EXHIBIT 10(d)
EXECUTION VERSION
PLEDGE AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated October 8, 2003, made
by the each of the Pledgors referred to below, in favor of Ableco Finance
LLC, a Delaware limited liability company, in its capacity as collateral
agent for the Agents and the Lenders (as such terms are defined below) party
to the Financing Agreement referred to below (in such capacity, together
with any successors and assigns, if any, the "Collateral Agent").
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W I T N E S S E T H:
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WHEREAS, Solutia Inc., a Delaware corporation (the
"Parent"), Solutia Business Enterprises, Inc., a New York corporation
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("Solutia Business", and together with the Parent, each a "Borrower" and
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collectively, the "Borrowers"), each subsidiary of the Parent listed as a
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"Guarantor" on the signature pages thereto (each a "Guarantor" and
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collectively, the "Guarantors", and together with the Borrowers, each a
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"Pledgor" and collectively the "Pledgors"), the lenders from time to time
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party thereto (each a "Lender" and collectively, the "Lenders"), the
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Collateral Agent, Wells Fargo Foothill, Inc., a California corporation, as
administrative agent for the Lenders (in such capacity, together with any
successors and assigns, if any, the "Administrative Agent") and Congress
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Financial Corporation (Central), an Illinois corporation, as documentation
agent for the Lenders (in such capacity, together with any successors and
assigns, if any, the "Documentation Agent", and together with the Collateral
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Agent and the Administration Agent, each an "Agent" and collectively, the
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"Agents"), are parties to a Financing Agreement, dated as of October 8, 2003
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(such agreement, as amended, restated, supplemented or otherwise modified
from time to time, including any replacement agreement therefor, being
hereinafter referred to as the "Financing Agreement");
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WHEREAS, pursuant to the Financing Agreement, the Lenders
have agreed to make certain revolving loans, which will include a
subfacility for the issuance of letters of credit (each a "Loan" and
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collectively, the "Loans"), to the Borrowers;
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WHEREAS, it is a condition precedent to the Lenders making
any Loan or making any other financial accommodation to the Borrowers
pursuant to the Financing Agreement that each Pledgor shall have executed
and delivered to the Collateral Agent a pledge and security agreement
providing for the pledge to the Collateral Agent, for the benefit of the
Agents and the Lenders, and the grant to the Collateral Agent, for the
benefit of the Agents and the Lenders, of a security interest in and Lien on
the outstanding shares of Capital Stock (as defined in the Financing
Agreement) and indebtedness from time to time owned by such Pledgor of each
Person now or hereafter existing and in which such Pledgor has any interest
at any time;
WHEREAS, the Pledgors are mutually dependent on each other
in the conduct of their respective businesses as an integrated operation,
with the credit needed from time to time by each Pledgor often being
provided through financing obtained by the other Pledgors and the ability to
obtain such financing being dependent on the successful operations of all of
the Pledgors as a whole; and
WHEREAS, each Pledgor has determined that the execution,
delivery and performance of this Agreement directly benefit, and are in the
best interest of, such Pledgor;
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain
the Loans, the Letter of Credit Accommodations and other financial
accommodations to the Borrowers pursuant to the Financing Agreement, the
Pledgors hereby jointly and severally agree with the Collateral Agent, for
the benefit of the Agents and the Lenders, as follows:
SECTION 1. Definitions. Reference is hereby made to the
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Financing Agreement for a statement of the terms thereof. All terms used in
this Agreement which are defined in the Financing Agreement or in Article 8
or Article 9 of the Uniform Commercial Code (the "Code") as in effect from
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time to time in the State of New York and which are not otherwise defined
herein shall have the same meanings herein as set forth therein; provided,
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that terms used herein which are defined in the Code as in effect in the
State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the
Collateral Agent may otherwise determine.
SECTION 2. Pledge and Grant of Security Interest. As
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collateral security for all of the Obligations (as defined in Section 3
hereof), each Pledgor hereby pledges and assigns to the Collateral Agent,
and grants to the Collateral Agent, for the benefit of the Agents and the
Lenders, a continuing security interest in, and Lien on such Pledgor's
right, title and interest in and to the following (collectively, the
"Pledged Collateral"):
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(a) the indebtedness described in Schedule I hereto and
all indebtedness from time to time required to be pledged to the Collateral
Agent pursuant to the terms of the Financing Agreement (the "Pledged Debt"),
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the promissory notes and other instruments evidencing the Pledged Debt, and
all interest, cash, instruments, investment property and other property from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Pledged Debt;
(b) the shares of Capital Stock described in Schedule II
hereto (the "Pledged Shares"), whether or not evidenced or represented by
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any stock certificate, certificated security or other instrument, issued by
the Persons described in such Schedule II (the "Existing Issuers"), the
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certificates representing the Pledged Shares, all options and other rights,
contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property
(including, but not limited to, any stock dividend and any distribution in
connection with a stock split) from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares;
(c) the shares of Capital Stock at any time and from time
to time acquired by such Pledgor of any and all Persons now or hereafter
existing (such Persons, together with the Existing Issuers, being
hereinafter referred to collectively as the "Pledged Issuers" and
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individually as a "Pledged Issuer"), the certificates representing such
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Capital Stock, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, distributions, cash, instruments,
investment property and other property (including, but not limited to, any
stock dividend and any distribution in connection with a stock split) from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the foregoing;
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(d) all investment property, financial assets, securities,
Capital Stock, other equity interests, stock options and commodity contracts
of such Pledgor, all notes, debentures, bonds, promissory notes or other
evidences of indebtedness of such Pledgor, and all other assets now or
hereafter received or receivable with respect to the foregoing;
(e) all security entitlements of such Pledgor in any and
all of the foregoing; and
(f) all proceeds (including proceeds of proceeds) of any
and all of the foregoing;
in each case, whether now owned or hereafter acquired by such Pledgor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, Lien, claim or otherwise).
Notwithstanding the foregoing, (i) if any Pledged Issuer is organized or
formed under the laws of a jurisdiction other than the District of Columbia
or any State or territory of the United States of America (a "Foreign
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Jurisdiction"), such Pledgor shall pledge not more than 65% of the voting
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Capital Stock of such Pledged Issuer (but shall pledge 100% of the
non-voting Capital Stock of such Pledged Issuer), (ii) Solutia Investments
LLC shall pledge not more than 65% of its interest in the intercompany
promissory note made by Solutia Belgium in favor of Solutia Investments LLC
and (iii) the maximum aggregate principal amount of Obligations that
constitutes "Debt" (as defined in the 1997 Indenture or the Euro Indenture)
that shall be secured by (A) the "Principal Properties and Related
Collateral" (as defined in the Security Agreement) and/or (B) the Capital
Stock of, or the Indebtedness owing by, any "Restricted Subsidiary" (as
defined in the 1997 Indenture or the Euro Indenture) pledged under this
Agreement (collectively, the "Restricted Pledged Collateral") shall not
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exceed the Senior Lien Limit then in effect minus $1,000, provided that so
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long as the aggregate principal amount of the Obligations exceeds the
aggregate principal amount of the Obligations constituting such "Debt"
secured by the Restricted Pledged Collateral and/or the Principal Properties
and Related Collateral, no payment on account of the Obligations
constituting such "Debt" shall be deemed to be applied against or to reduce
the amount of the Obligations constituting such "Debt" secured by the
Restricted Pledged Collateral and/or the Principal Properties and Related
Properties, but shall instead, be deemed to be applied against only such
portion of the Obligations constituting such "Debt" in excess of the amount
of such Obligations that are secured by the Pledged Collateral that is the
Restricted Pledged Collateral and/or the Principal Properties and Related
Collateral.
The Loan Parties agree that the pledge of shares of Capital Stock of any
Pledged Issuer who is organized or formed under the laws of a Foreign
Jurisdiction in favor of the Collateral Agent hereunder may be supplemented
by one or more separate pledge agreements, deeds of pledge, share charges,
or other similar agreements or instruments, executed and delivered by the
relevant Pledgors in favor of the Collateral Agent, which pledge agreements
will provide for the pledge of such shares of Capital Stock in accordance
with the laws of such Foreign Jurisdiction. With respect to such shares of
Capital Stock, the Collateral Agent may, at any time and from time to time,
in its sole discretion, exercised reasonably, take actions in such Foreign
Jurisdictions that will result in the perfection of the Lien created in such
shares of Capital Stock, without notice to the Pledgor.
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SECTION 3. Security for Obligations. The security interest
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created hereby in the Pledged Collateral constitutes continuing collateral
security for all of the following obligations, whether now existing or
hereafter incurred (the "Obligations"):
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(a) the prompt payment by each Pledgor, as and when due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), of all amounts from time to time owing
by it in respect of the Financing Agreement and the other Loan Documents,
including, without limitation, (i) all principal of and interest on the
Loans (including, without limitation, all interest that accrues after the
commencement of any Insolvency Proceeding of any Loan Party, whether or not
a claim for post-filing interest is allowed in such proceeding), (ii) all
Letter of Credit Obligations, (iii) in the case of a Guarantor, all amounts
from time to time owing by such Pledgor in respect of its guaranty made
pursuant to Article XI of the Financing Agreement or under any other
Guaranty to which it is a party, including all obligations guaranteed by
such Pledgor and (iv) all fees, commissions, charges, expense
reimbursements, indemnifications and all other amounts due or to become due
under any Loan Document; and
(b) the due performance and observance by each Pledgor
of all of its other obligations from time to time existing in respect of the
Loan Documents.
SECTION 4. Delivery of the Pledged Collateral.
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(a) (i) All promissory notes currently evidencing the
Pledged Debt and all certificates currently representing the Pledged Shares
shall be delivered to the Collateral Agent on or prior to the execution and
delivery of this Agreement. All other promissory notes, certificates and
instruments constituting Pledged Collateral from time to time required to be
pledged to the Collateral Agent pursuant to the terms of this Agreement or
the Financing Agreement (the "Additional Collateral") shall be delivered to
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the Collateral Agent promptly upon receipt thereof by or on behalf of any of
the Pledgors. All such promissory notes, certificates and instruments shall
be held by or on behalf of the Collateral Agent pursuant hereto and shall be
delivered in suitable form for transfer by delivery or shall be accompanied
by duly executed instruments of transfer or assignment or undated stock
powers executed in blank, all in form and substance reasonably satisfactory
to the Collateral Agent. If any Pledged Collateral consists of
uncertificated securities, unless the immediately following sentence is
applicable thereto, such Pledgor shall cause the Collateral Agent (or its
designated custodian or nominee) to become the registered holder thereof, or
cause each issuer of such securities to agree that it will comply with
instructions originated by the Collateral Agent with respect to such
securities without further consent by such Pledgor. If any Pledged
Collateral consists of security entitlements, such Pledgor shall transfer
such security entitlements to the Collateral Agent (or its custodian,
nominee or other designee), or cause the applicable securities intermediary
to agree that it will comply with entitlement orders by the Collateral Agent
without further consent by such Pledgor.
(ii) Within ten (10) Business Days of the receipt by
a Pledgor of any Additional Collateral, a Pledge Amendment, duly executed by
such Pledgor, in substantially the form of Annex I hereto (a "Pledge
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Amendment"), shall be delivered to the Collateral Agent, in respect of the
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Additional Collateral which must be pledged pursuant to this Agreement and
the Financing Agreement. The Pledge Amendment shall from and after delivery
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thereof constitute part of Schedules I and II hereto. Each Pledgor hereby
authorizes the Collateral Agent to attach each Pledge Amendment to this
Agreement and agrees that all promissory notes, certificates or instruments
listed on any Pledge Amendment delivered to the Collateral Agent shall for
all purposes hereunder constitute Pledged Collateral and such Pledgor shall
be deemed upon delivery thereof to have made the representations and
warranties set forth in Section 5 hereof with respect to such Additional
Collateral.
(b) If any Pledgor shall receive, by virtue of such
Pledgor's being or having been an owner of any Pledged Collateral, any (i)
stock certificate (including, without limitation, any certificate
representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Pledged Collateral,
or otherwise, (iii) dividends payable in cash (except such dividends
permitted to be retained by any such Pledgor pursuant to Section 7 hereof)
or in securities or other property or (iv) dividends, distributions, cash,
instruments, investment property and other property in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in surplus, such Pledgor shall
receive such stock certificate, promissory note, instrument, option, right,
payment or distribution in trust for the benefit of the Collateral Agent,
shall segregate it from such Pledgor's other property and shall deliver it
forthwith to the Collateral Agent, in the exact form received, with any
necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Collateral Agent as Pledged Collateral and as
further collateral security for the Obligations.
SECTION 5. Representations and Warranties. Each Pledgor
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jointly and severally represents and warrants as follows:
(a) Each Pledgor (i) is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good
standing under the laws of the state, province or other applicable
jurisdiction of its organization, (ii) has all requisite power and authority
to conduct its business as now conducted and as presently contemplated and
to execute, deliver and perform this Agreement and each other Loan Document
to be executed and delivered by it pursuant hereto and to consummate the
transactions contemplated hereby and thereby, and (iii) is duly qualified to
do business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary except to the
extent that the failure to be so qualified could reasonably be expected to
have a Material Adverse Effect.
(b) The execution, delivery and performance by each Pledgor
of this Agreement and the other Loan Documents to which such Pledgor is or
will be party (i) have been duly authorized by all necessary action, (ii) do
not and will not contravene its charter or by-laws, its limited liability
company or operating agreement or its certificate of partnership or
partnership agreement, as applicable, or any applicable law or any
contractual restriction binding on or affecting it or any of its properties
(including, without limitation, the 2009 Note Indenture, the 1997 Indenture
or the Euro Indenture), (iii) do not and will not result in or require the
creation of any Lien (other than pursuant to any Loan Document or the 2009
Note Indenture) upon or with respect to any of its material properties and
(iv) do not and will not result in any
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material default, noncompliance, suspension, revocation, impairment,
forfeiture or nonrenewal of any material permit, license, authorization or
approval applicable to it or its operations or any of its properties.
(c) The Existing Issuers set forth in Schedule II hereto
are the Pledgors' only Domestic Subsidiaries and directly owned Foreign
Subsidiaries existing on the date hereof. The Pledged Shares have been duly
authorized and validly issued and are fully paid and nonassessable and the
holders thereof are not entitled to any preemptive, first refusal or other
similar rights. Except as noted in Schedule II hereto, the Pledged Shares
constitute 100% of the issued shares of Capital Stock of the Pledged Issuers
as of the date hereof. All other shares of stock constituting Pledged
Collateral will be duly authorized and validly issued, fully paid and
nonassessable.
(d) The promissory notes currently evidencing the Pledged
Debt executed by the Parent or any Subsidiary of the Parent have been (and,
to the best knowledge of each Pledgor, the promissory notes evidencing the
Pledged Debt executed by any other Person have been), and all other
promissory notes from time to time evidencing Pledged Debt, when executed
and delivered by the Parent or any Subsidiary of the Parent, will have been
(and, to the best knowledge of each Pledgor, the promissory notes evidencing
the Pledged Debt, when executed and delivered by any other Person, will have
been), duly authorized, executed and delivered by the respective makers
thereof, and all such promissory notes executed by the Parent or any
Subsidiary of the Parent are or will be (and to the best knowledge of each
Pledgor all such promissory notes executed by any other Person, are or will
be), as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws.
(e) Each Pledgor is and will be at all times the legal
and beneficial owner of its Pledged Collateral free and clear of all Liens,
except for the Lien created by this Agreement and for Liens in favor of the
2009 Note Trustee, for the benefit of the 2009 Note Holders, as permitted by
the Financing Agreement.
(f) The exercise by the Collateral Agent of any of its
rights and remedies hereunder will not contravene any law or any contractual
restriction binding on or affecting any Pledgor or any of the properties of
any Pledgor and will not result in or require the creation of any Lien upon
or with respect to any of the properties of such Pledgor other than pursuant
to this Agreement or the other Loan Documents.
(g) No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority is required to be
obtained or made by any Pledgor for (i) the due execution, delivery and
performance by any Pledgor of this Agreement, (ii) the grant by any Pledgor,
or the perfection, of the Lien created hereby in the Pledged Collateral or
(iii) the exercise by the Collateral Agent of any of its rights and remedies
hereunder, except as may be required in connection with any sale of any
Pledged Collateral by laws affecting the offering and sale of securities
generally.
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(h) This Agreement creates a valid Lien in favor of the
Collateral Agent, for the benefit of the Agents and the Lenders, in the
Pledged Collateral as security for the Obligations. The Collateral Agent's
having possession of the promissory notes evidencing the Pledged Debt, the
certificates representing the Pledged Shares and all other certificates,
instruments and cash constituting Pledged Collateral from time to time
results in the perfection of such Lien. Such Lien is, or in the case of
Pledged Collateral in which any of the Pledgors obtains rights after the
date hereof, will be, a perfected, first priority Lien. All action necessary
or desirable to perfect and protect such Lien has been duly taken in the
jurisdictions of the District of Columbia or any State or territory of the
United States of America except for the Collateral Agent's having possession
of certificates, instruments and cash constituting Pledged Collateral after
the date hereof.
SECTION 6. Covenants as to the Pledged Collateral. So long
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as any of the Obligations shall remain outstanding or prior to the
termination of the Total Revolving Credit Commitments and Letter of Credit
Accommodations (unless otherwise cash collateralized pursuant to the terms
of the Financing Agreement), each Pledgor will, unless the Collateral Agent
shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral
and permit the Collateral Agent or any agents, designees or representatives
thereof at any time or from time to time during regular business hours to
examine and make copies of and abstracts from such records;
(b) at the Pledgors' joint and several expense, promptly
deliver to the Collateral Agent a copy of each notice or other communication
received by it in respect of the Pledged Collateral;
(c) at the Pledgors' joint and several expense, defend the
Collateral Agent's right, title and security interest in and to the Pledged
Collateral against the claims of any Person;
(d) at the Pledgors' joint and several expense, at any time
and from time to time, promptly execute and deliver all further instruments
and documents and take all further action that may be necessary or desirable
or that the Collateral Agent may reasonably request in order to (i) perfect
and protect, or maintain the perfection of, the security interest and Lien
created hereby, (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Pledged Collateral or (iii)
otherwise effect the purposes of this Agreement, including, without
limitation, delivering to the Collateral Agent irrevocable proxies in
respect of the Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise),
exchange or otherwise dispose of any Pledged Collateral or any interest
therein except as expressly permitted by Section 7.02 of the Financing
Agreement;
(f) not create or suffer to exist any Lien upon or with
respect to any Pledged Collateral, except for the Lien created hereby or for
the Lien in favor of the 2009 Note Trustee for the benefit of the 2009 Note
Holders, as permitted by the Financing Agreement;
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(g) not make or consent to any amendment or other
modification or waiver with respect to any Pledged Collateral or enter into
any agreement or permit to exist any restriction with respect to any Pledged
Collateral other than pursuant to the Loan Documents and the 2009 Note
Security Documents, 2009 Notes and 2009 Note Indenture;
(h) not permit the issuance of (i) any additional shares
of any class of Capital Stock of any Pledged Issuer, (ii) any securities
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such shares of Capital Stock or (iii) any warrants, options,
contracts or other commitments entitling any Person to purchase or otherwise
acquire any such shares of Capital Stock, except in the case of clauses (i),
(ii) and (iii), to the extent any such issuance is expressly permitted by
the Financing Agreement; and
(i) not take or fail to take any action which would in any
manner impair the validity or enforceability of the Collateral Agent's
security interest in and Lien on any Pledged Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the
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Pledged Collateral.
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(a) So long as no Event of Default shall have occurred and
be continuing:
(i) each Pledgor may exercise any and all voting and
other consensual rights pertaining to any Pledged Collateral for any purpose
not inconsistent with the terms of this Agreement, the Financing Agreement
or the other Loan Documents; provided, however, that (A) none of the
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Pledgors will exercise or refrain from exercising any such right, as the
case may be, if the Collateral Agent gives a Pledgor notice that, in the
Collateral Agent's judgment, such action (or inaction) is reasonably likely
to have a Material Adverse Effect and (B) each Pledgor will give the
Collateral Agent at least five (5) Business Days' notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising,
any such right which is reasonably likely to have a Material Adverse Effect;
(ii) each of the Pledgors may receive and retain any
and all dividends, interest or other distributions paid in respect of the
Pledged Collateral to the extent permitted by the Financing Agreement;
provided, however, that any and all (A) dividends and interest paid or
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payable other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of or in exchange
for, any Pledged Collateral, (B) dividends and other distributions paid or
payable in cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in surplus, and (C) cash paid,
payable or otherwise distributed in redemption of, or in exchange for, any
Pledged Collateral, together with any dividend, interest or other
distribution or payment which at the time of such payment was not permitted
by the Financing Agreement, shall be, and shall forthwith be delivered to
the Collateral Agent, to hold as, Pledged Collateral and shall, if received
by any of the Pledgors, be received in trust for the benefit of the
Collateral Agent, shall be segregated from the other property or funds of
the Pledgors, and shall be forthwith delivered to the Collateral Agent in
the exact form
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received with any necessary indorsement and/or appropriate stock powers duly
executed in blank, to be held by the Collateral Agent as Pledged Collateral
and as further collateral security for the Obligations; and
(iii) the Collateral Agent will execute and deliver
(or cause to be executed and delivered) to a Pledgor all such proxies and
other instruments as such Pledgor may reasonably request for the purpose of
enabling such Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the
dividends, interest and/or other distributions which it is authorized to
receive and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) all rights of each Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 7(a)(i) hereof, and to receive the dividends,
distributions, interest and other payments that it would otherwise be
authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall thereupon have the sole right to exercise such voting and
other consensual rights and to receive and hold as Pledged Collateral such
dividends and interest payments;
(ii) the Collateral Agent is authorized to notify each
debtor with respect to the Pledged Debt to make payment directly to the
Collateral Agent (or its designee) and may collect any and all moneys due or
to become due to any Pledgor in respect of the Pledged Debt, and each of the
Pledgors hereby authorizes each such debtor to make such payment directly to
the Collateral Agent (or its designee) without any duty of inquiry;
(iii) without limiting the generality of the foregoing,
the Collateral Agent may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Collateral as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Collateral upon the
merger, consolidation, reorganization, recapitalization or other adjustment
of any Pledged Issuer, or upon the exercise by any Pledged Issuer of any
right, privilege or option pertaining to any Pledged Collateral, and, in
connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depository, transfer agent, registrar or
other designated agent upon such terms and conditions as it may determine;
and
(iv) all dividends, distributions, interest and other
payments that are received by any of the Pledgors contrary to the provisions
of Section 7(b)(i) hereof shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other funds of the Pledgors, and
shall be forthwith paid over to the Collateral Agent as Pledged Collateral
in the exact form received with any necessary indorsement and/or appropriate
stock powers duly executed in blank, to be held by the Collateral Agent as
Pledged Collateral and as further collateral security for the Obligations.
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SECTION 8. Additional Provisions Concerning the Pledged
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Collateral.
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(a) To the maximum extent permitted by applicable law, and
for the purpose of taking any action that the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, each
Pledgor (i) authorizes the Collateral Agent to execute any such agreements,
instruments or other documents in such Pledgor's name and to file such
agreements, instruments or other documents in such Pledgor's name and to
file such agreements, instruments, or other documents in any appropriate
filing office, (ii) authorizes the Collateral Agent to file any financing
statements required hereunder or under any other Loan Document, and any
continuation statements or amendment with respect thereto, in any
appropriate filing office without the signature of such Pledgor and (iii)
ratifies the filing of any financing statement, and any continuation
statement or amendment with respect thereto, filed without the signature of
such Pledgor prior to the date hereof. A photocopy or other reproduction of
this Agreement or any financing statement covering the Pledged Collateral or
any part thereof shall be sufficient as a financing statement where
permitted by law.
(b) Each Pledgor hereby irrevocably appoints the Collateral
Agent as such Pledgor's attorney-in-fact and proxy, with full authority in
the place and stead of such Pledgor and in the name of such Pledgor or
otherwise, from time to time in the Collateral Agent's discretion, to take
any action and to execute any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement (subject
to the rights of such Pledgor under Section 7(a) hereof), including, without
limitation, to receive, indorse and collect all instruments made payable to
such Pledgor representing any dividend, interest payment or other
distribution in respect of any Pledged Collateral and to give full discharge
for the same. This power is coupled with an interest and is irrevocable
until the date on which all of the Obligations have been Paid in Full (other
than indemnification obligations for which no claim has been asserted).
(c) If any Pledgor fails to perform any agreement or
obligation contained herein, the Collateral Agent itself may perform, or
cause performance of, such agreement or obligation, and the expenses of the
Collateral Agent incurred in connection therewith shall be jointly and
severally payable by the Pledgors pursuant to Section 10 hereof and shall be
secured by the Pledged Collateral.
(d) Other than the exercise of reasonable care to assure
the safe custody of the Pledged Collateral while held hereunder, the
Collateral Agent shall have no duty or liability to preserve rights
pertaining thereto and shall be relieved of all responsibility for the
Pledged Collateral upon surrendering it or tendering surrender of it to any
of the Pledgors. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if the Pledged Collateral is accorded treatment substantially
equal to that which the Collateral Agent accords its own property, it being
understood that the Collateral Agent shall not have responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral,
whether or not the Collateral Agent has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against
any parties with respect to any Pledged Collateral.
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(e) The powers conferred on the Collateral Agent hereunder
are solely to protect its interest in the Pledged Collateral and shall not
impose any duty upon the Collateral Agent to exercise any such powers.
Except for the safe custody of any Pledged Collateral in its possession and
the accounting for monies actually received by it hereunder, the Collateral
Agent shall have no duty as to any Pledged Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Pledged Collateral.
(f) The Collateral Agent may, after an Event of Default,
at any time in its discretion (i) transfer or register in the name of the
Collateral Agent or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights of such Pledgor under
Section 7(a) hereof, and (ii) exchange certificates or instruments
constituting Pledged Collateral for certificates or instruments of smaller
or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default
---------------------
shall have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the
Pledged Collateral, in addition to any other rights and remedies provided
for herein or otherwise available to it, all of the rights and remedies of a
secured party upon default under the Code then in effect in the State of New
York; and without limiting the generality of the foregoing and without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange or
broker's board or elsewhere, at such price or prices and on such other terms
as the Collateral Agent may deem commercially reasonable. Each Pledgor
agrees that, to the extent notice of sale shall be required by law, at least
ten (10) days' notice to such Pledgor of the time and place of any public
sale of Pledged Collateral owned by such Pledgor or the time after which any
private sale is to be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale of Pledged
Collateral regardless of whether or not notice of sale has been given. The
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Each Pledgor recognizes that the Collateral Agent may
deem it impracticable to effect a public sale of all or any part of the Pledged
Shares or any other securities constituting Pledged Collateral and that the
Collateral Agent may, therefore, determine to make one or more private sales
of any such securities to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such securities for their
own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sale may be
at prices and on terms less favorable to the seller than the prices and
other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the
Collateral Agent shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities
Act. Each Pledgor further acknowledges and agrees that any offer to sell
such securities which has been (i) publicly advertised on a bona fide basis
in a newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such an offer may be so
11
advertised without prior registration under the Securities Act) or (ii) made
privately in the manner described above to not less than fifteen bona fide
---- ----
offerees shall be deemed to involve a "public disposition" for the purposes
of Section 9-610(c) of the Code (or any successor or similar, applicable
statutory provision) as then in effect in the State of New York,
notwithstanding that such sale may not constitute a "public offering" under
the Securities Act, and that the Collateral Agent may, in such event, bid
for the purchase of such securities.
(c) Any cash held by the Collateral Agent as Pledged
Collateral and all cash proceeds received by the Collateral Agent in respect
of any sale of, collection from, or other realization upon, all or any part
of the Pledged Collateral may, in the discretion of the Collateral Agent, be
held by the Collateral Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Collateral
Agent pursuant to Section 10 hereof) in whole or in part by the Collateral
Agent against, all or any part of the Obligations in such order as the
Collateral Agent shall elect consistent with the provisions of the Financing
Agreement. Any surplus of such cash or cash proceeds held by the Collateral
Agent and remaining after the date on which all of the Obligations have been
Paid in Full (other than indemnification obligations for which no claim has
been asserted) shall be paid over to the Pledgors or to such Person as may
be lawfully entitled to receive such surplus.
(d) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Agents and the Lenders are legally entitled, the Pledgors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the highest rate specified in any applicable Loan Document for interest on
overdue principal thereof or such other rate as shall be fixed by applicable
law, together with the costs of collection and the reasonable fees, costs
and expenses and other client charges of any attorneys employed by the
Collateral Agent to collect such deficiency.
SECTION 10. Indemnity and Expenses.
----------------------
(a) Each Pledgor jointly and severally agrees to defend,
protect, indemnify and hold each Indemnitee harmless from and against any
and all damages, losses, liabilities, obligations, penalties, fees,
reasonable costs and expenses (including, without limitation, reasonable
legal fees, costs, expenses and disbursements of each Agent's and each
Lender's counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement), provided, however, that the Pledgors shall not have any
-------- -------
obligation under this Section 10(a) (i) to any Indemnitee caused by such
Person's gross negligence or willful misconduct, as determined by a final
judgment of a court of competent jurisdiction or (ii) to any Lender or its
Indemnitees arising directly from any action solely between or among the
Lenders.
(b) Each Pledgor jointly and severally agrees to pay to
the Collateral Agent upon demand the amount of any and all costs and
expenses, including the reasonable fees, costs, expenses and disbursements
of the Collateral Agent's counsel and of any experts and agents (including,
without limitation, any collateral trustee which may act as agent of the
Collateral Agent) which the Collateral Agent may incur in connection with
(i) the preparation, negotiation, execution, delivery, recordation,
administration, amendment, waiver or other modification or termination of
this Agreement, (ii) the custody, preservation, use or operation of,
12
or the sale of, collection from, or other realization upon, any Pledged
Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or (iv) the failure by any Pledgor to perform or
observe any of the provisions hereof.
SECTION 11. Notices, Etc. All notices and other
------------
communications provided for hereunder shall be in writing and shall be
mailed, telecopied or delivered, if to any Pledgor, to it in care of the
Administrative Borrower at its address specified in the Financing Agreement;
if to the Collateral Agent, to it at its address specified in the Financing
Agreement; or as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Person complying
as to delivery with the terms of this Section 11. All such notices and other
communications shall be effective (a) if mailed, when received or three (3)
Business Days after deposited in the mails, whichever occurs first, (b) if
telecopied, when transmitted and confirmation received, or (c) if delivered,
upon delivery.
SECTION 12. Security Interest Absolute. All rights of the
--------------------------
Agents, the Lenders and the L/C Issuer, all Liens and all obligations of
each of the Pledgors hereunder shall be absolute and unconditional
irrespective of: (a) any lack of validity or enforceability of the Financing
Agreement or any other Loan Document, (b) any change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the
Obligations, or any other amendment or waiver of or consent to any departure
from the Financing Agreement or any other Loan Document, (c) any exchange or
release of, or non-perfection of any Lien on any Collateral, or any release
or amendment or waiver of, or consent to or departure from any guaranty, for
all or any of the Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any of the
Pledgors in respect of the Obligations. All authorizations and agencies
contained herein with respect to any of the Pledged Collateral are
irrevocable and powers coupled with an interest.
SECTION 13. Miscellaneous.
-------------
(a) No amendment of any provision of this Agreement shall
be effective unless it is in writing and signed by each Pledgor and the
Collateral Agent, and no waiver of any provision of this Agreement, and no
consent to any departure by any of the Pledgors therefrom, shall be
effective unless it is in writing and signed by the Collateral Agent, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
(b) No failure on the part of the Agents, the Lenders or
the L/C Issuer to exercise, and no delay in exercising, any right hereunder
or under any other Loan Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Agents, the Lenders and the L/C Issuer provided herein and
in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Agents, the Lenders and the L/C Issuer under any Loan Document against any
party thereto are not conditional or contingent on any attempt by the
Agents, the Lenders or the L/C Issuer to exercise any of their rights under
any other document against such party or against any other Person.
13
(c) Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security
interest in and Lien on the Pledged Collateral and shall (i) remain in full
force and effect until the date on which all of the Obligations have been
Paid in Full (other than indemnification obligations for which no claim has
been asserted) and (ii) be binding on each Pledgor and its respective
successors and assigns, and shall inure, together with all rights and
remedies of the Agents, the Lenders and the L/C Issuer hereunder, to the
benefit of the Agents, the Lenders and the L/C Issuer and their respective
successors, transferees and assigns. Without limiting the generality of
clause (ii) of the immediately preceding sentence, the Agents, the Lenders
and the L/C Issuer may assign or otherwise transfer their respective rights
and obligations under this Agreement and any other Loan Document to any
other Person pursuant to the terms of the Financing Agreement, and such
other Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Agents, the Lenders and the L/C Issuer herein
or otherwise. Upon any such permitted assignment or transfer, all references
in this Agreement to any Agent, any Lender or the L/C Issuer shall mean the
assignee of such Agent, such Lender or the L/C Issuer. None of the rights or
obligations of any of the Pledgors hereunder may be assigned or otherwise
transferred without the prior written consent of the Collateral Agent, and
any such assignment or transfer shall be null and void.
(e) Upon the date on which all of the Obligations have
been Paid in Full (other than indemnification obligations for which no claim
has been asserted), (i) this Agreement and the security interest and Lien
created hereby shall terminate and all rights to the Pledged Collateral
shall revert to the Pledgors, and (ii) the Collateral Agent will, upon the
Pledgors' request and at the Pledgors' expense, without any representation,
warranty or recourse whatsoever, (A) return to the Pledgors such of the
Pledged Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof and (B) execute and deliver to the
Pledgors such documents as the Pledgors shall reasonably request to evidence
such termination.
(f) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION
OF THE SECURITY INTEREST AND LIEN CREATED HEREBY, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAW OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) Section headings herein are included for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
(h) This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which shall be deemed an
14
original, but all such counterparts shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement by
facsimile shall be equally effective as delivery of an original executed
counterpart.
(i) All of the obligations of the Pledgors hereunder are
joint and several. The Collateral Agent may, in its sole and absolute
discretion, enforce the provisions hereof against any of the Pledgors and
shall not be required to proceed against all Pledgors jointly or seek
payment from the Pledgors ratably. In addition, the Collateral Agent may, in
its sole and absolute discretion, select the Pledged Collateral of any one
or more of the Pledgors for sale or application to the Obligations, without
regard to the ownership of such Pledged Collateral, and shall not be
required to make such selection ratably from the Pledged Collateral owned by
all of the Pledgors. The release or discharge of any Pledgor by the
Collateral Agent shall not release or discharge any other Pledgor from the
obligations of such Person hereunder.
15
IN WITNESS WHEREOF, each Pledgor has caused this Agreement
to be executed and delivered by its officer thereunto duly authorized, as of
the date first above written.
PLEDGORS:
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SOLUTIA INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: Vice President and Treasurer
Solutia Inc.
SOLUTIA BUSINESS ENTERPRISES, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
CPFILMS INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: Vice President
MONCHEM, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
Monchem, Inc.
MONCHEM INTERNATIONAL, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
Monchem International, Inc.
SOLUTIA INVESTMENTS, LLC
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
SOLUTIA SYSTEMS, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
Solutia Systems, Inc.