Filed by Bowne Pure Compliance





EXHIBIT 10(f)




Amended 2008 Solutia Inc. Annual Incentive Plan




This document sets forth the terms of the Solutia Inc. Annual Incentive Plan (the “Plan” or the
“AIP”) for the year beginning January 1, 2008 and ending December 31, 2008 (the Performance Year”).



Purpose




The purpose of the Solutia Inc. Annual Incentive Plan is to provide employees with annual cash
bonus opportunities to incent strong operational and financial performance and promote the creation
of shareholder value.



I. Performance Metrics



The Executive Compensation and Development Committee of the Company’s Board of Directors (the
“ECDC”) sets performance metrics for the Plan based on industry expectation, market opportunities
and other factors the ECDC believes are relevant. The 2008 performance metrics for each incentive
pool are shown in the following charts:



Business Unit Pools




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Performance	 	 	 	 	 	 	Performance	 	 	 	 	 	 	Performance	 	 	 	 
	Unit	 	Measure #1	 	 	Weight	 	 	Measure #2	 	 	Weight	 	 	Measure #3	 	 	Weight	 
	 
	 	Enterprise	 	 	 	 	 	Enterprise Free	 	 	 	 	 	 	 	 	 	 	 	 
	Core
	 	EBITDAR	 	 	50	%	 	Cash Flow	 	 	50	%	 	NA	 	NA
	Integrated Nylon
	 	EBITDAR	 	 	50	%	 	Free Cash Flow	 	 	50	%	 	NA	 	NA
	Saflex
	 	EBITDAR	 	 	33.3	%	 	Free Cash Flow	 	 	33.3	%	 	Gross Margin %	 	 	33.3	%
	CPFilms
	 	EBITDAR	 	 	50	%	 	Free Cash Flow	 	 	50	%	 	NA	 	NA
	Flexsys
	 	EBITDAR	 	 	50	%	 	Free Cash Flow	 	 	50	%	 	NA	 	NA
	Other PPD
	 	EBITDAR	 	 	50	%	 	Free Cash Flow	 	 	50	%	 	NA	 	NA






Enterprise Discretionary Bonus Pool




	 	 	 	 	 	 	 	 	 
	Unit	 	Performance Measure	 	 	Weight	 
	All
	 	Enterprise EBITDAR	 	 	100	%






 


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Target performance levels and funding factors have been established by the ECDC. Performance
metrics may be adjusted, as appropriate, based on asset sales and dispositions. For purposes of
the Plan the performance measures have the following meaning:




	 	•	 	“EBITDAR” means with respect to any specified entity for any
period, consolidated net income (loss) of such specified entity
and its subsidiaries for such period, determined on a consolidated
basis, in accordance with GAAP and subject to historical internal
reporting standards, excluding (without duplication), to the
extent deducted in determining consolidated net income (loss) (a)
any extraordinary, non-recurring, non-operational or non-cash
gains or losses, (b) restructuring charges, and (c) effects of
discontinued operations, plus (without duplication), in accordance
with GAAP and to the extent deducted in determining consolidated
net income (loss), (d) interest expense, and (e) income tax
expense plus, (f) depreciation expense, and (g) amortization
expense excluding amortization of deferred credits plus, (h)
reorganization items. Calculation of EBITDAR shall exclude all
impacts of fresh start accounting and any effects of accounting
policy changes made in connection with fresh start, effective as
of the emergence date.






	 	•	 	“Free Cash Flow” means, with respect to any specified entity for
any period, the cash flow provided by (used in) continued
operations of such specified entity and its subsidiaries for such
period, determined on a consolidated basis, in accordance with
GAAP and subject to historical internal reporting standards,
excluding (without duplication), to the extent deducted in
determining cash flow provided by (used in) continued operations
(a) any extraordinary, non-recurring or non-operational gains or
losses, (b) restructuring charges, and (c) effects of discontinued
operations, less Capital Expenditures, plus net proceeds received
related to asset sales and proceeds received by Solutia in excess
of management’s estimate from the disposition of any of the
Company’s business units or divisions, to the extent sold during
the calendar year.






	 	•	 	“Gross Margin %” means, with respect to any specified entity for
any period, gross margin (the difference between the reported
revenue less cost of goods sold of the business unit) divided by
revenue of such specified entity and its subsidiaries for such
period, determined on a consolidated basis, in accordance with
GAAP and subject to historical internal reporting standards,
excluding (without duplication), to the extent deducted in
determining gross margin or revenue (a) any extraordinary,
non-recurring, non-operational or non-cash gains or losses or
gains or losses from dispositions, (b) restructuring charges, and
(c) effects of discontinued operation, and (d) all impacts of
fresh start accounting, including accounting policy changes made
in connection with fresh start, effective as of the emergence
date.




 


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II. Calculation of Incentive Awards



Solutia Inc. (the “Company”), for purposes of the Plan, is organized along business lines
(Integrated Nylon, Saflex, CPFilms, Flexsys, and Other Performance Products Divisions (Other PPD),
each a “Business”) in order to place emphasis on key performance measures of each individual
Business.



The size of the incentive pool available for awards will be based on the achievement of specific
performance measures (each incentive pool shall be referred to herein as a “Business Unit Incentive
Pool”). Employees assigned to a specific Business Unit will receive the funding factor tied to
that Business Unit’s specific performance measures.



For employees assigned to enterprise-wide functions (“Core Functions”), overall enterprise
performance shall determine the incentive pool available for awards (such pool to be referred to as
the “Core Function Incentive Pool”).



The actual funding of each Business Unit Incentive Pool and the Core Function Incentive Pool shall
be 90% of all aggregate target bonuses for individuals assigned to each pool multiplied by the
weighted average of the pre-established funding factor for achievement of specific performance
measures relative to target performance. The target performance and weightings for each
performance measure, and the related funding factors, have been determined by the ECDC based upon
the recommendation of the Chief Executive Officer of the Company (the “CEO”).



The entire Business Unit Incentive Pool or the Core Function Incentive Pool will be allocated in
the form of awards to individuals assigned to these Pools. Each Pool will be divided equally into
an objective award pool and a discretionary award pool as described below:




	 	•	 	The objective award pool will be based upon business-unit
performance and will be equal to 45% of such individual’s target
bonus multiplied by the relevant funding factor.






	 	•	 	The discretionary award pool will be based upon a participant’s
individual performance versus established objectives, performance
in relation to peers, and according to the process described
below. The discretionary portion of an individual participant’s
bonus may range from zero upward.




 


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In addition to the Business Unit Incentive Pools and the Core Function Incentive Pool, an overall
enterprise discretionary bonus pool (the “Enterprise Discretionary Incentive Bonus Pool”) shall be
funded by the enterprise-level EBITDAR performance relative to a pre-established target performance
level. The funding of the Enterprise Discretionary Incentive Pool shall be 10% of all aggregate
target bonuses multiplied by a pre-established funding factor. All participating employees will be
eligible for a discretionary award from this pool at the discretion of the CEO and the ECDC (if
applicable).



If threshold performance levels are not met, there would be no bonus pool for that performance
year. If a bonus pool is funded, a participant would be eligible to receive a minimum bonus of 45%
of their performance adjusted target bonus (after applying the funding factor that is based on
financial performance). The maximum funding factor that can be achieved under this plan is 3.0x
target performance (if the maximum performance is achieved). After applying the funding factor,
the participant’s maximum opportunity is 2.0x the performance adjusted bonus.



The process for determining bonuses is as follows:




	 	1)	 	Incentive Pools are determined and funded based on Business Unit/Core
performance relative to the pre-established targets, funding factors,
and weighting. The Pools are then allocated equally to objective
awards and discretionary awards.






	 	2)	 	The Enterprise Discretionary Incentive Pool is determined and funded
based on the enterprise EBITDAR performance relative to the
pre-established target.






	 	3)	 	The objective portion of bonuses are determined and approved by the ECDC.






	 	4)	 	Managers will make individual award recommendations based upon
individual performance compared to established objectives for
individual discretionary portion. Individual discretionary awards
will be approved by the Business Unit President and the CEO.






	 	5)	 	Bonus amounts from the Enterprise Discretionary Bonus Pool will be
determined at the discretion of the CEO with the advice of the
Executive Leadership Team (ELT).






	 	6)	 	The ECDC shall determine the discretionary bonus for the CEO and
approve discretionary awards for the ELT. Any discretionary bonus
paid to the CEO in excess of 50% of the CEO’s target bonus multiplied
by the relevant funding factor shall not, at the discretion of the
ECDC, diminish awards available under the Core Function Incentive
Pool, the Business Unit Incentive Pool or the Enterprise Discretionary
Bonus Pool.




 


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	 	7)	 	The ECDC has determined that the maximum bonus an individual can
receive under the AIP is 200% of his/her performance adjusted target
bonus (after applying the funding factor).






	 	8)	 	In cases where an individual is assigned to a specific Business Unit
or Core, but supports more than one Business Unit, the performance
metric component of the funding will be based on the following rules:






	 	•	 	Employees who support a Business Unit more than 50% of the time
will receive that Unit’s funding factor.






	 	•	 	Employees who support two Business Units equally will receive an
average of the two Units’ funding factors.






	 	•	 	Employees who support multiple Business Units (and aren’t covered
by the above) will receive the Core funding factor.






	 	•	 	Funding sources for an employee’s award will be determined based
on the number of full months spent, rounded if applicable, in each
function or Business Unit.






Each employee’s actual award will also depend on individual performance in serving all
relevant functions and Business Units and will include input from each respective
manager.



Actual awards based on the performance metric will vary as described above based upon achievement
of Business Unit or Core performance measures and individual performance. Management, the CEO and
the ECDC reserve the right to make no award to individuals who exhibit below standard performance,
incidents of misconduct, etc.



III. Administration




The ECDC and the CEO, whose decisions are final, shall administer the Plan jointly. The Senior
Vice President — Human Resources will be responsible for the administrative procedures governing
the Plan, including ensuring the existence of approved Performance Measures and the presentation of
the performance results under the Plan to the ECDC for its approval. The following administrative
procedures shall govern:




	 	1.	 	The ECDC will approve individual incentive awards for the CEO and all
Executive Leadership Team (ELT) members. The CEO and his direct
reports may approve all other incentive awards.






	 	2.	 	Employees must be actively employed with the company on the day of the payout to receive an award.




 


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	 	3.	 	Employees who retire, resign, or are terminated shall not be eligible
for an award if they are not employed by Solutia on the date of
payment.






	 	4.	 	Employees on leave of absence during the Performance Year will be
considered for a prorated award reflecting actual serve, rounded to
the nearest whole month. Payment will be made, if any, at the time
awards are normally paid, or upon returning from leave of absence, if
later.






	 	5.	 	In the event of an employee’s death, payment will be made to the
employee’s estate reflecting the employee’s actual service to the
nearest whole month.






	 	6.	 	Employees promoted or hired before December 1 into a position that is
eligible to participate may be considered for an award that will be
prorated reflecting the employees’ actual participation to the nearest
whole month.






	 	7.	 	Awards for Employee who change jobs (and incentive targets) during the
year will be prorated to reflect the employee’s actual participation
in both positions to the nearest whole month.






	 	8.	 	Employees who transfer from another Business Unit not participating in
this plan to a participating position or vice versa during the
Performance Year will receive a prorated award based on the time spent
in the participating position.






	 	9.	 	Employees who are involuntarily terminated with severance between the
end of the Performance Year and prior to the payout may be eligible to
receive an award.






	 	10.	 	Awards are paid in cash or common stock of the Company and are to be
paid on or between January 1, 2009 and March 15, 2009. If all or a
portion of the payment is made after March 15, 2009, the amount paid
after March 15, 2009 may be considered nonqualified deferred
compensation under Code Section 409A, and the Company shall comply
with any IRS Form W-2 reporting requirements that may apply to such
amounts. Awards outside of the United States are determined at the
same time as the awards for participants in the United States and paid
as soon as administratively possible once approved.





IV. Pension and Savings and Investment Plan (SIP) Implications




For participants in the United States, the entire amount of any annual award made for a year will
become part of the earnings used to calculate your Savings and Investment Plan (SIP) contributions,
subject to IRS and SIP limits. For participants outside the United States, the process established
in their country, pension plan or retirement program will apply.


 


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V. Taxes




For U.S. participants, any award you receive under the Plan is taxable as supplemental income in
the year of payment and is subject to all applicable withholding taxes in the year paid at a
minimum of 25%. For participants outside the United States, the laws of the tax jurisdiction(s) to
which you are subject will apply.



VI. Legal Information





	 	•	 	In all events, whether any cash award is made under the Plan to a
participant will depend on management’s recommendation and the
decision of the ECDC (or its delegate).






	 	•	 	Nothing in this document or any other document describing or
referring to the Plan shall confer any right whatsoever on any
person to be considered for any incentive commitments or awards.






	 	•	 	This document is subject to and governed by actions,
interpretation, and rules and regulations of the ECDC (or its
delegate) and may be changed or discontinued at any time without
notice or liability. Incentive commitments and awards shall be
subject to and governed by the specific terms and conditions of
this Plan and the applicable award.






	 	•	 	Nothing in this document or any other document describing or
referring to the Plan shall confer on any employee or participant
the right to continue in the employ of the Company or affect the
right of the Company to terminate the employment of any such
person with or without cause.






	 	•	 	Nothing contained herein shall require the Company to segregate
any monies from its general fund or to create any trusts, or to
make any special deposits for amounts payable to any participant.






	 	•	 	No bonus commitment or unpaid bonus award shall be pledged or
transferred except as specifically provided for herein (such as in
the case of death). If any participant attempts to pledge,
assign, transfer or otherwise alienate any award, any obligation
of the Company hereunder shall terminate.






	 	•	 	The Company will withhold any federal, state or local, domestic or
foreign taxes as required by law or regulation or as the Company
deems appropriate from any payments that it makes to participants
hereunder.






	 	•	 	The Plan is subject to the laws of the State of Delaware.




 


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	 	•	 	Nothing in this Plan shall be deemed to modify any terms and
conditions of a participant’s employment agreement.






	 	•	 	The Plan may be amended, modified or terminated without notice by
the Company at any time, including (but not limited to) any such
amendment, modification or termination that reduces or eliminates
any benefit otherwise to be paid or payable hereunder.






 


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