UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 11, 2005
SOLUTIA INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OF INCORPORATION)
001-13255 43-1781797
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(COMMISSION (IRS EMPLOYER
FILE NUMBER) IDENTIFICATION NO.)
575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI 63166-6760
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 674-1000
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
AWARDS UNDER 2004 SOLUTIA ANNUAL INCENTIVE PLAN
On January 11, 2005, the Executive Compensation and
Development Committee (the "Committee") of Solutia's Board of Directors
approved funding for the 2004 Solutia Annual Incentive Program. The
Committee also approved annual incentive awards to executive officers in
accordance with award opportunities established under the Program by
the Committee and approved by the Bankruptcy Court in June 2004.
The 2004 Solutia Annual Incentive Program is applicable to the
majority of Solutia's employees. Funding for awards for employees assigned
to business divisions is based on the level of achievement of specific
financial objectives established for each business division. For employees
assigned to "core" areas, overall enterprise performance based 50% on free
cash use and 50% on enterprise cost reduction, each measured against plan
target, determined the size of the incentive pool. Actual awards are determined
based on a combination of unit and individual performance with up to 75% of
each employee's targeted amount being based on unit performance. For executive
officers, targeted payouts are set as a multiple of salary and vary by
executive with the target bonus opportunity for the chief executive officer
being 150% of annual base salary. The funding pool can be an amount up to two
times all the targets. For additional information about the Program, please
refer to the Description of the 2004 Solutia Annual Incentive Program, which
is attached as Exhibit 99.1 to this Report and is incorporated herein by
reference.
AGREEMENTS WITH LUC DE TEMMERMAN
On January 11, 2005, Solutia Inc. entered into an agreement dated
as of July 19, 2004, (the "Agreement") with Luc De Temmerman, its Senior
Vice President and Chief Operating Officer. During the Employment Period, i.e.,
the period from July 19, 2004 until the six month anniversary of the Emergence
Date (as hereinafter described), Mr. De Temmerman will receive an annual base
salary of not less than Euro 289,519 (corresponding to USD 350,000 at the
exchange rate of 1.2089). He will participate in Solutia's annual incentive
program with a target annual bonus opportunity of 100% of his annual base
salary. He will also be entitled to participate in all long-term and other
incentive plans or programs applicable to senior executive officers of
Solutia and its subsidiaries and to the applicable savings, retirement,
welfare benefit, and vacation plans.
The Agreement, provides for Mr. De Temmerman's eligibility for a
special emergence bonus at such time, if ever, at which the U.S. Bankruptcy
Court for the Southern District of New York shall have confirmed a plan of
reorganization of Solutia Inc. under Chapter 11 of the U.S. Bankruptcy Code
and such plan shall have become effective (the "Emergence Date"), if Mr.
De Temmerman is employed by Solutia (or a subsidiary of Solutia) on the
Emergence Date. If Mr. De Temmerman is employed by Solutia on the six-month
anniversary of the Emergence Date, or shall have been terminated by Solutia
without Cause (as defined in the Agreement), or shall have resigned for Good
Reason (as defined in the Agreement), or shall have died or been terminated for
Disability (as defined in the Agreement), he shall be entitled to receive from
Solutia a special emergence bonus equal to 30% of the bonus pool as determined
in accordance with the terms of the Solutia Inc. Emergence Incentive Bonus
Program ("Emergence Incentive Bonus Program"). Under the Emergence Incentive
Bonus Program, the amount of the entire bonus pool cannot exceed $7.5 million.
Solutia's Board of Directors, in its discretion, may elect to pay Mr. De
Temmerman's bonus in shares of Solutia common stock in lieu of cash if Mr.
De Temmerman remains employed by Solutia as of the six-month anniversary of
the Emergence Date. If Mr. De Temmerman voluntarily terminates his
employment other than for Good Reason or is
terminated for Cause between the Emergence Date and the six-month
anniversary thereof, then he shall forfeit his right to receive the special
emergence bonus.
If, during the Employment Period, Solutia terminates Mr. De
Temmerman's employment other than for Cause, or Mr. De Temmerman terminates
his employment for Good Reason, Solutia will pay Mr. De Temmerman: (a) any
unpaid but accrued base salary through the Date of Termination (as defined
in the Agreement), (b) any unpaid annual bonus earned with respect to the
previous year, and (c) any unpaid accrued vacation pay (collectively,
"Accrued Obligations"). In addition, if the Date of Termination occurs
before the Emergence Date, Mr. De Temmerman will receive an amount equal to
125% of his annual base salary immediately prior to the Date of Termination,
provided that he waives any and all claims against Solutia and its
subsidiaries. Mr. De Temmerman will also be entitled to any other benefits or
amounts, excluding severance or separation pay or benefits, for which he is
eligible under any plan, program, or policy of Solutia and its subsidiaries,
such as any vested benefit under any qualified defined benefit or defined
contribution retirement plan in which he participates (collectively, "Other
Benefits"). If Mr. De Temmerman's employment terminates because of death or
Disability, he or his estate, as applicable, will receive Accrued Obligations
and Other Benefits.
The Agreement supersedes Mr. De Temmerman's change-of-control
agreement dated as of January 29, 2003, and his retention agreement dated as
of December 11, 2003.
Solutia and Mr. De Temmerman also entered into a letter agreement
(the "Letter Agreement") providing that Mr. De Temmerman, who is currently
based in Belgium, will perform his services in St. Louis, Missouri, beginning
not later than February 1, 2005, and that such assignment to St. Louis will
not constitute Good Reason under the Agreement. The Letter Agreement provides
for certain allowances so
that Mr. De Temmerman will be made whole with respect to the costs incurred
in his relocation.
The agreements described above are attached hereto as Exhibits
99.2 and 99.3 and are incorporated herein by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) The following exhibit is included in this Report:
Exhibit Number Description
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99.1 Description of 2004 Solutia Annual Incentive Program
99.2 Agreement by and between Solutia Inc. and Luc De
Temmerman dated as of July 19, 2004
99.3 Letter Agreement by and between Solutia Inc.
and Luc De Temmerman effective as of July 19, 2004
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SOLUTIA INC.
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(Registrant)
/s/ Rosemary L. Klein
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Secretary
DATE: January 18, 2005
EXHIBIT INDEX
Exhibit Number Description
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99.1 Description of 2004 Solutia Annual Incentive Program
99.2 Agreement by and between Solutia Inc. and Luc De
Temmerman dated as of July 19, 2004
99.3 Letter Agreement by and between Solutia Inc.
and Luc De Temmerman effective as of July 19, 2004