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): OCTOBER 19, 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
As previously reported, on December 17, 2003 Solutia Inc. ("Solutia") and
its 14 U.S. subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code") in the U.S.
Bankruptcy Court for the Southern District of New York (the "Court"). The
cases were consolidated for the purpose of joint administration and were
assigned case number 03-17949 (PCB). Solutia's subsidiaries outside the
United States were not included in the Chapter 11 filing.
On October 19, 2005 the Court entered an order (the "Approval Order")
approving Solutia's entry into an Asset Purchase Agreement, dated as of
September 1, 2005 (the "Purchase Agreement"), among Solutia, a Delaware
corporation, FMC Corporation, a Delaware Corporation ("FMC"), Astaris LLC, a
Delaware limited liability company ("Astaris"), Israel Chemicals Limited, an
Israeli corporation ("ICL") and ICL Performance Products Holding, Inc., a
Delaware corporation and wholly-owned subsidiary of ICL ("Buyer"), as
reported by Solutia in a press release and Form 8-K filed on September 1,
2005. The Approval Order also authorized Solutia's entry into an Owners
Agreement, dated as of September 1, 2005 (the "Owners Agreement"), between
Solutia and FMC as the owners of Astaris, and a P2S5 toll manufacturing
agreement (the "Toll Agreement") between Solutia and an affiliate of ICL,
to be dated as of the closing of the transactions contemplated by the
Purchase Agreement.
The descriptions of the Purchase Agreement, the Owners Agreement and the
Toll Agreement contained herein set forth a brief summary of certain terms
of those agreements that may be material to Solutia. However, these
descriptions do not purport to be complete and are qualified in their
entirety by reference to the specific terms of the Purchase Agreement, the
Owners Agreement and the Toll Agreement.
The Purchase Agreement provides for the sale, assignment and transfer by
Astaris, a 50/50 joint venture between Solutia and FMC that produces and
sells phosphorus and derivative products in the North American market, to
Buyer, or certain other affiliates of ICL, of substantially all of the
operating assets, other than certain excluded assets, used in the business
of Astaris and for the assumption by Buyer of specified liabilities of
Astaris. Certain liabilities, including, but not limited to, certain
employee benefit and retiree obligations, will be retained by Astaris.
The sale price is $255 million, subject to adjustment for capital
expenditure and working capital amounts as of the closing date. At closing,
$10 million (or a greater amount if the estimated adjustment amount at
closing exceeds that amount) of the sale proceeds will be placed into escrow
to fund any required adjustments and $12.5 million of Solutia's share of the
sale proceeds will be placed into escrow for one year to secure Solutia's
indemnification obligations to ICL and Buyer under the Purchase Agreement.
The sale price will be allocated between Solutia and FMC based on the terms
of the Owners Agreement. Solutia expects to receive approximately $80
million in proceeds upon closing of the Purchase Agreement, after reduction
for the escrowed amounts.
Closing of the sale is subject to a number of conditions, including the
Approval Order having become final and other customary closing conditions.
Closing is also subject to clearance under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), and early termination of the
waiting period under the HSR Act was granted effective October 17, 2005.
The Purchase Agreement may be terminated by Solutia, FMC and Astaris, on the
one hand, or by Buyer, on the other hand, if the Closing has not occurred
within 120 days after September 28, 2005.
The Purchase Agreement may also be terminated by Buyer if the Approval Order
has not become final by November 17, 2005.
If Buyer terminates the Purchase Agreement, as described above, or, under
certain circumstances, if Solutia, FMC and Astaris terminate the Purchase
Agreement, Astaris will be required to reimburse Buyer for up to $2,000,000
of its transaction expenses.
Solutia, FMC and Astaris have agreed to five-year non-competition covenants
in the phosphorus chemicals business engaged in by Astaris at closing and to
three-year restrictions on hiring employees of Buyer or the business sold to
Buyer.
Solutia and FMC have agreed, severally and not jointly, to indemnify, defend
and hold harmless Buyer, ICL and their affiliates from and against losses
and liabilities arising out of or resulting from breaches of the
representations, warranties and covenants contained in the Purchase
Agreement, excluded assets and liabilities other than assumed liabilities,
including, but not limited to, environmental liabilities arising prior to
the closing of the transaction contemplated by the Purchase Agreement.
Certain indemnification obligations arising from those assets that Solutia
and FMC separately contributed to the formation of Astaris will be the sole
responsibility of Solutia or FMC, respectively, and other indemnification
obligations will be equally shared by Solutia and FMC. The indemnification
obligations are subject to various limitations set forth in the Purchase
Agreement.
The Owners Agreement, provides for, among other things: (a) the application
of the sale proceeds under the Purchase Agreement to satisfy outstanding
liabilities of Astaris that are not being assumed by Buyer; (b) an
allocation between Solutia and FMC of the remaining sale proceeds (after
giving effect to the payments described in the preceding clause (a)); (c)
the establishment and subsequent adjustment of a reserve account for the
purposes of satisfying any remaining debts, expenses or obligations of
Astaris and paying any purchase price adjustment under the Purchase
Agreement; (d) the transfer of certain assets and liabilities of Astaris not
transferred to Buyer back to Solutia and FMC, including transfer of the
Sauget P2S5 Facility (as defined below) to Solutia; (e) indemnity
obligations between Solutia and FMC for certain environmental liabilities
arising prior to the closing of the Purchase Agreement and relating to the
assets that each of Solutia or FMC separately contributed to the formation
of Astaris; and (f) certain modifications to the joint venture agreement and
limited liability company agreement entered into between Solutia and FMC in
connection with the formation of Astaris.
The Purchase Agreement provides that, at closing, Solutia and an affiliate
of ICL will enter into the Toll Agreement. At the time Astaris was formed in
2000, Solutia contributed to Astaris a facility at its W.G. Krummrich plant
in Sauget, Illinois that manufactures P2S5 (the "Sauget P2S5 Facility").
Since the formation of Astaris, Astaris has owned and Solutia has operated
the Sauget P2S5 Facility for Astaris pursuant to a lease and operating
agreement (the "Lease and Operating Agreement"). The Sauget P2S5 Facility is
excluded from the assets being sold to Buyer under the Purchase Agreement
and will be transferred from Astaris back to Solutia effective upon closing
of the Purchase Agreement or shortly thereafter, as provided under the
Owners Agreement. Under the Toll Agreement, Solutia will continue to
manufacture, package and supply P2S5 exclusively for Buyer at the Sauget
P2S5 Facility using raw materials and packaging provided by Buyer. The Toll
Agreement provides for economic terms that are no less favorable to Solutia
than those under the Lease and Operating agreement.
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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Senior Vice President, General Counsel
and Secretary
DATE: OCTOBER 25, 2005