Exhibit 99.2
KIRKLAND & ELLIS LLP
Citigroup Center HEARING DATE: FEBRUARY 1, 2006 AT 2:30 P.M.
153 East 53rd Street
New York, NY 10022-4611 OBJECTION DEADLINE: JANUARY 5, 2006 AT 5:00 P.M.
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Richard M. Cieri (RC 6062)
Robbin L. Itkin (RI 1019)
Jonathan S. Henes (JH 1979)
Attorneys for the Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- ---------------------------------------------------x
THIS NOTICE APPLIES TO:
X All Debtors Axio Research Corporation
- --- ---
Solutia Inc. Solutia Investments, LLC
- --- ---
Solutia Business Enterprises, Inc. Beamer Road Management Company
- --- ---
Solutia Systems, Inc. Monchem, Inc.
- --- ---
Solutia Overseas, Inc. Solutia Inter-America, Inc.
- --- ---
CPFilms Inc. Solutia International Holding, LLC
- --- ---
Solutia Management Company, Inc. Solutia Taiwan, Inc.
- --- ---
Monchem International, Inc. Solutia Greater China, Inc.
- --- ---
NOTICE OF HEARING ON
DEBTORS' MOTION FOR AN ORDER PURSUANT TO
SECTIONS 105(a), 362(a)(3) AND 541 OF THE BANKRUPTCY CODE
(A) LIMITING CERTAIN TRANSFERS OF EQUITY INTERESTS IN
SOLUTIA INC. AND (B) APPROVING RELATED NOTICE PROCEDURES
--------------------------------------------------------
PLEASE TAKE NOTICE that pursuant to the Order to Show Cause
Scheduling Hearing to Consider Debtors' Motion for an Order Pursuant to
Sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code (A) Limiting
Certain Transfers of Equity Interests in Solutia Inc. and (B) Approving
Related Notice Procedures, entered on December 7, 2005 (Docket No. 2720), a
hearing on Debtors' Motion for an Order Pursuant to Sections 105(a),
362(a)(3) and 541 of the Bankruptcy Code (A) Limiting Certain Transfers of
Equity Interests in Solutia Inc. and (B) Approving Related Notice Procedures
(the "Motion") will be held before the Honorable Prudence Carter Beatty,
United States Bankruptcy Judge, in Room 701 of the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court"), One
Bowling Green, New York, New York, on FEBRUARY 1, 2006 AT 2:30 P.M.
PLEASE TAKE FURTHER NOTICE that any responses or objections to the
Motion must be in writing, shall conform to the Federal Rules of Bankruptcy
Procedure and the Local Rules of the Bankruptcy Court, and shall be filed
with the Bankruptcy Court electronically by registered users of the
Bankruptcy Court's case filing system (the User's Manual for the Electronic
Case Filing System can be found at www.nysb.uscourts.gov, the official
website for the Bankruptcy Court) and, by all other parties in interest, on
a 3.5 inch disk, preferably in Portable Document Format (PDF), Wordperfect
or any other Windows-based word processing format (in either case, with a
hard-copy delivered directly to Chambers), and shall be served upon (i)
Kirkland & Ellis LLP, Citigroup Center, 153 East 53rd Street, New York, New
York 10022 (Attn: Michael J. Frishberg, Esq.), (ii) the Office of the United
States Trustee for the Southern District of New York, 33 Whitehall Street,
21st floor, New York, New York 10004 (Attn: Greg Zipes, Esq.), (iii)
Skadden, Arps, Slate, Meagher & Flom LLP, 333 West Wacker Drive, Chicago,
Illinois 60606 (Attn: Timothy R. Pohl, Esq. and Samuel S. Ory, Esq.),
counsel
2
for the agents for the Debtors' postpetition secured lenders, (iv) Skadden,
Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036
(Attn: Bennett S. Silverberg, Esq.), counsel for the agents for the Debtors'
postpetition secured lenders, (v) Akin, Gump, Strauss, Hauer & Feld, LLP,
590 Madison Avenue, New York, New York 10022 (Attn: Daniel H. Golden, Esq.),
counsel for the official committee of unsecured creditors, (vi) Weil Gotshal
& Manges LLP, 767 Fifth Avenue, New York, New York 10153 (Attn: John
Rapisardi, Esq.), counsel for the prepetition ad hoc committee of Solutia
senior secured noteholders, (vii) Spencer Fane Britt Browne LLP, 1 North
Brentwood Boulevard, Tenth Floor, St. Louis, Missouri 63105 (Attn: Nicholas
A. Franke, Esq.), counsel to the official committee of retirees, (viii)
Haskell Slaughter Young & Rediker LLC, 1400 Park Place Tower, 2001 Park
Place North, Birmingham, Alabama 35203 (Attn: R. Scott Williams, Esq.),
counsel to the official committee of retirees, (ix) Pillsbury Winthrop Shaw
Pittman LLP, 650 Town Center Drive, Seventh Floor, Costa Mesa, California
92626 (Attn: Craig A. Barbarosh, Esq.), counsel to the official committee of
equity security holders, and (x) all persons or entities that have served
and filed notices of appearance in these chapter 11 cases pursuant to Rule
2002 of the Federal Rules of Bankruptcy Procedure, so as to be received no
later than JANUARY 5, 2006 AT 5:00 P.M.
Dated: December 7, 2005 Respectfully submitted,
New York, New York
/s/ Richard M. Cieri
------------------------------
Richard M. Cieri (RC 6062)
Robbin L. Itkin (RI 1019)
Jonathan S. Henes (JH 1979)
KIRKLAND & ELLIS LLP
153 East 53rd Street
New York, New York 10022-4611
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Attorneys for the Debtors
and Debtors in Possession
3
KIRKLAND & ELLIS LLP
Citigroup Center
153 East 53rd Street
New York, NY 10022-4611
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Richard M. Cieri (RC 6062)
Robbin L. Itkin (RI 1019)
Jonathan S. Henes (JH 1979)
Attorneys for the Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- -----------------------------------------------------x
THIS MOTION APPLIES TO:
X All Debtors Axio Research Corporation
- --- ---
Solutia Inc. Solutia Investments, LLC
- --- ---
Solutia Business Enterprises, Inc. Beamer Road Management Company
- --- ---
Solutia Systems, Inc. Monchem, Inc.
- --- ---
Solutia Overseas, Inc. Solutia Inter-America, Inc.
- --- ---
CPFilms Inc. Solutia International Holding, LLC
- --- ---
Solutia Management Company, Inc. Solutia Taiwan, Inc.
- --- ---
Monchem International, Inc. Solutia Greater China, Inc.
- --- ---
DEBTORS' MOTION FOR AN ORDER PURSUANT TO
SECTIONS 105(a), 362(a)(3) AND 541 OF THE BANKRUPTCY CODE
(A) LIMITING CERTAIN TRANSFERS OF EQUITY INTERESTS IN
SOLUTIA INC. AND (B) APPROVING RELATED NOTICE PROCEDURES
--------------------------------------------------------
Solutia Inc. ("Solutia"), a debtor and debtor in possession
(collectively with certain of its affiliates as debtors and debtors in
possession, the "Debtors"), pursuant to this motion (the "Motion"), seeks
entry of an order (the "Order") pursuant to sections 105(a), 362(a)(3) and
541 of the Bankruptcy Code (as defined below) (a) limiting certain transfers
of equity interests in Solutia and (b) approving related notice procedures.
In support of this Motion, Solutia respectfully represents as follows:
JURISDICTION AND VENUE
----------------------
1. This Court has jurisdiction to consider this Motion and the
relief requested herein pursuant to 28 U.S.C. Sections 157 and 1334. This
matter is a core proceeding pursuant to 28 U.S.C. Section 157(b). Venue is
proper before this Court pursuant to 28 U.S.C. Sections 1408 and 1409.
BACKGROUND
----------
2. On December 17, 2003 (the "Commencement Date"), the Debtors
each commenced with this Court a voluntary case under chapter 11 of title 11
of the United States Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy
Code").
3. The Debtors are authorized to operate their business and
manage their properties as debtors in possession pursuant to sections
1107(a) and 1108 of the Bankruptcy Code.
4. The Debtors' chapter 11 cases have been consolidated for
procedural purposes only and are being jointly administered pursuant to Rule
1015(b) of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules").
5. No trustee or examiner has been appointed in these
reorganization cases.
6. On January 6, 2004, pursuant to section 1102 of the
Bankruptcy Code, the United States Trustee for the Southern District of New
York (the "U.S. Trustee") appointed a statutory
2
committee of unsecured creditors (as constituted pursuant to an amended
appointment on January 21, 2004, the "Creditors' Committee").
7. On February 20, 2004, pursuant to section 1114 of the
Bankruptcy Code, this Court appointed an official committee of retirees (the
"Retirees' Committee").
8. On March 24, 2004, pursuant to section 1102 of the Bankruptcy
Code, the U.S. Trustee appointed a statutory committee of equity security
holders (the "Equity Committee").
9. The Debtors and their wholly owned nondebtor foreign
subsidiaries (collectively, the "Solutia Group") are a multinational
corporate organization that manufactures and sells high-performance
chemical-based materials for industrial and consumer use. Solutia, a
publicly owned company, is the direct or indirect parent corporation of each
of the other members of the Solutia Group. The Solutia Group is a world
leader in the development and manufacture of three main product lines with
diverse and worldwide applications: performance films, chemical products and
nylon products.
10. As of the Commencement Date, the Solutia Group operated 29
manufacturing plants worldwide - including 18 sites in North America, ten
sites in Western Europe and one site in South America - and had sales
offices, research laboratories and technical centers spanning the globe.
11. For the nine months ended September 30, 2005, the Solutia
Group's consolidated net sales were approximately $2.16 billion. As of
September 30, 2005, for financial reporting purposes, the Solutia Group had
approximately $2.0 billion in assets and approximately $3.4 billion in
liabilities on a consolidated basis.
12. Prior to the Petition Date, Solutia's Equity Securities (as
defined below) traded on the New York Stock Exchange (the "NYSE") under the
ticker symbol "SOI." As a result of
3
Solutia's bankruptcy filing, the NYSE suspended trading in Solutia's Equity
Securities on December 17, 2003 and, on February 27, 2004, delisted the
Equity Securities from the exchange. Since February 27, 2004, trading in
Solutia's Equity Securities has continued in the over-the-counter market. As
of September 30, 2005, Solutia had approximately 104,459,578 shares issued
and outstanding.
THE DEBTORS' NET OPERATING LOSSES ("NOLS")
------------------------------------------
13. The Debtors have accumulated significant net operating losses
(the "NOLs") for United States federal income tax purposes.(1) Under the
Internal Revenue Code of 1986, as amended (the "IRC"), and the Treasury
Regulations thereunder the Debtors can carry forward their NOLs to offset
their future taxable income for up to twenty taxable years. In this way, the
Debtors can utilize their NOLs to reduce their future consolidated United
States federal income tax obligations.(2)
14. The Debtors' NOLs, as of the end of calendar year 2005, are
estimated to be approximately $767.8 million. Based on the applicable 35%
corporate tax rate now in effect, this represents approximately $268.7
million in potential tax savings that could be utilized by the Debtors in
future years. These tax savings -- and the accompanying increase in the
Debtors' cash flow -- will greatly facilitate the Debtors' successful
reorganization. As one bankruptcy court has recognized, "what is certain is
that the NOL has a potential value, as yet undetermined, which will be of
benefit to creditors and will assist [the debtors] in their reorganization
process. This asset is entitled to protection while [the debtors] move
forward toward their reorganization." See In re
--- -- --
<FN>
- --------
(1) NOLs can be used as either "carrybacks" (where the corporation uses
the NOLs to offset taxable income for up to two previous taxable years) or
"carryovers" (where the corporation uses the NOLs to offset taxable income
for up to twenty taxable years into the future).
(2) See 26 U.S.C. Section 172.
---
4
Phar-Mor, Inc., 152 B.R. 924, 927 (Bankr. N.D. Ohio 1993). Thus, the
- --------------
Debtors' NOLs are extremely valuable assets of their estates.
15. A corporation's ability to use its NOLs may be reduced under
certain circumstances.(3) Of primary concern for the Debtors is the
reduction in NOLs that occurs if the corporation experiences an "ownership
change." A corporation that undergoes an "ownership change" may be limited
in the amount of NOLs that it can use to offset its taxable income.(4)
Pursuant to section 382(g) of the IRC, an "ownership change" occurs if,
immediately after a "testing date," and as measured during a rolling 3-year
"testing period,"(5) the percentage of the corporation's stock (measured by
value) held by certain significant shareholders (i.e., shareholders owning
----
5% or more) increases by 50 percentage points or more. For example, if a 10%
shareholder purchased additional stock and became a 61% shareholder, the
percentage of stock owned by 5% or greater stockholders would have increased
by 51 percentage points, thereby causing an "ownership change."(6) A
"significant shareholder" also includes an entity that becomes
<FN>
- --------
(3) See 26 U.S.C. Sections 269, 381, 382, 383 and 384.
---
(4) In general, under IRC Section 382, if a corporation undergoes an
"ownership change," the amount of NOLs that the corporation can use in any
given year to reduce its taxable income is limited to an amount equal to (a)
the value of the corporation's equity on the date that the "ownership
change" occurs multiplied by (b) the tax-exempt bond rate on that date.
Currently, the tax-exempt bond rate is 4.40%. As a result, if a debtor's
equity had a total market value of $100 million on a date that an "ownership
change" occurred, the amount of NOLs that the corporation could use to
offset its taxable income would be limited to approximately $4.40 million
per year (i.e., $100 million x 4.40%). If the debtor later had $50 million
of taxable income in a future year, it would be able to offset $4.40 million
of such taxable income, but would have to pay tax on the remaining $45.60
million. Because the Debtors have approximately $767.8 million of NOLs but
negligible equity value, an ownership change would effectively eliminate the
Debtors' ability to use NOLs to offset future taxable income. If the Debtors
were to lose the use of $767.8 million of NOLs to offset future taxable
income, the Debtors would lose approximately $268.7 million in potential
future tax savings to be utilized in future years (based on the applicable
35% corporate tax rate now in effect).
(5) Generally, a "testing date" occurs when there is a change in the
percentage of stock owned by a 5% or more shareholder before or after the
change, or when an option to purchase the stock of the corporation is
granted by the corporation. The "testing period" generally consists of the
3-year period prior to any testing date.
(6) Under IRC Section 382(g)(4)(A), all stockholders who individually
hold less than 5% of the shares of stock of a company are generally deemed
to be a single 5% stockholder throughout the 3-year testing period, and
transfers between such stockholders are disregarded for purposes of
determining whether an "ownership change" has occurred (the "Public Group
Rule"). Thus, so long as half or more of the debtor's stock is owned by less
than 5% stockholders throughout the 3-year testing period, there will be no
"ownership change" under IRC Section 382. Accordingly, the Debtors do not
seek to impose the requested notice and hearing procedures on transactions
by stockholders holding less than 5% of the Debtors' stock, provided that
such stockholders do not intend to accumulate a 5% or greater block of stock
or add or sell shares to or from such a block.
5
a significant shareholder by virtue of one or more purchases. Thus, for
example, if a 2% shareholder purchased additional stock and became a 53%
shareholder, then the percentage of stock owned by such shareholder would
have increased by 51 percentage points, thereby causing an "ownership
change."
16. Once all or part of a NOL is disallowed under section 382 of
the IRC, its use is limited forever, and once an equity interest is
transferred, the transfer generally cannot be nullified. Thus, unrestricted
transfers of Equity Securities could hinder the Debtors' reorganization
efforts by limiting the Debtors' ability to use their NOLs to offset future
taxable income.
17. As a result of the commencement of these chapter 11 cases,
trading in Solutia's Equity Securities was suspended by the New York Stock
Exchange. Even upon the delisting of Solutia's Equity Securities and the
resumed trading in the over-the-counter market, trading in the Equity
Securities has been extremely limited and has not occurred among investors
trading in large volumes. However, on November 18, 2005, a group of
investors, led by Lime Capital Management LLC, filed a schedule 13-G under
the Securities and Exchange Act of 1934, indicating that they had acquired a
Beneficial Interest (as defined below) in Solutia. These stockholders
collectively own 7,767,509 shares of Solutia, which represents 7.4% of the
outstanding Equity Securities. Accordingly, this transfer runs the risk of
affecting the Debtors' NOLs.
18. Due to the significant potential tax savings (approximately
$268.7 million to be utilized over future years) that will be lost if an
"ownership change" occurs, and the recent increase in trading of the
Debtors' Equity Securities, it is now necessary to restrict the trading of
Equity
6
Securities and related Options (as defined below) in order to help
facilitate a successful restructuring of the Debtors.
RELIEF REQUESTED
----------------
19. By this Motion, the Debtors request that this Court enter an
Order requiring that certain notice and waiting periods, described herein,
govern certain significant transfers of Equity Securities. This will provide
the Debtors with advance notice of certain transfers that may jeopardize
their NOLs and will enable the Debtors, if necessary, to act expeditiously
to prevent such transfers and to obtain substantive relief from this Court
to protect and preserve their NOLs.
20. Specifically, the Debtors request that the Court enter an
Order, substantially in the form attached hereto as Exhibit A, establishing
the following procedures (the "Notice and Hearing Procedures"):
A. NOTICE PROCEDURES FOR TRANSFERS OF EQUITY SECURITIES
(1) Notice of Substantial Equityholder Status. Any person or
-----------------------------------------
entity (as defined for purposes of section 382 of the IRC)
that currently Beneficially Owns (as defined below) at
least 4,700,681 shares (representing approximately 4.5% of
all issued and outstanding shares) of the Equity
Securities (a "Substantial Equityholder") shall file with
the Court and serve upon the Debtors' counsel a notice of
such status in the form attached hereto as Exhibit B(1) on
------------
or before the date that is thirty days after the entry of
the Order.
(a) Beneficial Ownership. For purposes of the Order,
--------------------
beneficial ownership ("Beneficial Ownership") of
an "Equity Interest" (as defined in section 101
of the Bankruptcy Code) in and of Solutia (the
"Equity Securities") or an Option (as defined
below) with respect to either (each of the
foregoing, an "Interest"), consistent with
section 382 of the IRC (including attribution
rules), includes, without limitation:
(i) title ownership;
7
(ii) direct and indirect ownership (for
example, a holding company would be
considered to "beneficially own" all
Interests owned or acquired by its
subsidiaries);
(iii) ownership by family members;
(iv) ownership by persons acting in concert
to make a coordinated acquisition of an
Interest; and
(v) ownership of an Interest that a holder
has a right to acquire through the
ownership of an option, a contingent
purchase right, a warrant, convertible
debt or equity, a put, an Interest
subject to risk of forfeiture or a
contract to acquire an Interest,
regardless of whether such Interest or
right to acquire is contingent or
otherwise not currently exercisable
(each such right or interest to acquire,
an "Option").
(2) Acquisition of Equity Securities. Prior to effecting any
--------------------------------
acquisition of a Beneficial Ownership in the Equity
Securities (including the acquisition of Option to acquire
the Equity Securities) that would result in an increase in
the amount of the Equity Securities Beneficially Owned by
a Substantial Equityholder or would result in a person or
entity (as defined for purposes of section 382 of the IRC)
becoming a Substantial Equityholder (a "Proposed Equity
Acquisition Transaction"), such person, entity or
Substantial Equityholder (a "Proposed Equity Transferee")
shall file with the Court and serve on the Debtors'
counsel a Notice of Intent to Purchase, Acquire or
Otherwise Accumulate an Equity Interest (an "Equity
Acquisition Notice"), in the form attached hereto as
Exhibit B(2), specifically and in detail describing the
------------
intended transaction acquiring the Equity Securities.
(3) Disposition of Equity Securities. Prior to effecting any
--------------------------------
disposition of a Beneficial Ownership in the Equity
Securities (including the disposition of an Option to
acquire the Equity Securities) that would result in a
decrease in the amount of the Equity Securities
Beneficially Owned by a Substantial Equityholder or that
would result in a person or entity (as defined for
purposes of section 382 of the IRC) ceasing to be a
Substantial Equityholder (a "Proposed Equity Disposition
Transaction"), such person, entity or Substantial
Equityholder (a "Proposed Equity Transferor") shall file
with the Court and serve on the Debtors' counsel a Notice
of Intent to Sell, Trade or Otherwise Transfer an Equity
Interest (an "Equity Disposition Notice"), in the form
attached hereto as Exhibit B(3), specifically and in
------------
detail describing the intended transaction disposing of
the Equity Securities.
(4) Objection Procedures. No later than the date that is
--------------------
thirty calendar days after the Debtors' actual receipt of
an Equity Acquisition Notice or an Equity Disposition
Notice, as the case may be (the "Objection Deadline"), the
Debtors may file with the Court and serve on a Proposed
Equity Transferor or a Proposed Equity Transferee,
8
as the case may be, an objection to any proposed transfer
of the Equity Securities described in an Equity Acquisition
Notice or an Equity Disposition Notice, as the case may
be, on the grounds that such transfer would adversely
affect the Debtors' ability to utilize their NOLs (an
"Objection").
(a) If the Debtors timely file an Objection by the
Objection Deadline, the Proposed Equity
Acquisition Transaction or Proposed Equity
Disposition Transaction, as the case may be,
shall not be effective unless approved by an
order of this Court, after notice and a hearing
and such order is not subject to appeal, stay,
modification or reconsideration.
(b) If the Debtors do not timely file an Objection by
the Objection Deadline, the Proposed Equity
Acquisition Transaction or Proposed Equity
Disposition Transaction, as the case may be, may
proceed only as specifically described in an
Equity Acquisition Notice or Equity Disposition
Notice, as the case may be.
(c) Any further transactions beyond the scope of the
Equity Acquisition Notice or Equity Disposition
Notice, as the case may be, must separately
follow the notice procedure as set forth herein.
B. OTHER NOTICE PROCEDURES
(1) Service of Procedures Notice. Following the filing of this
----------------------------
Motion, the Debtors shall deliver a copy of the Notice of
(A) Notification procedures Applicable to Substantial
Holders of Equity Securities and (B) Notification and
Hearing Procedures for Trading in Equity Securities (the
"Notice of Notification Procedures") (a copy of which is
attached hereto as Exhibit C) to the entities listed below.
---------
The Notice of Notification Procedures shall inform all
recipients thereof how to obtain copies of these Notice
Procedures and the relevant notices described herein.
(a) the United States Trustee for the Southern
District of New York,
(b) counsel to the Creditors' Committee,
(c) counsel to the Retirees' Committee,
(d) counsel to the Equity Committee,
(e) counsel to the agents for the Debtors'
post-petition secured bank lenders,
(f) the indenture trustee for each of the public debt
securities issued or guaranteed by the Debtors,
(g) the labor organizations that are party to
collective bargaining agreements with the
Debtors,
9
(h) counsel to any ad hoc committees for the public
debt securities issued or guaranteed by the
Debtors,
(i) Pharmacia Corporation,
(j) Monsanto Company,
(k) the Securities and Exchange Commission,
(l) the Internal Revenue Service,
(m) those parties who have formally appeared and
requested service in these cases pursuant to
Bankruptcy Rule 2002;
(n) the transfer agents for Solutia's Equity
Securities; and
(o) any shareholder holding 4.5% or more of Solutia's
issued and outstanding Equity Securities.
(2) Upon receipt of the Notice of Notification Procedures, any
transfer agent(s) for any Equity Securities shall, at
least once every three months during the pendency of these
chapter 11 cases, deliver the Notice of Notification
Procedures to all holders of the Equity Securities
registered with such transfer agent(s).
(a) Any such registered holder shall, in turn,
deliver a copy of the Notice of Notification
Procedures to any holder for whose account such
registered holder holds such Equity Securities
and so on down the chain of ownership.
(b) Any person or entity in their individual capacity
(a "Prospective Seller") and any broker or agent
acting on behalf of a Prospective Seller, who
contemplates selling Beneficial Ownership in
4,700,681 shares, or more, of Equity Securities
to another person or entity (a "Prospective
Purchaser") must provide a copy of the Notice of
Notification Procedures to each Prospective
Purchaser or any broker or agent acting on behalf
of a Prospective Purchaser.
(3) The Debtors shall publish the Notice of Notification
Procedures in the domestic editions of the Wall Street
Journal and the New York Times.
21. Any acquisition or disposition or other transfer of an Equity
Security or an Option in violation of the Notice and Hearing Procedures
shall be null and void ab initio as an act in violation of the automatic
-- ------
stay prescribed in section 362 of the Bankruptcy Code and shall confer no
rights on the transferee.
10
22. The requirements set forth in these Notice Procedures are in
addition to the requirements of any and all applicable securities, corporate
and other laws and do not excuse compliance therewith.
23. To preserve to the fullest extent possible the flexibility
to craft a plan of reorganization that maximizes the use of their NOLs, the
Debtors seek this limited relief that will enable them to closely monitor
certain transfers of Equity Securities or Options. The Notice and Hearing
Procedures described above will enable the Debtors to be in a position to
act expeditiously to prevent any such transfers necessary to preserve their
NOLs. Because, without the relief requested herein, transfers of the Equity
Securities could not be nullified after the fact, the Debtors requested the
relief set forth in the Order to Show Cause Scheduling Hearing to Consider
Debtors' Motion for an Order Pursuant to Sections 105(a), 362(a)(3) and 541
of the Bankruptcy Code (A) Limiting Certain Transfers of Equity Interests in
Solutia Inc. and (B) Approving Related Notice Procedures, entered on
December 7, 2005 (Docket No. 2720) (the "Order to Show Cause"), thereby
preserving the status quo with regard to the Debtors' Equity Securities,
pending a final order regarding this Motion. Such interim relief is
necessary to protect the Debtors' NOLs during the period prior to the
Hearing, and the entry of the Order.
BASIS FOR RELIEF
----------------
A. NOLS ARE PROPERTY OF A DEBTOR'S ESTATE ENTITLED TO PROTECTION
24. Courts have uniformly held that a debtor's NOLs constitute
property of the estate under section 541 of the Bankruptcy Code. Courts also
have uniformly held that they have the authority to impose measures intended
to protect and preserve a debtor's NOLs. The seminal case articulating this
rule is In re Prudential Lines, Inc., 107 B.R. 832 (Bankr. S.D.N.Y. 1989),
----------------------------
aff'd,
- -----
11
119 B.R. 430 (S.D.N.Y. 1990), aff'd, 928 F.2d 565 (2d Cir. 1991), cert.
----- -----
denied 502 U.S. 821 (1991). In Prudential Lines, the Court enjoined a parent
- ------ ----------------
corporation from taking a worthless stock deduction with respect to its
equity in a bankrupt wholly-owned subsidiary. In doing so, the court found
that allowing the parent to take such a deduction would destroy its
debtor-subsidiary's NOLs. In issuing the injunction, the Court held that the
"debtor's potential ability to utilize NOLs [was] property of [the debtor's]
estate," and that "the taking of a worthless stock deduction [was] an
exercise of control over a debtor's NOLs" that was properly subject to the
automatic stay. Prudential Lines, 107 B.R. 832, 838-42; see also In re
---------------- -------- -----
Southeast Banking Corp., Case No. 91-14561-BKC-PGH (Bankr. S.D. Fla., July
- -----------------------
21, 1994) (debtor's interest in their NOLs "constitutes property of the
estate within the scope of [11 U.S.C. Section 541(a)(1)] and is entitled to
the protection of the automatic stay"); In re Phar-Mor, Inc., 152 B.R. 924,
--------------------
926 (Bankr. N.D. Ohio 1993) ("the sale of stock is prohibited by Section
362(a)(3) as an exercise of control over the NOL, which is property of the
estate"); In re Grossman's, Inc., Case No. 97-695 (PJW) (Bankr. D. Del. Oct.
----------------------
9, 1997) (the debtors' net operating loss carryforward is property of the
debtors' estates and is protected by the automatic stay).
25. Because the Debtors' NOLs are property of their estates, this
Court has the authority under section 362 of the Bankruptcy Code to enforce
the automatic stay by restricting the transfer of the Equity Securities and
Options which could reduce the value of the NOLs, thus diminishing estate
property.
12
B. PROPRIETY OF RELIEF REQUESTED
26. The Bankruptcy Court for the Southern District of New York
commonly grants relief similar to that requested herein.(7) See, e.g., In re
--------- -----
WHX Corp., Case No. 05-11444 (Bankr. S.D.N.Y. March 31, 2005) (debtor
- ---------
provided 10 days to object to proposed transfers of claims or equity by
large claimholders and equityholders); In re WorldCom, Inc., Case No.
--------------------
02-13533 (Bankr. S.D.N.Y. March 5, 2003) (restricting transfers of stock
that would result in the transferee's holdings increasing to or beyond
4.75%; debtor provided 10 days notice to object to proposed transfers of
unsecured claims against the debtor); In re Adelphia Comm. Corp., Case No.
--------------------------
02-41729 (Bankr. S.D.N.Y. Sept. 27, 2002 (debtors provided thirty days to
object to proposed transfers of equity by large equityholders); In re
-----
Williams Comm. Group, Inc., Case No. 02-11957 (BRL) (Bankr. S.D.N.Y. July
- --------------------------
24, 2002) (debtor provided thirty days notice to object to proposed
transfers of claims against the debtor that would increase the transferee's
holdings to or above $200 million
<FN>
- --------
(7) In addition, bankruptcy courts in other jurisdictions commonly
grant such relief. See In re UAL Corporation, et al., Case No. 02-B-48191
--- -----------------------------
(ERW) (Bankr. N.D. Ill. Feb. 24, 2003) (debtors provided fifteen (15) days
notice to object to transfers of claims or equity securities by persons who
were, or would become as a result of the proposed transfer, 4.5%
stockholders or holders of claims in excess of $200 million); In re
-----
Metrocall, et al., Case No. 02-11579 (RB) (Bankr. D. Del. June 6, 2002)
- -----------------
(debtor provided five (5) business days notice to object to proposed
transfers of stock that would result in the transferee holding 5% or more of
the debtor's stock or a reduction in the ownership interest of an existing
5% or greater shareholder); In re Worldtex, Inc., Case No. 01-785 (MFW)
--------------------
(Bankr. D. Del. Apr. 2, 2001) (debtor provided thirty days notice to object
to proposed transfers that would result in the transferee holding 5% or more
of the debtor's common stock or decrease the ownership interest of an
existing 5% or greater shareholder); In re Reliance Acceptance Group Inc.,
------------------------------------
Case No. 98-288 (PJW) (Bankr. D. Del. Apr. 28, 1998) (debtor provided thirty
days notice to object to proposed transfers that would result in the
transferee holding 5% or more of debtor's common stock); In re First
-----------
Merchants Acceptance Corp., 1998 Bankr. LEXIS 1816 (Bankr. D. Del. 1998)
- --------------------------
(debtor provided thirty days notice to object to proposed transfers of stock
in the debtor that would increase the transferee's holdings to or above
300,000 shares of the debtor's stock and to any proposed transfers of 1995
subordinated reset notes or general unsecured claims against the debtor);
In re Grossman's, Inc., Case No. 97-695 (PJW) (Bankr. D. Del. Oct. 9, 1997)
- ----------------------
(debtor provided thirty days notice to object to proposed transfers of stock
that would increase the transferee's holdings to or above 1,350,000 shares
of debtor's stock and to proposed transfers of general unsecured claims that
would increase the transferee's the holdings to or above an aggregate face
amount of $3,500,000); In re Southeast Banking Corp., Case No.
-----------------------------
9l-14561-BKC-PGH (Bankr. S.D. Fla. July 21, 1994) (enjoining 5% trades of
common stock); In re Phar-Mor, Inc., 152 B.R. 924 (Bankr. N.D. Ohio 1993)
--------------------
(enjoining shareholders from selling stock in the debtor unless they
obtained relief from the automatic stay). However, the order in UAL was
---
subsequently called into question by the Seventh Circuit Court of Appeals,
which found that such relief would require adequate protection for any loss
in value caused by such restrictions. In re UAL Corp., 412 F.3d 775, 779
---------------
(7th Cir. 2005).
13
in the aggregate face amount; $200 million in claims was the lowest amount
that could reasonably be expected to lead to a distribution of 5% of the
stock in the reorganized debtor); In re Casual Male Corp., Case No. 01-41404
-----------------------
(REG) (Bankr. S.D.N.Y. May 18, 2001) (enjoining transfers of common stock
and convertible notes that would result in the transferee's holdings
increasing to or beyond 4.99%; debtor provided thirty days notice to object
to proposed transfers of senior subordinated notes or other general
unsecured claims against the debtor); In re McLean Indus. Inc., Case Nos.
------------------------
86-B-12238-l224l (Bankr. S.D.N.Y. Feb. 16, 1989) (requiring an application
to the court for authority to transfer any claims).
27. In such cases, courts generally impose notice and hearing
requirements on any proposed transfer of stock to or by a person whose
holdings of such stock exceeds, or would exceed as a result of the proposed
transfer, a certain threshold amount. See In re Casual Male Corp., Case No.
--- -----------------------
01-41404 (Bankr. S.D.N.Y. May 18, 2001) (court entered an order prohibiting
any party from purchasing, acquiring, or otherwise obtaining more than a
prescribed number of shares of the debtor); See also In re Williams Comm.
--- ---- --------------------
Group, Inc., Case No. 02-11957 (BRL) (Bankr. S.D.N.Y. July 24, 2002) (claims
- -----------
trading restrictions applied to certain claimholders); In re Worldtex, Inc.,
--------------------
Case No. 01-785 (MFW) (Bankr. D. Del. Apr. 2, 2001) (stock trading
restrictions applied to persons who were or would become as a result of the
proposed transfer, 5% stockholders).
28. In addition, in such cases, the Bankruptcy Court for the
Southern District of New York has granted relief on an interim basis pending
a hearing on the underlying motion. See In re Delphi Corp., Case No.
--- ------------------
05-44481 (RDD) (Bankr. S.D.N.Y. October 12, 2005); In re Delta Airlines,
--------------------
Inc., Case No. 05-17923 (PCB (Bankr. S.D.N.Y. September 16, 2005); In re
- ---- -----
Northwest Airlines Corp., Case No. 05-17930 (ALG) (Bankr. S.D.N.Y.
- ------------------------
September 15, 2005).
14
C. THE RELIEF SOUGHT IS NARROW IN SCOPE
29. The Notice and Hearing Procedures have been narrowly tailored
to apply only to those persons who own (or would own as a result of the
proposed transfer) equity in Solutia constituting 4.5% or more of total
shares outstanding. Thus, the Debtors only seek to impose the proposed
Notice and Hearing Procedures on a relatively small group of persons, whose
trading activities could have an impact on the Debtors' NOLs.
30. It is imperative that the Debtors closely scrutinize any
transactions that would increase the risk of an "ownership change" because
the very low consolidated value of Solutia's equity makes acquiring large
blocks of such equity relatively inexpensive. As a result, investors may
purchase large blocks of the Equity Securities for purely speculative
purposes. In addition, there may be a significant delay until current
significant equity holders have to disclose their stock transactions to the
Debtors or to the Securities and Exchange Commission. In order for the
Debtors to adequately evaluate whether a particular transaction would
materially increase the risk of an "ownership change" occurring, the Debtors
need to conduct a thorough investigation to determine the identity of their
stockholders and the size of such stockholders' holdings before and after
such proposed transaction. Once the Debtors determine the identity of their
current stockholders, the Debtors must analyze whether the proposed transfer
of stock would likely trigger an "ownership change" for purposes of section
382 of the IRC. This analysis is very complicated. Accordingly, the Debtors
believe that they cannot conduct a necessarily thorough and diligent
investigation and analysis in much less than thirty days. In addition, the
proposed Notice and Hearing Procedures do not preclude any trading in the
Equity Securities. Instead, the proposed Notice and Hearing Procedures set
forth the procedure by which any transfers, that may result in a limitation
of the
15
Debtors' NOLs, will be subject to a hearing by this Court. Thus, the
Objection Deadline is reasonable and necessary to provide the Debtors' with
ample time to conduct the appropriate diligence and evaluate applicable
transactions.
31. The Debtors' NOLs are valuable assets of their estates that
will facilitate the Debtors' reorganization and benefit all of their
stakeholders. If the Debtors are unable to monitor and take action with
respect to transfers which could impact their NOLs, the Debtors' future use
of their NOLs may be jeopardized. The Debtors have proposed Notice and
Hearing Procedures that impose minimal burdens on affected entites while
allowing the Debtors to preserve a substantial asset of their estates. Thus,
the Debtors believe that granting the relief requested in this Motion is in
the best interests of the Debtors' estates, their creditors and other
parties in interest.
MEMORANDUM OF LAW
-----------------
32. The Debtors respectfully submit that the citation of
applicable authorities and the argument set forth herein satisfies the
requirement that the Debtors file a memorandum of law in support of this
Motion pursuant to Rule 9013-1(b) of the Local Bankruptcy Rules for the
Southern District of New York.
NOTICE
------
33. Notice of this Motion and the Order to Show Cause will be
provided by first-class mail to (a) the United States Trustee for the
Southern District of New York, (b) counsel to the Creditors' Committee, (c)
counsel to the Retirees' Committee, (d) counsel to the Equity Committee, (e)
counsel to the agents for the Debtors' post-petition secured bank lenders,
(f) the indenture trustee for each of the public debt securities issued or
guaranteed by the Debtors, (g) the labor organizations that are party to
collective bargaining agreements with the Debtors, (h) counsel
16
to any ad hoc committees for the public debt securities issued or guaranteed
by the Debtors, (i) Pharmacia Corporation, (j) Monsanto Company, (k) the
Securities and Exchange Commission, (l) the Internal Revenue Service and (m)
those parties who have formally appeared and requested service in these
cases pursuant to Bankruptcy Rule 2002. In light of the nature of the relief
requested herein, the Debtors submit that no other or further notice of the
Motion need be given.
NO PRIOR REQUEST
----------------
34. No prior request for the relief sought in this Motion has been
made to this or any other court in connection with these chapter 11 cases.
17
CONCLUSION
----------
WHEREFORE, the Debtors respectfully request that the Court
(a) enter an Order, substantially in the form attached hereto as Exhibit A,
---------
implementing the Notice and Hearing Procedures set forth herein and (b)
grant such other and further relief as the Court deems appropriate.
Dated: December 7, 2005
New York, New York
Respectfully submitted,
/s/ Richard M. Cieri
---------------------------------
Richard M. Cieri (RC 6062)
Robbin L. Itkin (RI 1019)
Jonathan S. Henes (JH 1979)
KIRKLAND & ELLIS LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022-4675
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Attorneys for Debtors and Debtors in Possession
18
EXHIBIT A
---------
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- ----------------------------------------------------x
THIS ORDER APPLIES TO:
X All Debtors Axio Research Corporation
- --- ---
Solutia Inc. Solutia Investments, LLC
- --- ---
Solutia Business Enterprises, Inc. Beamer Road Management Company
- --- ---
Solutia Systems, Inc. Monchem, Inc.
- --- ---
Solutia Overseas, Inc. Solutia Inter-America, Inc.
- --- ---
CPFilms Inc. Solutia International Holding, LLC
- --- ---
Solutia Management Company, Inc. Solutia Taiwan, Inc.
- --- ---
Monchem International, Inc. Solutia Greater China, Inc.
- --- ---
ORDER PURSUANT TO
SECTIONS 105(a), 362(a)(3) AND 541 OF THE BANKRUPTCY CODE
(A) LIMITING CERTAIN TRANSFERS OF EQUITY INTERESTS IN
SOLUTIA INC. AND (B) APPROVING RELATED NOTICE PROCEDURES
--------------------------------------------------------
Upon the Debtors' Motion for an Order Pursuant to Sections
105(a), 362(a)(3) and 541 of the Bankruptcy Code (A) Limiting Certain
Transfers of Equity Interests in Solutia Inc. and (B) Approving Related
Notice Procedures (the "Motion");(1) upon consideration of the supporting
papers and the files and records in these cases; it appearing that the Court
has jurisdiction over the subject matter of the Motion and the relief
requested therein pursuant to 28 U.S.C. Sections 157 and 1334; it appearing
that this is a core proceeding pursuant to 28 U.S.C. Section 157(b); it
appearing that the relief requested in the Motion is in the best interests
of the Debtors, their estates and their
<FN>
- --------
(1) Capitalized terms used but not defined herein shall have the
meaning set forth in the Motion.
creditors; it appearing that notice of the Motion was sufficient and no
other or further notice need be provided; and after due deliberation and
cause appearing therefor;
IT IS HEREBY ORDERED THAT:
1. The Motion is granted.
2. All sales or other transfers of Equity Securities or
Options, in violation of the Notice and Hearing Procedures, by Substantial
Equityholders or that result in an entity becoming a Substantial
Equityholder are prohibited and shall be void ab initio.
-- ------
3. The following Notice and Hearing Procedures are hereby
approved:
A. NOTICE PROCEDURES FOR TRANSFERS OF EQUITY SECURITIES
(1) Notice of Substantial Equityholder Status. Any person or
-----------------------------------------
entity (as defined for purposes of section 382 of the
Internal Revenue Code of 1986, as amended and the Treasury
Regulations thereunder that currently Beneficially Owns
(as defined below) at least 4,700,681 shares (representing
approximately 4.5% of all issued and outstanding shares)
of the of the Equity Securities (a "Substantial
Equityholder") shall file with the Court and serve upon
the Debtors' counsel a notice of such status in the form
attached as Exhibit B(1) to the Motion on or before the
------------
date that is thirty days after the entry of this Order.
(a) Beneficial Ownership. For purposes of this Order,
--------------------
beneficial ownership ("Beneficial Ownership") of
an "Equity Interest" (as defined in section 101
of the Bankruptcy Code) in and of Solutia (the
"Equity Interests") or an Option (as defined
below) with respect to either (each of the
foregoing, an "Interest"), consistent with
section 382 of the IRC (including attribution
rules), includes, without limitation:
(i) title ownership;
(ii) direct and indirect ownership (for
example, a holding company would be
considered to "beneficially own" all
Interests owned or acquired by its
subsidiaries);
(iii) ownership by family members;
(iv) ownership by persons acting in concert
to make a coordinated acquisition of an
Interest; and
(v) ownership of an Interest that a holder
has a right to acquire through the
ownership of an option, a contingent
purchase right, a warrant, convertible
debt or equity, a put, an Interest
2
subject to risk of forfeiture or a
contract to acquire an Interest,
regardless of whether such Interest or
right to acquire is contingent or
otherwise not currently exercisable
(each such right or interest to acquire,
an "Option").
(2) Acquisition of Equity Securities. Prior to effecting any
--------------------------------
acquisition of a Beneficial Ownership in the Equity
Securities (including the acquisition of Option to acquire
the Equity Securities) that would result in an increase in
the amount of the Equity Securities Beneficially Owned by
a Substantial Equityholder or would result in a person or
entity (as defined for purposes of section 382 of the IRC)
becoming a Substantial Equityholder (a "Proposed Equity
Acquisition Transaction"), such person, entity or
Substantial Equityholder (a "Proposed Equity Transferee")
shall file with the Court and serve on the Debtors'
counsel a Notice of Intent to Purchase, Acquire or
Otherwise Accumulate an Equity Interest (an "Equity
Acquisition Notice"), in the form attached as Exhibit B(2)
------------
to the Motion, specifically and in detail describing the
intended transaction acquiring the Equity Securities.
(3) Disposition of Equity Securities. Prior to effecting any
--------------------------------
disposition of a Beneficial Ownership in the Equity
Securities (including the disposition of an Option to
acquire the Equity Securities) that would result in a
decrease in the amount of the Equity Securities
Beneficially Owned by a Substantial Equityholder or that
would result in a person or entity (as defined for
purposes of section 382 of the IRC) ceasing to be a
Substantial Equityholder (a "Proposed Equity Disposition
Transaction"), such person, entity or Substantial
Equityholder (a "Proposed Equity Transferor") shall file
with the Court and serve on the Debtors' counsel a Notice
of Intent to Sell, Trade or Otherwise Transfer an Equity
Interest (an "Equity Disposition Notice"), in the form
attached as Exhibit B(3) to the Motion, specifically and
------------
in detail describing the intended transaction disposing of
the Equity Securities.
(4) Objection Procedures. No later than the date that is
--------------------
thirty calendar days after the Debtors' actual receipt of
an Equity Acquisition Notice or an Equity Disposition
Notice, as the case may be (the "Objection Deadline"), the
Debtors may file with the Court and serve on a Proposed
Equity Transferor or a Proposed Equity Transferee, as the
case may be, an objection to any proposed transfer of the
Equity Securities described in an Equity Acquisition
Notice or an Equity Disposition Notice, as the case may
be, on the grounds that such transfer would adversely
affect the Debtors' ability to utilize their NOLs (an
"Objection").
(a) If the Debtors timely file an Objection by the
Objection Deadline, the Proposed Equity
Acquisition Transaction or Proposed Equity
Disposition Transaction, as the case may be,
shall not be effective unless approved by an
order of this Court, after notice and a hearing
and such order is not subject to appeal, stay,
modification or reconsideration.
(b) If the Debtors do not timely file an Objection by
the Objection Deadline, the Proposed Equity
Acquisition Transaction or Proposed Equity
Disposition Transaction, as the case may be, may
proceed only as specifically described
3
in an Equity Acquisition Notice or Equity
Disposition Notice, as the case may be.
(c) Any further transactions beyond the scope of the
Equity Acquisition Notice or Equity Disposition
Notice, as the case may be, must separately
follow the notice procedure as set forth herein.
B. OTHER NOTICE PROCEDURES
(1) Service of Procedures Notice. Following the filing of the
----------------------------
Motion, the Debtors shall deliver a copy of the Notice of
(A) Notification Procedures Applicable to Substantial
Holders of Equity Securities and (B) Notification and
Hearing Procedures for Trading in Equity Securities (the
"Notice of Notification Procedures") (a copy of which is
attached as Exhibit C to the Motion) to the entities
---------
listed below. The Notice of Notification Procedures shall
inform all recipients thereof how to obtain copies of
these Notice Procedures and the relevant notices described
herein.
(a) the United States Trustee for the Southern
District of New York,
(b) counsel to the Creditors' Committee,
(c) counsel to the Retirees' Committee,
(d) counsel to the Equity Committee,
(e) counsel to the agents for the Debtors'
post-petition secured bank lenders,
(f) the indenture trustee for each of the public debt
securities issued or guaranteed by the Debtors,
(g) the labor organizations that are party to
collective bargaining agreements with the
Debtors,
(h) counsel to any ad hoc committees for the public
debt securities issued or guaranteed by the
Debtors,
(i) Pharmacia Corporation,
(j) Monsanto Company,
(k) the Securities and Exchange Commission,
(l) the Internal Revenue Service,
(m) those parties who have formally appeared and
requested service in these cases pursuant to
Bankruptcy Rule 2002;
(n) the transfer agents for Solutia's Equity
Securities; and
4
(o) any shareholder holding 4.5% or more of Solutia's
issued and outstanding Equity Securities.
(2) Upon receipt of the Notice of Notification Procedures, any
transfer agent(s) for any Equity Securities shall, at
least once every three months during the pendency of these
chapter 11 cases, deliver the Notice of Notification
Procedures to all holders of the Equity Securities
registered with such transfer agent(s).
(a) Any such registered holder shall, in turn,
deliver a copy of the Notice of Notification
Procedures to any holder for whose account such
registered holder holds such Equity Securities
and so on down the chain of ownership.
(b) Any person or entity in their individual capacity
(a "Prospective Seller") and any broker or agent
acting on behalf of a Prospective Seller, who
contemplates selling Beneficial Ownership in
4,700,681 shares, or more, of Equity Securities
to another person or entity (a "Prospective
Purchaser") must provide a copy of the Notice of
Notification Procedures to each Prospective
Purchaser or any broker or agent acting on behalf
of a Prospective Purchaser.
(3) The Debtors shall publish the Notice of Notification
Procedures in the domestic editions of the Wall Street
Journal and the New York Times.
(4) The requirements set forth in these Notice and Hearing
Procedures are in addition to the requirements of
applicable securities, corporate and other laws and do not
excuse compliance therewith.
(5) The Court shall retain jurisdiction with respect to any
matters, claims, rights or disputes arising from or
related to the implementation of this Order.
(6) Notwithstanding the provisions of Bankruptcy Rule 6004(g),
this Order shall take effect immediately upon its entry.
Dated: , 2005
------------------
New York, New York
------------------------------
PRUDENCE CARTER BEATTY
UNITED STATES BANKRUPTCY JUDGE
5
EXHIBIT B
---------
EXHIBIT B(1)
------------
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- ---------------------------------------------------x
NOTICE OF STATUS AS A SUBSTANTIAL EQUITYHOLDER(1)
----------------------------------------------
PLEASE TAKE NOTICE that [name of each equityholder] is/has
-------------------------
become a Substantial Equityholder with respect to the equity securities (the
"Equity Securities") of Solutia Inc. ("Solutia"), a debtor and debtor in
possession (collectively with certain of its affiliates as debtors and
debtors in possession, the "Debtors") in Case No. 03-17949 pending in the
United States Bankruptcy Court for the Southern District of New York.
PLEASE TAKE FURTHER NOTICE that, as of [date], [name of
---- -------
each equityholder] Beneficially Owns [ ] shares of the Equity Securities
- ----------------- ---
of Solutia Inc. The following table sets forth the date(s) on which [name of
-------
equityholder] acquired or otherwise became the Beneficial Owner of such
- ------------
Equity Securities:
---------------------------------------------------------------------
Number of Shares Type of Equity Security Date Acquired
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
(Attach additional page if necessary)
PLEASE TAKE FURTHER NOTICE that the taxpayer identification
number of [name of each equityholder] is .
------------------------- -------------------
<FN>
- --------
(1) For purposes of this Notice: (A) a "Substantial Equityholder" is
any person or entity (as defined for purposes of Section 382 of the Internal
Revenue Code of 1986, as amended (the "IRC") and the Treasury Regulations
thereunder) that currently or in the future "Beneficially Owns" at least
4,700,681 shares (representing approximately 4.5% of all issued and
outstanding shares) of the common stock of the Debtors, (B) "Beneficial
Ownership" of Equity Securities shall be defined consistently with the
applicable definitions of the IRC and the Treasury Regulations thereunder
(including attribution rules) and includes, without limitation, (1) direct
and indirect ownership (e.g., a holding company would be considered to
----
"Beneficially Own" all Equity Securities owned or acquired by its
subsidiaries), (2) ownership by family members, (3) persons acting in
concert to make a coordinated acquisition of an Equity Security and (4)
ownership of shares that such person or entity has an Option to acquire; and
(C) an "Option" to acquire an Equity Security includes any contingent
purchase right, warrant, convertible debt or equity, put, an Equity Security
subject to risk of forfeiture, or a contract to acquire an Equity Security
or similar interest, regardless of whether it is contingent or otherwise not
currently exercisable.
PLEASE TAKE FURTHER NOTICE that, under penalties of
perjury, [name of each equityholder] hereby declares that it has examined
-------------------------
this Notice and accompanying attachments (if any) and, to the best of its
knowledge and belief, this Notice and any attachments that purport to be
part of this Notice are true, correct and complete.
PLEASE TAKE FURTHER NOTICE that, pursuant to the Order
Pursuant to Sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code (A)
Limiting Certain Transfers of Equity Interests in Solutia Inc. and (B)
Approving Related Notice Procedures, this Notice is being (a) filed with the
United States Bankruptcy Court for the Southern District of New York and (b)
served upon Kirkland & Ellis LLP, counsel to the Debtors, 153 East 53rd
Street, New York, New York 10022, Attn.: Michael J. Frishberg, Esq.
Date: Respectfully Submitted,
--------------------------
(Name of Equityholder)
By:
Name:
Title:
Address:
Telephone:
Facsimile:
2
EXHIBIT B(2)
------------
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- ---------------------------------------------------x
NOTICE OF INTENT TO PURCHASE, ACQUIRE
OR OTHERWISE ACCUMULATE AN EQUITY INTEREST
------------------------------------------
PLEASE TAKE NOTICE that [name of each prospective
------------------------
acquirer] hereby provides notice of its intention to purchase, acquire or
- --------
otherwise accumulate one or more shares of the equity securities (the
"Equity Securities") of Solutia Inc. ("Solutia"), a debtor and debtor in
possession (collectively with certain of its affiliates as debtors and
debtors in possession, the "Debtors") or an Option (as defined below) with
respect thereto (the "Proposed Transfer").
PLEASE TAKE FURTHER NOTICE that, if applicable, on [prior
-----
date(s)], [name of each prospective acquirer] filed a Notice of Status as a
- ------- ---------------------------------
Substantial Equityholder(1) with the Court and served copies thereof on the
Debtors' counsel.
PLEASE TAKE FURTHER NOTICE that [name of each prospective
------------------------
acquirer] currently Beneficially Owns shares of the Equity
- -------- --------
Securities (type of Equity Security) of [name of Debtor].
PLEASE TAKE FURTHER NOTICE that, pursuant to the Proposed
Transfer, [name of each prospective acquirer] proposes to purchase, acquire
---------------------------------
or otherwise accumulate [ ] shares of Equity Securities or an Option
-----
with respect to [ ] shares of Equity
-----
<FN>
- --------
(1) For purposes of this Notice: (A) a "Substantial Equityholder" is
any person or entity (as defined for purposes of Section 382 of the Internal
Revenue code of 1986, as amended (the "IRC") and the Treasury Regulations
thereunder) that currently or in the future "Beneficially Owns" at least
4,700,681 shares (representing approximately 4.5% of all issued and
outstanding shares) of the common stock of the Debtors, (B) "Beneficial
Ownership" of Equity Securities shall be defined consistently with the
applicable definitions of the IRC and the Treasury Regulations thereunder
(including attribution rules) and includes, without limitation, (1) direct
and indirect ownership (e.g., a holding company would be considered to
----
"Beneficially Own" all Equity Securities owned or acquired by its
subsidiaries), (2) ownership by family members, (3) persons acting in
concert to make a coordinated acquisition of an Equity Security and (4)
ownership of shares that such person or entity has an Option to acquire; and
(C) an "Option" to acquire an Equity Security includes any contingent
purchase right, warrant, convertible debt or equity, put, an Equity Security
subject to risk of forfeiture, or a contract to acquire an Equity Security
or similar interest, regardless of whether it is contingent or otherwise not
currently exercisable.
Securities. If the Proposed Transfer is permitted to occur,
[name of each prospective acquirer] will Beneficially Own [ ] shares
--------------------------------- -----
of Equity Securities after the transfer.
PLEASE TAKE FURTHER NOTICE that the taxpayer identification
number of [name of each prospective acquirer] is .
--------------------------------- -----------------------
PLEASE TAKE FURTHER NOTICE that, under penalties of
perjury, [name of each prospective acquirer] hereby declares it has examined
---------------------------------
this Notice and accompanying attachments (if any) and, to the best of its
knowledge and belief, this Notice and any attachments that purport to be
part of this Notice are true, correct and complete.
PLEASE TAKE FURTHER NOTICE that, pursuant to the Order
Pursuant to Sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code (A)
Limiting Certain Transfers of Equity Interests in Solutia Inc. and (B)
Approving Related Notice Procedures, this Notice is being (a) filed with the
United States Bankruptcy Court for the Southern District of New York and (b)
served upon Kirkland & Ellis LLP, counsel to the Debtors, 153 East 53rd
Street, New York, New York 10022, Attn.: Michael J. Frishberg, Esq.
PLEASE TAKE FURTHER NOTICE that the Debtors have thirty
calendar days after receipt of this Notice to object to the Proposed
Transfer described herein. If the Debtors file an objection, such Proposed
Transfer will not be effective unless approved by an order of the Court not
subject to appeal, modification, stay or reconsideration. If the Debtors do
not object within such thirty day period, then after expiration of such
period the Proposed Transfer may proceed specifically as set forth in the
Notice.
2
The undersigned prospective acquirer(s) understand(s) that
any further transactions that may result in [name of each prospective
------------------------
acquirer] purchasing, acquiring or otherwise accumulating Beneficial
- --------
Ownership additional shares of Equity Securities will each require an
additional notice filed with the Court to be served in the same manner as
this Notice.
Date: Respectfully Submitted,
------------------------------
(Name of Prospective Acquiror)
By:
Name:
Title:
Address:
Telephone:
Facsimile:
3
EXHIBIT B(3)
------------
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- ---------------------------------------------------x
NOTICE OF INTENT TO SELL, TRADE OR
OTHERWISE TRANSFER AN EQUITY INTEREST
-------------------------------------
PLEASE TAKE NOTICE that [name of each prospective seller]
-------------------------------
hereby provides notice of its intention to sell, trade or otherwise transfer
one or more shares of the equity securities (the "Equity Securities") of
Solutia Inc. ("Solutia"), a debtor and debtor in possession (collectively
with certain of its affiliates as debtors and debtors in possession, the
"Debtors") or an Option (as defined below) with respect thereto (the
"Proposed Transfer").
PLEASE TAKE FURTHER NOTICE that, if applicable, on
[prior date(s)], [name of each prospective seller] filed a Notice of Status
------------- -------------------------------
as a Substantial Equityholder(1) with the Court and served copies thereof on
the Debtors' counsel.
PLEASE TAKE FURTHER NOTICE that [name of prospective
-------------------
seller] currently Beneficially Owns shares of Equity Securities
- ------ -----
of [name of Debtor].
PLEASE TAKE FURTHER NOTICE that, pursuant to the Proposed
Transfer, [name of each prospective seller] proposes to sell, trade or
-------------------------------
otherwise transfer shares of Equity Securities or an Option with
-----
respect to shares of Equity Securities. If the Proposed
-----
Transfer is permitted to occur, [name of each prospective seller] will
-------------------------------
Beneficially Own shares of Equity Securities after the
-----
transfer.
<FN>
- --------
(1) For purposes of this Notice: (A) a "Substantial Equityholder" is
any person or entity (as defined for purposes of Section 382 of the Internal
Revenue code of 1986, as amended (the "IRC") and the Treasury Regulations
thereunder) that currently or in the future "Beneficially Owns" at least
4,700,681 shares (representing approximately 4.5% of all issued and
outstanding shares) of the common stock of the Debtors, (B) "Beneficial
Ownership" of Equity Securities shall be defined consistently with the
applicable definitions of the IRC and the Treasury Regulations thereunder
(including attribution rules) and includes, without limitation, (1) direct
and indirect ownership (e.g., a holding company would be considered to
----
"Beneficially Own" all Equity Securities owned or acquired by its
subsidiaries), (2) ownership by family members, (3) persons acting in
concert to make a coordinated acquisition of an Equity Security and (4)
ownership of shares that such person or entity has an Option to acquire; and
(C) an "Option" to acquire an Equity Security includes any contingent
purchase right, warrant, convertible debt or equity, put, an Equity Security
subject to risk of forfeiture, or a contract to acquire an Equity Security
or similar interest, regardless of whether it is contingent or otherwise not
currently exercisable.
PLEASE TAKE FURTHER NOTICE that, under penalties of
perjury, [name of each prospective seller] hereby declares that it has
-------------------------------
examined this Notice and accompanying attachments (if any) and, to the best
of its knowledge and belief, this Notice and any attachments that purport to
be part of this Notice are true, correct and complete.
PLEASE TAKE FURTHER NOTICE that, pursuant to the Order
Pursuant to Sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code (A)
Limiting Certain Transfers of Equity Interests in Solutia Inc. and (B)
Approving Related Notice Procedures, this Notice is being (a) filed with the
United States Bankruptcy Court for the Southern District of New York and (b)
served upon Kirkland & Ellis LLP, counsel to the Debtors, 153 East 53rd
Street, New York, New York 10022, Attn.: Michael J. Frishberg, Esq.
PLEASE TAKE FURTHER NOTICE that the Debtors have thirty
calendar days after receipt of this Notice to object to the Proposed
Transfer described herein. If the Debtors file an objection, such Proposed
Transfer will not be effective unless approved by an order of the Court not
subject to appeal, modification, stay or reconsideration. If the Debtors do
not object within such thirty day period, then after expiration of such
period the Proposed Transfer may proceed specifically as set forth in the
Notice.
2
[Name of each prospective seller] understands that any
-------------------------------
further transactions that may result in [name of prospective seller]
--------------------------
selling, trading or otherwise transferring Beneficial Ownership of shares of
Equity Securities will each require an additional notice filed with the
Court to be served in the same manner as this Notice.
Date: Respectfully Submitted,
----------------------------
(Name of Prospective Seller)
By:
Name:
Title:
Address:
Telephone:
Facsimile:
3
EXHIBIT C
---------
KIRKLAND & ELLIS LLP
Citigroup Center
153 East 53rd Street
New York, NY 10022-4611
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Richard M. Cieri (RC 6062)
Robbin L. Itkin (RI 1019)
Jonathan S. Henes (JH 1979)
Attorneys for the Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------------------x
:
In re : Chapter 11
:
SOLUTIA INC., ET AL., : Case No. 03-17949 (PCB)
:
Debtors. : (Jointly Administered)
:
:
- ---------------------------------------------------x
THIS MOTION APPLIES TO:
X All Debtors Axio Research Corporation
- --- ---
Solutia Inc. Solutia Investments, LLC
- --- ---
Solutia Business Enterprises, Inc. Beamer Road Management Company
- --- ---
Solutia Systems, Inc. Monchem, Inc.
- --- ---
Solutia Overseas, Inc. Solutia Inter-America, Inc.
- --- ---
CPFilms Inc. Solutia International Holding, LLC
- --- ---
Solutia Management Company, Inc. Solutia Taiwan, Inc.
- --- ---
Monchem International, Inc. Solutia Greater China, Inc.
- --- ---
NOTICE OF (A) NOTIFICATION PROCEDURES APPLICABLE TO SUBSTANTIAL
HOLDERS OF EQUITY SECURITIES AND (B) NOTIFICATION AND
HEARING PROCEDURES FOR TRADING CLAIMS AND EQUITY SECURITIES
-----------------------------------------------------------
TO ALL PERSONS OR ENTITIES WITH
EQUITY INTERESTS IN THE DEBTORS:
PLEASE TAKE NOTICE that on December 17, 2003 (the
"Commencement Date"), the Debtors each commenced with this Court a voluntary
case under chapter 11 of title 11 of the United States Code, 11 U.S.C.
Sections 101-1330 (the "Bankruptcy Code").
PLEASE TAKE FURTHER NOTICE that on December 7, 2005, the
Debtors filed the Debtors' Motion for an Order Pursuant to Sections 105(a),
362(a)(3) and 541 of the Bankruptcy Code (A) Limiting Certain Transfers of
Equity Interests in Solutia Inc. and (B) Approving Related Notice Procedures
(the "Motion").
PLEASE TAKE FURTHER NOTICE that on December 7, 2005, the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") entered the Order to Show Cause Scheduling Hearing to
Consider Debtors' Motion for an Order Pursuant to Sections 105(a), 362(a)(3)
and 541 of the Bankruptcy Code (A) Limiting Certain Transfers of Equity
Interests in Solutia Inc. and (B) Approving Related Notice Procedures,
entered on December 7, 2005 (Docket No. 2720) (the "Order to Show Cause").
PLEASE TAKE FURTHER NOTICE that on , the
-----------
Bankruptcy Court entered an order (the "Order") approving the procedures set
forth in the Motion (the "Notice Procedures") to preserve the Debtors' net
operating losses ("NOLs"). Any sale, acquisition or other transfer of equity
securities in the Debtors in violation of the Notice Procedures shall be
null and void ab initio and shall confer no rights on the transferee.
-- ------
PLEASE TAKE FURTHER NOTICE that, pursuant to the Order to
Show Cause and the Order, the Notice Procedures shall apply to holding,
acquiring and disposing and any other transfers of EQUITY SECURITIES.
PLEASE TAKE FURTHER NOTICE that any person or entity may
obtain a copy of the Order to Show Cause, the Order, the Motion, including
the Notice Procedures and the forms of each of the required notices
described therein by:
(4) Requesting a copy by contacting the Debtors' claim agent
(the "Claim Agent") at The Trumbull Group, P.O. Box 721,
Windsor, Connecticut 06095, or
(5) Retrieving the Order to Show Cause, the Order, the Motion
and forms on the Claim Agent's website at
www.trumbullgroup.com.
ANY PROHIBITED ACQUISITION, DISPOSITION OR OTHER TRANSFER OF EQUITY
SECURITIES IN OR OF THE DEBTORS IN VIOLATION OF THE ORDER TO SHOW CAUSE OR
THE ORDER WILL BE NULL AND VOID AND MAY RESULT IN THE IMPOSITION OF
SANCTIONS BY THE BANKRUPTCY COURT.
2
PLEASE TAKE FURTHER NOTICE that the requirements set forth
in this Notice are in addition to the requirements of applicable securities,
corporate and other laws and do not excuse compliance therewith.
Dated: December , 2005
--
New York, New York
Respectfully submitted,
------------------------------
Richard M. Cieri (RC 6062)
Robbin L. Itkin (RI 1019)
Jonathan S. Henes (JH 1979)
KIRKLAND & ELLIS LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022-4675
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Attorneys for Debtors and Debtors in Possession
3