Document:

EX-10(YY)

 

    Exhibit
    10yy

 

    FORM OF

 

    REGISTRATION
    RIGHTS AGREEMENT

 

    THIS REGISTRATION RIGHTS AGREEMENT is entered into as of
    [          ],
    2007 by and between Solutia Inc., a Delaware corporation (the
    “Company”), and Monsanto Company, a Delaware
    corporation (“Monsanto”).

 

    R E C
    I T A L S

 

    The Company will issue to Monsanto shares of Common Stock (as
    defined below) pursuant to the Solutia Inc. Fourth Amended Joint
    Plan of Reorganization (the “Plan”) dated
    [          ],
    2007.

 

    NOW, THEREFORE, in consideration of the foregoing and of the
    mutual promises herein contained, the parties hereby agree as
    follows:

 

    AGREEMENT

 

    1. Definitions.  Unless the context
    otherwise requires, the terms defined in this Section 1
    shall have the meanings herein specified for all purposes of
    this Agreement, applicable to both the singular and plural forms
    of any of the terms herein defined.

 

    “Agreement” means this Registration Rights
    Agreement.

 

    “Automatic Shelf Registration Statement” means
    an automatic shelf registration statement as defined under
    Rule 405 of the Securities Act.

 

    “Board” means the Board of Directors of the
    Company.

 

    “Commission” means the Securities and Exchange
    Commission.

 

    “Common Stock” means the common stock, par
    value $.01, of the Company.

 

    “Exchange Act” means the Securities Exchange
    Act of 1934, as amended.

 

    “Free Writing Prospectus” means a free writing
    prospectus, as defined in Rule 405 under the Securities Act.

 

    “Holder” means Monsanto or any record or
    beneficial owner of Registrable Securities who became a party to
    this Agreement in accordance with Section 12 hereof.

 

    “Holders of a Majority of Registrable
    Securities” means the Person or Persons who are the
    Holders of greater than 50% of the Registrable Securities then
    outstanding.

 

    “Initiating Holder” means any Holder of
    Registrable Securities requesting registration pursuant to and
    in accordance with this Agreement. .

 

    “NASD” means the National Association of
    Securities Dealers, Inc.

 

    “Person” means any natural person, corporation,
    trust, association, company, partnership, limited liability
    company, joint venture and other entity and any government,
    governmental agency, instrumentality or political subdivision.

 

    The terms “register,”
    “registered” and
    “registration” refer to a registration effected
    by preparing and filing a registration statement in compliance
    with the Securities Act, and the declaration or ordering of the
    effectiveness of such registration statement.

 

    “Registration Date” means the earlier of
    (i) the date upon which the Company first files on a
    Form 10-K
    or
    Form 10-Q
    as promulgated under the Exchange Act, or any amendment to such
    a
    Form 10-K
    or
    Form 10-Q,
    financial statements that include a balance sheet for a date and
    income statements for a period for which the

 

    Company has adopted fresh-start accounting in accordance with
    SOP 90-7
    and (ii) the 135th day following the Effective Date
    (as defined in the Plan).

 

    “Registrable Securities” means (i) the
    shares of Common Stock issued or to be issued to Monsanto, and
    (ii) any shares of Common Stock or other securities issued
    or issuable in respect of the Common Stock or the other
    securities referred to in clause (i) above by way of a
    spin-off, split-off, dividend, stock split or other distribution
    or in connection with a combination of shares, reclassification,
    merger, consolidation, reorganization or similar transaction;
    provided, however, that such shares of Common Stock or
    other securities shall constitute Registrable Securities only so
    long as (x) they have not been sold by a Holder to or
    through a broker or dealer or underwriter in a public
    distribution or a public securities transaction pursuant to an
    effective registration statement under the Securities Act,
    (y) they have not been sold by a Holder in a transaction
    exempt from the registration and prospectus delivery
    requirements of the Securities Act under Section 4(1)
    thereof so that all transfer restrictions and restrictive
    legends with respect to such Common Stock or other securities
    are removed upon the consummation of such sale and the seller
    and purchaser of such Common Stock or other securities receive
    an opinion of counsel for the Company, which shall be in form
    and content reasonably satisfactory to the seller and purchaser
    and their respective counsel, to the effect that such Common
    Stock or other securities in the hands of the purchaser are
    freely transferable without restriction or registration under
    the Securities Act in any public or private transaction, or
    (z) they are not capable of being sold by the holder
    thereof under Rule 144 (without giving effect to
    subsection (k) of Rule 144) in a single
    transaction.

 

    “Rule 144” means Rule 144 as
    promulgated under the Securities Act.

 

    “Securities Act” means the Securities Act of
    1933, as amended.

 

    “WKSI” means a well-known seasoned issuer as
    defined under Rule 405 of the Securities Act.

 

    2. Demand Registration.

 

    (a) Following the Registration Date, Holders of a Majority
    of Registrable Securities shall have the right to request, by
    delivery of a written notice to the Company (a “Demand
    Notice”), that the Company file a registration
    statement under the Securities Act (a “Demand
    Registration Statement”) covering all or a portion of
    the Registrable Securities for the purpose of effecting an
    offering of such Registrable Securities, whether underwritten or
    otherwise (a “Demand Registration”);
    provided, however, that no Initiating Holder shall be
    entitled to demand a Demand Registration Statement during the
    period when the Company is exercising its right to defer a
    Demand Registration pursuant to Section 2(b). Any such
    Demand Notice must request the registration of Registrable
    Securities having an aggregate market value, based on the
    average per share closing price of the Common Stock as reported
    on the principal exchange or market on which it is then traded
    over the ten (10) consecutive trading days prior to the
    date of the Demand Notice, of not less than twenty-five million
    dollars ($25,000,000), or, if the registration statement will be
    on
    Form S-3,
    not less than ten million dollars ($10,000,000). Subject to
    Section 6(b)(i), as soon as reasonably practicable, but in
    no event later than sixty (60) days (or thirty
    (30) days if the registration statement will be a shelf
    registration statement on
    Form S-3)
    after receiving a Demand Notice, the Company shall file with the
    Commission a registration statement covering the Registrable
    Securities subject to the Demand Notice. Subject to
    Sections 2(b) and 4, the Company shall use its reasonable
    best efforts to cause such registration statement to become
    effective as expeditiously as possible. Any registration under
    this Section 2 shall reflect such plan or method of
    distribution of the applicable securities as shall be designated
    by the Initiating Holder.

 

    (b) Notwithstanding the provisions of Section 2(a), if
    the Company shall furnish to the Initiating Holder a certificate
    signed by the President and Chief Executive Officer of the
    Company stating that such officer has made a good faith
    determination that a registration would (i) require the
    disclosure of material nonpublic information concerning the
    Company, its business or prospects and that such premature
    disclosure would be materially adverse to the Company,
    and/or
    (ii) materially interfere with a pending transaction
    involving the Company or a subsidiary or affiliate of the
    Company, then the Company shall have the right to defer such
    filing or the effectiveness hereunder for a period ending not
    more than ninety (90) days after the Company’s receipt
    of the applicable Demand Notice, provided, that the
    Company may not exercise its right under this

    

    2

 

    Section 2(b) more than twice in any
    24-month
    period; and provided further, that the Company may not exercise
    its rights under this Section 2(b) for two consecutive
    90-day
    periods.

 

    (c) Notwithstanding the provisions of Section 2(a),
    the Company shall not be obligated to (i) file or effect a
    Demand Registration Statement for an underwritten offering of
    Registrable Securities (an “Underwritten Demand
    Registration Statement”) within a period of
    90 days after the effective date of any other Underwritten
    Demand Registration Statement or an underwritten offering
    pursuant to a Shelf Demand Registration Statement (as defined
    below) or (ii) file or effect more than a total of two
    Underwritten Demand Registration Statements within any
    12-month
    period; provided, however, that each Shelf Demand
    Registration Statement filed during the applicable
    12-month
    period will reduce by one the number of Underwritten Demand
    Registration Statements the Company is obligated to file during
    such
    12-month
    period.

 

    (d) The Company may elect to register in any underwritten
    Demand Registration (an “Underwritten Demand
    Registration”) any additional shares of Common Stock
    (including, without limitation, any shares of Common Stock to be
    distributed in a primary offering made by the Company) so long
    as the inclusion of such Common Stock by the Company would not
    (as determined in the Initiating Holder’s reasonable
    discretion), (i) be reasonably likely to delay in any
    material respect the Initiating Holder’s ability timely to
    sell the Registrable Securities pursuant to the Underwritten
    Demand Registration Statement or (ii) cause a reduction in
    the number of Registrable Securities included in the
    Underwritten Demand Registration as a result of the
    Company’s election to so register additional shares of
    Common Stock. Such election of the Company, if made, shall be
    made by the Company giving written notice to the Initiating
    Holder prior to the effectiveness of the Underwritten Demand
    Registration Statement stating (A) that the Company
    proposes to include additional shares of Common Stock in such
    Underwritten Demand Registration Statement, and (B) the
    number of shares of Common Stock proposed to be included.

 

    3. Shelf Registration.

 

    (a) Following the Registration Date, any Initiating Holder
    shall have the right to request, by delivery of a written notice
    to the Company (a “Shelf Demand Notice”), that
    (i) the Company file a shelf registration statement (a
    “Shelf Registration Statement”) pursuant to
    Rule 415 under the Securities Act covering all or a portion
    of the Registrable Securities to enable the resale on a delayed
    or continuous basis of such Registrable Securities (a
    “Shelf Demand Registration”) or (ii) if
    the Company is a WKSI and has an outstanding effective
    Form S-3
    Registration Statement, the Company file a post-effective
    amendment to such
    Form S-3
    Registration Statement covering all or a portion of the
    Registrable Securities; provided, however, that no
    Initiating Holder shall be entitled to demand a Shelf
    Registration Statement during the period when the Company is
    exercising its right to defer a Demand Registration pursuant to
    Section 2(b). Subject to Section 6(b)(i), as soon as
    reasonably practicable, but in no event later than forty-five
    (45) days after receiving a Shelf Demand Notice (or fifteen
    (15) days if the Company is a WKSI and then has an
    effective
    Form S-3
    Registration Statement), the Company shall file with the
    Commission a Shelf Registration Statement on
    Form S-3
    of the Commission or, if the Company is a WKSI and has an
    effective
    Form S-3
    Registration Statement, a post-effective amendment thereto.
    Subject to Sections 3(b) and 3(c), the Company shall use
    its commercially reasonable best efforts to cause the Shelf
    Registration Statement to become effective as expeditiously as
    possible and to remain effective until the earlier of
    (x) the time all Registrable Securities subject thereto
    have been sold and (y) the third anniversary of the initial
    effective time, including by filing necessary post-effective
    amendments and prospectus supplements reasonably required by a
    Holder, subject to any blackout periods described in
    subparagraph (b) below. The Initiating Holder shall have
    the right to determine the plan and method of distribution for
    the Registrable Securities to be reflected in the Shelf
    Registration Statement in respect of which it is the Initiating
    Holder. Notwithstanding anything contained herein to the
    contrary, the Holders of Registrable Securities may not file, or
    request that the Company file, as required by Rule 424 of
    the Securities Act, more than three (3) prospectuses or
    prospectus supplements in connection with any Shelf Registration
    Statement in any thirty (30) day period.

 

    (b) Notwithstanding the provisions of Section 3(a), if
    the Company is required to effect a Shelf Registration Statement
    or make any filing with the Commission pursuant to this
    Section 3 or if the Company has a Shelf Registration
    Statement in effect pursuant to this Section 3, and the
    Company furnishes to the

    

    3

 

    Initiating Holder requesting such registration or filing or to
    the Holders of Registrable Securities included in such Shelf
    Registration Statement, as applicable, a certificate signed by
    the President and Chief Executive Officer of the Company stating
    that such officer has made a good faith determination that a
    registration would (i) require the disclosure of material
    nonpublic information concerning the Company, its business or
    prospects and that such disclosure would be materially adverse
    to the Company,
    and/or
    (ii) materially interfere with a pending transaction
    involving the Company or a subsidiary or affiliate of the
    Company, then, the Company shall have the right to defer such
    filing or the effectiveness thereof for a period of not more
    than ninety (90) days after the Company’s receipt of
    the applicable Shelf Demand Notice or prevent Holders of
    Registrable Securities from selling Registrable Securities
    pursuant to an effective Shelf Registration Statement for a
    period of not more than ninety (90) days after the Company
    delivers such certificate to the applicable Holder and demands
    that such Holder cease sales of securities under the Shelf
    Registration Statement (and during such period the Company shall
    not be obligated to file another Shelf Registration Statement
    during the period such sales under an effective Shelf
    Registration Statement are not allowed); provided, that
    the Company may not exercise its rights under this
    Section 3(b) more than two times in any
    18-month
    period; and provided further, that the Company may not exercise
    its rights under this Section 3(b) for two consecutive
    90-day
    periods.

 

    (c) Notwithstanding the provisions of Section 3(a),
    the Company shall not be obligated to file a Shelf Registration
    Statement within a period of ninety (90) days after the
    effective date of any Underwritten Demand Registration Statement
    or an underwritten offering pursuant to a Shelf Registration
    Statement or (ii) file or effect more than a total of three
    (3) Shelf Registration Statements within any
    12-month
    period; provided, however, that each filing of an
    Underwritten Demand Registration Statement during the
    12-month
    period will reduce by one the number of Shelf Registration
    Statements that the Company is obligated to file during such
    12-month
    period.

 

    (d) Upon the receipt by the Company of a Shelf Demand
    Notice given in accordance with and subject to Section 3(a)
    hereof, the Company shall give prompt written notice to all
    Holders of Registrable Securities (other than the Initiating
    Holder) that a Shelf Registration Statement pursuant to this
    Section 3 is being effected. In the event that any such
    Holder delivers to the Company a written request within fifteen
    (15) days after the delivery of such written notice to the
    Holder by the Company, to include in such Shelf Registration
    Statement Registrable Securities of the Holder the Company shall
    include such Registrable Securities in the Shelf Registration
    Statement, including by means of a pre-effective or
    post-effective amendment thereto; provided, however, that
    if the inclusion of the Registrable Securities of such Holders
    in such registration statement would, in the opinion of the
    Initiating Holders, be reasonably likely to delay in any
    material respect the Initiating Holder’s ability timely to
    sell the Registrable Securities pursuant to the Shelf
    Registration Statement, the Company shall not include such
    Holders’ Registrable Securities in the Shelf Registration
    Statement without the prior written consent of the Initiating
    Holder.

 

    (e) Following the Registration Date, any Initiating Holder
    shall have the right to request, by delivery of a written notice
    to the Company (a “Shelf Underwritten Demand
    Notice”), that the Company effect an underwritten
    offering of all or a portion of the Registrable Securities
    included in an existing Shelf Registration Statement. Any such
    Shelf Underwritten Demand Notice must request an underwritten
    offering of Registrable Securities having an aggregate market
    value, based on the average per share closing price of the
    Registrable Securities as reported on the principal exchange or
    market on which the Common Stock is then traded over the ten
    (10) consecutive trading days prior to the date of the
    Shelf Demand Notice, of not less than thirty million dollars
    ($30,000,000). Subject to Section 6(b)(i), as soon as
    reasonably practicable after receiving a Shelf Underwritten
    Demand Notice, but in no event later than twenty (20) days
    after receiving a Shelf Underwritten Demand Notice, the Company
    shall file with the Commission such amendments to the applicable
    Shelf Registration Statements and such prospectus supplements or
    other filings as are necessary in connection with the
    underwritten offering of the Registrable Securities subject to
    the Shelf Underwritten Demand Notice, subject to
    Sections 3(b) and Section 4. Any prospectus supplement
    or other filing with the Commission including a plan or method
    of distribution of the securities subject to an underwritten
    offering pursuant to this Section 3 shall reflect the plan
    or method of distribution of such securities as shall be
    designated by the managing underwriter of the offering.

    

    4

 

    (f) The Company may elect to register in any Shelf
    Registration Statement any additional shares of Common Stock
    (including, without limitation, any shares of Common Stock to be
    distributed in a primary offering made by the Company) so long
    as the inclusion of such Common Stock by the Company would not
    (as determined in the Initiating Holder’s reasonable
    discretion), (i) be reasonably likely to delay in any
    material respect the Initiating Holder’s ability timely to
    sell the Registrable Securities pursuant to the Shelf
    Registration Statement or (ii) cause a reduction in the
    number of Registrable Securities included in the Shelf Demand
    Registration as a result of the Company’s election to so
    register additional shares of Common Stock. Such election of the
    Company, if made, shall be made by the Company giving written
    notice to the Initiating Holder stating (A) that the
    Company proposes to include additional shares of Common Stock in
    such Shelf Registration Statement, and (B) the number of
    shares of Common Stock proposed to be included.

 

    4. Underwritten Offerings.

 

    (a) The Initiating Holder shall have the right to select
    the book-running managers and the co-managers (collectively, the
    “managing underwriter”) in connection with any
    underwritten offering pursuant to Section 2 or
    Section 3, provided, that the selection of the
    managing underwriter by the Initiating Holder shall be subject
    to the reasonable approval of the Company. In connection with
    any underwritten offering, the Company and the Initiating Holder
    shall enter into an underwriting agreement with the underwriter
    or underwriters selected for such underwriting, provided,
    that such underwriting agreement is in customary form and
    provides for customary compensation, expense reimbursement and
    indemnification.

 

    (b) Upon the receipt by the Company of an Underwritten
    Demand Notice or a Shelf Underwritten Demand Notice given in
    accordance with this Agreement, the Company shall give prompt
    written notice to all Holders of Registrable Securities (other
    than the Initiating Holder) that an underwritten offering
    pursuant to Section 2 or Section 3, as applicable is
    being effected. In the event that any such Holder delivers to
    the Company, within fifteen (15) days after the delivery of
    such written notice to the Holder by the Company, a written
    request to include in such underwritten offering any Registrable
    Securities of the Holder, the Company shall include such
    Registrable Securities in the registration statement; provided
    that the Company need not include in an underwritten offering
    pursuant to Section 3 any Registrable Securities that are
    not then included in the applicable Shelf Registration Statement
    (unless the Company is then a WKSI). The right of any Holder to
    include Registrable Securities in any underwritten offering
    shall be conditioned upon such Holder’s willingness to
    enter into an underwriting agreement with the underwriter or
    underwriters selected for such offering (in each case, unless
    otherwise mutually agreed by such Holder, the Initiating Holders
    and the Company).

 

    (c) Notwithstanding the foregoing, if the managing
    underwriter of an underwritten offering in connection with any
    registration pursuant to Section 2 or Section 3
    advises the Company and the Holders of Registrable Securities
    participating in such offering in writing that in its good faith
    judgment the number of Registrable Securities requested to be
    included in such offering exceeds the number of Registrable
    Securities which can be sold in such offering at a price
    acceptable to the applicable Initiating Holder, then
    (i) the number of Registrable Securities so requested to be
    included in such offering shall be reduced to that number of
    shares which in the good faith judgment of the managing
    underwriter can be sold in such offering at such price and
    (ii) this reduced number of Registrable Securities shall be
    allocated among all Holders of Registrable Securities in
    proportion, as nearly as practicable, to the respective number
    of shares of Registrable Securities then held by such Holders.

 

    (d) Those Registrable Securities which are excluded from an
    underwriting in connection with any registration pursuant to
    Section 2 or Section 3 hereof by reason of the
    managing underwriter’s marketing limitation and all other
    Registrable Securities not originally requested to be so
    included shall not be included in such offering and shall be
    withheld from the market by the Holders thereof for a period
    (not to exceed ninety (90) days) which the managing
    underwriter reasonably determines is necessary to effect the
    underwritten offering.

 

    (e) If the managing underwriter has not limited the number
    of Registrable Securities to be included in an underwritten
    offering pursuant to Section 2 or Section 3, the
    Company and, subject to the requirements of Section 8
    hereof, the other holders of the Company’s securities may
    include securities for its (or their) own

    

    5

 

    account in such registration if the managing underwriter so
    agrees and if the number of Registrable Securities which would
    otherwise have been included in such offering will not thereby
    be limited. The Company shall not grant registration rights to
    any holders of the Company’s securities that are more
    favorable to such holders without the prior written consent of
    Holders of a Majority of Registrable Securities. Without
    limiting the foregoing sentence, in the event that the Company
    grants or has previously granted registration rights to any
    holders of the Company’s securities that are more favorable
    to such holders (including, without limitation, in connection
    with the backstop of the rights offering to creditors
    contemplated under the Plan), the Company shall promptly amend
    this Agreement to provide such more favorable terms to the
    Holders of Registrable Securities.

 

    5. Piggyback Registration.

 

    (a) Each time the Company shall determine to file a
    registration statement under the Securities Act (other than on
    Form S-4
    or
    Form S-8
    or a registration statement on
    Form S-1
    or
    Form S-3
    covering solely an employee benefit plan) in connection with the
    proposed offer and sale of any of its securities of the same
    class as the Registrable Securities either for its own account
    or on behalf of any other security holder (other than a
    registration pursuant to Section 2 or Section 3), the
    Company agrees to give prompt written notice of its
    determination to all Holders of Registrable Securities. In the
    event that any such Holder delivers to the Company, within
    fifteen (15) days after the delivery of such written notice
    to the Holder by the Company, a written request to include in
    such registration statement any Registrable Securities of the
    Holder, the Company shall include such Registrable Securities in
    such registration statement, all to the extent required to
    permit the sale or other disposition by the prospective seller
    or sellers of the Registrable Securities to be so registered.

 

    (b) If the registration of which the Company gives written
    notice pursuant to Section 5(a) is for a public offering
    involving an underwriting, the Company shall so advise the
    Holders as a part of its written notice. In such event the right
    of any Holder to registration pursuant to this Section 5
    shall be conditioned upon such Holder’s participation in
    such underwriting and the inclusion of such Holder’s
    Registrable Securities in the underwriting to the extent
    provided herein. Holders proposing to distribute their
    Registrable Securities through such underwriting agree to enter
    into (together with the Company and the other Holders
    distributing their securities through such underwriting) an
    underwriting agreement with the underwriter or underwriters
    selected for such underwriting by the Company.

 

    (c) Notwithstanding any other provision of this
    Section 5, if the managing underwriter of an underwritten
    offering in connection with the registration pursuant to this
    Section 5 advises the Company and the Holders of the
    Registrable Securities participating in such registration in
    writing that in its good faith judgment the number of
    Registrable Securities and the other securities requested to be
    registered (i) exceeds the number of Registrable Securities
    and other securities which can be sold in such offering at a
    price acceptable to the Company, or (ii) would jeopardize
    the success of the offering, then (A) the number of
    Registrable Securities and other securities proposed to be
    included in the offering shall be reduced to that number which
    in the good faith judgment of the managing underwriter can be
    sold in such offering at a price acceptable to the Company and
    (B) such reduced number shall be allocated:

 

    A. If the registration is on behalf of the Company:

 

    a. First, to the Company, such that all securities proposed
    to be registered by or on behalf of the Company are included in
    the registration statement;

 

    b. Next, among all Holders of Registrable Securities in
    proportion, as nearly as practicable to the respective number of
    Registrable Securities held by such Holders at the time of the
    filing of the registration statement; and

 

    c. Last, among all other participating holders proposing to
    register securities other than Registrable Securities, in the
    manner determined by the Company.

    

    6

 

    B. If the registration is on behalf of holders of Common
    Stock other than any Holder of Registrable Securities:

 

    a. First, among all participating holders other than any
    stockholder participants in the manner determined by the Company
    and among all Holders of Registrable Securities in proportion,
    as nearly as practicable to the respective number of Registrable
    Securities and other shares of Common Stock held by such persons
    at the time of the filing of the registration statement; and

 

    b. Last, to the Company, for such number of shares of
    Common Stock as may be included in the registration statement.

 

    (d) Those Registrable Securities which are excluded from
    the underwriting by reason of the managing underwriter’s
    marketing limitation and all other Registrable Securities not
    originally requested to be so included shall not be included in
    such registration.

 

    6. Registration Procedures.

 

    (a) If and whenever the Company is required by the
    provisions of Section 2 or 3 to effect the registration of
    Registrable Securities under the Securities Act, the Company, at
    its expense and as expeditiously as possible shall use its
    reasonable best efforts to effect such registration and so as to
    permit the sale of the applicable Registrable Securities in
    accordance with the intended method or methods of distribution
    thereof in conformity with any required time period set forth
    therein, and in connection therewith the Company agrees to:

 

    (i) in accordance with the Securities Act and all
    applicable rules and regulations promulgated thereunder, prepare
    and file with the Commission a registration statement with
    respect to such securities and use its reasonable best efforts
    to cause such registration statement to become and remain
    effective for a period of 120 consecutive days (unless the
    registration is a Shelf Registration Statement in which case
    such period shall extend until the earlier of (x) the time
    all Registrable Securities subject thereto have been sold and
    (y) the third anniversary of the initial effectiveness
    thereof, subject to the Company’s rights to cause Holders
    of Registrable Securities to cease sales under an effective
    Shelf Registration Statement pursuant to Section 3(b)), and
    prepare and file with the Commission such amendments and
    supplements to such registration statement and the prospectus
    contained therein as may be necessary to keep such registration
    statement effective and such registration statement and
    prospectus accurate and complete and to permit the Holders of
    Registrable Securities subject to such registration statement to
    sell such securities; provided, that the Company shall provide
    counsel selected by the Holders of a majority of the Registrable
    Securities being registered in such registration
    (“Holders’ Counsel”) with a reasonable
    opportunity to participate in the preparation of such
    registration statement and each prospectus included therein (and
    each amendment or supplement thereto) to be filed with the
    Commission.

 

    (ii) if an offering is to be underwritten in whole or in
    part, enter into a written underwriting agreement in form and
    substance reasonably satisfactory to the Company, the managing
    underwriter of the offering, the Initiating Holder (in the case
    of a underwritten offering pursuant to Section 2 or
    Section 3) and to Holders of a majority of the
    Registrable Securities participating in such offering (in the
    case of a registration pursuant to Section 3);

 

    (iii) furnish to the Holders of securities participating in
    such registration and to the underwriters of the securities
    being registered such number of copies of the registration
    statement and each amendment and supplement thereto, preliminary
    prospectus, final prospectus, prospectus supplement and such
    other documents as such underwriters and Holders may reasonably
    request;

 

    (iv) use its reasonable best efforts to register and
    qualify the securities covered by such registration statement
    under such state securities or blue sky laws of such
    jurisdictions as such participating Holders of Registrable
    Securities and underwriters may reasonably request, except that
    the Company shall not for any purpose be required to execute a
    general consent to service of process or to qualify to do
    business as a foreign corporation in any jurisdiction where it
    is not so qualified;

 

    (v) notify the Holders of Registrable Securities
    participating in such registration, promptly after it shall
    receive notice thereof, of the date and time when (i) such
    registration statement and each post-

    

    7

 

    effective amendment thereto has become effective or a prospectus
    or supplement to any prospectus relating to a registration
    statement has been filed and (ii) any registration or
    qualification has become effective under a state securities or
    blue sky law or any exemption thereunder has been obtained;

 

    (vi) notify such Holders of Registrable Securities promptly
    of any request by the Commission for the amending or
    supplementing of such registration statement or prospectus or
    for additional information;

 

    (vii) notify such Holders of Registrable Securities
    promptly upon learning of the occurrence of any event as the
    result of which any such prospectus or any other prospectus as
    then in effect would include an untrue statement of a material
    fact or omit to state any material fact required to be stated
    therein or necessary to make the statements therein not
    misleading;

 

    (viii) prepare and file promptly with the Commission, and
    notify such Holders of Registrable Securities prior to the
    filing of, such amendments or supplements to such registration
    statement or prospectus as may be necessary to correct any
    statements or omissions if, at the time when a prospectus
    relating to such securities is required to be delivered under
    the Securities Act, when any event has occurred as the result of
    which any such prospectus or any other prospectus as then in
    effect would include an untrue statement of a material fact or
    omit to state any material fact required to be stated therein or
    necessary to make the statements therein not misleading;

 

    (ix) in case any of such Holders of Registrable Securities
    or any underwriter for any such Holders is required to deliver a
    prospectus at a time when the prospectus then in circulation is
    not in compliance with the Securities Act or the rules and
    regulations promulgated thereunder, the Company shall use
    reasonable best efforts to prepare promptly upon request such
    amendments or supplements to such registration statement and
    such prospectus as may be necessary in order for such prospectus
    to comply with the requirements of the Securities Act and such
    rules and regulations;

 

    (x) advise such Holders of Registrable Securities and
    Holders’ Counsel (if any), promptly after it shall receive
    notice or obtain knowledge thereof, of the issuance of any stop
    order by the Commission suspending the effectiveness of such
    registration statement or the initiation or threatening of any
    proceeding for that purpose and promptly use its reasonable best
    efforts to prevent the issuance of any stop order or to obtain
    its withdrawal if such stop order should be issued;

 

    (xi) at the request of any Holder of Registrable Securities
    covered by such registration statement, (i) furnish to such
    Holder on the effective date of the registration statement, upon
    the filing of a prospectus supplement with respect to such
    registration statement or, if such registration includes an
    underwritten offering, at the closing provided for in the
    underwriting agreement, an opinion dated such date of the
    counsel representing the Company for the purposes of such
    registration, addressed to the underwriters, if any, and to the
    Holder or Holders making such request, covering such matters
    with respect to the registration statement, the prospectus and
    each amendment or supplement thereto, proceedings under state,
    federal and other securities laws, other matters relating to the
    Company, the securities being registered and the offer and sale
    of such securities as are customarily the subject of opinions of
    issuer’s counsel provided to underwriters in underwritten
    public offerings, and such opinion of counsel shall additionally
    cover such legal matters with respect to the registration as
    such requesting Holder or Holders may reasonably request, and
    (ii) use its reasonable best efforts to furnish to such
    Holders letters dated each of such effective date, the date of
    the filing of a prospectus supplement and such closing date,
    from the independent certified public accountants of the
    Company, addressed to the underwriters, if any, and to the
    Holder or Holders making such request, stating that they are
    independent certified public accountants within the meaning of
    the Securities Act and dealing with such customary matters as
    the underwriters may request, or if the offering is not
    underwritten that in the opinion of such accountants the
    financial statements and other financial data of the Company
    included in the registration statement or the prospectus or any
    amendment or supplement thereto comply in all material respects
    with the applicable accounting requirements of the Securities
    Act, and additionally covering such other accounting and
    financial matters as such requesting Holder or Holders may
    reasonably request;

    

    8

 

    (xii) list the Registrable Securities (and to maintain such
    listing during the pendency of the relevant registration period)
    on any exchange on which the securities of the Company of the
    same class with Registrable Securities are listed;

 

    (xiii) make available for inspection by any Holder of
    Registrable Securities covered by the registration statement,
    any managing underwriter participating in any disposition
    pursuant to such registration statement, Holders’ Counsel
    (if any) and any attorney, accountant or other agent retained by
    any such Holder or any managing underwriter (each, an
    “Inspector” and collectively, the
    “Inspectors”), during regular business hours
    and upon reasonable advance notice, all financial and other
    records, pertinent corporate documents and properties of the
    Company (collectively, the “Records”) as shall
    be reasonably necessary to enable them to exercise their due
    diligence responsibility, and cause the Company’s officers,
    directors and employees, and the independent public accountants
    of the Company, to supply all information reasonably requested
    by any such Inspector in connection with such registration
    statement, subject to obligations of confidentiality;

 

    (xiv) no more than once in any 120 day period, make
    senior executives of the Company available, upon reasonable
    prior notice and subject to reasonable scheduling flexibility,
    to assist the underwriters with respect to, and to accompany the
    underwriters on the so-called “road show” in
    connection with, marketing efforts for the distribution and sale
    of Registrable Securities pursuant to an underwritten offering
    so long as the fulfillment of this Section 6(a)(xiv) shall not
    materially impair such senior executives’ management of the
    Company and other activities on behalf of the Company and so
    long as any related expenses (including, without limitation,
    expenses of the Company and participating senior executives) not
    required to be paid by the Company pursuant to Section 7(b)
    are paid by the Holders requesting such “road
    show” participation and assistance; and

 

    (xv) prepare other offering materials in a form customarily
    used in similar transactions or on the request of any Holder of
    Registrable Securities or any managing underwriter.

 

    (b) Each Holder of Registrable Securities included for
    registration agrees to:

 

    (i) provide the Company with such information and
    assistance as reasonably requested by the Company to effect such
    registration under the Securities Act;

 

    (ii) keep confidential that the Company has exercised its
    rights under Sections 2(b), 3(b) and any other confidential
    information provided by the Company in connection with this
    Agreement; and

 

    (iii) comply, with the prospectus delivery requirements and
    other provisions of the Securities Act and the Exchange Act and
    the respective rules and regulations promulgated thereunder,
    particularly Regulation M thereunder (or any successor
    rules or regulations), in connection with any offering of
    Registrable Securities.

 

    (c) Certain legal consequences arise from being named as a
    selling securityholder in a registration statement and related
    prospectus. Accordingly, each Holder of Registrable Securities
    acknowledges that it has been advised to consult its own
    independent securities law counsel regarding the consequences of
    demanding or requesting registration of Registrable Securities
    hereunder or being named or not being named as a selling
    securityholder in the registration statement and related
    prospectus.

 

    7. Expenses.

 

    (a) With respect to each inclusion of shares of Registrable
    Securities in a registration statement pursuant to
    Section 2 or Section 3, the Company agrees to bear all
    fees, costs and expenses of such registration and any public
    offerings in connection therewith (including without limitation
    the fees and expenses of Holder’s Counsel, if any, which
    shall not exceed $35,000 in respect of any one such inclusion or
    $70,000 in the aggregate, and all registration and qualification
    fees and printing expenses); provided, however, that Holders of
    Registrable Securities participating in any such registration
    agree to bear their pro rata share of the underwriting discount
    and commissions, and any expenses associated or incurred in
    connection with the “road show” or other
    marketing efforts, the expenses of which are not required to be
    paid by the Company pursuant to subparagraph (b) below
    shall be paid by the Holders of Registrable Securities
    requesting the same.

    

    9

 

    (b) The fees, costs and expenses of registration to be
    borne as provided in paragraph (a) above, shall consist of
    (i) all registration, filing and NASD fees, printing
    expenses, fees and disbursements of counsel and accountants for
    the Company, (ii) all legal fees and disbursements and
    other expenses of the Company complying with state securities or
    blue sky laws of any jurisdictions in which the securities to be
    offered are to be registered or qualified and (iii) the
    company’s expenses associated with the “road
    show” or other marketing efforts for the distribution and
    sale of Registrable Securities registered under two underwritten
    registration statements filed pursuant to either Section 2
    or 3.

 

    (c) Notwithstanding the foregoing, the Company shall pay
    the expenses of a registration statement requested pursuant to
    Section 2 or Section 3 only with respect to the first
    five (5) registration statements so filed (and then only to
    the extent provided for in this Section 7) and all
    expenses related to any additional registration statements,
    including those fees and expenses set forth in
    Section 7(b), shall be paid by the Initiating Holder
    and/or the
    Holders of Registrable Securities on a pro rata basis; provided
    that, in the event that a registration pursuant to
    Section 2 or 3 is requested by an Initiating Holder and
    such request is withdrawn prior to the filing of a registration
    statement by the Company, or the Holders of Registrable
    Securities cause the Company to withdraw a registration
    statement prior to its effectiveness, then either (at the
    election of the Initiating Holder), (i) the Initiating
    Holder and other Holders of Registrable Securities requesting
    inclusion of their shares in such registration shall bear pro
    rata all fees, costs and expenses of the registration and
    preparation of the registration statement and such requested
    registration statement shall not be deemed to be one of the
    registration statements for which the Company is required to pay
    expenses pursuant to this Section 7, or (ii) such
    requested registration statement shall be deemed to be one of
    the registration statements for which the Company is required to
    pay the expenses pursuant to this Section 7; provided,
    further, that if at the time of such withdrawal, the Holders
    have learned of a material adverse change in the condition,
    business, or prospects of the Company as of the date of their
    request for such registration statement not known to the
    Initiating Holder or publicly available at the time of its
    request and have withdrawn their request solely on such basis
    and with reasonable promptness after learning of such material
    adverse change, then the Holders shall not be required to pay
    any of such expenses and such requested registration statement
    shall not be deemed to be one of the registration statements for
    which the Company is required to pay expenses pursuant to this
    Section 7.

 

    8. Indemnification.

 

    (a) The Company hereby agrees to indemnify and hold
    harmless each Holder of Registrable Securities which are
    included in a registration statement pursuant to the provisions
    of this Agreement and each of such Holder’s officers,
    directors, partners, members, legal counsel and accountants, and
    each Person who controls such Holder within the meaning of the
    Securities Act and any underwriter (as defined in the Securities
    Act) for such Holder, and any Person who controls such
    underwriter within the meaning of the Securities Act, from and
    against, and agrees to reimburse such Holder, its officers,
    directors, partners, members, legal counsel, accountants and
    controlling Persons and each such underwriter and controlling
    Person of such underwriter with respect to, any and all claims,
    actions (actual or threatened), demands, losses, damages,
    liabilities, costs and expenses to which such Holder, its
    officers, directors, partners, members, legal counsel,
    accountants or controlling Persons, or any such underwriter or
    controlling Person of such underwriter who may become subject
    under the Securities Act or otherwise, insofar as such claims,
    actions, demands, losses, damages, liabilities, costs or
    expenses arise out of or are based upon (i) any untrue
    statement or alleged untrue statement of any material fact
    contained in such registration statement, any prospectus related
    thereto, or any amendment or supplement thereto, (ii) the
    omission or alleged omission to state therein a material fact
    necessary to make the statements therein, in light of the
    circumstances under which they were made, not misleading or
    (iii) any violation or alleged violation by the Company of
    the Securities Act, the Exchange Act, any federal or state
    securities law or any rule or regulation promulgated under the
    Securities Act, the Exchange Act or any federal or state
    securities law in connection with the offering covered by such
    registration statement; provided, however, that the
    Company will not be liable to any such Person to the extent that
    any such claim, action, demand, loss, damage, liability, cost or
    expense is caused by an untrue statement or alleged untrue
    statement or omission or alleged omission of material fact so
    made in strict conformity with written information

    

    10

 

    furnished by such Holder, such underwriter or such controlling
    Person specifically for use in the preparation thereof.

 

    (b) Each Holder of shares of Registrable Securities which
    are included in a registration statement pursuant to the
    provisions of this Agreement hereby agrees (severally and not
    jointly) to indemnify and hold harmless the Company, its
    officers, directors, legal counsel and accountants and each
    Person who controls the Company within the meaning of the
    Securities Act, from and against, and agrees to reimburse the
    Company, its officers, directors, legal counsel, accountants and
    controlling Persons with respect to, any and all claims,
    actions, demands, losses, damages, liabilities, costs or
    expenses to which the Company, its officers, directors, legal
    counsel, accountants or such controlling Persons may become
    subject under the Securities Act or otherwise, insofar as such
    claims, actions, demands, losses, damages, liabilities, costs or
    expenses are caused by any untrue or alleged untrue statement of
    any material fact contained in such registration statement, any
    prospectus related thereto or any amendment or supplement
    thereto, or are caused by the omission or the alleged omission
    to state therein a material fact required to be stated therein
    or necessary to make the statements therein, in light of the
    circumstances in which they were made, not misleading, in each
    case to the extent, but only to the extent, that such untrue
    statement or alleged untrue statement or omission or alleged
    omission was so made in reliance upon and in strict conformity
    with written information furnished by such Holder specifically
    for use in the preparation thereof and such untrue statement or
    omission of material fact was not subsequently corrected in a
    subsequent writing from such Holder to the Company at least
    36 hours prior to sale of Registrable Securities to the
    Person asserting the claim or loss; provided, however,
    that the indemnity agreement contained in this subsection 8(b)
    shall not apply to amounts paid in settlement of any such loss,
    claim, damage, liability or action if such settlement is
    effected without the consent of the Holder, which consent shall
    not be unreasonably withheld or delayed; provided, further, that
    the total amounts payable in indemnity by a Holder under this
    subsection 8(b) shall not exceed the net proceeds received by
    such Holder in the registered sale out of which such claim,
    action, demand, loss, damage, liability, cost, or expense arises.

 

    (c) Promptly after receipt by a party indemnified pursuant
    to the provisions of subsection (a) or (b) of this
    Section 8 of notice of the commencement of any action
    involving the subject matter of the foregoing indemnity
    provisions, such indemnified party will, if a claim therefore is
    to be made against the indemnifying party pursuant to the
    provisions of subsection (a) or (b), notify the
    indemnifying party of the commencement thereof; but the omission
    so to notify the indemnifying party will not relieve it from any
    liability which it may have to an indemnified party otherwise
    than under this Section 8 and shall not relieve the
    indemnifying party from liability under this Section 8
    unless such indemnifying party is actually and materially
    prejudiced by such omission. In case any such action is brought
    against any indemnified party, and it notifies the indemnifying
    party of the commencement thereof, the indemnifying party will
    be entitled to participate therein and, to the extent that it
    may wish, jointly with any other indemnifying parties similarly
    notified, to assume the defense thereof, with counsel reasonably
    satisfactory to such indemnified party; provided,
    however, that if the defendants in any such action include
    both the indemnified party and the indemnifying party and the
    indemnified party shall have reasonably concluded that there may
    be legal defenses available to it
    and/or other
    indemnified parties which are different from, conflict with or
    additional to those available to the indemnifying party, the
    indemnified party or parties shall have the right to select
    separate counsel (in which case the indemnifying party shall not
    have the right to direct the defense of such action on behalf of
    the indemnified party or parties). Upon the permitted assumption
    by the indemnifying party of the defense of such action, and
    approval by the indemnified party of counsel, the indemnifying
    party shall not be liable to such indemnified party under
    subsection (a) or (b) for any legal or other expenses
    subsequently incurred by such indemnified party in connection
    with the defense thereof (other than reasonable costs of
    investigation) unless (i) the indemnified party shall have
    employed separate counsel in connection with the assertion of
    legal defenses in accordance with the proviso to the next
    preceding sentence, (ii) the indemnifying party shall not
    have employed counsel reasonably satisfactory to the indemnified
    party to represent the indemnified party within a reasonable
    time, (iii) the indemnifying party and its counsel do not
    actively and vigorously pursue the defense of such action, or
    (iv) the indemnifying party has authorized the employment
    of counsel for the indemnified party at the expense of the
    indemnifying party. No indemnifying party shall be liable to an
    indemnified party for any settlement of any action or claim
    without the consent of the indemnifying party and no
    indemnifying party may unreasonably withhold its consent to any
    such settlement. No indemnifying party will consent to

    

    11

 

    entry of any judgment or enter into any settlement that does not
    include as an unconditional term thereof the giving by the
    claimant or plaintiff to such indemnified party of a release
    from all liability with respect to such claim or litigation.

 

    (d) If the indemnification provided for in
    subsection (a) or (b) of this Section 8 is held
    by a court of competent jurisdiction to be unavailable to a
    party to be indemnified with respect to any claims, actions,
    demands, losses, damages, liabilities, costs or expenses
    referred to therein, then each indemnifying party under any such
    subsection, in lieu of indemnifying such indemnified party
    thereunder, hereby agrees to contribute to the amount paid or
    payable by such indemnified party as a result of such claims,
    actions, demands, losses, damages, liabilities, costs or
    expenses in such proportion as is appropriate to reflect the
    relative fault of the indemnifying party on the one hand and of
    the indemnified party on the other in connection with the
    statements or omissions which resulted in such claims, actions,
    demands, losses, damages, liabilities, costs or expenses, as
    well as any other relevant equitable considerations. The
    relative fault of the indemnifying party and of the indemnified
    party shall be determined by reference to, among other things,
    whether the untrue or alleged untrue statement of a material
    fact or the omission or alleged omission to state a material
    fact relates to information supplied by the indemnifying party
    or by the indemnified party and the parties’ relative
    intent, knowledge, access to information and opportunity to
    correct or prevent such statement or omission. Notwithstanding
    the foregoing, the amount any Holder of Registrable Securities
    shall be obligated to contribute pursuant to this
    subsection (d) shall be limited to an amount equal to the
    per share sale price (less any underwriting discount and
    commissions) multiplied by the number of shares of Registrable
    Securities sold by such Holder pursuant to the registration
    statement which gives rise to such obligation to contribute
    (less the aggregate amount of any damages which such Holder has
    otherwise been required to pay in respect of such claim, action,
    demand, loss, damage, liability, cost or expense or any
    substantially similar claim, action, demand, loss, damage,
    liability, cost or expense arising from the sale of such
    Registrable Securities).

 

    (e) No person guilty of fraudulent misrepresentation
    (within the meaning of Section 11(f) of the Securities Act)
    shall be entitled to contribution hereunder from any person who
    was not guilty of such fraudulent misrepresentation.

 

    (f) The obligations of the Company and Holders under this
    Section 8 shall survive the completion of any offering of
    Registrable Securities in a registration statement and
    termination of this Agreement.

 

    9. Stockholder Information.

 

    The Company may request each Holder of Registrable Securities as
    to which any registration is to be effected pursuant to this
    Agreement to furnish the Company with such information with
    respect to such Holder and the distribution of such Registrable
    Securities as the Company may from time to time reasonably
    request in writing and as shall be required by law or by the
    Commission in connection therewith, and each Holder of
    Registrable Securities as to which any registration is to be
    effected pursuant to this Agreement agrees to promptly furnish
    the Company with such information.

 

    10. Forms.

 

    All references in this Agreement to particular forms of
    registration statements are intended to include, and shall be
    deemed to include, references to all successor forms which are
    intended to replace, or to apply to similar transactions as, the
    forms herein referenced.

 

    11. Agreements of the Holders of Registrable
    Securities.

 

    (a) Each Holder of Registrable Securities agrees in
    connection with any registration of the Company’s
    securities that, upon the request of the managing underwriter of
    any underwritten offering of the Company’s securities, it
    or he or she shall not sell, make any short sale of, loan, grant
    any option for the purchase of, or otherwise dispose of any
    capital stock of the Company (other than the securities included
    in such registration) without the prior written consent of such
    managing underwriter for a period not to exceed ninety
    (90) days ) (the
    “Lock-Up
    Period”), provided, however, that each
    Holder of Registrable Securities also agrees that such
    Lock-Up
    Period may be automatically extended by an additional eighteen
    (18) days pursuant to the terms of the agreement entered
    into with such managing underwriter. The Company may impose stop
    transfer

    

    12

 

    instructions with respect to the Registrable Securities subject
    to the foregoing restriction until the end of the
    Lock-Up
    Period.

 

    (b) Each Investor represents that it has not prepared or
    had prepared on its behalf or used or referred to, and agrees
    that it will not prepare or have prepared on it behalf or use or
    refer to, any Free Writing Prospectus, and has not distributed
    and will not distribute any written materials in connection with
    the offer or sale of the Common Stock without the prior express
    written consent of the Company and, in connection with any
    underwritten offering, the underwriters.

 

    12. Transfer of Registration Rights.

 

    The rights to cause the Company to register securities granted
    to the Holders of Registrable Securities pursuant to this
    Agreement may be transferred or assigned only to (i) an
    affiliate or immediate family member of a Holder of Registrable
    Securities or (ii) an immediate or remote transferee of the
    Holder of Registrable Securities who, after such transfer, is
    the Holder of not less than 5% of the number of shares of
    Registrable Securities outstanding as of the date of this
    Agreement; provided that the transferee first agrees in writing
    to be bound by the terms of this Agreement.

 

    13. Miscellaneous.

 

    13.1. Waivers and Amendments.

 

    (a) With the written consent of the Holders of a Majority
    of the Registrable Securities, the obligations of the Company
    and the rights of the Holders of Registrable Securities under
    this Agreement may be waived (either generally or in a
    particular instance, either retroactively or prospectively and
    either for a specified period of time or indefinitely), and with
    such consent the Company may enter into a supplementary
    agreement for the purpose of adding any provisions to or
    changing in any manner or eliminating any of the provisions of
    this Agreement or of any supplemental agreement or modifying in
    any manner the rights and obligations hereunder of the Holders
    of Registrable Securities and the Company; provided,
    however, that no such waiver or supplemental agreement shall
    reduce the aforesaid proportion of Registrable Securities, the
    Holders of which are required to consent to any waiver or
    supplemental agreement, without the consent of the Holders of
    all of the Registrable Securities.

 

    (b) Upon the effectuation of each such waiver, consent or
    agreement of amendment or modification, the Company agrees to
    give prompt written notice thereof to the Holders of the
    Registrable Securities who have not previously consented thereto
    in writing.

 

    (c) Neither this Agreement nor any provision hereof may be
    changed, waived, discharged or terminated orally or by course of
    dealing, but only by a statement in writing signed by the party
    against which enforcement of the change, waiver, discharge or
    termination is sought. Specifically, but without limiting the
    generality of the foregoing, the failure of any party hereunder
    at any time or times to require performance of any provision
    hereof by the Company shall in no manner affect the right of
    such party at a later time to enforce the same. No waiver by any
    party of the breach of any term or provision contained in this
    Agreement, in any one or more instances, shall be deemed to be,
    or construed as, a further or continuing waiver of any such
    breach, or a waiver of the breach of any other term or covenant
    contained in this Agreement.

 

    13.2. Effect of Waiver or Amendment.

 

    (a) Each Holder of Registrable Securities acknowledges that
    by operation of Section 13.1 hereof the Holders of a
    Majority of the Registrable Securities will, subject to the
    limitations contained in Section 13.1, have the right and
    power to diminish or eliminate certain rights of such Holder
    under this Agreement.

 

    13.3. Rights of Holders of Registrable
    Securities.

 

    (a) Each Holder of Registrable Securities shall have the
    absolute right to exercise or refrain from exercising any right
    or rights which such Holder may have by reason of this Agreement
    or any

    

    13

 

    Registrable Security, including, without limitation, the right
    to consent to the waiver of any obligation of the Company under
    this Agreement and to enter into an agreement with the Company
    for the purpose of modifying this Agreement or any agreement
    effecting any such modification, and such Holder shall not incur
    any liability to any other Holder with respect to exercising or
    refraining from exercising any such right or rights.

 

    13.4. Notices.

 

    (a) All notices, requests or consents required or permitted
    under this Agreement shall be made in writing and shall be given
    to the other parties by personal delivery, registered or
    certified mail (with return receipt), overnight air courier
    (with receipt signature) or facsimile transmission (with
    “answerback” confirmation of transmission), sent to
    such party’s addresses or telecopy numbers as follows:

 

    If to the Company:

 

    Solutia Inc.

    575 Maryville Centre Dr.

    St. Louis, MO 63141

    Attn: General Counsel

 

    with a copy to:

 

    Kirkland & Ellis LLP

    Citicorp Center

    153 East
    53rd
    Street

    New York, NY 10022

    Fax:
    (212) 446-4900

    Attn: Thomas W. Christopher

    Christian O. Nagler

 

    If to Monsanto:

 

    [          ]

 

    with a copy to:

 

    [          ]

 

    Each such notice, request or consent shall be deemed effective
    upon the date of actual receipt, receipt signature or
    confirmation of transmission, as applicable (or if given by
    registered or certified mail, upon the earlier of
    (i) actual receipt or (ii) three days after deposit
    thereof in the United States mail (with respect to addresses
    within the United States) or ten (10) days after deposit
    thereof in the United States mail (with respect to addresses
    outside of the United States).

 

    13.5.  Severability.  

 

    (a) Should any one or more of the provisions of this
    Agreement or of any agreement entered into pursuant to this
    Agreement be determined to be illegal or unenforceable, all
    other provisions of this Agreement and of each other agreement
    entered into pursuant to this Agreement, shall be given effect
    separately from the provision or provisions determined to be
    illegal or unenforceable and shall not be affected thereby.

 

    13.6.  No Third Parties.  

 

    (a) Subject to Section 8 hereof, this Agreement shall
    not run to the benefit of or be enforceable by any Person other
    than a party to this Agreement or, with respect to the Company,
    any successor thereto.

    

    14

 

    13.7.  Headings.  

 

    (a) The headings of the sections, subsections and
    paragraphs of this Agreement have been inserted for convenience
    of reference only and do not constitute a part of this Agreement.

 

    13.8.  Choice of Law.  

 

    (a) It is the intention of the parties that the internal
    substantive laws, and not the laws of conflicts, of the State of
    New York should govern the enforceability and validity of this
    Agreement, the construction of its terms and the interpretation
    of the rights and duties of the parties.

 

    13.9.  Counterparts.  This
    Agreement may be executed in any number of counterparts and by
    different parties hereto in separate counterparts, with the same
    effect as if all parties had signed the same document. All such
    counterparts shall be deemed an original, shall be construed
    together and shall constitute one and the same instrument.

 

    13.10.  Reports Under the Exchange
    Act.  In order to provide the Holders the use
    of Sections 2 and 3 hereof, and so long as there are
    Registrable Securities outstanding, the Company will
    (i) file in a timely manner (giving effect to any delay
    permitted by the Securities Act and the Exchange Act and the
    rules and regulations promulgated thereunder) the reports
    required to be filed by it pursuant to the Securities Act and
    the Exchange Act and the rules and regulations promulgated
    thereunder; (ii) make and keep public information
    available, as those terms are understood and defined in the
    General Instructions to
    Form S-3,
    or any successor or substitute form, and in Rule 144 under
    the Securities Act, or (iii) will take such further action
    as any holder of Registrable Securities may reasonably request,
    all to the extent required from time to time to enable such
    Holder to sell Registrable Securities on
    Form S-3
    (or any successor or substitute form) or without registration
    under the Securities Act within the limitation of the exemptions
    provided by Rule 144 or Rule 144A under the Securities
    Act, as such Rule may be amended from time to time, or any
    similar rule or regulation hereafter adopted by the Commission.
    Upon the request of any holder of Registrable Securities, the
    Company will deliver to such holder a written statement as to
    whether it has complied with such information and requirements
    and, to the extent available, with a copy of the most recent
    annual or quarterly report of the Company, and such other
    reports and documents of the Company as a Holder may reasonably
    request in availing itself of any rule or regulation of the
    Commission allowing a Holder to sell securities without
    registration only if such report is not available at www.sec.gov
    or on the Company’s website.

 

    13.11.  Entire Agreement/Effectiveness.

 

    This Agreement contains the entire understanding of the parties
    hereto in respect of its subject matter and supersedes all prior
    and contemporaneous agreements and understandings, oral and
    written, between the parties with respect to such subject matter.

 

    [signature
    page follows]
    

    

    15

 

    [REGISTRATION
    RIGHTS AGREEMENT SIGNATURE PAGE]

 

    IN WITNESS WHEREOF, the parties hereto, intending to be bound by
    the terms of this agreement, have caused this Registration
    Rights Agreement to be executed by its duly authorized officer
    as of the date first above written.

 

    Solutia Inc.

 

			
	 	    By: 
	

    Name: 

			
	 	    Title: 
	

 

    Monsanto Company

 

			
	 	    By: 
	

    Name: 

    Title: 

    

    16EX-10(ZZ)

 

    Exhibit 10(ZZ)

    Execution Copy

 

 

    COMMITMENT
    AGREEMENT

    by and among

    SOLUTIA, INC.

    and

    THE INVESTORS SET FORTH HEREIN

    Dated as of October 15, 2007

 

 

    Table of
    Contents

 

	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	

    Section 1.
    

	
 
	
    The Rights Offering
	
 
	 
	
    1
	 

	

    (a)

	
 
	
    Rights Offering Procedures; Amended Plan
	
 
	 
	
    1
	 

	

    (b)

	
 
	
    Rights Exercise Period; Expiration Time
	
 
	 
	
    2
	 

	

    (c)

	
 
	
    Over-Allotment Right
	
 
	 
	
    2
	 

	

    (d)

	
 
	
    Issuance of Shares
	
 
	 
	
    2
	 

	

    (e)

	
 
	
    Commitment Notice; Satisfaction Notice; Payment Notice
	
 
	 
	
    2
	 

	

    Section 2.
    

	
 
	
    The Backstop Commitment
	
 
	 
	
    2
	 

	

    (a)

	
 
	
    Backstop Commitment
	
 
	 
	
    2
	 

	

    (b)

	
 
	
    Direct Purchase Right
	
 
	 
	
    3
	 

	

    (c)

	
 
	
    Backstop Fee
	
 
	 
	
    3
	 

	

    (d)

	
 
	
    Transaction Fees and Expenses
	
 
	 
	
    4
	 

	

    (e)

	
 
	
    Delivery of Investor Shares
	
 
	 
	
    5
	 

	

    (f)

	
 
	
    Taxes
	
 
	 
	
    5
	 

	

    (g)

	
 
	
    Document Delivery
	
 
	 
	
    5
	 

	

    (h)

	
 
	
    Investor Affiliates
	
 
	 
	
    5
	 

	

    Section 3.
    

	
 
	
    Representations and Warranties of the Company
	
 
	 
	
    5
	 

	

    (a)

	
 
	
    Incorporation and Qualification
	
 
	 
	
    5
	 

	

    (b)

	
 
	
    Corporate Power and Authority
	
 
	 
	
    5
	 

	

    (c)

	
 
	
    Execution and Delivery; Enforceability
	
 
	 
	
    6
	 

	

    (d)

	
 
	
    Authorized Capital Stock
	
 
	 
	
    6
	 

	

    (e)

	
 
	
    Issuance
	
 
	 
	
    6
	 

	

    (f)

	
 
	
    No Conflict
	
 
	 
	
    7
	 

	

    (g)

	
 
	
    Consents and Approvals
	
 
	 
	
    7
	 

	

    (h)

	
 
	
    Arm’s Length
	
 
	 
	
    7
	 

	

    (i)

	
 
	
    Financial Statements
	
 
	 
	
    8
	 

	

    (j)

	
 
	
    Disclosure Statement and Exchange Act Documents
	
 
	 
	
    8
	 

	

    (k)

	
 
	
    Preliminary Prospectus
	
 
	 
	
    8
	 

	

    (l)

	
 
	
    Registration Statement and Prospectus
	
 
	 
	
    9
	 

	

    (m)

	
 
	
    Absence of Certain Changes
	
 
	 
	
    9
	 

	

    (n)

	
 
	
    Descriptions of the Transaction Documents
	
 
	 
	
    9
	 

	

    (o)

	
 
	
    No Violation or Default
	
 
	 
	
    9
	 

	

    (p)

	
 
	
    Legal Proceedings
	
 
	 
	
    10
	 

	

    (q)

	
 
	
    Independent Accountants
	
 
	 
	
    10
	 

	

    (r)

	
 
	
    Title to Intellectual Property
	
 
	 
	
    10
	 

	

    (s)

	
 
	
    No Undisclosed Relationships
	
 
	 
	
    10
	 

	

    (t)

	
 
	
    Investment Company Act
	
 
	 
	
    10
	 

	

    (u)

	
 
	
    Licenses and Permits
	
 
	 
	
    10
	 

	

    (v)

	
 
	
    Compliance With Environmental Laws
	
 
	 
	
    11
	 

	

    (w)

	
 
	
    Compliance With ERISA
	
 
	 
	
    11
	 

	

    (x)

	
 
	
    Accounting Controls
	
 
	 
	
    11
	 

	

    (y)

	
 
	
    Insurance
	
 
	 
	
    11
	 

	

    (z)

	
 
	
    No Unlawful Payments
	
 
	 
	
    11
	 

	

    (aa)

	
 
	
    No Restrictions on Subsidiaries
	
 
	 
	
    11
	 

    

    i

 

	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	

    (bb)

	
 
	
    No Broker’s Fees
	
 
	 
	
    12
	 

	

    (cc)

	
 
	
    No Registration Rights
	
 
	 
	
    12
	 

	

    (dd)

	
 
	
    No Stabilization
	
 
	 
	
    12
	 

	

    (ee)

	
 
	
    Margin Rules
	
 
	 
	
    12
	 

	

    (ff)

	
 
	
    Forward-Looking Statements
	
 
	 
	
    12
	 

	

    (gg)

	
 
	
    Statistical and Market Data
	
 
	 
	
    12
	 

	

    Section 4.
    

	
 
	
    Representations and Warranties of the Investors
	
 
	 
	
    12
	 

	

    (a)

	
 
	
    Organization
	
 
	 
	
    12
	 

	

    (b)

	
 
	
    Power and Authority
	
 
	 
	
    12
	 

	

    (c)

	
 
	
    Execution and Delivery
	
 
	 
	
    12
	 

	

    (d)

	
 
	
    Securities Laws Compliance
	
 
	 
	
    13
	 

	

    (e)

	
 
	
    Accredited Investor
	
 
	 
	
    13
	 

	

    (f)

	
 
	
    Resale
	
 
	 
	
    13
	 

	

    (g)

	
 
	
    Information
	
 
	 
	
    13
	 

	

    (h)

	
 
	
    No Broker’s Fees
	
 
	 
	
    13
	 

	

    (i)

	
 
	
    No Conflict
	
 
	 
	
    13
	 

	

    (j)

	
 
	
    Consents and Approvals
	
 
	 
	
    13
	 

	

    (k)

	
 
	
    Arm’s Length
	
 
	 
	
    14
	 

	

    (l)

	
 
	
    Legal Proceedings
	
 
	 
	
    14
	 

	

    (m)

	
 
	
    Sufficiency of Funds
	
 
	 
	
    14
	 

	

    Section 5.
    

	
 
	
    Additional Covenants of the Company
	
 
	 
	
    14
	 

	

    (a)

	
 
	
    Agreement Motion and Agreement Order
	
 
	 
	
    14
	 

	

    (b)

	
 
	
    Amended Plan and Disclosure Statement
	
 
	 
	
    14
	 

	

    (c)

	
 
	
    Rights Offering
	
 
	 
	
    15
	 

	

    (d)

	
 
	
    Listing
	
 
	 
	
    15
	 

	

    (e)

	
 
	
    Notification
	
 
	 
	
    15
	 

	

    (f)

	
 
	
    Unsubscribed Shares
	
 
	 
	
    15
	 

	

    (g)

	
 
	
    Stock Splits, Dividends, etc
	
 
	 
	
    15
	 

	

    (h)

	
 
	
    HSR
	
 
	 
	
    15
	 

	

    (i)

	
 
	
    Effectiveness of the Registration Statement
	
 
	 
	
    15
	 

	

    (j)

	
 
	
    Clear Market
	
 
	 
	
    16
	 

	

    (k)

	
 
	
    No Stabilization
	
 
	 
	
    16
	 

	

    (l)

	
 
	
    Reports
	
 
	 
	
    16
	 

	

    (m)

	
 
	
    Registration Rights Agreement
	
 
	 
	
    16
	 

	

    (n)

	
 
	
    Access and Information
	
 
	 
	
    16
	 

	

    (o)

	
 
	
    Non-Solicitation
	
 
	 
	
    17
	 

	

    (p)

	
 
	
    Opinion of Counsel For The Company
	
 
	 
	
    17
	 

	

    Section 6.
    

	
 
	
    Additional Covenants of the Investors
	
 
	 
	
    17
	 

	

    (a)

	
 
	
    Information
	
 
	 
	
    17
	 

	

    (b)

	
 
	
    HSR Act
	
 
	 
	
    17
	 

	

    (c)

	
 
	
    Agreement Order
	
 
	 
	
    17
	 

	

    (d)

	
 
	
    Inconsistent Transaction
	
 
	 
	
    17
	 

	

    Section 7.
    

	
 
	
    Conditions to the Obligations of the Parties
	
 
	 
	
    18
	 

	

    (a)

	
 
	
    Conditions to the Obligations of the Investors
	
 
	 
	
    18
	 

    

    ii

 

	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	

    (i)

	
 
	
    Agreement Order
	
 
	 
	
    18
	 

	

    (ii)

	
 
	
    Material Adverse Effect
	
 
	 
	
    18
	 

	

    (iii)

	
 
	
    Inconsistent Transaction
	
 
	 
	
    18
	 

	

    (iv)

	
 
	
    Confirmation Order
	
 
	 
	
    18
	 

	

    (v)

	
 
	
    Amended Plan and Confirmation Order
	
 
	 
	
    18
	 

	

    (vi)

	
 
	
    Conditions to Confirmation
	
 
	 
	
    18
	 

	

    (vii)

	
 
	
    Rights Offering
	
 
	 
	
    18
	 

	

    (viii)

	
 
	
    Commitment Notice
	
 
	 
	
    18
	 

	

    (ix)

	
 
	
    Valid Issuance
	
 
	 
	
    18
	 

	

    (x)

	
 
	
    No Restraint
	
 
	 
	
    19
	 

	

    (xi)

	
 
	
    HSR Act
	
 
	 
	
    19
	 

	

    (xii)

	
 
	
    Consents and Approvals
	
 
	 
	
    19
	 

	

    (xiii)

	
 
	
    Enforceability
	
 
	 
	
    19
	 

	

    (xiv)

	
 
	
    NYSE/Nasdaq
	
 
	 
	
    19
	 

	

    (xv)

	
 
	
    Comfort Letters
	
 
	 
	
    19
	 

	

    (xvi)

	
 
	
    Execution of Documents
	
 
	 
	
    19
	 

	

    (xvii)

	
 
	
    No Legal Impediment to Issuance
	
 
	 
	
    19
	 

	

    (xviii)

	
 
	
    Good Standing
	
 
	 
	
    19
	 

	

    (xix)

	
 
	
    Representations and Warranties and Covenants
	
 
	 
	
    19
	 

	

    (xx)

	
 
	
    Officer’s Certificate
	
 
	 
	
    19
	 

	

    (xxi)

	
 
	
    Bankruptcy Court Approval
	
 
	 
	
    20
	 

	

    (xxii)

	
 
	
    Exit Facility
	
 
	 
	
    20
	 

	

    (xxiii)

	
 
	
    Financial Projections
	
 
	 
	
    20
	 

	

    (xxiv)

	
 
	
    Extension Fees
	
 
	 
	
    20
	 

	

    (b)

	
 
	
    Conditions to the Obligations of the Company
	
 
	 
	
    20
	 

	

    (i)

	
 
	
    Aggregate Purchase Price
	
 
	 
	
    20
	 

	

    (ii)

	
 
	
    Agreement Order
	
 
	 
	
    20
	 

	

    (iii)

	
 
	
    Confirmation Order
	
 
	 
	
    20
	 

	

    (iv)

	
 
	
    Amended Plan and Confirmation Order
	
 
	 
	
    20
	 

	

    (v)

	
 
	
    Conditions to Confirmation
	
 
	 
	
    21
	 

	

    (vi)

	
 
	
    Rights Offering
	
 
	 
	
    21
	 

	

    (vii)

	
 
	
    No Restraint
	
 
	 
	
    21
	 

	

    (viii)

	
 
	
    HSR Act
	
 
	 
	
    21
	 

	

    (ix)

	
 
	
    Enforceability
	
 
	 
	
    21
	 

	

    (x)

	
 
	
    Representations and Warranties and Covenants
	
 
	 
	
    21
	 

	

    Section 8.
    

	
 
	
    Indemnification
	
 
	 
	
    21
	 

	

    (a)

	
 
	
    Indemnification Generally
	
 
	 
	
    21
	 

	

    (b)

	
 
	
    Certain Procedures
	
 
	 
	
    22
	 

	

    (c)

	
 
	
    Limitations
	
 
	 
	
    23
	 

	

    Section 9.
    

	
 
	
    Survival of Representations and Warranties, Etc
	
 
	 
	
    23
	 

	

    Section 10.
    

	
 
	
    Termination
	
 
	 
	
    23
	 

	

    (a)

	
 
	
    Termination by Investors
	
 
	 
	
    23
	 

	

    (b)

	
 
	
    Effect of Termination
	
 
	 
	
    24
	 

	

    Section 11.
    

	
 
	
    Notices
	
 
	 
	
    24
	 

    

    iii

 

	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	

    Section 12.
    

	
 
	
    Assignment; Third Party Beneficiaries
	
 
	 
	
    24
	 

	

    Section 13.
    

	
 
	
    Prior Negotiations; Entire Agreement
	
 
	 
	
    25
	 

	

    Section 14.
    

	
 
	
    GOVERNING LAW; VENUE
	
 
	 
	
    25
	 

	

    Section 15.
    

	
 
	
    Counterparts
	
 
	 
	
    25
	 

	

    Section 16.
    

	
 
	
    Waivers and Amendments
	
 
	 
	
    25
	 

	

    Section 17.
    

	
 
	
    Headings
	
 
	 
	
    25
	 

	

    Section 18.
    

	
 
	
    Specific Performance
	
 
	 
	
    25
	 

	

    Section 19.
    

	
 
	
    Voting Restriction
	
 
	 
	
    25
	 

	
 
	
 
	
 
	
 
	
	
 
	 
	

    Schedule I

	
 
	
    Index of Defined Terms
	
 
	 
	
 
	 

	

    Exhibit A

	
 
	
    Rights Offering Procedures
	
 
	 
	
 
	 

	

    Exhibit B

	
 
	
    Settlement Term Sheet
	
 
	 
	
 
	 

	

    Exhibit C

	
 
	
    Registration Rights Agreement Terms
	
 
	 
	
 
	 

	

    Exhibit D

	
 
	
    Exit Facility Terms
	
 
	 
	
 
	 

    

    iv

 

    COMMITMENT
    AGREEMENT

 

    This Commitment Agreement (this “Agreement”),
    dated as of October 15, 2007, is made by and among,
    (i) Solutia Inc., a Delaware corporation (as a
    debtor-in-possession
    and a reorganized debtor, as applicable, the
    “Company”) and (ii) Highland Crusader
    Holding Corporation, a Delaware corporation, Longacre
    Fund Management, L.L.C., a Delaware limited liability
    company, Merrill Lynch, Pierce, Fenner & Smith
    Incorporated, a Delaware corporation, GMAM Investment Funds
    Trust II, a trust organized under the laws of New
    Hampshire, ReCap International (Master) Ltd., a company
    organized under the laws of the British Virgin Islands,
    Institutional Benchmarks Series (Master Feeder) Ltd., a Bermuda
    segregated accounts company, solely with respect to the Muscida
    series, Southpaw Asset Management LP, a Delaware limited
    partnership and UBS Securities LLC, a Delaware limited liability
    company (the entities referred to in this clause (ii),
    collectively, the “Investors”). Each
    capitalized term used herein but not defined herein shall have
    the meaning given to it in the Fourth Amended Plan of
    Reorganization (the “Existing Plan”) of the
    Company and the other debtors therein submitted to the United
    States Bankruptcy Court for the Southern District of New York
    (the “Bankruptcy Court”) on July 9, 2007.

 

    WHEREAS, the Company proposes to conduct a rights offering (the
    “Rights Offering”) whereby each Eligible Holder
    (including any Equity Holder who has purchased General Unsecured
    Claims of less than $100,000 from General Unsecured Creditors
    pursuant to such Equity Holder’s election) of a Noteholder
    Claim or a General Unsecured Claim (each an “Eligible
    Holder”), pursuant to the Rights Offering Procedures
    filed with the Bankruptcy Court in connection with the
    Disclosure Statement relating to the Amended Plan (as defined
    herein) and attached hereto as Exhibit A (the
    “Rights Offering Procedures”) shall be offered
    the right (each, a “Right”) to purchase, on a
    pro rata basis, based upon the amount of their respective
    pre-petition claims, up to 15,936,703 shares (each a
    “Share”) of New Common Stock at a purchase
    price of $13.33 per Share (the “Purchase
    Price”); provided, that the number of Shares
    available for purchase pursuant to the Rights will be increased
    by the number of Direct Purchase Shares (as defined below) that
    the Investors do not purchase pursuant to the Direct Purchase
    Right (as defined below);

 

    WHEREAS, each holder of Rights who exercises in full its Rights
    will be entitled, on a pro rata basis, to subscribe for
    additional Shares at a price per share equal to the Purchase
    Price, to the extent that other holders of Rights do not
    exercise all of their respective Rights; and

 

    WHEREAS, in order to facilitate the Rights Offering, pursuant to
    this Agreement, and subject to the terms, conditions and
    limitations set forth herein, the Investors have agreed to
    purchase, and the Company agrees to sell, for a price per share
    equal to the Purchase Price, a number of Shares equal to
    (i) the number of shares of New Common Stock offered
    pursuant to the Rights Offering and the Direct Purchase Right
    and not validly subscribed for and purchased pursuant to the
    Rights Offering Procedures (such Shares in the aggregate, the
    “Unsubscribed Shares”) and (ii) at the
    option of each Investor, the Direct Purchase Shares.

 

    In consideration of the foregoing, and the representations,
    warranties and covenants set forth herein, and other good and
    valuable consideration, the Company and the Investors agree as
    follows:

 

    Section 1.  The
    Rights Offering.

 

    (a) Rights Offering Procedures; Amended
    Plan.  The Company will conduct the Rights
    Offering pursuant to the Rights Offering Procedures, as such may
    be amended from time to time provided that any such amendment is
    reasonably satisfactory to the Investors, and an amended plan of
    reorganization (the “Amended Plan”) which shall
    be in form and substance reasonably satisfactory to the
    Investors and include only those revisions, modifications and
    amendments to the Existing Plan as necessary to incorporate the
    transactions contemplated by this Agreement and the other
    proposed transactions described in the term sheet attached
    hereto as Exhibit B (the “Settlement Term
    Sheet”) and such other revisions, modifications and
    amendments that the Company deems necessary or appropriate and
    that shall not (i) materially adversely affect the
    obligations or rights of the Investors hereunder,
    (ii) cause any representation or warranty contained herein
    to be incorrect in any material respect or (iii) be
    inconsistent with the terms of the Settlement Term Sheet. To the
    extent that the Investors object to any amendments or
    modifications to the Rights Offering Procedures or the Amended
    Plan, then they shall provide the Company and the
    Creditors’ Committee with written notice of such

 

    objections with two (2) Business Days after the filing of
    such amended or modified Rights Offering or Amended Plan, which
    shall be delivered by the Company to the Investors by email
    promptly upon filing.

 

    (b) Rights Exercise Period; Expiration
    Time.  In connection with the Amended Plan,
    the Company shall issue Rights to purchase up to
    15,936,703 Shares in the aggregate, subject to increase by
    the number of Direct Purchase Shares not purchased by the
    Investors pursuant to the Direct Purchase Right. The Rights
    Offering shall be conducted in accordance with the terms of the
    Rights Offering Procedures. The Rights may be exercised during a
    period (the “Rights Exercise Period”)
    commencing on the date that the Rights Exercise Forms (as
    defined in the Rights Offering Procedures) are mailed to the
    Eligible Holders and ending on the deadline specified in the
    Rights Offering Procedures (the “Expiration
    Time”). In accordance with the Rights Offering
    Procedures, after the Expiration Time, the Company shall deliver
    to each Eligible Holder a notice (a “Purchase
    Notice”) setting forth the number of shares of New
    Common Stock such Eligible Holder is entitled to purchase, such
    Holders’ Total Exercise Price (as defined in the Rights
    Offering Procedures) and instructions for payment of the Total
    Exercise Price. Eligible Holders who receive the Purchase Notice
    shall be required to pay their Total Exercise Price on or prior
    to the deadline for payment set forth in the Purchase Notice
    (the “Payment Date”), which amount shall be
    held in escrow by the Company until the Effective Date.

 

    (c) Over-Allotment Right.  Each
    Eligible Holder who exercises in full its Rights will have the
    right (an “Over-Allotment Right”) to subscribe
    for additional Shares at a price per share equal to the Purchase
    Price pursuant to the instructions set forth in the Rights
    Offering Procedures to the extent that other Eligible Holders
    elect not to exercise all of their respective Rights in full. If
    the number of Shares remaining after the exercise of all Rights
    is not sufficient to satisfy all requests for Shares under the
    Over-Allotment Rights, the Eligible Holders who exercised their
    Over-Allotment Rights will be allocated such remaining Shares on
    a pro rata basis as set forth in the Rights Offering Procedures.

 

    (d) Issuance of Shares.  Upon the
    effective date of the Amended Plan (the “Effective
    Date”), the Company will issue the Shares to the
    Eligible Holders with respect to which Rights and Over-Allotment
    Rights were validly exercised by such holder. If the exercise of
    a Right or Over-Allotment Right would result in the issuance of
    a fractional share of New Common Stock, then the number of
    shares of New Common Stock to be issued in respect of such Right
    will be rounded down to the next whole share.

 

    (e) Commitment Notice; Satisfaction Notice; Payment
    Notice.  The Company will give the Investors
    by electronic facsimile transmission the certification by an
    officer of the Company conforming to the requirements specified
    herein for such certification of either (i) the number of
    Unsubscribed Shares and the aggregate purchase price therefor (a
    “Commitment Notice”) or (ii) in the
    absence of any Unsubscribed Shares, the fact that there are no
    Unsubscribed Shares and that the Backstop Commitment (as defined
    in Section 2) is terminated (a “Satisfaction
    Notice”) as soon as practicable and, in any event,
    within 3 Business Days after the Payment Date (the date of
    transmission of confirmation of a Commitment Notice or a
    Satisfaction Notice, the “Determination Date”).
    If the number of Unsubscribed Shares specified in the Commitment
    Notice increases following the Payment Date as a result of
    non-payment on the Payment Date by an Eligible Holder that
    exercised Rights or Over-Allotment Rights, as promptly as
    practicable following the Payment Date and in any event within 7
    Business Days following the Payment Date, the Company give the
    Investors by electronic facsimile transmission a revised
    Commitment Notice specifying the correct number of Unsubscribed
    Shares and the aggregate Purchaser Price therefor.

 

    Section 2.  The
    Backstop Commitment.

 

    (a) Backstop Commitment.  On the
    basis of the representations and warranties contained herein,
    but subject to the conditions set forth in Section 7:

 

    (i) Backstop Commitment; Commitment
    Percentage.  Each Investor agrees, severally
    and not jointly, to subscribe for and purchase on the Effective
    Date, and the Company agrees to sell and issue, at a price per
    share equal to the Purchase Price, a number of Shares equal to
    the product of (i) such Investor’s Commitment
    Percentage (as defined below) and (ii) all Unsubscribed
    Shares (the “Backstop Commitment”). For
    purposes of this Agreement, an Investor’s
    “Commitment Percentage” shall mean the

    

    2

 

    percentage next to such Investor’s name set forth on
    Schedule II which percentage represents such
    Investor’s purchase obligations hereunder, subject to any
    adjustment pursuant to Section 2(a)(ii) below.

 

    (ii) Default Purchase Right.  If
    and to the extent that any one Investor or multiple Investors do
    not fully and timely satisfy its or their obligations in respect
    of the Backstop Commitment as required under Section
    (2)(a)(i) (an “Investor Default”, and each
    such Investor, a “Defaulting Investor”), then
    each of the remaining Investors (the “Non-Defaulting
    Investors”) shall have the right (the “Default
    Purchase Right”), but not the obligation, to purchase
    at a price per share equal to the Purchase Price, up to a number
    of Shares equal to the product of (A) the quotient
    determined by dividing the Commitment Percentage of such Non-
    Defaulting Investor by the aggregate Commitment Percentage owned
    by all Non-Defaulting Investors electing to exercise their
    Default Purchase Right and (B) the number of Shares not
    purchased by all Defaulting Investors (“Default
    Shares”). As soon as practicable after an Investor
    Default, the Company will send a notice to each Non-Defaulting
    Investor, specifying the number of Shares subject to the Default
    Purchase Right. Each Non-Defaulting Investor will have 2
    Business Days from receipt of such notice to elect to exercise
    the Default Purchase Right by notifying the Company in writing
    of its election and specifying the maximum number of Default
    Shares (up to the 100% of the Default Shares) that it is
    electing to purchase. If any Non-Defaulting Investor wishes to
    purchase less than all the Default Shares such Non-Defaulting
    Investor is entitled to purchase in accordance with the
    preceding sentence, the Default Shares shall be allocated among
    the Non-Defaulting Investors who wish to purchase such available
    Default Shares on a pro rata basis according to each
    Non-Defaulting Investor’s Commitment Percentage. If any
    Non-Defaulting Investors exercise the Default Right, the
    Commitment Percentage for the Defaulting Investor shall be
    reduced by the portion of the Backstop Commitment that such
    Defaulting Investor has failed to fully satisfy and the
    Commitment Percentage for the Non-Defaulting Investors
    participating in the Default Right shall be adjusted accordingly
    to reflect their respective portion of the Default Shares.

 

    (b) Direct Purchase Right.  Each
    Investor shall have the right (the “Direct Purchase
    Right”), but not the obligation, to subscribe for and
    purchase on the Effective Date, and the Company agrees to issue
    and sell on the Effective Date, a number of Shares equal to up
    to the product of (A) the quotient determined by dividing
    the Commitment Percentage of each such Investor exercising its
    Direct Purchase Right by the aggregate Commitment Percentage
    owned by all Investors electing to exercise their Direct
    Purchase Right and (B) 2,812,359 shares of New Common
    Stock, at a price per share equal to the Purchase Price (the
    shares subscribed for by the Investors, (the “Direct
    Purchase Shares”). Each Investor may elect to exercise
    its Direct Purchase Right by notifying the Company in writing of
    its election on or prior to the 4th Business Day after the
    Expiration Time and specifying the maximum number of Direct
    Purchase Shares (up to 100% of the Direct Purchase Shares) that
    it is electing to purchase. If any Investor wishes to purchase
    less than all the Direct Purchase Shares such Investor is
    entitled to purchase in accordance with the preceding sentence,
    the Direct Purchase Shares shall be allocated among the
    Investors who wish to purchase such available Direct Purchase
    Shares on a pro rata basis according to each Investor’s
    Commitment Percentage. In the event that any Investors do not
    exercise the Direct Purchase Right, the number of Shares subject
    to purchase pursuant to exercise of Rights
    and/or
    Over-Allotment Rights in the Rights Offering shall be increased
    by the number of Direct Purchase Shares not purchased by the
    Investors. The Unsubscribed Shares and the Direct Purchase
    Shares are herein collectively referred to as the
    “Investor Shares.”

 

    (c) Backstop Fee.  On the basis of
    the representations and warranties herein contained, but subject
    to the entry of an order of the Bankruptcy Court approving this
    Agreement and the exhibits attached hereto, the payment of the
    fees and expenses provided for herein, and the release and
    exculpation of the Investors, their affiliates, representatives
    and advisors from any liability for participation in the
    transactions contemplated hereby, by the Registration Rights
    Agreement and the Amended Plan to the fullest extent permitted
    under applicable law (the “Agreement Order”),
    the Company shall pay to the Investors, and each Investor shall
    have earned as of the date of the payment, a backstop fee (the
    “Backstop Fee”) to compensate the Investors for
    the risk of their undertaking herein. The Backstop Fee shall be
    paid in U.S. dollars, by wire transfer of federal (same
    day) funds to the accounts specified by the Investors to the
    Company at least 24 hours in advance as follows:
    (1) $4,375,000 shall be paid, on the first Business Day
    following the date of the entry of the

    

    3

 

    Agreement Order by the Bankruptcy Court, and (2) $1,875,000
    shall be paid on the date that the Company enters into a
    definitive agreement for Exit Financing on terms consistent with
    or more favorable than the terms set forth on
    Exhibit D hereto (the “Exit Financing
    Condition”) in the event that such date occurs prior to
    December 31, 2007. As provided in Section 10(a)(ii)
    hereto, in the event that the Company satisfies the Exit
    Financing Condition, each Investor shall have the right to
    terminate its Commitment unless the Effective Date has occurred
    prior to February 28, 2008. As provided in
    Section 10(a)(iii) hereto, if the Company fails to satisfy
    the Exit Financing Condition, prior to 3:00 p.m. on
    December 31, 2007, each Investor shall have the right to
    terminate its Commitment unless the Company pays the Extension
    Fee, in which case (i) the Exit Financing Condition shall
    be waived by each Investor and (ii) each Investor shall
    have the right to terminate its Commitment unless the Effective
    Date has occurred prior to March 31, 2008. It is understood
    that in the event the Agreement Order is appealed, and the
    highest court to which the Agreement Order was appealed issues a
    final order vacating or reversing in whole or in part the
    Agreement Order and further orders disgorgement of all or a
    portion of the Backstop Fee, each of the Investors shall
    promptly return to the Company its share (based on its
    Commitment Percentage) of the portion of the Backstop Fee
    required to be so disgorged. The Backstop Fee shall be allocated
    among the Investors in the same proportion as their respective
    Commitment Percentages. If the Investors receive the Backstop
    Fee, the Investors shall waive any rights to receive punitive
    damages in connection with this Agreement and the transactions
    contemplated hereby. If any Investor votes against confirmation
    of the Amended Plan in respect of such Investor’s
    Noteholder Claims and at the time of such vote this Agreement
    has not been terminated pursuant to Section 10, such
    Investor shall promptly after submitting its ballot to the
    Company, return the portion of the Backstop Fee, and any
    Extension Fee (as defined below), paid to such Investor. Except
    as set forth herein, the Backstop Fee and any Extension Fee will
    be nonrefundable when paid. Each Investor who is entitled to
    cast a ballot on the Amended Plan shall provide copies of such
    ballots to the Company and the Committee within 5 days
    after the Voting Deadline.

 

    (d) Transaction Fees and Expenses.  

 

    (i) Transaction Expenses.  Upon the
    entry of the Agreement Order, the Company will reimburse or pay,
    as the case may be, the fees and out-of-pocket expenses
    reasonably incurred by the Investors with respect to the
    negotiation, documentation and execution of the transactions
    contemplated hereby and the enforcement, attempted enforcement
    or preservation of any rights or remedies contemplated
    hereunder, including the filing fee, if any, required by the HSR
    Act (as defined in Section 5) and expenses related
    thereto and all Bankruptcy Court and other judicial and
    regulatory proceedings related to such transactions, and
    including all reasonable fees and expenses of
    Stroock & Stroock & Lavan LLP, counsel to
    the Investors, and separate counsel to each Investor that is a
    broker-dealer or affiliate thereof (collectively, the
    “Broker/Dealer Counsel”), together with the
    reasonable fees and expenses of any other professionals to be
    retained by the Investors with the prior approval of the Company
    (which approval shall not be unreasonably withheld) in
    connection with the transactions contemplated by herein
    (collectively, “Transaction Expenses”), within
    10 days of presentation of an invoice approved by the
    Investors, without Bankruptcy Court review or further Bankruptcy
    Court order, whether or not the transactions contemplated hereby
    are consummated; provided, that (1) the aggregate
    amount of such Transaction Expenses payable to Broker/Dealer
    Counsel shall not exceed $300,000 and (2) the aggregate
    amount of such Transaction Expenses payable to
    Stroock & Stroock & Lavan LLP
    (“Stroock”) by the Company shall not exceed
    $1 million unless there are Proceedings (as defined below)
    in which case such Transaction Expenses relating to such
    Proceedings payable to Stroock (the “Litigation
    Expenses”) shall be governed by Section 2(d)(ii).
    The Company acknowledges and agrees that Haynes and Boone, LLP,
    counsel to Highland Capital Management, L.P. and its affiliates,
    is also to be paid Transaction Expenses, and that such
    Transaction Expenses payable to Haynes and Boone shall be fully
    paid and are governed by the provisions for payment of Haynes
    and Boone’s fees in the Settlement Term Sheet and are not
    included in the calculation of any payments made on behalf of
    the other Investors hereunder. These obligations are in addition
    to, and do not limit, the Company’s obligations under
    Section 8.

 

    (ii) Litigation Expenses.  The
    Company will provide payment within 10 days of presentation
    of an invoice of any Litigation Expenses; provided, that
    the aggregate amount of Litigation Expenses payable to Stroock
    shall not exceed $1 million exclusive of any Transaction
    Expenses otherwise payable to Stroock pursuant to
    Section 2(d)(i). In the event that Stroock is paid
    Litigation Expenses and a final nonappealable

    

    4

 

    order shall have been entered by the court having jurisdiction
    over the Proceedings that the Investors involved in such
    Proceedings are not the prevailing party with respect to the
    Proceedings (taking into account all claims and recoveries
    related to the Proceedings), then the Investors involved in the
    Proceedings shall promptly following such judgment cause to be
    returned to the Company an amount equal to all Litigation
    Expenses paid to Stroock. In the event that the Investors are
    the prevailing party with respect to certain issues in the
    Proceedings and not others, the court having jurisdiction over
    the Proceedings shall apportion the Litigation Expenses
    applicable to the various issues and will direct repayment of
    such fees as are apportioned to the issues on which the
    Investors are not the prevailing party and will order that the
    Litigation Expenses paid to the Investors with respect to the
    issues on which they are the prevailing party are not subject to
    disgorgement.

 

    (e) Delivery of Investor
    Shares.  Delivery of the Investor Shares, if
    any, will be made by the Company to the account of the Investors
    (or to such other accounts as the Investors may designate) in
    book entry form at 9:00 a.m., New York City time, on the
    Effective Date against payment of the aggregate purchase price
    for the Shares by wire transfer of federal (same day) funds to
    the account specified by the Company to the Investors at least
    24 hours in advance.

 

    (f) Taxes.  All Investor Shares, if
    any, will be delivered with any and all issue, stamp, transfer
    or similar taxes or duties payable in connection with such
    delivery duly paid by the Company to the extent required under
    the Confirmation Order or applicable law.

 

    (g) Document Delivery.  The
    documents to be delivered on the Effective Date by or on behalf
    of the parties hereto and the Unsubscribed Shares will be
    delivered at the offices of Kirkland & Ellis LLP,
    153 East 53rd Street, New York, New York
    10022-4611.

 

    (h) Investor
    Affiliates.  Notwithstanding anything to the
    contrary in this Agreement, the Investors, in their sole
    discretion, may designate that some or all of the Investor
    Shares be issued in the name of, and delivered to, one or more
    of their Affiliates or to any other Person.

 

    Section 3.  Representations
    and Warranties of the Company.  The Company
    represents and warrants to, and agrees with, the Investors as
    set forth below. Each representation, warranty and agreement is
    made as of the date hereof and as of the Effective Date.

 

    (a) Incorporation and
    Qualification.  The Company and each of its
    Subsidiaries is a legal entity duly organized, validly existing
    and in good standing under the laws of their respective
    jurisdictions of organization, with the requisite power and
    authority to own its properties and conduct its business as
    currently conducted, and is duly qualified as a foreign
    corporation for the transaction of business and is in good
    standing under the laws of each other jurisdiction in which it
    owns or leases properties or conducts any business so as to
    require such qualification, except to the extent the failure to
    be so organized, validly existing, qualified or in good standing
    has not had or would not reasonably be expected to have, a
    Material Adverse Effect. For purposes of this Agreement, a
    “Material Adverse Effect” shall mean any
    circumstance, change in or effect on the Company and the
    Company’s Subsidiaries, taken as a whole, that individually
    or in the aggregate with all other circumstances, changes in or
    effects on the Company and the Company’s Subsidiaries,
    taken as a whole, is or is reasonably likely to be materially
    adverse to the business, operations, assets or liabilities
    (including without limitation contingent liabilities), results
    of operations or the conditions (financial or otherwise) of the
    Company and the Company’s Subsidiaries taken as a whole;
    provided, however, that none of the following
    shall be deemed, either alone or in combination, to constitute a
    Material Adverse Effect: (i) changes in any statute, rule
    or regulation after the date hereof, (ii) changes generally
    affecting the industries in which the Company and its
    Subsidiaries operate, (iii) changes in laws, GAAP or
    accounting principles, and (iv) changes after the date
    hereof resulting from the announcement or the existence of, or
    compliance with, this Agreement or the Settlement Term Sheet, or
    the announcement of the Rights Offering, the Amended Plan or any
    of the other transactions contemplated hereby or thereby;
    provided, further, that any circumstance, change
    or effect described in clauses (i), (ii), (iii) or
    (iv) shall not, either alone or in combination, constitute
    a “Material Adverse Effect” only if the impact of such
    circumstance, change or effect on the Company and its
    Subsidiaries, taken as a whole, is not materially
    disproportionate as compared to its impact on other participants
    in the industries in which the Company and its Subsidiaries
    operate.

    

    5

 

    (b) Corporate Power and Authority.

 

    (i) The Company has the requisite corporate power and
    authority to enter into, execute and deliver this Agreement and,
    subject to entry of the Agreement Order and the Confirmation
    Order (together, the “Court Orders”) and the
    expiration, or waiver by the Bankruptcy Court, of the
    10-day
    period set forth in Rules 6004(g) and 3020(e) of the
    Federal Rules of Bankruptcy Procedure (the “Bankruptcy
    Rules”) respectively, to perform its obligations
    hereunder, including the issuance of the Rights and Shares. The
    Company has taken all necessary corporate action required for
    the due authorization, execution, delivery and performance by it
    of this Agreement, including the issuance of the Rights and
    Shares, other than board of directors’ approval of, or
    other board action to be taken with respect to, the documents to
    implement the Rights Offering.

 

    (ii) When executed and delivered, the Company will have the
    requisite corporate power and authority to enter into, execute
    and deliver the Registration Rights Agreement (as defined in
    Section 5(m) hereof) and all necessary corporate
    action required for the due authorization, execution, delivery
    and, subject to entry of the Court Orders and the expiration, or
    waiver by the Bankruptcy Court, of the
    10-day
    period set forth in Bankruptcy Rules 6004(g) and 3020(e),
    respectively, performance of the Registration Rights Agreement
    will have been taken by the Company by the Effective Date.

 

    (iii) The Company will have the requisite corporate power
    and authority to execute the Amended Plan and to file the
    Amended Plan with the Bankruptcy Court and, subject to entry of
    the Confirmation Order and the expiration, or waiver by the
    Bankruptcy Court, of the
    10-day
    period set forth in Bankruptcy Rule 3020(e), to perform its
    obligations thereunder, and will have taken all necessary
    corporate actions required for the due authorization, execution,
    delivery and performance by it of the Amended Plan by the
    Effective Date.

 

    (c) Execution and Delivery;
    Enforceability.  

 

    (i) This Agreement has been and the Registration Rights
    Agreement will be duly and validly executed and delivered by the
    Company, and, upon the entry of the Agreement Order and the
    expiration, or waiver by the Bankruptcy Court, of the
    10-day
    period set forth in Bankruptcy Rule 6004(g), and assuming
    this Agreement and the Registration Rights Agreement will
    constitute valid and binding agreements of the other parties
    hereto and thereto, each such document will constitute the valid
    and binding obligations of the Company, enforceable against the
    Company in accordance with their respective terms.

 

    (ii) The Amended Plan will be duly and validly filed with
    the Bankruptcy Court by the Company and, upon the entry of the
    Confirmation Order and the expiration, or waiver by the
    Bankruptcy Court, of the
    10-day
    period set forth in Bankruptcy Rule 3020(e), will
    constitute the valid and binding obligation of the Company,
    enforceable against the Company in accordance with its terms.

 

    (d) Authorized Capital Stock.  On
    the Effective Date, the authorized capital stock of the Company
    will consist of 500,000,000 shares of New Common Stock, par
    value $0.01 per share and 100,000,000 shares of preferred
    stock, par value $0.01 per share and the issued and outstanding
    capital stock of the Company will consist of
    59,750,000 shares of New Common Stock. Except as will be
    provided by the Amended Plan, neither the Company nor any of its
    Subsidiaries is a party to or otherwise bound by or subject to
    any outstanding option, warrant, call, subscription or other
    right (including any preemptive right), agreement or commitment
    which (w) obligates the Company or any of its Subsidiaries
    to issue, deliver, sell or transfer or repurchase, redeem or
    otherwise acquire, or cause to be issued, delivered, sold or
    transferred or repurchased, redeemed or otherwise acquired, any
    shares of the capital stock of, or other equity or voting
    interests in, the Company or any security convertible or
    exercisable for or exchangeable into any capital stock of, or
    other equity or voting interest in the Company,
    (x) obligates the Company or any of its Subsidiaries to
    issue, grant, extend or enter into any such option, warrant,
    call, right, security, commitment, contract, arrangement or
    undertaking, (y) restricts the transfer of any shares of
    capital stock of the Company or (z) relates to the voting
    of any shares of capital stock of the Company.

 

    (e) Issuance.  Subject to the
    approval of this Agreement by the Bankruptcy Court, the
    distribution of the Rights and issuance of the Shares, including
    the Investor Shares to be issued and sold by the Company to the
    Investors hereunder, have been duly and validly authorized and,
    when the Shares are issued and delivered against payment
    therefor in the Rights Offering or to the Investors hereunder,
    will be duly and validly issued,

    

    6

 

    fully paid and non-assessable, and free and clear of all taxes,
    liens, pre-emptive rights, rights of first refusal, subscription
    and similar rights.

 

    (f) No Conflict.  Subject to the
    entry of the Court Orders and the expiration, or waiver by the
    Bankruptcy Court, of the
    10-day
    period set forth in Bankruptcy Rules 6004(g) and 3020(e),
    as applicable, the distribution of the Rights, the sale,
    issuance and delivery of the Shares upon exercise of the Rights
    and the consummation of the Rights Offering by the Company, the
    sale, issuance and delivery of the Investor Shares and the
    execution and delivery (or, with respect to the Amended Plan,
    the filing) by the Company of this Agreement and the Amended
    Plan and compliance by the Company with all of the provisions
    hereof and thereof and the consummation of the transactions
    contemplated herein and therein (including compliance by the
    Investors with their obligations hereunder and thereunder)
    (i) will not conflict with or result in a breach or
    violation of, any of the terms or provisions of, or constitute a
    default under (with or without notice or lapse of time, or
    both), or result in the acceleration of, or the creation of any
    lien under, any indenture, mortgage, deed of trust, loan
    agreement or other agreement or instrument to which the Company
    or any of its Subsidiaries is a party or by which the Company or
    any of its Subsidiaries is bound or to which any of the property
    or assets of the Company or any of its Subsidiaries is subject,
    (ii) will not result in any violation of the provisions of
    the Certificate of Incorporation or Bylaws of the Company
    included in the Amended Plan and as applicable to the Company
    from and after the Effective Date and (iii) will not result
    in any material violation of, or any termination or material
    impairment of any rights under, any statute or any license,
    authorization, injunction, judgment, order, decree, rule or
    regulation of any court or governmental agency or body having
    jurisdiction over the Company or any of its Subsidiaries or any
    of their properties, except in any such case described in
    subclause (i) or (iii) as will not have or would not
    reasonably be expected to have, individually or in the
    aggregate, a Material Adverse Effect.

 

    (g) Consents and Approvals.  No
    consent, approval, authorization, order, registration or
    qualification of or with any court or governmental agency or
    body having jurisdiction over the Company or any of its
    Subsidiaries or any of their properties is required for the
    distribution of the Rights, the sale, issuance and delivery of
    the Shares upon exercise of the Rights or to Investors hereunder
    and the consummation of the Rights Offering by the Company and
    the execution and delivery by the Company of this Agreement, the
    Registration Rights Agreement or the Amended Plan or the
    performance of and compliance by the Company with all of the
    provisions hereof and thereof and the consummation of the
    transactions contemplated herein and therein, except
    (i) the entry of the Court Orders and the expiration, or
    waiver by the Bankruptcy Court, of the
    10-day
    period set forth in Bankruptcy Rules 6004(g) and 3020(e),
    as applicable, (ii) the registration under the Securities
    Act of 1933 and the rules and regulations of the Securities and
    Exchange Commission (the “Commission”)
    thereunder (the “Securities Act”) of resales of
    the Investor Shares, (iii) filings with respect to and the
    expiration or termination of the waiting period under the
    Hart-Scott-Rodino
    Antitrust Act (the “HSR Act”) relating to the
    placement of Shares with the Investors, (iv) the filing
    with the Secretary of State of the State of Delaware of the
    Certificate of Incorporation to be applicable to the Company
    from and after the Effective Date and (v) such consents,
    approvals, authorizations, registrations or qualifications as
    may be required under state securities or Blue Sky laws in
    connection with the purchase of the Shares by the Investors or
    (vi) such consents, approvals, authorizations,
    registrations or qualifications the absence of which will not
    have or would not reasonably be expected to have, individually
    or in the aggregate, a Material Adverse Effect.

 

    (h) Arm’s Length.  The Company
    acknowledges and agrees that the Investors are acting solely in
    the capacity of arm’s length contractual counterparties to
    the Company with respect to the transactions contemplated hereby
    (including in connection with determining the terms of the
    offering) and not as financial advisors or fiduciaries to, or
    agents of, the Company or any other person. Additionally, the
    Investors are not advising the Company or any other person as to
    any legal, tax, investment, accounting or regulatory matters in
    any jurisdiction. The Company shall consult with its own
    advisors concerning such matters and shall be responsible for
    making its own independent investigation and appraisal of the
    transactions contemplated hereby, and the Investors shall have
    no responsibility or liability to the Company with respect
    thereto. Any review by the Investors of the Company, the
    transactions contemplated hereby or other matters relating to
    such

    

    7

 

    transactions will be performed solely for the benefit of the
    Investors and shall not be on behalf of the Company.

 

    (i) Financial Statements.  The
    financial statements and the related notes thereto of the
    Company and its consolidated Subsidiaries included or
    incorporated by reference in the disclosure statement relating
    to the Amended Plan (the disclosure statement, as it may be so
    filed, revised, modified, supplemented or amended from time to
    time, the “Disclosure Statement”), the
    documents filed under the Securities Exchange Act of 1934 and
    the rules and regulation of the Commission thereunder (the
    “Exchange Act”) with the Commission since
    December 31, 2004 (the “Exchange Act
    Documents”), and to be included or incorporated by
    reference in the Registration Statement (as defined in
    Section 5(i)) and the Prospectus, comply or will
    comply in all material respects with the applicable requirements
    of the Securities Act, the Exchange Act and the Bankruptcy Code,
    as applicable, and present fairly or will present fairly in all
    material respects the financial position of the Company and its
    Subsidiaries as of the dates indicated and the results of their
    operations and the changes in their cash flows for the periods
    specified; such financial statements have been prepared in
    conformity with generally accepted accounting principles applied
    on a consistent basis throughout the periods covered thereby
    (except as disclosed in the Exchange Act Documents), and the
    supporting schedules included or incorporated by reference in
    the Disclosure Statement and the Exchange Act Documents, and to
    be included or incorporated by reference in the Registration
    Statement and the Prospectus, present fairly or will present
    fairly the information required to be stated therein; and the
    other financial information included or incorporated by
    reference in the Disclosure Statement and the Exchange Act
    Documents, and to be included or incorporated by reference in
    the Registration Statement and the Prospectus, has been derived
    or will be derived from the accounting records of the Company
    and its Subsidiaries and presents fairly or will present fairly
    the information shown thereby; and the pro forma financial
    information and the related notes thereto included or
    incorporated by reference in the Disclosure Statement and the
    Exchange Act Documents, and to be included in the Registration
    Statement and the Prospectus, has been prepared or will be
    prepared in accordance with the applicable requirements of the
    Securities Act and the Exchange Act, as applicable, and the
    assumptions underlying such pro forma financial information are
    reasonable and are set forth in the Disclosure Statement and the
    Exchange Act Documents and will be set forth in the Registration
    Statement and the Prospectus when they become effective.
    Notwithstanding the foregoing, the Investors acknowledge that
    the financial position of the Company reflected in the financial
    information included or incorporated by reference in the
    Disclosure Statement and the Exchange Act Documents, to be
    included or incorporated by reference in the Registration
    Statement and the Prospectus, does not reflect implementation of
    “fresh start” accounting pursuant to Statement of
    Position
    90-7,
    “Financial Reporting by Entities in Reorganization Under
    the Bankruptcy Code” by the American Institute of Certified
    Public Accountants.

 

    (j) Disclosure Statement and Exchange Act
    Documents.  The Disclosure Statement, when it
    was filed with the Bankruptcy Court, and the Exchange Act
    Documents filed prior to the date of this Agreement, when they
    became effective or were filed with the Commission, as the case
    may be, or, if amended prior to the date hereof, when they were
    so amended, conformed in all material respects, in the case of
    the Disclosure Statement, to the Bankruptcy Code, and in the
    case of the Exchange Act Documents, to the requirements of the
    Securities Act or the Exchange Act, as applicable, and none of
    such Disclosure Statement or Exchange Act Documents contained
    any untrue statement of a material fact or omitted to state a
    material fact required to be stated therein or necessary to make
    the statements therein, in the light of the circumstances under
    which they were made, not misleading; and any further documents
    so filed and incorporated by reference in the Disclosure
    Statement or the Prospectus, as the case may be, or any future
    amendments thereto, when such documents become effective or are
    filed with the Bankruptcy Court or the Commission, as the case
    may be, will conform in all material respects to, in the case of
    the Disclosure Statement, the requirements of the Bankruptcy
    Code, and in the case of documents filed under the Exchange Act,
    the requirements of the Exchange Act, as applicable, and will
    not contain any untrue statement of a material fact or omit to
    state a material fact required to be stated therein or necessary
    to make the statements therein, in the light of the
    circumstances under which they were made, not misleading.

 

    (k) Preliminary Prospectus.  Each
    Preliminary Prospectus, at the time of filing thereof, will
    comply in all material respects with the Securities Act and will
    not contain any untrue statement of a material fact or

    

    8

 

    omit to state a material fact required to be stated therein or
    necessary in order to make the statements therein, in the light
    of the circumstances under which they were made, not misleading;
    provided that the Company makes no representation and warranty
    with respect to any statements or omissions made in reliance
    upon and in conformity with information relating to the
    Investors furnished to the Company in writing by the Investors
    expressly for use in any Preliminary Prospectus. For purposes of
    this Agreement, the term “Preliminary
    Prospectus” shall mean each prospectus included in such
    registration statement (and any amendments thereto) before it
    becomes effective, any prospectus filed with the Commission
    pursuant to Rule 424(a) under the Securities Act and the
    prospectus included in the Registration Statement, at the time
    of their respective effectiveness that omits Rule 430A
    Information, and the term “Prospectus” means
    the prospectus in the form first used to confirm sales of the
    Shares.

 

    (l) Registration Statement and
    Prospectus.  As of the effective date of the
    Registration Statement (as defined in Section 5(i)),
    the Registration Statement will comply in all material respects
    with the Securities Act, and will not contain any untrue
    statement of a material fact or omit to state a material fact
    required to be stated therein or necessary in order to make the
    statements therein not misleading; and as of the applicable
    filing date of the Prospectus and any amendment or supplement
    thereto and as of the Effective Date, the Prospectus will not
    contain any untrue statement of a material fact or omit to state
    a material fact required to be stated therein or necessary in
    order to make the statements therein, in the light of the
    circumstances under which they were made, not misleading;
    provided that the Company makes no representation and warranty
    with respect to any statements or omissions made in reliance
    upon and in conformity with information relating to the
    Investors furnished to the Company in writing by the Investors
    expressly for use in the Registration Statement and the
    Prospectus and any amendment or supplement thereto.

 

    (m) Absence of Certain
    Changes.  Since March 6, 2007, other than
    as disclosed in the Exchange Act Documents or the Disclosure
    Statement, and except for the transactions contemplated hereby
    or by the Settlement Term Sheet:

 

    (i) no event, fact or circumstance has occurred which has
    or would reasonably be expected to have, individually or in the
    aggregate, a Material Adverse Effect;

 

    (ii) there has not been any material change in the capital
    stock or long-term debt of the Company or any of its
    Subsidiaries, or any dividend or distribution of any kind
    declared, set aside for payment, paid or made by the Company on
    any class of capital stock;

 

    (iii) neither the Company nor any of its Subsidiaries has
    entered into any transaction or agreement that is material to
    the Company and its Subsidiaries taken as a whole or incurred
    any liability or obligation, direct or contingent, that is
    material to the Company and its Subsidiaries taken as a
    whole; and

 

    (iv) neither the Company nor any of its Subsidiaries has
    sustained any material loss or interference with its business
    from fire, explosion, flood or other calamity, whether or not
    covered by insurance, or from any labor disturbance or dispute
    or any action, order or decree of any court or arbitrator or
    governmental or regulatory authority,

 

    (n) Descriptions of the Transaction
    Documents.  The statements in the Registration
    Statement and the Prospectus insofar as they purport to
    constitute summaries of each of this Agreement, the Registration
    Rights Agreement, the Amended Plan, the Agreement Order and the
    Confirmation Order (collectively, the “Transaction
    Documents”), will constitute accurate statements in all
    material respects.

 

    (o) No Violation or Default.  The
    Company is in compliance with its charter and bylaws and each
    Subsidiary of the Company is in compliance in all material
    respects with its charter and bylaws or similar organizational
    documents. Neither the Company nor any of its Subsidiaries is:
    (i) except as a result of the Chapter 11 Proceedings
    (as defined below), in default, and no event has occurred that,
    with notice or lapse of time or both, would constitute such a
    default, in the due performance or observance of any term,
    covenant or condition contained in any indenture, mortgage, deed
    of trust, loan agreement or other agreement or instrument to
    which the Company or any of its Subsidiaries is a party or by
    which the Company or any of its Subsidiaries is bound or to
    which any of the property or assets of the Company or any of its
    Subsidiaries is subject; or (ii) in violation of any law or
    statute or any judgment, order, rule or regulation of any court
    or arbitrator or

    

    9

 

    governmental or regulatory authority, except, in the case of
    clauses (i) and (ii) above, for any such default or
    violation that would not, individually or in the aggregate, have
    a Material Adverse Effect. For purposes of this Agreement,
    “Chapter 11 Proceedings” shall mean the
    chapter 11 cases jointly administered as Case
    No. 03-17949
    (PCB) in the Bankruptcy Court, In re Solutia Inc., et al.,
    Debtors.

 

    (p) Legal Proceedings.  Except as
    described in the Disclosure Statement or the Exchange Act
    Documents, there are no legal, governmental or regulatory
    investigations, actions, suits or proceedings pending to which
    the Company or any of its Subsidiaries is or may be a party or
    to which any property of the Company or any of its Subsidiaries
    is or may be the subject that, individually or in the aggregate,
    if determined adversely to the Company or any of its
    Subsidiaries, would reasonably be expected to have a Material
    Adverse Effect or materially and adversely affect the ability of
    the Company to perform its obligations under the Transaction
    Documents; no such investigations, actions, suits or proceedings
    are threatened or, to the best knowledge of the Company,
    contemplated by any governmental or regulatory authority or
    threatened by others; and as of the date hereof, (i) there
    are no current or pending legal, governmental or regulatory
    actions, suits or proceedings that are required under the
    Exchange Act to be described in the Exchange Act Documents that
    are not so described and (ii) there are no statutes,
    regulations or contracts or other documents that are required
    under the Exchange Act to be filed as exhibits to the Exchange
    Act Documents or described in the Exchange Act Documents that
    are not so filed or described.

 

    (q) Independent
    Accountants.  Deloitte & Touche LLP
    (the “Independent Accountants”), who have
    certified certain financial statements of the Company and its
    Subsidiaries are independent public accountants with respect to
    the Company and its Subsidiaries as required by the Securities
    Act.

 

    (r) Title to Intellectual
    Property.  The Company and its Subsidiaries
    own or possess adequate rights to use all material patents,
    patent applications, trademarks, service marks, trade names,
    trademark registrations, service mark registrations, copyrights,
    licenses and know-how (including trade secrets and other
    unpatented
    and/or
    unpatentable proprietary or confidential information, systems or
    procedures) necessary for the conduct of their respective
    businesses, except where the failure to own or possess any such
    rights would not reasonably be expected to have a Material
    Adverse Effect; and, except as would not reasonably be expected
    to have a Material Adverse Effect, the conduct of their
    respective businesses will not conflict in any material respect
    with any such rights of others, and the Company and its
    Subsidiaries have not received any notice of any material claim
    of infringement or conflict with any such material rights of
    others.

 

    (s) No Undisclosed
    Relationships.  No relationship, direct or
    indirect, exists between or among the Company or any of its
    Subsidiaries, on the one hand, and the directors, officers,
    stockholders, customers or suppliers of the Company or any of
    its Subsidiaries, on the other, that is required by the Exchange
    Act to be described in the Exchange Act Documents and that are
    not described, except for the relationships contemplated by this
    Agreement, the Settlement Term Sheet and the Amended Plan.

 

    (t) Investment Company Act.  As of
    the date hereof, the Company is not and, after giving effect to
    the offering and sale of the Shares and the application of the
    proceeds thereof as described in the Prospectus, will not be
    required to register as an “investment company” or an
    entity “controlled” by an “investment
    company” within the meaning of the Investment Company Act
    of 1940, as amended, and the rules and regulations of the
    Commission thereunder.

 

    (u) Licenses and Permits.  The
    Company and its Subsidiaries possess all licenses, certificates,
    permits and other authorizations issued by, and have made all
    declarations and filings with, the appropriate federal, state,
    local or foreign governmental or regulatory authorities that are
    necessary for the ownership or lease of their respective
    properties or the conduct of their respective businesses as
    described in the Disclosure Statement and the Exchange Act
    Documents, except where the failure to possess or make the same
    would not, individually or in the aggregate, have a Material
    Adverse Effect; and, except as described in the Disclosure
    Statement and the Exchange Act Documents and except as would not
    reasonably be expected to have a Material Adverse Effect,
    neither the Company nor any of its Subsidiaries has received
    notice of any revocation or modification of any such license,
    certificate, permit or authorization or has any reason to
    believe that any such license, certificate, permit or
    authorization will not be renewed in the ordinary course.

    

    10

 

    (v) Compliance With Environmental
    Laws.  The Company and its Subsidiaries
    (i) are in compliance with any and all applicable federal,
    state, local and foreign laws, rules, regulations, decisions and
    orders relating to the protection of human health and safety,
    the environment or hazardous or toxic substances or wastes,
    pollutants or contaminants (collectively, “Environmental
    Laws”); (ii) have received and are in compliance
    with all permits, licenses or other approvals required of them
    under applicable Environmental Laws to conduct their respective
    businesses; and (iii) have not received notice of any
    actual or potential liability for the investigation or
    remediation of any disposal or release of hazardous or toxic
    substances or wastes, pollutants or contaminants, except, in the
    case of each of the clauses (i), (ii) and (iii), as would
    not, individually or in the aggregate, have a Material Adverse
    Effect.

 

    (w) Compliance With ERISA.  Each
    employee benefit plan, within the meaning of Section 3(3)
    of the Employee Retirement Income Security Act of 1974, as
    amended (“ERISA”), that is maintained,
    administered or contributed to by the Company or any of its
    affiliates for employees or former employees of the Company and
    its affiliates has been maintained in compliance with its terms
    and the requirements of any applicable statutes, orders, rules
    and regulations, including but not limited to ERISA and the
    Internal Revenue Code of 1986, as amended (the
    “Code”), except where the failure to comply
    with such applicable statutes, orders, rules and regulations
    would not, individually or in the aggregate, have a Material
    Adverse Effect, no prohibited transaction, within the meaning of
    Section 406 of ERISA or Section 4975 of the Code, has
    occurred with respect to any such plan excluding transactions
    effected pursuant to a statutory or administrative exemption,
    except such transactions that would not, individually or in the
    aggregate, have a Material Adverse Effect; and for each such
    plan that is subject to the funding rules of Section 412 of
    the Code or Section 302 of ERISA, no “accumulated
    funding deficiency” as defined in Section 412 of the
    Code has been incurred, whether or not waived, and the fair
    market value of the assets of each such plan (excluding for
    these purposes accrued but unpaid contributions) exceeds the
    present value of all benefits accrued under such plan determined
    using reasonable actuarial assumptions.

 

    (x) Accounting Controls.  The
    Company and its Subsidiaries maintain systems of internal
    accounting controls sufficient to provide reasonable assurance
    that (i) transactions are executed in accordance with
    management’s general or specific authorizations;
    (ii) transactions are recorded as necessary to permit
    preparation of financial statements in conformity with generally
    accepted accounting principles and to maintain asset
    accountability; (iii) access to assets is permitted only in
    accordance with management’s general or specific
    authorization; and (iv) the recorded accountability for
    assets is compared with the existing assets at reasonable
    intervals and appropriate action is taken with respect to any
    differences.

 

    (y) Insurance.  The Company and its
    Subsidiaries have insurance covering their respective
    properties, operations, personnel and businesses, including
    business interruption insurance, which insurance is in amounts
    and insures against such losses and risks as are customary for
    companies whose businesses are similar to the Company and its
    Subsidiaries; and, as of the date hereof, neither the Company
    nor any of its Subsidiaries has (i) received notice from
    any insurer or agent of such insurer that capital improvements
    or other expenditures are required or necessary to be made in
    order to continue such insurance or (ii) any reason to
    believe that it will not be able to renew its existing insurance
    coverage as and when such coverage expires or to obtain similar
    coverage at reasonable cost from similar insurers as may be
    necessary to continue its business.

 

    (z) No Unlawful Payments.  Neither
    the Company nor any of its Subsidiaries has (i) used any
    corporate funds for any unlawful contribution, gift,
    entertainment or other unlawful expense relating to political
    activity; (ii) made any direct or indirect unlawful payment
    to any foreign or domestic government official or employee from
    corporate funds; (iii) violated or is in violation of any
    provision of the Foreign Corrupt Practices Act of 1977; or
    (iv) made any bribe, rebate, payoff, influence payment,
    kickback or other unlawful payment, in each case (other than
    clause (iii)) as would reasonably be expected to have a Material
    Adverse Effect.

 

    (aa) No Restrictions on
    Subsidiaries.  Except as (i) described in
    the Disclosure Statement, (ii) otherwise set forth in the
    record of the Chapter 11 Proceedings or (iii) as
    provided in (A) that certain Financing Agreement, dated as
    of January 16, 2004, as amended on March 1, 2004,
    July 20, 2004, June 1, 2005, March 14, 2006 and
    January 25, 2007, among the Company and Solutia Business
    Enterprises, as borrowers, all of the Debtors, as guarantors,
    Citicorp USA Inc., as administrative, collateral and
    documentation agent, and

    

    11

 

    Citibank, N.A., as Issuer and the lenders party thereto,
    (B) the Exit Facility, (C) that certain
    (Euro)200,000,000 Facility Agreement, amended and restated as of
    September, 2006, between Solutia Europe S.A./N.V., Solutia
    Services International S.C.A./Comm. V.A., the guarantors listed
    therein, Citigroup Global Markets Limited, as mandated lead
    arranger, the financial institutions listed therein, as the
    original lenders, KBC Bank N.V. as agent for the finance parties
    and Citibank N.A. as security agent for the secured parties and
    (D) that certain $225,000,000 Syndication and Amendment and
    Restatement Agreement dated May 23, 2007 for Flexsys
    Holding B.V., arranged by KBC Bank N.V. and Citigroup Global
    Markets Limited with KBC Bank N.V. acting as Agent, and subject
    to the Bankruptcy Code, no Subsidiary of the Company is
    currently prohibited, directly or indirectly, under any
    agreement or other instrument to which it is a party or is
    subject, from paying any dividends to the Company, from making
    any other distribution on such Subsidiary’s capital stock,
    from repaying to the Company any loans or advances to such
    Subsidiary from the Company or from transferring any of such
    Subsidiary’s properties or assets to the Company or any
    other Subsidiary of the Company.

 

    (bb) No Broker’s
    Fees.  Neither the Company nor any of its
    Subsidiaries is a party to any contract, agreement or
    understanding with any person (other than this Agreement) that
    would give rise to a valid claim against the Company or any of
    its Subsidiaries or the Investors for a brokerage commission,
    finder’s fee or like payment in connection with the
    transactions contemplated by this Agreement

 

    (cc) No Registration
    Rights.  Except as will be expressly provided
    in the Registration Rights Agreement or the Disclosure
    Statement, no person has the right to require the Company or any
    of its Subsidiaries to register any securities for sale under
    the Securities Act by reason of the filing of the Registration
    Statement with the Commission or the issuance and sale of the
    Rights and the Shares.

 

    (dd) No Stabilization.  The Company
    has not taken, directly or indirectly, any action designed to or
    that would reasonably be expected to cause or result in any
    stabilization or manipulation of the price of the Shares.

 

    (ee) Margin Rules.  Neither the
    issuance, sale and delivery of the Rights or the Shares nor the
    application of the proceeds thereof by the Company as to be
    described in the Registration Statement and the Prospectus will
    violate Regulation T, U or X of the Board of Governors of
    the Federal Reserve System or any other regulation of such Board
    of Governors

 

    (ff) Forward-Looking
    Statements.  No forward-looking statement
    (within the meaning of Section 27A of the Securities Act
    and Section 21E of the Exchange Act) contained in the case
    of the Disclosure Statement and the Exchange Act Documents, has
    been made or reaffirmed, and in the case of the Registration
    Statement and the Prospectus, will be made or reaffirmed,
    without a reasonable basis or has been disclosed other than in
    good faith.

 

    (gg) Statistical and Market
    Data.  Nothing has come to the attention of
    the Company that has caused the Company to believe that the
    statistical and market-related data to be included in the
    Disclosure Statement, Registration Statement and the Prospectus
    is not based on or derived from sources that are reliable and
    accurate in all material respects.

 

    Section 4.  Representations
    and Warranties of the Investors.  Each of the
    Investors, severally and not jointly, represents and warrants
    to, and agrees with, the Company as set forth below. Each
    representation, warranty and agreement is made as of the date
    hereof and as of the Effective Date.

 

    (a) Organization.  It has been duly
    organized and is validly existing and in good standing under the
    laws of the jurisdiction of its organization.

 

    (b) Power and Authority.  It has
    the requisite corporate, limited liability company or similar
    power and authority to enter into, execute and deliver this
    Agreement and to perform its obligations hereunder and has taken
    all necessary action required for the due authorization,
    execution, delivery and performance by it of this Agreement.

 

    (c) Execution and Delivery.  This
    Agreement has been duly and validly executed and delivered by it
    and constitutes its valid and binding obligation, enforceable
    against it in accordance with its terms.

    

    12

 

    (d) Securities Laws
    Compliance.  The Investor Shares will not be
    offered for sale, sold or otherwise transferred by it except
    pursuant to a registration statement or in a transaction exempt
    from or not subject to registration under the Securities Act and
    any applicable state securities laws. Each Investor understands
    that (i) the Investor Shares are being offered and sold to
    such Investor in reliance upon specific exemptions from the
    registration requirements of the U.S. federal and state
    securities laws and that the Company is relying upon the truth
    and accuracy of, and such Investor’s compliance with, the
    representations, warranties and covenants of such Investor set
    forth herein in order to determine the availability of such
    exemptions and the eligibility of such Investor to acquire its
    Shares and (ii) the Investor Shares to be purchased by it
    pursuant to the terms of this Agreement have not been registered
    under the Securities Act or any state securities law, and except
    as provided in the Registration Rights Agreement, the Company
    shall not be required to effect any registration under any
    U.S. federal or state securities law.

 

    (e) Accredited Investor.  It has
    such knowledge and experience in financial and business matters
    that they are capable of evaluating the merits and risks of
    their investment in the Investor Shares being acquired
    hereunder. It is an “accredited investor” within the
    meaning of Rule 501(a) under the Securities Act. It
    understands and is able to bear any economic risks associated
    with such investment (including, without limitation, the
    necessity of holding the Shares for an indefinite period of
    time).

 

    (f) Resale.  The Investor Shares
    are being acquired under this Agreement by the Investor in good
    faith solely for its own account and will not be offered for
    sale, sold or otherwise transferred by the Investor except
    pursuant to a registration statement or in a transaction exempt
    from or not subject to registration under the Securities Act and
    any applicable state securities laws.

 

    (g) Information.  It acknowledges
    that it has been afforded the opportunity to ask questions and
    receive answers concerning the Company and its Subsidiaries and
    their respective financial conditions, results of operations,
    business properties, management and prospects and to obtain
    additional information that it has requested to verify the
    accuracy of the information contained herein. Notwithstanding
    the foregoing, nothing contained herein will operate to modify
    or limit in any respect the representations and warranties of
    the Company or to relieve it from any obligations to the
    Investors for breach thereof or the making of misleading
    statements or the omission of material facts in connection with
    the transactions contemplated herein.

 

    (h) No Broker’s Fees.  It is
    not a party to any contract, agreement or understanding with any
    person (other than this Agreement) that would give rise to a
    valid claim against it for a brokerage commission, finder’s
    fee or like payment in connection with the transactions
    contemplated by this Agreement.

 

    (d) (i) No Conflict.  The
    execution and delivery by the Investor of this Agreement and
    compliance by the Investor with all of the provisions hereof and
    the consummation of the transactions contemplated herein
    (i) will not conflict with or result in a breach or
    violation of, any of the terms or provisions of, or constitute a
    default under (with or without notice or lapse of time, or
    both), or result in the acceleration of, or the creation of any
    lien under, any indenture, mortgage, deed of trust, loan
    agreement or other agreement or instrument to which the Investor
    is a party or by which the Investor is bound or to which any of
    the property or assets of the Investor is subject,
    (ii) will not result in any violation of the provisions of
    the certificate of incorporation or bylaws or similar governance
    documents of the Investor and (iii) will not result in any
    material violation of, or any termination or material impairment
    of any rights under, any statute or any license, authorization,
    injunction, judgment, order, decree, rule or regulation of any
    court or governmental agency or body having jurisdiction over
    the Investor or any of its properties, except in any such case
    described in subclause (i) or (iii) as will not have
    or would not reasonably be expected to prohibit, materially
    delay or materially and adversely impact the Investor’s
    performance of its obligations under this Agreement.

 

    (j) Consents and Approvals.  No
    consent, approval, authorization, order, registration or
    qualification of or with any court or governmental agency or
    body having jurisdiction over the Investor or any of its
    properties is required for the purchase of the Investor Shares,
    the execution and delivery by the Investor of this Agreement or
    the Registration Rights Agreement and the performance of and
    compliance by the Investor with all of the provisions hereof and
    thereof or the consummation of the transactions contemplated
    herein and therein, except (i) the registration under the
    Securities Act of resales of the Investor Shares,
    (ii) filings with respect to and the expiration or
    termination of the waiting period under the HSR Act relating to
    the placement

    

    13

 

    of Shares with the Investors, (iii) such consents,
    approvals, authorizations, registrations or qualifications as
    may be required under state securities or Blue Sky laws in
    connection with the purchase of the Shares by the Investors or
    (iv) such consents, approvals, authorizations,
    registrations or qualifications the absence of which will not
    have or would not reasonably be expected to prohibit, materially
    delay or materially and adversely impact the Investor’s
    performance of its obligations under this Agreement.

 

    (k) Arm’s Length.  The
    Investor acknowledges and agrees that the Company is acting
    solely in the capacity of an arm’s length contractual
    counterparty to the Investor with respect to the transactions
    contemplated hereby (including in connection with determining
    the terms of the offering). Additionally, the Investor is not
    relying on the Company for any legal, tax, investment,
    accounting or regulatory advice in any jurisdiction, except as
    specifically set forth in this Agreement. The Investor shall
    consult with its own advisors concerning such matters and shall
    be responsible for making its own independent investigation and
    appraisal of the transactions contemplated hereby, and the
    Company shall have no responsibility or liability to the
    Investor with respect thereto.

 

    (l) Legal Proceedings.  There are
    no legal, governmental or regulatory investigations, actions,
    suits or proceedings pending to which the Investor is a party or
    to which any property of the Investor is the subject that,
    individually or in the aggregate, if determined adversely to the
    Investor, would reasonably be expected to prohibit, materially
    delay or materially and adversely impact the Investor’s
    performance of its obligations under this Agreement; no such
    investigations, actions, suits or proceedings are threatened or,
    to the best knowledge of the Investor, contemplated by any
    governmental or regulatory authority or threatened by others.

 

    (m) Sufficiency of Funds.  On the
    Effective Date, each Investor will have available funds
    sufficient to pay the aggregate purchase price for its share of
    the Backstop Commitment, as adjusted pursuant to
    Sections 2(a)(ii) (to the extent applicable).

 

    Section 5.  Additional
    Covenants of the Company.  The Company agrees
    with the Investors:

 

    (a) Agreement Motion and Agreement
    Order.  To file a motion and supporting papers
    (the “Agreement Motion”) (including an order in
    form and substance reasonably satisfactory to each of the
    Investors and providing that the schedules and exhibits be
    redacted as the Investors reasonably determine to be necessary
    and appropriate including, without limitation, the names of the
    Backstop Purchasers and the Commitment Percentages of each)
    seeking the entry of the Agreement Order. The Agreement Motion
    shall be filed within 10 Business Days following the signing of
    this Agreement. The Company agrees that it shall use its
    reasonable best efforts, subject to any applicable fiduciary
    duties, to (i) obtain a waiver of Bankruptcy
    Rule 6004(g) and request that the Agreement Order be
    effective immediately upon its entry by the Bankruptcy Court,
    which Agreement Order shall not be revised, modified, or amended
    by the Confirmation Order for the Amended Plan or any other
    further order of this Bankruptcy Court, (ii) fully support
    the Agreement Motion, and any application seeking Bankruptcy
    Court approval and authorization to pay the fees and expenses
    hereunder as an administrative expense of the estate, including,
    but not limited to, filing supporting affidavits on behalf of
    the Company
    and/or its
    financial advisor and providing the testimony of the affiants if
    needed, and (iii) use its reasonable best efforts to obtain
    approval of the Agreement Order as soon as practicable following
    the filing of the motion therefor.

 

    (b) Amended Plan and Disclosure
    Statement.  To file the Amended Plan and
    Disclosure Statement in a form that is reasonably satisfactory
    to each of the Investors, and that is consistent in all material
    respects with the Settlement Term Sheet, and to use its
    reasonable best efforts to obtain the entry of the Confirmation
    Order by the Bankruptcy Court. The Company will authorize,
    execute, file with the Bankruptcy Court and seek confirmation
    of, an Amended Plan that (i) is consistent in all respects
    with this Agreement, (ii) provides for the release and
    exculpation of the Investors, their affiliates, representatives
    and advisors to the fullest extent permitted under applicable
    law (provided, that such release and exculpation shall not
    prohibit or impede the Company’s ability to assert defenses
    or counterclaims in connection with or relating to this
    Agreement), and (iii) has conditions to confirmation and
    the effective date of the Amended Plan (and to what extent any
    such conditions can be waived and by whom) that are reasonably
    consistent with this Agreement. The Company will provide to the
    Investors and their counsel a copy of the Amended Plan and the
    Disclosure Statement by email and a reasonable opportunity to
    review

    

    14

 

    and comment on such documents. In addition, the Company will
    provide to the Investors and their counsel a copy of the
    Confirmation Order and a reasonable opportunity to review and
    comment on such order prior to such order being filed with the
    Bankruptcy Court.

 

    (c) Rights Offering.  To effectuate
    the Rights Offering as provided herein and to use reasonable
    best efforts to seek entry of an order of the Bankruptcy Court,
    prior to the commencement of the Rights Offering, authorizing
    the Company to conduct the Rights Offering pursuant to the terms
    of the Rights Offering Procedures.

 

    (d) Listing.  To use reasonable
    best efforts to list and maintain the listing of the New Common
    Stock (and any applicable associated share purchase rights) on
    the NYSE or Nasdaq Global Select Market.

 

    (e) Notification.  To notify, or to
    cause Financial Balloting Group, LLC, the Subscription Agent for
    the Rights Offering (the “Subscription Agent”)
    to notify the Investors, (i) on each Friday during the
    Rights Exercise Period and, to the extent reasonably requested
    by the Investors, on each Business Day during the 5 Business
    Days prior to the Expiration Time (and any extensions thereto),
    of the aggregate number of Rights known by the Company or the
    Subscription Agent to have been exercised pursuant to the Rights
    Offering as of the close of business on the preceding Business
    Day or the most recent practicable time before such request, as
    the case may be and (ii) as soon as practicable after the
    Expiration Time, and in no event later than 1 Business Day
    following the day of the Expiration Time, the aggregate number
    of Rights exercised pursuant to the Rights Offering.

 

    (f) Unsubscribed Shares.  To
    determine the number of Unsubscribed Shares, if any, in good
    faith, to provide a Commitment Notice or a Satisfaction Notice
    that accurately reflects the number of Unsubscribed Shares as so
    determined and to provide to the Investors a certification by
    the Subscription Agent of the Unsubscribed Shares or, if such
    certification is not available, such written backup to the
    determination of the Unsubscribed Shares as Investors may
    reasonably request.

 

    (g) Stock Splits, Dividends,
    etc.  In the event of any stock split, stock
    dividend, stock combination or similar transaction affecting the
    number of issued and outstanding shares of New Common Stock, the
    Purchase Price and the number of Unsubscribed Shares to be
    purchased hereunder will be proportionally adjusted to reflect
    the increase or decrease in the number of issued and outstanding
    shares of New Common Stock.

 

    (h) HSR.  To use its reasonable
    best efforts to promptly prepare and file all necessary
    documentation and to effect all applications that are necessary
    or advisable under the HSR Act so that the applicable waiting
    period shall have expired or been terminated thereunder with
    respect to the purchase of Shares hereunder, and not to take any
    action that is intended or reasonably likely to materially
    impede or delay the ability of the parties to obtain any
    necessary approvals required for the transactions contemplated
    by this Agreement.

 

    (i) Effectiveness of the Registration
    Statement.  To use its reasonable best efforts
    to prepare and file, on or prior to the first Business Day
    following the date of the entry of the Agreement Order by the
    Bankruptcy Court and in any event no later than
    November 20, 2007, in cooperation with the Investors, a
    shelf registration statement on the appropriate form (the
    “Registration Statement”) covering resales of
    New Common Stock held by the Investors, and provide the
    Investors with a reasonable opportunity to review and propose
    changes to the Registration Statement before the filing with the
    Commission; to advise the Investors, promptly after it receives
    notice thereof, of the time when the Registration Statement has
    been filed or has become effective or any prospectus or
    prospectus supplement has been filed and to furnish the
    Investors with copies thereof; to advise the Investors promptly
    after it receives notice thereof of any comments or inquiries by
    the Commission (and to furnish the Investors with copies of any
    correspondence related thereto), of the issuance by the
    Commission of any stop order or of any order preventing or
    suspending the use of any prospectus, of the initiation or
    threatening of any proceeding for any such purpose, or of any
    request by the Commission for the amending or supplementing of
    the Registration Statement or prospectus or for additional
    information; and to use reasonable best efforts to

    

    15

 

    have the Registration Statement effective on or prior to the
    Effective Date. The foregoing provisions shall be set forth in
    the Registration Rights Agreement.

 

    (j) Clear Market.  For a period of
    180 days after the Effective Date (the “Restricted
    Period”), the Company will not (i) offer, pledge,
    announce the intention to sell, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase or
    otherwise transfer or dispose of, directly or indirectly, any
    shares of capital stock of the Company or any securities
    convertible into or exercisable or exchangeable for capital
    stock of the Company or (ii) enter into any swap or other
    agreement that transfers, in whole or in part, any of the
    economic consequences of ownership of the capital stock of the
    Company, whether any such transaction described in
    clause (i) or (ii) above is to be settled by delivery
    of capital stock of the Company or such other securities, in
    cash or otherwise, without the prior written consent of the
    Investors, except for (A) Rights and New Common Stock
    issuable upon exercise of Rights, (B) shares of New Common
    Stock issued upon the exercise of any stock options outstanding
    as of the Effective Date, (C) the issuance of New Common
    Stock and other equity interests as set forth in the Settlement
    Term Sheet and pursuant to the Amended Plan, (D) the grant
    or issuance of any shares of New Common Stock or other equity
    securities of the Company or any other securities convertible
    into or exchangeable for shares of New Common Stock or other
    equity securities of the Company, including options and warrants
    in respect of shares of New Common Stock and restricted shares
    of New Common Stock, in any case, not to exceed, together with
    any shares of new Common Stock issued pursuant to
    Section 5(j)(E), 5% of the outstanding New Common
    Stock and (E) the issuance in the aggregate, together with
    any shares of new Common Stock issued pursuant to
    Section 5(j)(D), of up to 5% of the outstanding New
    Common Stock as of the Effective Date. Notwithstanding the
    foregoing, if (1) during the last 17 days of the
    Restricted Period, the Company issues an earnings release or
    material news or a material event relating to the Company
    occurs; or (2) prior to the expiration of the Restricted
    Period, the Company announces that it will release earnings
    results during the
    16-day
    period beginning on the last day of the Restricted Period, the
    restrictions imposed by this Agreement (subject to the
    exceptions set forth in clauses (A) through (E) of the
    preceding sentence) shall continue to apply until the expiration
    of the
    18-day
    period beginning on the issuance of the earnings release or the
    occurrence of the material news or material event.

 

    (k) No Stabilization.  The Company
    will not take, directly or indirectly, any action designed to or
    that would reasonably be expected to cause or result in any
    stabilization or manipulation of the price of the Shares.

 

    (l) Reports.  So long as the
    Investors hold Shares, the Company will furnish to the
    Investors, as soon as they are available, copies of all reports
    or other communications (financial or other) furnished to
    holders of the Rights or the Shares, as the case may be, and
    copies of any reports and financial statements furnished to or
    filed with the Commission or any national securities exchange to
    the extent not then available on either the Company’s own
    website or the website of the Commission.

 

    (m) Registration Rights
    Agreement.  The Company and the Investors
    shall use their respective reasonable best efforts to negotiate
    and execute, as soon as practicable after the date hereof, a
    registration rights agreement in form and substance reasonably
    satisfactory to such parties and which shall include the terms
    set forth in Exhibit C hereto (the
    “Registration Rights Agreement”). Within five
    (5) Business Days after execution of the Registration
    Rights Agreement by the Company and each of the Investors, the
    Company shall file with the Bankruptcy Court a motion (attaching
    thereto a copy of the Registration Rights Agreement) seeking
    Bankruptcy Court approval of the Registration Rights Agreement
    as promptly as practicable thereafter, it being understood and
    agreed that the Company may satisfy its obligations under this
    sentence by seeking Bankruptcy Court approval of the
    Registration Rights Agreement as part of the process and at the
    hearing to confirm the Amended Plan (the “Confirmation
    Hearing”).

 

    (n) Access and Information.  From
    the date hereof until the Effective Date, subject to any
    applicable laws, provided that the Investor has executed a
    confidentiality agreement mutually agreeable to the Company and
    the Investor, the Company shall at the Investor’s expense,
    (i) afford any Investor and its representatives access,
    during regular business hours, upon reasonable advance notice
    and in a manner as

    

    16

 

    would not be unreasonably disruptive to the business or
    operations of the Company or any of its Subsidiaries, to the
    assets, books and records of the Company and its Subsidiaries,
    (ii) furnish, or cause to be furnished, to the Investor any
    financial and operating data and other information that is
    available with respect to the Company and its Subsidiaries as
    the Investor from time to time reasonably requests and
    (iii) instruct the employees and the Company’s legal
    and financial advisors to cooperate with the Investor in its
    investigation of the Company and its Subsidiaries.

 

    (o) Non-Solicitation.  The Company
    will not, and will not cause or permit any officer, director,
    employee or affiliate of the Company to, and will not cause or
    authorize any advisor or other agent or representative of the
    Company to, and the Creditors’ Committee and any agent or
    representative, including its professional advisors will not,
    directly or indirectly, (i) solicit, encourage or initiate
    any inquiries, discussions, proposals or offers regarding,
    (ii) continue, propose or enter into negotiations or
    discussions with respect to, or (iii) enter into any
    agreement, letter of intent, memorandum of understanding,
    agreement in principle, commitment or other understanding
    providing for, any Inconsistent Transaction, and will not
    respond to any proposal, offer or inquiry made by any person
    concerning any Inconsistent Transaction (including persons with
    whom the Company may have had discussions prior to the date
    hereof), except to advise such person that the Investors have
    been granted an exclusive right to negotiate concerning the
    transactions contemplated by this Agreement. The Company and the
    Creditors’ Committee and any agent or representative,
    including its professional its advisors further agree to advise
    the Investors promptly, but in no event more than 48 hours
    upon receiving any inquiry from any such person (including the
    identity of any such person, the terms of any proposal and any
    other relevant information that the Investors reasonably may
    request), and to supply Investors with a copy of any written
    offer, proposal or other indication of interest received from
    any such person. The term “Inconsistent Transaction”
    means any transaction inconsistent with the Amended Plan or this
    Agreement, including on terms identical with this Agreement with
    parties other than those to this Agreement.

 

    (p) Opinion of Counsel For The
    Company.  Once the Registration Statement has
    been declared effective, the Company shall cause
    Kirkland & Ellis LLP, counsel for the Company, to
    furnish to the Investors, their written (i) opinion that
    the Registration Statement has been declared effective and
    complies as to form in all material respects (other than with
    respect to financial statements and other financial information)
    and (ii) negative assurance statement customarily received
    by underwriters in underwritten offerings relating to the
    Registration Statement and Prospectus, in each case which
    opinion and negative assurance letter shall state that it is
    being delivered at the request of the Company and solely in
    order to assist the Investors in establishing a “due
    diligence” defense.

 

    Section 6.  Additional
    Covenants of the Investors.  Each Investor
    agrees, severally and not jointly, with the Company:

 

    (a) Information.  To provide the
    Company with such information as the Company reasonably requests
    regarding the Investors for inclusion in the Registration
    Statement and the Disclosure Statement.

 

    (b) HSR Act.  To use reasonable
    best efforts to promptly prepare and file all necessary
    documentation and to effect all applications that are necessary
    or advisable under the HSR Act so that the applicable waiting
    period shall have expired or been terminated thereunder with
    respect to the purchase of Shares hereunder, and not to take any
    action that is intended or reasonably likely to materially
    impede or delay the ability of the parties to obtain any
    necessary approvals required for the transactions contemplated
    by this Agreement. Notwithstanding the foregoing, in no event
    shall this Section 6(b) obligate any Investor to
    dispose or hold separate any of its assets.

 

    (c) Agreement Order.  To use
    reasonable efforts to facilitate the entry of the Agreement
    Order.

 

    (d) Inconsistent Transaction.  To
    not file any pleading or take any other action in the Bankruptcy
    Court with respect to this Agreement, the Amended Plan, the
    Disclosure Statement or the Confirmation Order of the
    consummation of the transactions contemplated hereby or thereby
    that is inconsistent in any material respect with this Agreement
    or the Company’s efforts to obtain the entry of court
    orders consistent with this Agreement.

    

    17

 

    Section 7.  Conditions
    to the Obligations of the Parties.  

 

    (a) Conditions to the Obligations of the
    Investors.  The obligation of each of the
    Investors to purchase the Investor Shares pursuant to the
    Backstop Commitment on the Effective Date are subject to the
    following conditions:

 

    (i) Agreement Order.  The Agreement
    Order shall have been entered by the Bankruptcy Court in the
    form reasonably satisfactory to each of the Company and the
    Investors, and the Agreement Order shall have become a Final
    Order.

 

    (ii) Material Adverse
    Effect.  Since the date hereof, there shall
    not have occurred any changes or events that, individually or in
    the aggregate, would reasonably be expected to result in a
    Material Adverse Effect.

 

    (iii) Inconsistent
    Transaction.  The Company shall not have made
    a public announcement, entered into an agreement, or filed any
    pleading or document with the Bankruptcy Court, evidencing its
    intention to support, or otherwise supported, any Inconsistent
    Transaction.

 

    (iv) Confirmation Order.  The
    Confirmation Order shall have been entered by the Bankruptcy
    Court and such order shall be in form and substance reasonably
    satisfactory to the Investors and shall be non-appealable, shall
    not have been appealed within 10 days of entry or, if such
    order is appealed, shall not have been stayed pending appeal,
    and there shall not have been entered by any court of competent
    jurisdiction any reversal, modification or vacatur, in whole or
    in part, of the Confirmation Order

 

    (v) Amended Plan and Confirmation
    Order.  The Amended Plan, as approved, and the
    Confirmation Order, as entered, in each case by the Bankruptcy
    Court shall be consistent with the requirements for the Amended
    Plan and the Confirmation Order set forth in Section 5(b)
    of this Agreement. Any amendment, modification or change to the
    Amended Plan or the Confirmation Order after the date of their
    initial filing with the Bankruptcy Court shall (A) be
    consistent in all material respects with the Settlement Term
    Sheet, (B) be consistent in all respects with this
    Agreement, (C) provide for the release and exculpation of
    the Investors, their affiliates, representatives and advisors as
    provided herein and (D) to the extent any amendment,
    modification or change adversely impacts the Investors,
    otherwise be in a form that is reasonably satisfactory to each
    of the Investors. The Company agrees to provide the Investors by
    email (i) a draft of any proposed amendment, modification
    or change to the Amended Plan or the Confirmation Order at least
    three (3) Business Days prior to it being filed with the
    Bankruptcy Court and (ii) a copy of such amendment,
    modification or change to the Amended Plan or the Confirmation
    Order promptly after it is filed with the Bankruptcy Court. The
    Investors hereby agree to provide the Company and the
    Creditors’ Committee with written notice of any term of the
    Amended Plan or the Confirmation Order that does not comply with
    the foregoing conditions (A) through (D) within two
    (2) Business Days of receipt of such amendment,
    modification or change to the Amended Plan or the Confirmation
    Order being delivered to the Investors pursuant to
    clause (ii) of the preceding sentence.

 

    (vi) Conditions to
    Confirmation.  The conditions to confirmation
    and the conditions to the effective date of the Amended Plan
    shall have been satisfied or waived, with the consent of the
    Investors (with such consent not to be unreasonably withheld),
    by the Company in accordance with the Amended Plan.

 

    (vii) Rights Offering.  The Company
    shall have commenced the Rights Offering, the Rights Offering
    shall have been conducted in accordance with the Rights Offering
    Procedures and in all material respects in accordance with this
    Agreement and the Expiration Time shall have occurred.

 

    (viii) Commitment Notice.  The
    Investors shall have received a Commitment Notice in accordance
    with Section 1(e) from the Company, dated as of the
    Determination Date, certifying as to the number of Unsubscribed
    Shares to be purchased pursuant to the Backstop Commitment.

 

    (ix) Valid Issuance.  The New
    Common Stock shall be, upon payment of the aggregate purchase
    price as provided herein, validly issued, fully paid,
    non-assessable and free and clear of all taxes, liens,
    pre-emptive rights, rights of first refusal, subscription and
    similar rights.

    

    18

 

    (x) No Restraint.  No judgment,
    injunction, decree or other legal restraint shall prohibit the
    consummation of the Amended Plan, the Rights Offering or the
    transactions contemplated by this Agreement.

 

    (xi) HSR Act.  If the purchase of
    Shares by the Investors pursuant to this Agreement is subject to
    the terms of the HSR Act, the applicable waiting period shall
    have expired or been terminated thereunder with respect to such
    purchase.

 

    (xii) Consents and Approvals.  All
    other governmental and third party notifications, filings,
    consents, waivers and approvals required for the consummation of
    the transactions contemplated by this Agreement, the Settlement
    Term Sheet and the Amended Plan shall have been made or received
    and shall remain in full force and effect.

 

    (xiii) Enforceability.  This
    Agreement shall be valid and enforceable against the Company and
    the Company shall not be in breach of this Agreement in any
    material respect.

 

    (xiv) NYSE/Nasdaq.  The New Common
    Stock issuable upon exercise of the Rights shall be approved for
    trading on the NYSE or Nasdaq Global Select Market, subject to
    official notice of issuance.

 

    (xv) Comfort Letters.  On the
    Effective Date, the Independent Accountants shall have furnished
    to the Investors, at the request of the Company, letters, dated
    the respective dates of delivery thereof and addressed to the
    Investors, in form and substance reasonably satisfactory to the
    Investors, containing statements and information of the type
    customarily included in accountants’ “comfort
    letters” to underwriters with respect to the financial
    statements and certain financial information contained or
    incorporated by reference in the Registration Statement and the
    Prospectus; provided, that the letter delivered on the Effective
    Date shall use a “cut-off” date no more than 3
    Business Days prior to such Effective Date.

 

    (xvi) Execution of Documents.  All
    documents set forth on Schedule 7(a) shall have been
    executed in form and substance reasonably satisfactory to the
    Company and the Investors.

 

    (xvii) No Legal Impediment to
    Issuance.  No action shall have been taken and
    no statute, rule, regulation or order shall have been enacted,
    adopted or issued in each by any federal, state or foreign
    governmental or regulatory authority that, as of the Effective
    Date, prohibits the issuance or sale of the Rights or the
    Shares; and no injunction or order of any federal, state or
    foreign court shall have been issued that, as of the Effective
    Date, prohibits the issuance or sale of the Rights or the Shares.

 

    (xviii) Good Standing.  The
    Investors shall have received on and as of the Effective Date
    satisfactory evidence of the good standing of the Company and
    its Significant Subsidiaries (as such term is defined in
    Article 1,
    Rule 1-02
    of
    Regulation S-X
    promulgated pursuant to the Securities Act) in their respective
    jurisdictions of organization, in each case in writing or any
    standard form of telecommunication from the appropriate
    governmental authorities of such jurisdictions.

 

    (xix) Representations and Warranties and
    Covenants.  The representations and warranties
    of the Company in this Agreement that are not qualified as to
    materiality or Material Adverse Effect shall be true and correct
    in all material respects and the representations and warranties
    that are qualified as to materiality or Material Adverse Effect
    shall be true and correct, in each case, at and as of the
    Effective Date as if made at and as of the Effective Date
    (except for representations and warranties made as of a
    specified date, which shall be true and correct only as of the
    specified date) and the Company shall have complied in all
    material respects with all covenants in this Agreement and the
    Registration Rights Agreement applicable to it.

 

    (xx) Officer’s
    Certificate.  The Investors shall have
    received on and as of the Effective Date a certificate of the
    chief financial officer or chief accounting officer of the
    Company (i) confirming that the Company has satisfied all
    conditions on its part to be performed or satisfied hereunder at
    or prior to such Effective Date and (ii) to the effect set
    forth in Section 7(a)(xx) above.

    

    19

 

    (xxi) Bankruptcy Court
    Approval.  The Registration Rights Agreement
    shall have been approved by the Bankruptcy Court and shall have
    been executed by the parties thereto in substantially the same
    form as the form thereof filed with the Bankruptcy Court.

 

    (xxii) Exit Facility.  The Company
    shall have obtained secured and unsecured or other exit
    financing upon terms and conditions consistent with, or more
    favorable than, the terms set forth on Exhibit D hereto
    (the “Exit Facility”) and which shall be
    consummated on or prior to the Effective Date. In addition, the
    material terms of the Exit Facility, other than those set forth
    on Exhibit D, shall be such that the Investors providing a
    majority of the Backstop Commitment do not have a reasonable
    basis for believing that such terms negatively and materially
    impact the commitment of the Investors provided for in this
    Agreement, by among other things, negatively and materially
    impacting the operating or financial performance of Reorganized
    Solutia. The Company will promptly provide copies of all term
    sheets, drafts and final execution copies of the documentation
    for the Exit Facility (the “Exit Facility
    Documentation”) to counsel for the Investors and, in
    the event that counsel to the Investors does not notify the
    Company that any material provision contained in the Exit
    Facility Documentation, other than those terms set forth on
    Exhibit D, is not reasonably satisfactory to a majority of
    the Investors within five (5) business days from the
    receipt thereof, such Exit Facility Documentation shall be
    deemed to be reasonably satisfactory to the Investors. For
    purposes of clarity, any change to any subsequent version of
    Exit Facility Documentation that impacts provisions contained in
    earlier versions of the Exit Facility Documentation shall renew
    the opportunity for counsel to the Investors to provide notice
    to the Company of such provision being not reasonably
    satisfactory to each Investor.

 

    (xxiii) Financial Projections.  The
    financial projections of the Company set forth in the Disclosure
    Statement shall be consistent in all material respects with the
    financial projections provided to the ratings agencies on
    September 17, 2007, as updated by materials provided to the
    Investors on September 26, 2007.

 

    (xxiv) Extension Fees.  If required
    by Section 10(a)(iii), the Investors shall have
    received payment of any Extension Fees; the Extension Fees, if
    any, shall not have been required to be repaid, by the
    Bankruptcy Court or otherwise, to the Company.

 

    (b) Conditions to the Obligations of the
    Company.  The obligation of the Company to
    issue and sell the Investor Shares to the Investors on the
    Effective Date are subject to the following conditions:

 

    (i) Aggregate Purchase Price.  The
    Investors shall have delivered to the Company, as the total
    aggregate purchase price for the Investor Shares, an amount of
    readily available (same day) funds denominated in United States
    Dollars equal to the product obtained by multiplying
    (A) the Purchase Price (as it may be adjusted in accordance
    with the terms hereof) and (B) the number of Investor
    Shares (as it may be adjusted in accordance with the terms
    hereof).

 

    (ii) Agreement Order.  The
    Agreement Order shall have been entered by the Bankruptcy Court
    in the form reasonably satisfactory to each of the Company and
    the Investors, and the Agreement Order shall have become a Final
    Order.

 

    (iii) Confirmation Order.  The
    Confirmation Order shall have been entered by the Bankruptcy
    Court and such order shall be non-appealable, shall not have
    been appealed within 10 days of entry or, if such order is
    appealed, shall not have been stayed pending appeal, and there
    shall not have been entered by any court of competent
    jurisdiction any reversal, modification or vacatur, in whole or
    in part, of the Confirmation Order.

 

    (iv) Amended Plan and Confirmation
    Order.  The Amended Plan, as approved, and the
    Confirmation Order as entered, by the Bankruptcy Court, and all
    amendments, modifications or changes thereto shall (A) be
    consistent in all respects with this Agreement, (B) provide
    for the release and exculpation of the Investors, their
    affiliates, representatives and advisors as provided herein and
    (C) otherwise consistent in all material respects with the
    Settlement Term Sheet.

    

    20

 

    (v) Conditions to
    Confirmation.  The conditions to confirmation
    and the conditions to the Effective Date of the Amended Plan
    shall have been satisfied or waived, with the consent of the
    Investors, by the Company in accordance with the Amended Plan.

 

    (vi) Rights Offering.  The Rights
    Offering shall have been conducted in accordance with the Rights
    Offering Procedures and in all material respects in accordance
    with this Agreement and the Expiration Time shall have occurred.

 

    (vii) No Restraint.  No judgment,
    injunction, decree or other legal restraint shall prohibit the
    consummation of the Amended Plan, the Rights Offering or the
    transactions contemplated by this Agreement.

 

    (viii) HSR Act.  If the purchase of
    Shares by the Investors pursuant to this Agreement is subject to
    the terms of the HSR Act, the applicable waiting period shall
    have expired or been terminated thereunder with respect to such
    purchase.

 

    (ix) Enforceability.  This
    Agreement shall be valid and enforceable against each Investor
    and no Investor shall be in breach of this Agreement in any
    material respect, except to the extent that Non-Defaulting
    Investors purchase any Default Shares as a result of any breach
    by a Defaulting Investor pursuant to
    Sections 2(a)(ii).

 

    (x) Representations and Warranties and
    Covenants.  The representations and warranties
    of each Investor in this Agreement that are not qualified as to
    materiality or material adverse effect on the Investor’s
    performance of its obligations hereunder or similar
    qualifications shall be true and correct in all material
    respects, and the representations and warranties that are
    qualified as to materiality or material adverse effect on the
    Investor’s performance of its obligations hereunder or
    similar qualifications shall be true and correct, in each case,
    at and as of the Effective Date as if made at and as of the
    Effective Date (except for representations and warranties made
    as of a specified date, which shall be true and correct only as
    of the specified date) and each Investor shall have complied in
    all material respects with all covenants in this Agreement
    applicable to it, except, in each case, to the extent that
    Non-Defaulting Investors or purchase any Default Shares as a
    result of any breach of representations, warranties or covenants
    by a Defaulting Investor pursuant to
    Sections 2(a)(ii).

 

    Section 8.  Indemnification.  

 

    (a) Indemnification
    Generally.  Subject to the approval of this
    Agreement by the Bankruptcy Court, whether or not the Rights
    Offering is consummated or this Agreement or the Backstop
    Commitment is terminated, the Company (in such capacity, the
    “Indemnifying Party”) shall indemnify and hold
    harmless the Investors and their respective officers, directors,
    employees, agents, controlling persons and affiliates (each an
    “Indemnified Person”) from and against any and
    all losses, claims, damages, liabilities and reasonable
    expenses, joint or several, to which any such Indemnified Person
    may become subject arising out of or in connection with any
    claim, challenge, litigation, investigation or proceeding with
    respect to the Rights Offering, the Backstop Commitment, the
    Transaction Documents, the Registration Statement, the
    Prospectus or the transactions contemplated thereby, including
    without limitation, payment of the Backstop Fee or the Extension
    Fees, if any, distribution of Rights, purchase and sale of
    Shares in the Rights Offering and purchase and sale of Shares
    pursuant to the Backstop Commitment or the Registration Rights
    Agreement, or any breach of the Company of this Agreement or the
    Registration Rights Agreement, regardless of whether any of such
    Indemnified Persons is a party thereto, and to reimburse such
    Indemnified Persons for any reasonable legal or other reasonable
    out-of-pocket expenses as they are incurred in connection with
    investigating, responding to or defending any of the foregoing,
    provided that the foregoing indemnification will not, as to any
    Indemnified Person, apply to losses, claims, damages,
    liabilities or expenses to the extent that they are finally
    judicially determined to have resulted from (i) any breach
    of this Agreement by such Indemnified Person, (ii) bad
    faith, gross negligence or willful misconduct on the part of
    such Indemnified Person or (iii) statements or omissions in
    the Registration Statement or Prospectus or any amendment or
    supplement thereto made in reliance upon or in conformity with
    information relating to the Investors furnished to the Company
    in writing by or on behalf of the Investors expressly for use in
    the Registration Statement or Prospectus or any amendment or
    supplement

    

    21

 

    thereto. If for any reason the foregoing indemnification is
    unavailable to any Indemnified Person or insufficient to hold it
    harmless, then the Indemnifying Party shall contribute to the
    amount paid or payable by such Indemnified Person as a result of
    such loss, claim, damage, liability or expense in such
    proportion as is appropriate to reflect not only the relative
    benefits received by the Indemnifying Party on the one hand and
    such Indemnified Person on the other hand but also the relative
    fault of the Indemnifying Party, on the one hand, and such
    Indemnified Person, on the other hand, as well as any relevant
    equitable considerations. It is hereby agreed that the relative
    benefits to the Indemnifying Party on the one hand and all
    Indemnified Persons on the other hand shall be deemed to be in
    the same proportion as (i) the total value received or
    proposed to be received by the Company pursuant to the sale of
    Shares contemplated by this Agreement bears to (ii) the
    Backstop Fee and Extension Fees paid or proposed to be paid to
    the Investors. The Indemnifying Party also agrees that no
    Indemnified Person shall have any liability based on their
    exclusive or contributory negligence or otherwise to the
    Indemnifying Party, any person asserting claims on behalf of or
    in right of any of the Indemnifying Party, or any other person
    in connection with or as a result of the Rights Offering, the
    Backstop Commitment, the Transaction Documents, the Registration
    Statement, the Prospectus or the transactions contemplated
    thereby, except as to any Indemnified Person to the extent that
    any losses, claims, damages, liability or expenses incurred by
    the Company are finally judicially determined to have resulted
    from ( i) bad faith, gross negligence or willful misconduct
    of such Indemnified Person in performing the services that are
    the subject of this Agreement or the Registration Rights
    Agreement or (ii) statements or omissions in the
    Registration Statement or Prospectus or any amendment or
    supplement thereto made in reliance upon or in conformity with
    information relating to the Investors furnished to the Company
    in writing by or on behalf of the Investors expressly for use in
    the Registration Statement or Prospectus or any amendment or
    supplement thereto; provided, however, that in no
    event shall an Indemnified Person or such other parties have any
    liability for any indirect, consequential or punitive damages in
    connection with or as a result of any of their activities
    related to the foregoing. Notwithstanding the foregoing, each of
    the parties hereto may enforce the terms of this Agreement and
    may seek indirect, consequential and other damages as a result
    of any breach of the terms hereof. The indemnity, reimbursement
    and contribution obligations of the Indemnifying Party under
    this Section 8 shall be in addition to any liability
    that the Indemnifying Party may otherwise have to an Indemnified
    Person and shall be binding upon and inure to the benefit of any
    successors, assigns, heirs and personal representatives of the
    Indemnifying Party and any Indemnified Person.

 

    (b) Certain Procedures.  Promptly
    after receipt by an Indemnified Person of notice of the
    commencement of any claim, litigation, investigation or
    proceeding relating to the Transaction Documents, the
    Registration Statement, the Prospectus or any of the
    transactions contemplated thereby
    (“Proceedings”), such Indemnified Person will,
    if a claim is to be made hereunder against the Indemnifying
    Party in respect thereof, promptly (and in any event within 10
    Business Days) notify the Indemnifying Party in writing of the
    commencement thereof; provided that (i) the omission so to
    notify the Indemnifying Party will not relieve it from any
    liability that it may have hereunder except to the extent it has
    been materially prejudiced by such failure and (ii) the
    omission so to notify the Indemnifying Party will not relieve it
    from any liability that it may have to an Indemnified Person
    otherwise than on account of this Section 8. In
    case any such Proceedings are brought against any Indemnified
    Person and it notifies the Indemnifying Party of the
    commencement thereof, the Indemnifying Party will be entitled to
    participate therein, and, to the extent that it may elect by
    written notice delivered to such Indemnified Person, to assume
    the defense thereof, with counsel reasonably satisfactory to
    such Indemnified Person, provided that if the defendants in any
    such Proceedings include both such Indemnified Person and the
    Indemnifying Party and such Indemnified Person shall have
    reasonably concluded that there may be legal defenses available
    to it that are different from or additional to those available
    to the Indemnifying Party, such Indemnified Person shall have
    the right to select separate counsel to assert such legal
    defenses and to otherwise participate (but not control) in the
    defense of such Proceedings on behalf of such Indemnified
    Person. Upon receipt of notice from the Indemnifying Party to
    such Indemnified Person of its election so to assume the defense
    of such Proceedings and approval by such Indemnified Person of
    counsel, the Indemnifying Party shall not be liable to such
    Indemnified Person for expenses incurred by such Indemnified
    Person in connection with the defense thereof (other than
    reasonable costs of investigation) unless (i) such
    Indemnified Person shall have employed separate counsel in
    connection with the assertion of legal defenses in accordance
    with the proviso to the next preceding sentence (it being
    understood, however,

    

    22

 

    that the Indemnifying Party shall not be liable for the expenses
    of more than one separate counsel, approved by Investors,
    representing the Indemnified Persons who are parties to such
    Proceedings), (ii) the Indemnifying Party shall not have
    employed counsel reasonably satisfactory to such Indemnified
    Person to represent such Indemnified Person within a reasonable
    time after notice of commencement of the Proceedings or
    (iii) the Indemnifying Party shall have authorized in
    writing the employment of counsel for such Indemnified Person.

 

    (c) Limitations.  The Indemnifying
    Party shall not be liable for any settlement of any Proceedings
    effected without its written consent (which consent shall not be
    unreasonably withheld). If any settlement of any Proceeding is
    consummated with the written consent of the Indemnifying Party
    or if there is a final judgment for the plaintiff in any such
    Proceedings, the Indemnifying Party agrees to indemnify and hold
    harmless each Indemnified Person from and against any and all
    losses, claims, damages, liabilities and expenses by reason of
    such settlement or judgment in accordance with, and subject to
    the limitations of, the provisions of this
    Section 8. Notwithstanding anything in this
    Section 8 to the contrary, if at any time an
    Indemnified Person shall have requested the Indemnifying Party
    to reimburse such Indemnified Person for legal or other expenses
    in connection with investigating, responding to or defending any
    Proceedings as contemplated by this Section 8, the
    Indemnifying Party shall be liable for any settlement of any
    Proceedings effected without its written consent if
    (i) such settlement is entered into more than 60 days
    after receipt by the Indemnifying Party of such request for
    reimbursement and (ii) the Indemnifying Party shall not
    have reimbursed such Indemnified Person in accordance with such
    request prior to the date of such settlement. The Indemnifying
    Party shall not, without the prior written consent of an
    Indemnified Person (which consent shall not be unreasonably
    withheld), effect any settlement of any pending or threatened
    Proceedings in respect of which indemnity has been sought
    hereunder by such Indemnified Person unless (a) such
    settlement includes an unconditional release of such Indemnified
    Person in form and substance satisfactory to such Indemnified
    Person from all liability on the claims that are the subject
    matter of such Proceedings and (b) does not include any
    statement as to or any admission of fault, culpability or a
    failure to act by or on behalf of any Indemnified Person.

 

    Section 9.  Survival
    of Representations and Warranties,
    Etc.  Notwithstanding any investigation at any
    time made by or on behalf of any party hereto, all
    representations and warranties made in this Agreement shall
    survive the execution and delivery of this Agreement and the
    Effective Date, except that the representations and warranties
    made in Sections 3(f) through (s), and (u)
    through (gg) shall only survive for a period of 2 years
    after the Effective Date.

 

    Section 10.  Termination.

 

    (a) Termination by Investors.  Each
    of the Investors may terminate this Agreement as to itself:

 

    (i) upon (A) any material breach by the Company of any
    of its representations, warranties, covenants or agreements
    contained in this Agreement, including Section 3 and
    Section 7, (B) the failure of any of the
    conditions set forth in this Agreement, or (C) any of the
    conditions set forth in this Agreement becoming incapable of
    fulfillment (other than through the failure of the Investors to
    comply with their obligations), in the case of (A), (B) or
    (C), that is not curable or, if curable, is not cured within
    15 days after written notice of such breach or failure is
    given to the Company by any Investor; provided, that the
    right to terminate this Agreement under this
    Section 10(a)(i) shall not be available to any
    Investor whose breach is the cause of the failure of the
    condition in Section 7 to be satisfied.

 

    (ii) if the Exit Financing Condition has been satisfied and
    the Effective Date has not occurred, on or after
    February 28, 2007.

 

    (iii) if the Exit Financing Condition has not been
    satisfied and the Effective Date has not occurred, on or after
    February 28, 2007, on or after 3:01 p.m. New York
    City time on December 31, 2007 if the Effective Date has
    not occurred prior to that time; provided that if the Company
    has paid to the Investors by wire transfer of immediately
    available funds not later than 3:00 p.m. New York City
    time on December 31, 2007, a fee in the amount of
    $3,125,000 (the “Extension Fee”), which shall
    be earned by each Investor upon payment, then the Investors may
    not terminate this Agreement pursuant to this
    Section 10(a)(iii) until March 31, 2008.

    

    23

 

    (b) Effect of Termination.  Upon
    termination under this Section 10, all rights and
    obligations of the parties under this Agreement shall terminate
    without any liability of any party to any other party except
    that (i) nothing contained herein shall release any party
    hereto from liability from any breach and (y) the covenants
    and agreements made by the parties herein under
    Section 2(d) Sections 8, 9 and
    11 through 19 shall survive indefinitely in
    accordance with their terms.

 

    Section 11.  Notices.  All
    notices and other communications in connection with this
    Agreement will be in writing and will be deemed given (and will
    be deemed to have been duly given upon receipt) if delivered
    personally, sent via electronic facsimile (with confirmation),
    mailed by registered or certified mail (return receipt
    requested) or delivered by an express courier (with
    confirmation) to the parties at the following addresses (or at
    such other address for a party as will be specified by like
    notice):

 

    (a) If to the Investors, to the addresses set forth below
    each Investor’s signature on the signature pages hereto.

 

    with copies to:

 

    Stroock & Stroock & Lavan LLP

    180 Maiden Lane

    New York, New York 10038

    Attention: Kris Hansen

    Brett Lawrence

    Fax:
    (212) 806-6006

 

    and to:

 

    Haynes and Boone, LLP

    901 Main St., Suite 3100

    Dallas, TX 75202

    Attention: Lenard M. Parkins

    Fax:
    (713) 236-5405

 

    (b) If to the Company, to:

 

    Solutia Inc.

    575 Maryville Centre Drive

    P.O. Box 66760

    St Louis, Missouri

    Attention: General Counsel

    Fax:
    (314) 674-8703

 

    with a copy to:

 

			
	 	    Kirkland & Ellis LLP

    153 East 53rd Street,

    New York, New York
    10022-4611

    Attention:
	
    Thomas W. Christopher

    Jonathan S. Henes

    Fax:
    (212) 446-4900

 

    Section 12.  Assignment;
    Third Party Beneficiaries.  Neither this
    Agreement nor any of the rights, interests or obligations under
    this Agreement will be assigned by any of the parties (whether
    by operation of law or otherwise) without the prior written
    consent of the other party. Notwithstanding the previous
    sentence, this Agreement, or the Investors’ obligations
    hereunder, may be assigned, delegated or transferred, in whole
    or in part, by the Investors to any Affiliate (as defined in
    Rule 12b-2
    under the Exchange Act) of the Investors over which the
    Investors or any of their Affiliates exercise investment
    authority, including, without limitation, with respect to voting
    and dispositive rights; provided, that any such assignee assumes
    the obligations of the Investors hereunder and agree in writing
    to be bound by the terms of this Agreement in the same manner as
    the Investors. Notwithstanding the foregoing or any other
    provisions herein, no such assignment will relieve

    

    24

 

    the Investors of their obligations hereunder if such assignee
    fails to perform such obligations. Except as provided in
    Section 8 with respect to the Indemnified Parties,
    this Agreement (including the documents and instruments referred
    to in this Agreement) is not intended to and does not confer
    upon any person other than the parties hereto any rights or
    remedies under this Agreement.

 

    Section 13.  Prior
    Negotiations; Entire Agreement.  This
    Agreement (including the agreements attached as exhibits to and
    the documents and instruments referred to in this Agreement)
    constitutes the entire agreement of the parties and supersedes
    all prior agreements, arrangements or understandings, whether
    written or oral, between the parties with respect to the subject
    matter of this Agreement, except that the parties hereto
    acknowledge that any confidentiality agreements heretofore
    executed among the parties will continue in full force and
    effect.

 

    Section 14.  GOVERNING
    LAW; VENUE.  THIS AGREEMENT WILL BE GOVERNED
    AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
    OF NEW YORK. THE INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE
    JURISDICTION OF, AND VENUE IN, THE UNITED STATES BANKRUPTCY
    COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND WAIVES ANY
    OBJECTION BASED ON FORUM NON CONVENIENS.

 

    Section 15.  Counterparts.  This
    Agreement may be executed in any number of counterparts, all of
    which will be considered one and the same agreement and will
    become effective when counterparts have been signed by each of
    the parties and delivered to the other party (including via
    facsimile or other electronic transmission), it being understood
    that each party need not sign the same counterpart.

 

    Section 16.  Waivers
    and Amendments.  This Agreement may be
    amended, modified, superseded, cancelled, renewed or extended,
    and the terms and conditions of this Agreement may be waived,
    only by a written instrument signed by the Company and those
    Investors providing two-thirds of the Backstop Commitment, and,
    to the extent required, the approval of the Bankruptcy Court;
    provided, however, that no such amendment,
    modification, supersession, cancellation, renewal, extension or
    waiver shall materially alter the rights or obligations of any
    Investor without such Investor’s individual prior written
    consent; provided, further, that the amendment,
    modification, supersession, cancellation, renewal extension or
    waiver of any of the following provisions shall require the
    express written consent of each Investor: the definition of
    “Material Adverse Effect”, Section 2,
    Section 5(m), Section 7(a)(ii),
    Section 7(a)(iv), Section 7(a)(v),
    Section 7(a)(xxii), Section 10 and
    Section 16 Notwithstanding the foregoing,
    (i) no amendment, modification, supersession, cancellation,
    renewal extension or waiver of any provision shall adversely
    affect any Investor, or such Investor’s broker-dealer
    affiliates, in connection with such Investor’s or
    affiliate’s activities as a broker-dealer, in such
    Investor’s sole discretion, without such Investor’s
    consent. and (ii) any amendment waiver of
    Section 19 with respect to any Investor and its
    affiliates shall not require the consent of any other Investor.
    No delay on the part of any party in exercising any right, power
    or privilege pursuant to this Agreement will operate as a waiver
    thereof, nor will any waiver on the part of any party of any
    right, power or privilege pursuant to this Agreement, nor will
    any single or partial exercise of any right, power or privilege
    pursuant to this Agreement, preclude any other or further
    exercise thereof or the exercise of any other right, power or
    privilege pursuant to this Agreement. The rights and remedies
    provided pursuant to this Agreement are cumulative and are not
    exclusive of any rights or remedies which any party otherwise
    may have at law or in equity.

 

    Section 17.  Headings.  The
    headings in this Agreement are for reference purposes only and
    will not in any way affect the meaning or interpretation of this
    Agreement.

 

    Section 18.  Specific
    Performance.  The parties acknowledge and
    agree that any breach of the terms of this Agreement would give
    rise to irreparable harm for which money damages would not be an
    adequate remedy, and, accordingly, the parties agree that, in
    addition to any other remedies, each will be entitled to enforce
    the terms of this Agreement by a decree of specific performance
    without the necessity of proving the inadequacy of money damages
    as a remedy and without the necessity of posting bond.

 

    Section 19.  Voting
    Restriction.  Subject to the last sentence of
    this Section 19, the shares of New Common Stock acquired by
    the Investors hereunder, as well as any other shares of New
    Common Stock

    

    25

 

    received by the Investors and their respective affiliates under
    or in connection with the Amended Plan and any shares of such
    stock that may be acquired by the Investors and their respective
    affiliates during the Restriction Period, as defined below,
    shall not be entitled to vote for the election of directors of
    the Company at any time during the Restriction Period while held
    by or for the benefit of any of the Investors or their
    respective affiliates. This restriction shall apply to the
    Investors, together with their respective affiliates, on a
    several and not joint basis, and shall terminate at 12:01 am on
    the day following the last day of the Restriction Period. This
    restriction shall not apply to any share of New Common Stock
    after sale or other transfer of such share by the Investors or
    their affiliates to a party not affiliated with any Investor or
    affiliate. For purposes of this provision, the
    “Restriction Period” shall begin on the
    Effective Date and shall terminate on the date that is eight
    months and one day after the Effective Date. Notwithstanding
    anything contained herein to the contrary, (i) none of the
    provisions of this Section 19 shall apply to any
    shares of New Common Stock acquired or received by Highland
    Capital Management, L.P. or its affiliates, (ii) the
    provisions of this Section 19 shall apply to shares
    of New Common Stock acquired or received by UBS Securities LLC
    or its affiliates only to the extent they are held as part of
    proprietary trading or investment for the account of UBS
    Securities LLC or an affiliate, excluding any claims or
    interests in respect of which UBS Securities LLC or an affiliate
    exercises voting authority due to a financing, custodial,
    advisory or fiduciary relationship and (iii) the provisions
    of this Section 19 shall apply to shares of New
    Common Stock acquired or received by Merrill Lynch, Pierce,
    Fenner & Smith Incorporated or its affiliates only to
    the extent they are held as part of proprietary trading or
    investment for the account of Merrill Lynch, Pierce,
    Fenner & Smith Incorporated or an affiliate, excluding
    any claims or interests in respect of which Merrill Lynch,
    Pierce, Fenner & Smith Incorporated or an affiliate
    exercises voting authority due to a financing, custodial,
    advisory or fiduciary relationship.

 

    [Signature
    Page Follows]

    

    26

 

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

 

    SOLUTIA INC.

 

			
	 	    By: 
	
    /s/  Jeffry
    N. Quinn

    

     Name:     Jeffry N. Quinn

			
	 	     Title: 
	
    President, Chief Executive Officer and Chairman of the Board

 

    Agreed and Accepted:

 

    OFFICIAL COMMITTEE OF UNSECURED

    CREDITORS OF SOLUTIA INC., ET AL

 

			
	    By: 
	
        

	 

    Name:     

				
	 	    Title: 
	

	 

 

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

 

    SOLUTIA INC.

 

			
	 	    By: 
	
        

    Name:     

			
	 	    Title: 
	

 

    Agreed and Accepted:

 

    OFFICIAL COMMITTEE OF UNSECURED

    CREDITORS OF SOLUTIA INC., ET AL

 

			
	    By: 
	
    /s/  James
    Savin

	 

    Name:     James Savin

				
	 	    Title: 
	
    Partner, Akin Gump Strauss Hauer & Feld LLP, Counsel to
    the

    Official Committee of Unsecured

    Creditors of Solutia Inc. et al
	 

 

    INVESTORS

    

 

    HIGHLAND CRUSADER HOLDING CORPORATION

 

			
	 	    By: 
	
    /s/  Michael
    Colvin

    Name:     Michael Colvin

			
	 	    Title: 
	
    Secretary

 

    Address:

    Two Galleria Tower

    13455 Noel Road, Suite 800

    Dallas, TX
    75240-6620

    Attention: Patrick Conner

    Fax:
    (972) 628-4147

 

    [Signature Page of Commitment Agreement]

 

    LONGACRE FUND MANAGEMENT, L.L.C.*

 

			
	 	    By: 
	
    /s/  Steven
    Weissman

    Name:     Steven Weissman

    Title:     Member

 

    Address:

    810 Seventh Avenue, 22nd Floor

    New York, NY 10019

    Attention: John Brecker

    Fax:
    (212) 259-4304

 

 

    *   As Investment Manager,

    On behalf of Longacre Master Fund, Ltd. and Longacre Capital
    Partners (QP), L.P.

 

    [Signature Page of Equity Commitment Agreement]

 

    MERRILL LYNCH PIERCE, FENNER &

    SMITH INCORPORATED

 

			
	 	    By: 
	
    /s/  Ronald
    Torok

    Name:     Ronald Torok

    Title:     Director

 

    Address:

    4 World Financial Center

    250 Vesey Street

    New York, NY 10080

    Attention: Chris Moon/Ron Torok

    Fax: (212) 449-0769

 

    [Signature Page of Commitment Agreement]

 

    GMAM INVESTMENT FUNDS TRUST II By: Murray Capital
    Management, Inc., its agent

 

			
	 	    By: 
	
    /s/  Scott
    V. Beechert

    Name:     Scott V. Beechert

			
	 	    Title: 
	
    General Counsel &

    Chief Compliance Officer

 

    RECAP INTERNATIONAL (MASTER) LTD. By: Murray Capital
    Management, Inc., its agent

 

			
	 	    By: 
	
    /s/  Scott
    V. Beechert

    Name:     Scott V. Beechert

			
	 	    Title: 
	
    General Counsel &

    Chief Compliance Officer

 

    INSTITUTIONAL BENCHMARK SERIES

    (MASTER FEEDER) LTD., a segregated

    accounts company, solely with respect to the

    Muscida series.

    By: Murray Capital Management, Inc., its agent

 

			
	 	    By: 
	
    /s/  Scott
    V. Beechert

    Name:     Scott V. Beechert

			
	 	    Title: 
	
    General Counsel &

    Chief Compliance Officer

 

    Address (for the above three entities):

    c/o Murray
    Capital Management, Inc.

    680 Fifth Avenue

    New York, NY 10019

    Attention: General Counsel

    Fax:
    (212) 582-5525

 

    [Signature Page of Equity Commitment Agreement]

 

    SOUTHPAW ASSET MANAGEMENT*

 

			
	 	    By: 
	
    /s/  Kevin
    Wyman

    Name:     Kevin Wyman

			
	 	    Title: 
	
    Managing Member of

    General Partner-Southpaw Holdings LLC

 

    Address:

    Southpaw Asset Management LP

    4 Greenwich Office Park, 1st Floor

    Greenwich, CT 06831

    Attention: Arif Y. Gangat

    Fax:
    (203) 862-6201

 

    [Signature Page of Equity Commitment Agreement]

 

    UBS SECURITIES LLC

 

			
	 	    By: 
	
    /s/  Mark
    Lane

    Name:     Mark Lane

			
	 	    Title: 
	
    Managing Director

 

			
	 	    By: 
	
    /s/  Thomas
    Tormey

    Name:     Thomas Tormey

			
	 	    Title: 
	
    Director

 

    Address:

    677 Washington Boulevard

    Stamford, CT 06901

    Attention: Thomas A. Tormey

    Fax:
    (203) 719-0207

    W/Copy To:

    Fixed Income Legal

    Fax:
    (203) 719-0680

 

    [Signature Page of Commitment Agreement]

 

    Schedule I

    

 

    Index of
    Defined Terms

 

	 	 	 	 	 
	

    Term

	
 
	

    Section

	 

	

    Agreement

	
 
	 
	
    Preamble
	 

	

    Agreement Motion

	
 
	 
	
    Section 5(a)
	 

	

    Agreement Order

	
 
	 
	
    Section 2(c)
	 

	

    Amended Plan

	
 
	 
	
    Section 1(a)
	 

	

    Backstop Commitment

	
 
	 
	
    Section 2(a)(i)
	 

	

    Backstop Fee

	
 
	 
	
    Section 2(c)
	 

	

    Bankruptcy Court

	
 
	 
	
    Preamble
	 

	

    Bankruptcy Rules

	
 
	 
	
    Section 3(b)(i)
	 

	

    Chapter 11 Proceedings

	
 
	 
	
    Section 3(o)
	 

	

    Code

	
 
	 
	
    Section 3(w)
	 

	

    Commission

	
 
	 
	
    Section 3(g)
	 

	

    Commitment Notice

	
 
	 
	
    Section 1(e)
	 

	

    Commitment Percentage

	
 
	 
	
    Section 2(a)(i)
	 

	

    Company

	
 
	 
	
    Preamble
	 

	

    Confirmation Hearing

	
 
	 
	
    Section 2(c)
	 

	

    Court Orders

	
 
	 
	
    Section 3(b)(i)
	 

	

    Defaulting Investor

	
 
	 
	
    Section 2(a)(i)
	 

	

    Default Purchase Right

	
 
	 
	
    Section 2(a)(ii)
	 

	

    Default Shares

	
 
	 
	
    Section 2(a)(ii)
	 

	

    Determination Date

	
 
	 
	
    Section 1(e)
	 

	

    Direct Purchase Right

	
 
	 
	
    Section 2(b)
	 

	

    Direct Purchase Shares

	
 
	 
	
    Section 2(b)
	 

	

    Disclosure Statement

	
 
	 
	
    Section 3(j)
	 

	

    Effective Date

	
 
	 
	
    Section 1(d)
	 

	

    Eligible Holder

	
 
	 
	
    Recitals
	 

	

    Environmental Laws

	
 
	 
	
    Section 3(v)
	 

	

    ERISA

	
 
	 
	
    Section 3(w)
	 

	

    Exchange Act

	
 
	 
	
    Section 3(i)
	 

	

    Exchange Act Documents

	
 
	 
	
    Section 3(i)
	 

	

    Existing Plan

	
 
	 
	
    Preamble
	 

	

    Exit Extension Fee

	
 
	 
	
    Section 10(a)(ii)
	 

	

    Exit Facility

	
 
	 
	
    Section 7(a)(xxiii)
	 

	

    Exit Financing Condition

	
 
	 
	
    Section 2(c)
	 

	

    Expiration Time

	
 
	 
	
    Section 1(b)
	 

	

    Extension Fee

	
 
	 
	
    Section 10(a)(iii)
	 

	

    HSR Act

	
 
	 
	
    Section 3(g)
	 

	

    Inconsistent Transaction

	
 
	 
	
    Section 5(o)
	 

	

    Indemnified Person

	
 
	 
	
    Section 8(a)
	 

	

    Indemnifying Party

	
 
	 
	
    Section 8(a)
	 

	

    Independent Accountants

	
 
	 
	
    Section 3(q)
	 

	

    Investor Agreement

	
 
	 
	
    Section 2(a)(i)
	 

	

    Investor Default

	
 
	 
	
    Section 2(a)(ii)
	 

	

    Investor Shares

	
 
	 
	
    Section 2(b)
	 

 

	 	 	 	 	 
	

    Term

	
 
	

    Section

	 

	

    Investors

	
 
	 
	
    Preamble
	 

	

    Material Adverse Effect

	
 
	 
	
    Section 3(a)
	 

	

    Non-Defaulting Investors

	
 
	 
	
    Section 2(a)(ii)
	 

	

    Over-Allotment Right

	
 
	 
	
    Section 1(c)
	 

	

    Payment Date

	
 
	 
	
    Section 1(b)
	 

	

    Preliminary Prospectus

	
 
	 
	
    Section 3(k)
	 

	

    Proceedings

	
 
	 
	
    Section 8(b)
	 

	

    Prospectus

	
 
	 
	
    Section 3(k)
	 

	

    Purchase Price

	
 
	 
	
    Recitals
	 

	

    Registration Rights Agreement

	
 
	 
	
    Section 5(m)
	 

	

    Registration Statement

	
 
	 
	
    Section 5(i)
	 

	

    Restricted Period

	
 
	 
	
    Section 5(j)
	 

	

    Right

	
 
	 
	
    Recitals
	 

	

    Rights Exercise Period

	
 
	 
	
    Section 1(b)
	 

	

    Rights Offering

	
 
	 
	
    Recitals
	 

	

    Rights Offering Procedures

	
 
	 
	
    Recitals
	 

	

    Satisfaction Notice

	
 
	 
	
    Section 1(e)
	 

	

    Securities Act

	
 
	 
	
    Section 3(g)
	 

	

    Settlement Term Sheet

	
 
	 
	
    Section 1(a)
	 

	

    Share

	
 
	 
	
    Recitals
	 

	

    Subscription Agent

	
 
	 
	
    Section 5(e)
	 

	

    Transaction Documents

	
 
	 
	
    Section 3(n)
	 

	

    Transaction Expenses

	
 
	 
	
    Section 2(d)
	 

	

    Unsubscribed Shares

	
 
	 
	
    Recitals
	 

 

    Schedule II

    

 

    Commitment
    Percentages

 

    Exhibit A

    

 

    Rights
    Offering Procedures

 

    RIGHTS
    OFFERING PROCEDURES

 

		
	
    1.  
	
    Introduction

 

    Each
    Holder1
    of a General Unsecured Claim, whose General Unsecured Claim has
    been allowed for voting purposes, or a Noteholder Claim (an
    “Eligible Holder”) has the right, but not the
    obligation, to purchase New Common Stock (the “Rights
    Offering”) pursuant to the rights offering subscription
    exercise form (the “Rights Exercise Form”),
    which will be sent to each Eligible Holder contemporaneously
    with the Disclosure Statement. The Rights Exercise Form will
    indicate the price per share of New Common Stock (the
    “Rights Exercise Price”) payable in connection
    with such an exercise. Any reference to an Eligible
    Holder’s Rights Exercise Price shall mean the Rights
    Exercise Price multiplied by the number of shares of New Common
    Stock such Eligible Holder elected and duly purchased in
    accordance with and subject to these Rights Offering Procedures.
    For purposes of these Rights Offering Procedures, an Eligible
    Claim Transfer Shareholder who purchases one or more Allowed
    General Unsecured Claims in accordance with the Claim Transfer
    Procedures and validly exercises Rights with respect thereto
    shall be deemed to be an Eligible Holder.

 

    Each Eligible Holder shall have the right to purchase up to its
    New Common Stock Pro Rata Share (as defined below) of the New
    Common Stock that is subject to the Rights Offering, not
    including the Backstop Reserve (the “Initial
    Rights”). “New Common Stock Pro Rata Share”
    means the ratio (expressed as a percentage) of such
    holder’s Rights Participation Claim Amount (as defined
    below) to the aggregate amount of all Rights Participation Claim
    Amounts available to Eligible Holders as of the Record Date. In
    addition, the Rights Exercise Form will provide that Eligible
    Holders that have exercised their full pro rata share of Initial
    Rights may indicate the amount of additional Rights (the
    “Additional Rights”) that they would like to
    exercise in the event that the Rights Offering is
    under-subscribed (an “Under-Subscription”) as
    of the deadline for returning Rights Exercise forms (the
    “Rights Offering Deadline”). No Eligible Holder will
    be granted or allowed to exercise any fractional Rights.

 

    In the event of an Under-Subscription, Eligible Holders that
    elected to exercise Additional Rights will be entitled to
    purchase a number of additional shares of New Common Stock in an
    amount equal to the number of Additional Rights elected on each
    Eligible Holder’s Rights Exercise Form; provided,
    however, that in the event that Eligible Holders, in the
    aggregate, attempt to exercise more Additional Rights than are
    available for all Eligible Holders electing to exercise
    Additional Rights, Eligible Holders will only be able to
    exercise their pro rata share of Additional Rights (as
    determined by the Rights Participation Claim Amounts of all such
    Eligible Holders). The Initial Rights and Additional Rights are
    collectively referred to herein as the “Rights.”

 

    The Rights Offering will be backstopped by the Backstop Group in
    exchange for a $6.25 million fee and the right to subscribe
    for, and acquire, up to 15% of the New Common Stock being issued
    pursuant to the Rights Offering (the “Direct Purchase
    Option”).

 

    Each Right can be exercised for one share of New Common Stock.
    An aggregate of 15,936,703 shares of New Common Stock will
    be available upon the exercise of Initial Rights; provided,
    however, that the number of shares available for the exercise of
    Additional Rights may be increased by up to
    2,812,359 shares if the Backstop Parties do not exercise
    the Direct Purchase Option.

 

    “Claim Transfer Shareholder Claim” means the
    General Unsecured Claims that an Eligible Claim Transfer
    Shareholder acquired by exercising its rights pursuant to the
    Claim Transfer Procedures.

 

    “Disclosure Statement” means that certain
    Disclosure Statement, approved by the United States Bankruptcy
    Court for the Southern District of New York (the
    “Bankruptcy Court”) on October [  ],
    2007.

 

    “Subscription Agent” means Financial Balloting
    Group LLC, in its capacity as such.

 

 

    1 All
    capitalized terms used, but not defined herein, shall have the
    meanings ascribed to them in the Amended Plan.

 

    “Rights Participation Claim Amount” means,
    (a) in the case of a Noteholder Claim, the principal amount
    adjusted for unaccrued interest of such Noteholder Claim as of
    the Record Date; and (b) in the case of any General
    Unsecured Claim other than a Noteholder Claim, the amount of
    such Claim listed on the Rights Exercise Form, which shall
    reflect the amount of such General Unsecured Claim that is
    allowed for voting purposes, or such other amount as may be
    adjudicated in an order of the Bankruptcy Court at least
    five (5) days prior to the Voting Deadline.

 

    Notwithstanding anything contained in the Plan to the contrary,
    under no circumstances shall any Holder of a General Unsecured
    Claim that is not entitled to vote on the Plan pursuant to the
    Disclosure Statement Order have any Rights Participation Claim
    Amount with respect to such General Unsecured Claim.

 

    Before exercising any Rights, Eligible Holders should read
    the Disclosure Statement, including the section entitled,
    “Risks Related to the Debtors’ Business and
    Industry” and the valuation of the Reorganized Debtors
    contained therein.

 

		
	
    2.  
	
    Commencement/Expiration
    of the Rights Offering

 

    The Rights Offering shall commence on the day upon which the
    Rights Exercise Forms are mailed to Eligible Holders (the
    “Commencement Date”). The Rights Offering shall
    expire on the Rights Offering Deadline. Each Eligible Holder
    intending to participate in the Rights Offering must
    affirmatively make a
    non-binding
    election to exercise its Rights on or prior to the Rights
    Offering Deadline in accordance with the provisions of
    Section 3 below.

 

    As promptly as practicable, and in any event not later than
    [twenty-five (25)] Days, following the Voting Deadline, Solutia
    shall deliver, or cause to be delivered, to each Eligible Holder
    that has sought to exercise Rights or their bank, broker, agent
    or other nominee a written statement specifying the Rights,
    including the Additional Rights, each Eligible Holder may
    purchase.

 

		
	
    3.  
	
    Exercise
    of Rights 

 

    Exercise
    of Initial Rights

 

    Each Eligible Holder may designate on its Rights Exercise Form
    whether it wishes to exercise its Initial Rights and such
    designation shall be non-binding.

 

    Each Eligible Holder is entitled to participate in the Rights
    Offering solely to the extent of its Rights Participation Claim
    Amount, together with any Additional Rights to the extent
    available in the event of an Under-Subscription, provide,
    however, that an Eligible Holder may only elect to subscribe
    for Additional Rights if they elect to fully subscribe to their
    Initial Rights.

 

    Each Eligible Holder may exercise all or any portion of such
    holder’s Rights pursuant to the procedures outlined below,
    as appropriate.

 

    Exercise
    of Additional Rights

 

    Any Eligible Holder that exercises all of its Initial Rights may
    indicate on its Rights Exercise Form how many additional shares
    of New Common Stock such Eligible Holder wishes to purchase
    through the exercise of Additional Rights.

 

    Exercise
    by Holders of General Unsecured Claims

 

    To exercise the Rights, each Eligible Holder (excluding Eligible
    Holders that hold Noteholder Claims or Claim Transfer
    Shareholder Claims) must deliver a duly completed Rights
    Exercise Form so that such form is actually received by the
    Subscription Agent on or before the Rights Offering Deadline.
    If, on or prior to the Rights Offering Deadline, the
    Subscription Agent for any reason does not receive from an
    Eligible Holder or its intermediary a duly completed Rights
    Exercise Form, such Eligible Holder shall be deemed to have
    relinquished and waived its Rights.

    

    2

 

    To facilitate the exercise of the Rights, on the Commencement
    Date, the Debtors will mail or cause to be mailed a Rights
    Exercise Form to each Eligible Holder or its intermediary as of
    the Record Date, together with instructions for the proper
    completion, due execution and timely delivery of the Rights
    Exercise Form to the Subscription Agent.

 

    Exercise
    by Holders of Noteholder Claims

 

    For an Eligible Holder of a Noteholder Claim to exercise its
    Rights, such holder must provide its instruction to its bank,
    broker, or other nominee or to its agent. The bank, broker, or
    other nominee or agent, in turn, must then convey the
    instruction to the Subscription Agent on or before the Rights
    Offering Deadline. For purposes of this Rights Offering,
    Wilmington Trust Company, in its capacity as Indenture
    Trustee, shall not constitute a Nominee and shall have no
    responsibility with respect to sending any Rights Offering
    information or collecting any Rights Offering Forms.

 

    To facilitate the exercise of the Rights for Holders of
    Noteholder Claims, on the Commencement Date, the Debtors will
    deliver Rights Exercise Forms to the record holders of such
    Claims, including, without limitation, brokers, banks, dealers,
    or other agents or nominees (the “Subscription
    Nominees”). Each Subscription Nominee will be entitled
    to receive sufficient copies of the Rights Exercise Form and
    Disclosure Statement for distribution to the beneficial owners
    of the Noteholder Claims for whom such Subscription Nominee
    holds such Noteholder Claims. The Subscription Nominees may use
    the Rights Exercise Form provided or such other form as they may
    customarily use for the purpose of obtaining instructions with
    respect to a rights offering.

 

    Exercise
    by Holders of Claim Transfer Shareholder Claims

 

    To facilitate the exercise of the Rights for Holders of Claim
    Transfer Shareholder Claims, the Debtors will include the Claim
    Transfer Procedures and Equity Claim Purchase Election Form with
    the Disclosure Statement, which is being provided to all Holders
    of Solutia Stock eligible to vote as of the Voting Record Date
    (see Exhibit [     ] to the Disclosure
    Statement).

 

    Payment
    for Rights

 

    As soon as practicable after the Registration Statement filed
    with the SEC on
    Form S-1
    is declared “effective” by the SEC, Solutia shall
    deliver to each Eligible Holder that has indicated an interest
    to exercise its Initial Rights (and Additional Rights, if
    applicable) a notice setting forth the number of shares of New
    Common Stock such Eligible Holder is entitled to purchase, such
    Holder’s Total Exercise Price and instructions for payment
    of such Holder’s Exercise Price.

 

    If, on or prior to the payment deadline set forth in such
    instructions, which deadline shall be approximately ten days
    after the notices described above are distributed, the
    Subscription Agent for any reason does not receive on behalf of
    the Eligible Holder immediately available funds by wire transfer
    or bank cashier’s check in an amount equal to the Total
    Exercise Price for such Eligible Holder’s Rights, such
    Eligible Holder shall be deemed to have relinquished and waived
    its Rights.

 

    Subsequent
    determination of Rights Participation Claim Amount

 

    If, after the Record Date but at least five (5) days prior
    to the Voting Deadline, a Holder of a General Unsecured Claim
    becomes entitled to Initial Rights, or a different amount of
    Initial Rights than initially granted, as a result of a
    Bankruptcy Court order estimating, allowing, disallowing or
    reclassifying such Claim, such Eligible Holder shall be
    permitted to participate in the Rights Offering with respect to
    such new Rights Participation Claim Amount.

 

    Disputes,
    Waivers, and Extensions

 

    Any and all disputes concerning the timeliness, viability, form
    and eligibility of any exercise of Rights shall be addressed in
    good faith by the Debtors in consultation with the
    Creditors’ Committee, and the Equity

    

    3

 

    Committee with respect to Rights exercised by Eligible Claim
    Transfer Shareholders, and subject to a final determination by
    the Bankruptcy Court, the determinations of which shall be final
    and binding. The Debtors, in consultation with the
    Creditors’ Committee and subject to Bankruptcy Court
    approval, may seek to waive any defect or irregularity, or
    permit a defect or irregularity to be corrected, within such
    times as they may determine in good faith to be appropriate, or
    reject the purported exercise of any Rights. Subscription
    instructions shall be deemed not to have been properly completed
    until all irregularities have been waived or cured within such
    time as the Debtors determine in their discretion reasonably
    exercised in good faith. The Debtors reserve the right, but are
    under no obligation, to give notice to any Eligible Holder
    regarding any defect or irregularity in connection with any
    purported exercise of Rights by such Eligible Holder and the
    Debtors may, but are under no obligation, to permit such defect
    or irregularity to be cured within such time as they may
    determine in good faith, in consultation with the
    Creditors’ Committee, the Equity Committee with regard to
    Rights exercised by Eligible Claim Transfer Shareholders, and
    subject to Bankruptcy Court approval, to be appropriate;
    provided, however, that none of the Debtors, the
    Subscription Agent, the Creditors’ Committee, or the Equity
    Committee shall incur any liability for failure to give such
    notification.

 

    The Debtors, with the approval of the Bankruptcy Court and
    Creditors’ Committee, and following advance written notice
    to the Noteholders’ Committee, may extend the duration of
    the Rights Offering or adopt additional detailed procedures to
    more efficiently administer the distribution and exercise of the
    Rights.

 

    Funds

 

    The payments made in accordance with the Rights Offering (the
    “Rights Offering Funds”) shall be deposited
    when made and held by the Subscription Agent in escrow pending
    the Effective Date in an account or accounts (a) which
    shall be separate and apart from the Subscription Agent’s
    general operating funds and any other funds subject to any lien
    or any cash collateral arrangements and (b) which
    segregated account or accounts will be maintained for the
    purpose of holding the money for administration of the Rights
    Offering and the Equity Purchase Offering until the Effective
    Date. The Subscription Agent shall not use the Rights Offering
    Funds for any purpose other than to release the funds as
    directed by the Debtors on the Effective Date and shall not
    encumber or permit the Rights Offering Funds to be encumbered by
    any lien or similar encumbrance.

 

    Waiver

 

    Each Holder that participates in the Rights Offering shall be
    deemed by virtue of such participation, to have waived and
    released, to the fullest extent permitted under applicable law,
    all rights, claims or causes of action against the Debtors, the
    Reorganized Debtors, the Creditors’ Committee and the
    Subscription Agent arising out of or related to the receipt,
    delivery, disbursements, calculations, transmission or
    segregation of cash, Rights and shares of New Common Stock in
    connection with the Rights Offering.

 

		
	
    4.  
	
    Transfer
    Restriction; Revocation

 

    Pursuant to the Plan, and subject to the Claim Transfer
    Procedures, the Rights are not transferable independently of the
    underlying General Unsecured Claims or Noteholder Claims from
    which such Rights arise. Except with regard to Rights acquired
    pursuant to the Claims Transfer Procedures, Rights may only be
    exercised by or through the Eligible Holder entitled to exercise
    such Rights on the Record Date. Any such independent transfer or
    attempted transfer of the Rights, aside from a transfer pursuant
    to the Claim Transfer Procedures, will be null and void and the
    Debtors will not treat any purported transferee as the holder of
    any Rights. Once the Eligible Holder of a General Unsecured
    Claim, Noteholder Claim, or Claim Transfer Shareholder Claim has
    properly exercised its Rights and paid its Total Exercise Price,
    such exercise will not be permitted to be revoked by such
    Eligible Holder.

 

		
	
    5.  
	
    Subsequent
    Adjustments

 

    If, as of the Rights Offering Deadline, as a result of
    allowances of General Unsecured Claims or Noteholder Claims or
    other actions following the Record Date, more than all of the
    New Common Stock

    

    4

 

    subject to the Rights Offering has been subscribed for (other
    than as a result of the exercise of Additional Rights in the
    event of an Under-Subscription), each properly exercising holder
    of a General Unsecured Claim, Noteholder Claim, or Claim
    Transfer Shareholder Claim shall have the Rights which it may
    exercise reduced on a pro rata basis. The difference between the
    price actually paid by such exercising holder and the Rights
    Exercise Price that such holder is required to pay after giving
    effect to the reduction, if any, shall be refunded, without
    interest, as soon as reasonably practicable after the Effective
    Date. Any adjustment to Rights shall first be made to the
    Additional Rights, if any.

 

		
	
    6.  
	
    Inquiries
    And Transmittal Of Documents; Subscription Agent

 

    The exercise instructions contained in the Rights Exercise Form
    should be carefully read and strictly followed.

 

    Questions relating to the Rights Offering should be directed to
    the Subscription Agent at the following phone number:

 

    Financial Balloting Group LLC

    646-282-1800

 

    The risk of non-delivery of all documents and payments is on the
    Eligible Holders electing to exercise their Rights, not the
    Debtors or the Subscription Agent.

 

		
	
    7.  
	
    Rights
    Offering Conditioned Upon Confirmation of The Plan; Reservation
    of Rights

 

    All exercises of Rights are subject to and conditioned upon the
    confirmation of the Plan and the occurrence of the Effective
    Date of the Plan. Notwithstanding anything contained herein, the
    Disclosure Statement or the Plan to the contrary, the Debtors
    and the Reorganized Debtors reserve the right, in consultation
    with the Creditors’ Committee and the Equity Committee, to
    modify these Rights Offering Procedures in order to comply with
    applicable law.

    

    5

 

    Exhibit B

 

    Settlement
    Term Sheet

 

    Exhibit C

 

    Registration
    Rights Agreement Terms

 

    Exhibit D

 

    Exit Facility Terms

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