductible and
minimum limits on each such policy.




     Section 3.21 Environmental, Health or Safety Matters.



          (a) (i) Sellers have obtained, have held and hold all material Permits required pursuant to
Environmental, Health or Safety Requirements (“Environmental Permits”) required to be
obtained and held by them in connection with the ownership and operation of the Business, the
Facilities and the Contributed Assets; and (ii) each such Environmental Permit as of the date
hereof is identified on Section 3.21(a) of the Disclosure Schedule.




          (b) Sellers are and have been: (i) in material compliance with all required Environmental
Permits, and (ii) in material compliance with all Environmental, Health or Safety Requirements
presently or previously in effect, except for such noncompliance that has either (a) been fully and
finally resolved and for which no material Liability remains or (b) would not reasonably be
expected to result in any Material Adverse Effect on the Business.




          (c) There are no (i) Decrees which could reasonably be expected to have a Material Adverse
Effect on the Business, or (ii) material Litigations in each case issued, pending or, to Seller’s
Knowledge, threatened against Sellers or with respect to which Sellers have entered into or are
subject, that relate to the Facilities, the Business or the Contributed Assets, under or relating
to the Environmental, Health or Safety Requirements.




          (d) (i) No Release of Hazardous Materials has occurred and no Person has been exposed to any
Hazardous Materials at, from, in, to, on or under any of the Facilities; and (ii) no Hazardous
Materials are present in, on or migrating to or from any of the Facilities, in the case of either
clause (i) or (ii) hereof, that is reasonably likely to give rise to a Liability or Litigation
under Environmental, Health or Safety Requirements to Sellers or Newco except for any Liability or
Litigation that would not reasonably be expected to have a Material Adverse Effect on the Business.




          (e) None of the Facilities is listed or, to Seller’s Knowledge, proposed for listing on the
National Priorities List (as defined in Comprehensive Environmental Response, Compensation and
Liability Act of 1980) or on any similar list of sites requiring investigation or clean up under
any Environmental, Health or Safety Requirements, which listing would reasonably be expected to
have a Material Adverse Effect on the Business.




          (f) There is no (i) asbestos-containing materials, (ii) polychlorinated biphenyl-containing
equipment or materials, or (iii) underground storage tanks on or under any
of the Facilities, in any of cases (i) — (iii) above, that would reasonably be expected to
have a Material Adverse Effect on the Business.



          (g) Seller has made available to Buyer such material environmental reports, documents,
studies, analyses, investigations, audits and reviews in any Sellers’ (or their respective
representatives or advisors) possession or control as reasonably necessary to disclose material
environmental, health and safety liability issues to Seller’s Knowledge.




42









 










          (h) Neither the execution of this Agreement nor any of the Related Agreements nor the
consummation of the transactions contemplated hereby or thereby will require any notification to or
the consent of any Governmental Authority (other than such notifications as may be required in
connection with the transfer or reissuance of any Environmental Permits) or the undertaking of any
investigation or remedial actions pursuant to Environmental, Health or Safety Requirements other
than those which the failure to comply with would not reasonably be expected to have a Material
Adverse Effect on the Business.




          (i) Sellers have not contractually assumed responsibility for or agreed to indemnify or hold
harmless any Person for any Liability arising under or relating to any Environmental, Health or
Safety Requirements which Liability relating to the Contributed Assets, Facilities or the Business
that would reasonably be expected to have a Material Adverse Effect on the Business.




          (j) Notwithstanding anything to the contrary set forth herein, the representations and
warranties set forth in this Section 3.21 and Section 3.3, Section 3.6,
Section 3.7, Section 3.11, Section 3.20, and Section 3.28 are the
exclusive representations and warranties of Seller relating to environmental, health and safety
matters, including any matters arising under Environmental, Health or Safety Requirements.




     Section 3.22 Labor Relations.



          (a) Except as would not reasonably be likely to have a Material Adverse Effect on the
Business, each Seller is in material compliance with all laws relating to the employment of labor,
including those laws relating to wages and hours, collective bargaining, equal opportunity,
discrimination, affirmative action, workplace safety, layoffs, vacation, immigration, and the
withholding and payment of all employment-related Taxes and other withholdings.




          (b) No Seller is a party to or bound by any collective bargaining agreement covering the
Covered U.S. Employees, nor has any of them experienced any strike or material grievance, claim of
unfair labor practices or other material labor dispute with respect to the Business within the two
(2) years prior to the date hereof. No unfair labor practice charge or complaint of sex, race, or
other discrimination claim has been brought since January 1, 2004 against any Seller with respect
to the conduct of the Business before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other Governmental Authority that would reasonably be expected to
result in any material liability.




          (c) No Seller is a party to any Contract with its Covered Employees (or any Person on their
behalf) which prohibits Seller from relocating, closing or terminating any of its operations or
facilities or any portion thereof. Since the Most Recent Fiscal Quarter End, none of the Sellers
has effectuated any plant closings or other employee lay offs in violation of the WARN Act.




          (d) Notwithstanding anything to the contrary set forth herein, the representations and
warranties set forth in this Section 3.22 are the exclusive representations and warranties
of Seller relating to labor matters.




43









 








     Section 3.23 Employee Benefit Plans and Employees. 



          (a) Each of the employees listed on Annex C hereto (including all Covered EU Employees
and Covered Foreign Employees) has responsibilities as of the date hereof primarily related to the
Business except as indicated on Annex C.




          (b) Section 3.23(b) of the Disclosure Schedule lists each Employee Benefit Plan (with
specific notations for Foreign Benefit Plans). With respect to each such Employee Benefit Plan:




               (i) Such plan, if intended to meet the requirements of a “qualified plan” under Section 401(a)
of the IRC, has received a determination letter (or the prototype form plan document on which such
plan is based has received an opinion letter or advisory letter) from the Internal Revenue Service
regarding its qualified status under the IRC and, to Seller’s Knowledge, no circumstances exist
that would reasonably be expected to adversely affect such qualified status.



               (ii) Seller has made available to Buyer correct and complete copies of the plan documents and
summary plan descriptions, the associated Forms 5500 annual returns/reports and the most recent
determination letter received from the Internal Revenue Service, as applicable, for each Employee
Benefit Plan.



          (c) Each Employee Benefit Plan has been maintained and administered in accordance with its
terms and applicable law in all material respects.




          (d) Seller does not have, and does not expect to have, any obligation to make any contribution
to any Multiemployer Plans or any Multiple Employer Plans.




          (e) All contributions required by law to have been made under any of the Employee Benefit
Plans that are defined benefit plans or money purchase pension plans (without regard to any waivers
granted under Section 412 of the IRC) to any funds or trusts established thereunder or in
connection therewith have been made in all material respects by the due date thereof (including any
valid extension), except any of the Employee Benefit Plans that are defined benefit plans or money
purchase pension plans which are either fully funded or for which any estimated underfunding is set
forth on Section 3.23(e) of the Disclosure Schedule.




          (f) Neither Seller nor any ERISA Affiliate currently, or in the past six (6) years, has
sponsored, maintained, or contributed to an “employee pension benefit plan” (within the meaning of
Section 3(2) of ERISA) that is subject to Title IV of ERISA or to the minimum funding requirements
of Section 412 of the IRC or Part 3 of Subtitle B of Title I of ERISA. Neither Seller nor any ERISA
Affiliate has taken any action or failed to take any action, nor has any event occurred to Seller’s
Knowledge, with respect to a plan other than an Employee Benefit Plan, which has resulted or would
reasonably be expected to result in Seller becoming subject to liability under Title IV of ERISA or
the minimum funding requirements of Section 412 of the IRC or Part 3 of Subtitle B of Title I of
ERISA, or to any excise taxes under IRC Sections 4971, 4977 or 4980B.




44









 








          (g) There is no pending Litigation that has been asserted or instituted, or to Seller’s
Knowledge, threatened against any of the Employee Benefit Plans, the assets of any of the trusts
under such plans or the plan sponsor or the plan administrator, or against any fiduciary of any of
the Employee Benefit Plans with respect to the operation of such plans (other than routine benefit
claims) pursuant to which Buyer would have material liability.




          (h) None of the Employee Benefit Plans is a “welfare benefit plan” within the meaning of
Section 3(1) of ERISA that provides for continuing benefits or coverage after termination of
employment for any participant or any beneficiary of any participant, except as may be required
under COBRA and at the expense of the participant or the participant’s beneficiary.




          (i) Section 3.23(i) of the Disclosure Schedule lists all change of control or
retention plans or agreements that would be triggered by the transactions contemplated by this
Agreement.




          (j) Sellers have made all payments to Covered Employees under any employment, severance,
termination, bonus plan or other similar agreement or arrangement that are due and payable and
outstanding.




          (k) Notwithstanding anything to the contrary set forth herein, the representations and
warranties set forth in this Section 3.23 are the exclusive representations and warranties
of Seller regarding employee and Employee Benefit Plan matters.




     Section 3.24 Brokers’ Fees. Other than the fees and expenses payable to HSBC
Securities (USA) Inc. in connection with the transactions contemplated hereby, which shall be borne
by Solutia, no Seller has entered into any Contract to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated hereby for which Buyer could become
liable or obligated to pay.



     Section 3.25 Newco.



          (a) Newco was formed for the purpose of effecting the transactions contemplated hereby and has
not conducted any activities other than in connection with the Business and transactions
contemplated hereby.




          (b) Seller has heretofore furnished to Buyer a complete and correct copy of the limited
liability company agreement, as amended to date, of Newco.




     Section 3.26 Title to Newco Units. At the Closing, Seller will have good and valid
title to Newco Units, and Seller will convey at the Closing good and valid title to all of the
Newco Units, free and clear of all Liens (other than Permitted Liens) to Holdings pursuant to the
contribution of the Newco Units contemplated by Section 2.5(a).



     Section 3.27 Newco Capitalization.



          (a) As of the date hereof, there is one common unit of Newco issued and outstanding. Other
than as contemplated by this Agreement or any Related Agreement, there are



45









 






no existing preemptive
rights, outstanding subscriptions, options, rights, warrants, convertible or exchangeable
securities, calls, rights of exchange, plans or other agreements, commitments or claims or other
similar rights relating to any equity units or other equity security of Newco of any character
providing for the transfer, purchase, issuance or sale of any equity units of Newco, other than as
contemplated by this Agreement or any Related Agreement.




          (b) The equity units of Newco have been duly authorized and are validly issued, fully paid,
and non-assessable. Other than as contemplated by this Agreement or any Related Agreement, there
are no outstanding or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights or other Contracts that would require Newco to issue, sell, or
otherwise cause to become outstanding any of its equity units. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar rights with respect
to Newco.




     Section 3.28 Solvency. Immediately after giving effect to the consummation of the
transactions contemplated by this Agreement and the Related Agreements, at the Closing (a) each of
the Sellers will be able to pay its debts as they mature and have sufficient capital (and not
unreasonably small capital) to carry on its business consistent with its past practices, and (b)
the assets and properties of each of the Sellers at a fair valuation will be greater than its debts
and other liabilities.



     Section 3.29 No Undisclosed Liabilities. With respect to the Business, Solutia does not have any Liability that would be an Assumed
Liability that would be required by GAAP, as in effect on the date thereof, to be reflected on a
consolidated balance sheet of the Business except for: (i) liabilities as reflected or reserved for
in the Most Recent Financial Statements; (ii) liabilities incurred in the ordinary course of
business since the date of the Most Recent Financial Statements; (iii) liabilities to be reflected
on the Conclusive Net Working Capital Statement; (iv) liabilities that arose under, or were
incurred in connection with, the transactions contemplated by this Agreement or any Related
Agreement; (v) liabilities which have been discharged or paid in full; (vi) liabilities set forth
on Section 3.29 of the Disclosure Schedule; and (vii) any liability that is not material to
the Business.



     Section 3.30 Seller Information. As of the date hereof, Seller has provided to Buyer
true, correct and complete information relating to the businesses and sales of Seller and its
Subsidiaries and joint ventures upon which Buyer can reasonably determine whether any objections to
the transactions contemplated hereby may be credibly asserted under any Antitrust Law.



     Section 3.31 Disclaimer of Other Representations and Warranties. Except for the
representations and warranties contained in this Article III or expressly contained in any
Related Agreement, neither Seller nor any other Person shall be deemed to have made any
representation or warranty, express or implied, including as to the accuracy or completeness of any
information regarding any Seller, Newco, Holdings, the Business, any Contributed Assets, any
Assumed Liabilities, the Holdings Contribution Shares, the Newco Units or any other matter.



46









 





ARTICLE IV

BUYER’S AND SK’S REPRESENTATIONS AND WARRANTIES




     Buyer and SK, jointly and severally, represent and warrant to Seller that the statements
contained in this Article IV are true and correct as of the date of this Agreement.



     Section 4.1 Organization of Buyer and SK; Good Standing.



          (a) SK is a limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate or similar power and authority to
own, lease and operate its assets and to carry on its business as now being conducted.




          (b) Buyer is a limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate or similar power and
authority to own, lease and operate its assets and to carry on its business as now being conducted.




     Section 4.2 Authorization of Transaction.



          (a) Each of SK and Buyer has full power and authority (including full corporate or other
entity power and authority) to execute and deliver this Agreement and all other agreements
contemplated hereby to which it is a party, including pursuant to the Financing, and to perform its
obligations hereunder and thereunder.




          (b) The execution, delivery and performance of this Agreement and all other agreements
contemplated hereby to which SK or Buyer is a party, including pursuant to the Financing, have been
duly authorized by SK and Buyer, respectively.




          (c) This Agreement has been duly executed and delivered by SK and Buyer and constitutes the
valid and legally binding obligation of SK and Buyer, enforceable against SK and Buyer in
accordance with its terms and conditions, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors’ rights and general principles of equity.




     Section 4.3 Noncontravention. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby (including the transactions referred
to in Article II), including pursuant to the Financing, will: (i) conflict with or result
in a breach of the certificate of incorporation or bylaws, or other organizational documents, of SK
or Buyer; (ii) violate any law or Decree to which SK or Buyer is, or its respective assets or
properties are, subject, or (iii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate, terminate, modify or
cancel, or require any notice under any Contract to which SK or Buyer is a party or by which it is
bound, except, in the case of either clause (ii) or (iii), for such conflicts, breaches, defaults,
accelerations, rights or failures to give notice as would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer. Other than the filings required under the applicable laws
of China, neither SK nor Buyer is required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Governmental Authority in order for the Parties to



47









 







consummate the transactions contemplated by this Agreement or any Related Agreement, except where
the failure to give notice, file or obtain such authorization, consent or approval would not,
individually or in the aggregate, have a Material Adverse Effect on Buyer.



     Section 4.4 Legal Compliance. (a) SK and Buyer are in compliance with all applicable
laws, except for such noncompliance which would not result in any Material Adverse Effect on Buyer,
and (b) no Litigation has been filed, commenced or, to Buyer’s Knowledge, threatened in writing by
any Governmental Authority primarily relating to SK or Buyer against any of them alleging any
failure so to comply which would be reasonably likely to result in any Material Adverse Effect on
Buyer.



     Section 4.5 Litigation. Neither SK nor Buyer, nor any of their respective Subsidiaries, (a) is subject to any
outstanding Decree or (b) is a party or, to Buyer’s Knowledge, is threatened in writing to be made
a party to any Litigation (other than any action filed, commenced or threatened in writing by a
Governmental Authority), except for such Decrees or Litigation which would not have a Material
Adverse Effect on Buyer.



     Section 4.6 Brokers’ Fees. Neither SK nor Buyer has entered into any Contract to pay
any fees or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Seller or any of its Affiliates could become liable or
obligated to pay.



     Section 4.7 Financing; Sufficient Funds.



          (a) SK and Buyer have delivered to Seller a true, accurate and complete copy of a letter of
interest from a senior lender (the “Debt Letter of Interest”), which Debt Letter of
Interest is attached hereto as Annex H hereto, pursuant to which, and subject to the terms
and conditions thereof, the lender parties thereto have indicated an interest to lend the amounts
set forth therein to Buyer for the purpose of funding the transactions contemplated by this
Agreement (the “Debt Financing”). SK and Buyer have delivered to Seller a true, accurate
and complete copy of an executed commitment letter from SK (the “Equity Commitment Letter”
and together with the Debt Letter of Interest, the “Financing Commitments”), pursuant to
which SK has committed to invest the amounts set forth therein (the “Equity Financing” and
together with the Debt Financing, the “Financing”), which Equity Commitment Letter is
attached hereto as Annex I hereto. The aggregate proceeds from the Financing constitute
all of the financing required to be provided to Buyer for the consummation of the transactions
contemplated hereby, and are sufficient for the satisfaction of all of SK’s and Buyer’s obligations
under this Agreement and the Related Agreements, including the payment of the Cash Amount. The
Equity Financing Commitment and the Debt Letter of Interest contain all of the conditions precedent
to the obligations of the parties thereunder to make the Financing available to SK or Buyer on the
terms therein. There are no other agreements, side letters or arrangements relating to the
Financing except as set forth in the Equity Commitment Letter.




          (b) The Equity Commitment Letter is in full force and effect and has not been withdrawn or
terminated or otherwise amended or modified in any respect. The Equity Commitment Letter, in the
form so delivered, is a legal, valid and binding obligation of SK and Buyer and the other parties
thereto. There are no other agreements, side letters or arrangements



48









 






relating to the Equity
Commitment Letter that could affect the availability of the Equity Financing. No event has
occurred which, with or without notice, lapse of time or both, would constitute a default or breach
on the part of SK or Buyer under any term or condition of the Equity Commitment Letter, and neither
SK nor Buyer has reason to believe that it will be unable to satisfy on a timely basis any term or
condition of closing to be satisfied by it contained in the Equity Commitment Letter. SK and/or
Buyer have fully paid any and all commitment fees or other fees required by the Equity Commitment
Letter to be paid on or before the date of this Agreement and the Deposit (as defined in the Debt
Letter of Interest).




     Section 4.8 SK Information. As of the date hereof, Buyer and SK have disclosed to
Seller any and all potential issues under any Antitrust Law that may be credibly raised about the
transactions contemplated hereby. As of the date hereof, Buyer and SK have provided to Seller
true, correct and complete information relating to the businesses and sales of SK and its
Subsidiaries and joint ventures upon which Seller can reasonably determine whether any objections
to the transactions contemplated hereby may be credibly asserted under any Antitrust Law.



     Section 4.9 Acquiring Person; HSR Act. None of SK, Buyer or any other Affiliate of
either of the foregoing who would be considered an acquiring person (as such term is used in the
HSR Act) satisfies the size-of-person test under the HSR Act.



     Section 4.10 Disclaimer of Other Representations and Warranties. Except for the
representations and warranties contained in this Article IV or expressly contained in any
Related Agreement, neither SK, Buyer or any other Person shall be deemed to have made any
representation or warranty, express or implied, including as to the accuracy or completeness of any
information regarding SK, Buyer, the Financing or any other matter.



ARTICLE V

PRE-CLOSING COVENANTS




     The Parties agree as follows with respect to the period between the execution of this
Agreement and the Closing (except as otherwise expressly stated to apply to a different period):



     Section 5.1 Reasonable Best Efforts; Cooperation. Upon the terms and subject to the
conditions set forth in this Agreement, each of the Parties shall use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the transactions contemplated
hereby. Without limiting the generality of the foregoing, (i) Seller shall use its reasonable best
efforts to cause the conditions set forth in Section 7.1 to be satisfied or fulfilled, and
(ii) SK and Buyer shall each use its reasonable best efforts to cause the conditions set forth in
Section 7.2 to be satisfied or fulfilled.



     Section 5.2 Regulatory Approvals. Without limiting the generality of Section
5.1:



          (a) Subject to the terms and conditions of this Agreement, each Party shall use its reasonable
best efforts to: (i) file any filing or notification required pursuant to any Antitrust Law with
respect to the transactions contemplated hereby within ten (10) Business Days after the



49









 






date
hereof; (ii) supply as promptly as practicable any additional information and documentary material
that may be requested or required pursuant to any Antitrust Law; and (iii) cause the
expiration or termination of the applicable waiting periods under any Antitrust Law as soon as
practicable.




          (b) In connection with the efforts referenced in Section 5.1 and this Section
5.2 to obtain all requisite approvals and authorizations for the transactions contemplated by
this Agreement under any Antitrust Law, or any state law, each of the Parties shall use reasonable
best efforts to: (i) cooperate with each other in connection with any filing or submission and in
connection with any investigation or other inquiry, including any proceeding initiated by a private
party; (ii) keep the other Parties informed in all material respects of any material communication
received by such Party from, or given by such Party to, any Governmental Authority and of any
material communication received or given in connection with any proceeding by a private party, in
each case, regarding any of the transactions contemplated hereby; and (iii) permit the other Party
to review any material communication given to it by, and consult with each other in advance of any
meeting or conference with any Governmental Authority, including in connection with any proceeding
by a private party. The foregoing obligations in this Section 5.2(b) shall be subject to
the Confidentiality Agreement and any attorney-client, work product or other privilege.




          (c) Without limiting the generality of Section 5.2(b), if any objections are asserted
with respect to the transactions contemplated hereby under any Antitrust Law or if any suit is
instituted by any Governmental Authority or any private party challenging any of the transactions
contemplated hereby as violative of any Antitrust Law or if a filing pursuant to Section
5.2(a) is reasonably likely to be rejected or conditioned by a Governmental Authority, each of
the Parties shall use reasonable best efforts to resolve such objections or challenges as such
Governmental Authority or private party may have to such transactions, including to vacate, lift,
reverse or overturn any order, whether temporary, preliminary or permanent, so as to permit
consummation of the transactions contemplated by this Agreement as soon as practicable and in any
event on or prior to the Outside Date.




          (d) Without limiting the generality of Section 5.2(c), if necessary to obtain any
regulatory actions or non-actions, orders, waivers, consents, clearances, extensions and approvals
necessary to consummate the transactions contemplated by this Agreement, or if any suit or other
action is threatened or instituted by any Person challenging the transactions contemplated by this
Agreement or any Related Agreement as violative of any applicable law, upon the request of Seller,
SK and Buyer shall, and shall cause their respective Subsidiaries (including, if applicable, from
and after the Closing, Newco) to, hold separate or dispose of any portion of their assets or
businesses or otherwise conduct their businesses or any portion of their businesses in a specified
manner as soon as practicable and in any event on or prior to the Outside Date or take any other
actions unless such actions, in the aggregate, would result in a Material Adverse Effect on SK
(after giving effect to the consummation of the transactions contemplated hereby).




     Section 5.3 Notices and Consents. Prior to the Closing and as necessary following the
Closing:




50











 





          (a) Seller will, or will cause the Other Sellers to, give any notices to third parties, and
each of the Parties will use its reasonable best efforts to obtain any third party consents or
sublicenses and transfer all Permits (or apply for new Permits in the name of Newco) with respect
to the Permits that are not transferable) as are necessary and appropriate to consummate the
transactions contemplated hereby, including in connection with the matters referred to in
Section 5.3(a) of the Disclosure Schedule; provided, however, that: (i)
Seller shall, in consultation with Buyer, control all correspondence and negotiations with third
parties regarding any such matters; provided, further, that Seller shall
periodically update Buyer, at Buyer’s request, on the status of such negotiation and, upon request,
provide Buyer copies of written requests delivered to such third parties; (ii) Buyer shall bear any
reasonable effects as a result of amendments or modifications to any Transferred Contract
(including granting reasonable security interests in related property or rights of entry or
easements to related Facilities), including any Maintenance Costs, as is necessary to obtain such
consent or sublicense; (iii) Seller and Buyer shall each pay one-half of the reasonable costs
incurred to obtain such consent or sublicense; and (iv) solely as to any Environmental Permit set
forth on Section 5.3(a) of the Disclosure Schedule which cannot be transferred or reissued
prior to Closing despite the Parties’ reasonable best efforts and mutual cooperation, in order to
satisfy the condition set forth in Section 7.1(c) and absent an objection by the relevant
Governmental Authority to the following arrangement, the Parties agree to enter into an arrangement
by which Newco may operate on an interim basis pursuant to Sellers’ Environmental Permit pending
transfer or re-issuance, and to apprise the relevant Governmental Authority of such arrangement.
Each Party, at the request of any other Party, shall, and shall cause any Subsidiary thereof to,
use reasonable best efforts to obtain, or to cause to be obtained, any consent, substitution, or
amendment required for any third party to novate any Transferred Contract or to obtain in writing
the unconditional release of such third party to such arrangements, so that, in any case, as
between Buyer, Newco and such third party, Newco will be solely responsible for performance under
such Contracts.



          (b) Without limiting Section 5.2, each of the Parties will give any notices to, make
any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of
Governmental Authorities in connection with the matters referred to in Section 5.3(b) of the
Disclosure Schedule or as are otherwise necessary and appropriate to consummate the
transactions contemplated hereby.



     Section 5.4 Cooperation Regarding Holdings and Newco Formation. Without limiting the
generality of Section 5.1, Section 5.2 or Section 5.3:



          (a) Prior to the Closing, the Parties shall cooperate with each other Party regarding the
formation of Holdings, shall incorporate Holdings and shall cause Holdings to have the certificate
of incorporation of Holdings as of and immediately following the Closing be substantially in the
form of Exhibit L hereto and the bylaws of Holdings as of and immediately following the
Closing be substantially in the form of Exhibit M hereto. Each of the Parties will take
actions so that, as of the Closing, (i) Holdings has full power and authority (including full
corporate or other entity power and authority) to execute and deliver all agreements contemplated
hereby to which it is, or is to be, a party and to perform its respective obligations hereunder and
thereunder, (ii) the execution, delivery and performance of all agreements
contemplated hereby to which Holdings is to be a party have been duly authorized by Holdings,



51









 




and (iii) all agreements contemplated hereby to which Holdings is, or is to be, a party have been
duly executed and delivered by Holdings and will constitute the valid and legally binding
obligation of Holdings, enforceable against Holdings in accordance with its terms and conditions,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors’ rights and general principles of equity, and promptly following the Closing, the Parties
shall take all actions reasonably necessary to ratify all actions contemplated hereby to be taken
by Holdings in connection with the consummation of the transactions contemplated hereby at or prior
to such date of ratification, and (iv) to elect the Board of Directors of Holdings effective as of
Closing as set forth in the Securityholders Agreement. From the date hereof until the Closing,
except as expressly contemplated hereby, the Parties shall not permit or take any action to permit,
or enter into or permit Holdings to enter into any agreement to issue any capital stock of Holdings
or any security convertible or exchangeable into any such capital stock other than as contemplated
by this Agreement or any Related Agreement.




          (b) Prior to the Closing, each of the Parties shall cooperate with each other Party and shall
each use its reasonable best efforts to assist each other Party in the contribution by Solutia and
the Other Sellers to Newco or any Newco Subsidiary of the Contributed Assets and the assumption of
Newco of the Assumed Liabilities and the contribution by Seller of the Newco Units to Holdings so
that from and after the Closing, the Business will continue to operate without interruption,
including to seek to obtain all material permits and registrations which are not Contributed
Assets, to seek to form or obtain qualifications to conduct business of Holdings, Newco, or any
Newco Subsidiary, to seek to appoint new managers of any Newco Subsidiary to be appointed upon
proposal by Buyer with effect as from the Closing, to seek to register Holdings, Newco or any Newco
Subsidiary as a foreign branch office, including the appointment of branch managers to be appointed
upon proposal by Buyer with effect as from the Closing, and to make copies of, and obtain consent
to transfer, or obtain new licenses for, the software listed on Section 1.1(a)(i) of the
Disclosure Schedule as inseparable assets (it being understood that the process and costs of
such copies, consents or new licenses shall be treated in the same manner as contemplated by
Section 5.3(a)). Section 5.4(b) of the Disclosure Schedule sets forth a list of
the foreign branch office registrations that Seller intends to cause Newco or a Newco Subsidiary to
file prior to the Closing.



          (c) Prior to the Closing, each of the Parties shall cooperate with each other Party and shall
each use its reasonable best efforts to: (i) transfer the benefit of the previously filed
pre-registrations of chemical substances manufactured, imported or exported by the Business
pursuant to EU chemical regulations (including, the EU Registration, Evaluation, Authorization and
Restriction of Chemical Substances Act) to Newco or Holdings (as the case may be) or file new
pre-registrations to the extent necessary or appropriate; (ii) disengage the Belgian Limited
Liability Company Solutia Europe sprl/bvba as “Only Representative” (as such term is used or
defined in REACH); and (iii) cause Holdings or Newco to appoint an EU-based “Only Representative”
for complying with EU chemicals rules from and after the Closing and whereby Solutia Europe
sprl/bvba is released from any and all Liability in relation to its acting as such an Only
Representative.



          (d) Prior to the Closing, Solutia shall, or shall cause the Other Sellers, to take the actions
contemplated by Section 5.4(d) of the Disclosure Schedule to effect the transfer of



52









 







Contributed Assets (but in no event including the China Business Assets) located outside of
the United States of America.



          (e) Buyer and Solutia shall each pay one-half of the costs and expenses (excluding legal fees,
except to the extent covered by Section 10.1) incurred by Seller, Holdings, Newco or Buyer
in connection with the actions contemplated by this Section 5.4 promptly following request
therefor.



     Section 5.5 Preservation of Business. Except as otherwise contemplated hereby or as
required by law, Seller will, and will cause the Other Sellers to, use commercially reasonable
efforts to keep the Business as conducted as of the date hereof substantially intact in all
material respects, including maintaining its present operations, physical facilities, working
conditions and relationships with suppliers, customers and employees.



     Section 5.6 Notice of Developments. Each of Seller and Buyer will give prompt written
notice to the other Party of: (i) the existence of any fact or circumstance, or the occurrence of
any event, of which it has Knowledge which would reasonably be likely to cause a condition to a
Party’s obligations to consummate the transactions contemplated hereby set forth in Article
VII not to be satisfied as of a reasonably foreseeable Closing Date; or (ii) the receipt of any
notice or other communication from any Governmental Authority or any securities market or
securities regulator in connection with the transactions contemplated by this Agreement;
provided, however, that the delivery of any such notice pursuant to this
Section 5.6 shall not be deemed to amend or supplement this Agreement and the failure to
deliver any such notice shall not constitute a waiver of any right or condition to the consummation
of the transactions contemplated hereby by any Party.



     Section 5.7 Notice of Supplemental Disclosure. Without limiting the obligations of
Seller contemplated by Section 5.6, from and after the date hereof but prior to the fifth
(5th) Business Day prior to the Closing Date, Seller may inform Buyer pursuant to this
Section 5.7 that any representation or warranty of Seller was, may have been or may have
been deemed to have been inaccurate when made and provide a proposed supplement to the Disclosure
Schedule delivered as of the date hereof to correct such actual or potential inaccuracy as if set
forth on the Disclosure Statement as of the date hereof (a “Disclosure Supplement”). If
the inaccuracies contemplated by such Disclosure Supplement are sufficiently material to prevent,
after a reasonable period in which to cure such inaccuracy, the satisfaction of the condition set
forth in Section 7.1(a), Buyer may terminate this Agreement prior to the Closing and in no
event later than ten (10) Business Days after receipt by Buyer of such Disclosure Supplement. If
Buyer shall not have exercised such right of termination by such date, the Disclosure Schedule
shall be deemed to have been amended (effective as of the date of this Agreement) to add such
Disclosure Supplement. Prior to the Closing, Seller will deliver to Buyer financial statements for
the most recent fiscal quarter end prior to the Closing (if the Closing shall be within forty-five
(45) calendar days thereafter).



     Section 5.8 Access; No Contact; Confidentiality.



          (a) Upon the reasonable request of Buyer, Seller will, and will cause the Other Sellers to,
permit Buyer and its Representatives to have reasonable access during normal



53









 







business hours, and in
a manner so as not to interfere unreasonably with the normal business operations of Sellers, to all
premises, properties (including the Facilities for the purposes of conducting Phase I environmental
assessments or environmental compliance reviews (but not for the purposes of conducting intrusive
investigations of the sort generally referred to as “Phase II” assessments or investigations)),
personnel, Records and Contracts of or related to the Business; provided, however,
that, for the avoidance of doubt, the foregoing shall not require any Person to waive, or take any
action with the affect of waiving, its attorney-client privilege with respect thereto.



          (b) Except in response to a request contemplated by Section 5.8(a), during the period
from the date hereof and ending on the Closing Date, Buyer shall not, and shall cause its
Representatives not to, contact any employees, customers, suppliers or licensors of the Business in
connection with or pertaining to any subject matter of this Agreement except with the prior written
notice to and consent of Seller, which shall not be unreasonably withheld, conditioned or delayed.



          (c) All information obtained pursuant to Section 5.2 or this Section 5.8 shall
be Evaluation Material (as such term is defined in the Confidentiality Agreement) subject to the
terms and conditions of the Confidentiality Agreement.



     Section 5.9 Press Releases and Public Announcements. The Parties have agreed prior to
execution of this Agreement on the initial forms of press release. Hereafter, no Party shall issue
any press release or make any public announcement relating to the existence or subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its reasonable best efforts to advise the
other Party prior to making the disclosure to the extent practicable and permissible under
applicable law); and provided further that each of the Parties may make internal
announcements to their respective employees that are not inconsistent in any material respects with
the Parties’ prior public disclosures regarding the transactions contemplated by this Agreement.



     Section 5.10 Bulk Transfer Laws. SK, Buyer and Newco acknowledge that none of
Sellers, Holdings, Newco or any Newco Subsidiary will comply with the provisions of any bulk
transfer laws or similar laws of any jurisdiction in connection with the transactions contemplated
by this Agreement, including the United Nations Convention on the Sale of Goods, and SK, Buyer and
Newco each hereby waive all claims related to the non-compliance therewith.



     Section 5.11 Buyer Financing.



          (a) SK and Buyer shall each use its reasonable best efforts to (i) arrange the Financing, (ii)
enter into definitive agreements with respect thereto, in accordance with the terms set forth in
the Financing Commitments, which agreements shall be in effect no later than the Closing, and (iii)
consummate the Financing at the Closing. In the event that any portion of the Financing becomes
unavailable, (x) Buyer shall notify Seller thereof promptly and in any event within one (1)
Business Day, and (y) SK and Buyer shall use their reasonable best efforts to arrange to obtain any
such portion from alternative sources, on terms that are no more adverse to



54









 







Seller or Newco, as
promptly as practicable following the occurrence of such event, including entering into definitive
agreements with respect thereto (such definitive agreements entered into pursuant to the first or
second sentence of this Section 5.11(a) being referred to as the “Financing
Agreements”). SK and Buyer shall, and shall cause their respective Representatives to, comply
with the terms, and satisfy on a timely basis the conditions, of the Equity Financing Letter, the
Debt Letter of Interest, any alternative financing commitments, and any related fee and engagement
letters. SK and Buyer shall not, and shall not permit any of their respective Affiliates to,
without the prior written consent of Seller, take or fail to take any action or enter into any
transaction, that could reasonably be expected to materially impair, delay or prevent consummation
of the Financings. Neither SK nor Buyer shall amend or alter, or agree to amend or alter, the
Equity Financing Commitment or any alternative equity financing commitments, without the prior
written consent of Seller. Any breach of the Equity Financing Commitment or any alternative
financing commitment by SK or Buyer shall be deemed a breach by Buyer of this Section 5.11.



          (b) SK and Buyer shall keep Seller informed with respect to all material activity concerning
the status of the Financing contemplated by the Financing Commitments or any alternative financing
and shall give Seller prompt notice of any material adverse change with respect thereto. Without
limiting the generality of the foregoing, SK and Buyer shall give Seller notice promptly (and in
any event no later than two (2) Business Days) following any of the following: (i) any breach by
any party of any of the Financing Commitments, any alternative financing commitment or the
Financing Agreements of which SK or Buyer becomes aware or any actual or purported expiration or
termination thereof; (ii) any notice to SK or Buyer from a financing source that is a party to a
Financing Commitment that such source no longer intends to provide financing to Buyer on the terms
set forth therein; or (iii) if for any reason SK or Buyer no longer believes in good faith that it
will be able to obtain all or any portion of the Financing contemplated by the Financing
Commitments on the terms described therein. Buyer shall furnish complete, correct and executed
copies of the Financing Agreements promptly upon their execution.



          (c) Seller shall, and shall cause its Subsidiaries and Newco to reasonably cooperate in
connection with the arrangement of the Financing as may be reasonably requested by Buyer
(provided that such requested cooperation does not unreasonably interfere with the ongoing
operations of Seller or its Subsidiaries and Buyer shall pay any out-of-pocket expenses in
connection with such cooperation), including, at the reasonable request of Buyer, entering into
such agreements to be effective as of the Closing, and to use reasonable best efforts to deliver
officer’s certificates as of the Closing, in each case as are customary in financings of such
type and as are, in the good faith determination of the Persons executing such officer’s
certificates, accurate. Furthermore, prior to the Closing, Seller shall use its commercially
reasonable efforts to obtain a written opinion from Seller’s counsel, in Seller’s counsel’s
customary form, as of the closing of the Debt Financing, with respect to the matters set forth on
Section 5.11(c) of the Disclosure Schedule. Notwithstanding anything to the contrary set
forth in this Agreement, neither Seller nor any of its Representatives (including Newco) shall be
required to pay any commitment or other similar fee or incur any other Liability in connection with
the Debt Financing or the Equity Financing.



55









 





          (d) SK and Buyer agree that none of Seller, any of its Subsidiaries or any of its or their
Representatives shall have any obligation under, or shall be bound by, the Debt Letter of Interest
(notwithstanding anything to the contrary set forth in the Debt Letter of Interest purporting to
obligate or bind any such Person) and shall not purport to obligate or bind any such Person without
such Person’s prior written consent.



     Section 5.12 SK Guarantee. SK hereby irrevocably and unconditionally guarantees to
Sellers the due and punctual observance and performance of each and every obligation of Buyer
contemplated by this Agreement or any the Related Agreement to be performed prior to the Closing,
including the payment of the amounts to be contributed pursuant to Section 2.5(b), all upon
the terms and subject to the conditions set forth herein and therein, provided that Seller’s sole
remedy with regard to SK’s guarantee is collection of the amount of the Buyer Termination Fee.



     Section 5.13 Seller Guarantee. Seller hereby irrevocably and unconditionally
guarantees to Buyer the due and punctual observance and performance of each and every obligation of
Newco contemplated by this Agreement or any Related Agreement to be performed prior to the Closing,
provided that Buyer’s sole remedy with regard to Seller’s guarantee is collection of the amount of
the Seller Termination Fee.



     Section 5.14 Newco Capitalization and Organizational Documents. From the date hereof
until the Closing, except as expressly contemplated hereby, Newco shall not, or enter into any
agreement to: (a) issue any membership interests or any security convertible or exchangeable into
any such membership interests other than as contemplated by this Agreement or any Related
Agreement; (b) cause any stock split, reverse stock split, stock dividend, reorganization,
recapitalization, reclassification, combination, exchange of shares or other like change with
respect to any of its outstanding membership interests; or (c) amend its limited liability company
agreement.



     Section 5.15 Investment Acknowledgements. Each of Seller and Buyer hereby
acknowledge, for the benefit of each other and Holdings, that:



          (a) Investment Intent. It is acquiring (x) in the case of Holdings, the Newco
Formation Contribution Units or (y) in the case of Seller and Buyer, the Holdings Contribution
Shares (as applicable, the “Subject Securities”), for investment and is not acquiring such
Subject Securities with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act. It will not distribute its applicable Subject Securities in
violation of the Securities Act or the applicable securities laws of any state.



          (b) Subject Securities Not Registered. It understands that the applicable Subject
Securities that it will acquire hereunder have not been registered under the Securities Act or the
securities laws of any state and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption from such
registration is or becomes available.



          (c) Independent Investment Decision. In formulating a decision to enter into this
Agreement, it has relied solely upon: (a) the provisions of this Agreement; (b) an



56









 







independent
investigation of the Business; and (c) consultations with its legal and financial advisors and
other advisors with respect to this Agreement and the nature of its investment; and that in
entering into this Agreement no reliance was placed by it upon any representations or warranties
other than those contained in this Agreement.



          (d) Ability to Hold Investment. It is financially able to hold the Subject Securities
it will acquire hereunder for long-term investment, believes that the nature and amount of the
Subject Securities it will acquire are consistent with its overall investment program and financial
position and recognizes that there are substantial risks involved in the acquisition of the Subject
Securities.



          (e) Knowledge and Experience in Financial Matters. It confirms that: (a) it is
familiar with the Business; (b) it has had the opportunity to ask questions of the officers,
directors and employees of Seller and Newco and to obtain (and that it has received to its
satisfaction) such information about the business and financial condition of the Business as it has
reasonably requested; and (c) it, either alone or with a representative (as defined in Rule 501(h)
promulgated under the Securities Act), has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the prospective investment in the
Subject Securities.



          (f) Accredited Investor. It is an “accredited investor” within the meaning of Rule
501(a) of Regulation D under the Securities Act.



     Section 5.16 Solicitation of Alternative Transactions.



          (a) Except as otherwise contemplated by this Section 5.16, from the date hereof until
the Closing, Seller agrees that it shall not, nor shall it direct or cause any of the Other
Sellers, any of its or their respective officers or directors or advisors to, directly or
indirectly:



               (i) initiate, solicit or knowingly and intentionally encourage or knowingly and intentionally
facilitate any inquiries with respect to, or the making of, an Acquisition Proposal;



               (ii) participate or engage in any discussions of a Solicited Acquisition Proposal or
negotiations with, or furnish or disclose any material non-public information relating to the
Business to, any Person in connection with a Solicited Acquisition Proposal;



               (iii) approve, endorse or recommend any Solicited Acquisition Proposal; or



               (iv) enter into any letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement relating to a Solicited Acquisition
Proposal.



          (b) Seller shall, and shall cause each of the Other Sellers and its and their respective
officers, directors and advisors to, immediately cease any existing solicitations, discussions or
negotiations with any Person (other than the Parties hereto) regarding any



57









 







Acquisition Proposal
that exists as of the date hereof except as may become permitted pursuant to Section
5.16(d).



          (c) In the event that Seller or any of its Subsidiaries or its or their respective
Representatives receives an Acquisition Proposal or request for non-public information relating to
the Business with respect to a Covered Transaction from the date hereof until the Closing
(including any renewal or revision of any Acquisition Proposal or request made prior to the date
hereof), Seller shall inform Buyer of such Acquisition Proposal or request within two (2) Business
Days following the date on which a senior executive of Seller becomes aware of the receipt thereof.



          (d) Notwithstanding anything to the contrary set forth in this Agreement (including
Section 5.16(a) or Section 5.16(c)), if Seller or any of its Subsidiaries or any of
its or their respective Representatives receives an Unsolicited Acquisition Proposal or request for
non-public information relating to the Business with respect to a Covered Transaction from the date
hereof until the Closing (including any renewal or revision of any Acquisition Proposal or request
made prior to the date hereof), any Seller or any of its respective Representatives may take any
action that might otherwise be restricted by clause (i) through (iv) of Section 5.16(a)
with respect thereto, including responding to such Acquisition Proposals or requests, furnishing
any non-public information relating to the Business to, engaging in negotiations or discussions
with, the Person making such Acquisition Proposal or request and/or terminating this Agreement as
and to the extent contemplated by Section 9.1(c)(iv).



ARTICLE VI

OTHER COVENANTS




     The Parties agree as follows with respect to the period from and after the Closing:



     Section 6.1 Cooperation.
The Parties shall cooperate with each other, and shall use their commercially reasonable
efforts to cause their respective Representatives to cooperate with each other, to provide an
orderly transition of the Business from Sellers to Newco and Holdings and to minimize the
disruption to the Business and Seller’s and its Subsidiaries’ other businesses resulting from the
transactions contemplated hereby as requested by any Party and at the requesting Party’s sole cost
and expense (and without liability of any kind to the other Party cooperating with such request in
providing such requested actions other than arising from the cooperating Party’s gross negligence,
willful misconduct or bad faith in connection therewith).



     Section 6.2 Further Assurances; Inadvertent Transfers of Assets.



          (a) In case at any time after the Closing any further action is necessary or desirable to
carry out the purposes of this Agreement or any Related Agreement, at any Party’s request and sole
cost and expense, each Party shall take such further action (including the execution and delivery
to any other Party of such other reasonable instruments of sale, transfer, conveyance, assignment,
assumption and confirmation, providing materials and information) as another Party may reasonably
request as shall be reasonably deemed necessary to transfer, convey and assign to Newco or a Newco
Subsidiary all of the Contributed Assets and the China



58









 







Business Assets and to confirm Newco’s or a
Newco Subsidiary’s assumption of the Assumed Liabilities and the China Assumed Liabilities.



          (b) Without limiting the provisions of Section 6.2(a), to the extent that either Buyer
or Seller discovers any additional assets or properties, including any Intellectual Property, which
should have been transferred or assigned to Newco as the Contributed Assets or the China Business
Assets but were not so transferred or assigned, Buyer, Seller and Newco shall cooperate and execute
and deliver any instruments of transfer or assignment reasonably necessary to transfer and assign
such asset or property to Newco or a Newco Subsidiary. Without limiting the provisions of
Section 6.2(a), to the extent that either Buyer, Seller or Newco discovers any assets or
properties, including any Intellectual Property, which is an Excluded Asset which was inadvertently
or otherwise mistakenly transferred or assigned to Newco or any Newco Subsidiary, Buyer, Seller and
Newco shall cooperate and execute and deliver any instruments of transfer or assignment reasonably
necessary to transfer and assign such asset or property back to the applicable Seller.



     Section 6.3 Litigation Support. In the event and for so long as any Party actively is
contesting or defending against any Litigation commenced by any third party with respect to (i) any
transaction contemplated by this Agreement or any Related Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction involving the Business, the other Party will cooperate with the
contesting or defending Party and its and its Subsidiaries’ counsel in the contest or defense, make
available its and its Subsidiaries’ personnel and provide such testimony and access to its and its
Subsidiaries’ books and records as shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to
indemnification therefor pursuant to Article VIII); provided, however,
that, for the avoidance of doubt, the foregoing shall not require any Party to take any such action
if it (x) may result in a waiver or breach of any attorney/client privilege, (y) could reasonably
be expected to result in violation of applicable law, or (z) providing such access or information
would be reasonably expected to be unreasonably disruptive to its operations.



     Section 6.4 Run-Off.



          (a) Referrals. From and after the Closing Date and until one (1) year following the
date thereof, Seller shall, and shall cause the Other Sellers to, use commercially reasonable
efforts to refer all customer or supplier inquiries received by Sellers relating to the Business to
Holdings.



          (b) Use of Name. From and after the Closing Date, Buyer will, and will cause Holdings
to: (i) use its commercially reasonable efforts to remove any and all Solutia Marks from all
Contributed Assets, and (ii) cease all use of such Solutia Marks in each case as promptly as
commercially practicable after the Closing Date and in no event later than one hundred eighty (180)
calendar days following the date thereof. Notwithstanding the foregoing, from and after the
Closing Date, Buyer shall not, and Buyer shall ensure that none of Holdings, Newco or any Newco
Subsidiary shall use existing marketing and sales material bearing any Solutia Marks unless
appropriately stickered by Holdings, Newco or a Newco Subsidiary to reflect the



59









 







consummation of the
transactions contemplated hereby in a form reasonably satisfactory to Seller.



          (c) Websites. As soon as commercially practicable after the Closing Date, but in no
event more than one hundred eighty (180) calendar days thereafter, Buyer shall, or shall cause
Holdings, Newco or a Newco Subsidiary to, remove any content, images and links on any of their
Internet pages or websites to the extent related to any Seller or any of its respective businesses.



          (d) Affiliation. Buyer shall, and shall cause each of its Affiliates (including
Holdings, Newco and any Newco Subsidiary) to, cease to hold itself out as having any affiliation
with any Seller or any of its respective Affiliates.



          (e) Phone Numbers. From and after the Closing Date, Seller shall use its commercially
reasonable efforts to transfer Seller’s phone numbers at which customers or suppliers contact
employees primarily related to the Business to the account of Newco, but in no event including
Seller’s phone numbers currently in use at Solutia’s headquarters in St. Louis, Missouri.



     Section 6.5 Access; Enforcement; Record Retention. From and after the Closing, and
without limiting Section 5.11(c), upon request by any Party, each other Party will permit
the requesting Party and its Representatives to have reasonable access during normal business
hours, and in a manner so as not to interfere unreasonably with the normal business operations of
the other Party (and in the case of Buyer,
Holdings), to all premises, properties, personnel, Records and Contracts of or related to the
Business, the Contributed Assets, the China Business Assets, the Assumed Liabilities, the China
Assumed Liabilities, Holdings, Newco or any Newco Subsidiary; provided, however,
that, for the avoidance of doubt, the foregoing shall not require any Person to take any such
action if it (x) may result in a waiver or breach of any attorney/client privilege, (y) could
reasonably be expected to result in violation of applicable law, or (z) providing such access or
information would be reasonably expected to be unreasonably disruptive to its operations. Without
limiting the generality of the immediately preceding sentence, such reasonable access may be for
the purposes of (i) monitoring or enforcing rights or obligations of any Party under this Agreement
or any of the Related Agreements, or (ii) complying with the requirements of any Governmental
Authority. Each Party agrees to maintain, and cause its Subsidiaries to maintain, the files or
records which are contemplated by the first sentence of this Section 6.5 in a manner
consistent in all material respects with its document retention and destruction policies, as in
effect from time to time, for six (6) years following the Closing.



     Section 6.6 Non-Competition. For a period of three (3) years following the Closing,
Seller shall not, and shall ensure that none of its Subsidiaries will, directly or indirectly
(including as a stockholder, consultant, member or partner), engage in the Business as conducted
during the one (1) year prior to the Closing, including any development, design, manufacture, sale
or promotion for sale of any Product developed, designed, manufactured, sold or promoted for sale
by the Business during the one (1) year prior to the Closing in those countries in which the
Business has active operations as of the Closing; provided, however, that for
avoidance of doubt, the foregoing shall not restrict Seller or any of its Subsidiaries from in any
way



60









 







conducting any business or operation of any such Person other than the Business as of the date
hereof (any such business or operation, an “Existing Grandfathered Business”), including
Solutia’s plastic products business or any business that may consume, use, contain, depend upon,
any product developed, designed, manufactured, sold or promoted for sale by the Business; and
provided further that, for such purposes, (x) no owner of less than five percent
(5%) of the outstanding equity or voting interests of any Person and (y) no director (or other
equivalent position on an equivalent governing body) of any Person (other than those Persons listed
in the definition of Knowledge with respect to Seller who continues to be employed by Seller or any
of its Affiliates), and (z) without limiting clause (x) hereof, no pension plan, savings plan or
other similar employee benefit plan owning any equity or other interests in a Person for passive
investment purposes only, in any such case shall be deemed to be engaged in the business of such
Person solely as a result of ownership of such equity or voting interests or such directorship.
For the avoidance of doubt, nothing in this Section 6.6 shall (x) require Seller or any of
its Subsidiaries from taking or refraining to take any action with respect to Holdings or any of
its Subsidiaries incident or relating to Solutia’s equity interest in Holdings, (y) restrict Seller
or any of its Subsidiaries from taking any action required to be taken by it pursuant to any
Related Agreement, including the Securityholders Agreement or the Transition Services Agreement, or
(z) limit any rights of Seller granted pursuant to Section 8.7 or Section 6.14. If
a court of competent jurisdiction declares in a final judgment that any term or provision of this
Section 6.6 is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce the scope, duration
or area of the term or provision, to delete specific words or phrases or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after the expiration of
the time within which the judgment may be appealed.



     Section 6.7 Non-Solicitation of Employees. For a period of two (2) years following
the Closing, Seller shall not, and shall ensure that none of its Subsidiaries will, directly or
indirectly, solicit the employment of or employ any Covered Employee as of the Closing Date who is
offered employment in accordance with Section 6.8; provided, however, that
the foregoing provision shall not prevent Seller or any of its respective Subsidiaries from
(x) soliciting any such Covered Employee by a public advertisement placed by it or by a search firm
retained by it (provided that the search firm was not instructed or encouraged to target or
focus on such Covered Employees) or hiring any Covered Employee responding thereto or (y)
soliciting or hiring any Covered Employee whose employment with the Business has been terminated
for at least three (3) months. If a court of competent jurisdiction declares in a final judgment
that any term or provision of this Section 6.7 is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration or area of the term or provision, to delete specific words or
phrases or to replace any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.



61









 





     Section 6.8 Covered Employees.



          (a) Offer of Employment. Prior to the Closing Date, Newco shall make an offer of
employment, effective as of the Closing Date, to each of the Covered Employees (initially at the
same location and on the same terms and conditions of employment as in effect immediately prior to
the Closing); provided, however, that any offer of employment shall be contingent
upon the Closing actually occurring; and provided, further, that Newco shall, or
shall cause a Newco Subsidiary to, make an offer of employment, effective as of the China Asset
Transfer Closing, to each of the Covered China Employees (determined as of such time) in accordance
with the China Asset Transfer Agreement. Notwithstanding the foregoing, nothing herein shall be
construed as to prevent Newco from terminating the employment of any Covered Employee at any time
on or following the Closing Date for any reason (or no reason) provided that such termination is
permitted under applicable law and approved by Government Authorities, if applicable. Seller shall
not transfer any employee to Newco who is not a Covered Employee and Seller shall be solely
responsible for all severance or other compensation for any employee of the Business who is not a
Covered Employee.



          (b) Compensation and Benefits.



               (i) Commencing on the Closing Date and continuing until December 31, 2009, Newco or a Newco
Subsidiary shall provide or cause to be provided to the
Covered Employees (other than, until the China Asset Transfer Closing, any Covered China
Employees) compensation and employee benefits that are no less favorable in the aggregate than the
compensation, benefits, plans, programs, policies and arrangements (including base salary,
incentive bonus opportunities and incentive equity) and employee benefits provided by any Seller or
Newco to such Covered Employees immediately prior to the Closing. For clarity, no retiree health
benefits shall be required to be provided to Covered Employees.



               (ii) Seller shall pay all Liabilities with respect to the Covered Employees under the Seller’s
incentive bonus plans that relate to performance periods ending prior to the Closing Date, other
than those Liabilities set forth on the Conclusive Net Working Capital Statement. Seller has
represented to Buyer that there it has not established broad-based incentive plan to which the
Covered Employees participate for any period ending after the Closing Date. Newco shall, at the
times prescribed by, and in accordance with the terms of, the Seller’s employee agreements as in
effect as of the Closing Date, make payments to the Covered Employees with respect to achievement
of any performance goals therein. In addition, Newco shall provide each Covered Employee with the
severance, retention and transaction bonus benefits arising following the Closing that are set
forth on Section 6.8(b)(ii)(A) of the Disclosure Schedule applicable to each Covered
Employee (other than Covered Employees on furlough or temporary leave as of March 1, 2009, who are
set forth on Section 6.8(b)(ii)(B) of the Disclosure Schedule, who are not rehired,
returned to active status or otherwise re-employed by Newco in 2009) in accordance with the
applicable underlying plans or agreements as in effect immediately prior to the Closing Date.
Notwithstanding the preceding sentence, so long as Buyer, Newco or a Newco Subsidiary rehires,
returns to active service or otherwise re-employs or continues to employ the Covered Employees
specifically listed on Section 6.8(b)(ii)(C) of the Disclosure Schedule for a period of at
least sixty (60) calendar days following the Closing, Seller shall be responsible for all costs,
including severance benefits that may become payable to such specified



62









 







individuals in the event of
their subsequent termination of employment on or prior to December 31, 2009.



               (iii) Newco or a Newco Subsidiary shall honor and assume, and cause Newco’s Affiliates to
honor and assume, in accordance with their current terms, each employment, severance, termination
or other similar agreement or arrangement between Seller or any of its Affiliates (including
Newco), on the one hand, and any Covered Employee, on the other hand.



          (c) Service Credit. Each Covered Employee shall be given credit for all service with
any Seller or Newco or the Business and their respective predecessors (including Monsanto Company)
under any employee benefit plans or arrangements of Buyer and its Affiliates, including any such
plans providing vacation, sick pay, severance and retirement benefits maintained by Buyer, Holdings
or Newco or any of their respective Subsidiaries in which such Covered Employees participate for
purposes of eligibility, vesting and entitlement to benefits, including for severance benefits and
vacation entitlement (but not for accrual of pension benefits). Notwithstanding the foregoing,
nothing in this Section 6.8(c) shall be construed to require crediting of service that
would result in a duplication of benefits.



          (d) Waiver of Pre-Existing Conditions; Crediting of Deductibles. No later than the
Closing Date, Holdings or Newco or any of their respective Subsidiaries shall establish
or cause to be established, at such Person’s own expense, benefit plans that provide life
insurance, health care, dental care, accidental death and dismemberment insurance, disability and
other group welfare benefits for Covered Employees. Holdings or Newco or any of their respective
Subsidiaries shall cause (i) the waiver of all limitations as to pre-existing conditions,
exclusions and waiting periods with respect to participation and coverage requirements applicable
to the Covered Employees under any such welfare benefit plans to the extent that such conditions,
exclusions or waiting periods would not apply under the Employee Benefit Plans, and (ii) for the
plan year in which the Closing Date occurs (or, if later, in the calendar year in which Covered
Employees and their dependents commence participation in the applicable welfare plans), the
crediting of each Covered Employee with any co-payments and deductibles paid prior to participation
in such welfare plans in satisfying any applicable deductible or out-of-pocket requirements
thereunder.



          (e) 401(k) Plan Rollovers. Holdings or Newco or any of their respective Subsidiaries
shall cause Holdings’ or Newco’s 401(k) plan to accept a “direct rollover” to Holdings’ or Newco’s
401(k) plan of each Covered Employee’s account balances (including promissory notes evidencing all
outstanding loans) under the Sellers’ 401(k) plans if such rollover is elected in accordance with
applicable law by such Covered Employee. Buyer further agrees to cause Holdings or Newco to take
all actions as may be necessary to cause each Covered Employee that participates in Holdings’ or
Newco’s 401(k) plan following the Closing Date to receive full and immediate vesting of all
employer contributions made by Holdings or Newco or its Affiliates to the Holdings’ or Newco’s
401(k)
plan following the Closing Date. Seller shall take all actions as may be necessary to cause
each Covered Employee that participates in the Sellers’ 401(k)
plans prior to the Closing Date to
receive full and immediate vesting of all employer contributions made by Sellers or their
Affiliates to the Sellers’ 401(k)



63









 







plans prior to the Closing Date. Nothing herein shall require
any future employer contributions to be made by Holdings or Newco or its Affiliates to any
Holdings’ or Newco’s 401(k) plan.



          (f) Accrued Vacation. Buyer shall cause Holdings or Newco or any of their respective
Subsidiaries to provide each Covered Employee with credit for the same number of vacation and
sickness benefit days such Covered Employee has accrued but not used in the calendar year in which
the Closing Date occurs, provided that, to the extent required by applicable law, such
amount shall be paid by Buyer, Holdings or Newco in cash.



          (g) Welfare Benefit Claims; COBRA. Seller shall be responsible in accordance with its
applicable welfare plans (and the applicable welfare plans of its Affiliates) in effect prior to
the Closing Date for all reimbursement claims (such as medical and dental claims) for expenses
incurred, and for all non-reimbursement claims (such as life insurance claims) incurred, under such
plans prior to the Closing Date by the Covered Employees and their dependents. Holdings or Newco
shall be responsible in accordance with the applicable welfare plans of Holdings or Newco and its
Affiliates for all reimbursement claims (such as medical and dental claims) for expenses incurred,
and for all non-reimbursement claims (such as life insurance claims) incurred, on or after the
Closing Date (or the date of commencement of employment with Newco or a Newco Subsidiary, if later)
by Covered Employees and their dependents. For purposes of this Section 6.8(g), a claim
shall be deemed to have been incurred for all purposes on the date of rendition of the initial
service to which such claim relates (including the first day of any inpatient stay), except with
respect to life, disability or accidental
death and dismemberment and business travel accident insurance benefits, in which case the
claim is expressly incurred upon the death, disability or accident giving rise to such benefits.
Seller and its affiliates shall remain obligated under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”) with respect to events occurring on or prior to the
Closing Date; provided, however, that to the extent that a dependent of an active
Covered Employee is receiving continuation coverage under COBRA as of the Closing Date, Holdings or
Newco or a Newco Subsidiary shall continue to provide COBRA continuation coverage to such dependent
on and following the Closing Date for the period required under applicable law.



          (h) Flexible Spending Accounts. Holdings’ or Newco’s or any of their respective
Subsidiaries’ flexible spending reimbursement account plan (“Newco’s Flex Plan”) shall
accept a spin-off of the flexible spending reimbursement accounts from the Seller’s flexible
spending reimbursement account plan (“Seller’s Cafeteria Plan”) and to honor and continue
through the end of the calendar year in which the Closing Date occurs the elections made by each
Covered Employee under the Seller’s Cafeteria Plan in respect of the flexible spending
reimbursement accounts that are in effect immediately prior to the Closing Date. As soon as
practicable following the Closing Date, Seller shall cause to be transferred from the Seller’s
Cafeteria Plan to Newco’s Flex Plan the excess of the aggregate accumulated contributions to the
flexible spending reimbursement accounts made prior to the Closing Date during the year in which
the Closing Date occurs by Covered Employees over the aggregate reimbursement payouts made prior to
the Closing Date for such year from such accounts prior to the Closing Date to the Covered
Employees. If the aggregate reimbursement payouts from the flexible spending reimbursement
accounts made prior to the Closing Date during the year in which the Closing Date occurs made to
Covered Employees exceed the aggregate accumulated contributions to such accounts prior to the
Closing Date for such year by the Covered



64









 







Employees, Holdings or Newco shall cause such excess to
be transferred to Seller as soon as practicable following the Closing Date. On and after the
Closing Date, Holdings or Newco shall assume and be solely responsible for all claims for
reimbursement by Covered Employees under the flexible spending reimbursement accounts of Seller’s
Cafeteria Plan, whether incurred prior to, on or after the Closing Date, that have not been paid in
full as of the Closing Date.



          (i) Liabilities. Buyer, Holdings and Newco shall be solely responsible for all
employment and employee benefits related Liabilities (including any severance payments) that are
incurred or arise as a result of events that occurred on or after the Closing Date and relate to
any Covered Employee (or any dependent or beneficiary of any Covered Employee) or in respect of any
Employee Benefit Plan and no Seller shall have any responsibility for any such Liability. Except
to the extent such Liability is an Assumed Liability (including any Liability set forth on the
Conclusive Net Working Capital Statement) or as otherwise provided in this Agreement (including
this Section 6.8 and Section 6.12), Seller shall be solely responsible for all
employment and employee benefits-related Liabilities that are incurred or arise as a result of
events that occurred prior to the Closing Date in respect of Covered Employees (or any dependent or
beneficiary thereof) or, to the extent such Liability is not an Assumed Liability, in respect of
any Employee Benefit Plan.



          (j) WARN Act. Provided that on or before the Closing Date Sellers have supplied Buyer
with a list of all employee layoffs, by date and location, implemented by Sellers or their
Affiliates in the ninety- (90-) calendar day period preceding the Closing Date, Buyer
shall indemnify and hold harmless Sellers and their respective Affiliates and Representatives
with respect to any Liability under the WARN Act with respect to Covered Employees or any employee
of any Seller or any of their respective Affiliates arising from the actions of Buyer from and
after the Closing Date. Provided that Buyer supplies Seller with a list of all employee layoffs
following the Closing, by date and location, implemented by Holdings or their Affiliates promptly
following any such layoffs, Seller shall indemnify and hold harmless Holdings and its Affiliates
and Representatives with respect to any Liability under the WARN Act with respect to Covered
Employees or any employee of any Seller or any of their respective Affiliates arising from the
actions of Seller from and after the Closing Date.



          (k) Tax Reporting. Newco shall adopt the “alternate procedure” for preparing and
filing Internal Revenue Service Forms W-2 (Wage and Tax Statements), as described in Revenue
Procedure 2004-53. Under this procedure, Newco as the successor employer shall provide Forms W-2
to Covered Employees reflecting all wages paid and taxes withheld with respect to such Covered
Employees for the calendar year in which the Closing Date occurs. Sellers as the predecessor
employers shall have no employment tax reporting responsibilities for the Covered Employees
following the Closing Date. Newco shall also adopt the “alternate procedure” of Revenue Procedure
2004-53 for purposes of Internal Revenue Service Forms W-4 (Employee’s Withholding Allowance
Certificate) and W-5 (Earned Income Credit Advance Payment Certificate).



65









 





          (l) Covered EU Employees.



               (i) Notwithstanding anything to the contrary in Section 6.8(a), each contract of
employment of each of the Covered EU Employees shall automatically transfer to Newco in accordance
with the EU Transfer Regulations with effect upon the Closing Date.



               (ii) The Parties agree that each Covered EU Employee shall be employed by the Affiliates of
Newco that have been organized or established in accordance with applicable local law in a manner
that will allow such Affiliates to be able to employ such Covered EU Employees in jurisdictions
where the relevant Covered EU Employees are currently employed without causing adverse tax
consequences to such Covered EU Employees as a result of such transfer.



               (iii) In the event that the employment of any Covered EU Employees does not transfer
automatically to Newco or its Affiliates with effect from the Closing in accordance with the
foregoing or any Covered EU Employees otherwise allege that that is the case, Buyer shall, or shall
cause one of Newco or one of Buyer’s other Affiliates to, within five (5) Business Days of
receiving a written request from Seller, offer to employ the applicable Covered EU Employees as of
the Closing on similar terms and conditions as per the above (and with continuity of service
preserved) and shall use all reasonable endeavors to encourage the individuals to accept such
offers.



               (iv) In all circumstances, Buyer shall be responsible for the Covered Employees as of the date
of Closing. Consequently, if a Covered EU Employee refuses to enter the employ of Newco or its
Affiliates and makes claims for employment and continued payment of his salary and other emoluments
at Seller, Buyer will indemnify Seller against all claims
submitted by or with regard to Covered EU Employees including any claims for severance
payments. Such indemnity shall extend to all damage and costs incurred by Seller relating to the
foregoing sentence, within the framework of legal action taken by the Covered EU Employees and
otherwise.



               (v) Notwithstanding anything to the contrary in Section 6.8(b)(i), Newco shall
recognize for any and all purposes full past service of the Covered EU Employees at any Seller or
its respective predecessors (including Monsanto Company) and shall observe and maintain similar
terms and conditions of employment that are no less favorable in the aggregate, including any
benefits and occupational pensions, and including the benefits provided for in any Employee Benefit
Plan, which the Covered EU Employees enjoy while employed by a Seller as of the Closing Date.



               (vi)



                    (A) With respect to Covered EU Employees employed in Belgium, Seller shall procure that these
employees will cease to participate as an active member in any occupational pension plan from
Seller with effect from the date of Closing. The Parties agree that, in any event and irrespective
of Buyer’s option selected as contemplated below, Seller shall bear no liability with regard to
such Covered EU Employees in excess of the accrued benefit obligations as calculated at the date of
Closing in accordance with applicable law for



66









 







each individual concerned (i.e. excluding the impact
of any future salary increase). Buyer will, or will cause Holdings or Newco to, at its option,
either (i) set up a new pension scheme as at the date of Closing that will provide benefits to the
Covered EU Employees employed in Belgium that are at least equivalent to the benefits provided
under the corresponding Seller occupational pension plan immediately before the date of Closing
(the “New Pension Plan”), or (ii) join the
existing multi-employer Seller pension plan.
Buyer will inform Seller of the option selected by Buyer no later than April 7, 2009. If these
employees request that their accrued benefits be transferred from the applicable pension plan of
which the Covered EU Employee was a member while employed with Seller or any of its Affiliates to a
pension plan of Buyer or any of its Affiliates (including Newco or Holdings or any of such Person’s
respective Affiliate) as applicable, such sums will be calculated on an accrued benefit obligation
basis in accordance with the applicable laws at the date of the Closing and Seller shall procure
that such benefits be transferred in accordance with the applicable law, with no further Liability
on the part of Seller or any of its Affiliates. In any event and irrespective of Buyer’s option
selected as contemplated above, and in addition to the above, Buyer will procure that a Newco,
either directly or through its Belgium Subsidiary, will bear any and all Liability related to
occupational pension schemes and will therefore hold any of the Sellers harmless without any
limitation (in time or otherwise) with regard to any liability related to any occupational pension
scheme as from the date of Closing.



                    (B) Buyer shall procure that a Belgian Newco Subsidiary will comply with its obligations under
the occupational pension scheme it will set up as from the date of Closing onwards. These
obligations include all obligations or requirement related to the employment of personnel that an
employer needs to comply with in its relation with employees, former employees, employee
representatives, trade unions, public authorities, pension funds and insurance companies, whether
statutory, regulatory, contractual or otherwise. Buyer shall cause
any costs or indemnity charged by the multi-employer Seller pension plan relating to the above
to be borne by Buyer, Newco or a Newco Subsidiary.



               (vii) With respect to Covered EU Employees employed in Germany, Buyer shall, or will cause
Holdings or Newco or any of such Person’s respective Affiliate to, take over and continue any
pension promise granted by Seller or its respective Affiliate, including pension expectancies
related to past service. Buyer shall indemnify Seller against all damages and costs in relation to
or arising from disputes with the Covered EU Employees that arise from both past and future pension
obligations.



               (viii) Except as otherwise set forth in this Section 6.8, (x) Seller shall perform and
discharge all of its EU Employer’s Obligations in respect of the Covered EU Employees in respect of
all periods up to the Closing Date, and (y) Buyer, Holdings or Newco shall be responsible for
performing and discharging all of its EU Employer’s Obligations in respect of the Covered EU
Employees in respect of all periods from and after the Closing Date.



               (ix) Any claims from Covered EU Employees made against any Seller, Buyer, Holdings or Newco or
any of such Person’s respective Affiliate against more than one of the foregoing from and after the
Closing Date or in



67









 







relation to the transfer shall be for the account and risk of Buyer, Holdings
and Newco or any of such Person’s respective Affiliate. Buyer shall, or will cause Holdings or
Newco to, assume all Liabilities, costs and expenses in relation to or arising from disputes with
the Covered EU Employees that arise from any employment agreement.



               (x) Nothing in this Section 6.8(l) shall limit in any way any obligations of Buyer
pursuant to any other provision of this Section 6.8 that may apply with respect to any
Covered EU Employee.



          (m) Covered Foreign Employees.



               (i) Without limiting the generality of any other provision of this Section 6.8, Buyer
shall, or shall cause Holdings or Newco or any of its respective Subsidiaries to, provide the
Covered Foreign Employees with compensation and employee benefits consistent with the provisions of
this Section 6.8, as applicable to Covered Foreign Employees (or such greater compensation
and employee benefits as may be required by applicable law) and to observe the employment terms and
conditions (including the benefits provided for in any Employee Benefit Plan) of the Covered
Foreign Employees as in effect immediately prior to the Closing Date or as otherwise enhanced by
applicable law.



               (ii) To the extent applicable and as the case may be, Buyer or an Affiliate of Buyer shall, at
its cost and in jurisdictions where the relevant Covered Foreign Employees are employed immediately
prior to the Closing, or the China Asset Transfer Closing with respect to the Covered China
Employees, ensure that it has an entity or affiliate, which are fully established and operational
in accordance with local law, capable of fully employing such Covered Foreign Employees in the
respective jurisdictions.



               (iii) With respect to Covered Foreign employees employed in Korea, Buyer or its respective
Affiliate shall take over and continue any retirement pension plan (i.e.
severance pay) granted by Seller or its respective Affiliate, including pension expectancies
for the period of employment with Seller. Buyer shall indemnify Seller against all damages and
costs in relation to or arising from disputes with the Covered Foreign Employees that arise from
both past and future pension obligations.



          (n) Covered China Employees. For purposes of this Section 6.8, with respect
to the Covered China Employees, the term “Closing” means “China Asset Transfer Closing” and the
terms “Closing Date” means “Completion” (as defined in the China Asset Transfer Agreement).



          (o) No Third Party Beneficiary Rights. The Parties agree that nothing in this
Section 6.8, whether express or implied, is intended to create any third party beneficiary
rights in any Covered Employee or to amend any employee benefit plan in any respect.



     Section 6.9 Recording of Intellectual Property Assignments. All of the Intellectual
Property Assignments shall be recorded and filed by Buyer, Holdings or Newco with the appropriate
Governmental Authorities as promptly as practicable following the Closing, with one-half of the
costs and expenses of such recording and filing to be borne by each of Buyer and Seller.



68









 





     Section 6.10 Transfer Taxes. Buyer and Seller shall each pay one-half of any stamp,
documentary, registration, use, transfer (including real estate transfer), value added (to the
extent not recoverable within one (1) year of the Closing Date) or other non-income Tax (a
“Transfer Tax”) imposed under applicable law in connection with the transactions
contemplated hereby. Seller, Buyer and Newco shall cooperate, and Buyer and Seller shall cause
Holdings to cooperate, to prepare and timely file any Tax Returns required to be filed in
connection with Transfer Taxes described in the immediately preceding sentence.



     Section 6.11 Insurance Matters. Buyer and Newco acknowledge that, upon Closing, all
insurance coverage provided in relation to Sellers, Newco and the Business that is maintained by
Seller or its Affiliates (whether such policies are maintained with third party insurers or with
Seller or its Affiliates) shall cease to provide any coverage to Holdings, Newco, Buyer or the
Business and no further coverage shall be available to Holdings, Newco, Buyer or the Business
following the Closing under any such policies. Notwithstanding the foregoing, from and after the
Closing, if Seller receives any insurance proceeds from a third party insurance policy maintained
by Seller prior to the Closing in respect of any Damages arising out of any pending Litigation (x)
set forth on Section 3.15 of the Disclosure Schedule (other than the Retained Litigation
Matters) or (y) required to have been set forth on Section 3.15 of the Disclosure Schedule
with respect to which notice of a claim for recovery of Damages in respect of such Litigation has
been made to Seller’s insurance carrier prior to the Closing, Seller will remit to Newco the
amount, if any, by which such third party insurance proceeds (net of any deductible or self insured
retention under such third party insurance policy) exceeds the amount of the Damages of any Seller
Indemnified Party incurred or reasonably expected to be incurred in respect of such pending
Litigation. Upon request of
Newco from and after the Closing but subject to the last sentence of this Section
6.11, Seller shall use commercially reasonable efforts to notify Seller’s insurance carrier of
any available claims for recovery of Damages in respect of pending Litigation required to be listed
on Section 3.15 of the Disclosure Schedule which was not so listed and for which notice of a claim
in respect of any Damages has not been made to Seller’s insurance carrier prior to the Closing, and
Seller will remit to Newco any insurance proceeds which Seller is required by the immediately
preceding sentence to remit with respect to such claims made pursuant to this sentence, on the
terms and subject to the conditions set forth in the immediately preceding sentence. Nothing
herein shall require any Seller to maintain any insurance policy or any part thereof at any time,
or to make any claim under any insurance policy not already made by Seller as of the Closing in
respect of Damages, or shall confer on any Buyer Indemnified Party any rights, interests or claims
under any third party insurance policy maintained by Seller.



     Section 6.12 Business Pension Plan Arrangements.



          (a) Except as provided in this Section 6.12, Seller shall retain all assets and
liabilities relating to the retirement plans of Seller.



          (b) Seller shall cause assets and liabilities associated with the Transferred Participants
under the defined benefit pension plan maintained by Seller (the “Seller Pension Plan”) to
be spun off from the Seller Pension Plan (the “Spun Off Plan”). Each person considered a
Transferred Participant for purposes of this Section 6.12 is set forth on Section



69









 




6.12(b)(i) of the Disclosure Schedule. On December 31, 2008, Seller filed Form 5310-A with the
Internal Revenue Service with respect to the proposed spin off from the Seller Pension Plan.




               (i) Effective as of February 28, 2009, Seller caused the assets and liabilities associated
with the Transferred Participants under the Seller Pension Plan to be spun off from the Seller
Pension Plan to the Spun Off Plan. The assets of the Spun Off Plan will be segregated into a
separate trust within thirty (30) calendar days following the Closing Date. The amount of assets
to be segregated will be determined on a termination basis using the applicable interest and
mortality assumptions prescribed by the Pension Benefit Guaranty Corporation (the “4044
Allocation”) as provided under Treas. Reg. Section. 1.414(1) 1(b)(5). As soon as practicable
after the segregation of assets as described in the preceding two sentences, Buyer shall either (i)
cause Holdings to assume the Spun Off Plan, (ii) cause the Spun Off Plan to be merged with and into
a defined benefit plan qualified under Section 401(a) of the IRC for the benefit of Transferred
Participants (the assumed Spun Off Plan or the new plan established by Holdings, as the case may
be, the “Holdings Pension Plan”), including credit for past service with Seller or the
Business and their respective predecessors (including Monsanto Company) for early retirement and
benefit accrual previously recognized under the Seller Pension Plan, or (iii) cause the Holdings
Pension Plan to be merged with and into the Spun Off Plan. If the Spun Off Plan is later merged
with a pension plan of Holdings instead of being assumed by Holdings, another Form 5310-A shall be
filed with respect to such merger at least thirty (30) calendar days prior to the merger. In the
case of such a merger as described herein, Buyer shall cause Holdings to, or Seller shall, as
appropriate, file a Form 5310-A with the Internal Revenue Service
describing the proposed merger of the Holding Pension Plan into the Spun Off Plan or the
proposed merger of the Spun Off Plan into the Holdings Pension Plan.



               (ii) All assets transferred under this Section 6.12 shall be in cash. From and after
the Closing Date until the assumption of the Spun Off Plan by Holdings or the merger of the Spun
Off Plan with and into the Holdings Pension Plan or the merger of the Holdings Pension Plan with
and into the Spun Off Plan, any benefits that would otherwise be payable to Transferred
Participants under the Holding Pension Plan shall be paid or continue to be paid out of the Seller
Pension Plan, and the amounts to be transferred to the Spun Off Plan shall be reduced by the amount
of such payments. After the assumption or merger of the Spun Off Plan, any pension benefits that
accrued under the Seller Pension Plan that would have otherwise been payable to the Transferred
Participants under the Seller Pension Plan shall instead be payable to such Transferred
Participants under the Holdings Pension Plan.



               (iii) The Holdings Pension Plan shall be liable for benefits with respect to service
recognized under the Seller Pension Plan prior to the Closing Date solely with respect to
Transferred Participants, contingent upon the spin off from the Seller Pension Plan and the
assumption by Holdings or the merger of the Spun Off Plan with the Holding Pension Plan as provided
in Section 6.12. Buyer, on its own behalf and on behalf of Holdings and Newco from and
after the Closing, agrees that neither Seller nor the Seller Pension Plan shall have any further
responsibility with respect to the assets and liabilities that are spun off from the Seller Pension
Plan to the Spun Off Plan following the assumption of the Spun Off Plan by Holdings or the merger
of the Spun Off Plan with the Holdings Pension Plan. Seller agrees that neither Buyer, Holdings or
Newco shall have any further responsibility with respect to the assets and liabilities of the
Seller Plan.



70









 





          (c) The Spun Off Plan was spun off from the Seller Pension Plan effective February 28, 2009.
The term “Underfunded Amount” means the amount by which the present value of the
liabilities of the Spun Off Plan determined as of February 28, 2009 exceed the pension assets to be
transferred from the Seller Pension Plan to the Spun Off Plan determined as of February 28, 2009,
with the assumption that an additional contribution of One Million Five Hundred Thousand Dollars
($1,500,000) will be made on April 15, 2009, thus reducing the Underfunded Amount by One Million
Five Hundred Thousand Dollars ($1,500,000), and otherwise determined in accordance with the
actuarial assumptions set forth on Section 6.12(c) of the Disclosure Schedule. Seller’s
actuary will determine the Underfunded Amount in accordance with its normal procedures and
practices in preparing Seller’s actuarial report and such determination will be reviewed by the
actuary for the Holdings Pension Plan. If the Underfunded Amount exceeds Eighty Million Dollars
($80,000,000) (“Pension Target Amount”), determined as of February 28, 2009, Seller will
pay to Holdings the difference between the Underfunded Amount and the Pension Target Amount, in
cash, within five (5) Business Days of the final determination of such excess amount.



               (i) If the difference between the Underfunded Amount determined by Seller’s actuary and the
Underfunded Amount determined by Buyer’s or Holdings’ actuary is less than two percent (2%) of the
Underfunded Amount determined by Seller’s actuary, then Seller’s determination of the Underfunded
Amount shall be conclusive; provided, however, that Seller shall provide Buyer and
Holdings with the material factors, methods and assumptions used
in its determination and, to the extent such factors, methods and assumptions are materially
incorrect or unreasonable and inconsistent with the assumptions and methods set forth on
Section 6.12(c) of the Disclosure Schedule, Seller and Holdings shall cooperate in good
faith to minimize the difference between the Underfunded Amount as determined by Seller’s actuary
and by Buyer’s or Holdings’ actuary. If such difference is greater than two percent (2%), then the
actuaries retained by Seller and Buyer or Holdings shall attempt in good faith to reach agreement
to resolve the difference. Unless Buyer or Holdings delivers written notice to Seller of dispute
hereunder on or prior to the forty-fifth (45th) calendar day after the delivery to Buyer’s or
Holdings’ actuary of Seller’ determination (the “Underfunded Dispute Notice”), Buyer and
Holdings shall be deemed to have accepted and agreed to the Underfunded Amount as determined by
Seller’ actuary and such determination shall be final, binding and conclusive. If Buyer or
Holdings notifies Seller in writing of disputed items contained in the determination of the
Seller’s actuary within such forty-five (45) calendar day period, for thirty (30) calendar days
following delivery of such notice by Buyer or Holdings to Seller, Buyer’s or Holdings’ actuary and
Seller’s actuary shall attempt in good faith to resolve their differences.



               (ii) If the actuaries retained by Seller and Buyer or Holdings cannot resolve all disputes
with respect to a determination within such period and the disputes involve more than two percent
(2%) of the Underfunded Amount as determined by Seller, Seller and Buyer or Holdings will appoint a
third actuary from a nationally recognized actuarial firm to resolve their differences (the costs
of the third actuary will be shared equally by Seller and Holdings). The third actuary’s
determination of any dispute will be final. In reaching such resolution, the third actuary will
consider only the issues of disagreement between the first two actuaries, it being understood that
the third actuary will not be retained to conduct its own independent review but rather will be
retained to resolve specific differences between Buyer’s or Holdings actuary and Seller’s actuary
as set forth in the Underfunded Dispute Notice. The



71









 







actuarial assumptions and methods used by
Seller’s actuary in determining the Underfunded Amount will not be subject to dispute unless such
assumptions and methods are materially incorrect or unreasonable and inconsistent with the
assumptions and methods set forth on Section 6.12(c) of the Disclosure Schedule.



     Section 6.13 Replacement Bonding Requirements. On or prior to the Closing Date, Buyer
shall, or shall cause Holdings to, use reasonable best efforts to provide replacement guarantees,
standby letters of credit or other assurances of payment with respect to all Bonding Requirements,
in form and substance satisfactory to Seller and any banks, financial institutions or other
counterparty thereto (including, if necessary, through posting cash collateral to obtain such
guarantees, letters of credit or other assurances), and to terminate the then existing Bonding
Requirements and obtain a release in form and substance reasonably satisfactory to Seller and any
bank or other financial institution issuing such Bonding Requirements. To the extent Buyer is
unable to make such arrangements with respect to any Bonding Requirements prior to the Closing,
with Seller’s consent in lieu thereof, Buyer shall, or shall cause Holdings to, deliver to Seller
(or, at Seller’s request, the bank or financial institution currently issuing the Bonding
Requirements) either, at Seller’s option, but in either case, in form and substance reasonably
satisfactory to such bank or financial institution: (x) an irrevocable, unconditional standby
letter of credit in favor of Seller (or such bank or financial institution) in an amount equal to
the amount of such Bonding Requirements, issued by
a bank rated “A” or better by Standard and Poor’s, in form and substance reasonably
satisfactory to Seller (or such bank or financial institution), or (y) cash collateral, in an
amount equal to the amount of such Bonding Requirements, and, in each case, enter into
reimbursement agreements, letter of credit agreements, cash collateral agreements, and any related
documentation with respect to all Bonding Requirements with such bank or financial institution, and
provide any such bank or financial institution with any required information in connection
therewith, until all such arrangements for replacements and termination can be made from and after
the Closing; provided, however, that Buyer shall, or shall cause Holdings to, use
reasonable best efforts to make such arrangements in order to terminate the Bonding Requirements
within one hundred eighty (180) calendar days after the Closing, but, in any event, no later than
December 31, 2009. Upon termination of each of the Bonding Requirements, the amount of any cash
collateral delivered in respect of such Bonding Requirement pursuant to the preceding sentence
shall be released pursuant to mechanics to be agreed upon by Seller and Buyer and such bank or
financial institution that have the effect of returning (x) the amount of cash collateral that may
have been provided by Seller in excess of the amount of such Bonding Requirement to Seller and (y)
the amount of cash collateral that has been provided by Buyer in respect of the amount of such
Bonding Requirement to Buyer. Seller shall be solely responsible for any fees charged by Seller’s
existing bank or financial institution and Holdings shall be solely responsible for any fees
charged by Buyer’s bank or financial institution, in either case, in connection with the Bonding
Requirements and the transition of the Bonding Requirements.



     Section 6.14 Equistar Arrangements.



          (a) At the Closing, Seller and Buyer will enter into the Equistar Lease and Subcontract
Agreement under which Buyer will lease back to Seller the Leased Premises (as defined in the
Equistar Land Lease) and will agree to continue providing, as a subcontractor of



72









 







Solutia, Utilities
and Services (as such term is defined in the Equistar U&S Agreement) to Equistar on the terms and
conditions set forth in the Equistar U&S Agreement.



          (b) On the terms and subject to the conditions set forth in this Section 6.14(b),
Seller agrees to reimburse Newco for any Equistar Residual Costs during the period commencing on
the Contract Rejection Effective Date and ending on December 31, 2010 (the “Covered
Period”).



               (i) Newco shall use its best efforts to reduce and minimize the amount of Equistar Residual
Costs, including taking the following actions (each, a “Mitigation Action”): (A) perform
all of its obligations under the Equistar Lease and Subcontract Agreement, (B) effective in the
first month of the Covered Period reallocate to the Users other than Equistar, the User Cost
Allocation that would have been charged to Equistar prior to the Covered Period, and (C) as soon as
reasonably practicable after the Contract Rejection Effective Date, implement headcount reductions
and related restructuring actions, including those actions described in Section 6.14(b) of the
Disclosure Schedule. The calculation of the User Costs that are eliminated by a Mitigation
Action will be exclusive of the costs and expenses incurred by Newco to complete such Mitigation
Action. Upon the request of Seller from time to time but no more frequently than monthly, Newco
shall provide a written progress report to Seller describing in
reasonable detail the status of the implementation of the Mitigation Actions including an
explanation of the steps that will be taken to overcome any actual or reasonably foreseeable
delays.



               (ii) Within ten (10) Business Days after the end of each calendar quarter during the Covered
Period in which Newco incurs any Equistar Residual Costs, Newco shall prepare and deliver to Seller
an invoice for the amount of Equistar Residual Costs incurred by Newco for the immediately
preceding calendar quarter, prorated for any partial calendar quarter (the “Quarterly
Invoice”), together with a written statement setting forth in good faith and in reasonable
detail the calculation of and the basis for such Equistar Residual Costs (the “Quarterly
Statement”). The payment terms for the Quarterly Invoice shall be net forty-five (45) days
receipt of invoice, except as may otherwise be provided for disputed invoices under Section
6.14(b)(iii). Newco shall maintain and furnish to Seller together with the Quarterly
Statement, information and documents sufficient to permit Seller to independently calculate and
verify the amount of and the basis for such Equistar Residual Costs, and Newco shall provide to
Seller and its representatives and accountants reasonable access to any additional information and
documents and to the facilities and personnel of Newco reasonably requested by Seller in connection
with its review of such Equistar Residual Costs.



               (iii) If Seller notifies Newco of its objection to any items (the “Objection Notice”)
contained in the Quarterly Statement (or specific calculations contained therein) within forty-five
(45) days following its receipt of the Quarterly Statement, Seller and Newco shall, within twenty
(20) days after Seller’s delivery of the Objection Notice (the “Equistar Resolution
Period”), attempt in good faith to resolve their differences with respect to the disputed items
(or calculations) specified in the Objection Notice (the “Objectionable Items”). Any
resolution by Seller and Newco during the Equistar Resolution Period as to any Objectionable Items
shall be final, binding and conclusive on Seller and Newco and shall be documented in a written
acknowledgment signed by both parties. If Seller and Newco do not



73









 







resolve all Objectionable Items
by the end of the Equistar Resolution Period, then all Objectionable Items remaining in dispute
will be submitted with twenty (20) calendar days after the expiration of the Equistar Resolution
Period to the Neutral Arbitrator. The Neutral Arbitrator shall act as an arbitrator to determine
only those Objectionable Items remaining in dispute, and shall request a statement from Seller and
Newco regarding such Objectionable Items. In resolving Objectionable Items, the Neutral Arbitrator
may not assign a value to any Objectionable Item greater than the greatest value for such
Objectionable Item claimed by any party or less than the lowest value for such Objectionable Item
claimed by any party. All fees and expenses relating to the work, if any, to be performed by the
Neutral Arbitrator will be allocated between Seller and Newco in the same proportion that the
aggregate amount of the Objectionable Items so submitted to the Neutral Arbitrator that is
unsuccessfully disputed by each such party (as finally determined by the Neutral Arbitrator) bears
to the total amount of such Objectionable Items so submitted. In addition, Seller and Newco shall
provide to the Neutral Arbitrator any and all information and documents in the possession and
control of such party reasonably necessary to enable the Neutral Arbitrator to perform its function
as arbitrator. If either Seller or Newco fails to submit a statement regarding any Objectionable
Item submitted to the Neutral Arbitrator or otherwise fails to provide to the Neutral Arbitrator
any information or documents referred to in the preceding sentence, in each case within the time
determined by the Neutral Arbitrator, then the Neutral Arbitrator shall render a decision based
solely on the
statement and other information and documents timely submitted. The Neutral Arbitrator will
deliver to Seller and Newco a written determination (such determination to include a work sheet
setting forth all material calculations used in arriving at such determination and to be based
solely on information timely provided to the Neutral Arbitrator by Seller and Newco) of the
Objectionable Items submitted to the Neutral Arbitrator within thirty (30) calendar days of receipt
of such Objectionable Items, which determination will be final, binding and conclusive and judgment
may be entered on the award. The final, binding and conclusive Quarterly Statement for any
quarter, based either upon agreement between Seller and Newco or the written determination
delivered by the Neutral Arbitrator in accordance with this Section, will be the “Conclusive
Quarterly Statement.” Seller shall pay the amount set forth in the Conclusive Quarterly
Statement within five (5) Business Days of such Quarterly Statement becoming final, binding and
conclusive.



     Section 6.15 Tax Matters.



          (a) Cooperation. Buyer, Seller and Newco shall cooperate fully, and Buyer and Seller
shall cause Holdings to cooperate fully, as and to the extent reasonably requested by any other
Party, in connection with the filing of any Tax Returns and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other
Party’s request) the provision of records and information that are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any materials provided hereunder. Seller,
Holdings and Newco agree to retain all books and records with respect to Tax matters pertinent to
Holdings, Newco and the Business relating to any taxable period beginning prior to the Closing Date
until the expiration of the applicable statute of limitations (and, if notified by Buyer, Seller,
Holdings or Newco, any extensions thereof), and to abide by all record retention agreements entered
into with any taxing authority. The Parties agree to give each other Party reasonable written
notice prior to transferring, destroying or discarding any such books and



74









 







records, and if another
Party so requests, to give such other Party possession of such books and records. In addition,
Seller agrees to provide to Buyer, Newco and Holdings information regarding the adjusted Tax basis,
classification and remaining depreciable life of the Contributed Assets as of the Closing Date.



          (b) Section 351 Contribution and Exchange. Each of the Parties intends that the
transactions contemplated by the Holdings Formation Contribution shall be treated for the United
States federal Income Tax purposes as part of an exchange of property for stock of Holdings
described in IRC Section 351(a), and that (i) the Holdings Contribution Shares issued to Seller and
Buyer pursuant to Section 2.6 constitute stock issued as part of such exchange; (ii) each
of Seller and Buyer is a transferor of property to Holdings in such exchange; and (iii) each of
Seller and Buyer is part of the group of holders of shares of Holdings Common Stock that “control”
(within the meaning of IRC Section 368(c)) Holdings immediately after the consummation of the
transactions contemplated by this Agreement. Each of the Parties shall, to the extent permitted by
applicable law, file all Tax Returns in a manner consistent with such treatment, and each such
Party shall provide the information required under Treasury Regulations Section 1.351-3 in such
Party’s United States federal income Tax Return for such
Party’s taxable year that includes the Closing Date. Each of Seller and Buyer represents and
warrants as to itself that, as of the date hereof and at all times from the date hereof through and
including the Closing Date, it has, and shall have, no plan or intention to sell, convey, assign,
transfer, or otherwise dispose of any of the shares of Holdings Common Stock. Each of Seller,
Buyer and Holdings shall make (i) an irrevocable election under IRC Section 362(e)(2) so that IRC
Section 362(e)(2)(A) does not apply to the property contributed pursuant to Section 2.5
and, if permitted by law, so that each of Seller and Buyer has an initial tax basis in the Holdings
Contribution Shares issued to it hereunder in an amount not exceeding the fair market value of such
Holdings Contribution Shares on the Closing Date; (ii) a protective election under Treasury
Regulations Section 1.1502-36(e)(5)(viii), made in the manner provided under Treasury Regulations
Section 1.1502-36(d)(6); and (iii) such other elections or filings as may be reasonably requested
by Buyer or Seller so as to achieve the tax characterization described in this Section
6.15(b).



     Section 6.16 Implementation by Holdings. From and after the Closing, Buyer shall take
all actions necessary to cause Holdings to comply with observance and performance of each and every
obligation of Holdings contemplated by this Agreement or any Related Agreement to be performed from
and after the Closing.



     Section 6.17 Acknowledgements.



          (a) Each of SK and Buyer acknowledges that it has received or may receive from Seller certain
projections, forecasts and prospective or third party information relating to Sellers, Newco,
Holdings, the Business, the Contributed Assets, the Assumed Liabilities, the Newco Units, the
Holdings Contribution Shares and/or other related topics. Without limiting the generality of
Section 3.31 each of SK and Buyer acknowledges that neither any Seller nor any other Person
makes any representations or warranties with respect to such projections, forecasts or information.



75









 





          (b) Without limiting any representation, warranty or covenant of Seller expressly set forth
herein, each of SK and Buyer acknowledges that it has waived and hereby waives as a condition to
the Closing any further due diligence reviews, inspections or examinations with respect to any
Seller, Newco, Holdings, the Business, the Contributed Assets, the Assumed Liabilities, the Newco
Units, the Holdings Contribution Shares or any other matter, including with respect to engineering,
environmental, title, survey, financial, operational, regulatory and legal compliance matters.



ARTICLE VII

CONDITIONS TO OBLIGATION TO CLOSE




     Section 7.1 Conditions to Buyer’s Obligations. Buyer’s obligation to consummate the
transactions contemplated hereby in connection with the Closing is subject to satisfaction or
waiver of the following conditions:



          (a) (i) the representations and warranties set forth in Section 3.2 (Authorization of
Transaction), Section 3.3 (Noncontravention), Section 3.5 (Sufficiency of Assets),
Section 3.6 (Financial Statements), Section 3.11(a) (Material Contracts),
Section 3.14 (Legal Compliance), Section 3.15 (Litigation) and Section 3.17
(Product Liability) shall have been true and correct on the date hereof and shall be true and
correct in all material respects at and as of the Closing Date as if made at and as of such time
(in either case except to the extent expressly made as of an earlier date, in which case as of such
date as if made at and as of such date); and (ii) the other representations and warranties set
forth in Article III shall have been true and correct on the date hereof and shall be true
and correct at and as of the Closing Date as if made at and as of such time (in either case except
to the extent expressly made as of an earlier date, in which case as of such date as if made at and
as of such date), in either case contemplated by this clause (ii) except where the failure of such
representations and warranties to be so true and correct (without giving effect to any limitation
as to “material” or “Material Adverse Effect” set forth therein) has not resulted in a Material
Adverse Effect on the Business;



          (b) Seller and Newco shall have performed and complied with their covenants hereunder through
the Closing in all material respects;



          (c) (i) all notices to third parties contemplated by Section 5.3(a) of the Disclosure
Schedule to have been delivered on or prior to the Closing shall have been delivered, and all
third party consents or sublicenses or permits contemplated by Section 5.3(a) of the Disclosure
Schedule to have been received on or prior to the Closing shall have been received, except
where the failure to deliver such notices or to receive such consents or sublicenses or permits
does not have a material adverse impact on the Business or result in a material liability to Buyer,
Newco or Holdings, and (ii) Buyer shall have received evidence of each of the foregoing reasonably
satisfactory to it;



          (d) (i) all applicable waiting periods (and any extensions thereof) under any Antitrust Law
shall have expired or otherwise been terminated and Sellers, Holdings, Newco and Buyer shall have
received all other authorizations, consents, clearances and approvals of Governmental Authorities
contemplated by Section 5.3(b) of the Disclosure Schedule to have been received on or prior
to the Closing, where the failure to have received such other



76









 







authorizations, consents, clearances
and approvals would have a Material Adverse Effect on the Business or Buyer, and (ii) Buyer shall
have received evidence of each of the foregoing reasonably satisfactory to it;



          (e) no Decree shall be in effect which (i) prohibits consummation of any of the transactions
contemplated by this Agreement, or (ii) would be reasonably expected to result in any of the
transactions contemplated by this Agreement being rescinded following consummation thereof;



          (f) each delivery contemplated by Section 2.8 to be delivered by Seller, Newco or
Holdings to Buyer, Newco or Holdings shall have been delivered;



          (g) Buyer shall have received the aggregate proceeds from the Equity Financing pursuant to the
terms of the Equity Financing Commitment and borrowing available
pursuant to the Debt Financing of at least Seventy-Five Million Dollars ($75,000,000) under
the ABL; and



          (h) Buyer shall have received evidence of the release of the Liens (i) under the security
documents contemplated by the credit agreements of Solutia and certain of its Subsidiaries, dated
February 28, 2008, with respect to any Contributed Assets or any Newco Units and (ii) under the
caption “Intellectual Property Liens” set forth in Section 3.4 of the Disclosure Schedules,
but only to the extent such Liens contemplated by this clause (ii) are material to the Business.



     Section 7.2 Conditions to Seller’s Obligation. Seller’s obligation to consummate the
transactions contemplated hereby in connection with the Closing are subject to satisfaction or
waiver of the following conditions:



          (a) the representations and warranties set forth in Article IV shall have been true
and correct on the date hereof and shall be true and correct at and as of the Closing Date as if
made at and as of such time in either case (in either case except to the extent expressly made as
of an earlier date, in which case as of such date as if made at and as of such date), in either
case except where the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to “material” or “Material Adverse Effect” set forth
therein) has not resulted in a Material Adverse Effect on Buyer or diminution of the benefits of
Seller hereunder;



          (b) SK and Buyer shall have performed and complied with their covenants hereunder through the
Closing in all material respects;



          (c) (i) all notices to third parties contemplated by Section 5.3(a) of the Disclosure
Schedule to have been delivered on or prior to the Closing shall have been delivered, and all
third party consents or sublicenses or permits contemplated by Section 5.3(a) of the Disclosure
Schedule to have been received on or prior to the Closing shall have been received, except
where the failure to deliver such notices or to receive such consents or sublicenses or permits
does not have a material adverse impact on the Business or result in a material liability to
Sellers, and (ii) Seller shall have received evidence of each of the foregoing reasonably
satisfactory to it;



77









 





          (d) (i) all applicable waiting periods (and any extensions thereof) under any Antitrust Law
shall have expired or otherwise been terminated and Sellers, Holdings, Newco and Buyer shall have
received all other authorizations, consents, clearances and approvals of Governmental Authorities
contemplated by Section 5.3(b) of the Disclosure Schedule to have been received on or prior
to the Closing, where the failure to have received such other authorizations, consents, clearances
and approvals would have a Material Adverse Effect on the Business or Seller, and (ii) Seller shall
have received evidence of each of the foregoing reasonably satisfactory to it;



          (e) no Decree shall be in effect which (i) prohibits consummation of any of the transactions
contemplated by this Agreement, or (ii) would be reasonably expected to result
in any of the transactions contemplated by this Agreement being rescinded following
consummation thereof;



          (f) with respect to each Bonding Requirement, at the Closing, Buyer or Holdings shall have
delivered to Seller either (x) an irrevocable, unconditional standby letter of credit or (y) cash
collateral, in compliance with the requirements in Section 6.13, and, in each case, shall
have entered into reimbursement agreements with respect to all Bonding Requirements with such bank
or financial institution in accordance with Section 6.13;



          (g) Seller shall have received evidence of the release of the Liens under the security
documents contemplated by the credit agreements of Solutia and certain of its Subsidiaries, dated
February 28, 2008, with respect to any Contributed Assets or any Newco Units; and



          (h) each delivery contemplated by Section 2.8 to be delivered by Buyer, Newco or
Holdings to Seller, Newco or Holdings shall have been delivered.



     Section 7.3 No Frustration of Closing Conditions. Neither Buyer nor Seller may rely
on the failure of any condition to its obligation to consummate the transactions contemplated
hereby set forth in Section 7.1 or Section 7.2, as the case may be, to be satisfied
if such failure was caused by such Party’s or its Affiliates’ failure to use its reasonable best
efforts (or best efforts or commercially reasonable efforts, as applicable) to satisfy the
conditions to the consummation of the transactions contemplated hereby or by any other breach of a
representation, warranty or covenant hereunder.



ARTICLE VIII

INDEMNIFICATION




     Section 8.1 No Survival of Representations and Warranties. Except as otherwise
expressly set forth in any Related Agreement and except that the disclaimers set forth in
Section 3.31 and Section 4.10 shall survive the Closing, none of the
representations and warranties of the Parties set forth in, or deemed made pursuant to, this
Agreement or any Related Agreement (other than the Transition



78









 







Services Agreement, the DPO Operating
Agreement, the DME Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease, the
Equistar Lease and Subcontract Agreement, the China Asset Transfer Agreement (but surviving only
through the China Asset Transfer Closing) or any other Related Agreement arising under the
Transition Services Agreement, the DPO Operating Agreement, the DME Supply Agreement, the
Securityholders Agreement, the Louvain-La-Neuve Lease, the Equistar Lease and Subcontract Agreement
or the China Asset Transfer Agreement) will survive the Closing, and from and after the Closing,
such representations and warranties shall be of no further force or effect and no claim for
indemnification or otherwise may be made with respect to breaches thereof. Each Party acknowledges
that it expressly intends to shorten the statute of limitations for claims or causes of action
based upon, directly or indirectly, any of such representations and warranties as provided in this
Section 8.1.



     Section 8.2 Indemnification Provisions for Buyer’s Benefit. Subject to the limitations set forth in this Article VIII, from and after the
Closing, Seller shall defend and hold Buyer, its Affiliates and its and their respective officers,
directors, stockholders, employees, agents and other Representatives (each, a “Buyer
Indemnified Party”) harmless from and against any and all actual losses, claims, liabilities,
debts, damages, fines, penalties, costs (in each case, including reasonable actual out-of-pocket
expenses (including reasonable actual fees and expenses of counsel) (collectively,
“Damages”) incurred by a Buyer Indemnified Party as a result of:



          (a) any failure to perform any covenant or agreement of Seller or, solely with respect to
covenants and agreements to be performed prior to the Closing, Newco set forth in this Agreement or
any Related Agreement (other than the Transition Services Agreement, the DPO Operating Agreement,
the DME Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease or the Equistar
Lease and Subcontract Agreement or any other Related Agreement arising under the Transition
Services Agreement, the DPO Operating Agreement, the DME Supply Agreement, the Securityholders
Agreement, the Louvain-La-Neuve Lease or the Equistar Lease and Subcontract Agreement);



          (b) any of the Excluded Liabilities (other than, from and after the China Asset Transfer
Closing, any of the China Assumed Liabilities); or



          (c) any material Liability, whether or not required by GAAP to be reflected on a consolidated
balance sheet of the Business, (i) that is actually Known by any of the Seller Knowledge designees
as of the date hereof, (ii) that is required to be disclosed in the Disclosure Schedules based on
the representations and warranties of Seller made under Article III as of the date hereof,
(iii) that is not disclosed or described on any Disclosure Schedule or the Financial Statements,
and (iv) for which the existence thereof would not reasonably be inferred to exist from information
otherwise provided to Buyer.



     Section 8.3 Indemnification Provisions for Seller’s Benefit. Subject to the
limitations set forth in this Article VIII, from and after the Closing, Buyer shall defend
and hold each Seller, its respective Affiliates and its and their respective officers, directors,
stockholders, employees, agents and other Representatives (each, a “Seller Indemnified
Party”) harmless from and against any and all Damages incurred by a Seller Indemnified Party as
a result of:



          (a) any failure to perform any covenant or agreement of SK, Buyer or, solely with respect to
covenants and agreements to be performed at or following the Closing, Holdings or Newco set forth
in this Agreement or any Related Agreement (other than the Transition Services Agreement, the DPO
Operating Agreement, the DME Supply Agreement, the



79









 







Securityholders Agreement, the Louvain-La-Neuve
Lease or the Equistar Lease and Subcontract Agreement or any other Related Agreement arising under
the Transition Services Agreement, the DPO Operating Agreement, the DME Supply Agreement, the
Securityholders Agreement, the Louvain-La-Neuve Lease or the Equistar Lease and Subcontract
Agreement), including any failure to perform any Transferred Contract; or



          (b) any of the Assumed Liabilities and, from and after the China Asset Transfer Closing, any
of the China Assumed Liabilities.



     Section 8.4 Limitations on Indemnification; Calculation of Damages. Notwithstanding
anything to the contrary set forth in this Article VIII:



          (a) The Buyer Indemnified Parties and the Seller Indemnified Parties shall not be entitled to
recover from Seller or Buyer, respectively, Damages that are punitive Damages, Damages for lost
profits or diminution in value or consequential, exemplary or special Damages, other than
consequential damages that a third party is seeking to recover pursuant to any Third Party Claim.



          (b) The Buyer Indemnified Parties shall not be entitled to recover from Seller Damages to the
extent reflected as a Liability on the Conclusive Net Working Capital Statement.



          (c) The amount of any Damages for which indemnification is provided under this Article
VIII shall be computed net of any (x) net Tax benefit realized by the Indemnified Party and (y)
third party insurance proceeds and recoveries in respect of third party indemnification obligations
actually received by the Indemnified Party in connection with such Damages. Each Indemnified Party
agrees to use its commercially reasonable efforts to obtain recovery in respect of any Damages from
any third party insurance or third party indemnity which is available in respect of Damages. If an
Indemnified Party receives such insurance proceeds or indemnification recoveries in connection with
Damages for which it has been indemnified hereunder, the Indemnified Party shall notify the Seller
or Buyer who has provided or is providing such indemnification hereunder, as appropriate (the
“Indemnifying Party”), and refund to the Indemnifying Party the amount of such insurance
proceeds or indemnification recoveries when received, up to the amount for which indemnification
was paid hereunder.



          (d) Each Indemnified Party shall take all reasonable steps to mitigate any Damages in respect
of which a claim could be made under this Article VIII. The amount of any Damages pursuant
to which an Indemnified Party shall be entitled to seek indemnification hereunder shall be deemed
reduced by the amount of the Damages resulting from any failure to mitigate such Damages.



          (e) No Buyer Indemnified Party may seek indemnification pursuant to this Article VIII
with respect to any Damages of any Buyer Indemnified Party who is or was an officer or director of
Seller or any of its Subsidiaries resulting from any right of contribution, indemnification or
other similar right against Seller or such Subsidiary that such Buyer
Indemnified Party may have by
virtue of his or her status as an officer or director of Seller or such Subsidiary, whether arising
from any breach of any representation, warranty or covenant set forth in this Agreement or any
Related Agreement or otherwise. Buyer, on behalf of each Buyer



80









 







Indemnified Party, agrees that no
Buyer Indemnified Party shall make any such claim for contribution or indemnification or make a
claim for recovery against any directors’ and officers’ liability insurance policy of Seller or any
of its Affiliates with respect to matters covered by the foregoing matters.



          (f) For the avoidance of doubt, if Buyer or any other Buyer Indemnified Party other than
Holdings or Newco, any of their respective Subsidiaries or their or their respective officers,
directors, stockholders, employees, agents or other Representatives (in such capacity) seeks to be
indemnified pursuant to this Article VIII for any Damages of Holdings, Newco or any of
their respective Subsidiaries, Buyer or such other Buyer Indemnified Party shall only be entitled
to seek indemnification pursuant to this Article VIII for and recover Damages equal to the
product of (x) the amount of the Damage incurred by such Person multiplied by (y) a fraction, the
numerator of which is the number of shares of Holdings Common Stock owned by such Indemnified Party
immediately following the Closing and the denominator of which is the total number of shares of
Holdings Common Stock outstanding immediately following the Closing.



          (g) No Buyer Indemnified Party shall be entitled to recover from Seller for any claim for
indemnity in respect of Damages arising under Section 8.2(c) unless and until, and then
only to the extent that, the total of all such claims against Buyer in respect of such Damages
exceeds One Million Dollars ($1,000,000) (the “Basket”), and in such event only for the
amount of such excess.



          (h) No Buyer Indemnified Party shall be entitled to recover from Seller, or include for
purposes of determining if Damages have met or exceeded the Basket, any claim for indemnity under
Section 8.2(c) in respect of any individual Damage arising unless and until the indemnity
claim against Seller in respect of such Damage exceeds Two Hundred Thousand Dollars ($200,000) (the
“Minimum Claim Amount”).



          (i) The Buyer Indemnified Parties shall not be entitled to recover from Seller any Damages
based on indemnity claims under Section 8.2(c) in excess of Ten Million Dollars
($10,000,000) in the aggregate (the “Cap”).



          (j) The Buyer Indemnified Parties shall not be entitled to recover from Seller Damages arising
under Section 8.2(c) to the extent the breach of the representation or warranty, or the
fact giving rise to such breach, that is the basis for the indemnity claim was actually known by
Buyer or any of its officers as of the Closing Date or otherwise provided to Buyer or any of its
Representatives (including placement in the electronic data room to the extent such fact would
reasonably be inferred from such information).



          (k) No Buyer Indemnified Party shall be entitled to make a claim for indemnification under
Section 8.2(c) from and after December 31, 2010.



          (l) Notwithstanding anything herein to the contrary, the Buyer Indemnified Parties shall not
be entitled to recover from Seller any Damages arising under Section 8.2(c) to the extent
such Damages relate to or arise out of the ownership or operation of the Facilities or otherwise
relate to or arise out of the past, current or future conduct of the Business with respect



81









 







to
environmental, health or safety matters, including any Liabilities arising pursuant to
Environmental, Health or Safety Requirements.



     Section 8.5 Matters Involving Third Parties.



          (a) If any third party shall notify any Indemnified Party of any third party claim, demand,
assessment or the commencement of any Litigation (each, a “Third Party Claim”) which may
give rise to a claim for indemnification pursuant to this Article VIII, the Indemnified
Party shall promptly (and in any event within ten (10) Business Days after receiving notice of the
Third Party Claim or the commencement of Litigation with respect thereto) notify the Indemnifying
Party thereof in writing stating that the Third Party Claim may give rise to a claim for
indemnification against the Indemnifying Party and specifying the facts constituting the basis for
such claim and the amount, to the extent known, of the claim asserted; provided,
however, that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.



          (b) The Indemnifying Party will have the right at any time to assume the defense of the Third
Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party and control
the defense of such Third Party Claim so long as the Indemnifying Party conducts such defense in a
reasonably diligent manner.



          (c) From and after the date that the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 8.5(b), (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and participate in, but not
control, the defense of the Third Party Claim; (ii) the Indemnifying Party and the Indemnified
Party shall cooperate fully with each other and their respective counsel in connection with the
defense, negotiation or settlement of any such Third Party Claim, including providing access to any
relevant books and records, properties, employees and Representatives; provided,
however, that, for the avoidance of doubt, the foregoing shall not require any Party to
waive, or take any action which has the affect of waiving, its attorney-client privilege with
respect thereto; (iii) the Indemnifying Party will not consent to the entry of, or intentionally
permit a default leading to, any judgment on or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (which shall not be
unreasonably withheld, conditioned or delayed) unless the judgment or proposed settlement includes
as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party
of a release from all liability in respect of such claim or litigation; and (iv) the Indemnified
Party will not consent to the entry of, or intentionally permit a default leading to, any judgment
or enter into any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which shall not be unreasonably withheld, conditioned or
delayed).



          (d) In the event that the Indemnifying Party has not assumed the defense of the Third Party
Claim after notice thereof, (i) the Indemnified Party may defend against the Third Party Claim in
any manner it reasonably may deem appropriate; (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys’ fees and expenses actually incurred) to the



82









 







extent such
costs are Damages for which the Indemnified Party is actually entitled to
indemnification hereunder; and (iii) the Indemnifying Party will remain responsible for any
costs the Indemnified Party may incur resulting from the Third Party Claim to the extent such costs
are Damages for which the Indemnified Party is actually entitled to indemnification hereunder.



          (e) Notwithstanding anything to the contrary in this Section 8.5, the Parties agree
that from and after Closing, (i) Seller shall assume and control the defense of the Retained
Litigation Matters without the need for any written notice to Buyer of such Third Party Claims; and
(ii) Newco shall assume and control the defense of the Litigation of the Business other than the
Retained Litigation Matters, without the need for any written notice to Seller of such Third Party
Claims.



     Section 8.6 Claims and Payment; Treatment of Payments. On each occasion that any
Indemnified Party shall be entitled to indemnification under this Article VIII, the
Indemnifying Party shall, at each such time, promptly pay the amount of such indemnification
following the receipt of notice of a claim therefor. All notices of claims for indemnification
hereunder by any Indemnified Party shall be made with reasonable particularity and shall state the
amount of Damages sought thereunder. Any indemnification payments made pursuant to this Agreement
shall be treated for tax purposes as an adjustment to the consideration contributed to Holdings in
the Holdings Formation Contribution pursuant to Section 2.5, unless otherwise required by
applicable law. At the time at which any payment pursuant to Section 2.14 is required to
be made, Seller has (x) received notice of a claim from a Buyer Indemnified Party, (y) at such
time, Seller has agreed with the Buyer Indemnified Party that amounts are due and payable by Seller
thereunder (and in no event including contingent obligations) for which neither the validity nor
amounts thereof are in dispute or at such time as such dispute has been decided by a court of
competent jurisdiction, and (z) Seller has failed to promptly pay such amounts, Buyer may withhold
payment of, and set-off such indemnification claims against, the payment required to be paid
pursuant to Section 2.14 upon notice to Seller for up to the undisputed amount due and
payable as of such time in lieu of payment for such unpaid indemnification claim.



     Section 8.7 Guest Operations. Notwithstanding anything to the contrary in the
Securityholders Agreement or in this Agreement, including under Section 8.4, Section
8.5, Section 6.6 or the proviso in the first sentence of Section 6.5, and in
addition to Seller’s rights under Section 6.5, Seller shall have the rights and remedies
set forth in this Section 8.7 with respect to any Guest Agreements for which a novation or
an unconditional release of Seller thereunder has not been obtained as contemplated by the last
sentence of Section 5.3(a) (each, an “Applicable Guest Agreement”).



          (a) At any time and from time to time, if Seller reasonably believes that (i) Holdings, Newco
or any Newco Subsidiary (or any of their respective successors) or any assignee or transferee
thereof under an Applicable Guest Agreement (each, a “Buyer Counterparty”) is failing or
refusing, or is reasonably likely to fail or refuse, to perform its obligations under any
Applicable Guest Agreement, and (ii) as a result thereof any Seller Indemnified Party has incurred,
is incurring, or is reasonably likely to incur, Damages with respect to such Applicable Guest
Agreement (the satisfaction of both of the conditions in clauses
(i) and (ii) hereinafter referred to as a “Guest Occurrence”), then Seller may deliver
written notice to Buyer of such Guest Occurrence. The Buyer Counterparty shall have five (5)
Business



83









 







Days following delivery of the foregoing notice to cure such Guest Occurrence to the
reasonable satisfaction of Seller, or if such Guest Occurrence cannot be cured within such time,
then such additional time as may be necessary if, within such five (5) Business Days, the Buyer
Counterparty has commenced and is diligently pursuing the remedies necessary to cure such Guest
Occurrence to the reasonable satisfaction of Seller.



          (b) In the event that, and for so long as, the Guest Occurrence continues beyond the
applicable cure period in Section 8.7(a), then (i) upon written notice to Buyer, Holdings
or Newco, without the execution of any further instruments on the part of Seller, Buyer or any
Buyer Counterparty, Seller shall have the right, but not the obligation, such right exercisable in
Seller’s sole and absolute discretion, and Buyer, Holdings and Newco each hereby expressly
authorizes Seller as attorney-in-fact for the applicable Buyer Counterparty, to take any and all
reasonable actions, in the name and on behalf of such Buyer Counterparty, as Seller may deem
appropriate in its reasonable discretion to avert or mitigate any Damages under Section
8.7(a)(ii), including enforcing any obligations and curing the nonperformance of such Buyer
Counterparty, inter alia, by contacting and meeting with the counterparty to the relevant
Applicable Guest Agreement, entering the applicable Facility, directing operations at all or a
portion of such Facility, and using Seller’s or the applicable Buyer Counterparty’s personnel to
inspect, maintain, repair or operate all or a portion of such Facility; and (ii) Buyer, Holdings
and Newco shall, and shall cause the applicable Buyer Counterparty and its employees to, permit
Seller to take any action contemplated by clause (i) and to comply with the instructions of Seller
in the exercise of its rights hereunder. If Seller shall exercise its rights contemplated by this
Section 8.7(b), Seller shall keep Buyer, Holdings and Newco reasonably informed of the
actions taken thereunder and upon request of Buyer, Holdings or Newco, consult with Buyer, Holdings
or Newco with respect to the applicable matter giving rise to such rights.



          (c) For the avoidance of doubt, Seller’s exercise of its rights under this Section 8.7
shall be without prejudice to its right to indemnification under Section 8.3, and all
Liabilities relating to or arising out of the Applicable Guest Agreements from and after the
Closing Date shall constitute Assumed Liabilities, and any and all losses, claims, liabilities,
debts, damages, fines, penalties, costs, in each case, including reasonable actual out-of-pocket
expenses (including reasonable attorneys’ fees and expenses) incurred by Seller in exercising its
rights under this Section 8.7 shall constitute Damages for which Seller is entitled to
indemnification from Buyer under Section 8.3. Seller shall be entitled to retain from or
set-off against amounts due to, or otherwise charge and collect from, Buyer, Newco or Holdings (or
any of their respective successors) all Damages incurred by Seller in the exercise of the rights
contemplated by this Section 8.7.



          (d) The Parties intend to create, and are hereby creating, an equitable remedy of Seller under
this Section 8.7. Buyer shall not, nor shall it permit any other Buyer Counterparty to,
enter into or amend any Contract or otherwise take any action that purports to restrict, limit or
impair the right of Seller to exercise its rights under this Section 8.7. The rights of
Seller under this Section 8.7 shall not be affected by any act, omission, matter or thing
which, but for this provision, might operate to modify, restrict, limit or otherwise impair
Seller’s rights and remedies hereunder.



84









 





     Section 8.8 Exclusive Remedy. From and after the Closing, the remedies set forth in
this Article VIII shall be the sole and exclusive remedy of the Indemnified Parties for
Damages relating to the subject matter hereof (other than the Transition Services Agreement, the
DPO Operating Agreement, the DME Supply Agreement, the Securityholders Agreement, the
Louvain-La-Neuve Lease or the Equistar Lease and Subcontract Agreement or any other Related
Agreement arising under the Transition Services Agreement, the DPO Operating Agreement, the DME
Supply Agreement, the Securityholders Agreement, the Louvain-La-Neuve Lease or the Equistar Lease
and Subcontract Agreement). Without limiting the generality of the foregoing, Buyer and Seller
hereby waive any statutory, equitable or common law rights or remedies relating to any
environmental, health or safety matters relating to the subject matter hereof, including any such
matters arising under the Comprehensive Environmental Response, Compensation and Liability Act or
any other Environmental, Health or Safety Requirements.



ARTICLE IX

TERMINATION




     Section 9.1 Termination of Agreement. The Parties may terminate this Agreement at any
time prior to the Closing as provided below:



          (a) Buyer and Seller may terminate this Agreement by mutual written consent;



          (b) Buyer may terminate this Agreement by giving written notice to Seller:



               (i) if the Closing shall not have occurred prior to June 30, 2009 (the “Outside
Date”);



               (ii) if any event, circumstance, condition, fact or effect has occurred or exists which (A)
would result in a failure of a condition to Buyer’s obligations to consummate the transactions
contemplated hereby set forth in Section 7.1 (unless the failure results primarily from SK
or Buyer itself breaching any representation, warranty or covenant set forth in this Agreement),
and (B) cannot reasonably be cured prior to the Outside Date; provided, however,
that Buyer shall have given Seller written notice, delivered at least ten (10) Business Days prior
to such termination stating its intention to terminate this Agreement pursuant to this Section
9.1(b)(ii) and the basis for such termination with reasonable particularity and provided the
opportunity to cure any breach giving rise to the effects set forth in clauses (A) and (B) above
during such time; or



               (iii) as and to the extent Buyer has a right of termination pursuant to Section 5.7;



          (c) Seller may terminate this Agreement by giving written notice to Buyer:



               (i) if the Closing shall not have occurred prior to the Outside Date;



               (ii) if any event, circumstance, condition, fact or effect has occurred or exists which (A)
would result in a failure of a condition to Seller’s obligations to consummate the transactions
contemplated hereby set forth in Section 7.2 (unless the failure results primarily



85









 







from
Seller itself breaching any representation, warranty or covenant set forth in this Agreement), and
(B) cannot reasonably be cured prior to the Outside Date; provided, however, that
Seller shall have given Buyer written notice thereof, delivered at least ten (10) Business Days
prior to such termination stating its intention to terminate this Agreement pursuant to this
Section 9.1(c)(ii) and the basis for such termination with reasonable particularity and
provided the opportunity to cure any breach giving rise to the effects set forth in clauses (A) and
(B) above during such time;



               (iii) without limiting the generality of Section 9.1(c)(i), if (A) the conditions to
Buyer’s obligations to consummate the transactions contemplated hereby set forth in Section
7.1 (other than those conditions that by their terms are to be satisfied at Closing or that
have been waived by Buyer) have been satisfied and Buyer has failed to consummate the transactions
contemplated hereby within five (5) Business Days after the date on which Seller notifies Buyer
that all such conditions have been satisfied, or (B) the Equity Commitment Letter is actually or is
purported to be terminated, modified or amended (whether or not permissible under the terms thereof
or this Agreement) without Seller’s prior written consent; or



               (iv) if the board of directors of Seller has determined to terminate this Agreement to enter
into a transaction contemplated by an Unsolicited Acquisition Proposal.



     Section 9.2 Termination Fees.



          (a) In the event that this Agreement is terminated (i) by Seller pursuant to Section
9.1(c)(ii) based on the failure of the condition to Seller’s obligations to consummate the
transactions contemplated hereby set forth in Section 7.2(a) (other than the failure of
such condition relating to any untruth or inaccuracy of any representation or warranty as of any
date deemed made other than the date hereof) or Section 7.2(b) to reasonably be cured prior
to the Outside Date or (ii) by Seller pursuant to Section 9.1(c)(iii), then in such event,
Buyer shall pay Seller a termination fee in an aggregate amount of Five Million Dollars
($5,000,000) (the “Buyer Termination Fee”). Upon any termination of this Agreement giving
rise to the payment of the Buyer Termination Fee, within one (1) Business Day following such
termination, Buyer shall pay the Buyer Termination Fee to Seller. Upon the payment of the Buyer
Termination Fee, neither SK nor Buyer shall have any further Liability relating to or arising out
of this Agreement, any other Contract contemplated hereby or the transactions contemplated hereby
or thereby, whether at law or equity, in contract, in tort or otherwise. For the avoidance of
doubt, in no event shall Buyer be obligated to pay, or cause to be paid, the Buyer Termination Fee
on more than one occasion.



          (b) In the event that this Agreement is terminated (i) by Buyer pursuant to Section
9.1(b)(ii) based on the failure of the condition to Buyer’s obligations to consummate the
transactions contemplated hereby set forth in Section 7.1(a) (other than the failure of
such condition relating to any untruth or inaccuracy of any representation or warranty as of any
date
deemed made other than the date hereof) or Section 7.1(b) to reasonably be cured prior
to the Outside Date, or (ii) by Seller pursuant to Section 9.1(c)(iv), then in such event,
Seller shall pay Buyer a termination fee in an aggregate amount of Five Million Dollars
($5,000,000) (the “Seller Termination Fee”). Upon any termination of this Agreement giving
rise to the payment of the Seller Termination Fee, within one (1) Business Day following such
termination (in the case of clause (i) above) or simultaneously with such termination (in the case
of



86









 







clause (ii) above), Seller shall pay the Seller Termination Fee to Buyer. Upon the payment of
the Seller Termination Fee, neither Seller nor any of its Subsidiaries (including Newco) shall have
any further Liability relating to or arising out of this Agreement, any other Contract contemplated
hereby or the transactions contemplated hereby or thereby, whether at law or equity, in contract,
in tort or otherwise. For the avoidance of doubt, in no event shall Seller be obligated to pay, or
cause to be paid, the Seller Termination Fee on more than one occasion.



     Section 9.3 Effect of Termination. If any Party terminates this Agreement pursuant to
Section 9.1, all rights and obligations of the Parties hereunder shall terminate upon such
termination and shall become null and void (except that Article I (Definitions),
Section 3.31 (Disclaimer of Other Representations and Warranties), Section 4.10
(Disclaimer of Other Representations and Warranties), Section 5.8(c) (Access; No Contact;
Confidentiality), Section 5.12 (SK Guarantee), Section 5.13 (Seller Guarantee),
Section 6.17 (Acknowledgements), Section 9.2 (Termination Fees), Section
9.4 (Maximum Recovery), Article X (Miscellaneous) and this Section 9.3 (Effect
of Termination) shall survive any such termination) and, for the avoidance of doubt, the
Confidentiality Agreement shall survive any such termination) and no Party shall have any Liability
to the other Party hereunder; provided, however, that, subject to the limitation of
remedies and liability set forth in Section 9.2 and Section 9.4, nothing in this
Section 9.3 shall relieve any Party from Liability for any breach occurring prior to any
such termination of any of the representations and warranties (but solely to the extent such breach
would result in a failure of the condition set forth in Section 7.1(a) or Section
7.2(a), as appropriate) or covenants (but solely to the extent such breach would result in a
failure of the condition set forth in Section 7.1(b), or Section 7.2(b), as
appropriate) set forth in this Agreement. The Parties hereby agree to cause the China Asset
Transfer Agreement to be terminated concurrently with the termination of this Agreement.



     Section 9.4 Maximum Recovery. Notwithstanding anything to the contrary in this
Agreement or any other Contract contemplated hereby:



          (a) prior to the Closing (including from and after the termination of this Agreement), the
aggregate Liability of Seller and its Subsidiaries (including Newco) to SK and Buyer and the
aggregate Liability of SK and Buyer to Seller and Newco, in either case relating to or arising out
of this Agreement, any other Contract contemplated hereby or the transactions contemplated hereby
(including any Liability to pay any Termination Fee), shall in each case be Five Million Dollars
($5,000,000); and no such Party shall have any further or other Liability to any other Parties
relating to or arising out of any such matter, whether at law or equity, in contract, in tort or
otherwise; and



          (b) other than Seller, Newco, SK and Buyer (and for such Parties, subject to Section
9.4(a)), none of such Party’s respective Affiliates, nor any former, current or future direct
or indirect equity holders, controlling persons, directors, officers, employees, agents, members,
managers, assignees, successors or other Representatives of such Parties shall have any Liability
relating to or arising out of this Agreement, any other Contract contemplated hereby, whether at
law or equity, in contract, in tort or otherwise.



87









 





ARTICLE X

MISCELLANEOUS




     Section 10.1 Expenses. Except as otherwise expressly set forth herein or in the
Securityholders Agreement, each Party will bear its own costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including all fees of law firms,
commercial banks, investment banks, accountants, public relations firms, experts and consultants.
Notwithstanding the foregoing, within five (5) Business Days following the presentment of
documentation thereof from and after the date hereof, Seller shall pay to SK the amount of the
reasonable, documented out-of pocket expenses incurred by SK from March 6, 2009 through and
including March 18, 2009 contemplated to be reimbursed pursuant to the Expense Reimbursement Letter
Agreement (the “Seller Advanced Expenses”); provided, however, that the
maximum amount of the Seller Advanced Expenses shall be Seven Hundred Thousand Dollars ($700,000);
and provided further that at the Closing, SK shall reimburse Seller for the amount
of the Seller Advanced Expenses paid to SK pursuant to this sentence, for which SK shall thereafter
be entitled to collect the Seller Advanced Expenses from Newco as and to the extent provided for in
the Securityholders Agreement.



     Section 10.2 Entire Agreement. This Agreement, the Related Agreements and the
Confidentiality Agreement constitute the entire agreement between the Parties and supersede any
prior understandings, agreements or representations (whether written or oral) by or between the
Parties, written or oral, to the extent they relate in any way to the subject matter hereof. For
the avoidance of doubt, except as provided in Section 10.1, none of (i) the letter
agreement dated as of December 5, 2008 by and between Seller and SK, (ii) the letter agreement
dated as of March 18, 2009 by and between Seller and SK (the “Expense Reimbursement Letter
Agreement”), and (iii) any agreement to reimburse expenses deemed to exist by virtue of the
term sheet exchanged between Seller and SK on March 5, 2009, in any such case shall be of any
further force and effect as of the execution and delivery of this Agreement, and the Parties agree
that no payment is or ever shall become due thereunder. To the extent there is any conflict
between this Agreement and the China Asset Transfer Agreement, this Agreement shall prevail.



     Section 10.3 Incorporation of Annexes, Exhibits and Disclosure Schedule. The Annexes
and Exhibits to this Agreement and the Disclosure Schedule are incorporated herein by reference and
made a part hereof.



     Section 10.4 Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by each Party except as expressly provided herein. No waiver of any breach of
this Agreement shall be construed as an implied amendment or agreement to amend or modify any
provision of this Agreement. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be valid unless the same shall be
in writing and signed by the Party making such waiver, nor shall such waiver be deemed to extend to
any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent default,
misrepresentation or breach of warranty or covenant. No conditions, course of dealing or
performance, understanding or agreement purporting to modify, vary, explain or supplement the terms
or conditions of this Agreement shall be binding unless this Agreement is amended or modified in
writing pursuant to



88









 







the first sentence of this Section 10.4 except as expressly provided
herein. Except where a specific period for action or inaction is provided herein, no delay on the
part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver
thereof.



     Section 10.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests or obligations hereunder
without the prior written consent of the other Parties.



     Section 10.6 Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing except as expressly provided herein. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given (i) when delivered personally to
the recipient; (ii) one (1) Business Day after being sent to the recipient by reputable overnight
courier service (charges prepaid); (iii) upon receipt of confirmation of receipt if sent by
facsimile transmission; or (iv) three (3) Business Days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid, and addressed to the
intended recipient as set forth below:



	 	 	 	 	 
	 

	 	If to Seller:
	 	Solutia Inc.

575 Maryville Centre Drive

P.O. Box 66760

St. Louis, Missouri 63166

Attention: General Counsel

Facsimile: (314) 674-5469
	 
	 	 	 	 
	 

	 	 	 	With a copy (which shall not constitute notice to Seller) to:
	 
	 	 	 	 
	 

	 	 	 	Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, New York 10022

Attention: Frederick Tanne, P.C., Esq.

                 Andrew E. Nagel, Esq.

                 William B. Sorabella, Esq.

Facsimile: (212) 446-6460
	 
	 	 	 	 
	 	 	If to Newco prior to the Closing:
	 

	 	 	 	NyCo LLC

c/o Solutia Inc.

575 Maryville Centre Drive

P.O. Box 66760

St. Louis, Missouri 63166

Attention: General Counsel

Facsimile: (314) 674-5469






89









 






	 	 	 	 	 
	 

	 	 	 	With a copy (which shall not constitute notice to Newco) to:
	 
	 	 	 	 
	 

	 	 	 	Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, New York 10022

Attention: Frederick Tanne, P.C., Esq.

                  Andrew E. Nagel, Esq.

                 William B. Sorabella, Esq.

Facsimile: (212) 446-6460
	 
	 	 	 	 
	 	 	If to SK, Buyer or, following the Closing, Newco:
	 
	 	 	 	 
	 

	 	 	 	SK Capital Partners II, L.P.

400 Park Avenue, Suite 810

New York, New York 10022

Attention: General Counsel

Facsimile: (212) 867-4525
	 
	 	 	 	 
	 

	 	 	 	With a copy (which shall not constitute notice to SK,
Buyer or Newco) to:
	 
	 	 	 	 
	 

	 	 	 	Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, New Jersey 08540

Attention: Steven M. Cohen, Esq.

Facsimile: (609) 919-6701





Any Party may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice in the manner set
forth in this Section 10.6.




     Section 10.7 Governing Law; Governing Language.



          (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.



          (b) Notwithstanding anything to the contrary herein or in any Related Agreement, the English
language version of any Related Agreement shall govern the interpretation of any Related Agreement.



     Section 10.8 Submission to Jurisdiction; Service of Process. Each of the Parties
irrevocably and unconditionally submits to the exclusive jurisdiction of any state or federal court



90









 




sitting in New York, New York in any Litigation arising out of or relating to this Agreement or any
Related Agreement and agrees that all claims in respect of such Litigation may be heard and
determined in any such court. Each Party also agrees not to bring any action or proceeding arising
out of or relating to this Agreement or any Related Agreement other than the China Asset Transfer
Agreement in any other court. Each of the Parties irrevocably and unconditionally waives any
objection to the laying of venue in, and any defense of inconvenient forum to the maintenance of,
any Litigation so brought and waives any bond, surety or other security that might be required of
any other Party with respect thereto. Any Party may make service on any other Party by sending or
delivering a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 10.6; provided, however, that
nothing in this Section 10.8 shall affect the right of any Party to serve legal process in
any other manner permitted by law or in equity. Each Party agrees that a final judgment in any
Litigation so brought shall be conclusive and may be enforced by Litigation or in any other manner
provided by law or in equity. The Parties intend that all foreign jurisdictions will enforce any
Decree of any state or federal court sitting in New York, New York in any
Litigation arising out of or relating to this Agreement or any Related Agreement other than
the China Asset Transfer Agreement.




     Section 10.9 Waivers of Jury Trial. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.



     Section 10.10 Specific Performance. Each Party acknowledges and agrees that the other
Parties would be damaged irreparably in the event any provision of this Agreement is not performed
in accordance with its specific terms or otherwise breached, so that, in addition to any other
remedy that a Party may have under law or equity, a Party shall be entitled to injunctive relief to
prevent breaches of the provisions of this Agreement applicable to the Parties from and after
Closing or termination of this Agreement, including Section 9.2 and Section 9.4,
and to enforce specifically such provisions of this Agreement and the terms and provisions thereof.
No Party shall be entitled to injunctive relief to prevent breaches of the provisions of this
Agreement applicable to the Parties at or prior to the Closing or prior to the termination of this
Agreement or to enforce specifically such provisions of this Agreement or the terms and provisions
thereof.



     Section 10.11 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other provisions of this
Agreement. In the event that any of the provisions of this Agreement shall be held by a court or
other tribunal of competent jurisdiction to be illegal, invalid or unenforceable, such provisions
shall be limited or eliminated only to the minimum extent necessary so that this Agreement shall
otherwise remain in full force and effect.



     Section 10.12 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties, the Other Sellers and the respective
successors and permitted assigns of the foregoing.



91









 





     Section 10.13 Mutual Drafting. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.



     Section 10.14 Disclosure Schedule. All capitalized terms not defined in the Disclosure Schedule shall have the meanings ascribed to
them in this Agreement. Each representation and warranty of Seller in this Agreement is made and
given, and the covenants are agreed to, subject to the disclosures and exceptions set forth on the
Disclosure Schedule. The disclosure of any matter in any section of the Disclosure Schedule shall
be deemed to be a disclosure for all purposes of this Agreement and all other sections of the
Disclosure Schedule to which such disclosure reasonably would be inferred. The listing of any
matter shall expressly not be deemed to constitute an admission by any Seller, or to otherwise
imply, that any such matter is material, is required to be disclosed under this Agreement or falls
within relevant minimum thresholds or materiality standards set forth in this Agreement. No
disclosure in the Disclosure Schedule relating to any possible breach or violation of any Contract
or law shall be construed as an admission or indication that any such breach or violation exists or
has actually occurred. In no event shall the listing of any matter in the Disclosure Schedule be
deemed or interpreted to expand the scope of Seller’s representations, warranties and/or covenants
set forth in this Agreement. All attachments to the Disclosure Schedule are incorporated by
reference into the Disclosure Schedule in which they are directly or indirectly referenced. The
information contained in the Disclosure Schedule is in all events provided subject to the
Confidentiality Agreement.



     Section 10.15 Headings; Table of Contents. The section headings and the table of
contents contained in this Agreement and the Disclosure Schedule are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this Agreement.



     Section 10.16 Counterparts; Facsimile and Electronic Signatures. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement or any counterpart may be
executed and delivered by facsimile copies or delivered by electronic communications by portable
document format (.pdf), each of which shall be deemed an original.



{Remainder of page intentionally left blank.}




92









 





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



	 	 	 	 	 	 	 
	 	 	SOLUTIA INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jeffry N. Quinn
 

Name: Jeffry N. Quinn
	 	 
	 

	 	 	 	Title: President and CEO	 	 






	 	 	 	 	 	 	 
	 	 	NYCO LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Paul J. Berra, III
 

Name: Paul J. Berra, III
	 	 
	 

	 	 	 	Title: Senior Vice President, General Counsel
and Chief Administrative Officer	 	 






	 	 	 	 	 	 	 
	 	 	SK CAPITAL PARTNERS II, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	SK Capital Investment II, LLC

its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Barry B. Siadat
 

Name: Barry B. Siadat
	 	 
	 

	 	 	 	Title: President	 	 






	 	 	 	 	 	 	 
	 	 	SK TITAN HOLDINGS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Barry B. Siadat
 

Name: Barry B. Siadat
	 	 
	 

	 	 	 	Title: President	 	 






{Signature Page to Transaction Agreement}





S-1