2. Terms of Employment.(a) Position and Duties.(i) During the Employment Period, (A) the Executive shall continue to serve as SeniorVice President and Chief Financial Officer of the Company, with such authority, duties andresponsibilities consistent with such position and as may be reasonably assigned to him fromtime to time by the Company’s Chief Executive Officer and (B) the Executive’s services shallcontinue to be performed at the location where the Executive was employed immediatelypreceding the Effective Date or at any office or location of the Company not more than 50miles from the Company’s headquarters in St. Louis, Missouri.(ii) During the Employment Period, the Executive shall serve the Company faithfully,diligently and to the best of his ability, and shall devote substantially all of his timeand efforts during normal business hours to the business and affairs of the Company. Duringthe Employment Period it shall not be a violation of this Agreement for the Executive to (A)deliver lectures, fulfill speaking engagements or teach at educational institutions, and (B)manage personal investments, so long as such activities described in clauses A and B do notinterfere with the performance of the Executive’s responsibilities as an employee of theCompany in accordance with this Agreement, and (C) with the advance approval of the Board,serve on corporate, civic or charitable boards or committees.(b) Compensation.(i) Base Salary. During the Employment Period, the Executive shall receive anannual base salary (“Annual Base Salary”) of not less than $440,000, which shall be paid inaccordance with the Company’s normal payroll practice. Thereafter, the Board or theExecutive Compensation and Development Committee of the Board (“ECDC”) shall review annuallyExecutive’s compensation and may elect to increase his Annual Base Salary.(ii) Annual Bonuses. In addition to Annual Base Salary, the Executive shallparticipate in the Company’s Annual Incentive Program, or any successor annual bonusplan(s), with a target annual bonus opportunity of not less than 75% of his Annual BaseSalary. In addition, during the Employment Period, the Executive shall be entitled toparticipate in all long-term and other incentive plans, practices, policies and programsgenerally applicable to senior executive officers of the Company and its affiliatedcompanies.(iii) Equity Compensation. During the Employment Period, the Executive shallhave the right to participate in an equity compensation arrangement to be established by theBoard or the ECDC of the Board and subject to such terms and conditions as will bedetermined by the Board in its sole discretion.(iv) Savings and Retirement Plans. During the Employment Period, the Executiveshall be entitled to participate in all savings and retirement plans, practices, policiesand programs generally applicable to senior executive officers of the Company and itsaffiliated companies, subject to the Board’s authority to modify or terminate any suchplans, practices, policies or programs on a Company-wide basis at any time.
 
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(v) Welfare Benefit Plans. During the Employment Period, the Executive and/orthe Executive’s family, as the case may be, shall be eligible for participation in and shallreceive all benefits under welfare benefit plans, practices, policies and programs providedby the Company and its affiliated companies (including, without limitation, medical,prescription drug, dental, disability, salary continuance, employee life, group life,accidental death and travel accident insurance plans and programs) to the extent generallyapplicable to senior executive officers of the Company and its affiliated companies, subjectto the Board’s authority to modify or terminate any such plans, practices, policies orprograms on a Company-wide basis at any time.(vi) Expenses. During the Employment Period, the Executive shall be entitledto receive prompt reimbursement, in accordance with Company policy, for all reasonableexpenses incurred by the Executive in performing his duties hereunder.(vii) Vacation. During the Employment Period, the Executive shall be entitledto paid vacation in accordance with the plans, policies, programs and practices of theCompany and its affiliated companies as in effect from time to time.3. Termination of Employment.(a) Death or Disability. The Executive’s employment shall terminate automaticallyupon the Executive’s death during the Employment Period. If the Company determines in good faiththat the Disability of the Executive has occurred during the Employment Period (pursuant to thedefinition of Disability set forth below), it may give to the Executive written notice inaccordance with Section 8(b) of this Agreement of its intention to terminate the Executive’semployment. In such event, the Executive’s employment with the Company shall terminate effectiveon the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”),provided that, within the 30 days after such receipt, the Executive shall not have returned tofull-time performance of the Executive’s duties. For purposes of this Agreement, “Disability”shall mean the Executive’s long-term disability for purposes of any reasonable occupation asdetermined under the Company’s disability plan that is applicable to the Executive.(b) Cause. The Company may terminate the Executive’s employment during the EmploymentPeriod for Cause. For purposes of this Agreement, “Cause” shall mean:(i) the willful and continued failure of the Executive to perform substantially theExecutive’s duties with the Company or one of its affiliates (other than any such failureresulting from incapacity due to physical or mental illness), after a written demand forsubstantial performance is delivered to the Executive by the Board or the Chief ExecutiveOfficer of the Company which specifically identifies the manner in which the Board or ChiefExecutive Officer believes that the Executive has not substantially performed theExecutive’s duties;(ii) the willful engaging by the Executive in illegal conduct or gross misconduct whichis materially and demonstrably injurious to the Company;(iii) the Executive’s conviction of, or plea of guilty or no contest to, a felony orany other crime involving moral turpitude, fraud, theft, embezzlement or dishonesty; or(iv) the Executive’s habitual drug or alcohol abuse.
 
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For purposes of this provision, no act or failure to act, on the part of the Executive, shall beconsidered “willful” unless it is done, or omitted to be done, by the Executive in bad faith orwithout reasonable belief that the Executive’s action or omission was in the best interests of theCompany. Any act, or failure to act, based upon authority given pursuant to a resolution dulyadopted by the Board or upon the instructions of the Chief Executive Officer or based upon theadvice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done,by the Executive in good faith and in the best interests of the Company. The cessation ofemployment of the Executive shall not be deemed to be for Cause unless and until there shall havebeen delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of notless than a majority of the entire membership of the Board at a meeting of the Board called andheld for such purpose (after reasonable notice is provided to the Executive and the Executive isgiven an opportunity, together with counsel, in the case of conduct described in subparagraph (i)or (ii) above, to be heard before the Board), finding that, in the good faith opinion of the Board,the Executive is guilty of the conduct described in subparagraph (i),(ii), (iii) or (iv) above, andspecifying the particulars thereof in detail.(c) Good Reason. The Executive’s employment may be terminated by the Executive forGood Reason. For purposes of this Agreement, “Good Reason” shall mean:(i) a material failure by the Company to comply with any of the provisions of Section2(b) of this Agreement relating to compensation, other than an isolated, insubstantial andinadvertent failure not occurring in bad faith and which is remedied by the Company promptlyafter receipt of notice thereof given by the Executive;(ii) the assignment to the Executive of any duties inconsistent in any respect with theExecutive’s position as Senior Vice President and Chief Financial Officer of the Company andthe authority, duties and responsibilities contemplated by Section 2(a) of this Agreement,or any other action by the Company, including a fundamental change to the nature and scopeof the Company’s business, which results in a material diminution in such position,authority, duties or responsibilities, excluding for this purpose an isolated, insubstantialand inadvertent action not taken in bad faith and which is remedied by the Company promptlyafter receipt of notice thereof given by the Executive;(iii) the Company’s requiring the Executive to be based at any office or location otherthan as provided in Section 2(a)(i)(B) hereof or the Company’s requiring the Executive totravel on Company business to a substantially greater extent than required immediately priorto the Effective Date; or(iv) Executive’s receipt of the Company’s written notice not to renew the Agreement orthe failure of the Company and the Executive to enter into a new employment agreement by nolater than the last day of the Employment Period.If the Executive terminates his employment for Good Reason pursuant to subparagraph (ii) above as aresult of a sale by the Company of substantially all of its assets, then the Executive shall makehimself available to the Company as a paid independent consultant for such fee, at such times, oversuch period of time and for such number of hours as the parties shall reasonably agree, takingaccount of any new employment that the Executive may undertake.
 
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(d) Notice of Termination. Any termination by the Company for Cause, or by theExecutive for Good Reason, shall be communicated by Notice of Termination to the other party heretogiven in accordance with Section 8(b) of this Agreement. For purposes of this Agreement, a “Noticeof Termination” means a written notice which (i) indicates the specific termination provision inthis Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail thefacts and circumstances claimed to provide a basis for termination of the Executive’s employmentunder the provision so indicated and (iii) if the Date of Termination (as defined below) is otherthan the date of receipt of such notice, specifies the termination date (which date shall be notmore than thirty days after the giving of such notice). The failure by the Executive or theCompany to set forth in the Notice of Termination any fact or circumstance which contributes to ashowing of Good Reason or Cause shall not waive any right of the Executive or the Company,respectively, hereunder or preclude the Executive or the Company, respectively, from asserting suchfact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.(e) Date of Termination. “Date of Termination” means (i) if the Executive’semployment is terminated by the Company for Cause, or by the Executive for Good Reason, the date ofreceipt of the Notice of Termination or any later date specified therein, as the case may be, (ii)if the Executive’s employment is terminated by the Company other than for Cause or Disability, theDate of Termination shall be the date on which the Company notifies the Executive of suchtermination and (iii) if the Executive’s employment is terminated by reason of death or Disability,the Date of Termination shall be the date of death of the Executive or the Disability EffectiveDate, as the case may be.4. Obligations of the Company upon Termination.(a) Good Reason; Other Than for Cause. Except as provided in Section 4(b) below, if,during the Employment Period, the Company shall terminate the Executive’s employment other than forCause or the Executive shall terminate employment for Good Reason:(i) the Company shall pay to the Executive in a lump sum in cash within ten days of theDate of Termination, or, with respect to the payments described in Sections 4(a)(i)(B) and(C), such other time described in Section 8(g), the aggregate of the following amounts:A. the sum of (1) the Executive’s accrued Annual Base Salary through the Dateof Termination, (2) any unpaid annual bonus earned by the Executive with respect tothe previous year, and (3) any accrued vacation pay, in each case to the extent nottheretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shallbe hereinafter referred to as the “Accrued Obligations”); and
 
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B. an amount equal to the average annualized payment the Executive received forthe 3 years (or such shorter period during which the Executive has served as SeniorVice President and Chief Financial Officer of the Company) immediately preceding theDate of Termination under the Company’s Annual Incentive Program, multiplied by thenumber of days that have transpired during that fiscal year immediately prior to theDate of Termination, divided by 365; andC. an amount equal to 200% of the sum of (i) the Executive’s Annual Base Salaryimmediately prior to the Date of Termination and (ii) the average annualized paymentthe Executive received for the 3 years (or such shorter period during which theExecutive has served as Senior Vice President and Chief Financial Officer of theCompany) immediately preceding the Date of Termination under the Company’s AnnualIncentive Program (the “Severance Payment”).(ii) subject to the provisions of Section 8(g) hereof, to the extent not theretoforepaid or provided, the Company shall timely pay or provide to the Executive any other amountsor benefits, excluding any severance or separation pay or benefits, required to be paid orprovided or which the Executive is eligible to receive under any plan, program, policy,practice, contract or agreement of the Company and its affiliated companies, including,without limitation, the vested benefit, if any, of the Executive under any qualified definedbenefit or defined contribution retirement plan of the Company and its affiliated companiesin which the Executive participates, in accordance with the terms of such plan (such otheramounts and benefits shall be hereinafter referred to as the “Other Benefits”);(iii) the Company shall continue to provide at its expense (on the same basis as at theExecutive’s Date of Termination) for the continued participation of the Executive and, tothe extent applicable, his family, in the Company’s medical, dental, vision and lifeinsurance plans and programs, for a period of four months commencing with the Date ofTermination; and(iv) upon request of the Executive, the Company shall provide outplacement services tothe Executive for up to twelve months and up to an aggregate cost of $25,000.(b) Change in Control. If the Company shall terminate the Executive’s employmentother than for Cause or the Executive shall terminate employment for Good Reason upon a Change inControl (pursuant to the definition of Change in Control set forth below) or at any time within 24months after the Change in Control, then the Executive shall be entitled to receive (1) all amountsas provided for in Section 4(a) hereof, provided, however, that the Severance Payment under thisSection 4(b) will be an amount equal to 250% of the sum of (i) the Executive’s Annual Base Salaryimmediately prior to the Date of Termination and (ii) the average annualized payment the Executivereceived for the 3 most recent years under the Company’s Annual Incentive Program (or such shorterperiod during which the Executive has served as Senior Vice President and Chief Financial Officerof the Company), and (2) immediate vesting of all outstanding equity awards granted pursuant to theCompany’s equity compensation plan as may be in effect from time to time.
 
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(i) For purposes of this Agreement, “Change in Control” shall be deemed to haveoccurred if:A. Any “person” (as such term is used in Sections 13(d) and 14(d) of theExchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under theExchange Act), directly or indirectly, of securities of the Company representingmore than 50% of the voting power of the then outstanding securities of the Company,and such person owns more aggregate voting power of the Company’s then outstandingsecurities entitled to vote generally in the election of directors than any otherperson;B. The shareholders of the Company approve (or, if shareholder approval is notrequired, the Board approves) an agreement providing for (x) the merger orconsolidation of the Company with another corporation where the shareholders of theCompany, immediately prior to the merger or consolidation, will not beneficiallyown, immediately after the merger or consolidation, shares entitling suchshareholders to 50% or more of all votes to which all shareholders of the survivingcorporation would be entitled in the election of directors (without consideration ofthe rights of any class of stock to elect directors by a separate class vote), (y)the sale or other disposition of 50% or more of the Company’s assets that it owns asof the Effective Date of this Agreement, or (z) a liquidation or dissolution of theCompany; provided, however, the effectiveness of a plan of reorganization pursuantto which a majority of the common stock of the reorganized Company is distributed(i) to Persons who are (a) holders of claims against the Company; (b) holders ofequity interests in the Company; and/or (c) designated in the Company’s plan ofreorganization proposal dated December 8, 2006, to receive common stock of thereorganized Company; or (ii) to or for the benefit of Company management, shall notconstitute a “Change in Control”; orC. Directors are elected such that a majority of the members of the Board shallhave been members of the Board for less than two years, unless the election ornomination for election of each new director who was not a director at the beginningof such two-year period was approved by a vote of at least two-thirds of thedirectors then still in office who were directors at the beginning of such period.(c) Death. If the Executive’s employment is terminated by reason of the Executive’sdeath during the Employment Period, this Agreement shall terminate without further obligations tothe Executive’s legal representatives under this Agreement, other than for timely payment orprovision of the following:(i) Accrued Obligations; and(ii) Other Benefits.
 
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Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in alump sum in cash within 30 days of the Date of Termination.(d) Disability. If the Executive’s employment is terminated by reason of theExecutive’s Disability during the Employment Period, this Agreement shall terminate without furtherobligations to the Executive, other than for timely payment or provision of the following:(i) Accrued Obligations; and(ii) Other Benefits.Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Dateof Termination.(e) Cause. If the Executive’s employment shall be terminated for Cause during theEmployment Period this Agreement shall terminate without further obligations to the Executive,other than for Accrued Obligations and the timely payment or provision of Other Benefits. In suchcase, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 daysof the Date of Termination.(f) Other than for Good Reason. If the Executive shall voluntarily terminateemployment, excluding a termination for Good Reason, he shall receive the Accrued Obligations paidin a lump sum in cash within 10 days of the Date of Termination. In such case, the Executive shallalso receive timely payment or provision of Other Benefits.5. Full Settlement; Legal Fees. The Company’s obligation to make the paymentsprovided for in this Agreement and otherwise to perform its obligations hereunder shall not beaffected by any set-off, counterclaim, recoupment, defense or other claim, right or action whichthe Company may have against the Executive or others. In no event shall the Executive be obligatedto seek other employment or take any other action by way of mitigation of the amounts payable tothe Executive under any of the provisions of this Agreement, and such amounts shall not be reducedwhether or not the Executive obtains other employment. The Company agrees to pay, to the fullextent permitted by law, all legal fees and expenses which the Executive may reasonably incur as aresult of any contest, by the Company, the Executive or others of the validity or enforceabilityof, or liability under, any provision of this Agreement or any guarantee of performance thereof(whether such contest is between the Company and the Executive or between either of them and anythird party, and including as a result of any contest by the Executive about the amount of anypayment pursuant to this Agreement). The Company shall make payment of such reimbursements fromtime to time, but in no event later than the last day of the calendar year following the calendaryear in which such expenses are incurred, provided the Executive timely submits reasonabledocumentation of such expenses. In the event the Executive is not the prevailing party in any suchcontest, the Executive shall pay back any reimbursements made by the Company hereunder within 30days of final disposition of such contest.
 
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6. Confidential Information and Competitive Activity.(a) Confidential Information. As used herein, “Confidential Information” means alltechnical and business information of the Company and its affiliated companies, whether patentableor not, which is of a confidential, trade secret and/or proprietary character and which is eitherdeveloped by the Executive (alone or with others) or to which the Executive has had access duringthe Executive’s employment. “Confidential Information” shall also include confidential evaluationsof, and the confidential use or non-use by the Company or any affiliated company of, technical orbusiness information in the public domain.The Executive shall use the Executive’s best efforts and diligence both during and afteremployment by the Company to protect the confidential, trade secret and/or proprietary character ofall Confidential Information. The Executive shall not, directly or indirectly, use (for theExecutive or another) or disclose any Confidential Information, for so long as it shall remainproprietary or protectible as confidential or trade secret information, except as may be necessaryfor the performance of the Executive’s duties with the Company.The Executive shall deliver promptly to the Company, at the termination of the Executive’semployment, or at any other time at the Company’s request, without retaining any copies, alldocuments and other material in the Executive’s possession relating, directly or indirectly, to anyConfidential Information.Each of the Executive’s obligations in this Section shall also apply to the confidential,trade secret and proprietary information learned or acquired by the Executive during theExecutive’s employment from others with whom the Company or any affiliated company has a businessrelationship.The Executive understands that the Executive is not to disclose to the Company or anyaffiliated company, or use for its benefit, any of the confidential, trade secret or proprietaryinformation of others, including any of the Executive’s former employers.(b) Competitive Activity; Nonsolicitation. In the event that, during the EmploymentPeriod, Executive shall voluntarily terminate his employment hereunder, be terminated by theCompany without Cause, or terminate his employment hereunder for Good Reason, then the Executiveshall not, directly or indirectly (whether as owner, partner, consultant, employee or otherwise),at any time during the six months following termination of his employment with the Company or anyaffiliate for any reason, engage in or contribute his knowledge to any work or activity thatinvolves a product, process, apparatus, service or development which is then competitive with orsimilar to a product, process, apparatus, service or development on which he worked or with respectto which he had access to Confidential Information while employed by the Company or an affiliate atany time during the period of five years immediately prior to his Date of Termination (“CompetitiveWork”). However, the Executive shall be permitted to engage in such proposed work or activity, andthe Company shall furnish him a written consent to that effect signed by an officer of the Company,if the Executive shall have furnished to the Company clear and convincing written evidence,including assurances from the Executive and his new employer, that the fulfillment of his duties insuch proposed work or activity would not likely cause him to disclose, base judgment upon, or useany Confidential Information. In addition, during his employment by the Company or an affiliateand for a period of six months thereafter, the Executive shall not, directly or indirectly, (i)induce or attempt to induce a salaried employee of the Company or any of its affiliates to acceptemployment or affiliation involving Competitive Work with another firm or corporation of which theExecutive is an employee, owner, partner or consultant, or (ii) induce or attempt to induce anycustomer, supplier, licensee or other person having a business relationship with the Company tocease doing business with the Company or interfere materially with the relationship between theCompany and any such customer, supplier, licensee or other person having a business relationshipwith the Company.
 
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(c) Injunctive Relief. Executive agrees that the restrictions imposed upon him bythis Section 6 are fair and reasonable considering the nature of the Company’s business and arereasonably required for the protection of the Company. Executive also acknowledges that a breachof any of the provisions of this Section 6 may result in continuing and irreparable damages to theCompany for which there may be no adequate remedy at law, and that the Company, in addition to allother relief available to it, shall be entitled to the issuance of a temporary restraining order,preliminary injunction and permanent injunction restraining the Executive from committing orcontinuing to commit any breach of the provisions of this Section 6.(d) Blue Pencil. If, at any time, the provisions of this Section 6 shall bedetermined to be invalid or unenforceable under any applicable law, by reason of being vague orunreasonable as to area, duration or scope of activity, this Agreement shall be considereddivisible and shall become and be immediately amended to only such area, duration and scope ofactivity as shall be determined to be reasonable and enforceable by the court or other body havingjurisdiction over the matter and the Executive and the Company agree that this Agreement as amendedshall be valid and binding as though any invalid or unenforceable provision had not been includedherein.7. Successors.(a) This Agreement is personal to the Executive and without the prior written consent of theCompany shall not be assignable by the Executive otherwise than by will or the laws of descent anddistribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’slegal representatives.(b) This Agreement shall inure to the benefit of and be binding upon the Company and itssuccessors and assigns.8. Miscellaneous.(a) This Agreement shall be governed by and construed in accordance with the laws of the Stateof Delaware, without reference to principles of conflict of laws. The captions of this Agreementare not part of the provisions hereof and shall have no force or effect. This Agreement may not beamended or modified otherwise than by a written agreement executed by the parties hereto or theirrespective successors and legal representatives.
 
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(b) All notices and other communications hereunder shall be in writing and shall be given byhand delivery to the other party or by registered or certified mail, return receipt requested,postage prepaid, addressed as follows:If to the Executive:James M. Sullivan14 Windsor LaneKirkwood, MO 63122If to the Company:Jeffry N. QuinnChairman of the Board, President and Chief Executive OfficerSolutia Inc.P.O. Box 66760St. Louis, MO 63166-6760With a copy to:Rosemary L. KleinSenior Vice President, General Counsel and Corporate SecretarySolutia Inc.P.O. Box 66760St. Louis, MO 63166-6760or to such other address as either party shall have furnished to the other in writing in accordanceherewith. Notice and communications shall be effective when actually received by the addressee.(c) The invalidity or unenforceability of any one or more provisions of this Agreement shallnot affect the validity or enforceability of any other provision of this Agreement, which shallremain in full force and effect.(d) The Company may withhold from any amounts payable under this Agreement such Federal,state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law orregulation.(e) The Executive’s or the Company’s failure to insist upon strict compliance with anyprovision of this Agreement or the failure to assert any right the Executive or the Company mayhave hereunder shall not be deemed to be a waiver of such provision or right or any other provisionor right of this Agreement.
 
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(f) This Agreement constitutes the entire agreement between the parties with respect to thesubject matter hereof and supersedes all prior agreements, oral and written, between the partieshereto with respect to the subject matter hereof, including, without limitation, the Amended andRestated Employment Agreement dated as of April 11, 2007 and any other prior employment agreementbetween the Company and the Executive, and the Executive waives all rights with respect to suchagreements, including, without limitation, any claims for damages related to such agreements;provided, that this Agreement shall have no effect on the Executive’s rights under any plan,program, policy or practice provided by the Company or any of its affiliated companies except thatthe benefits and other payments provided for pursuant to Section 3 hereof shall be in lieu of anyseverance or separation pay or benefits to which the Executive might otherwise be entitled underany plan, program, policy or arrangement of the Company and its affiliates. In consideration ofthe promises set forth in the Agreement, and of the mutual releases set forth in this paragraph,each party hereto relinquishes all rights, and releases the other from all promises, liabilitiesand commitments that may have existed under such other agreements, which shall be null and void andof no further effect.(g) No amounts shall be payable pursuant to Section 4(a)(i)(B), 4(a)(i)(C) or 4(b) of thisAgreement unless and until the Executive shall have executed and delivered a waiver and release ofclaims against the Company substantially in the form attached hereto as Exhibit A. In the eventthe Executive does not execute and deliver such waiver and release to the Company within 30 days ofhis Date of Termination, no payments shall be made under Sections 4(a)(i)(B), 4(a)(i)(C) or 4(b)(with respect to amounts which relate to Sections 4(a)(i)(B) and 4(a)(i)(C)). Any payments dueunder such Sections shall be paid within ten (10) days of the date the Executive delivers thewaiver and release to the Company, provided such waiver and release is not revoked.Notwithstanding the above, these payments (and any other payments or benefits under this Agreementwhich are nonqualified deferred compensation under Code Section 409A for which an exemption fromsuch provision is not available) shall not be made prior to the date which is six months after thedate of Executive’s termination of employment if he is a “specified employee” at the time of histermination. In such case, the Executive’s payments shall be credited with interest at theapplicable Federal rate provided for in Code Section 7872(f)(2)(A) during such period, and paymentshall be made on the date after the last day of such six-month period. A “specified employee” is akey employee (as defined in Code Section 416(i) without regard to Code Section 416(i)(5))determined in accordance with the meaning of such term under Code Section 409A and the regulationspromulgated thereunder and the Company’s established methodology for determining specifiedemployees.(h) Except as otherwise provided by Section 6(c), in the event of any dispute, controversy orclaim arising out of or relating to this Agreement or Executive’s employment or terminationthereof, the parties hereby agree to settle such dispute, controversy or claim in a bindingarbitration by a single arbitrator in accordance with the Commercial Arbitration Rules of theAmerican Arbitration Association, which arbitration shall be conducted in St. Louis, Missouri. Theparties agree that the arbitral award shall be final and non-appealable and, except as otherwiseprovided by Section 6(c), shall be the sole and exclusive remedy between the parties hereunder.The parties agree that judgment on the arbitral award may be entered in any court having competentjurisdiction over the parties or their assets.9. Code Section 409A Compliance. With respect to those amounts payable hereunderwhich are subject to Code Section 409A, this Agreement shall be interpreted in a manner so as to beconsistent with such provision and the rules and regulations promulgated thereunder. The Companymay modify the Agreement to the extent necessary to prevent a benefit or payment from being subjectto a tax due to noncompliance with Code Section 409A.
 
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10. Code Section 4999. If, as a result of payments provided for under or pursuant tothis Agreement together with all other payments in the nature of compensation provided to or forthe benefit of Executive, any state, local or federal taxing authority imposes any taxes onExecutive that would not be imposed on such payments but for the occurrence of a change of control,including any excise tax under Section 4999 of the Code, then, in addition to any other benefitsprovided under or pursuant to this Agreement or otherwise, the Company (including any successor toor assignee of the Company) shall pay to Executive at the time any such payments are made under orpursuant to this Agreement or the other agreements, an amount equal to the amount of any such taxesimposed or to be imposed on Executive (the amount of any such payment, the “Tax Reimbursement”). Inaddition, the Company (including any successor to or assignee of the Company) shall “gross up” suchTax Reimbursement by paying to Executive at the same time an additional amount equal to theaggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes,employment taxes or otherwise) that are or will be payable by Executive as a result of the TaxReimbursement being paid or payable to Executive and/or as a result of the additional amounts paidor payable to Executive pursuant to this sentence, such that after payment of such additional taxesExecutive shall have been paid on a net after-tax basis an amount equal to the Tax Reimbursement.The amount of any Tax Reimbursement and of any such gross-up amounts shall be determined by theCompany’s independent auditing firm, whose determination, absent manifest error, shall be treatedas conclusive and binding absent a binding determination by a governmental taxing authority that agreater amount of taxes is payable by Executive. Any reimbursement under this Section 10 shall bepaid by the Company at the time required herein, but in no event later than the December 31 of thecalendar year following the calendar year during which the Executive pays the tax subject toreimbursement under this Section 10.11. Counterparts. This Agreement may be executed in separate counterparts, each ofwhich is deemed to be an original and all of which taken together constitute one and the sameagreement and shall become effective when one or more counterparts have been signed by each of theparties and delivered to the other party in original or facsimile form.[*signature page to follow*]
 
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to theauthorization from its Board of Directors, the Company has caused these presents to be executed inits name on its behalf, all as of the day and year first above written.                                                    /s/ James M. Sullivan   James M. Sullivan    SOLUTIA INC.