EX-10.2



 





Exhibit
10.2

PHARMACIA INDEMNITY AGREEMENT




     This INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of February 28, 2008 (the
“Effective Date”) by and among Solutia Inc., a Delaware corporation (“Solutia”),
and Pharmacia Corporation, a Delaware corporation (“Pharmacia”). Unless otherwise defined
herein, or the context otherwise requires, capitalized terms used herein and defined in the
Settlement Agreement, dated February 28, 2008, by and among Solutia, Monsanto Company, a Delaware
corporation, and SFC LLC, a Delaware limited liability corporation (the “Settlement
Agreement”) shall be used herein as therein defined. For purposes of this Agreement only, the
term “Indemnitee” shall mean the Pharmacia Indemnified Parties.



RECITALS




     WHEREAS, in connection with the Settlement Agreement and in exchange for the Pharmacia
Contribution and the Monsanto Contribution (as each is defined in the Plan), Solutia desires to
indemnify the Pharmacia Indemnified Parties for certain Losses.



     NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:




	1.	 	Indemnification by Solutia. After the Effective Date, Solutia shall indemnify
Pharmacia Indemnified Parties and save and hold each of them harmless against, and pay on
behalf of or reimburse Pharmacia Indemnified Parties as and when incurred for any Loss which
any Pharmacia Indemnified Party suffers, sustains or becomes subject to, as a result of or
arising out of:






	 	(a)	 	any Environmental Liability in connection with the Retained Sites;
	 
	 	(b)	 	any Environmental Liability in connection with the Shared Sites for which
Solutia is liable pursuant to Section 3.04 of the Settlement Agreement;
	 
	 	(c)	 	Solutia Tort Claims;
	 
	 	(d)	 	failure of Solutia to pay any amounts required to be paid by Solutia (i)
pursuant to the Anniston Settlement Agreement as specified in the Anniston Side Letter
or (ii) to the education trust fund pursuant to Section VI of the Anniston Consent
Decree, or failure of Solutia to honor any other obligation of Solutia under the
Anniston Settlement Agreement;
	 
	 	(e)	 	the PENNDOT Case; provided, that in no event shall Solutia be required
to indemnify Monsanto Indemnified Parties or Pharmacia Indemnified Parties in respect
of any Losses suffered by Monsanto Indemnified Parties or Pharmacia Indemnified Parties
described in this clause (e) to the extent the aggregate amount of all such Losses
exceeds $20 million; and
	 
	 	(f)	 	the Chemicals Liabilities; provided, that in no event shall Solutia be
required to indemnify Pharmacia Indemnified Parties in respect of any Losses suffered
by




 









 






	 	 	 	Pharmacia Indemnified Parties described in this clause (f) to the extent that (i)
Monsanto agreed to indemnify Solutia Indemnified Parties for such Losses pursuant to
Section 5.02 of the Settlement Agreement or (ii) such Losses relate to “claims” (as
defined in section 101(5) of the Bankruptcy Code) that are not satisfied in full
under the Plan arising in connection with or related to Pharmacia’s or Solutia’s
non-qualified plans or arrangements at issue in Miller v. Pharmacia Corporation,
Case No. 4:04CV981.




If and to the extent any provision of this Section 1 is unenforceable for any reason,
Solutia hereby agrees to make the maximum contribution to the payment and satisfaction of the Loss
for which indemnification is provided for in this Section 1 that is permissible under
applicable laws.





	2.	 	Manner of Payment. Any indemnification owing pursuant to this Agreement shall be
effected by wire transfer of immediately available funds from Solutia to an account designated
in writing by the Indemnitee within fifteen (15) days after the final determination of the
amount thereof pursuant to this Agreement. The amount of any Losses for which indemnification
is provided under this Agreement shall be computed net of any third-party insurance proceeds
and recoveries in respect of third party indemnification obligations actually received by the
Indemnitee in connection with such Losses. The Indemnitee shall use its commercially
reasonable efforts to obtain recovery in respect of any Losses from any insurer or other third
party indemnity which is available in respect of such Losses. If an Indemnitee receives such
insurance proceeds or indemnification recoveries in connection with Losses for which it has
received indemnification, such party shall refund to Solutia the amount of such insurance
proceeds or recovery when received, up to the amount of indemnification received.
	 
	3.	 	Indemnification Claims. Any indemnification claim which is not a result of a third
party claim shall be asserted by written notice given by the Indemnitee to Solutia. Solutia
shall have a period of thirty (30) days after the receipt of such notice within which to
respond thereto. If Solutia does not respond within such 30-day period, it shall be deemed to
have rejected such claim in whole. If Solutia does not respond within such 30-day period or
rejects such claim in whole or in part, the Indemnitee shall be free to pursue such remedies
as may be available to such party under Section 6.
	 
	4.	 	Third Party Claims.






	 	(a)	 	If there occurs an event which an Indemnitee asserts is an indemnifiable event
pursuant to this Agreement, the Indemnitee shall notify Solutia promptly in writing
specifying the facts constituting the basis for such claim and the amount, to the
extent known, of the claim asserted. If such event involves (i) any claim by a Person
other than the Indemnitee or (ii) the commencement of any Proceeding by a Person other
the Indemnitee (such claim or Proceeding hereinafter referred to as a “Third Party
Claim”), the Indemnitee shall give Solutia prompt written notice of such Third
Party Claim or the commencement of such Proceeding; provided that the failure
to provide prompt notice as provided herein (whether with respect to a Third Party
Claim or otherwise) will relieve Solutia of its obligations hereunder only to the
extent that such failure prejudices Solutia hereunder. In




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	 	 	 	case any such Third Party Claim shall be brought against any Indemnitee, it shall
notify Solutia of the commencement thereof promptly in writing specifying the facts
constituting the basis for such claim and the amount, to the extent known, of the
claim asserted.
	 
	 	(b)	 	Solutia shall be entitled to participate in the defense of any Third Party
Claim and to assume the defense thereof, with counsel selected by Solutia;
provided that Solutia notifies the Indemnitee in writing of its election to
assume such defense within twenty (20) Business Days of receipt of notice from the
Indemnitee of such Third Party Claim. After notice from Solutia to the Indemnitee of
such election so to assume the defense thereof, Solutia shall not, except as provided
in the next sentence, be liable to the Indemnitee for any legal expenses of other
counsel or any other expenses subsequently incurred by such party or parties in
connection with the defense thereof. Notwithstanding Solutia’s election to so assume
the defense of any such Third Party Claim, the Indemnitee shall have the right to
employ separate counsel (including local counsel) and participate in (but not control)
such defense; provided that Solutia shall bear the reasonable fees and expenses
of such separate counsel only if (x) the defendants in any such Proceeding include both
the Indemnitee and Solutia and the Indemnitee has legal defenses available to it which
are different from or additional to those available to Solutia; provided
further that, in each case, with respect to each Indemnitee in such
circumstance, Solutia shall not be required to bear the fees and expenses of more than
one firm of attorneys plus one firm of local counsel in each jurisdiction where the
primary counsel is not admitted to practice and where local counsel is necessary, or
(y) counsel for Solutia shall authorize in writing the Indemnitee to employ separate
counsel at the expense of Solutia.
	 
	 	(c)	 	Solutia and the Indemnitee agree to cooperate fully with each other and their
respective counsel in connection with the defense, negotiation of settlement or
settlement of any such Third Party Claim, including providing access to any relevant
books and records, properties, employees, representatives and advisors (regardless of
whether Solutia has assumed the defense thereof). If Solutia assumes the defense of a
Third Party Claim, no settlement or compromise thereof may be effected (x) by Solutia
without the written consent of the Indemnitee (which consent shall not be unreasonably
withheld or delayed) unless (1) there is no finding or admission of any violation of
law or any violation of the rights of any Person by any Indemnitee and no adverse
effect on any other third party claims that may be made against any Indemnitee and (2)
it involves solely the payment of monetary damages and all relief provided is paid or
satisfied in full by Solutia or (y) by the Indemnitee without the consent of Solutia,
except to the extent it involves only equitable or other non-monetary relief not
binding on any party other than the Indemnitee and ten (10) Business Days prior written
notice is given to Solutia. If Solutia elects not to assume the defense of a Third
Party Claim, the Indemnitee shall defend such Third Party Claim with counsel selected
by the Indemnitee, and Solutia shall bear reasonable fees and expenses of such counsel.
In no event shall Solutia be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld or delayed).




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	5.	 	Subrogation. In the event of payment by Solutia to an Indemnitee in connection with
any Third Party Claim, Solutia shall be subrogated to and shall stand in the place of the
Indemnitee as to any events or circumstances in respect of which the Indemnitee may have any
right or claim relating to such claim against any claimant or plaintiff asserting such claim.
The Indemnitee shall cooperate with Solutia in a reasonable manner, and at the cost and
expense of Solutia, in prosecuting any subrogated right or claim, including permitting Solutia
to bring suit against such third party in the name of the Indemnitee.
	 
	6.	 	Dispute Resolution.






	 	(a)	 	Agreement to Arbitrate. Except as otherwise specifically provided in
this Agreement, the procedures for discussion, negotiation and arbitration set forth in
this Section 6 shall apply to all disputes, controversies or claims (whether in
contract, tort or otherwise) that may arise out of or relate to, or arise under or in
connection with, this Agreement, the interpretation hereof and/or the rights,
interests, duties, obligations and liabilities of Pharmacia, Solutia or any Indemnitee
hereunder. Each party agrees that this Section 6 shall provide the sole and
exclusive remedy in connection with any dispute, controversy or claim relating to any
of the foregoing matters and irrevocably waives any right to commence any action or
proceeding in or before any Governmental Authority or court, except as expressly
provided in Section 6(b) and except to the extent provided under the
Arbitration Act in the case of judicial review of arbitration results or awards.
	 
	 	(b)	 	Bankruptcy Court Jurisdiction. Notwithstanding anything to the
contrary contained in this Agreement, for so long as the Solutia Chapter 11 Case
remains open, the Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of, and related to disputes arising in connection with the interpretation,
implementation or enforcement of this Agreement as provided for in the Plan.
	 
	 	(c)	 	Procedures.






	 	(i)	 	Any party hereto alleging that there exists a dispute or
disagreement regarding the matters covered hereby shall notify in writing the
other parties hereto of such alleged dispute or disagreement (the “Dispute
Notice”). The parties shall attempt to resolve such alleged dispute or
disagreement through good faith negotiations among the members of management of
each party designated by each party promptly following the sending or the
receipt, as applicable, of a Dispute Notice. If the parties hereto shall fail
to resolve such alleged dispute or disagreement within sixty (60) days from the
date of the Dispute Notice, then any party involved in such a dispute or
disagreement shall have the right to deliver to the other parties involved in
such dispute or disagreement an Escalation Notice requiring a meeting (which
may be in person or telephonic) of the CEOs of each such party, who shall meet
(either in person or telephonically) within twenty (20) days of the delivery of
the Escalation Notice to such other parties to seek to resolve such dispute or




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	 	 	 	disagreement. If such dispute or disagreement has not been resolved within
twenty (20) days of the date of such meeting between the CEOs, then any
party involved in such dispute or disagreement shall have the right to
commence an arbitration in accordance with the provisions of this
Section 6(c).
	 
	 	(ii)	 	The arbitration shall be held in St. Louis, MO or such other
place as the parties to the arbitration proceeding shall otherwise agree in
writing.
	 
	 	(iii)	 	The arbitration proceeding shall be conducted in accordance
with the Commercial Arbitration Rules of the AAA in effect on the date of the
commencement of the arbitration. Each Party shall nominate one arbitrator and
the two arbitrators so appointed shall attempt to agree on the appointment of a
third arbitrator. If they are unable to so agree within thirty (30) days after
the second arbitrator is appointed, the third arbitrator shall be appointed by
AAA.
	 
	 	(iv)	 	The decision of the panel of arbitrators shall be final,
binding and incontestable and may be used as a basis for judgment thereon in
any jurisdiction. Such decision shall include a determination as to which of
the parties shall bear the costs of the arbitration proceeding.
	 
	 	(v)	 	The parties hereby expressly agree to waive the right to appeal
from the decision of the arbitrators. Accordingly, there shall be no appeal to
any court or other authority (government or private) from the decision of the
arbitrators, and the parties shall not dispute nor question the validity of
such award before any regulatory or other authority in any jurisdiction where
enforcement action is taken by the party or parties in whose favor the award
was rendered.
	 
	 	(vi)	 	Notwithstanding the foregoing, any party may at any time
without regard to any notice periods required by the provisions hereof (whether
before, during or after arbitration), and as often as is necessary or
appropriate, seek provisional or interim relief (including, without limitation,
to the extent available under applicable law, a temporary restraining order,
preliminary injunction and/or pre-judgment attachment) in a court of law.
	 
	 	(vii)	 	The commencement and pendency of an arbitration under this
Section 6(c) shall not relieve any of the parties of their respective
obligations under this Agreement.
	 
	 	(viii)	 	The provisions of this Section 6 shall survive the termination of
this Agreement.






	7.	 	Miscellaneous.






	 	(a)	 	Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (other than the laws regarding




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	 	 	 	choice of laws and conflicts of laws) as to all matters, including matters of
validity, construction, effect, performance and remedies.
	 
	 	(b)	 	Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person or by facsimile (provided
confirmation is delivered to the recipient the next day in the case of facsimile), by
nationally recognized overnight courier, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:





	 	 	 	 	 
	 

	 	If to Solutia:
	 	General Counsel

Solutia Inc.

575 Maryville Centre

St. Louis, MO 63141

Telephone:                     

Facsimile: (314) 674-8703







with a copy (which shall not constitute notice) to:



	 	 	 
	 

	 	Jonathan S. Henes/Thomas W. Christopher

Kirkland & Ellis LLP

153 East 53rd Street

New York, NY 10022

Telephone: 212-446-4800

Facsimile: 212-446-4900







	 	 	 	 	 
	 

	 	If to Pharmacia:
	 	General Counsel

Pharmacia Corporation

1751 Lake Cook Road

Arbor Lake Center

Suite 300

Deerfield, IL 60015

Telephone: 847-945-5870

Facsimile:                     







with a copy (which shall not constitute notice) to:



	 	 	 
	 

	 	John H. Bae

Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, NY 10281

Telephone: 212-504-6000

Facsimile: 212-504-6666








          or to such other address as any party hereto may have furnished to the other parties by a
notice in writing in accordance with this Section 7(b).



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	 	(c)	 	Amendment and Modification. This Agreement may be amended, modified or
supplemented only by a written agreement signed by all of the parties hereto.
	 
	 	(d)	 	Successors and Assigns; No Third Party Beneficiaries. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns, but, neither this Agreement
nor any of the rights, interests and obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other parties; provided,
that in the event of a Sale of any party hereto, such party shall assign all of its
rights, interests, duties, obligations and/or liabilities under this Agreement to the
acquirer of or successor to such party in such Sale and shall cause such acquirer or
successor to accept the assignment of the rights and interests, and to assume the
duties, obligations and liabilities, under this Agreement.. Except for the provisions
of this Agreement relating to Indemnitees, which are also for the benefit of the
Indemnitees, this Agreement is solely for the benefit of the parties hereto and is not
intended to confer upon any other Persons any rights or remedies hereunder.
	 
	 	(e)	 	Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
	 
	 	(f)	 	Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction. Each party acknowledges that money damages would be an inadequate remedy
for any breach of the provisions of this Agreement and agrees that the obligations of
the parties hereunder shall be specifically enforceable.
	 
	 	(g)	 	Complete Agreement. This Agreement shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof and
shall supercede all previous negotiations, commitments and writings with respect to
such subject matter.
	 
	 	(h)	 	Subsidiary Guarantees. The indemnification obligations of Solutia
pursuant to this Agreement shall be guaranteed by certain domestic subsidiaries of
Solutia pursuant to the agreement set forth on Exhibit ___; provided, that,
notwithstanding anything to the contrary in this Section 7(h), such guarantee
shall in no event limit in any way whatsoever Solutia’s ability to (a) obtain any
financing or refinancing (and such guarantee shall be subordinated on customary terms
to, but not terminated by, any guarantee required in connection with any financing or
refinancing) or (b) acquire or sell any assets or businesses of Solutia (including the
stock of any direct or indirect subsidiary of Solutia), in each case in bona fide arm’s
length third party transactions. Upon any sale by Solutia of the stock of a direct or
indirect subsidiary that has executed such a guarantee in a bona fide




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	 	 	 	arm’s length third party transaction, the guarantee provided by such subsidiary
pursuant to this Section 7(h) shall automatically terminate and be of no
further force or effect.





* * * *





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     IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement on the day
and year first above written.



	 	 	 	 	 
	 	SOLUTIA INC.

 	 
	 	By:  	/s/ Rosemary L. Klein
 	 
	 	 	Name:  	Rosemary L. Klein 	 
	 	 	Title:  	Senior Vice President, General Counsel
and Secretary 	 
	 



	 	 	 	 	 
	 	PHARMACIA CORPORATION

 	 
	 	By:  	/s/ Stephen D. O’Sullivan
 	 
	 	 	Name:  	Stephen D. O’Sullivan 	 
	 	 	Title:  	General Counsel, Pharmacia Corp.