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):
SEPTEMBER 28, 2006 (SEPTEMBER 25, 2006)
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 "Bankruptcy 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 September 25, 2006, the Bankruptcy Court approved the
implementation of the 2006 Solutia Annual Incentive Program (the "Program").
The annual incentive-based bonus opportunities provided in the Program apply
to the majority of Solutia's employees, including its executive officers. The
Program provides for awards to be made to employees out of three categories of
incentive pools: awards for employees assigned to business divisions will be
paid primarily out of their respective business unit incentive pool (each a
"Business Unit Incentive Pool"), awards for employees assigned to
enterprise-wide functions will be paid out of a separately funded pool (the
"Core Function Incentive Pool") and all employees will be eligible to receive
payments out of the overall corporate discretionary bonus pool (the
"Enterprise Discretionary Bonus Pool").
Targeted payouts are set as a percentage of annual base salary and
vary by participant level in the organization. The target bonus opportunity
for the chief executive officer is 150% of annual base salary. For other
senior executive officers, the target bonus opportunities range from 75% to
100% of annual base salary. Actual awards are to be determined based on a
combination of unit (or enterprise) and individual performance. The objective
portion of bonuses based on unit or enterprise performance, as described
below, will be equal to 45% of each individual's target bonus, multiplied by
the relevant funding factor. The discretionary portion of each participant's
award will be based on a review of the participant's individual performance
against set goals and performance in relation to peers. The discretionary
portion of each participant's award is limited only by the aggregate amount
available in each individual's Business Unit Incentive Pool or the Core
Function Incentive Pool, less the aggregate amount to be awarded to
participants based on unit or enterprise performance, plus the amount in the
Enterprise Discretionary Incentive Pool. All participating employees are
eligible for discretionary awards from the Enterprise Discretionary Bonus Pool
at the discretion of Solutia's Chief Executive Officer and the Executive
Compensation and Development Committee of Solutia's Board of Directors (the
"ECDC"). Awards, if any, will be paid within two and one-half months following
the end of the 2006 calendar year. The Program will be administered by the
ECDC.
Each Business Unit Incentive Pool and the Core Function Incentive
Pool will be funded by an amount representing 90% of all aggregate target
bonuses for individuals assigned to such pool, multiplied by the applicable
funding factor for achievement of the established financial objectives. The
funding factors for each Business Unit Incentive Pool will be based on the
level of achievement of specific financial objectives, such as EBITDA, Free
Cash Flow and Gross Margin Percentage (all as defined in the Program),
established for each business division. The funding factor of the Core
Function Incentive Pool will be based on the level of achievement of specific
enterprise-wide financial objectives, such as enterprise EBITDAR (45%) and
Free Cash Flow (55%) (each as defined in the Program). The Enterprise
Discretionary Bonus Pool will be funded with the remaining 10% of all
aggregate target bonuses, multiplied by the applicable funding factor based on
the achievement of enterprise-level EBITDAR against established targets. The
Program will begin to provide awards to participants with the incentive pools
funded at a level of approximately 0.50 times the aggregate target payout
amounts for such pool. The incentive pools can be funded up to a maximum of
3.0 times the total of all target payout amounts.
The foregoing description of the Program does not purport to be
complete and is qualified in its entirety by reference to the Program, a copy
of which is attached as Exhibit 10.1 to this Report.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
Exhibit Number Description
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10.1 2006 Solutia Annual Incentive Program
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: September 28, 2006