Document:

EX-4C

 

 Exhibit 4(c)

SOLUTIA INC. 2007

MANAGEMENT LONG-TERM INCENTIVE PLAN

ARTICLE I

PURPOSE

          Purpose of the Plan. The Plan shall be known as the Solutia Inc. 2007 Stock
Compensation Plan. The Plan is intended to further the growth and profitability of the Company by
increasing incentives and encouraging Share ownership on the part of the Employees and Independent
Contractors of Solutia Inc. (the “Company”) and its Subsidiaries and Affiliates. The Plan
is intended to permit the grant of Awards that constitute Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Other Stock
Awards, and Cash Incentive Awards.

ARTICLE II

DEFINITIONS

     The following words and phrases shall have the following meanings unless a different meaning
is plainly required by the context:

     “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a
specific section of the 1934 Act or regulation thereunder shall include such section or regulation,
any valid regulation or interpretation promulgated under such section, and any comparable provision
of any future legislation or regulation amending, supplementing or superseding such section or
regulation.

     “Affiliate” means any corporation or any other entity (including, but not limited to,
partnerships and joint ventures) directly or indirectly controlled by the Company.

     “Award” means, individually or collectively, a grant under the Plan of Non-Qualified
Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Other Stock Awards, or Cash Incentive Award.

     “Award Agreement” means the written agreement setting forth the terms and conditions
applicable to an Award.

     “Base Price” means the price at which a SAR may be exercised with respect to a Share.

     “Board” means the Company’s Board of Directors, as constituted from time to time.

     “Cash Incentive Award” means an Award granted pursuant to ARTICLE IX

     “Change in Control” shall be deemed to have occurred if:

	 	(a)	 	Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) is or
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or

1

 

	 	 	 	indirectly, of securities of the Company representing more than 50% of the voting
power of the then outstanding securities of the Company, and such person owns more
aggregate voting power of the Company’s then outstanding securities entitled to vote
generally in the election of directors than any other person, excluding for this
purpose acquisitions by a person pursuant to a merger of the Company or a Subsidiary
that would not be a Change in Control under clause (b) below;

	 	(b)	 	Consummation of (x) a merger or consolidation of the Company or a Subsidiary
with another corporation where the shareholders of the Company, immediately prior to
the merger or consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to 50% or more of all votes to which
all shareholders of the surviving corporation (or the ultimate parent company of the
surviving company) would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a separate
class vote), (y) the sale or other disposition of 50% or more of the Company’s assets
that it owns as of the effective date of this Plan, or (z) a liquidation or dissolution
of the Company; provided, however, the effectiveness of a plan of reorganization
pursuant to which a majority of the common stock of the reorganized Company is
distributed (i) to Persons who are (a) holders of claims against the Company; (b)
holders of equity interests in the Company; and/or (c) designated in the Company’s plan
of reorganization proposal dated October 15, 2007 to receive common stock of the
reorganized Company; or (ii) to or for the benefit of Company management, shall not
constitute a “Change in Control”; or
	 
	 	(c)	 	Directors are elected such that a majority of the members of the Board shall
have been members of the Board for less than two years, unless the election or
nomination for election of each new director who was not a director at the beginning of
such two-year period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.

     “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific
section of the Code or regulation thereunder shall include such section or regulation, any valid
regulation or other guidance promulgated under such section, and any comparable provision of any
future legislation or regulation amending, supplementing or superseding such section or regulation.

     “Committee” means the committee of the Board described in ARTICLE III.

     “Employee” means an employee of the Company, a Related Company or a Subsidiary (each
an “Employer”) designated by the Committee. Notwithstanding anything to the contrary contained
herein, the Committee may grant Awards to an individual who has been extended an offer of
employment by the Company, a Related Company, a Subsidiary or an Affiliate; provided that any such
Award shall be subject to forfeiture if such individual does not commence employment by a date
established by the Committee.

     “Exercise Price” means the price at which a Share subject to an Option may be
purchased upon the exercise of the Option.

2

 

     “Fair Market Value” means, except as otherwise specified in a particular Award
Agreement, (a) while the Shares are readily traded on an established national or regional
securities exchange, the closing transaction price of such a Share as reported by the principal
exchange on which such Shares are traded on the date as of which such value is being determined or,
if there were no reported transaction for such date, the opening transaction price as reported by
exchange for the first trading date following the date by which such value is being determined on
the next preceding date for which a transaction was reported, (b) if the Shares are not readily
traded on an established national or regional securities exchange, the average of the bid and ask
prices for such a Share on the date as of which such value is being determined, where quoted for
such Shares, or (c) if Fair Market Value cannot be determined under clause (a) or clause (b) above,
or if the Committee determines in its sole discretion that the Shares are too thinly traded for
Fair Market Value to be determined pursuant to clause (a) or clause (b), the value as determined by
the Committee, in its sole discretion, on a good faith basis.

     “Grant Date” means the date that the Award is granted.

     “Immediate Family” means the Participant’s children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including half-brothers and half-sisters),
in-laws (including all such relationships arising because of legal adoption) and any other person
required under applicable law to be accorded a status identical to any of the foregoing.

     “Incentive Stock Option” means an Option that is designated as an Incentive Stock
Option and is intended by the Committee to meet the requirements of Section 422 of the Code.

     “Independent Contractor” means an independent contractor or consultant of the Company,
a Related Company or a Subsidiary (each an “Employer”) designated by the Committee.
Notwithstanding anything to the contrary contained herein, the Committee may grant Awards to an
individual who has been extended an offer to become an independent contractor or consultant by the
Company, a Related Company, a Subsidiary or an Affiliate; provided that any such Award shall be
subject to forfeiture if such individual does not commence employment by a date established by the
Committee.

     “Member of the Board” means an individual who is a member of the Board or of the board
of directors of a Subsidiary or an Affiliate.

     “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option.

     “Option” means an option to purchase Shares granted pursuant to ARTICLE V.

     “Other Stock Award” means an Award granted pursuant to ARTICLE VIII to receive Shares
on the terms specified in any applicable Award Agreement.

     “Participant” means an Employee or Independent Contractor with respect to whom an
Award has been granted and remains outstanding.

     “Performance Goals” means goals established by the Committee as contingencies for
Awards to vest and/or become exercisable or distributable.

3

 

     “Performance Period” means the designated period during which the Performance Goals
must be satisfied with respect to the Award to which the Performance Goals relate.

     “Period of Restriction” means the period during which Restricted Stock or an RSU is
subject to forfeiture and/or restrictions on transferability.

     “Plan” means this Solutia Inc. 2007 Management Long-Term Incentive Plan, as set forth
in this instrument and as hereafter amended from time to time.

     “Related Company” means any person or entity that would be considered a single
employee with the Company under Section 414(b) or (c) of the Code if the language “at least 80
percent” as used in connection with the application of these provisions were placed by “at least
50%.”

     “Restricted Stock” means a Stock Award granted pursuant to Article 6 under which the
Shares are subject to forfeiture upon such terms and conditions as specified in the relevant Award
Agreement.

     “Restricted Stock Unit” or “RSU” means a Stock Award granted pursuant to Article 6
subject to a period or periods of time after which the Participant will receive Shares if the
conditions contained in such Stock Award have been met.

     “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, as amended, and any
future regulation amending, supplementing or superseding such regulation.

     “Share” means the Company’s common stock, par value $.01 per share, or any security
issued by the Company or any successor in exchange or in substitution therefor.

     “Stock Appreciation Right” or “SAR” means an Award granted pursuant to ARTICLE
VII, granted alone or in tandem with a related Option which is designated by the Committee as an
SAR.

     “Stock Award” means an Award of Restricted Stock or an RSU pursuant to ARTICLE VI.

     “Subsidiary(ies)” means any corporation (other than the Company) in an unbroken chain
of corporations, including and beginning with the Company, if each of such corporations, other than
the last corporation in the unbroken chain, owns, directly or indirectly, more than fifty percent
(50%) of the voting stock in one of the other corporations in such chain.

     “Ten Percent Holder” means an Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code) who, at the time an Option is
granted, owns stock representing more than ten percent of the voting power of all classes of stock
of the Company.

ARTICLE III

ADMINISTRATION

     3.1 The Committee. The Plan shall be administered by the Executive Compensation and
Development Committee of the Board (the “Committee”). It is intended that each member of
the Committee shall qualify as (a) a “non-employee director” under Rule 16b-3, (b) an “outside

4

 

director” under Section 162(m) of the Code and (c) an “independent director” under the rules
of any national securities exchange or national securities association, as applicable. If it is
later determined that one or more members of the Committee do not so qualify, actions taken by the
Committee prior to such determination shall be valid despite such failure to qualify.

     Reference to the Committee shall refer to the Board if the Committee ceases to exist and the
Board does not appoint a successor Committee.

     3.2 Authority and Action of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan’s provisions. The Committee shall have all powers
and discretion necessary or appropriate to administer the Plan and to control its operation,
including, but not limited to, the power to (a) determine which Employees and Independent
Contractors shall be eligible to receive Awards and to grant Awards, (b) prescribe the form,
amount, timing and other terms and conditions of each Award, (c) interpret the Plan and the Award
Agreements, (d) adopt such procedures as it deems necessary or appropriate to permit participation
in the Plan by eligible Employees and Independent Contractors, (e) adopt such rules as it deems
necessary or appropriate for the administration, interpretation and application of the Plan, (f)
interpret, amend or revoke any such procedures or rules, (g) correct any technical defect(s) or
technical omission(s), or reconcile any technical inconsistency(ies), in the Plan and/or any Award
Agreement, (h) accelerate the vesting of any award, (i) extend the period during which an Option
may be exercisable, and (j) make all other decisions and determinations that may be required
pursuant to the Plan and/or any Award Agreement or as the Committee deems necessary or advisable to
administer the Plan.

     The acts of the Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts approved in writing by
all of the members of the Committee without a meeting. A majority of the Committee shall constitute
a quorum. The Committee’s determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are similarly situated. Each
member of the Committee is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any Employee of the Company or any of its Subsidiaries or
Affiliates, the Company’s independent certified public accountants or any executive compensation
consultant or other professional retained by the Company to assist in the administration of the
Plan.

     The Company shall effect the granting of Awards under the Plan, in accordance with the
determinations made by the Committee, by execution of written agreements and/or other instruments
in such form as is approved by the Committee.

     3.3 Delegation by the Committee. The Committee in its sole discretion and on such
terms and conditions as it may provide may delegate all or any part of its authority and powers
under the Plan to one or more Members of the Board of the Company and/or officers of the Company;
provided, however, that the Committee may not delegate its authority or power if prohibited by law,
or if such delegation would cause the Awards or other transactions under the Plan to cease to be
exempt from Section 16(b) of the 1934 Act or not to qualify for, or cease to qualify for, exemption
under Code § 162(m).

5

 

     3.4 Decisions Binding. All determinations, decisions and interpretations of the
Committee, the Board, and any delegate of the Committee pursuant to the provisions of the Plan or
any Award Agreement shall be final, conclusive, and binding on all persons, and shall be given the
maximum deference permitted by law.

     3.5 Performance Goals. The Committee shall have the authority to grant Awards under
this Plan that are contingent upon the achievement of Performance Goals. Such Performance Goals are
to be specified in the relevant Award Agreement and may be based on such factors including, but not
limited to: (a) revenue, (b) earnings per Share, (c) net income per Share, (d) Share price, (e)
pre-tax profits, (f) net earnings, (g) net income, (h) operating income, (i) cash flow, (j)
earnings before interest, taxes, depreciation and amortization, (k) sales, (l) total stockholder
return relative to assets, (m) total stockholder return relative to peers, (n) financial returns
(including, without limitation, return on assets, return on equity and return on investment), (o)
cost reduction targets, (p) customer satisfaction, (q) customer growth, (r) employee satisfaction,
(s) gross margin, (t) revenue growth, or (u) any combination of the foregoing, or, for Awards not
intended to qualify as “performance based compensation” under Code Section 162(m), such other
criteria as the Committee may determine. Performance Goals may be in respect of the performance of
the Company, any of its Subsidiaries or Affiliates or any combination thereof on either a
consolidated, business unit or divisional level. Performance Goals may be absolute or relative (to
prior performance of the Company or to the performance of one or more other entities or external
indices) and may be expressed in terms of a progression within a specified range. The foregoing
criteria shall have any reasonable definitions that the Committee may specify, which may include or
exclude any or all of the following items, as the Committee may specify: extraordinary, unusual or
non-recurring items; effects of accounting changes; effects of currency fluctuations; effects of
financing activities (e.g., effect on earnings per share of issuing convertible debt securities);
expenses for restructuring, productivity initiatives or new business initiatives; non-operating
items; acquisition expenses; and effects of divestitures. Any such performance criterion or
combination of such criteria may apply to the participant’s award opportunity in its entirety or to
any designated portion or portions of the award opportunity, as the Committee may specify.

ARTICLE IV

SHARES SUBJECT TO THE PLAN

     4.1 Number of Shares. Subject to adjustment as provided in Section 11.12, the number
of Shares available for grants of Awards under the Plan shall be 7,200,000 Shares. Shares awarded
under the Plan may be either: authorized but unissued Shares, authorized and issued Shares
reacquired and held as treasury Shares or a combination thereof. To the extent permitted by
applicable law or exchange rules, Shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the Company or any
Subsidiary or Affiliate shall not reduce the Shares available for grants of Awards under this
Section 4.1. The maximum number of shares with respect to which Incentive Stock Options may be
granted shall be 7,200,000. Notwithstanding anything in this Plan to the contrary and subject to
Section 11.12, without the approval of stockholders of the Company, the Committee will not amend or
replace any previously granted Option or SAR in a transaction that constitutes a “repricing,” as
such term is used in Section 303 A 08 of the Listed Company Manual of the New York Stock Exchange.

6

 

     4.2 Limit on Individual Awards. Subject to adjustment as provided in Section 11.12,
the maximum number of Shares with respect to which (i) Options and SARs, (ii) Restricted Stock,
RSUs and Other Stock Awards that vest only if the Participant achieves Performance Goals
established by the Committee in accordance with Section 162(m) of the Code or (iii) any combination
of (i) and (ii), may be granted during any year to any person shall be 1,500,000 Shares. The
maximum value of any Cash Incentive Award that may be granted by any Participant in any 12-month
period shall not exceed $7,500,000.

     4.3 Lapsed Awards. To the extent that Shares subject to an outstanding Option (except
to the extent Shares are issued or delivered by the Company in connection with the exercise of a
tandem SAR) or other Award are not issued or delivered by reason of (i) the expiration,
cancellation, forfeiture or other termination of such Award, (ii) the withholding of such Shares in
satisfaction of applicable federal, state or local taxes or (iii) of the settlement of all or a
portion of such Award in cash, then such Shares shall again be available under this Plan.

ARTICLE V

STOCK OPTIONS

     5.1 Grant of Options. Subject to the provisions of the Plan, Options may be granted to
Participants at such times, and subject to such terms and conditions, as determined by the
Committee in its sole discretion. An Award of Options may include Incentive Stock Options,
Non-Qualified Stock Options, or a combination thereof; provided, however, that an Incentive Stock
Option may only be granted to an Employee of the Company or a Subsidiary and no Incentive Stock
Option shall be granted more than ten years after the earlier of (i) the date this Plan is adopted
by the Board or (ii) the date this Plan is approved by the Company’s shareholders.

     5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall
specify the Exercise Price, the expiration date of the Option, the number of Shares to which the
Option pertains, any conditions to the exercise of all or a portion of the Option, and such other
terms and conditions as the Committee, in its discretion, shall determine. The Award Agreement
pertaining to an Option shall designate such Option as an Incentive Stock Option or a Non-Qualified
Stock Option. Notwithstanding any such designation, to the extent that the aggregate Fair Market
Value (determined as of the Grant Date) of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by a Participant during any calendar
year (under this Plan or any other plan of the Company, or any parent or subsidiary as defined in
Section 424 of the Code) exceeds $100,000, such Options shall constitute Non-Qualified Stock
Options. For purposes of the preceding sentence, Incentive Stock Options shall be taken into
account in the order in which they are granted.

     5.3 Exercise Price. Subject to the other provisions of this Section, the Exercise
Price with respect to Shares subject to an Option shall be determined by the Committee in its sole
discretion; provided, however, that the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date; and provided further, that the
Exercise Price with respect to an Incentive Stock Option granted to a Ten Percent Holder shall not
be less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the Grant
Date.

7

 

     5.4 Expiration Dates. Each Option shall terminate not later than the expiration date
specified in the Award Agreement pertaining to such Option; provided, however, that the expiration
date with respect to an Option shall not be later than the tenth anniversary of its Grant Date and
the expiration date with respect to an Incentive Stock Option granted to a Ten Percent Holder shall
not be later than the fifth anniversary of its Grant Date.

     5.5 Exercisability of Options. Subject to Section 5.4, Options granted under the Plan
shall be exercisable at such times, and shall be subject to such restrictions and conditions, as
the Committee shall determine in its sole discretion. The exercise of an Option is contingent upon
payment by the Optionee of the amount sufficient to pay all taxes required to be withheld by any
governmental agency. Such payment may be in any form approved by the Committee.

     5.6 Method of Exercise. Options shall be exercised by the Participant’s delivery of a
written notice of exercise to the Chief Financial Officer of the Company (or his or her designee),
setting forth the number of Shares with respect to which the Option is to be exercised, accompanied
by full payment of the Exercise Price with respect to each such Share and an amount sufficient to
pay all taxes required to be withheld by any governmental agency. The Exercise Price shall be
payable to the Company in full in cash or its equivalent. The Committee, in its sole discretion,
also may permit exercise (a) by tendering previously acquired Shares which have been held by the
Optionee for at least six months having an aggregate Fair Market Value at the time of exercise
equal to the aggregate Exercise Price of the Shares with respect to which the Option is to be
exercised, or (b) by any other means which the Committee, in its sole discretion, determines to
both provide legal consideration for the Shares, and to be consistent with the purposes of the
Plan. As soon as practicable after receipt of a written notification of exercise and full payment
for the Shares with respect to which the Option is exercised, the Company shall deliver to the
Participant Share certificates (which may be in book entry form) for such Shares with respect to
which the Option is exercised.

     5.7 Restrictions on Share Transferability. Incentive Stock Options are not
transferable, except by will or the laws of descent. The Committee may impose such additional
restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable,
including, but not limited to, restrictions related to applicable federal securities laws, the
requirements of any national securities exchange or system upon which Shares are then listed or
traded, or any blue sky or state securities laws.

     5.8 Cashing Out of Option. On receipt of written notice of exercise, the Committee may
elect to cash out all or part of the portion of the Shares for which an Option is being exercised
by paying the optionee an amount, in cash or Shares, equal to the excess of the Fair Market Value
of the Shares over the option price times the number of Shares for which the Option is being
exercised on the effective date of such cash-out.

ARTICLE VI

STOCK AWARDS

     6.1 Grant of Stock Awards. Subject to the provisions of the Plan, Stock Awards may be
granted to such Participants at such times, and subject to such terms and conditions, as determined
by the Committee in its sole discretion.

8

 

     6.2 Stock Award Agreement. Each Stock Award shall be evidenced by an Award Agreement
that shall specify the number of Shares granted, the price, if any, to be paid for the Shares and
the Period of Restriction applicable to a Restricted Stock Award or RSU Award and such other terms
and conditions as the Committee, in its sole discretion, shall determine.

     6.3 Transferability/Share Certificates. Shares subject to an Award of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated during a
Period of Restriction. During the Period of Restriction, a Restricted Stock Award may be registered
in the holder’s name or a nominee’s name at the discretion of the Company and may bear a legend as
described in Section 6.4.2. Unless the Committee determines otherwise, shares of Restricted Stock
shall be held by the Company as escrow agent during the applicable Period of Restriction, together
with stock powers or other instruments of assignment (including a power of attorney), each endorsed
in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which
would permit transfer to the Company of all or a portion of the Shares subject to the Restricted
Stock Award in the event such Award is forfeited in whole or part.

     6.4 Other Restrictions. The Committee, in its sole discretion, may impose such other
restrictions on Shares subject to an Award of Restricted Stock as it may deem advisable or
appropriate.

          6.4.1 General Restrictions. The Committee may set restrictions based upon applicable
federal or state securities laws, or any other basis determined by the Committee in its discretion.

          6.4.2 Legend on Certificates. The Committee, in its sole discretion, may legend the
certificates representing Restricted Stock during the Period of Restriction to give appropriate
notice of such restrictions. For example, the Committee may determine that some or all certificates
representing Shares of Restricted Stock shall bear the following legend: “The sale or other
transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or
by operation of law, is subject to certain restrictions on transfer as set forth in the Solutia
Inc. 2007 Management Long-Term Incentive Plan (the “Plan”), and in a Restricted Stock Award
Agreement (as defined by the Plan). A copy of the Plan and such Restricted Stock Award Agreement
may be obtained from the Chief Financial Officer of Solutia Inc.”

     6.5 Removal of Restrictions. Shares of Restricted Stock covered by a Restricted Stock
Award made under the Plan shall be released from escrow as soon as practicable after the
termination of the Period of Restriction and, subject to the Company’s right to require payment of
any taxes, a certificate or certificates evidencing ownership of the requisite number of Shares
shall be delivered to the Participant.

     6.6 Voting Rights. During the Period of Restriction, Participants holding Shares of
Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares,
unless otherwise provided in the Award Agreement.

     6.7 Dividends and Other Distributions. During the Period of Restriction, Participants
holding shares of Restricted Stock shall be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If
any such

9

 

dividends or distributions are paid in Shares, the Shares shall be deposited with the Company
and shall be subject to the same restrictions on transferability and forfeitability as the Shares
of Restricted Stock with respect to which they were paid.

     6.8 Performance Goals and Performance Periods. The Committee may grant Stock Awards
that become earned if the Participant achieves the applicable Performance Goals during and in
respect of the designated Performance Period. The Performance Goals and the Performance Period
shall be established by the Committee, in its sole discretion. The Committee shall establish
Performance Goals for each Performance Period prior to, or as soon as practicable after, the
commencement of such Performance Period. The Committee shall also establish a schedule or schedules
for the Stock Awards setting forth the portion of the Award which will be earned or forfeited based
on the degree of achievement, or lack thereof, of the Performance Goals at the end of the relevant
Performance Period, as certified by the Committee in accordance with Section 162(m) of the Code.
The Performance Goals shall be defined as to their respective components and meaning by the
Committee (in its sole discretion). During any Performance Period, the Committee shall have the
authority to adjust the Performance Goals and/or the Performance Period in such manner as the
Committee, in its sole discretion, deems appropriate at any time and from time to time. The payout
of any such Award to a Covered Employee may be reduced, but not increased, based on the degree of
attainment of other performance criteria or otherwise at the discretion of the Committee. For
purposes of the Plan, “Covered Employee” has the same meaning as set forth in Section
162(m) of the Code.

ARTICLE VII

STOCK APPRECIATION RIGHTS

     7.1 Grant of SARs. Subject to the provisions of the Plan, SARs may be granted to such
Participants at such times, and subject to such terms and conditions, as shall be determined by the
Committee in its sole discretion; provided, however, that any tandem SAR (i.e., a SAR granted in
tandem with an Option) related to an Incentive Stock Option shall be granted at the same time that
such Incentive Stock Option is granted.

     7.2 Base Price and Other Terms. The Committee, subject to the provisions of the Plan,
shall have complete discretion to determine the terms and conditions of SARs granted under the
Plan. Without limiting the foregoing, the Base Price with respect to Shares subject to a tandem SAR
shall be the same as the Exercise Price with respect to the Shares subject to the related Option.

     7.3 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall
specify the Base Price (which shall not be less than one hundred percent (100%) of the Fair Market
Value of a Share on the Grant Date), the term of the SAR, the conditions of exercise, and such
other terms and conditions as the Committee, in its sole discretion, shall determine.

     7.4 Expiration Dates. Each SAR shall terminate no later than the tenth anniversary of
its Grant Date; provided, however, that the expiration date with respect to a tandem SAR shall not
be later than the expiration date of the related Option.

     7.5 Payment of SAR Amount. Unless otherwise specified in the Award Agreement
pertaining to a SAR, a SAR may be exercised (a) by the Participant’s delivery of a written notice
of

10

 

exercise to the Chief Financial Officer of the Company (or his or her designee) setting forth
the number of whole SARs which are being exercised, (b) in the case of a tandem SAR, by
surrendering to the Company any Options which are cancelled by reason of the exercise of such SAR,
and (c) by executing such documents as the Company may reasonably request. Except as otherwise
provided in the relevant Award Agreement, upon exercise of a SAR, the Participant shall be entitled
to receive payment from the Company in an amount determined by multiplying: (i) the amount by which
the Fair Market Value of a Share on the date of exercise exceeds the Base Price specified in the
Award Agreement pertaining to such SAR; by (ii) the number of Shares with respect to which the SAR
is exercised.

     7.6 Payment Upon Exercise of SAR. Payment to a Participant upon the exercise of the
SAR shall be made, as determined by the Committee in its sole discretion, either (a) in cash, (b)
in Shares with a Fair Market Value equal to the amount of the payment or (c) in a combination
thereof, as set forth in the applicable Award Agreement.

ARTICLE VIII

OTHER STOCK AWARDS

     Subject to the provisions of the Plan, the Committee may develop sub-plans or grant other
equity-based awards (“Other Stock Awards”) on such terms as it may determine, including, but not
limited to, Awards designed to comply with or take advantage of applicable local laws of
jurisdictions outside of the United States.

ARTICLE IX

INCENTIVE AWARDS

     The Committee may develop incentive programs or grant other cash-based awards (“Cash Incentive
Awards”) on such terms as it may determine, including, but not limited to, Awards designed to
provide cash incentives based upon the achievement of Performance Goals over a Performance Period
specified by the Board.

ARTICLE X

CHANGE IN CONTROL

     Unless otherwise provided in an Award Agreement, in the event of a Change in Control, unless
the right to accelerated vesting, the lapse of restrictions or risks of fofeiture, or accelerated
delivery or receipt of cash provided for herein is waived or deferred by a Participant and the
Company by written notice prior to the Change in Control, all restrictions and risks of forfeiture
on Awards (other than those imposed by law or regulation) shall lapse, and all deferral or vesting
periods relating to Awards shall immediately expire. In the event of a Change in Control, the
Board can unilaterally implement or negotiate a procedure with any party to the Change in Control
pursuant to which all Participants’ unexercised Options may be cashed out as part of the purchase
transaction, without requiring exercise, for the difference between the purchase price and the
Exercise Price.

11

 

ARTICLE XI

MISCELLANEOUS

     11.1 No Effect on Employment or Service. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant’s employment or service at
any time, for any reason and with or without cause.

     11.2 Participation. No person shall have the right to be selected to receive an Award
under this Plan, or, having been so selected, to be selected to receive a future Award.

     11.3 Indemnification. Each person who is or shall have been a member of the Committee,
or of the Board, shall be indemnified and held harmless by the Company against and from (a) any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any good faith action taken or good
faith failure to act under the Plan or any Award Agreement, and (b) from any and all amounts paid
by him or her in settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company’s Certificate of Incorporation or By-Laws, by
contract, as a matter of law, or otherwise, or under any power that the Company may have to
indemnify them or hold them harmless.

     11.4 Successors. All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business or assets of the Company.

     11.5 Beneficiary Designations. Subject to the restrictions in Section 11.6 below, a
Participant under the Plan may name a beneficiary or beneficiaries to whom any vested but unpaid
Award shall be paid in the event of the Participant’s death. For purposes of this Section, a
beneficiary may include a designated trust having as its primary beneficiary a family member of a
Participant. Each such designation shall revoke all prior designations by the Participant and shall
be effective only if given in a form and manner acceptable to the Committee. In the absence of any
such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to
the Participant’s estate and, subject to the terms of the Plan and of the applicable Award
Agreement, any unexercised vested Award may be exercised by the administrator or executor of the
Participant’s estate.

     11.6 Nontransferability of Awards. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the
laws of descent and distribution; provided, however, that except as provided by in the relevant
Award Agreement, a Participant may transfer, without consideration, an Award other than an
Incentive Stock Option to one or more members of his or her Immediate Family, to a trust
established for the exclusive benefit of one or more members of his or her Immediate Family, to a

12

 

partnership in which all the partners are members of his or her Immediate Family, or to a
limited liability company in which all the members are members of his or her Immediate Family;
provided, further, that any such Immediate Family, and any such trust, partnership and limited
liability company, shall agree to be and shall be bound by the terms of the Plan, and by the terms
and provisions of the applicable Award Agreement and any other agreements covering the transferred
Awards. All rights with respect to an Award granted to a Participant shall be available during his
or her lifetime only to the Participant and may be exercised only by the Participant or the
Participant’s legal representative.

     11.7 No Rights as Stockholder. Except to the limited extent provided in Sections 6.6
and 6.7, no Participant (nor any beneficiary) shall have any of the rights or privileges of a
stockholder of the Company with respect to any Shares issuable pursuant to an Award (or exercise
thereof), unless and until certificates representing such Shares shall have been issued, recorded
on the records of the Company or its transfer agents or registrars, and delivered to the
Participant (or beneficiary).

     11.8 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to
an Award (or exercise thereof), the Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy any
federal, state, local and foreign taxes of any kind (including, but not limited to, the
Participant’s FICA and SDI obligations) which the Committee, in its sole discretion, deems
necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule
or regulation with respect to such Award (or exercise thereof).

     11.9 Withholding Arrangements. The Committee, in its sole discretion and pursuant to
such procedures as it may specify from time to time, may permit or require a Participant to satisfy
all or part of the tax withholding obligations in connection with an Award by (a) having the
Company withhold otherwise deliverable Shares, or (b) delivering to the Company already-owned
Shares, in each case having a Fair Market Value equal to the amount sufficient to satisfy the
minimum statutory tax withholding obligations, provided such Shares have been held by the
Participant for at least six months.

     11.10 No Corporate Action Restriction. The existence of the Plan, any Award Agreement
and/or the Awards granted hereunder shall not limit, affect or restrict in any way the right or
power of the Board or the shareholders of the Company to make or authorize (a) any adjustment,
recapitalization, reorganization or other change in the Company’s or any Subsidiary’s or
Affiliate’s capital structure or business, (b) any merger, consolidation or change in the ownership
of the Company or any Subsidiary or Affiliate, (c) any issue of bonds, debentures, capital,
preferred or prior preference stocks ahead of or affecting the Company’s or any Subsidiary’s or
Affiliate’s capital stock or the rights thereof, (d) any dissolution or liquidation of the Company
or any Subsidiary or Affiliate, (e) any sale or transfer of all or any part of the Company’s or any
Subsidiary’s or Affiliate’s assets or business, or (f) any other corporate act or proceeding by the
Company or any Subsidiary or Affiliate. No Participant, beneficiary or any other person shall have
any claim against any Member of the Board or the Committee, the Company or any Subsidiary or
Affiliate, or any employees, officers, shareholders or agents of the Company or any Subsidiary or
Affiliate, as a result of any such action.

13

 

     11.11 Restrictions on Shares. Each Award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing, registration or
qualification of the Shares subject to such Award upon any securities exchange or under any law, or
the consent or approval of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise or settlement of such Award or the
delivery of Shares thereunder, such Award shall not be exercised or settled and such Shares shall
not be delivered unless such listing, registration, qualification, consent, approval or other
action shall have been effected or obtained, free of any conditions not acceptable to the Company.
The Company may require that certificates evidencing Shares delivered pursuant to any Award made
hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the
holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the
rules and regulations thereunder. Finally, no Shares shall be issued and delivered under the Plan,
unless the issuance and delivery of those Shares shall comply with all relevant regulations and any
registration, approval or action thereunder.

     11.12 Changes in Capital Structure. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, change of control or exchange of Shares or other
securities of the Company, or other corporate transaction or event (each a “Corporate
Event”) affects the Shares, the Board shall, in such manner as it in good faith deems
equitable, adjust any or all of (i) the number of Shares or other securities of the Company (or
number and kind of other securities or property) with respect to which Awards may be granted, (ii)
the number of Shares or other securities of the Company (or number and kind of other securities or
property) subject to outstanding Awards, and (iii) the Exercise Price or Base Price with respect to
any Award, or make provision for an immediate cash payment to the holder of an outstanding Award in
consideration for the cancellation of such Award.

     If the Company enters into or is involved in any Corporate Event, the Board may, prior to such
Corporate Event and effective upon such Corporate Event, take such action as it deems appropriate,
including, but not limited to, replacing Awards with substitute awards in respect of the Shares,
other securities or other property of the surviving corporation or any affiliate of the surviving
corporation on such terms and conditions, as to the number of shares, pricing and otherwise, which
shall substantially preserve the value, rights and benefits of any affected Awards granted
hereunder as of the date of the consummation of the Corporate Event. Notwithstanding anything to
the contrary in the Plan, if any Corporate Event occurs, the Company shall have the right, but not
the obligation, to cancel each Participant’s Awards immediately prior to such Corporate Event and
to pay to each affected Participant in connection with the cancellation of such Participant’s
Awards, an amount equal that the Committee, in its sole discretion, in good faith determines to be
the equivalent value of such Award (e.g., in the case of an Option or SAR, the amount of the
spread), it being understood that the equivalent value of an Option or SAR with an exercise price
greater than or equal to the fair market value of the underlying stock shall be $0.

     Upon receipt by any affected Participant of any such substitute awards (or payment) as a
result of any such Corporate Event, such Participant’s affected Awards for which such substitute
awards (or payment) were received shall be thereupon cancelled without the need for obtaining the
consent of any such affected Participant. Any actions or determinations of the Committee under

14

 

this Section 11.12 need not be uniform as to all outstanding Awards, nor treat all
Participants identically.

ARTICLE XII

AMENDMENT, TERMINATION AND DURATION

     12.1 Amendment, Suspension or Termination. The Board, in its sole discretion, may
amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason, subject
to any requirement of stockholder approval required by applicable law, rule or regulation,
including, without limitation, Section 422 of the Code, Section 162(m) of the Code and the rules of
the New York Stock Exchange; provided, however, the Board may amend the Plan and any Award
Agreement, including without limitation retroactive amendments, without shareholder approval as
necessary to avoid the imposition of any taxes under Section 409A of the Code. Subject to the
preceding sentence, the amendment, suspension or termination of the Plan shall not, without the
consent of the Participant, materially adversely alter or impair any rights or obligations under
any Award theretofore granted to such Participant. Notwithstanding the foregoing, the Committee
may, but shall not be required to, amend or modify any Award to the extent necessary to avoid the
imposition of taxes under Section 409A of the Code. The Company intends to administer the Plan and
all Awards granted thereunder in a manner that complies with Code Section 409A, however, the
Company shall not be responsible for any additional tax imposed pursuant to Code Section 409A, nor
will the Company indemnify or otherwise reimburse Participant for any liability incurred as a
result of Code Section 409A. No Award may be granted during any period of suspension or after
termination of the Plan.

     12.2 Duration of the Plan. The Plan shall, subject to Section 12.1, terminate ten
years after adoption by the Board, unless earlier terminated by the Board and no further Awards
shall be granted under the Plan. The termination of the Plan shall not affect any Awards granted
prior to the termination of the Plan.

ARTICLE XIII

LEGAL CONSTRUCTION

     13.1 Gender and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

     13.2 Severability. In the event any provision of the Plan or of any Award Agreement
shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan or the Award Agreement, and the Plan and/or the Award Agreement shall
be construed and enforced as if the illegal or invalid provision had not been included.

     13.3 Requirements of Law. The granting of Awards and the issuance of Shares under the
Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

     13.4 Governing Law. The Plan and all Award Agreements shall be construed in accordance
with and governed by the laws of the State of Delaware, but without regard to its conflict of law
provisions. Participant hereby agrees to waive all rights to trial by jury in any

15

 

proceeding (whether based on contract, tort or otherwise) arising out of or relating to any
Award Agreement.

     13.5 Captions. Captions are provided herein for convenience only, and shall not serve
as a basis for interpretation or construction of the Plan.

     13.6 Incentive Stock Options. Should any Option granted under this Plan be designated
an “Incentive Stock Option,” but fail, for any reason, to meet the requirements of the Code for
such a designation, then such Option shall be deemed to be a Non-Qualified Stock Option and shall
be valid as such according to its terms.

16EX-4D

 

 Exhibit 4(d)

SOLUTIA INC. 2007

NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN

ARTICLE I

EFFECTIVE DATE AND PURPOSE

     Purpose of the Plan. The Plan shall be known as the Solutia Inc. 2007 Non-Employee
Stock Compensation Plan. The Plan is intended to further the growth and profitability of the
Company by increasing incentives and encouraging Share ownership on the part of the Members of the
Board of Solutia Inc. (the “Company”). The Plan is intended to permit the grant of Awards
that constitute Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and
Other Stock Awards.

ARTICLE II

DEFINITIONS

     The following words and phrases shall have the following meanings unless a different meaning
is plainly required by the context:

     “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a
specific section of the 1934 Act or regulation thereunder shall include such section or regulation,
any valid regulation or interpretation promulgated under such section, and any comparable provision
of any future legislation or regulation amending, supplementing or superseding such section or
regulation.

     “Affiliate” means any corporation or any other entity (including, but not limited to,
partnerships and joint ventures) directly or indirectly controlled by the Company.

     “Award” means, individually or collectively, a grant under the Plan of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units or Other Stock Awards.

     “Award Agreement” means the written agreement setting forth the terms and conditions
applicable to an Award.

     “Base Price” means the price at which a SAR may be exercised with respect to a Share.

     “Board” means the Company’s Board of Directors, as constituted from time to time.

     “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific
section of the Code or regulation thereunder shall include such section or regulation, any valid
regulation or other guidance promulgated under such section, and any comparable provision of any
future legislation or regulation amending, supplementing or superseding such section or regulation.

     “Committee” means the committee of the Board described in Article 3.

     “Change in Control” shall be deemed to have occurred if:

1

 

	 	(a)	 	Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) is or
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more than 50% of the
voting power of the then outstanding securities of the Company, and such person owns
more aggregate voting power of the Company’s then outstanding securities entitled to
vote generally in the election of directors than any other person, excluding for this
purpose acquisitions by a person pursuant to a merger of the Company or a Subsidiary
that would not be a Change in Control under clause (b) below;
	 
	 	(b)	 	Consummation of (x) a merger or consolidation of the Company or a Subsidiary
with another corporation where the shareholders of the Company, immediately prior to
the merger or consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to 50% or more of all votes to which
all shareholders of the surviving corporation (or the ultimate parent company of the
surviving company) would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a separate
class vote), (y) the sale or other disposition of 50% or more of the Company’s assets
that it owns as of the effective date of this Plan, or (z) a liquidation or dissolution
of the Company; provided, however, the effectiveness of a plan of reorganization
pursuant to which a majority of the common stock of the reorganized Company is
distributed (i) to Persons who are (a) holders of claims against the Company; (b)
holders of equity interests in the Company; and/or (c) designated in the Company’s plan
of reorganization proposal dated October 15, 2007 to receive common stock of the
reorganized Company; or (ii) to or for the benefit of Company management, shall not
constitute a “Change in Control”; or
	 
	 	(c)	 	Directors are elected such that a majority of the members of the Board shall
have been members of the Board for less than two years, unless the election or
nomination for election of each new director who was not a director at the beginning of
such two-year period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.

     “Exercise Price” means the price at which a Share subject to an Option may be
purchased upon the exercise of the Option.

     “Fair Market Value” means, except as otherwise specified in a particular Award
Agreement, (a) while the Shares are readily traded on an established national or regional
securities exchange, the closing transaction price of such a Share as reported by the principal
exchange on which such Shares are traded on the date as of which such value is being determined or,
if there were no reported transaction for such date, the opening transaction price as reported by
exchange for the first trading date following the date by which such value is being determined on
the next preceding date for which a transaction was reported, (b) if the Shares are not readily
traded on an established national or regional securities exchange, the average of the bid and ask
prices for such a Share on the date as of which such value is being determined, where quoted for
such Shares, or (c) if Fair Market Value cannot be determined under clause (a) or clause (b) above,
or if the Committee determines in its sole discretion that the Shares are too thinly traded for
Fair Market Value to be

2

 

determined pursuant to clause (a) or clause (b), the value as determined by the Committee, in
its sole discretion, on a good faith basis.

     “Grant Date” means the date that the Award is granted.

     “Immediate Family” means the Participant’s children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including half-brothers and half-sisters),
in-laws (including all such relationships arising because of legal adoption) and any other person
required under applicable law to be accorded a status identical to any of the foregoing.

     “Member of the Board” means an individual who is a member of the Board.

     “Option” means an option to purchase Shares granted pursuant to ARTICLE V.

     “Other Stock Award” means an Award granted pursuant to ARTICLE VIII to receive Shares
on the terms specified in any applicable Award Agreement.

     “Participant” means a Member of the Board with respect to whom an Award has been
granted and remains outstanding.

     “Performance Goals” means goals established by the Committee as contingencies for
Awards to vest and/or become exercisable or distributable.

     “Performance Period” means the designated period during which the Performance Goals
must be satisfied with respect to the Award to which the Performance Goals relate.

     “Period of Restriction” means the period during which Restricted Stock or an RSU is
subject to forfeiture and/or restrictions on transferability.

     “Plan” means this Solutia Inc. 2007 Non-Employee Director Stock Compensation Plan, as
set forth in this instrument and as hereafter amended from time to time.

     “Restricted Stock” means a Stock Award granted pursuant to ARTICLE VI under which the
Shares are subject to forfeiture upon such terms and conditions as specified in the relevant Award
Agreement.

     “Restricted Stock Unit” or “RSU” means a Stock Award granted pursuant to ARTICLE VI
subject to a period or periods of time after which the Participant will receive Shares if the
conditions contained in such Stock Award have been met.

     “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, as amended, and any
future regulation amending, supplementing or superseding such regulation.

     “Share” means the Company’s common stock, par value $.01 per share, or any security
issued by the Company or any successor in exchange or in substitution therefor.

     “Stock Appreciation Right” or “SAR” means an Award granted pursuant to ARTICLE
VII, granted alone or in tandem with a related Option which is designated by the Committee as an
SAR.

3

 

     “Stock Award” means an Award of Restricted Stock or an RSU pursuant to ARTICLE VI.

     “Subsidiary(ies)” means any corporation (other than the Company) in an unbroken chain
of corporations, including and beginning with the Company, if each of such corporations, other than
the last corporation in the unbroken chain, owns, directly or indirectly, more than fifty percent
(50%) of the voting stock in one of the other corporations in such chain.

ARTICLE III

ADMINISTRATION

     3.1 The Committee. The Plan shall be administered by the Governance Committee of the
Board (the “Committee”). It is intended that each member of the Committee shall qualify as
(a) a “non-employee director” under Rule 16b-3 and (b) an “independent director” under the rules of
any national securities exchange or national securities association, as applicable. If it is later
determined that one or more members of the Committee do not so qualify, actions taken by the
Committee prior to such determination shall be valid despite such failure to qualify.

     Reference to the Committee shall refer to the Board if the Governance Committee ceases to
exist and the Board does not appoint a successor Committee.

     3.2 Authority and Action of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan’s provisions. The Committee shall have all powers
and discretion necessary or appropriate to administer the Plan and to control its operation,
including, but not limited to, the power to (a) determine which Members of the Board shall be
eligible to receive Awards and to grant Awards, (b) prescribe the form, amount, timing and other
terms and conditions of each Award, (c) interpret the Plan and the Award Agreements, (d) adopt such
procedures as it deems necessary or appropriate to permit participation in the Plan by eligible
Members of the Board, (e) adopt such rules as it deems necessary or appropriate for the
administration, interpretation and application of the Plan, (f) interpret, amend or revoke any such
procedures or rules, (g) correct any technical defect(s) or technical omission(s), or reconcile any
technical inconsistency(ies), in the Plan and/or any Award Agreement, (h) accelerate the vesting of
any award, (i) extend the period during which an Option may be exercisable, and (j) make all other
decisions and determinations that may be required pursuant to the Plan and/or any Award Agreement
or as the Committee deems necessary or advisable to administer the Plan.

     The acts of the Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts approved in writing by
all of the members of the Committee without a meeting. A majority of the Committee shall constitute
a quorum. The Committee’s determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are similarly situated. Each
member of the Committee is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any employee of the Company or any of its Subsidiaries or
Affiliates, the Company’s independent certified public accountants or any executive compensation
consultant or other professional retained by the Company to assist in the administration of the
Plan.

4

 

     The Company shall effect the granting of Awards under the Plan, in accordance with the
determinations made by the Committee, by execution of written agreements and/or other instruments
in such form as is approved by the Committee.

     3.3 Delegation by the Committee. The Committee in its sole discretion and on such
terms and conditions as it may provide may delegate all or any part of its authority and powers
under the Plan to one or more Members of the Board of the Company and/or officers of the Company;
provided, however, that the Committee may not delegate its authority or power if prohibited by law,
or if such delegation would cause the Awards or other transactions under the Plan to cease to be
exempt from Section 16(b) of the 1934 Act.

     3.4 Decisions Binding. All determinations, decisions and interpretations of the
Committee, the Board, and any delegate of the Committee pursuant to the provisions of the Plan or
any Award Agreement shall be final, conclusive, and binding on all persons, and shall be given the
maximum deference permitted by law.

     3.5 Performance Goals. The Committee shall have the authority to grant Awards under
this Plan that are contingent on the achievement of performance goals established by the Committee.

ARTICLE IV

SHARES SUBJECT TO THE PLAN

     4.1 Number of Shares. Subject to adjustment as provided in Section 10.12, the number
of Shares available for grants of Awards under the Plan shall be 250,000 Shares. Shares awarded
under the Plan may be either: authorized but unissued Shares, authorized and issued Shares
reacquired and held as treasury Shares or a combination thereof. To the extent permitted by
applicable law or exchange rules, Shares issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the Company or any
Subsidiary or Affiliate shall not reduce the Shares available for grants of Awards under this
Section 4.1. Notwithstanding anything in this Plan to the contrary and subject to Section 10.12,
without the approval of stockholders of the Company, the Committee will not amend or replace any
previously granted Option or SAR in a transaction that constitutes a “repricing,” as such term is
used in Section 303 A 08 of the Listed Company Manual of the New York Stock Exchange.

     4.2 Lapsed Awards. To the extent that Shares subject to an outstanding Option (except
to the extent Shares are issued or delivered by the Company in connection with the exercise of a
tandem SAR) or other Award are not issued or delivered by reason of (i) the expiration,
cancellation, forfeiture or other termination of such Award, (ii) the withholding of such Shares in
satisfaction of applicable federal, state or local taxes or (iii) of the settlement of all or a
portion of such Award in cash, then such Shares shall again be available under this Plan.

ARTICLE V

STOCK OPTIONS

     5.1 Grant of Options. Subject to the provisions of the Plan, Options may be granted to
Participants at such times, and subject to such terms and conditions, as determined by the
Committee in its sole discretion.

5

 

     5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall
specify the Exercise Price, the expiration date of the Option, the number of Shares to which the
Option pertains, any conditions to the exercise of all or a portion of the Option, and such other
terms and conditions as the Committee, in its discretion, shall determine.

     5.3 Exercise Price. Subject to the other provisions of this Section, the Exercise
Price with respect to Shares subject to an Option shall be determined by the Committee in its sole
discretion; provided, however, that the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date.

     5.4 Expiration Dates. Each Option shall terminate not later than the expiration date
specified in the Award Agreement pertaining to such Option.

     5.5 Exercisability of Options. Subject to Section 5.4, Options granted under the Plan
shall be exercisable at such times, and shall be subject to such restrictions and conditions, as
the Committee shall determine in its sole discretion. The exercise of an Option is contingent upon
payment by the Optionee of the amount sufficient to pay all taxes required to be withheld by any
governmental agency. Such payment may be in any form approved by the Committee.

     5.6 Method of Exercise. Options shall be exercised by the Participant’s delivery of a
written notice of exercise to the Chief Financial Officer of the Company (or his or her designee),
setting forth the number of Shares with respect to which the Option is to be exercised, accompanied
by full payment of the Exercise Price with respect to each such Share and an amount sufficient to
pay all taxes required to be withheld by any governmental agency. The Exercise Price shall be
payable to the Company in full in cash or its equivalent. The Committee, in its sole discretion,
also may permit exercise (a) by tendering previously acquired Shares which have been held by the
Optionee for at least six months having an aggregate Fair Market Value at the time of exercise
equal to the aggregate Exercise Price of the Shares with respect to which the Option is to be
exercised, or (b) by any other means which the Committee, in its sole discretion, determines to
both provide legal consideration for the Shares, and to be consistent with the purposes of the
Plan. As soon as practicable after receipt of a written notification of exercise and full payment
for the Shares with respect to which the Option is exercised, the Company shall deliver to the
Participant Share certificates (which may be in book entry form) for such Shares with respect to
which the Option is exercised.

     5.7 Restrictions on Share Transferability. The Committee may impose such additional
restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable,
including, but not limited to, restrictions related to applicable federal securities laws, the
requirements of any national securities exchange or system upon which Shares are then listed or
traded, or any blue sky or state securities laws.

     5.8 Cashing Out of Option. On receipt of written notice of exercise, the Committee may
elect to cash out all or part of the portion of the Shares for which an Option is being exercised
by paying the optionee an amount, in cash or Shares, equal to the excess of the Fair Market Value
of the Shares over the option price times the number of Shares for which the Option is being
exercised on the effective date of such cash-out.

6

 

ARTICLE VI

STOCK AWARDS

     6.1 Grant of Stock Awards. Subject to the provisions of the Plan, Stock Awards may be
granted to such Participants at such times, and subject to such terms and conditions, as determined
by the Committee in its sole discretion.

     6.2 Stock Award Agreement. Each Stock Award shall be evidenced by an Award Agreement
that shall specify the number of Shares granted, the price, if any, to be paid for the Shares and
the Period of Restriction applicable to a Restricted Stock Award or RSU Award and such other terms
and conditions as the Committee, in its sole discretion, shall determine.

     6.3 Transferability/Share Certificates. Shares subject to an Award of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated during a
Period of Restriction. During the Period of Restriction, a Restricted Stock Award may be registered
in the holder’s name or a nominee’s name at the discretion of the Company and may bear a legend as
described in Section 6.4.2. Unless the Committee determines otherwise, shares of Restricted Stock
shall be held by the Company as escrow agent during the applicable Period of Restriction, together
with stock powers or other instruments of assignment (including a power of attorney), each endorsed
in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which
would permit transfer to the Company of all or a portion of the Shares subject to the Restricted
Stock Award in the event such Award is forfeited in whole or part.

     6.4 Other Restrictions. The Committee, in its sole discretion, may impose such other
restrictions on Shares subject to an Award of Restricted Stock as it may deem advisable or
appropriate.

          6.4.1 General Restrictions. The Committee may set restrictions based upon applicable
federal or state securities laws, or any other basis determined by the Committee in its discretion.

          6.4.2 Legend on Certificates. The Committee, in its sole discretion, may legend the
certificates representing Restricted Stock during the Period of Restriction to give appropriate
notice of such restrictions. For example, the Committee may determine that some or all certificates
representing Shares of Restricted Stock shall bear the following legend: “The sale or other
transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or
by operation of law, is subject to certain restrictions on transfer as set forth in the Solutia
Inc. 2007 Non-Employee Director Stock Compensation Plan (the “Plan”), and in a Restricted
Stock Award Agreement (as defined by the Plan). A copy of the Plan and such Restricted Stock Award
Agreement may be obtained from the Chief Financial Officer of Solutia Inc.”

     6.5 Removal of Restrictions. Shares of Restricted Stock covered by a Restricted Stock
Award made under the Plan shall be released from escrow as soon as practicable after the
termination of the Period of Restriction and, subject to the Company’s right to require payment of
any taxes, a certificate or certificates evidencing ownership of the requisite number of Shares
shall be delivered to the Participant.

7

 

     6.6 Voting Rights. During the Period of Restriction, Participants holding Shares of
Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares,
unless otherwise provided in the Award Agreement.

     6.7 Dividends and Other Distributions. During the Period of Restriction, Participants
holding shares of Restricted Stock shall be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If
any such dividends or distributions are paid in Shares, the Shares shall be deposited with the
Company and shall be subject to the same restrictions on transferability and forfeitability as the
Shares of Restricted Stock with respect to which they were paid.

ARTICLE VII

STOCK APPRECIATION RIGHTS

     7.1 Grant of SARs. Subject to the provisions of the Plan, SARs may be granted to such
Participants at such times, and subject to such terms and conditions, as shall be determined by the
Committee in its sole discretion.

     7.2 Base Price and Other Terms. The Committee, subject to the provisions of the Plan,
shall have complete discretion to determine the terms and conditions of SARs granted under the
Plan. Without limiting the foregoing, the Base Price with respect to Shares subject to a tandem SAR
shall be the same as the Exercise Price with respect to the Shares subject to the related Option.

     7.3 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall
specify the Base Price (which shall not be less than one hundred percent (100%) of the Fair Market
Value of a Share on the Grant Date), the term of the SAR, the conditions of exercise, and such
other terms and conditions as the Committee, in its sole discretion, shall determine.

     7.4 Expiration Dates. Each SAR shall terminate no later than the tenth anniversary of
its Grant Date; provided, however, that the expiration date with respect to a tandem SAR shall not
be later than the expiration date of the related Option.

     7.5 Payment of SAR Amount. Unless otherwise specified in the Award Agreement
pertaining to a SAR, a SAR may be exercised (a) by the Participant’s delivery of a written notice
of exercise to the Chief Financial Officer of the Company (or his or her designee) setting forth
the number of whole SARs which are being exercised, (b) in the case of a tandem SAR, by
surrendering to the Company any Options which are cancelled by reason of the exercise of such SAR,
and (c) by executing such documents as the Company may reasonably request. Except as otherwise
provided in the relevant Award Agreement, upon exercise of a SAR, the Participant shall be entitled
to receive payment from the Company in an amount determined by multiplying: (i) the amount by which
the Fair Market Value of a Share on the date of exercise exceeds the Base Price specified in the
Award Agreement pertaining to such SAR; by (ii) the number of Shares with respect to which the SAR
is exercised.

     7.6 Payment Upon Exercise of SAR. Payment to a Participant upon the exercise of the
SAR shall be made, as determined by the Committee in its sole discretion, either (a) in cash, (b)
in Shares with a Fair Market Value equal to the amount of the payment or (c) in a combination
thereof, as set forth in the applicable Award Agreement.

8

 

ARTICLE VIII

OTHER STOCK AWARDS

     8.1 Grant of Other Stock Awards. Subject to the provisions of the Plan, the Committee
may develop sub-plans or grant other equity-based awards (“Other Stock Awards”) on such
terms as it may determine, including, but not limited to, Awards designed to comply with or take
advantage of applicable local laws of jurisdictions outside of the United States.

ARTICLE IX

CHANGE IN CONTROL

     Unless otherwise provided in an Award Agreement, in the event of a Change in Control, unless
the right to accelerated vesting, the lapse of restrictions or risks of fofeiture, or accelerated
delivery or receipt of cash provided for herein is waived or deferred by a Participant and the
Company by written notice prior to the Change in Control, all restrictions and risks of forfeiture
on Awards (other than those imposed by law or regulation) shall lapse, and all deferral or vesting
periods relating to Awards shall immediately expire. In the event of a Change in Control, the
Board can unilaterally implement or negotiate a procedure with any party to the Change in Control
pursuant to which all Participants’ unexercised Options may be cashed out as part of the purchase
transaction, without requiring exercise, for the difference between the purchase price and the
Exercise Price.

ARTICLE X

MISCELLANEOUS

     10.1 No Effect on Service. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant’s service at any time, for any reason and
with or without cause.

     10.2 Participation. No person shall have the right to be selected to receive an Award
under this Plan, or, having been so selected, to be selected to receive a future Award.

     10.3 Indemnification. Each person who is or shall have been a member of the Committee,
or of the Board, shall be indemnified and held harmless by the Company against and from (a) any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any good faith action taken or good
faith failure to act under the Plan or any Award Agreement, and (b) from any and all amounts paid
by him or her in settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company’s Certificate of Incorporation or By-Laws, by
contract, as a matter of law, or otherwise, or under any power that the Company may have to
indemnify them or hold them harmless.

9

 

     10.4 Successors. All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business or assets of the Company.

     10.5 Beneficiary Designations. Subject to the restrictions in Section 9.6 below, a
Participant under the Plan may name a beneficiary or beneficiaries to whom any vested but unpaid
Award shall be paid in the event of the Participant’s death. For purposes of this Section, a
beneficiary may include a designated trust having as its primary beneficiary a family member of a
Participant. Each such designation shall revoke all prior designations by the Participant and shall
be effective only if given in a form and manner acceptable to the Committee. In the absence of any
such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to
the Participant’s estate and, subject to the terms of the Plan and of the applicable Award
Agreement, any unexercised vested Award may be exercised by the administrator or executor of the
Participant’s estate.

     10.6 Nontransferability of Awards. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the
laws of descent and distribution; provided, however, that except as provided by in the relevant
Award Agreement, a Participant may transfer, without consideration, an Award to one or more members
of his or her Immediate Family, to a trust established for the exclusive benefit of one or more
members of his or her Immediate Family, to a partnership in which all the partners are members of
his or her Immediate Family, or to a limited liability company in which all the members are members
of his or her Immediate Family; provided, further, that any such Immediate Family, and any such
trust, partnership and limited liability company, shall agree to be and shall be bound by the terms
of the Plan, and by the terms and provisions of the applicable Award Agreement and any other
agreements covering the transferred Awards. All rights with respect to an Award granted to a
Participant shall be available during his or her lifetime only to the Participant and may be
exercised only by the Participant or the Participant’s legal representative.

     10.7 No Rights as Stockholder. Except to the limited extent provided in Sections 6.6
and 6.7, no Participant (nor any beneficiary) shall have any of the rights or privileges of a
stockholder of the Company with respect to any Shares issuable pursuant to an Award (or exercise
thereof), unless and until certificates representing such Shares shall have been issued, recorded
on the records of the Company or its transfer agents or registrars, and delivered to the
Participant (or beneficiary).

     10.8 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to
an Award (or exercise thereof), the Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy any
federal, state, local and foreign taxes of any kind (including, but not limited to, the
Participant’s FICA and SDI obligations) which the Committee, in its sole discretion, deems
necessary to be withheld or remitted to comply with the Code and/or any other applicable law, rule
or regulation with respect to such Award (or exercise thereof).

     10.9 Withholding Arrangements. The Committee, in its sole discretion and pursuant to
such procedures as it may specify from time to time, may permit or require a Participant to satisfy

10

 

all or part of the tax withholding obligations in connection with an Award by (a) having the
Company withhold otherwise deliverable Shares, or (b) delivering to the Company already-owned
Shares, in each case having a Fair Market Value equal to the amount sufficient to satisfy the
minimum statutory tax withholding obligations, provided such Shares have been held by the
Participant for at least six months.

     10.10 No Corporate Action Restriction. The existence of the Plan, any Award Agreement
and/or the Awards granted hereunder shall not limit, affect or restrict in any way the right or
power of the Board or the shareholders of the Company to make or authorize (a) any adjustment,
recapitalization, reorganization or other change in the Company’s or any Subsidiary’s or
Affiliate’s capital structure or business, (b) any merger, consolidation or change in the ownership
of the Company or any Subsidiary or Affiliate, (c) any issue of bonds, debentures, capital,
preferred or prior preference stocks ahead of or affecting the Company’s or any Subsidiary’s or
Affiliate’s capital stock or the rights thereof, (d) any dissolution or liquidation of the Company
or any Subsidiary or Affiliate, (e) any sale or transfer of all or any part of the Company’s or any
Subsidiary’s or Affiliate’s assets or business, or (f) any other corporate act or proceeding by the
Company or any Subsidiary or Affiliate. No Participant, beneficiary or any other person shall have
any claim against any Member of the Board or the Committee, the Company or any Subsidiary or
Affiliate, or any employees, officers, shareholders or agents of the Company or any Subsidiary or
Affiliate, as a result of any such action.

     10.11 Restrictions on Shares. Each Award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing, registration or
qualification of the Shares subject to such Award upon any securities exchange or under any law, or
the consent or approval of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise or settlement of such Award or the
delivery of Shares thereunder, such Award shall not be exercised or settled and such Shares shall
not be delivered unless such listing, registration, qualification, consent, approval or other
action shall have been effected or obtained, free of any conditions not acceptable to the Company.
The Company may require that certificates evidencing Shares delivered pursuant to any Award made
hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the
holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the
rules and regulations thereunder. Finally, no Shares shall be issued and delivered under the Plan,
unless the issuance and delivery of those Shares shall comply with all relevant regulations and any
registration, approval or action thereunder.

     10.12 Changes in Capital Structure. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, change of control or exchange of Shares or other
securities of the Company, or other corporate transaction or event (each a “Corporate
Event”) affects the Shares, the Board shall, in such manner as it in good faith deems
equitable, adjust any or all of (i) the number of Shares or other securities of the Company (or
number and kind of other securities or property) with respect to which Awards may be granted, (ii)
the number of Shares or other securities of the Company (or number and kind of other securities or
property) subject to outstanding Awards, and (iii) the Exercise Price or Base Price with respect to
any Award, or make provision for an immediate cash payment to the holder of an outstanding Award in
consideration for the cancellation of such Award.

11

 

     If the Company enters into or is involved in any Corporate Event, the Board may, prior to such
Corporate Event and effective upon such Corporate Event, take such action as it deems appropriate,
including, but not limited to, replacing Awards with substitute awards in respect of the Shares,
other securities or other property of the surviving corporation or any affiliate of the surviving
corporation on such terms and conditions, as to the number of shares, pricing and otherwise, which
shall substantially preserve the value, rights and benefits of any affected Awards granted
hereunder as of the date of the consummation of the Corporate Event. Notwithstanding anything to
the contrary in the Plan, if any Corporate Event occurs, the Company shall have the right, but not
the obligation, to cancel each Participant’s Awards immediately prior to such Corporate Event and
to pay to each affected Participant in connection with the cancellation of such Participant’s
Awards, an amount equal that the Committee, in its sole discretion, in good faith determines to be
the equivalent value of such Award (e.g., in the case of an Option or SAR, the amount of the
spread), it being understood that the equivalent value of an Option or SAR with an exercise price
greater than or equal to the fair market value of the underlying stock shall be $0.

     Upon receipt by any affected Participant of any such substitute awards (or payment) as a
result of any such Corporate Event, such Participant’s affected Awards for which such substitute
awards (or payment) were received shall be thereupon cancelled without the need for obtaining the
consent of any such affected Participant. Any actions or determinations of the Committee under this
Section 10.12 need not be uniform as to all outstanding Awards, nor treat all Participants
identically.

ARTICLE XI

AMENDMENT, TERMINATION AND DURATION

     11.1 Amendment, Suspension or Termination. The Board, in its sole discretion, may
amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason, subject
to any requirement of stockholder approval required by applicable law, rule or regulation,
including, without limitation, the rules of the New York Stock Exchange; provided, however, the
Board may amend the Plan and any Award Agreement, including, without limitation, retroactive
amendments without shareholder approval as necessary to avoid the imposition of any taxes under
Section 409A of the Code. Subject to the preceding sentence, the amendment, suspension or
termination of the Plan shall not, without the consent of the Participant, materially adversely
alter or impair any rights or obligations under any Award theretofore granted to such Participant.
Notwithstanding the foregoing, the Committee may, but shall not be required to, amend or modify any
Award to the extent necessary to avoid the imposition of taxes under Section 409A of the Code. The
Company intends to administer the Plan and all Awards granted thereunder in a manner that complies
with Code Section 409A, however, the Company shall not be responsible for any additional tax
imposed pursuant to Code Section 409A, nor will the Company indemnify or otherwise reimburse
Participant for any liability incurred as a result of Code Section 409A. No Award may be granted
during any period of suspension or after termination of the Plan.

     11.2 Duration of the Plan. The Plan shall, subject to Section 11.1, terminate ten
years after adoption by the Board, unless earlier terminated by the Board and no further Awards
shall be granted under the Plan. The termination of the Plan shall not affect any Awards granted
prior to the termination of the Plan.

12

 

ARTICLE XII

LEGAL CONSTRUCTION

     12.1 Gender and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

     12.2 Severability. In the event any provision of the Plan or of any Award Agreement
shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan or the Award Agreement, and the Plan and/or the Award Agreement shall
be construed and enforced as if the illegal or invalid provision had not been included.

     12.3 Requirements of Law. The granting of Awards and the issuance of Shares under the
Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

     12.4 Governing Law. The Plan and all Award Agreements shall be construed in accordance
with and governed by the laws of the State of Delaware, but without regard to its conflict of law
provisions. Participant hereby agrees to waive all rights to trial by jury in any proceeding
(whether based on contract, tort or otherwise) arising out of or relating to any Award Agreement.

     12.5 Captions. Captions are provided herein for convenience only, and shall not serve
as a basis for interpretation or construction of the Plan.

13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}]]