Exhibit 10
RETENTION AGREEMENT
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This Retention Agreement ("Agreement") is entered into by and between
Solutia Inc., a Delaware corporation ("Solutia") and Max W. McCombs
("Employee"), as of the date indicated on the signature page attached
hereto.
WHEREAS, Employee and Solutia had previously entered into a retention
agreement prior to Solutia's commencement of its Chapter 11 Bankruptcy
filing ("Prior Agreement"); and
WHEREAS, as a result of the Chapter 11 Bankruptcy filing, the Prior
Agreement became subject to the United States Bankruptcy Court's approval;
and
WHEREAS, the Bankruptcy Court ruled that the Prior Agreement was null and
void from the beginning; and
WHEREAS, the Bankruptcy Court granted approval of this revised Retention
Agreement; and
WHEREAS, Solutia believes that establishing an incentive arrangement for
Employee will increase the likelihood that Solutia will continue to have
Employee's advice, counsel, leadership and dedication.
NOW, THEREFORE, for good and valuable consideration, Solutia and Employee,
intending to be bound, agree as set forth in this Agreement.
1) EMPLOYMENT
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a) Employee's employment with Solutia during the Employment
Period will be under the same terms and conditions as those
that applied immediately prior to the date of this Agreement
(or as subsequently amended from time to time). The
"Employment Period" for purposes of this Agreement shall mean
the period beginning on the date of this Agreement and ending
six months after the Emergence Date (as defined below).
b) Nothing in this Agreement is intended, and nothing herein will
be construed as limiting the ability of Employee or Solutia to
terminate such employment. Moreover, Employee understands that
their employment will remain as an "at will" relationship.
c) During the Employment Period, Employee will:
i) Devote all business time to the duties of employment with
Solutia;
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ii) perform all duties of employment with Solutia faithfully
and effectively and to the best of Employee's ability;
iii) act in the best interests of Solutia and its shareholders
and engage in no conflict of interest with Solutia.
2) COMPENSATION; SPECIAL AWARD
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a) During the Employment Period, Solutia will compensate Employee
in accordance with the terms and conditions in effect
immediately prior to the date of this Agreement (as amended
from time to time), including eligibility for an award under
the terms of the Solutia Inc. Annual Incentive Plan ("AIP").
Nothing in this Agreement shall be construed to provide
Employee with the right to participate in the AIP or any other
incentive or benefit plan if Solutia determines to change or
terminate such plan and the change or termination is generally
applicable to employees who are similarly situated to
Employee.
b) In addition to the foregoing, subject to Section 2(c) below,
Employee shall receive a special incentive award (the "Special
Award"). The total amount of the Special Award will be
$200,000.
c) The Special Award will be paid in four (4) equal installments,
less applicable taxes and withholdings, on the following dates
and, provided that the Employee has fulfilled the obligations
set forth in Section 1 of this Agreement, in the judgment of
the CEO of Solutia or his designee:
i) On or about June 30, 2004, Solutia will pay to Employee
25% of the Special Award, less applicable taxes and
withholdings, provided that Employee is employed by
Solutia on such date.
ii) On or about December 31, 2004, Solutia will pay to
Employee 25% of the Special Award, less applicable taxes
and withholdings, provided that Employee is employed by
Solutia on such date.
iii) As soon as practicable following the time, if ever, at
which both (x) the United States Bankruptcy Court for the
Southern District of New York shall have confirmed a plan
of reorganization of Solutia under Chapter 11 of the
United States Bankruptcy Code and (y) such confirmation
shall have become non-appealable (the "Emergence Date"),
Solutia will pay to Employee 25% of the Special Award,
less applicable taxes and withholdings, provided that
Employee is employed by Solutia on such date.
iv) On the six (6) month anniversary of the Emergence Date,
Solutia will pay to Employee 25% of the Special Award,
less applicable taxes and withholdings, provided that
Employee is employed by Solutia on such date.
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3) TERMINATION OF EMPLOYMENT
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a) If, prior to an applicable installment payment date during the
Employment Period, Employee (i) retires or voluntarily
terminates employment with Solutia (other than as a result of
death or Disability); (ii) announces his or her intent to so
retire or terminate employment; or (iii) is terminated by
Solutia for Cause, Employee will not receive any portion of
the Special Award installment payment applicable to that
installment period. "Cause" as used in this Agreement shall
include willful misconduct, dishonesty, insubordination,
conviction of a felony or its equivalent, negligence in the
performance of Employee's duties, the illegal use of drugs or
controlled substances and violation of Solutia's policies
(including without limitation Solutia's Guidelines for
Employee Conduct) in such a manner as to expose the employer
to administrative, civil or criminal liability;
b) If, prior to an applicable installment payment date during the
Employment Period, Employee is terminated other than for
Cause, Solutia shall pay to Employee in a lump sum, less
applicable taxes and withholdings, any unpaid amounts that
would have otherwise been payable to Employee pursuant to
Section 2(b).
c) If Employee is not actively employed for the entire
installment period due to disability, sick leave, family
leave, or other approved leave of absence, but is otherwise
eligible for a Special Award, the Award will be pro-rated to
cover only the time actively employed plus any qualifying
leave (up to 12 weeks) under the federal Family Medical Leave
Act, but will not cover any other disability or other leave.
Employee must return to active employment in order to qualify
for the Special Award installment, and will be paid only after
he or she so returns.
d) Payment of the Special Award terminates any and all
obligations of Solutia under this Agreement.
e) Solutia retains the right to condition payment of any portion
of the Special Award on Employee signing a waiver and release,
in a form acceptable to Solutia.
4) GENERAL
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a) Employee agrees not to disclose the existence of this
Agreement or any of its terms to anyone other than Employee's
spouse and a financial or legal advisor who agrees in writing
to be bound not to make any such disclosure. Notwithstanding
anything to the contrary in this Agreement, in the event this
Agreement or its terms are disclosed by Employee, Employee's
spouse or a legal or financial advisor, Employee will not
receive any portion of the Special Award.
b) All amounts required by law to be withheld from any payment
made pursuant to this Agreement, including any and all amounts
required to be withheld by the Internal Revenue Code or by the
Federal Insurance Contribution Act, any
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applicable state or foreign country's income tax act, any
applicable city, county or municipality's earnings or income
tax act, will be withheld.
c) This Agreement will be binding upon and inure to the benefit
of Employee and Employee's estate, and Solutia and any
successor, direct or indirect, of Solutia, whether such
succession, direct or indirect, of Solutia, results from a
merger, consolidation, liquidation, reorganization, purchase
of securities, acquisition of assets or otherwise.
d) The interests of Employee under this Agreement are not subject
to the claims of Employee's creditors and may not be
voluntarily or involuntarily sold, transferred, alienated,
assigned, pledged, anticipated or encumbered. Any attempt by
Employee or any other person or entity to sell, transfer,
alienate, assign, pledge, anticipate, encumber, charge or
otherwise dispose of any right to benefits payable hereunder
will be void and shall terminate any obligation of Solutia
hereunder to make payment. At no time will any interest or
other charge be due or payable on any amounts owing hereunder.
e) The payment provided under this Agreement is not intended to
qualify under Section 401 of the Internal Revenue Code and
will be paid from the general assets of Solutia or a third
party. Nothing contained herein shall require Solutia to
segregate any monies from its general funds or to create any
trusts, or to make any special deposits for amounts payable to
Employee. In no case will any amounts paid under this
Agreement be taken into account in determining any of
Employee's Solutia benefits, including without limitation
savings and investment plan contributions, pension, life
insurance and disability or in determining any other incentive
award or compensation.
f) Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or
affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction will not
invalidate or render unenforceable such provision in any other
jurisdiction.
g) Solutia has full power and authority in its sole discretion to
construe, interpret, and administer this Agreement. Decisions
of Solutia shall be final, conclusive, and binding on all
parties hereto.
h) This Agreement will in all respects be governed by, and
construed in accordance with, the laws of the State of
Delaware, without reference to conflicts of law principles
thereunder.
i) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and
supersede all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereof, if
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any. Separate copies of this document shall constitute
original documents which may be signed separately, but which
together will constitute one single agreement.
j) In the event of any breach by Employee of any term or
condition set forth in this Agreement, Employee's right to
receive the Special Payment shall immediately be forfeited.
k) The Employee acknowledges that Employee has carefully read
this Agreement in its entirety, fully understands its
provisions and its final and binding effect, and that Employee
is signing this Agreement voluntarily.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of 6/21/04 .
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Date
SOLUTIA INC.
By: /s/ Robert E. Lorah
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Robert E. Lorah
Title: Director, Human Resources
Accepted and Agreed to
EMPLOYEE:
By: /s/ Max W. McCombs
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Max W. McCombs
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Printed Name
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