Exhibit 10
SOLUTIA INC.
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
1. NAME OF PLAN. This plan shall be known as the "Solutia Inc.
Non-Employee Director Compensation Plan" and is hereinafter referred to as
the "Plan."
2. PURPOSES OF PLAN. The purposes of the Plan are to increase the
ownership interest in Solutia Inc., a Delaware corporation (the "Company"),
by Non-Employee Directors whose services are considered essential to the
Company's continued progress and to provide a further incentive to serve as
directors of the Company.
3. EFFECTIVE DATE AND TERM. The Plan is effective as of September 3,
1997 (the "Effective Date"). The Plan shall remain in effect until
terminated by action of the Board, or until no shares of Common Stock remain
available under the Plan, if earlier.
4. DEFINITIONS. The following terms shall have the meanings set forth below:
"Administrator" has the meaning set forth in Section 20(a).
"Annual Meeting" means an annual meeting of the shareholders of the
Company.
"Annual Retainer" means the amount a Non-Employee Director will be
entitled to receive for serving as a director in a Plan Year, on an
annualized basis, as determined by and set forth in resolutions of the
Board, but shall not include reimbursement for expenses, fees
associated with service on any committee of the Board, the retainer
payable for serving as the chairman of any committee of the Board, or
fees with respect to any other services to be provided to the Company.
"Board" means the Board of Directors of the Company.
"Business Combination" has the meaning set forth in subparagraph (c) of
the definition of "Change of Control."
"Change of Control" means any of the following events:
(a) The acquisition by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act") (a "Person"), of beneficial
ownership (within the meaning of Rule 13d-3
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 1
As amended 6/27/01
promulgated under the Exchange Act) of 20% or more of either
(i) the then outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that,
for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this
definition; or
(b) Individuals who, as of the date hereof, constitute the Board (as of
the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Company or the acquisition of assets or stock of another entity (a
"Business Combination"), in each case unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without
limitation, an entity that as a result of such transaction owns the
Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 2
As amended 6/27/01
be; (ii) no Person (excluding any entity resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
entity resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
entity except to the extent that such ownership existed prior
to the Business Combination; and (iii) at least a majority of the
members of the board of directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement or of the action of
the Board providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
"Change of Control Consideration" means, for purposes of this Plan, (i)
the amount of any cash, plus the value of any securities and other
noncash consideration, constituting the most valuable consideration per
share of Common Stock paid to any shareholder in the transaction or
series of transactions that results in a Change of Control or (ii) if
no consideration per share of Common Stock is paid to any shareholder
in the transaction or series of transactions that results in a Change
of Control, the highest reported sale price of a share of Common Stock
on the New York Stock Exchange composite tape (or if the Common Stock
is not listed on such exchange, on any other national securities
exchange on which the Common Stock is listed or the NASDAQ Stock
Market) during the 60-day period prior to and including the date of a
Change of Control. To the extent that such consideration consists all
or in part of securities or other noncash consideration, the value of
such securities or other noncash consideration shall be determined by
the Committee in good faith.
"Change of Control Date" has the meaning set forth in Section 19(b).
"Code" has the meaning set forth in Section 9.
"Committee" means the committee that supervises the Plan, as more fully
defined in Section 20(a).
"Common Stock" means the Company's common stock, par value $.01 per
share.
"Company" has the meaning set forth in Section 2.
"Deferred Cash Account" means a bookkeeping account maintained by the
Company
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 3
As amended 6/27/01
for a Non-Employee Director representing the Elective Cash Amount,
if any, credited to such account pursuant to Section 6.
"Deferred Stock Account" means a bookkeeping account maintained by the
Company for a Non-Employee Director representing the Non-Employee
Director's interest in the Stock Amount and the Elective Stock Amount,
if any, credited to such account pursuant to Section 6.
"Delivery Date" has the meaning set forth in Section 7.
"Discretionary Amount" means with respect to each Plan Year, the dollar
amount equal to 50% of the Annual Retainer for such Plan Year, all or
any portion (in percentage increments determined by the Administration)
of which the Non-Employee Director may, but is not required to, elect
to have credited to his or her Deferred Stock Account in the form of an
Elective Stock Amount and/or his or her Deferred Cash Account in the
form of an Elective Cash Amount.
"Dividend Equivalent" for a given dividend or distribution means a
number of shares of Common Stock having a Value, as of the date such
Dividend Equivalent is credited to a Deferred Stock Account, equal to
the amount of cash, plus the fair market value on the date of
distribution of any property, that is distributed with respect to one
share of Common Stock pursuant to such dividend or distribution; such
fair market value to be determined by the Committee in good faith.
"Effective Date" has the meaning set forth in Section 3.
"Election Amount" for each Non-Employee Director who has made a Plan
Year Deferral Election pursuant to Section 5 shall be, with respect to
each Plan Year, (i) the percentage that is set forth in the
Non-Employee Director's Plan Year Deferral Election Notice multiplied
by (ii) the Discretionary Amount.
"Elective Cash Amount" means that portion of the Election Amount which
the Non-Employee Director designated in his or her Plan Year Deferral
Election Notice to be credited to his or her Deferred Cash Account.
"Elective Stock Amount" means that portion of the Election Amount which
the Non-Employee Director designated in his or her Plan Year Deferral
Election Notice to be credited to his or her Deferred Stock Account in
the form of Common Stock.
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 4
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"Exchange Act" has the meaning set forth in subparagraph (a) of the
definition of "Change of Control."
"Fraction," with respect to a person who is a Non-Employee Director
during part, but not all, of a Plan Quarter, means the amount obtained
by dividing (i) the number of calendar months during such Plan Quarter
that such person was a Non-Employee Director by (ii) 3; provided, that
for purposes of the foregoing, a partial calendar month shall be treated
as a whole month.
"Incumbent Board" has the meaning set forth in subparagraph (b) of the
definition of "Change of Control."
The "Interest Rate" means Moody's Baa Bond Index Rate, as in effect
from time to time.
"Non-Employee Director" means any director of the Company who is not an
employee of the Company or any subsidiary thereof on the date of any
award made or granted to such person hereunder.
"Option" means an award to purchase Common Stock granted to a
Non-Employee Director pursuant to the terms of Section 8.
"Outstanding Company Common Stock" has the meaning set forth in
subparagraph (a) of the definition of "Change of Control."
"Outstanding Company Voting Securities" has the meaning set forth in
subparagraph (a) of the definition of "Change of Control."
"Partial Quarter Notice Period" has the meaning set forth in Section 5.
"Partial Year Fraction," with respect to a person who is a Non-Employee
Director during part, but not all of a Plan Year, means the amount
obtained by dividing (i) the number of calendar months during such Plan
Year that such person was a Non-Employee Director by (ii) 12; provided,
that for the purposes of the foregoing, a partial calendar month shall
be treated as a whole month.
"Person" has the meaning set forth in subparagraph (a) of the
definition of "Change of Control."
"Plan" has the meaning set forth in Section 1.
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 5
As amended 6/27/01
"Plan Quarter" means the 3 month period commencing on the first Trading
Day in May, August, November or February, as applicable, during a Plan
Year.
"Plan Year" means the year commencing on the date of an Annual Meeting
and ending on the day before the next succeeding Annual Meeting;
provided, that the first Plan Year shall begin on the Effective Date
and end on the day before the first Annual Meeting and provided
further, that the last Plan Year with respect to a Non-Employee
Director who ceases to be a Non-Employee Director during a Plan Year,
shall begin on the first day of such Plan Year and end on the day such
Non-Employee Director ceases to be a Non-Employee Director.
"Plan Year Deferral Election" means the irrevocable election to defer,
for any Plan Year, all or any part (in percentage increments determined
by the Administrator) of the Discretionary Amount for the next Plan
Year such that the deferred portion becomes the Election Amount. Any
Plan Year Deferral Election Notice shall remain in effect for that Plan
Year and for all subsequent Plan Years unless and until such
Non-Employee Director delivers to the Administrator, no later than the
last business day prior to the commencement of the next succeeding Plan
Year, a new Plan Year Deferral Election Notice setting forth a
different Plan Year Deferral Election.
"Plan Year Deferral Election Notice" means the notice of the Plan Year
Deferral Election delivered to the Administrator.
"Rule 16b-3" has the meaning set forth in Section 20(a).
"Stock Amount" means with respect to each Plan Year, the dollar amount
equal to 50% of the Annual Retainer for such Plan Year which will be
automatically and mandatorily credited to the Non-Employee Director's
Deferred Stock Account in the form of Common Stock determined in the
manner set forth in Section 6(b).
"Trading Day" means any day on which there are sales of Common Stock
reported on the New York Stock Exchange composite tape, or if the
Common Stock is not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or the Nasdaq
Stock Market.
The "Value" of a share of Common Stock as of any given date (including
the date a Deferred Stock Account is credited, or, in the case of
Options, the date the Option is granted) means the average of the
highest and lowest sales prices of a share of Common Stock reported on
the New York Stock Exchange Composite Transactions for such day, or, if
shares of Common Stock were not traded on the New York Stock Exchange
on such date, then on the next preceding date on which such shares were
traded, all as
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 6
As amended 6/27/01
reported by The Wall Street Journal under the heading "New York Stock
Exchange - Composite Transactions" or by such other source as the
Committee may select.
5. ELECTION TO RECEIVE SHARES OR DEFER CASH IN LIEU OF CASH COMPENSATION.
(a) In order to make a Plan Year Deferral Election pursuant to this Section
5, a Non-Employee Director who is a Non-Employee Director prior to the
Effective Date must deliver to the Administrator, no later than September
30, 1997, his or her Plan Year Deferral Election Notice.
(b) Except for the Plan Year Deferral Election due by September 30,
1997 as set forth in Section 5(a) and except for persons who first become
Non-Employee Directors on a date other than an Annual Meeting Date (to which
Section 5(c) applies), each Non-Employee Director (and each nominee for a
position on the Board who would, if elected by the Company's shareholders at
the next succeeding Annual Meeting, be a Non-Employee Director) may make a
Plan Year Deferral Election for the next succeeding Plan Year by delivering
to the Administrator, no later than the last business day prior to the
commencement of the next succeeding Plan Year, a Plan Year Deferral Election
Notice.
(c) Except for the Plan Year Deferral Election due by September 30,
1997 as set forth in Section 5(a), each person who becomes a Non-Employee
Director on a date other than the date of an Annual Meeting must deliver his
or her Plan Year Deferral Election Notice within thirty days of the date he
or she first becomes a Non-Employee Director (the "Partial Quarter Notice
Period").
6. ACCOUNTS; CREDIT OF SHARES AND CASH. (a) The Company shall maintain a
Deferred Stock Account and a Deferred Cash Account for each Non-Employee
Director. As part of the compensation payable to each Non-Employee Director
for service on the Board, the Deferred Stock Account of each Non-Employee
Director shall be credited with shares of Common Stock as set forth in this
Section 6 and the Deferred Cash Account of each Non-Employee Director may, at
the Non-Employee Director's election, be credited with cash as set forth in
this Section 6. The shares credited to the Deferred Stock Account pursuant to
this Section 6 may represent fractional as well as whole shares of Common
Stock.
(b) Except as set forth in Section 6(e), as of the first day of each
Plan Quarter (or in the case of a Non-Employee Director who becomes a
Non-Employee Director on a date other than on the date of an Annual Meeting,
the first Trading Day in a Plan Quarter on which he or she becomes a
Non-Employee Director), the Deferred Stock Account of each Non-Employee
Director shall be credited with a number of shares of Common Stock having a
Value equal to 25% of the Stock Amount, multiplied by the Fraction, if
applicable.
(c) Except as set forth in Section 6(e), as of the first day of each
Plan Quarter (or in
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 7
As amended 6/27/01
the case of a Non-Employee Director who first becomes a Non-Employee Director
on a date other than on the date of an Annual Meeting, on the first Trading
Day following the conclusion of the Partial Quarter Notice Period), the
Deferred Stock Account of each Non-Employee Director who has a Plan Year
Deferral Election for Common Stock in effect on such date shall be credited
with (i) a number of shares of Common Stock having a Value equal to 25% of
the Elective Stock Amount, multiplied by the Fraction, if applicable.
(d) Except as set forth in Section 6(f), as of the first day of each
Plan Quarter (or in the case of a Non-Employee Director who first becomes a
Non-Employee Director on a date other than on the date of an Annual Meeting,
on the first Trading Day following the conclusion of the Partial Quarter
Notice Period), the Deferred Cash Account of each Non-Employee Director who
has a Plan Year Deferral Election for cash in effect on such date shall be
credited with (i) an amount equal to 25% of the Elective Cash Amount,
multiplied by the Fraction, if applicable.
(e) On September 4, 1997, the Deferred Stock Account of each
Non-Employee Director who becomes a Non-Employee Director prior to the
Effective Date shall be credited with a number of shares of Common Stock
having a Value equal to 25% of the Stock Amount, multiplied by the Fraction.
In addition, the Deferred Stock Account of each Non-Employee Director who
becomes a Non-Employee Director prior to the Effective Date and who has a
Plan Year Deferral Election for Common Stock in effect on October 1, 1997,
shall be credited with a number of shares of Common Stock having a Value
equal to 25% of the Elective Stock Amount, multiplied by the Fraction.
(f) On October 1, 1997, the Deferred Cash Account of each Non-Employee
Director who becomes a Non-Employee Director prior to the Effective Date and
who has a Plan Year Deferral Election for cash in effect on October 1, 1997,
shall be credited with an amount equal to 25% of the Elective Cash Amount,
multiplied by the Fraction.
(g) Whenever a dividend is paid or other distribution made with respect
to the Common Stock, each Deferred Stock Account shall be credited with a
number of shares equal to (i) the number of shares of Common Stock in such
Deferred Stock Account as of the record date for such dividend or other
distribution, multiplied by (ii) the Dividend Equivalent for such dividend
paid or other distribution made.
(h) Each Deferred Cash Account shall accrue interest on the balance
therein at the Interest Rate, such interest to be credited at least monthly.
7. DELIVERY OF SHARES AND DEFERRED CASH. The shares of Common Stock in a
Non-Employee Director's Deferred Stock Account and the cash balance in a
Non-Employee Director's Deferred Cash Account as of the date the Non-Employee
Director ceases to be a
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 8
As amended 6/27/01
Non-Employee Director for any reason (the "Delivery Date") shall be delivered
in accordance with this Section 7. The shares and cash balance shall be
delivered as soon as practicable after the Delivery Date but in no case more
than 30 days after the Delivery Date. If the number of shares to be delivered
includes a fractional share, such number shall be rounded to the nearest whole
number of shares. If any such shares or cash are to be delivered after the
Non-Employee Director has died or become legally incompetent, they shall be
delivered to the Non-Employee Director's estate, legal guardian or beneficiary
designated pursuant to Section 21(a), as the case may be, as soon as
practicable. References to a Non-Employee Director in this Plan shall be
deemed to refer to the Non-Employee Director's estate, legal guardian or
beneficiary designated pursuant to Section 21(a), where appropriate. The
Non-Employee Director shall become the holder of record of the shares of
Common Stock upon delivery.
8. GRANT OF OPTIONS. (a) Except as set forth in Section 8(d), each
Non-Employee Director shall receive, on the date such person becomes a
Non-Employee Director, an initial Option to purchase 8,000 shares of Common
Stock.
(b) Each person who becomes a Non-Employee Director on the date of, or
who remains a Non-Employee Director on the date of and immediately following
each Annual Meeting held after the Effective Date hereof, shall receive, as
of such date, an annual Option to purchase 2,000 shares of Common Stock.
(c) Except as set forth in Section 8(d), each person who becomes a
Non-Employee Director on a date other than on an Annual Meeting date, shall
receive, as of such date, an Option to purchase that number of shares of
Common Stock equal to 2,000 multiplied by the Partial Year Fraction.
(d) Persons who become Non-Employee Directors prior to the Effective
Date shall receive, on the same date as the Committee makes the first option
grants to management personnel of the Company, an Option to purchase 9,334
shares of Common Stock, 8,000 of which constitute the initial grant that
would have otherwise been granted pursuant to Section 8(a) but for this
Section 8(d), and 1,334 of which constitute the prorated annual Option grant
for the first Plan Year calculated in accordance with Section 8(c).
9. TYPE OF OPTIONS. All Options granted under the Plan shall be
"nonqualified" stock options subject to the provisions of Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"). All Options granted
under the Plan prior to February 24, 1999, shall be subject to the terms and
conditions set forth in the certificate attached as Exhibit A hereto. All
Options granted under the Plan on or after February 24, 1999, shall be
subject to the terms and conditions set forth in the certificate attached as
Exhibit B hereto.
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 9
As amended 6/27/01
10. EXERCISE PRICE. The exercise price per share of Common Stock
purchasable under all Options granted pursuant to the Plan shall be the
Value of a share of Common Stock on the Option Grant Date.
11. EXERCISE RIGHTS. Each Option granted hereunder prior to February 24,
1999, shall become exercisable, during the Option term set forth in
Section 12, in three equal installments commencing on the first anniversary
of the Option Grant Date, and annually thereafter, provided that the
Non-Employee Director continues in the service of the Company as a director
through such anniversaries. Each Option granted on or after February 24,
1999, shall become exercisable during the Option term set forth in Section
12, in three equal installments, on the dates of the first three Annual
Meetings of Stockholders of the Company following the Option Grant Date,
provided that the Non-Employee Director continues in the service of the
Company as a director until such dates; provided, however, that the Option,
if not already fully exercisable, shall become fully exercisable upon the
Non-Employee Director's retirement from the Board at the mandatory retirement
age set forth in the Charter for the Company's Board, or other applicable
document. Each Option may be exercised in full share lots only.
Notwithstanding the foregoing, the Committee shall have the authority to
determine any vesting acceleration or forfeiture waiver regarding any Option
granted under the Plan.
12. OPTION TERM. The Option term will expire at the end of the day next
preceding ten years from the Option Grant Date, or at the end of the day
next preceding two years from the date the Non-Employee Director ceases to
be a director of the Company for any reason, whichever occurs first.
13. METHOD OF EXERCISE. The Option shall be exercised by (a) written notice
or notice in such other form as may be prescribed from time to time, given
to the Company or its designee (at the address specified by the Company from
time to time) specifying the date the Option was granted and the number of
shares of Common Stock as to which the Option is being exercised, plus (b)
payment to the Company in full for the Shares so specified. Within a
reasonable time after exercise of the Option, the Company shall deliver
shares of Common Stock to the Non-Employee Director in respect of which the
Option shall have been exercised and shall pay all stamp taxes in respect
thereof, provided that upon or prior to the delivery of such shares,
provision (as specified by the Company from time to time) shall be made by
the Non-Employee Director for the payment to the Company of any and all
taxes which it shall be required to withhold in connection with the exercise
of the Option by any law or regulation of any government, whether federal,
state or local, and whether domestic or foreign. The Non-Employee Director
shall have the right to pay the Option exercise price by delivery of shares
of Common Stock (or other evidence of ownership of shares satisfactory to
the Company) already owned by the Non-Employee Director with a Value equal
to the Option exercise price as payment, provided that such shares have been
held by the Non-Employee Director for at least six months on the date of
exercise.
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 10
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14. DELIVERY OF SHARES, VOTING AND OTHER RIGHTS. The Non-Employee Director
shall have no rights as a stockholder with respect to any Option shares or
the shares of Common Stock credited to his or her Deferred Stock Account
unless and until the Non-Employee Director becomes the holder of record of
such shares and, subject to the provisions of Sections 6 and 19 hereof, no
adjustment shall be made for dividends, ordinary or extraordinary (whether
in cash or securities or property), or other distributions, or other rights
in respect of such shares as to which the record date is prior to the date
upon which the Non-Employee Director shall have become the holder of record
thereof. Shares delivered under the Plan shall be in book entry form unless
the Non-Employee Director has requested in the written notice specified in
Section 13 that they be issued in certificate form.
15. TAX WITHHOLDING. The Company shall have the right to require, prior to
the delivery of any shares of Common Stock pursuant to the Plan, that a
Non-Employee Director make arrangements satisfactory to the Company for the
withholding of any taxes required by law to be withheld with respect to the
delivery of such shares, including without limitation by the withholding of
shares that would otherwise be so delivered, by withholding from any other
payment due to the Non-Employee Director, or by a cash payment to the
Company by the Non-Employee Director.
16. NO TRUST OR FUND CREATED. The Plan shall not create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship
between the Company or any of its subsidiaries and a Non-Employee Director
or any other person or entity. To the extent that any person acquires a
right to receive payments from the Company or any of its affiliates pursuant
to the Plan, such right shall be no greater than the right of any unsecured
general creditor of the Company or any of its subsidiaries.
17. GENERAL RESTRICTIONS. (a) Notwithstanding any other provision of the
Plan, the Company shall not be required to deliver any shares of Common
Stock under the Plan prior to fulfillment of all of the following
conditions:
(i) Any registration or other qualification of such shares under
any state, federal, or foreign law or regulation, or the
maintaining in effect of any such registration or other
qualification which the Administrator shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable;
and
(ii) Obtaining any other consent, approval, or permit from any
state or federal governmental agency which the Administrator shall,
in its absolute discretion after receiving the advice of counsel,
determine to be necessary or advisable.
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 11
As amended 6/27/01
(b) Nothing contained in the Plan shall prevent the Company from
adopting other or additional compensation arrangements for Non-Employee
Directors.
18. SHARES AVAILABLE. Subject to Section 19 below, 400,000 shares of Common
Stock may be delivered under the Plan. Shares of Common Stock deliverable
under the Plan may be taken from treasury shares of the Company or purchased
on the open market.
19. CHANGE IN CAPITAL STRUCTURE; CHANGE OF CONTROL. (a) In the event of any
change in corporate capitalization, such as a stock split or a corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property (without regard to the
payment of any cash dividends by the Company in the ordinary course) of the
Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares to be
delivered under the Plan, in the number, kind and Option exercise price of
shares subject to outstanding Options, in the number and kind of shares held
in the Deferred Stock Accounts or subject to Options and/or such other
equitable substitution or adjustments as it may determine to be appropriate
in its sole discretion; provided, however, that the number of shares held in
the Deferred Stock Accounts or subject to Options shall always be a whole
number.
(b) Without limiting the generality of the foregoing, and
notwithstanding any other provision of this Plan, in the event of a Change
of Control, the Options shall become fully exercisable by the Non-Employee
Director on the date of the Change of Control (the "Change of Control
Date"), without regard to Section 11.
(c) If the shares of Common Stock credited to the Deferred Stock
Accounts and subject to Options are converted pursuant to this Section 19
into another form of property, references in the Plan to the Common Stock
shall be deemed, where appropriate, to refer to such other form of property,
with such other modifications as may be required for the Plan to operate in
accordance with its purposes. Without limiting the generality of the
foregoing, references to the delivery of shares of Common Stock shall be
deemed to refer to delivery of cash and the incidents of ownership of any
other property held in the Deferred Stock Accounts and subject to Options.
20. ADMINISTRATION; AMENDMENT. (a) The Board shall have the power to amend
or terminate the Plan. The Executive Compensation and Development Committee
or any other committee of the Board (the "Committee") designated by the
Board that will satisfy Rule 16b-3 of the Exchange Act, including any
successor rule ("Rule 16b-3"), shall supervise the Plan. The Plan shall be
administered by the Vice President - Human Resources, or such other person
or persons designated by the Committee (the "Administrator"). The Committee
shall consist
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 12
As amended 6/27/01
solely of two or more "non-employee directors" of the Company who shall
be appointed by the Board. A member of the Board shall be deemed to be
a "non-employee director" for the purposes of this Section 20 only if
he satisfies such requirements as the Securities and Exchange Commission may
establish for "non-employee directors" under Rule 16b-3. Members of the
Board receive no additional compensation for their services in connection
with the administration of the Plan.
(b) Any act that the Committee is authorized to perform hereunder may
instead be performed by the Board at its discretion, and to the extent the
Board so acts, references in the Plan to the Committee shall refer to the
Board as so applicable. Anything to the contrary herein notwithstanding, to
the extent that any permitted action taken by the Board conflicts with
action taken by the Committee, the Board action shall control.
(c) The Committee may adopt such rules or guidelines as it deems
appropriate to implement the Plan. All questions of interpretation of the
Plan or of any shares delivered under it shall be determined by the
Committee and such determination shall be final and binding upon all persons
having an interest in the Plan.
(d) Notwithstanding any other provision of the Plan, no amendment or
termination of the Plan shall adversely affect the interest of any Non-Employee
Director in Options granted to him or her, in shares previously credited to
such Non-Employee Director's Deferred Stock Account, or in cash previously
credited to such Non-Employee Director's Deferred Cash Account without that
Non-Employee Director's express written consent.
21. TRANSFERABILITY. (a) In the event of a Non-Employee Director's death,
all of such person's rights with respect to his or her Deferred Stock
Account and Deferred Cash Account will transfer to the maximum extent
permitted by law to such person's beneficiary. Each Non-Employee Director
may name, from time to time, any beneficiary or beneficiaries (which may be
named contingently or successively) as his or her beneficiary for receiving
delivery of the shares of Common Stock from the Deferred Stock Account and
the cash from the Deferred Cash Account under this Plan. Each designation
shall be on a form prescribed by the Administrator, will be effective only
when delivered to the Company and when effective will revoke all prior
designations by the Non-Employee Director. If a Non-Employee Director dies
with no such beneficiary designation in effect, such person's beneficiary
shall be his or her estate and such person's payments will be transferable
by will or pursuant to laws of descent and distribution applicable to such
person.
(b) Each Option granted under the Plan by its terms shall not be
transferable by the Non-Employee Director otherwise than by will, or by the
laws of descent and distribution, and shall be exercised during the lifetime
of the Non-Employee Director only by him or her. No Option or interest
therein may be transferred, assigned, pledged or hypothecated by the Non-
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 13
As amended 6/27/01
Employee Director during his or her lifetime, whether by operation of
law or otherwise, or be made subject to execution, attachment or similar
process.
22. MISCELLANEOUS. Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any Non-Employee Director
for reelection by the Company's shareholders or to limit the rights of the
shareholders to remove any director.
23. GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
SOLUTIA INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN, PAGE 14
As amended 6/27/01
EXHIBIT A
FORM OF
SOLUTIA INC.
1997
NON-QUALIFIED STOCK OPTION
(NOT TRANSFERABLE)
CERTIFICATE
Grant to
[insert Name of Optionee]
(The "Optionee")
to purchase from Solutia Inc. (the "Company")
[insert Number of shares]
shares of its common stock
par value $0.01 per share (the "Optioned Shares")
at the price of
[insert Option Price]
per share
pursuant to and subject to the provisions of the
Solutia Inc. Non-Employee Director Compensation Plan (the "Plan")
and to the Terms and Conditions set forth on the reverse hereof
Option Grant Date: [insert grant date]
TERMS AND CONDITIONS OF NON-QUALIFIED STOCK OPTION
DEFINITIONS.
The terms "Administrator", "Value", and "Common Stock" when used
herein, shall have the meanings set forth in the Plan.
EXERCISE RIGHTS.
The Option shall become exercisable, during the Option term set forth
in the third paragraph hereof and subject to the other terms and conditions
hereof, as to one-third of the Optioned Shares on the first anniversary of the
Option Grant Date, as to an additional one-third of the Optioned shares on the
second anniversary of the Option Grant Date, and as to any or all of the
Optioned Shares on the third anniversary of the Option Grant Date, provided
that the Optionee continues in the service of the Company as a director through
such anniversaries. Notwithstanding the foregoing, but subject to the third
paragraph hereof, an Option shall become fully and immediately exercisable upon
the occurrence of a Change in Control as set forth in Section 19 of the Plan.
The Option may be exercised in full share lots only.
OPTION TERM.
The Option term will expire at the end of the day next preceding ten
years from the date the Option was granted, or at the end of the day next
preceding two years from the date the Optionee ceases to be a director of the
Company for any reason, whichever first occurs.
METHOD OF EXERCISE.
The Option shall be exercised by (a) written notice, or notice in such
other form as may be prescribed from time to time, given to the Company or its
designee (at the address specified by the Company from time to time) specifying
the date the Option was granted and the number of shares of Common Stock as to
which the Option is being exercised, plus (b) payment to the Company in full
for the shares so specified. Within a reasonable time after exercise of the
Option, the Company shall deliver shares of Common Stock to the Optionee in
respect of which the Option shall have been exercised and shall pay all stamp
taxes in respect thereof, provided that upon or prior to the delivery of such
shares of Common Stock, provision (as specified by the Company from time to
time) shall be made by the Optionee for the payment to the Company of any and
all taxes which it shall be required to withhold in connection with exercise of
the Option, by any law or regulation of any government, whether federal, state
or local and whether domestic or foreign. Payment may be made by delivery of
shares of Common Stock (or other evidence of ownership of shares of Common
Stock satisfactory to the Company) with a Value equal to the Option exercise
price, provided that such shares have been held by the Optionee for at least
six months at the time of exercise.
STOCKHOLDER STATUS.
The Optionee shall have no rights as a stockholder with respect to any
shares of Common Stock subject to an Option unless and until the Optionee shall
have become the holder of record of such underlying shares of Common Stock and,
subject to the provisions of the sixth paragraph hereof, no adjustment shall be
made for dividends, ordinary or extraordinary (whether in cash or securities or
other property), or other distributions, or other rights in respect of such
shares of Common Stock as to which the record date is prior to the date upon
which the Optionee shall have become the holder of record thereof.
SHARE AND PRICE ADJUSTMENT.
In the event of any adjustments in the outstanding shares of Common
Stock, as provided for in Section 19 of the Plan, the Executive Compensation
and Development Committee of the Board of Directors of the Company may make
such substitution or adjustments in the aggregate number and kind of shares to
be delivered under the Plan, in the number, kind and Option exercise price of
shares subject to outstanding Options and/or such other equitable substitution
or adjustments as it may determine to be appropriate in its sole discretion.
The Optionee shall be notified of any such adjustment and any adjustment, or
failure to adjust, shall be final and binding upon the Company and the
Optionee.
SERVICE AS A DIRECTOR.
The grant of this Option is a separate inducement in connection with
the Optionee's service as a director of the Company. Neither the Option nor any
provision hereof shall be deemed to create any obligation on the part of the
Board of Directors of the Company to nominate any Optionee for reelection to
the Company's Board of Directors by the Company's shareholders or to limit the
rights of the shareholders to remove any director.
OPTION SUBJECT TO LAWS AND REGULATION.
Each exercise of the Option shall be subject to all requirements as to
(a) any registration or other qualifications of such shares under any state,
federal, or foreign law or regulation, or the maintaining in effect of any such
registration or other qualification which the Administrator shall, in his or
her absolute discretion upon the advice of counsel, deem necessary or
advisable, and (b) obtaining any other consent, approval, or permit from any
state or federal governmental agency which the Administrator shall, in his or
her absolute discretion after receiving advice of counsel, determine to be
necessary or advisable. Anything herein to the contrary notwithstanding, the
Option may not be exercised, in whole or in part, unless and until the Company
shall have been able to comply with all such requirements and regulations free
of any conditions not acceptable to the Company. As a condition to the
exercise of the Option, either in whole or in part, the Optionee shall execute
such documents and take such action as the Company in its sole discretion deems
necessary or advisable to assist the Company in compliance
with any such requirements, and Optionee shall comply with all requirements of
any regulatory authority having control or supervision.
GENERAL PROVISIONS.
The Option is not transferable by the Optionee otherwise than by will
or by the laws of descent and distribution, and during the lifetime of the
Optionee shall be exercisable only by the Optionee.
The validity, interpretation, performance and enforcement of this
Option shall be governed by the laws of the State of Delaware.
Each and every provision of the Option shall be administered, construed
and interpreted so that the Option shall in all respects conform to the
provisions of the Plan, a copy of which has been delivered to the Optionee, and
any provision that cannot be so administered shall be deemed appropriately
modified, or, if necessary, disregarded. In no event shall this Option be
deemed to be an Incentive Stock Option under Section 422 of the Internal
Revenue Code of 1986, as amended.
EXHIBIT B
FORM OF
SOLUTIA INC.
[Year]
NON-QUALIFIED STOCK OPTION
(NOT TRANSFERABLE)
CERTIFICATE
Grant to
[insert Name of Optionee]
(The "Optionee")
to purchase from Solutia Inc. (the "Company")
[insert Number of shares]
shares of its common stock
par value $0.01 per share (the "Optioned Shares")
at the price of
[insert Option Price]
per share
pursuant to and subject to the provisions of the
Solutia Inc. Non-Employee Director Compensation Plan (the "Plan")
and to the Terms and Conditions set forth on the following pages
Option Grant Date: [insert grant date]
TERMS AND CONDITIONS OF NON-QUALIFIED STOCK OPTION
DEFINITIONS.
- -----------
The terms "Administrator", "Value", and "Common Stock" when used
herein, shall have the meanings set forth in the Plan.
EXERCISE RIGHTS.
- ---------------
The Option shall become exercisable, during the Option term set
forth in the third paragraph hereof and subject to the other terms and
conditions hereof, as to one-third of the Optioned Shares on the date of
the first Annual Meeting of Stockholders of the Company following the
Option Grant Date, as to an additional one-third of the Optioned shares
on the date of the second Annual Meeting of Stockholders of the Company
following the Option Grant Date, and as to any or all of the Optioned
Shares on the date of the third Annual Meeting of Stockholders of the
Company following the Option Grant Date, provided that the Optionee
continues in the service of the Company as a director until the date of
the applicable Annual Meetings of Stockholders. Notwithstanding the
foregoing, but subject to the third paragraph hereof, an Option shall
become fully and immediately exercisable upon the occurrence of a Change
in Control as set forth in Section 19 of the Plan or upon the Optionee's
retirement from the Board of Directors at the mandatory retirement age
set forth in the Charter for the Company's Board of Directors, or other
applicable document. The Option may be exercised in full share lots
only.
OPTION TERM.
- -----------
The Option term will expire at the end of the day next preceding
ten years from the date the Option was granted, or at the end of the day
next preceding two years from the date the Optionee ceases to be a
director of the Company for any reason, whichever first occurs.
METHOD OF EXERCISE.
- ------------------
The Option shall be exercised by (a) written notice, or notice in
such other form as may be prescribed from time to time, given to the
Company or its designee (at the address specified by the Company from
time to time) specifying the date the Option was granted and the number
of shares of Common Stock as to which the Option is being exercised,
plus (b) payment to the Company in full for the shares so specified.
Within a reasonable time after exercise of the Option, the Company shall
deliver shares of Common Stock to the Optionee in respect of which the
Option shall have been exercised and shall pay all stamp taxes in
respect thereof, provided that upon or prior to the delivery of such
shares of Common Stock, provision (as specified by the Company from time
to time) shall be made by the Optionee for the payment to the Company of
any and all taxes which it shall be required to withhold in connection
with exercise of the Option, by any law or regulation of any government,
whether federal, state or local and whether domestic
2
or foreign. Payment may be made by delivery of shares of Common Stock
(or other evidence of ownership of shares of Common Stock satisfactory
to the Company) with a Value equal to the Option exercise price,
provided that such shares have been held by the Optionee for at least
six months at the time of exercise.
STOCKHOLDER STATUS.
- ------------------
The Optionee shall have no rights as a stockholder with respect to
any shares of Common Stock subject to an Option unless and until the
Optionee shall have become the holder of record of such underlying
shares of Common Stock and, subject to the provisions of the sixth
paragraph hereof, no adjustment shall be made for dividends, ordinary or
extraordinary (whether in cash or securities or other property), or
other distributions, or other rights in respect of such shares of Common
Stock as to which the record date is prior to the date upon which the
Optionee shall have become the holder of record thereof.
SHARE AND PRICE ADJUSTMENT.
- --------------------------
In the event of any adjustments in the outstanding shares of
Common Stock, as provided for in Section 19 of the Plan, the Executive
Compensation and Development Committee of the Board of Directors of the
Company may make such substitution or adjustments in the aggregate
number and kind of shares to be delivered under the Plan, in the number,
kind and Option exercise price of shares subject to outstanding Options
and/or such other equitable substitution or adjustments as it may
determine to be appropriate in its sole discretion. The Optionee shall
be notified of any such adjustment and any adjustment, or failure to
adjust, shall be final and binding upon the Company and the Optionee.
SERVICE AS A DIRECTOR.
- ---------------------
The grant of this Option is a separate inducement in connection
with the Optionee's service as a director of the Company. Neither the
Option nor any provision hereof shall be deemed to create any obligation
on the part of the Board of Directors of the Company to nominate any
Optionee for reelection to the Company's Board of Directors by the
Company's shareholders or to limit the rights of the shareholders to
remove any director.
OPTION SUBJECT TO LAWS AND REGULATION.
- -------------------------------------
Each exercise of the Option shall be subject to all requirements
as to (a) any registration or other qualifications of such shares under
any state, federal, or foreign law or regulation, or the maintaining in
effect of any such registration or other qualification which the
Administrator shall, in his or her absolute discretion upon the advice
of counsel, deem necessary or advisable, and (b) obtaining any other
consent, approval, or permit from any state or federal governmental
agency
3
which the Administrator shall, in his or her absolute discretion after
receiving advice of counsel, determine to be necessary or advisable.
Anything herein to the contrary notwithstanding, the Option may not be
exercised, in whole or in part, unless and until the Company shall have
been able to comply with all such requirements and regulations free of
any conditions not acceptable to the Company. As a condition to the
exercise of the Option, either in whole or in part, the Optionee shall
execute such documents and take such action as the Company in its sole
discretion deems necessary or advisable to assist the Company in
compliance with any such requirements, and Optionee shall comply with
all requirements of any regulatory authority having control or
supervision.
GENERAL PROVISIONS.
- ------------------
The Option is not transferable by the Optionee otherwise than by
will or by the laws of descent and distribution, and during the lifetime
of the Optionee shall be exercisable only by the Optionee.
The validity, interpretation, performance and enforcement of this
Option shall be governed by the laws of the State of Delaware.
Each and every provision of the Option shall be administered,
construed and interpreted so that the Option shall in all respects
conform to the provisions of the Plan, a copy of which has been
delivered to the Optionee, and any provision that cannot be so
administered shall be deemed appropriately modified, or, if necessary,
disregarded. In no event shall this Option be deemed to be an Incentive
Stock Option under Section 422 of the Internal Revenue Code of 1986, as
amended.