S-4

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As Filed with the Securities and Exchange Commission on September 17, 2002

Registration No. 333-          

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933

SOLUTIA INC.
(Exact name of Registrant
as specified in its charter)

Delaware	and its Guarantor Subsidiaries	43-1781797
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Delaware	CPFilms Inc.	06-0385340
Delaware	Monchem, Inc.	43-1788418
Delaware	Monchem International, Inc.	43-1788416
Delaware	Solutia Systems, Inc.	43-1834280
(State or other jurisdiction of incorporation or organization)	(Exact name of Registrant as specified in its charter)	(I.R.S. Employer Identification No.)

575 Maryville Centre Drive
P.O. Box 66760
St. Louis, Missouri 63166-6760
(314) 674-1000
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive office)

Karl R. Barnickol, Esq.
Senior Vice President, General Counsel and Secretary
575 Maryville Centre Drive
P.O. Box 66760
St. Louis, Missouri 63166-6760
(314) 674-1000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:
R. Cabell Morris, Jr.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
(312) 558-5600

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

        If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o

        If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

        If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Security (1)	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
11.25% Senior Secured Notes due 2009	$223,000,000	100%	$223,000,000	$20,516
Guarantees of the 11.25% Senior Secured Notes due 2009	$223,000,000	None(2)	None(2)	None(2)

(1)

Estimated in accordance with Rule 457 under the Securities Act of 1993, as amended, solely for purpose of computing the registration fee.

(2)

Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is payable for the guarantees.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Prospectus (Subject to Completion, Dated September 17, 2002)

Solutia Inc.

Offer to Exchange

$223,000,000 of Our 11.25% Senior Secured Notes due 2009

•

The notes mature on July 15, 2009.



•

The notes (1) are our senior obligations, (2) rank equal in right of payment with all of our existing and future senior indebtedness and (3) will be guaranteed on a senior basis by all of our subsidiaries that guarantee our obligations under our amended and restated credit facility.




•

The notes and guarantees will be secured by either first- or second-priority liens on all of the domestic collateral securing our bank obligations. The first priority lien, which is shared with the lenders under our bank obligations and the holders of our outstanding publicly traded notes, is secured by two of our production facilities and the stock and intercompany debt of one of the subsidiary guarantors. The second-priority lien is secured by (1) certain of our other production facilities, which lien is shared with the lenders under our bank obligations and the holders of our outstanding publicly traded notes, and (2) substantially all of the stock of our other subsidiary guarantors, and our and the subsidiary guarantors' accounts receivable, inventory and certain intellectual property, which lien is not shared with others.




•

The notes bear interest at the rate of 11.25% per year, payable January 15 and July 15 of each year.




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The terms of the new notes that we will issue in the exchange offer will be substantially identical to the outstanding notes, except that transfer restrictions and registration rights relating to the outstanding notes will not apply to the new notes.^.The exchange offer expires at 5:00 p.m., New York City time, on                                , 2002, unless we extend it.




•

All outstanding notes that are validly tendered in the exchange offer and not withdrawn will be exchanged.




•

Tenders of outstanding notes may be withdrawn at any time before the expiration of the exchange offer.




•

There is no public market for the new notes.




•

We will not receive any proceeds from the exchange offer.




•

We will pay the expenses of the exchange offer.

Before participating in this exchange offer, please refer to the section in this prospectus entitled "Risk Factors" beginning on page 15.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                        , 2002.

You should rely only on the information contained in or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

TABLE OF CONTENTS

	Page
Summary	1
Risk Factors	15
Cautionary Statement About Forward-Looking Statements	25
Use of Proceeds	27
Ratio of Earnings to Fixed Charges	27
Capitalization	28
Selected Historical Consolidated Financial Data	29
Management's Discussion and Analysis of Financial Condition and Results of Operations	30
The Exchange Offer	50
Business	60
Management	77
Description of Certain Indebtedness	79
Description of Notes	81
Exchange Offer; Registration Rights	123
Certain United States Federal Tax Considerations	126
Plan of Distribution	127
Legal Matters	129
Experts	129
Where You Can Find More Information	129
Index to Financial Statements	F-1

        This prospectus contains summaries of the terms of certain documents. Such summaries are qualified in their entirety by reference to the full and complete text of such documents (copies of which will be made available to you upon request) for complete information with respect thereto.

INDUSTRY AND MARKET DATA

        In this prospectus we rely on and refer to information and statistics regarding our market share in the sectors in which we compete. We obtained this information and statistics from third-party sources that we believe are reliable, but have not independently verified them and cannot guarantee their accuracy or completeness.

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SUMMARY

This summary highlights information contained elsewhere in this prospectus and may not contain all of the information important to you. We urge you to carefully read this prospectus, including the "Risk Factors" section and the consolidated financial statements and related notes. In this prospectus, unless the context requires otherwise, "Solutia," the "company," "we," "us" and "our" each refers to Solutia Inc. and its subsidiaries.

The Exchange Offer

        The following summary is provided solely for your convenience. This summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this prospectus. For a more detailed description of the notes, see "Description of Notes."

The Exchange Offer	We are offering to exchange up to $223,000,000 in aggregate principal amount of our 11.25% Senior Secured Notes due 2009. The outstanding notes were originally issued and sold by SOI Funding Corp. on July 9, 2002, in reliance on an exemption from registration under the Securities Act. We assumed the obligations of SOI Funding under the notes on July 25, 2002.
	We believe you may offer the new notes for resale, resell and otherwise transfer them without compliance with the registration or prospectus delivery provisions of the Securities Act if:
		•	you are acquiring the new notes in the ordinary course of your business;
		•	you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the new notes issued to you; and
		•	you are not an affiliate, under Rule 405 of the Securities Act, of ours.
Expiration Date	The exchange offer, once commenced, will remain open for at least 20 business days and will expire at 5:00 p.m., New York City time, on                        , 2002, unless we decide to extend the expiration date, but in no event will we extend the expiration date past December 23, 2002.
Conditions to the Exchange Offer	We may end or amend the exchange offer if:
		•	any legal proceeding, government action or other adverse development materially impairs our ability to complete the exchange offer;
		•	any SEC rule, regulation or interpretation materially impairs the exchange offer; or
		•	we have not obtained all necessary governmental approvals with respect to the exchange offer.

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	Please refer to the section in this prospectus entitled "The Exchange Offer—Conditions to the Exchange Offer" for a complete discussion of these conditions. We may waive any or all of these conditions. At this time, there are no adverse proceedings, actions or developments pending or, to our knowledge, threatened against us that would prohibit us from completing the exchange offer. Furthermore, no federal or state governmental approvals are necessary to complete the exchange offer.
Withdrawal Rights	You may withdraw the tender of your outstanding notes at any time before 5:00 p.m., New York City time, on                        , 2002.
Procedures for Tendering Outstanding Notes	To participate in the exchange offer, you must:
		•	complete, sign and date the accompanying letter of transmittal, or a facsimile copy of the letter of transmittal; or
		•	tender outstanding notes following the procedures for book-entry transfer described on pages     to    .
	You must mail or otherwise deliver the documentation and your outstanding notes to HSBC Bank USA, as exchange agent, at one of the addresses listed on the letter of transmittal.
Special Procedures for Beneficial Owners	If you hold outstanding notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you should contact that person promptly if you wish to tender outstanding notes. Please refer to the section in this prospectus entitled, "The Exchange Offer—Procedures for Tendering Outstanding Notes" for more specific instructions on tendering your outstanding notes.
Guaranteed Delivery Procedures	If you wish to tender your outstanding notes and you cannot get required documents to the exchange agent on time, or you cannot complete the procedure for book-entry transfer on time, you may tender your outstanding notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer—Procedures for Tendering Outstanding Notes."
Use of Proceeds	We will not receive any proceeds from the exchange offer.
Federal Income Tax Consequences	The exchange of notes will not be a taxable event to you for United States federal income tax purposes. Please refer to the section in this prospectus entitled "Certain United States Federal Tax Considerations" for a more complete discussion of the tax consequences of tendering your outstanding notes in the exchange offer.
Exchange Agent	HSBC Bank USA is serving as exchange agent in the exchange offer. Please refer to the section in this prospectus entitled "The Exchange Offer—Exchange Agent" for more information on the exchange agent.

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The New Notes

        We use the term "notes" when describing provisions that apply to both the outstanding notes and the new notes. The new notes will evidence the same debt as the outstanding notes. The same indenture will govern both the outstanding notes and the new notes. Please refer to the section in this prospectus entitled "Description of Notes" for a more complete description of the terms of the notes.

Issuer	Solutia Inc.
Notes Offered	$223,000,000 aggregate principal amount of 11.25% Senior Secured Notes due 2009.
Maturity	July 15, 2009.
Interest Payments	January 15 and July 15, commencing January 15, 2003.
Guarantees	All of our subsidiaries that guarantee our obligations under our refinanced credit facility fully and unconditionally guarantee the notes on a senior joint and several basis. Certain of our future domestic subsidiaries will be required to execute similar guarantees. The subsidiary guarantees each rank in right of payment equal to each subsidiary guarantor's existing and future senior debt.
Collateral	Pursuant to collateral and pledge agreements, the notes and the guarantees are secured by:
		•	a first-priority lien, which is shared with (1) the lenders under our refinanced credit facility, the beneficiaries of our Astaris support agreement, the lessee under our co-generation lease facility at Pensacola, Florida and holders of certain designated letters of credit (collectively, the "bank obligations") and (2) holders of our outstanding publicly traded notes (together with the bank obligations, the "other secured obligations") on the following assets:
			•	our production facilities located in Pensacola, Florida and Martinsville, Virginia,
			•	100% of the stock of our subsidiary guarantor, CPFilms Inc., and
			•	all intercompany debt of CPFilms Inc.
	(collectively, the "first-priority collateral") and
		•	a second priority lien on the following assets on which the bank obligations have a first priority lien:
			•	65% of the voting stock (and 100% of all other stock) of Monchem International, Inc. and 100% of the stock of the remaining subsidiary guarantors, Monchem, Inc. and Solutia Systems, Inc.,
			•	all intercompany debt of and held by the subsidiary guarantors (other than CPFilms Inc.),
			•	substantially all of our and our subsidiary guarantors' accounts receivable and inventory and certain intellectual property, and

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		•	65% of the voting stock (and 100% of all other stock) of Solutia Europe, S.A./N.V. and Solutia U.K. Holdings Limited
(collectively, the "second-priority bank collateral"), and
	•	a second-priority lien, which is shared with all of the holders of the other secured obligations, on our production facilities located at:
		•	Chocolate Bayou, Texas,
		•	Decatur, Alabama,
		•	Indian Orchard, Massachusetts,
		•	Greenwood, South Carolina, and
		•	Trenton, Michigan
(collectively, the "second-priority facilities collateral," and together with the first-priority collateral and the second-priority bank collateral, the "collateral"). The holders of the bank obligations also have the benefit of a first-priority lien on the second-priority facilities collateral that is limited in amount to 15% of our consolidated net tangible assets, as the same may be increased from time to time, which as of the most recent relevant test date was $284.9 million (the "non-shared first lien amount"). The liens securing the notes and guarantees on the first-priority collateral and the second-priority facilities collateral will be released when the liens on such collateral securing the bank obligations have been permanently released. The liens securing the notes and guarantees on the second-priority bank collateral will be released if (1) the liens on such collateral securing the bank obligations have been released and (2) our entire credit facility is unsecured and the revolving credit facility portion thereof is in a minimum amount of $50 million and has a term of at least 364 days. If certain events of default with respect to our debt obligations, referred to as "triggering events," have occurred and are continuing, the proceeds of the second-priority facilities collateral in excess of the non-shared first lien amount and the first-priority collateral will be shared equally and ratably among the holders of the notes and all of the other secured obligations. At any time, the proceeds of any realization of the second-priority bank collateral will be applied first to retire the bank obligations and second to repay the notes. After giving pro forma effect to the application of the net proceeds of the offering of the outstanding notes, the aggregate principal amount of other secured debt outstanding as of June 30, 2002 would have been $1,209 million.

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Intercreditor Agreements	Pursuant to intercreditor agreements that were entered into concurrently with the collateral and pledge agreements, the second-priority liens securing the notes and the guarantees are expressly junior to the first-priority liens on the bank collateral and the second priority facilities collateral. In addition, under the intercreditor agreements, the liens securing the notes and the guarantees may not be enforced by the holders of the notes at any time when any bank obligations are outstanding, except for certain limited exceptions. Amendments or waivers by the holders of the bank obligations shall also be effective as to the liens securing the notes and the guarantees. Except for any time on and after a triggering event has occurred, the holders of the bank obligations will control the disposition of the collateral, and will receive all proceeds from sales of the collateral until the bank obligations are repaid in full.
	On and after the occurrence of a triggering event, collateral may not be sold without the consent of, among other parties, a majority in principal amount of the notes; however, the collateral may be sold in a foreclosure, regardless of whether such consent is given.
Ranking	The notes are senior obligations and rank equally in right of payment with all of our existing and future senior debt.
	The notes are structurally subordinated to all obligations of our subsidiaries that do not guarantee the notes with respect to the assets of those subsidiaries.
	At June 30, 2002, on a pro forma basis as if the offering of the outstanding notes had occurred on that date, we and the subsidiary guarantors would have had approximately $973 million of outstanding debt, and our non-guarantor subsidiaries would have had approximately $249 million of outstanding debt.
Change of Control	Upon a change of control of Solutia Inc., you will have the right to require us to repurchase all of your notes at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. We might not be able to pay you the required price for notes you request us to purchase at that time because we may not have enough funds or the terms of our other debt may prevent us from paying you. See "Description of Notes—Repurchase at Option of Holders—Change of Control."
Optional Redemption	At any time on or prior to July 15, 2005, we may redeem up to 35% of the notes with the net proceeds of one or more equity offerings, provided that
		•	we pay 111.25% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to the date of redemption and
		•	at least 65% of the aggregate principal amount of all notes issued under the indenture governing the notes remain outstanding afterward.
	See "Description of Notes—Optional Redemption."

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Covenants	The indenture limits our ability and the ability of our subsidiaries to:
		•	incur additional debt;
		•	pay dividends on our capital stock or repurchase our capital stock;
		•	make certain investments;
		•	enter into certain types of transactions with affiliates;
		•	limit dividends or other payments by our restricted subsidiaries to us;
		•	use assets as security in other transactions; and
		•	sell certain assets or merge with or into other companies.
	These covenants are subject to a number of important exceptions and limitations, which are described under the heading "Description of Notes—Certain Covenants."
Fall-Away of Certain Covenants	From the time the notes are rated investment grade by both Moody's and Standard & Poor's, many of the restrictive covenants will cease to apply.

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The Company

Overview

        We are a leading, global manufacturer and marketer of a wide variety of high-performance chemical-based materials used for a broad range of consumer and industrial applications. Our principal products and services include plastic films used to make laminated safety glass for automotive and architectural applications, branded resins and additives used to produce coatings and adhesives, nylon fibers used to manufacture commercial and residential carpets, and process research and development for the pharmaceutical industry. We own and operate 30 manufacturing facilities globally, including 15 facilities in the United States, and generated approximately 43% of our revenues from markets outside the United States in 2001. For the twelve months ended June 30, 2002, we had net sales of $2,723 million and adjusted EBITDA (as defined in note 2 under "—Summary Historical Consolidated Financial Data") of $253 million. At                        , 2002 our market capitalization was approximately $            million.

        Solutia Inc. was incorporated in April 1997 to hold most of the chemical businesses of the former Monsanto Company, now known as Pharmacia Corporation. On September 1, 1997, Monsanto distributed our shares as a dividend to Monsanto's stockholders, and we became an independent publicly held company listed on the New York Stock Exchange under the symbol "SOI".

        We have organized our operations into three business segments: Performance Films, Specialty Products and Integrated Nylon.

Performance Films

        Our Performance Films business is a leading global manufacturer of plastic interlayer for laminated safety glass. Performance Films products are used in automotive windshields and architectural applications and for electronic displays. Our products impart measurable benefits to glass: enhanced protection from shattering, noise reduction and UV protection. Our interlayer is marketed under the SAFLEX® and KEEPSAFE® families of products. Automobiles manufactured throughout the world are required to have laminated glass for their windshields. In addition to windshields, we also sell our interlayer for side and rear windows of automobiles as Enhanced Protective Glass, or EPG. Our window films for aftermarket installation on automobiles and buildings include the following leading brands: LLUMAR®, VISTA®, FORMULAONE PERFORMANCE AUTOMOTIVE FILMS® and GILA®. Our newest brand, VANCEVA™, combines our expertise in plastic interlayer products with our technology to add new features to film, such as design, color and enhanced sound protection, which provide new solutions for architectural and automotive glass systems. We also manufacture industrial films for use in high-tech electronic display applications. Our electronic display films offer electric conductivity and design capabilities.

        Our Performance Films business had net sales of $578 million for the twelve months ended June 30, 2002, representing approximately 21% of our total net sales.

Specialty Products

        Our Specialty Products business comprises Functional Solutions (formerly known as Resins and Additives and Industrial Products) and Pharmaceutical Services. Our Resins and Additives products include a diverse array of ingredients that provide durability to paints and other coatings; technical resins for specialty applications; and pressure-sensitive adhesives. We produce a range of environmentally friendly products, including waterborne alkyd resins for liquid coatings and solid resins for powder coatings. These products have experienced higher growth rates than solvent-based resins due to substitution trends in the United States and Europe. Pharmaceutical Services provides seamless

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development services—from process research to small scale-up manufacturing—for leading pharmaceutical and biotechnology companies. Pharmaceutical Services was formed by the acquisition of CarboGen and AMCIS in the first quarter of 2000. Our Industrial Products portfolio contains high-performance products, many of which are market leaders—including SKYDROL® aviation hydraulic fluids, THERMINOL® heat transfer fluids and DEQUEST® phosphonates water-treatment fluids.

        Our Specialty Products business had net sales of $891 million for the twelve months ended June 30, 2002, representing approximately 33% of our total net sales.

Integrated Nylon

        We are one of the world's few fully integrated producers of nylon 6,6, from intermediates to polymers, plastics, and fibers. Our nylon and acrylic fibers are used to make consumer goods such as wear-resistant carpeting, vibrant upholstery fabrics and tires. Many of our fibers are sold under widely recognized brand names such as WEAR-DATED® carpet and upholstery for consumers, and ULTRON® carpet for commercial markets. We expect that our branded products, which are principally distributed through nationally-recognized outlets such as Home Depot, Lowe's and Carpet One, will represent approximately 50% of our carpet fiber sales in 2002. We also produce nylon 6,6 resin, sold under the VYDYNE® and ASCEND® brand names, to the engineered thermoplastic and polymer markets. These resins are principally used to manufacture automotive products. Our intermediate products are used as feedstock for fiber and resin production and are also sold on the merchant market.

        Our Integrated Nylon business had net sales of $1,255 million for the twelve months ended June 30, 2002, representing approximately 46% of our total net sales.

Principal Equity Affiliates

        We participate in two principal joint ventures in which we maintain a 50% interest and share management control with other companies. Flexsys, a 50/50 joint venture with Akzo Nobel N.V., is a leading supplier of process chemicals to the rubber industry and is headquartered in Belgium. Astaris, a 50/50 joint venture with FMC Corporation, sells phosphorus and phosphate salts into the bakery, pharmaceutical, meat and poultry and industrial markets and is headquartered in the United States.

Recent Industry Conditions

        We are affected by economic conditions, particularly those in the domestic housing industry and global automotive industries. Each of these industries is cyclical. A general weakening of the economy in the United States and Europe in 2001 depressed consumer demand in these marketplaces, which negatively affected our sales for the year.

        Natural gas and propylene constitute our largest raw material costs. In January 2001, natural gas prices reached a high of nearly $10.00 per million British thermal units ("mmBtu"), versus a historical ten-year average price of $2.64/mmBtu. Slowing consumer demand negatively impacted the ability of chemical manufacturers, including us, to pass these rising costs on to customers. Though natural gas prices normalized in the second half of 2001, averaging $2.78/mmBtu, continued weak demand also limited the ability of chemical manufacturers to retain the benefit of decreasing raw material costs. This environment negatively affected our financial performance for the year.

        Contract propylene prices increased dramatically in the first half of 2000, rising from a historical ten-year average price of $0.17/lb to a high of approximately $0.26/lb in June 2000. Prices slowly declined during the second half of 2000, but remained elevated on a historical basis during the first quarter of 2001, averaging $0.21/lb. Following the adverse market conditions of 2000 and 2001, prices

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on key raw materials have returned to or fallen below historical levels. In the first half of 2002, natural gas prices averaged $2.96/mmBtu, while contract propylene prices averaged $0.17/lb.

        In addition to higher raw material costs, the nylon industry witnessed particularly weak demand in 2001. In response, nylon producers, including Solutia, and carpet manufacturers reduced operating rates and consequently depleted inventory through the production chain. However, beginning in the second quarter of 2001, declining raw material prices have helped to offset lower demand caused by the weak economic environment. In 2002, the industry continues to benefit from lower raw material prices. We expect that our Integrated Nylon business will also benefit from an economic recovery in the United States and Europe due to our significant operating leverage in the segment.

Competitive Strengths

        Leading market positions.    We have leading market positions for most of our principal products. For example, we are the leading global producer of polyvinyl butyral ("PVB"), the specialty resin used in the production of laminated safety glass. We are the only significant manufacturer of, or have leading positions in, a number of niche products in our Specialty Products segment. These products, including SKYDROL® aviation hydraulic fluids, THERMINOL® heat transfer fluids and DEQUEST® phosphonates water treatment fluids, benefit from distinct technical capabilities, unique properties and superior customer service. We also are the second largest North American producer of nylon fibers, which we competitively market on a branded and non-branded basis.

        Industry-leading technical and product development capabilities.    Our strong research and product development capabilities have resulted in the development of new products in many of our business segments. For example, in January 2002 at the North American International Auto Show in Detroit, Ford Motor Company and General Motors Corporation both unveiled concept vehicles that incorporate VANCEVA™ colored glass interlayer produced by our Performance Films business. These products enable designers to customize vehicles by color matching or contrasting the glass with a vehicle's paint. Our Specialty Products segment has developed low temperature vapor phase heat transfer fluids for processing of temperature sensitive polymers and developed biodegradable chelates and scale inhibitors to meet market needs for more environmentally friendly products. Our Integrated Nylon segment has introduced a new wear-resistant staple fiber system for carpet under the TRAFFIC CONTROL FIBER SYSTEM® brand name.

        Diverse business mix and high quality customer base.    We have a broad portfolio of products that are sold into a diverse array of applications and end-markets, including the automotive products, commercial carpet, architectural and pharmaceutical industries. Our customers represent the world's leading manufacturers in the industries we serve. These customers include DaimlerChrysler, General Motors, Ford, BMW, Weather-Shield, PPG and Pilkington, which purchase laminated safety glass manufactured with our PVB film. In our Specialty Products segment we have been awarded leading supplier status by customers such as Boeing for our aviation fluids. Additionally, as the second largest U.S. manufacturer of nylon 6,6, we supply leading national carpet manufacturers such as Mohawk, Shaw and Beaulieu. Our 10 largest customers have been with us for over 20 years and no single customer represented 10% or more of our net sales in 2001. We believe our broad product portfolio, diverse end markets and loyal, high quality customers lessen the impact of cyclicality within any one market on our combined operations.

        An increasingly global presence.    In addition to supplying our products to a wide variety of industries and customers, we have further reduced risk by geographically diversifying our business. We sell our products in more than 80 countries worldwide. Our sales for non-U.S. markets, including Europe, Canada, Latin America and Asia, have increased from 29% in 1998 to approximately 43% in 2001. Our products are sold globally through both a direct sales force and distributors.

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        Strong management team with extensive industry experience.    Our senior management team consists of professionals with long-term experience within our company or broad talents and expertise in the chemical industry. Our 8 senior executives have an average of over 26 years of experience in the chemical industry. Moreover, our senior management team is supported by business unit managers who have extensive experience within their respective industry segments.

Business Strategy and Financial Objectives

        Expand high margin, high growth businesses.    We plan to expand and grow our Performance Films and selected Specialty Products businesses through product development, new product introductions and prudent capital investments. In 2001, we introduced the VANCEVA™ brand of Advanced Solutions for Glass, which enables us to collaborate with customers to meet their specific needs for color, design and acoustic glazing in both automotive and architectural applications. We continue to work for the adoption of EPG in all glass openings of automobiles. EPG is currently a standard or an optional feature on 24 car models incorporating our SAFLEX® interlayer. In the rapidly evolving architectural segment, we created the Solutia Architectural Glazing Solutions Center to anticipate and satisfy developing needs for color, design and aesthetic choices. In the electronics sector, we are focusing on market-expanding opportunities in the growing electronics displays segment. In addition, we have dedicated resources to further building our world-leading LLUMAR® brand of window films in global markets.

        We plan to grow our state-of-the-art Pharmaceutical Services business through our unique combination of scientific expertise, efficient process management and unparalleled service. We significantly increased our sales in this business in 2001 and continue to view this area as a future growth opportunity. On May 31, 2002, we acquired Axio Research Corporation to complement our Pharmaceutical Services offerings. Axio is a contract research organization providing clinical trial design and data management to a wide range of clients including pharmaceutical, biotechnology and medical device companies as well as academic and government research groups. Our Resins and Additives business is backed by our global manufacturing and strong technical support capabilities. We continue to introduce technical solutions and provide application support to meet the rising demand for environmentally friendly coatings technologies. In Industrial Products, we continue to leverage our market-leading brands and pursue niche opportunities in new geographic markets.

        Optimize cash flow generation from our Integrated Nylon segment.    Our strategy is to maximize the value of our nylon businesses by leveraging our integrated position, aggressively managing our costs, as we have done through workforce reductions and improved operating efficiencies, and building on our leading brand names, such as WEAR-DATED®. For example, during the past several years, we extended the WEAR-DATED® brand to two new product lines: DURASOFT®, which offers exceptional softness and durability; and THERMASEALED®, which uses new technology to combine the look and feel of wool carpets with the reliability of nylon 6,6.

        Continue to improve our cost structure and capital efficiency.    We intend to continue to manage costs and capital effectively. Through headcount reductions and restructuring activities completed at the end of the first quarter of 2002, we achieved annual cost savings of $60 million. We also currently expect to achieve our goal of approximately $100 million in annual savings, relative to our 2000 costs, by the end of 2002. In addition, we reduced our capital expenditures for 2001 to $94 million from $221 million in 2000, and we expect that the level of capital expenditures in 2002 will be similar to or less than the amount spent in 2001. We believe these reductions in capital expenditures will improve our capital efficiency while allowing us to selectively invest in growth segments, take advantage of new markets and continue our product development efforts. In addition, we are continuing to efficiently manage working capital by maintaining inventory levels that are consistent with current market demand.

10

        Reduce debt.    We intend to use a significant portion of our cash flow from operations to reduce indebtedness. In addition, we plan to actively pursue divestments of non-strategic businesses and use proceeds from such divestitures to reduce debt, as was the case with our recent sale of our 50% interest in the Advanced Elastomer Systems joint venture for approximately $102 million.

        Re-establish an investment grade rating.    We are committed to the goal of re-establishing our investment grade rating through the execution of the business strategies and financial objectives discussed above.

Anniston Litigation

        We and the former Monsanto Company (now known as Pharmacia Corporation) are defendants in two principal tort cases claiming, among other things, property damage and personal injury arising out of the presence of PCBs in the Anniston, Alabama area: the Abernathy Litigation, involving approximately 3,500 plaintiffs, pending in Alabama state court, and the Tolbert Litigation, involving approximately 15,000 plaintiffs, pending in federal district court in Alabama. Pursuant to an agreement entered into at the time we were spun off as a separate company from the former Monsanto Company, we agreed to assume responsibility, and to indemnify Monsanto, for environmental liabilities related to the chemical businesses distributed to us.

        In the Abernathy Litigation, plaintiffs are seeking compensatory and punitive damages and injunctive relief requiring us to remove alleged contamination. On February 22, 2002, a jury returned a verdict for 17 plaintiffs on claims for property damage and exposure to PCBs. The trial court has not submitted the issue of compensatory damages for property claims to the jury for determination. Instead, the court has proceeded to hear damages evidence for each plaintiff making property claims. Personal injury claims have not yet been submitted by the court to the jury. Punitive damages, if any, will be determined at the end of the trial of all claims.

        We cannot predict the amount of damages we will have to pay, if any, or the timing of such payments with regard to these cases. The uncertain outcome of these cases could materially impact our ability to refinance our indebtedness as it comes due. For more information on this matter and the risks related thereto, see "Risk Factors—Risks Relating to Our Business—Legal proceedings and other claims could impose substantial costs on us."

Assumption

        The outstanding notes originally were issued by SOI Funding Corp., a Delaware corporation organized for the specific purpose of issuing the outstanding notes and placing the offering proceeds therefrom in escrow until such time as we amended our revolving credit facility and met specific other conditions to releasing the offering proceeds from escrow. On July 25, 2002 we (1) amended and restated our revolving credit facility, (2) assumed SOI Funding's obligations under the notes, and (3) satisfied the other conditions to releasing the offering proceeds from escrow. Having served its purpose in connection with our refinancing plan, SOI Funding was dissolved on July 31, 2002.

11

Summary Historical Consolidated Financial Data

        Our summary historical consolidated financial data as of December 31, 1997, 1998, 1999, 2000 and 2001 and for each of the years in the period then ended have been derived from our audited consolidated financial statements. The unaudited historical consolidated financial data as of June 30, 2001 and 2002 and for the six-month periods ended June 30, 2001 and 2002 was derived from our unaudited consolidated financial statements. The unaudited consolidated financial data reflect all normal recurring adjustments necessary for a fair presentation of these results. Our results of operations for the six-month period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the full fiscal year 2002. The information in this table is qualified in its entirety by, and you should read it in conjunction with, our consolidated financial statements, including the notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus or as previously filed with the SEC.

			Year Ended December 31,															Six Months Ended June 30,
			1997(1)			1998			1999			2000			2001			2001			2002
			(dollars in millions)
Operating Results:
	Net Sales:
		Performance Films	$	651		$	570		$	669		$	692		$	591		$	310		$	297
		Specialty Products		635			775			760			1,004			918			485			458
		Integrated Nylon		1,669			1,497			1,407			1,490			1,308			689			636
		Intersegment Sales		(23	)		(7	)		(6	)		(1	)		—			—			1
		Other Revenues		7			—			—			—			—			—			—
	Total Net Sales			2,969			2,835			2,830			3,185			2,817			1,484			1,390
	Gross Profit			653			750			652			486			429			256			259
		As percent of net sales		22	%		26	%		23	%		15	%		15	%		17	%		19	%
	Marketing, Administrative and Technological Expenses			363			364			355			429			401			197			191
	Amortization Expense			—			—			3			33			34			16			2
	Operating Income (Loss)			290			386			294			24			(6	)		43			66
		As percent of net sales		10	%		14	%		10	%		1	%		—			3	%		5	%
	Equity Earnings of Unconsolidated Affiliates			31			25			36			35			(13	)		12			12
	Interest Expense			41			43			40			83			90			(44	)		(44	)
	Income (Loss) from Continuing Operations before Income Taxes and Change in Accounting Principle			290			375			303			41			(77	)		48			43
	Net Income (Loss)(2)			192			249			206			49			(59	)		35			(130	)
Balance Sheet Data:
	Cash and Cash Equivalents		$	24		$	89		$	28		$	19		$	23		$	17		$	13
	Property, Plant & Equipment, net			923			944			1,316			1,205			1,143			1,157			1,137
	Total Assets			2,768			2,765			3,770			3,581			3,408			3,458			3,200
	Total Debt			790			597			1,313			1,278			1,310			1,367			1,222
	Total Shareholders' Equity (Deficit)			(131	)		(7	)		82			(34	)		(113	)		(52	)		(158	)
Selected Financial Data:
	Adjusted EBITDA(3)		$	519		$	533		$	506		$	373		$	244		$	133		$	142
	Depreciation and Amortization			145			147			151			191			184			90			76
	Capital Expenditures			165			158			257			221			94			43			31
Cash provided by (used in):
	Operating activities		$	159		$	537		$	364		$	244		$	44		$	(82	)	$	49
	Investing activities			(158	)		(144	)		(1,062	)		(111	)		(86	)		(29	)		52
	Financing activities			23			(328	)		637			(142	)		46			109			(111	)

	Twelve Months Ended June 30, 2002
Pro Forma Financial Data(4):
Adjusted EBITDA(3)	$	253
Interest Expense(5)		110
Total Debt(5)		1,211
Ratio of Total Debt to Adjusted EBITDA(3)		4.8
Ratio of Adjusted EBITDA to Interest Expense(3)		2.3

(footnotes begin on following page)

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(1)

Net Sales in 1997 for individual segments do not reflect adjustments made to reported amounts for 1998 through 2001 in connection with the realignment of our business segments in 2001.

(2)

Net income (loss) includes restructuring charges and other items of $1 million in 1998, $38 million in 1999, $74 million in 2000 and $79 million in 2001. Net income (loss) includes a gain of $17 million, resulting from an insurance settlement associated with a fire at our Wiesbaden, Germany production facility, for the six months ended June 30, 2001. Net income (loss) includes a charge for the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," of $167 million, for the six months ended June 30, 2002.

(3)

Adjusted EBITDA is defined as operating income plus depreciation and amortization and excludes certain cash and non-cash charges, as identified in the table below. Adjusted EBITDA is not a measure of performance under generally accepted accounting principles and should not be used in isolation or as a substitute for net income, cash flows from operating activities or other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Adjusted EBITDA information is included because we believe that certain investors may use it as supplemental information to evaluate a company's ability to service debt. The definition of Adjusted EBITDA used in this prospectus may not be comparable to the definition used by other companies.

	Year Ended December 31,													Six Months Ended June 30,
	1997			1998		1999			2000		2001			2001		2002
	(dollars in millions)
Operating Income (Loss)	$	290		$	386	$	294		$	24	$	(6	)	$	43	$	66
Add Depreciation & Amortization		145			147		151			191		184			90		76
Adjustments:
Severance Charges(a)		(8	)		—		(2	)		50		11			—		—
Restructuring Charges(b)		—			—		28			8		—			—		—
Non-Performing, Non-Strategic Asset Write Downs(c)		—			—		6			100		1			—		—
Increases to Environmental and Self-Insurance Reserves (d)		92			—		29			—		54			—		—
Adjusted EBITDA	$	519		$	533	$	506		$	373	$	244		$	133	$	142

(a)

Severance charges represent the following:



•

In 1997, an $8 million reversal of excess restructuring reserves related to facilities closures.



•

In 1999, a $2 million reversal of excess restructuring reserves related to headcount reductions and facilities closures.



•

In 2000, a $50 million charge for workforce reductions of approximately 700 people across all world areas and functions of the Company.



•

In 2001, an $11 million charge for additional severance charges to cover cost overruns associated with the 2001 restructuring program.

(b)

Restructuring charges represent the following:



•

In 1999, a $28 million charge related to exiting Integrated Nylon's ammonia business.



•

In 2000, an $8 million charge recorded in Specialty Products related to exiting operations at the Port Plastics site in Addyston, Ohio.

(c)

Non-performing and non-strategic asset write downs represent the following:



•

In 1999, a $6 million charge to write down an Integrated Nylon bulk continuous filament spinning machine.



•

In 2000, a $76 million charge recorded in Integrated Nylon to write down certain non-performing and non-strategic production assets, a $15 million charge recorded in Specialty Products to write down chlorobenzenes' production assets, a $6 million charge to write down certain capitalized software costs related to the formation of the Astaris joint venture and a $3 million charge for the closure of certain non-strategic facilities.



•

In 2001, a $1 million charge to write down certain intangible assets in Specialty Products.

(d)

Increases to environmental and self-insurance reserves represent the following:



•

In 1997, a $92 million charge to increase environmental reserves because of the adoption of Statement of Position No. 96-1 and for changed circumstances relating to the ultimate outcome of previously known environmental matters.



•

In 1999, a $29 million charge for the anticipated settlement of certain pending property claims related to the Anniston, Alabama plant site.

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•

In 2001, a $34 million charge to increase environmental reserves which reflects revised estimates for changed circumstances relating to the ultimate outcome of previously known environmental matters relating to solid and hazardous waste remediation of products that are no longer produced. These revised estimates were based upon agreements completed with environmental authorities and the availability of new information from recently completed environmental studies.



•

In 2001, a $20 million charge to increase self-insurance reserves which was necessary to bring the aggregate self-insurance liability to an appropriate balance based upon recent loss experience and recently updated actuarial assumptions. The majority of our self-insurance reserves are associated with estimated product liabilities that we inherited in the spinoff from Monsanto Company in 1997 and products that are no longer produced.

(4)

The pro forma data gives effect to the offering of the outstanding notes and the use of proceeds therefrom as if the offering occurred on July 1, 2001.

(5)

Pro forma interest expense and total debt are calculated after giving effect to the offering of the outstanding notes and the use of proceeds as set forth in "Use of Proceeds." These pro forma amounts do not reflect changes in interest rates under the revolving credit facility.

Risk Factors

        You should consider carefully all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth in the section entitled "Risk Factors" for an explanation of certain risks of participating in the exchange offer.

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RISK FACTORS

In considering whether to tender your outstanding notes in the exchange offer, you should carefully consider all the information we have included or incorporated by reference in this prospectus. In particular, you should carefully consider the risk factors described below.

Risks Relating to the Notes

Our substantial debt could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes.

        We and our consolidated subsidiaries have substantial indebtedness and, as a result, significant debt service obligations. At June 30, 2002, we had outstanding debt of $1,222 million, constituting approximately 115% of our total capitalization, and a total shareholders' deficit of $158 million. For each of the twelve months ended December 31, 2001 and June 30, 2002, interest expense of Solutia and its consolidated subsidiaries was, respectively, $90 million and $90 million. Earnings for each of the twelve months ended December 31, 2001, and June 30, 2002, were insufficient to cover fixed charges by $29 million and $18 million, respectively. At June 30, 2002, our bank credit agreements permitted us to incur $375 million of additional debt under our existing credit facility. Our credit facility and the indentures governing the notes and our other notes and debentures permit us and our consolidated subsidiaries to incur or guarantee certain additional indebtedness, subject to certain limitations.

        Our substantial level of debt and these significant demands on our cash resources could have important effects on your investment in the units. These effects may include:

•

making it more difficult for us to satisfy our obligations with respect to the notes and our other debt;



•

limiting our ability to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, research and development efforts, acquisitions, investments, debt service requirements and other general corporate obligations;



•

increasing our vulnerability to general economic downturns and adverse competitive and industry conditions, which could place us at a competitive disadvantage compared to our competitors that are less leveraged;



•

increasing our exposure to interest rate increases because a portion of our borrowings is at variable interest rates;



•

reducing the availability of our cash flow to fund our working capital requirements, capital expenditures, research and development, acquisitions, investments and other general corporate requirements because we will be required to use a substantial portion of our cash flow to service our debt obligations; and



•

limiting our flexibility in planning for, or reacting to, changes in our business and the chemical industry.

        Our ability to pay principal and interest on the notes and to satisfy our other debt obligations will depend upon our future operating performance and the availability of refinancing debt. If we are unable to service our debt and fund our business, we may be forced to reduce or delay capital expenditures, seek additional debt financing or equity capital, restructure or refinance our debt or sell assets.

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Our operations are restricted by the terms of our debt, which could adversely affect us.

        The indenture relating to the notes includes a number of significant restrictive covenants. These covenants could adversely affect us by limiting our ability to plan for or react to market conditions or to meet our capital needs. These covenants, among other things, restrict our ability and the ability of our subsidiaries to:

•

incur additional debt;



•

pay dividends on our equity interests or repurchase our equity interests;



•

make certain investments;



•

enter into certain types of transactions with affiliates;



•

limit dividends or other payments by our restricted subsidiaries to us;



•

use assets as security in other transactions; and



•

sell certain assets or merge with or into other companies.

        In addition, our refinanced credit facility requires us to maintain certain financial ratios and meet other financial tests. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we were unable to make this repayment or otherwise refinance these borrowings, the lenders under our refinanced credit facility could foreclose on our assets. If we were able to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely impacted by increased costs and rates.

The notes are our obligations and not obligations of our non-guarantor subsidiaries and will be effectively subordinated to the claims of our non-guarantor subsidiaries' creditors.

        The notes are our direct obligations and are guaranteed by substantially all of our domestic subsidiaries. All of our foreign subsidiaries and certain immaterial domestic subsidiaries are not guarantors of the notes. Our cash flow and our ability to service our debt, including the notes, depend partly upon the earnings of our non-guarantor subsidiaries. At June 30, 2002, the non-guarantor subsidiaries had approximately $249 million of outstanding debt.

        Our subsidiaries are separate and distinct legal entities. Except for the guarantors, our subsidiaries have no obligation to pay any amounts due on the notes or to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Payments to us by our subsidiaries will also be contingent upon our subsidiaries' earnings and business considerations. In addition, any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to statutory or contractual restrictions.

        Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of the notes to participate in those assets, will be effectively subordinated to the claims of that subsidiary's creditors, including senior debenture and note holders and bank and trade creditors. This means that the holders of that debt would have a claim prior to that of the noteholders with respect to the assets of that non-guarantor subsidiary. In addition, even if we were a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.

        At, and for the twelve months ended, June 30, 2002, the non-guarantor subsidiaries represented approximately 35% of our consolidated assets. To the extent we expand our foreign operations, a larger

16

percentage of our consolidated assets, net sales, EBITDA and operating income may be derived from non-guarantor subsidiaries. Our ability to repatriate cash from subsidiaries may be limited.

The collateral securing the notes is subject to control by other creditors. If there is a default, the value of the collateral may not be sufficient to repay the bank obligations, our outstanding publicly traded notes and the notes.

        The second-priority lien that secures the notes is expressly junior to the first-priority liens on the second-priority facilities collateral and the second-priority bank collateral. In addition, under the intercreditor agreements, the liens securing the notes may not be enforced by the holders of the notes at any time when any bank obligations are outstanding, except for certain limited exceptions. Provisions of the agreements relating to securing the notes may be amended or waived automatically upon comparable amendment or waiver of the collateral documents (except, in the case of releases of collateral, unless certain other conditions are met). Except on and after the occurrence of certain events of bankruptcy and acceleration under our debt obligations (any such event, a "triggering event"), the holders of the bank obligations will control the disposition of the collateral, and will receive all proceeds from the sale of the collateral until the bank obligations are repaid in full.

        The bank obligations are secured by a first-priority lien on all of the second-priority facilities collateral. This first-priority lien is limited in amount to 15% of our consolidated net tangible assets as of the most recent relevant test date, presently $284.9 million (the "non-shared first lien amount"). The non-shared first lien amount may be further increased from time to time as our tangible asset base grows. The remaining value of the second-priority facilities collateral provides a second-priority lien to equally and ratably secure the bank obligations, our outstanding publicly traded notes and the notes. Additional collateral, comprising substantially all of the stock of the subsidiary guarantors, accounts receivable, inventory and certain intellectual property, secures the bank obligations and provides a second-priority lien for the benefit of the holders of the notes. The liens securing the notes and guarantees on the first-priority collateral and the second-priority facilities collateral will be released when the liens on such collateral securing the bank obligations have been permanently released. The liens securing the notes and guarantees on the second-priority bank collateral will be released if (1) the liens on such collateral securing the bank obligations have been released and (2) our entire credit facility is unsecured and the revolving credit facility portion thereof is in a minimum amount of $50 million and has a term of at least 364 days. If a triggering event has occurred and is continuing, the proceeds of the second-priority facilities collateral in excess of the non-shared first lien amount and the first-priority collateral will be shared equally and ratably among the holders of the notes and all of the other secured obligations. At any time, the proceeds of any realization on the second-priority bank collateral will be applied first to retire the bank obligations and second to repay the notes.

        No appraisal of the value of the collateral has been performed in connection with this exchange offer, and the value of the collateral in the event of liquidation will depend on market conditions, the availability of buyers and other factors. We cannot assure you that the proceeds from the sale or sales of such collateral would be sufficient to satisfy the amounts outstanding under the notes and other obligations secured by the second-priority liens after payment in full of all obligations secured by the first-priority liens on the collateral. If such proceeds were not sufficient to repay amounts under the notes, then holders of the notes would have a general unsecured claim against our and the subsidiary guarantors' remaining assets that are not otherwise pledged to other creditors.

        The right of the collateral agent to foreclose upon and sell the collateral upon the occurrence of a default will also be subject to limitations under applicable bankruptcy laws if a bankruptcy proceeding is commenced against us or our subsidiaries.

17

We and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks described above.

        We and our subsidiaries may be able to incur substantial additional indebtedness in the future. We expect to incur additional indebtedness, including additional borrowings under our amended credit facility. The liens under our amended credit facility are effectively senior to the notes and the guarantees of the guarantors to the extent of the collateral securing those borrowings. In addition, under the terms of the intercreditor agreements, at any time that the bank obligations that have the benefit of the liens are outstanding, any actions that may be taken in respect of the collateral, including the approval of certain amendments to the collateral documents, waivers of past defaults, the ability to cause the commencement of enforcement proceedings and to control the conduct of such proceedings, will be at the direction of the holders of the bank obligations and the trustee, on behalf of the holders of the notes, will not have the ability to control or direct such actions, even if the rights of the holders of the notes are adversely affected. If additional new debt is added to our current debt levels, it could have an adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations on the notes.

Federal and state statutes allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors.

        Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor, if the guarantor at the time it incurred the indebtedness evidenced by its guarantee:

•

received less than reasonably equivalent value or fair consideration for the incurrence of its guarantee and was insolvent or rendered insolvent by reason of such incurrence;



•

was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or



•

intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.

        The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:

•

the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;



•

the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or



•

it could not pay its debts as they become due.

        The indenture requires that certain future domestic subsidiaries guarantee the notes. These considerations will also apply to their guarantees.

        On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its guarantee of the notes and its guarantee of our amended credit facility, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making such determinations or that a court would agree with our conclusions in this regard. If a court did not agree

18

with our conclusions, it could void the guarantees of the notes by one or more of our subsidiaries and require you to return any payments received from such subsidiaries.

We may not have the ability to raise the funds to purchase notes upon a change of control as required by the indenture.

        Upon the occurrence of certain change-of-control events, each holder of notes may require us to repurchase all or a portion of its notes at a purchase price equal to 101% of the principal amount thereof, plus accrued interest. Our ability to repurchase the notes upon a change of control will be limited by the terms of our other debt. Upon a change of control, we may be required immediately to repay the outstanding principal, any accrued interest and any other amounts owed by us under our amended credit facility. We cannot assure you that we would be able to repay amounts outstanding under our amended credit facility or obtain necessary consents under the amended credit facility to repurchase the notes. Any requirement to offer to purchase any outstanding notes may result in our having to refinance our outstanding indebtedness, which we may not be able to do. In addition, even if we were able to refinance this indebtedness, the financing may not be on terms favorable to us.

Servicing our debt obligations requires a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.

        Our ability to satisfy our debt service obligations will depend, among other things, upon our future operating performance and our ability to refinance indebtedness when necessary. Each of these factors largely depends on economic, financial, competitive and other factors beyond our control. If, in the future, we cannot generate sufficient cash from our operations to meet our debt service obligations, we may need to reduce or delay capital expenditures or curtail research and development. In addition, we may need to refinance our debt, obtain additional financing or sell assets, which we may not be able to do on commercially reasonable terms, if at all. Our business may not generate sufficient cash flow to satisfy our debt service obligations, and we may not be able to obtain funding sufficient to do so.

Restrictions imposed by the indenture and our amended credit facility may limit our ability to finance future operations or capital needs or engage in other business activities that may be in our interest. Our failure to comply with these restrictions could lead to an acceleration of our indebtedness.

        The indenture relating to the notes and our amended credit facility contain numerous financial and operating covenants that, among other things, limit our and our subsidiaries' ability to (1) incur additional indebtedness, (2) repurchase or redeem capital stock, (3) create liens or other encumbrances, (4) make certain payments and investments, including dividend payments other than our normal cash dividend, (5) sell or otherwise dispose of assets, (6) merge or consolidate with other entities or (7) engage in certain transactions with subsidiaries and affiliates. Our amended credit facility also requires us to meet certain financial ratios and tests. Agreements governing future indebtedness could also contain significant financial and operating restrictions. Our ability to comply with these restrictions may be affected by the other factors discussed in this section, "—Risks Relating to Our Business," and factors beyond our control. A failure to comply with the obligations contained in our amended credit facility or our indentures could result in an event of default under our amended credit facility or the indentures, which could permit acceleration of the related debt and acceleration of debt under other instruments that may contain cross-acceleration or cross-default provisions. We are not certain whether we would have, or be able to obtain, sufficient funds to make these accelerated payments. If not, the notes would likely lose much or all of their value.

19

You may find it difficult to sell your new notes because no public trading market for the new notes exists.

        The new notes are a new issue of securities for which there is currently no active trading market. The new notes will be registered under the Securities Act, but will constitute a new issue of securities with no established trading market. We do not intend to list the new notes on any national securities exchange or to seek the admission of the new notes for quotation through the Nasdaq Stock Market, Inc. In addition, the new notes will not be eligible for trading on the Private Offerings, Resales, and Trading through Automatic Linkages Market, also known as the PORTAL Market. PORTAL is a computerized communications facility for primary offering and secondary trading of securities that are eligible for resale pursuant to Rule 144A and that are (1) restricted securities, as defined in Rule 144(a)(3), or (2) contractually required to be resold only in compliance with Rule 144, Rule 144A, Regulation S or in secondary private placements. If the new notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our financial condition, performance and prospects.

        Accordingly,

•

a market for the new notes may not develop;



•

you may not be able to sell your new notes; and



•

you may not be able to sell your new notes at any particular price.

If you do not exchange your outstanding notes for new notes, your notes will continue to have restrictions on transfer.

        If you do not exchange your outstanding notes for new notes in the exchange offer, or if your outstanding notes are tendered but not accepted, your notes will continue to have restrictions on transfer. In general, you may offer or sell any outstanding notes only if the notes are registered under the Securities Act and applicable state laws, or resold under an exemption from these laws. We do not intend to register the outstanding notes under the Securities Act, other than in the limited circumstances described in the registration rights agreement discussed in the section "Exchange Offer; Registration Rights."

The issuance of the new notes may adversely affect the market for outstanding notes.

        If outstanding notes are tendered for exchange, the trading market for untendered and tendered but unaccepted outstanding notes could be adversely affected. Please refer to the section in this prospectus entitled "The Exchange Offer—Consequences of Failure to Exchange."

Risks Relating to Our Business

Legal proceedings and other claims could impose substantial costs on us.

        As a manufacturer of chemical-based materials, we have lawsuits involving environmental and product liability claims filed against us from time to time. We are defending a number of legal proceedings primarily relating to former operations, including claims for personal injury and property damage arising out of releases of or alleged exposure to materials that are classified as hazardous substances under federal environmental law. Some of these proceedings have also been brought against our former parent, the former Monsanto Company (now known as Pharmacia Corporation), which we have agreed to indemnify for the claims. Before merging with Pharmacia & Upjohn, Monsanto conducted many of the businesses we now operate that are the subject of these lawsuits.

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        The most significant claims involve allegations of personal injury and property damage associated with the former manufacture of polychlorinated biphenyls, which are known as "PCBs," and related releases of PCBs at our Anniston, Alabama facility. Four cases originally filed in Circuit Court for Calhoun County, Alabama on behalf of approximately 3,500 individuals living or working near the Anniston facility (the "Abernathy Plaintiffs") were consolidated for trial. In February 2002, a jury returned a verdict for the plaintiffs in the first phase of the trial relating to claims of property damage and exposure to PCBs made by 16 individuals and one business from the larger group of plaintiffs. The verdict found us liable with respect to all counts before the jury, including negligence, wantonness, trespass, nuisance, outrage and suppression of truth. The jury has yet to return a finding with respect to damages, but the verdict carries the possibility of both compensatory and punitive damages.

        In February 2002, the Attorney General of Alabama, the Alabama Department of Environmental Management and certain district attorneys intervened in the Abernathy case, seeking an order that directs the defendants to fund an investigation of the extent of the PCB contamination and the setting of a schedule and procedures for remediation. We believe that the filing of a partial consent decree by the EPA ("PCD") in federal court has preempted the jurisdiction of the state court to prescribe any remedial action directed to PCB issues in Anniston.

        If damages are awarded against us, we would appeal on all available grounds. We believe that we have meritorious grounds for appeal; however, there can be no guarantee any such appeal would be successful. Also, in order to appeal any lower court judgment, we would be required to post a surety bond. Such a bond is often required to be collateralized.

        Pharmacia, our co-defendant in these cases, has agreed to obtain a surety bond if it is able to do so on commercially reasonable terms if needed and if we do not obtain the bond. If Pharmacia obtains an appeal bond without providing collateral, any decisions regarding management or settlement of this litigation would be jointly controlled by us, Pharmacia, and Monsanto (the new company that Pharmacia spun off on August 13, 2002) with each company having an equal vote. If such a bond is required to be secured by collateral, Solutia would have the right to provide the collateral and control any settlement decisions regarding these cases. If Solutia does not provide the required collateral, then Monsanto would have the option to provide the collateral and would then control any settlement decisions regarding these cases. If Monsanto does not provide the required collateral, then Pharmacia would provide the necessary collateral and would assume control of any settlement decisions in these cases.

        We have insurance coverage that we believe would be available to mitigate potential damages in these cases. However, there is no assurance that our available insurance will cover all claims, or that our insurers will not challenge coverage for certain claims, or that the final damage award will not exceed our available insurance coverage. Any of the foregoing may have a material adverse effect on our results from operations, financial position, liquidity, and our ability to satisfy our financial obligations.

        Another Anniston lawsuit, originally filed in federal court in Birmingham, Alabama, on behalf of 1,116 minor plaintiffs, now involves approximately 15,000 adult and minor plaintiffs. These plaintiffs claim to suffer unspecified injuries from exposure to PCBs and assert their right to medical monitoring and testing, and seek compensatory and punitive damages in unspecified amounts. This lawsuit is scheduled to go to trial in or after February 2003.

        There is little, if any, precedent available for use in predicting potential outcomes in the Anniston litigation and, at this stage of the proceedings, we cannot reasonably determine the extent of liability or the amount of any damages. We cannot predict the amount of damages we will have to pay, if any, or the timing of such payments with regard to these cases. The uncertain outcome of these cases could materially impact our ability to refinance our indebtedness as it comes due.

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        We also manufactured PCBs at one of our facilities in Illinois. Remediation of PCBs found off the plant site is proceeding under the supervision of the EPA. Although there are no pending lawsuits from third parties in Illinois similar to those related to the Anniston plant, we can give no assurance that such lawsuits will not be filed against us.

        In addition to any damages that we may have to pay in connection with our PCB litigation, our business and proposed remedial actions may also be negatively affected by publicity relating to these lawsuits. Major newspapers, magazines and television networks have run or may run stories with respect to our role in the manufacture of PCBs and the effect such operations allegedly have had on the communities in which we operate or have operated.

We manufacture products for highly competitive, cyclical end markets.

        We sell our products into cyclical end markets such as the domestic housing industry and global automotive industries. A general weakening of the economy in the United States and Europe in 2001 depressed consumer demand in these marketplaces, which negatively affected our sales for the year. As long as these conditions exist, they will continue to have a negative effect on our volumes and operating margins.

        The global markets in which our chemical businesses operate are highly competitive. Competition is based on a number of factors, such as price, product quality and service. In addition, some of our competitors may have greater financial, technological and other resources than ours, and may be better able to withstand changes in market conditions. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than we can. Consolidation of our competitors or customers may also have an adverse effect on us. In addition, global competition and customer demands for efficiency will continue to make price increases difficult. The occurrence of any of these events could adversely affect our financial condition and results of operations.

Our business fluctuates materially due to external factors which may negatively affect our financial condition and results of operations.

        External factors beyond our control, such as general economic conditions described above, competitor actions, international events and governmental regulation in the United States and abroad, can cause fluctuations in demand for our products, fluctuations in prices and margins and volatility in the price of raw materials that we purchase. In particular, demand within the primary end-markets for our products is generally a function of regional economic conditions in geographic areas in which sales are generated. For example, in 2001, a decline in the U.S. economy reduced market demand in all business segments, which adversely affected our results of operations. These external factors can magnify the impact of industry cycles. As a result, our income and cash flow fluctuate significantly.

        As a result of demand, we may operate individual facilities below or above rated capacities, may idle individual facilities or may shut down and restart individual facilities in any period. During 2001, we reduced operating rates in all segments, thereby increasing our per unit cost of products sold. It is possible that lower demand in the future will cause us to reduce operating rates.

Increased raw material and energy costs may reduce our income.

        We purchase large amounts of commodity raw materials, including natural gas, propylene, cyclohexane and benzene. While temporary shortages of raw materials and energy may occasionally occur, these items are generally sufficiently available to cover current and projected requirements. We typically purchase major requirements for key raw materials under medium-term contracts. However, their prices fluctuate under these contracts as a result of unscheduled plant interruptions and domestic and world market conditions.

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        For example, during 2000, the cost of many of our raw materials increased significantly as the price of crude oil increased above $30 a barrel. During the second half of 2000, natural gas escalated in price to nearly $10 per MMBtu. Given our competitive markets, it is often not possible to pass all of these increased costs on to our customers. While prices have now dropped, raw material and energy costs may increase significantly again. A return of high raw material and energy costs could significantly reduce our operating margins in the future.

Operating problems in our business may materially adversely affect our financial condition and results of operations.

        The occurrence of material operating problems at our facilities, including but not limited to the events described below, may have a material adverse effect on the productivity and profitability of a particular manufacturing facility, or on our operations as a whole, during and after the period of the operational difficulties. Our income is dependent on the continued operation of our various production facilities. Our manufacturing operations are subject to the usual hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes, including pipeline leaks and ruptures, explosions, fires, inclement weather and natural disasters, mechanical failure, unscheduled downtime, labor difficulties and transportation interruptions.

Because we operate worldwide, we are affected by risks of doing business abroad. Our results of operations may be adversely affected by currency risk or political instability.

        We generate revenue from export sales as well as from operations conducted outside the United States. Approximately 43% of our consolidated sales in 2001 were made into markets outside the United States including Europe, Canada, Latin America and Asia. Operations outside the United States are potentially subject to a number of risks and limitations that are not present in domestic operations, including fluctuations in currency values, trade restrictions, investment regulations, governmental instability and other potentially detrimental governmental practices or policies affecting companies doing business abroad. Our Performance Films and Specialty Products segments are particularly dependent on their international operations. Approximately half of the sales of the Performance Films segment and two-thirds of the sales of the Specialty Products segment were made into markets outside the United States. Identifiable assets of the non-United States operations represented approximately 26% of total identifiable assets at December 31, 2001, and approximately 28% of total identifiable assets at June 30, 2002.

        The functional currency of each of our non-United States operations is the local currency. Exchange rates between these currencies and U.S. dollars have fluctuated significantly in recent years and may do so in the future. Unfavorable currency exchange rates adversely affected our revenues and net income in 2000 and 2001. We cannot predict future events, which may significantly increase or decrease the risk of future movement in foreign currencies in which we conduct our business. We generate revenue from export sales and operations conducted outside the United States that may be denominated in currencies other than the relevant functional currency. It is possible that fluctuations in foreign exchange rates will have a negative effect on our results of operations. Additionally, we generate revenues from sales in countries that may experience greater degrees of economic and political uncertainty than those experienced by us in the United States.

Environmental and regulatory compliance imposes substantial costs on us.

        In 2001 we spent approximately $7 million for environmental capital projects and approximately $122 million for the management of environmental programs, including the operation and maintenance of facilities for environmental control, of which $40 million was charged against recorded environmental liabilities. During 2002 and 2003, we estimate that we will spend a total of approximately $26 million

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on additional capital projects for environmental protection and that expenses for the management of environmental programs in 2002 and 2003 will decrease slightly from 2001 levels.

        With respect to environmental remediation obligations, our policy is to accrue costs for remediation of contaminated sites in the accounting period in which the obligation is probable and the cost is reasonably estimable. Significant adjustments to these obligations resulted in the 2001 fourth quarter charges of $34 million ($22 million aftertax) to increase our environmental reserves. This action was required in order to reflect revised estimates for changed circumstances relating to the ultimate outcome of previously known environmental matters. These revised estimates were based upon further discussions with environmental authorities and the availability of new information from recently completed environmental studies. These events and activities help to better define and quantify our ultimate liability for these matters.

        At the time of our spinoff from the former Monsanto Company (now Pharmacia Corporation), we assumed liabilities related to specified proceedings under federal and state environmental remediation laws including the federal Comprehensive Environmental Response, Compensation & Liability Act, which is known as "Superfund." As a result, while Monsanto remains the named potentially responsible party or defendant for actions that occurred before the September 1, 1997 spinoff, we manage these proceedings and litigation against Monsanto and indemnify it for any costs, expenses and judgments arising from these proceedings and from the PCD described below.

        Our estimates of our liabilities for Superfund sites are based on evaluations of currently available facts with respect to each individual site and take into consideration factors such as existing technology, laws and agency policy and prior experience in remediation of contaminated sites. As assessments and remediation activities progress at individual sites, we review these liabilities periodically and adjust them to reflect additional technical, engineering and legal information that becomes available. We had an accrued liability of $25 million as of June 30, 2002, for Superfund sites. Major Superfund sites in this category include the noncompany-owned sites at Brio and MOTCO in Texas and Fike/Artel in West Virginia, which account for $17 million of the accrued amount. We spent approximately $8 million in 2001 for remediation of Superfund sites. Similar Superfund remediation costs are likely in future years.

        We had an accrued liability of $56 million as of June 30, 2002, for plants no longer in operation and third-party sites for which we assumed responsibility from Monsanto. Our estimate of our liability related to these sites is based on evaluations of currently available facts with respect to each individual site. The estimate takes into consideration factors such as existing technology, laws and agency policy and prior experience in remediation of contaminated sites. We spent $16 million in 2001 for remediation of these sites. Similar remediation costs for these kinds of sites are likely in future years.

        We had an accrued liability of $82 million as of June 30, 2002, for solid and hazardous waste remediation, and for post-closure costs at our operating locations. We accrue these post-closure costs over the estimated remaining useful life of the related facilities. We spent $16 million in 2001 for remediation of these facilities. Similar remediation costs for these kinds of sites are likely in future years.

        Our largest known environmental exposure arises from the alleged release of PCBs from our facility in Anniston, Alabama. Environmental remediation issues related to this facility relate principally to: (1) remediation of the seventy-acre plant site; (2) investigation and remediation of soil contamination at properties in the Anniston area; and (3) investigation and remediation of sediments in waterways and soils in flood plains impacted by discharges from the plant. We have tested and continue to test soils at residential properties in the Anniston area for PCBs and are conducting clean-ups where action levels are exceeded and access can be obtained pursuant to an administrative order on consent agreed to with the federal EPA. On March 25, 2002, we and Pharmacia entered into a PCD with EPA pursuant to Superfund for the area designated by EPA as the Anniston PCB site. It was lodged with

24

the U.S. District Court for the Northern District of Alabama; approval and entry by the Court is subject to a public comment period which ended June 3, 2002 and review by the Court of any objections. The PCD requires us and Pharmacia to conduct a remedial investigation and feasibility study, the results of which will be used by EPA to select a clean-up remedy for the Anniston PCB site, and to continue to address residential properties pursuant to the pre-existing removal order issued by EPA. Under the PCD, EPA has reserved the right to seek natural resource damages, if any, under Superfund allegedly caused by releases of PCBs, for example, in waterways used for recreational fishing.

        EPA has also reserved the right to seek remediation of alleged lead contamination in soil in the Anniston area. While we believe our operations did not contribute to any lead contamination, there can be no guarantee that significant costs will not be incurred to address it.

        Uncertainties related to all of our environmental liabilities include changing governmental policy and regulations, discovery of unknown conditions, the method and extent of remediation and future changes in technology. Because of these uncertainties, we estimate that potential future expenses associated with these liabilities could exceed the amounts reserved by an additional $20 million to $30 million. Although we cannot predict the ultimate costs and results of remediation of contaminated sites with certainty, we do not expect them to result in a material adverse effect on our consolidated financial position or liquidity, but they could have a material adverse effect on our net income in any one year. However, there can be no guarantee that the ultimate cost of remediation and related matters, including any natural resource damages, will not have a material adverse effect on our financial position.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

        We make statements in this prospectus and the documents incorporated by reference that are considered forward-looking statements under the federal securities laws. We consider all statements regarding anticipated or future matters, including the following, to be forward-looking statements:

•

our expected future financial position, liquidity, results of operations, profitability and cash flows;



•

dividends;



•

financing plans;



•

business strategy;



•

budgets;



•

projected cost reductions;



•

effect of changes in accounting due to recently issued accounting standards;



•

plans and objectives of management for future operations;



•

competitive position;



•

results of litigation;



•

growth opportunities for existing products and services;



•

price increases;



•

benefits from new technology; and



•

share repurchases.

        These statements are not guarantees of our future performance. They represent our estimates and assumptions only on the date we made them. There are risks, uncertainties and other important factors

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that could cause our actual performance or achievements to be materially different from those we may project. These risks, uncertainties and factors include:

•

general economic, business and market conditions, which affect us because some of our customers are in cyclical businesses;



•

lower prices for our products or a decline in our market share due to competition or price pressure by customers;



•

ability to implement cost reduction initiatives in a timely manner;



•

interest rate fluctuations;



•

customer acceptance of new products;



•

efficacy of new technology and facilities;



•

shortages or price increases of raw materials and energy;



•

currency fluctuations;



•

ability to acquire and integrate new businesses or divest existing businesses;



•

changes in U.S. and foreign laws and regulations; and



•

exposure to product liability and other litigation and cost of environmental remediation.

        These forward-looking statements represent our estimates and assumptions only on the date they were made. Many of the factors that will determine these items are beyond our ability to control or predict. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this prospectus or the date of any document incorporated by reference.

        All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date of this prospectus.

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USE OF PROCEEDS

        We will not receive any proceeds from the exchange offer. In consideration for issuing the new notes, we will receive in exchange outstanding notes of like principal amount, the terms of which are substantially identical in all material respects to the new notes. The outstanding notes surrendered in exchange for new notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the new notes will not result in any increase in our indebtedness. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer.

        We used the net proceeds of the offering of the outstanding notes to (1) make an irrevocable deposit of approximately $155 million with the trustee for our $150 million of outstanding 6.50% notes due 2002 to pay the principal and interest at their October 15, 2002 maturity date, (2) pay fees, expenses and other costs related to the amended credit facility, (3) cash collateralize certain outstanding letters of credit and (4) repay a portion of borrowings under our amended credit facility. As of June 28, 2002, we had approximately $425 million principal amount of borrowings under our previous credit facility with a weighted average maturity of 14 days and a weighted average interest rate of approximately 3.63%, and we had issued and outstanding approximately $50 million of letters of credit.

RATIO OF EARNINGS TO FIXED CHARGES

        The following table shows our consolidated ratio of earnings to fixed charges for the four-month period ended December 31, 1997, the fiscal years ended December 31, 1998, 1999, 2000 and 2001 and the six months ended June 30, 2002.

	Four Months Ended December 31,	Years Ended December 31,				Six Months Ended June 30,
	1997	1998	1999	2000	2001	2002
Ratio of Earnings to Fixed Charges	3.23	7.69	6.18	1.35	0.72	2.08

        We have calculated the ratio of earnings to fixed charges according to a formula the SEC requires us to use. This formula defines earnings generally as our pre-tax earnings from operations before equity earnings from affiliates, less interest expense and defines fixed charges generally as all interest and interest-related payments and accruals. Earnings include restructuring and other items of $72 million for the four months ended December 31, 1997, $61 million for the year ended December 31, 1999, $107 million for the year ended December 31, 2000 and $58 million for the year ended December 31, 2001. Earnings for the year ended December 31, 2001 would have to be $29 million higher in order to achieve a one-to-one ratio. If you would like to see how we have calculated these ratios, you should review Exhibit 12.1 to the registration statement of which this prospectus forms a part.

        We have not calculated the ratio of earnings to fixed charges for periods before September 1, 1997. Computation of the ratio of earnings to fixed charges is not meaningful before that date because we were not an independent company and the former Monsanto Company did not allocate debt to us.

        Because we have not issued any preferred stock to date, the ratio of earnings to fixed charges and preferred stock dividend requirements is identical to the ratio shown above.

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CAPITALIZATION

        The following table shows:

•

our capitalization as of June 30, 2002, and



•

our pro forma as adjusted capitalization, which reflects the offering of the outstanding notes and the application of the net proceeds therefrom as described in "Use of Proceeds".

        From time to time, we may issue additional debt or equity securities. You should read the following information in conjunction with our consolidated financial statements, including the notes to the consolidated financial statements, included below in this prospectus.

		June 30, 2002
		(Unaudited)
		Actual			Pro Forma As Adjusted
		(dollars in millions)
Revolving credit facility		$	425		$	382
6.500% notes due 2002(1)			150			—
6.250% euro notes due 2005			198			198
7.375% debentures due 2027			300			300
6.720% debentures due 2037			150			150
Outstanding notes issued on July 9, 2002			—			223
Other			2			2
Unamortized debt discount			(3	)		(44	)
	Total debt		1,222			1,211
Shareholders' Deficit:
Common stock (authorized, 600,000,000 shares, par value $0.01) Issued: 118,400,635 shares			1			1
Warrants issued on July 9, 2002			—			19
Net deficiency of assets at spinoff			(113	)		(113	)
Treasury stock, at cost (13,597,101 shares)			(250	)		(250	)
Accumulated other comprehensive loss			(62	)		(62	)
Reinvested earnings			266			266
	Total shareholders' deficit		(158	)		(139	)
	Total capitalization	$	1,064		$	1,072

(1)

To be repaid through the irrevocable deposit with the trustee for such notes of an amount sufficient to repay such notes at their maturity on October 15, 2002.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        Our selected historical consolidated financial data as of December 31, 1997, 1998, 1999, 2000 and 2001 and for each of the years in the period then ended have been derived from our audited consolidated financial statements. The unaudited historical consolidated financial data as of June 30, 2001 and 2002 and for the six-month periods ended June 30, 2001 and 2002 was derived from our unaudited consolidated financial statements. The unaudited consolidated financial data reflect all normal recurring adjustments necessary for a fair presentation of these results. Our results of operations for the six-month period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the full fiscal year 2002. The information in this table is qualified in its entirety by, and you should read it in conjunction with, our consolidated financial statements, including the notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus or as previously filed with the SEC.

			Year Ended December 31,															Six Months Ended June 30,
			1997(1)			1998			1999			2000			2001			2001			2002
			(dollars in millions)
Operating Results:
	Net Sales:
		Performance Films	$	651		$	570		$	669		$	692		$	591		$	310		$	297
		Specialty Products		635			775			760			1,004			918			485			458
		Integrated Nylon		1,669			1,497			1,407			1,490			1,308			689			636
		Intersegment Sales		(23	)		(7	)		(6	)		(1	)		—			—			1
		Other Revenues		7			—			—			—			—			—			—
	Total Net Sales			2,969			2,835			2,830			3,185			2,817			1,484			1,390
	Gross profit			653			750			652			486			429			256			259
	Marketing, Administrative and Technological Expenses			363			364			355			429			401			197			191
	Amortization expense			—			—			3			33			34			16			2
	Operating Income (Loss)(2)			290			386			294			24			(6	)		43			66
	Income (Loss) from Continuing Operations
		Before Income Taxes and Change in Accounting Principle		290			375			303			41			(77	)		48			43
	Net Income (Loss) (3)			192			249			206			49			(59	)		35			(130	)
Balance Sheet Data:
	Cash and Cash Equivalents		$	24		$	89		$	28		$	19		$	23		$	17		$	13
	Property, Plant & Equipment, net			923			944			1,316			1,205			1,143			1,157			1,137
	Total Assets			2,768			2,765			3,770			3,581			3,408			3,458			3,200
		Short-Term Debt		193			—			511			494			683			597			576
		Long-Term Debt		597			597			802			784			627			770			646
	Total Debt			790			597			1,313			1,278			1,310			1,367			1,222
	Total Shareholders' Equity (Deficit)			(131	)		(7	)		82			(34	)		(113	)		(52	)		(158	)
Selected Financial Data:
	Depreciation and Amortization		$	145		$	147		$	151		$	191		$	184		$	90		$	76
	Capital Expenditures			165			158			257			221			94			43			31
Share Data:
	Basic Earnings (Loss) per Share		$	1.63		$	2.16		$	1.86		$	0.46		$	(0.57	)	$	0.34		$	(1.24	)
	Diluted Earnings (Loss) per Share			1.55			2.03			1.80			0.46			(0.57	)		0.33			(1.24	)
	Dividends per Share			0.01			0.04			0.04			0.04			0.04			—			—

(1)

Net Sales in 1997 for individual segments do not reflect adjustments made to reported amounts for 1998 through 2001 in connection with the realignment of our business segments in 2001.

(2)

Operating income (loss) includes restructuring charges and other non-recurring items of $84 million in 1997, $1 million in 1998, $61 million in 1999, $158 million in 2000, and $78 million in 2001.

(3)

Net income (loss) includes restructuring charges and other items of $53 million in 1997, $1 million in 1998, $38 million in 1999, $74 million in 2000 and $79 million in 2001. Net income (loss) includes a gain of $17 million, resulting from an insurance settlement associated with a fire at our Wiesbaden, Germany production facility, for the six months ended June 30, 2001. Net income (loss) includes a charge for the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets," of $167 million, for the six months ended June 30, 2002.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This section presents information about our financial results for the six months ended June 30, 2002 and 2001 and for the years ended December 31, 2001, 2000 and 1999. You should read this information together with our consolidated financial statements, including the notes, included elsewhere in this prospectus.

        Effective January 1, 2001, we reorganized our management structure from a centralized organization to a decentralized organization. This change redefined segment profitability as the costs for certain functional services, which were previously managed centrally, are now reflected in the operating segments. In addition, certain product groups have been moved between operating segments in recognition of the new management structure and related product management responsibilities. The discussion in this section gives effect to this reorganization.

General

        Our operations have historically been influenced by a number of factors beyond our control that have, at times, had a significant effect on our financial performance. We sell primarily to cyclical markets in the United States and Europe (such as the housing, global automotive and textile industries) which are closely tied to conditions in domestic and global economies. These markets are influenced by factors such as sales of new and existing homes, the overall level of passenger car and light truck production and consumer spending. In addition to macro-economic conditions, raw material prices and energy prices can have significant effects on our operating results. Over the past 18 months, the slowdown in the U.S. and European economies has hurt demand for our products, and volatile energy prices dramatically increased our raw material costs in 2001 and 2000. In addition to being cyclical, some of our businesses are seasonal, particularly our Integrated Nylon business.

        The strength of our Performance Films business is linked to the overall strength of the automotive, construction and housing industries; however, due to our diversification between new and aftermarket applications (windshield, residential and commercial glass replacement), that business is less cyclical than either of the underlying industries. Organic growth rates in this business generally resemble GDP growth, however our product diversification in aftermarket applications and our exposure to various geographic regions provide us some protection in times of economic weakness. Demand for Performance Films tends to be stable during the course of the year.

        Our Resins and Additives business is linked to the performance of the overall economy in the markets in which we compete. This industry has been experiencing customer consolidation and globalization trends. We compete on the basis of service, price, and customized solutions for our customers. We will look to expand our presence in the United States and Asia by cross-selling products into these markets. In addition, a number of our specialty products businesses operate in niche markets such as industrial water treatment, functional fluids, plastic products and pharmaceutical services. We believe that demand for these products is relatively stable due to the overall lack of readily available substitutes that meet all of our customers' requirements for performance, reliability and service. Sales of our specialty products, while not large compared to our total sales, have historically grown at rates at or above those of GDP in the United States and Europe.

        The operations of our Integrated Nylon business are affected by a number of factors, including general economic conditions, raw material prices and supply and demand for both nylon and substitute products. Our Integrated Nylon business is also the most seasonal of our businesses, with our lowest sales levels typically occurring in the fourth quarter. Elevated raw material prices in 2000 and weakened U.S. and European economies in 2001 accentuated the typical seasonality patterns for that business. We would expect our nylon business to benefit from an economic recovery in the United States and

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Europe due to the significant restocking of inventory that will be required to support recovering economies and our significant operating leverage in the segment.

Results of Operations

Six Months Ended June 30, 2002 Compared with Six Months Ended June 30, 2001

        Net sales for the six-month period ended June 30, 2002, decreased by 6 percent as compared with the six-month period ended June 30, 2001. Sales decreases reflect lower average selling prices, and to a lesser extent, lower volumes.

Performance Films

        Performance Films' net sales for the first six months of 2002 decreased 4 percent in comparison to the first six months of 2001. Net sales decreased primarily because of lower average selling prices than those of the year-ago period due to competitive pricing pressures, partially offset by higher sales volumes. Higher CPFilms' window film sales were partially offset by decreased demand for SAFLEX® plastic interlayer products due to significantly lower sales to a large customer and lower specialty films sales into the electronic display market. Sales volumes will be negatively impacted by lower sales to this customer for the remainder of 2002.

        Performance Films' segment profit for the first half of 2002 increased 11 percent from the first half of 2001 because of lower raw material costs, lower marketing, administrative and technological spending, lower personnel expense associated with restructuring activities carried out during 2001 and lower amortization expense due to the adoption of SFAS No. 142. The impact of significantly lower sales volumes to the large Saflex customer on segment profitability is expected to be mostly offset by higher sales of SAFLEX® plastic interlayer products to other glass laminators, improved product mix and cost reductions.

Specialty Products

        Net sales in the Specialty Products segment decreased 6 percent for the six months ended June 30, 2002, over the comparable period of the prior year. The decrease in net sales was primarily caused by lower average selling prices than those of the year-ago period because of pricing pressures. Also, to a lesser extent, net sales were negatively impacted by lower volumes in the Resins and Additives business and lower sales of chlorobenzenes. Partially offsetting the decreases in average selling prices and sales volumes were modest volume increases in Pharmaceutical Services.

        Segment profit for the six-month period ended June 30, 2002, decreased 35 percent as compared to the six-month period ended June 30, 2001. Excluding a gain of $28 million ($17 million aftertax) recorded in the first quarter of 2001 from an insurance settlement, segment profit increased 17 percent primarily due to lower amortization expense due to the adoption of SFAS No. 142, lower raw material costs and lower personnel expense associated with restructuring activities carried out during 2001.

Integrated Nylon

        The Integrated Nylon segment's net sales for the six months ended June 30, 2002, decreased 8 percent as compared with the six months ended June 30, 2001 primarily due to declines in average selling prices in all businesses in this segment. Sales volumes were also down slightly from the comparable prior-year period. The effects of a weak U.S. economy continue to unfavorably impact average selling prices and volumes in comparison with 2001. Price decreases in all businesses were due to competitive pricing pressures. In addition, price decreases in intermediate chemicals also resulted from contracts with formula pricing tied to raw material costs. Carpet fiber sales experienced an unfavorable product mix, while achieving overall increases in volume.

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        Integrated Nylon's segment profit for the first half of 2002 was $19 million, up $15 million from the $4 million experienced for the first half of 2001. The increase resulted primarily from lower raw material and energy prices, lower marketing, administrative, and technological spending, lower personnel expense associated with restructuring activities carried out during 2001 and favorable manufacturing variances associated with higher capacity utilization rates. Segment profitability was negatively affected by approximately $6 million due to the temporary shutdown of the Chocolate Bayou Intermediates facility during the second quarter of 2002 because of a power outage.

Operating Income

        Operating income for the first six months of 2002 increased to $66 million from $43 million in the first six months of 2001. Excluding the effects of amortization expense from operating results for the six months ended June 30, 2001, associated with the adoption of SFAS No. 142, operating income for the six months ended June 30, 2002, increased $9 million from the prior year. The increase in operating income was primarily driven by the lower raw material and energy costs, lower personnel costs resulting from restructuring activities carried out during 2001 and lower marketing, administrative and technological expenses, partially offset by a year-over-year increase in corporate expenses of approximately $5 million due to protracted litigation in Anniston, Alabama.

Equity Earnings from Affiliates—net of tax

        Equity earnings from affiliates was $12 million in the first half of 2002, even with the comparable period of 2001. Excluding the loss of income from the sale of our 50 percent interest in the Advanced Elastomer Systems joint venture during the first quarter of 2002, equity earnings increased by $4 million. The increase is primarily due to higher earnings from the Astaris joint venture.

Other Income—Net

        Other income—net for the six months ended June 30, 2002, was $9 million compared to $37 million for the same period in 2001. The six months ended June 30, 2002, includes a $5 million ($3 million aftertax) gain from the sale of our 50 percent interest in the Advanced Elastomer Systems joint venture. The six months ended June 30, 2001, includes a $28 million gain ($17 million aftertax) from an insurance settlement. Excluding these gains from both periods, other income for the six months ended June 30, 2002, was $4 million compared to $9 million for the same period in 2001, which was due in part to a small gain from certain asset sales in 2001.

Cumulative Effect of Change in Accounting Principle

        Effective January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets." In accordance with SFAS No. 142, we discontinued the amortization of goodwill and identifiable intangible assets that have indefinite useful lives. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. Goodwill will be assessed annually for impairment. This statement also required certain intangible assets that did not meet the criteria for recognition apart from goodwill, to be subsumed into goodwill. During the quarter ended March 31, 2002, we subsumed into goodwill $74 million of intangible assets net of related deferred tax liabilities representing assembled workforce and noncontractual customer relationships that did not meet the separability criteria under SFAS No. 141, "Business Combinations."

        Fair value measurements of the reporting units were estimated by a third-party specialist utilizing both an income and market multiple approach. Based on this analysis, we recorded an impairment loss of $167 million for the Resins and Additives business in the Specialty Products segment due to declining estimates of future results given current economic and market conditions. This goodwill is

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non-deductible for tax purposes. The impairment charge is reflected as the cumulative effect of change in accounting principle in the accompanying statement of consolidated income (loss).

Year Ended December 31, 2001 Compared with Year Ended December 31, 2000 and Year Ended December 31, 2000 Compared with Year Ended December 31, 1999

(Dollars in millions)		2001			2000			1999
Net Sales		$	2,817		$	3,185		$	2,830
Operating Income/(Loss)		$	(6	)	$	24		$	294
	Charges included in Operating Income/(Loss)	$	(78	)	$	(158	)	$	(61	)

        Our net sales for 2001 of $2.817 billion were 12 percent lower than 2000 net sales of $3.185 billion and slightly lower than 1999 net sales of $2.830 billion. A number of events affect the comparability of 2001 results with those in 2000 and 1999. These events include the acquisitions of the Vianova Resins Group in December 1999, CarboGen Holdings AG in February 2000 and AMCIS AG in March 2000. In addition, we contributed our Phosphorus Derivatives business to the Astaris joint venture in April 2000 and sold our Polymer Modifiers business in August 2000. Excluding the sales associated with the Phosphorus Derivatives and Polymer Modifiers businesses, net sales for 2001 were down 7 percent from the comparable period of 2000. The net sales decrease reflected lower volumes, lower average selling prices and unfavorable currency exchange rate fluctuations. After adjustments for acquisitions and divestitures, net sales for 2000 increased 3 percent over net sales in 1999. The increase reflected higher average selling prices, partially offset by unfavorable currency exchange rate fluctuations and lower volumes.

        The operating loss for the year ended December 31, 2001 was $6 million, compared to 2000 operating income of $24 million and 1999 operating income of $294 million. As indicated in the preceding table, operating results for each year were affected by various charges, which are described in greater detail in the following sections. Excluding the effects of the charges in both 2001 and 2000, the 2001 decline in operating income was primarily caused by the impact of lower net sales, partially offset by lower raw material and energy costs and lower administrative and technological expenses. The decrease in administrative and technological expenses can be attributed principally to lower personnel costs resulting from restructuring activities during 2001. Operating income in 2000 decreased 49 percent from operating income in 1999 when charges are excluded from both years. The decline in 2000 operating income versus operating income in 1999 was caused by higher raw material and energy costs that resulted from the sharp increase in petrochemical and natural gas prices. In addition, higher marketing, administrative, technological and amortization expenses associated with acquisitions and the integration of newly acquired companies, along with spending on growth programs, contributed to the operating income decline.

Performance Films

(Dollars in millions)	2001		2000		1999
Net Sales	$	591	$	692	$	669
Segment Profit	$	61	$	106	$	126

        Net sales for Performance Films were $591 million in 2001, compared with $692 million in 2000 and $669 million in 1999. The 15 percent decrease in 2001 net sales over 2000 principally resulted from the loss of sales from the divestiture of the Polymer Modifiers business. Excluding the Polymer Modifiers business, net sales decreased 2 percent from the comparable prior year period. Net sales were negatively affected by unfavorable currency exchange rate fluctuations due to the devaluation of the euro and Japanese yen in relation to the U.S. dollar. Also, to a lesser extent, businesses in this segment achieved lower average selling prices than those of the year-ago period due to competitive pricing pressures. Sales volumes increased over the prior-year period because of increased demand for

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SAFLEX® plastic interlayer products by European and Asian automotive glass manufacturers and European architectural glass laminators. Partially offsetting the increases in sales volumes were decreased demand by North American automotive glass manufacturers and lower specialty films sales into the electronic display market.

        The Performance Films segment's net sales for 2000 increased 3 percent over 1999 net sales because of the full year's effect of the CPFilms acquisition and higher volumes in the SAFLEX® plastic interlayer business, partially offset by the loss of sales from the Polymer Modifiers business and unfavorable currency exchange movements. Excluding CPFilms and the Polymer Modifiers businesses, 2000 net sales were up slightly from 1999 net sales. Higher year-over-year volumes in the SAFLEX® plastic interlayer business were driven primarily from increased demand by North American and European automotive glass manufacturers. Also, to a lesser extent, businesses in this segment achieved higher average selling prices than those of the 1999 period. Offsetting the increases in sales volumes and average selling prices were unfavorable currency exchange movements due to the devaluation of the euro in relation to the U.S. dollar.

        Segment profit was $61 million in 2001, versus $106 million in 2000 and $126 million in 1999. The 42 percent decrease in 2001 segment profit compared with 2000 resulted from the loss of income associated with the sale of the Polymer Modifiers business, unfavorable manufacturing costs primarily associated with production cutbacks to control inventory, lower selling prices, the impact of unfavorable currency exchange rate fluctuations and increased marketing and technological costs associated with growth programs. This decrease was partially offset by the impact of increased sales volumes and lower personnel expense associated with restructuring activities. The 16 percent decrease in 2000 segment profit compared with 1999 primarily resulted from higher marketing, administrative, technological and amortization expenses associated with the acquisition and integration of CPFilms and other growth programs, increased raw material costs in the SAFLEX® plastic interlayer business and the loss of sales from the divestment of the Polymer Modifiers business.

Specialty Products

(Dollars in millions)		2001		2000			1999
Net Sales		$	918	$	1,004		$	760
Segment Profit		$	77	$	32		$	119
	Net (Charges)/Gains included in Segment Profit	$	25	$	(23	)	$	—

        Our Specialty Products segment had net sales of $918 million in 2001, compared with $1.004 billion in 2000 and $760 million in 1999. The 9 percent decrease in 2001 net sales over 2000 was primarily due to the contribution of the Phosphorus Derivatives business to the Astaris joint venture. Excluding the contribution of the Phosphorus Derivatives business, net sales decreased by 1 percent principally due to lower sales volumes in the Resins and Additives business because of decreased demand by European customers and unfavorable currency exchange movements resulting from the devaluation of the euro in relation to the U.S. dollar. Partially offsetting these decreases were higher average selling prices in the Resins and Additives business and a full year of net sales from the Pharmaceutical Services businesses.

        The 32 percent increase in 2000 net sales over 1999 was due to the acquisitions of Vianova Resins, CarboGen and AMCIS, partially offset by the impact of contributing the Phosphorus Derivatives business to the Astaris joint venture. Excluding the effects of the acquisitions and the loss of sales associated with the Phosphorous Derivatives business, net sales declined by 6 percent. Net sales decreased primarily due to unfavorable currency exchange movements associated with the devaluation of the euro in relation to the U.S. dollar, and to a lesser extent, the loss of sales from the Scriptset line of business which was sold in August 1999.

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        Specialty Products' segment profit was $77 million in 2001, compared with $32 million in 2000 and $119 million in 1999. Segment profit for 2001 included a fourth quarter charge of $3 million ($2 million aftertax) associated with the termination of a former CarboGen owner and a first quarter gain from an insurance settlement of $28 million ($17 million aftertax) associated with the explosion and fire that destroyed the Vianova printing inks and phenolics production facility in Wiesbaden, Germany. Segment profit for 2000 included an impairment charge of $15 million ($10 million aftertax) incurred during the fourth quarter to write down chlorobenzenes' production equipment and a restructuring charge of $8 million ($5 million aftertax) incurred during the second quarter related to exiting operations at the Port Plastics site in Addyston, Ohio. Excluding these items, 2001 segment profit decreased 5 percent from 2000 due to the loss of income associated with the Phosphorus Derivatives business, as well as lower sales volumes and higher raw material costs for the Resins and Additives business, partially offset by increased profitability in Pharmaceutical Services. Segment profit in 2000 decreased 73 percent from 1999 profit levels. However, excluding the 2000 charges described above, segment profit in 2000 decreased 54 percent from the prior year primarily because of the loss of income from the Phosphorus Derivatives business, and higher marketing, administrative, technological and amortization expenses associated with the acquisition and integration of Vianova Resins, CarboGen, and AMCIS.

Integrated Nylon

(Dollars in millions)		2001			2000			1999
Net Sales		$	1,308		$	1,490		$	1,407
Segment Profit/(Loss)		$	11		$	(29	)	$	161
	Charges included in Segment Profit/(Loss)	$	(12	)	$	(105	)	$	(34	)

        Our Integrated Nylon segment had net sales in 2001 of $1.308 billion, compared with $1.490 billion in 2000 and $1.407 billion in 1999. The 12 percent decrease in 2001 sales occurred in almost all businesses in this segment as both volumes and average selling prices declined. The effects of a slowing U.S. economy had an unfavorable impact on the Integrated Nylon segment. With the exception of intermediate chemicals, significant volume declines occurred in all of the segment's businesses. Carpet fiber sales volumes decreased as carpet mills continued to manage inventory levels in response to lower retail demand. Decreased sales volumes of nylon plastics and polymers resulted from lower shipments of VYDYNE® nylon molding resins to Dow Plastics because of the slowdown in the U.S. automotive industry, and lower global demand for textile polymers. Sales volumes for nylon industrial products decreased because of the slowdown in the U.S. automotive industry. Sales volumes for acrylic fibers decreased in the U.S. because of the slowing U.S. economy. The effects of lower segment sales were partially offset by higher sales volumes of merchant acrylonitrile sales to Asian and European customers. Price decreases in intermediate chemicals were primarily attributable to contract business with formula pricing tied to raw material costs. Price decreases in the remaining businesses were due to competitive pricing pressures.

        The 6 percent increase in this segment's 2000 net sales compared to 1999 net sales was attributable to the effect of higher average selling prices in each of the segment's businesses, partially offset by volume declines in the carpet fiber and nylon plastics and polymer businesses. The majority of the segment's price increases were in the carpet fiber and intermediates businesses, and to a lesser extent, the ACRILAN® acrylic fiber business. Considerable pricing actions were taken in the carpet business during 2000 in response to rapid raw material and energy cost increases. Price increases in the intermediates business were primarily attributable to contract business with formula pricing tied to raw material costs. ACRILAN® acrylic fiber products experienced higher average selling prices in the export markets because of the economic recovery in the Asia Pacific region. Despite the increases in average selling prices, we offset only approximately 40 percent of the raw material cost increases. Carpet fiber sales volumes decreased in the second half of 2000 as carpet mills reduced inventory levels in response to lower retail demand. Decreased sales volumes in the nylon plastics and polymer business resulted

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from lower shipments of VYDYNE® nylon molding resins to Dow Plastics and lower demand for textile polymers principally because of the bankruptcy of a Taiwanese textile polymer customer.

        The Integrated Nylon segment's profit was $11 million in 2001, compared to a loss of $29 million in 2000 and profit of $161 million in 1999. Segment profitability in 2001 was negatively impacted by charges of $12 million ($8 million aftertax) incurred during the fourth quarter to write down certain notes and receivables primarily from textile fiber customers who have experienced financial difficulties as a result of the current economic downturn. In addition, the charges included the write off of certain non-performing assets. Segment profitability in 2000 was negatively affected by charges of $14 million ($8 million aftertax) to write down certain Asian investments based upon indicators that the loss in their values was permanent and $5 million ($3 million aftertax) to accrue for debt payments under certain loan guarantees associated with one of the investments incurred during the second quarter, impairment charges of $76 million ($47 million aftertax) to write down certain non-performing and non-strategic fiber spinning, drawing and packaging equipment which supports several of Integrated Nylon's product lines, and a charge of $10 million ($6 million aftertax) primarily to reserve for advances and working capital loans to an Asian equity affiliate incurred during the fourth quarter. Excluding these items, segment profit for 2001 decreased 70 percent over 2000. The decline resulted primarily from lower net sales in the segment, higher energy prices and unfavorable manufacturing variances associated with lower capacity utilization rates. Lower raw material costs and lower personnel expense associated with restructuring activities partially offset the decline in segment profit. In addition to increased energy costs and decreased sales volumes, segment profitability was also negatively affected by the temporary shutdown of the Chocolate Bayou Intermediates facility in February 2001 as a result of a power outage.

        Segment profitability in 2000 declined 118 percent from 1999 levels. However, profitability for both years includes charges that affect comparability. As previously described, segment profitability for 2000 includes charges of $105 million ($64 million aftertax) primarily for asset impairments and write downs. Segment profitability in 1999 includes a restructuring charge of $28 million ($18 million aftertax) to exit the ammonia business and an impairment charge of $6 million ($4 million aftertax) to write down a bulk continuous filament spinning machine incurred in the first quarter of 1999. Excluding these charges in both years, segment profitability in 2000 declined 61 percent. This decline resulted primarily from higher raw material and energy costs associated with the sharp increase in petrochemical and natural gas prices throughout 2000. The cost of propylene, a major feedstock for the segment, increased more than 60 percent over 1999 levels. The cost of cyclohexane, another major feedstock for the segment, increased more than 30 percent over 1999 levels. The cost of natural gas, which is used as an energy source and also affects the cost of various raw materials within the segment, increased approximately 80 percent over the year-ago period.

        Under a marketing alliance between us and Dow Plastics, a business unit of The Dow Chemical Company, Dow markets Solutia's VYDYNE® nylon 6,6 molding resins for injection molding applications worldwide. On March 1, 2002, we and Dow Plastics signed a formal agreement to end the marketing alliance. Following a transition period, we will resume marketing responsibilities for the nylon molding resins business. The financial impact is not expected to be material to our consolidated financial statements.

Operating Income (Loss)

(Dollars in millions)		2001			2000			1999
Operating Income/(Loss)		$	(6	)	$	24		$	294
	Charges included in Operating Income/(Loss)	$	(78	)	$	(158	)	$	(61	)

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        We had an operating loss of $6 million in 2001, compared with operating income of $24 million in 2000 and $294 million in 1999. The decline in operating income since 1999 was primarily the result of lower segment profit; however, operating income (loss) was also affected by various charges in all years.

        During the fourth quarter of 2001, we reached agreements with various state and federal agencies having enforcement authority on the nature, timing and extent of certain environmental remediation obligations. As a result, the 2001 operating loss included a fourth quarter charge of $34 million ($21 million aftertax) to cost of goods sold to increase environmental reserves. In addition, we modified our estimates of the aggregate liability for uninsured product liability claims based upon certain actuarial assumptions and historical experience. As a result, the 2001 operating loss included a fourth quarter charge of $20 million ($13 million aftertax) to cost of goods sold to increase self-insurance reserves. We also recorded a loss contingency during the fourth quarter of 2001 of $3 million ($2 million aftertax) to administrative expenses due to certain unoccupied leased office space.

        As more fully described in the preceding sections, the 2001 operating loss also reflects fourth quarter charges of $9 million ($6 million aftertax) to write down certain notes primarily associated with textile fiber customers in the Integrated Nylon segment and $3 million ($2 million aftertax) for employee termination costs incurred in the Specialty Products segment.

        During 2001, we reduced our workforce by approximately 700 positions and eliminated more than 750 contractor positions. While savings from the restructuring program are difficult to estimate, given the nature of the activities, the corollary benefits achieved and the timing of the actions taken, the best estimate of the savings realized during 2001 from our restructuring actions was approximately $60 million. These savings were primarily reflected in cost of goods sold. We expect to receive approximately $100 million in cumulative savings during 2002 as compared with 2000, primarily reflected in cost of goods sold, from reduced employee and contractor expenses. Cash outlays associated with the restructuring actions were funded from operations. Approximately 90 percent of the workforce reductions affected North American business and manufacturing operations, and approximately 10 percent affected European, Asian and Latin American operations and sales offices. Management positions represented approximately one-third of the workforce reductions. During the fourth quarter of 2001, we determined that the original provision taken for our 2001 restructuring program was insufficient to cover our total costs. Actual costs to terminate certain European and North American management employees and certain employee benefit costs for involuntary terminations were higher than the original estimates. As a result, we recorded additional restructuring charges of $9 million ($6 million aftertax) to cost of goods sold to cover these higher costs. The restructuring actions contemplated by this reserve were completed by the end of 2001. Certain severance payments owed to individuals terminated late in the fourth quarter of 2001 have been included in accrued liabilities and will be paid in their entirety during the first quarter of 2002.

        During the first half of 2001, we reduced our workforce by approximately 70 positions under the Vianova integration plan, incurring cash outlays associated with our restructuring actions of approximately $8 million. As a result of these actions, we realized approximately $3 million in savings during 2001, primarily reflected in cost of goods sold, from reduced employee expense.

        During the fourth quarter of 2000, we recorded restructuring charges of $53 million ($33 million aftertax) to cost of goods sold for costs associated with workforce reductions and the closure of certain non-strategic facilities. The restructuring was part of an enterprise-wide cost reduction initiative that was targeted to achieve $100 million in annual savings. The closure of non-strategic facilities is not anticipated to have a significant impact on future operations. The results of this restructuring action were described previously in this section.

        As part of the integration of Vianova Resins with our resins businesses, we identified excess production capacity for certain Solutia resins products that allowed for the consolidation of production facilities. As a result, we decided to exit operations at the Port Plastics site in Addyston, Ohio. We

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recorded a restructuring charge in the Specialty Products segment of $8 million ($5 million aftertax) to cost of goods sold during the second quarter of 2000. The financial impact will not be material to us as production will be shifted to other production facilities. During the second quarter of 2000, we also recorded an impairment charge of $6 million ($4 million aftertax) to administrative expenses for the write down of capitalized software costs related to the formation of the Astaris joint venture.

        During the fourth quarter of 2000, we recorded to cost of goods sold impairment charges of $76 million ($47 million aftertax) primarily to write down certain non-performing and non-strategic fiber spinning, drawing and packaging equipment which supports several of Integrated Nylon's product lines. We also recorded an impairment charge to cost of goods sold in the Specialty Products segment of $15 million ($10 million aftertax) for the write down of chlorobenzenes' production equipment. The impairments were indicated by current period operating losses and projections of continued losses primarily because of the noncompetitive cost positions these businesses have and the competitive market conditions that they face. The carrying values of the assets were written down as determined by discounting expected future cash flows, using an appropriate discount rate. The assumptions used in the cash flow projections were not materially different from the market conditions experienced in 2000. These conditions are not expected to improve significantly in the foreseeable future. The cash flow assumptions included declining demand and market share combined with decreased operating margins. Lower operating margins reflect the non-competitive cost position of these businesses and the impact of lower selling prices associated with an extremely competitive operating environment. Annual depreciation charges associated with these assets of approximately $10 million will no longer be reflected in cost of goods sold. We will continue to operate these assets as they contribute to the recovery of fixed costs.

        Operating income in 2001 declined $30 million from 2000 levels. However, when the charges described above are excluded from the results in each year, operating income declined $110 million. This decline was caused primarily by the impact of lower net sales, partially offset by lower raw material and energy costs and lower administrative and technological expenses. The decrease in administrative and technological expenses can be attributed principally to lower personnel costs resulting from restructuring activities during 2001.

        During February 1999, certain equipment critical to our ammonia production process failed. After analyzing the economics of purchased ammonia versus the cost to repair the equipment, we decided to exit the ammonia business. A $28 million ($18 million aftertax) charge to cost of goods sold in the Integrated Nylon segment was recorded in the first quarter to complete the exit plan. The charge included $2 million to write down the assets to their fair value of approximately $4 million, $4 million of dismantling costs, and $22 million of estimated costs for which we are contractually obligated under an operating agreement. The contractually obligated costs represented an estimate of the direct manufacturing, overhead and utilities that we were required to pay to a third-party operator during a 36-month termination period. Ammonia business net sales were $1 million in 1999. Operating income for that period was minimal. During the first quarter of 2000, we entered into an agreement for the dismantling of those assets by a third-party and as a result, transferred the liability for dismantling to the third-party. During the third quarter of 2000, we reached an agreement with the plant operator for the final settlement of the contractually obligated costs. As a result, we transferred the liability for the contractually obligated costs to accrued liabilities.

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        During the first quarter of 1999, an impairment charge of $6 million ($4 million aftertax) was recorded to cost of goods sold in the Integrated Nylon segment primarily to write down a bulk continuous filament spinning machine that was shut down due to a noncompetitive cost position. The adjusted carrying value of the machine is $0.5 million. The charge resulted from a Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of" review, which indicated that the carrying amount of the assets exceeded the identifiable, undiscounted cash flows related to the assets. Fair value of the assets was determined based on estimates of market prices for the machinery. Operating income derived from the machinery was minimal for the year ended December 31, 1999.

        During the first quarter of 1999, we also recorded a $29 million ($18 million aftertax) charge to cost of goods sold related to the anticipated settlement of two lawsuits concerning the alleged discharge of polychlorinated biphenyls (PCBs) from the Anniston, Alabama, plant site. During the third quarter of 2000, we paid approximately $23 million for the settlement of these actions. The remainder of the reserve was established to cover costs associated with environmental remediation of the allegedly affected areas.

        During the fourth quarter of 1999, we reversed excess restructuring reserves due to the completion of the actions at a lower cost than the 1996 restructuring plan contemplated. A reversal of $1 million ($1 million aftertax) was made to eliminate a reserve for headcount reductions after the final stage of headcount reductions was carried out. A second reversal of $1 million ($1 million aftertax) was made to eliminate a reserve recorded to shutdown a non-strategic facility after that shutdown was completed at a lower cost.

        Operating income in 2000 decreased $270 million from its level in 1999. However, when the charges described above are excluded from the results in each year, operating income declined $173 million from the prior year. This decrease was principally caused by higher raw material and energy costs that resulted from the sharp increase in petrochemical and natural gas prices. The remainder of the decline resulted from higher marketing, administrative, technological and amortization expenses associated with the acquisition and integration of newly acquired companies and other growth programs.

Equity Earnings (Loss) from Affiliates

(Dollars in millions)		2001			2000			1999
Equity Earnings/(Loss) from Affiliates		$	(13	)	$	35		$	36
	Charges included in Equity Earnings/(Loss) from Affiliates	$	(41	)	$	(15	)	$	—

        Equity loss from affiliates totaled $13 million in 2001. This compares to equity earnings from affiliates of $35 million in 2000 and $36 million in 1999. Equity earnings (loss) from affiliates were affected by various charges in 2001 and 2000. During the fourth quarter of 2001, the Astaris joint venture recorded charges associated with the closure of its elemental phosphorus production facility in Pocatello, Idaho. Our share of these charges was approximately $37 million ($37 million aftertax). Also, during the fourth quarter of 2001, the Flexsys joint venture recorded charges associated with the closure of its 4NDPA facility in Newport, Wales. Our share of these charges was approximately $4 million ($4 million aftertax). During the second quarter of 2000, Flexsys recorded charges associated with the closure and impairment of certain manufacturing operations in the United Kingdom. Our share of these charges was $13 million ($13 million aftertax). In addition, Astaris recorded charges during the second quarter of 2000 related to the closure of certain of its production facilities. Our share of these charges was approximately $2 million ($2 million aftertax). Excluding these charges, equity earnings from affiliates in 2001 decreased because of lower earnings from the Astaris joint venture primarily resulting from higher raw material costs. In addition, lower sales volumes at the Advanced Elastomer Systems and Flexsys joint ventures contributed to lower earnings.

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        The slight decrease in 2000 equity earnings over 1999 was primarily the result of charges recorded by the Flexsys and Astaris joint ventures during the second quarter of 2000. Excluding these charges, equity earnings from affiliates increased primarily because of the formation and startup of the Astaris joint venture in April 2000 and improved sales volumes at the Flexsys and Advanced Elastomer Systems joint ventures.

Sale of Polymer Modifiers Business

        In August 2000, we completed the sale of our Polymer Modifiers business and related manufacturing facilities to Ferro Corporation for approximately $130 million. As a result of this transaction, we recognized a $73 million pretax gain ($46 million aftertax). Our results of operations included net sales of approximately $90 million in 2000 and $145 million in 1999, and operating income of approximately $16 million in 2000 and $36 million in 1999, from the Polymer Modifiers business.

Other Income (Expense)—Net

(Dollars in millions)		2001		2000			1999
Other Income (Expense)—Net		$	32	$	(8	)	$	13
	Net (Charges)/Gains included in Other Income(Expense)—Net	$	20	$	(22	)	$	—

        Other income in 2001 was $32 million. This compares to other expense in 2000 of $8 million and other income in 1999 of $13 million. However, 2001 and 2000 were affected by various gains and charges. During the fourth quarter of 2001, we recorded charges of $5 million ($3 million aftertax) to write down an e-commerce investment to its fair value based upon indicators that the loss in its value was permanent and $3 million ($2 million aftertax) in the Integrated Nylon segment to write off certain non-performing assets. During the first quarter of 2001, we recorded in the Specialty Products segment a $28 million gain ($17 million aftertax) from an insurance settlement. During the fourth quarter of 2000, we recorded in the Integrated Nylon segment a charge of $10 million ($6 million aftertax) to reserve for advances and working capital loans to an Asian equity affiliate. During the second quarter of 2000, we recorded in the Integrated Nylon segment charges of $14 million ($8 million aftertax) to write down Asian investments based upon indicators that the loss in their values was permanent, $5 million ($3 million aftertax) to accrue for debt payments under certain loan guarantees associated with one of the Asian equity investments, $8 million ($5 million aftertax) associated with the startup and formation of the Astaris joint venture and a $15 million gain ($9 million aftertax) resulting from the sale of substantially all of our 40 percent interest in P4 Production L.L.C., a phosphorus manufacturing venture. Excluding these gains and charges from both periods, other income for 2001 was $12 million compared to other income of $14 million in 2000.

Income Taxes

        In July 2000, Germany reduced its corporate tax rate effective January 1, 2001. In accordance with SFAS No. 109, "Accounting for Income Taxes," we recognized income of $7 million to income taxes to record the net effect of the change on deferred income tax assets and liabilities during the third quarter of 2000. Other items reducing our overall effective tax rate include effective tax planning strategies and a greater percentage of after-tax equity earnings from affiliates in pretax operating income.

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Summary of Events Affecting Comparability

        Charges recorded in 2001, 2000 and 1999 and other events affecting comparability have been summarized in the tables below (dollars in millions).

Increase/(Decrease)	Performance Films	Specialty Products			2001 Integrated Nylon		Corporate/ Other		Consolidated
Cost of goods sold		$	2						$	2	(a)
							54			54	(f)
	—		—		—		9			9	(g)
Total cost of goods sold	—		2		—		63			65
Marketing, administrative, technological and amortization expenses			1							1	(a)
					9					9	(c)
	—		—		—		3			3	(h)
Operating income (loss)	—		(3	)	(9	)	(66	)		(78	)
Equity earnings (loss) from affiliates							(37	)		(37	)(d)
							(4	)		(4	)(e)
Other income (expense)			28							28	(b)
					(3	)				(3	)(c)
							(5	)		(5	)(i)
Income(loss) before income taxes	—		25		(12	)	(112	)		(99	)
Income taxes (benefit)										(20	)
Net income (loss)									$	(79	)

2001 Charges and Other Events

(a)

Charges recorded in the Specialty Products segment related to the termination of a former CarboGen owner ($3 million pretax, $2 million aftertax).

(b)

A gain recorded in the Specialty Products segment from an insurance settlement associated with the explosion and fire that destroyed the Vianova printing inks and phenolics production facility in Wiesbaden, Germany ($28 million pretax, $17 million aftertax).

(c)

Charges recorded in the Integrated Nylon segment to write down certain notes, primarily from textile fiber customers, and to write down certain non-performing assets ($12 million pretax, $8 million aftertax).

(d)

Charges for the closure of Astaris' elemental phosphorus production facility in Pocatello, Idaho ($37 million pretax, $37 million aftertax).

(e)

Charges for the closure of Flexsys' 4NDPA manufacturing facility in Newport, Wales ($4 million pretax, $4 million aftertax).

(f)

Charges to increase environmental and self-insurance reserves ($54 million pretax, $34 million aftertax).

(g)

Additional severance charges recorded to cover cost overruns associated with the 2001 restructuring program ($9 million pretax, $6 million aftertax).

(h)

A loss contingency due to certain unoccupied leased office space ($3 million pretax, $2 million aftertax).

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(i)

A charge to write down the value of an e-commerce investment based upon indicators that the loss in its value was permanent ($5 million pretax, $3 million aftertax).

	2000
Increase/(Decrease)	Performance Films	Specialty Products			Integrated Nylon		Corporate/ Other		Consolidated
Cost of goods sold		$	8						$	8	(j)
			15							15	(k)
							53			53	(l)
	—		—		76		—			76	(m)
Total cost of goods sold	—		23		76		53			152
Marketing, administrative, technological and amortization expenses	—		—		—		6			6	(p)
Operating income (loss)	—		(23	)	(76	)	(59	)		(158	)
Equity earnings (loss) from affiliates							(2	)		(2	)(p)
							(13	)		(13	)(q)
Gain on sale of Polymer Modifiers business							73			73	(r)
Other income (expense)							(8	)		(8	)(p)
							15			15	(s)
					(14	)				(14	)(n)
					(5	)				(5	)(n)
	—		—		(10	)	—			(10	)(o)
Income(loss) before income taxes	—		(23	)	(105	)	6			(122	)
Income taxes (benefit)										(48	)(t)
Net income (loss)									$	(74	)

2000 Charges and Other Events

(j)

Restructuring charges recorded in the Specialty Products segment related to exiting operations at the Port Plastics site in Addyston, Ohio ($8 million pretax, $5 million aftertax).

(k)

Impairment charges recorded in the Specialty Products segment to write down chlorobenzenes' production assets ($15 million pretax, $10 million aftertax).

(l)

Restructuring charges for workforce reductions of approximately 700 people across all world areas and functions of the Company and the closure of certain non-strategic facilities ($53 million pretax, $33 million aftertax).

(m)

Impairment charges recorded in the Integrated Nylon segment to write down certain non-performing and non-strategic production assets ($76 million pretax, $47 million aftertax).

(n)

Charges recorded in the Integrated Nylon segment to write down certain investments in Asia based upon indicators that the loss in their values was permanent ($14 million pretax, $8 million aftertax) and to accrue for payment of debt obligations associated with one of the investments ($5 million pretax, $3 million aftertax).

(o)

Charges recorded in the Integrated Nylon segment to primarily reserve for advances and working capital loans to an Asian equity affiliate ($10 million pretax, $6 million aftertax).

(p)

Charges related to the formation and startup of the Astaris joint venture ($16 million pretax, $11 million aftertax).

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(q)

Charges associated with the impairment and closure of certain manufacturing operations in the United Kingdom for the Flexsys joint venture ($13 million pretax, $13 million aftertax).

(r)

A gain on the sale of the Polymer Modifiers business and related manufacturing facilities ($73 million pretax, $46 million aftertax).

(s)

A gain on the sale of P4 Production L.L.C., a phosphorus manufacturing venture ($15 million pretax, $9 million aftertax).

(t)

Amount represents the tax effect of the charges and other events affecting comparability. Included in this line is the impact of a $7 million reduction in income tax expense for changes in the German tax rates.

	1999
Increase/(Decrease)	Performance Films	Specialty Products	Integrated Nylon			Corporate/ Other		Consolidated
Cost of goods sold			$	34				$	34	(u)
						29			29	(v)
						(2	)		(2	)(w)
Total cost of goods sold	—	—		34		27			61
Marketing, administrative, technological and amortization expenses	—	—		—		—			—
Operating income (loss)	—	—		(34	)	(27	)		(61	)
Equity earnings (loss) from affiliates									—
Other income (expense)	—	—		—		—			—
Income (loss) before income taxes	—	—		(34	)	(27	)		(61	)
Income taxes (benefit)									(23	)
Net income (loss)								$	(38	)

1999 Charges and Other Events

(u)

Charges related to exiting Integrated Nylon's ammonia business and for the write down of an Integrated Nylon segment bulk continuous filament spinning machine site ($34 million pretax, $22 million aftertax).

(v)

A charge for the anticipated settlement of certain pending property claims litigation related to the Anniston, Alabama plant site ($29 million pretax, $18 million aftertax).

(w)

Reversal of excess restructuring reserves related to headcount reductions and facilities closures ($2 million pretax, $2 million aftertax).

Financial Condition and Liquidity

        Cash generated from operations was $49 million for the six months ended June 30, 2002, compared to cash used in operations of $82 million for the six months ended June 30, 2001. The improvement was primarily attributable to an income tax refund received during the first quarter of 2002, a $21 million dividend received during the second quarter of 2002 from the Flexsys joint venture, stronger operating earnings and lower severance payments. In March of 2002, the "Job Creation and Worker Assistance Act" was enacted which allowed for, among other things, a five-year carryback of net operating losses. As a result of this new law, we received a $30 million income tax refund from the United States taxing authorities, in addition to our $30 million anticipated income tax refund during the first quarter of 2002.

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        Our working capital at June 30, 2002 increased to negative $310 million from negative $495 million at December 31, 2001. The increase in the working capital position primarily resulted from a reduction of short-term debt and an increase in accounts receivable, partially offset by an increase in accounts payable.

Liquidity

        On June 30, 2002, our debt obligations totaled $1,222 million, including borrowings under the existing $800 million credit facility with a syndicate of commercial banks, notes and debentures. The weighted average interest rate on our total debt outstanding at June 30, 2002, was approximately 5.7 percent.

        At June 30, 2002, debt maturing within one year consisted primarily of borrowings of $425 million from the $800 million facility due in August of 2002 and $150 million of 6.5 percent notes due in October of 2002.

Amended Credit Facility

        On July 25, 2002, we and our bank syndicate amended our revolving credit facility. The amendment extends the maturity of the facility until August 2004. It also reduces the facility from $800 million to $600 million and separates the facility into a $300 million term loan and a $300 million revolving credit facility. The term loan has scheduled payment obligations as follows: $25 million at December 31, 2002; $50 million at December 31, 2003; $25 million at June 30, 2004; and the remainder at maturity. The amended credit facility requires us to cash collateralize certain outstanding letters of credit. Fees, expenses and other costs associated with the amended credit facility and cash collateralization of letters of credit totaled approximately $50 million. The amended credit facility is available for working capital and other general corporate purposes.

        Guarantees    Our obligations and the obligations of our subsidiary borrowers under the amended credit facility are guaranteed by Solutia Inc., CPFilms Inc., Monchem International Inc., Monchem, Inc., Solutia Systems, Inc. (the "subsidiary guarantors") and each of our subsequently acquired or organized domestic subsidiaries, subject to certain exceptions.

        Collateral    Borrowings under the amended credit facility as well as the beneficiaries of the Astaris support agreement, the lessee under the co-generation facility at Pensacola, Florida and holders of certain designated letters of credit are secured by (1) liens on all of our inventory and receivables and those of the subsidiary guarantors, (2) pledges of 100 percent of the stock of Monchem, Inc. and Solutia Systems, Inc. and 65 percent of the voting stock and 100 percent of all other stock of Monchem International, Inc., (3) liens on intercompany debt of and held by Monchem, Inc., Monchem International, Inc. and Solutia Systems, Inc., (4) pledges of 65 percent of the voting stock (and 100 percent of all other stock) of Solutia Europe, S.A./N.V. and Solutia U. K. Holdings Limited, (5) a lien on certain principal properties, (6) a lien on certain intellectual property; and (7) liens on property, plant and equipment, inventory, receivables and certain intellectual property of four European subsidiaries. The aggregate amount of our obligations entitled to the benefit of the lien on such principal properties is limited to 15 percent of its net tangible assets, as determined at the date that the lien was granted.

        In addition, borrowings under the amended credit facility are secured by liens shared equally and ratably with the holders of our outstanding publicly traded notes and senior secured notes described below. These include a lien on (1) certain other principal properties, (2) 100 percent of the stock of CPFilms Inc., and (3) pledges of intercompany debt of CPFilms Inc; and a second priority lien shared equally and ratably on the principal properties on which the banks have a first priority lien. The amended credit facility also contains customary representations and warranties and affirmative and negative covenants.

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        Interest    Borrowings under the amended credit facility bear interest at a floating rate based on LIBOR, plus an applicable margin. The margin for LIBOR loans is 5.75 percent and will increase by 50 basis points in July 2003 and an additional 50 basis points in January 2004. A premium in the amount of 2 percent of the principal repaid on the term loan will apply until July 25, 2003, and a premium of 1 percent will apply to such principal payments thereafter.

        Covenants    The amended credit facility requires us to meet certain financial tests, including, but not limited to, maximum leverage and minimum interest coverage ratios. In addition, the amended credit facility contains certain covenants which, among other things, limit the incurrence of additional debt, aggregate capital expenditures, guarantees, liens, investments, asset sales, dividends, restricted payments, acquisitions, mergers and consolidations, change of business, transactions with affiliates, prepayments of debt, repurchases of stock and redemptions of certain other indebtedness and other matters customarily restricted in such agreements.

Senior Secured Notes

        On July 9, 2002, we completed a private placement of 223,000 units consisting of $223 million of the outstanding notes and warrants to purchase 5,533,522 shares of common stock at an exercise price of $7.59 per share. The outstanding notes were issued by SOI Funding Corp., a special purpose entity, and the offering resulted in cash proceeds, net of estimated fees, of $193 million which were placed in escrow pending amendment of our credit facility, as described under "Amended Credit Facility" above and assumption of SOI Funding Corp.'s obligations under the outstanding notes. Both of these events occurred on July 25, 2002, at which time the net offering proceeds were released from escrow. We deposited approximately $155 million of the proceeds with the trustee for the $150 million of 6.5 percent notes due October 15, 2002 to pay the principal and interest at maturity. The remaining proceeds were used to pay fees, expenses and other costs related to the amended credit facility, cash collateralize certain outstanding letters of credit and repay a portion of borrowings under our amended credit facility. The discount associated with this offering, which includes the value given to the warrants, will be non-deductible for income tax purposes.

        Guarantees    All of the subsidiaries that guarantee the obligations under our amended credit facility will fully and unconditionally guarantee the notes on a senior joint and several basis. Certain of our future domestic subsidiaries will be required to execute similar guarantees. The subsidiary guarantees will each rank in right of payment equal to each subsidiary guarantor's existing and future senior debt.

        Collateral    The notes and guarantees will be secured by a first priority lien (shared with (A) holders of our bank obligations, (B) the beneficiaries of the Astaris support agreement, (C) the lessee under the co-generation facility at Pensacola, Florida and (D) holders of certain designated letters of credit) on the following assets: (1) certain principal properties, (2) pledges of 100 percent of the stock of CPFilms Inc., and (3) intercompany debt of CPFilms Inc.; and a second priority lien on the following assets: (1) 65 percent of the voting stock (100 percent of all other stock) of Monchem International, Inc. and 100 percent of the stock of the remaining subsidiary guarantors, Monchem, Inc. and Solutia Systems, Inc., (2) intercompany debt of and held by the subsidiary guarantors (other than CPFilms Inc.), (3) substantially all of our and the subsidiary guarantors' accounts receivable and inventory and certain intellectual property, (4) 65 percent of the voting stock (and 100 percent of all other stock) of two foreign subsidiaries, and (5) certain other production facilities.

        Interest expense, giving effect to the new facilities, is expected to be approximately $107 million for 2002. Assuming a constant debt level and current LIBOR rates, interest expense is expected to be approximately $125 million for 2003. Included in the 2003 estimate for interest expense is approximately $25 million of amortization of debt discount, warrants and issuance costs primarily for the amended credit facility and the senior secured notes.

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Capital Expenditures

        Capital expenditures for 2001 were $94 million. These expenditures were used to fund various cost reduction, maintenance and Pharmaceutical Services capacity expansion projects. We expect that our capital requirements will be approximately $70 million in 2002, principally for Pharmaceutical Services capacity expansion, maintenance and cost reduction projects. As of June 30, 2002, we have incurred approximately $31 million of capital expenditures.

Equity Affiliates

        During the first quarter of 2002, we sold our 50 percent interest in the Advanced Elastomer Systems joint venture to ExxonMobil Chemical Company, a division of ExxonMobil Corporation and Exxon Chemical Asset Management Partnership, a subsidiary of ExxonMobil Corporation, for approximately $102 million. The sale resulted in a gain of $5 million ($3 million aftertax). We used the net proceeds from the sale to pay down debt, fund operations and for other general corporate purposes.

        In connection with the completion of the external financing agreement for Astaris which expires in September of 2005, we contractually agreed to provide Astaris with funding in the event the joint venture fails to meet certain financial benchmarks. During 2001, we contributed $31 million to the joint venture under this agreement. We anticipate that a contribution of up to $27 million will be required in 2002. We believe that this obligation is not likely to have a significant impact on our consolidated financial position, liquidity or profitability. In August 2000, we received $85 million from our 50 percent-owned Astaris joint venture that represented a cash distribution and repayment of working capital loans.

Other

        In 1993, a co-generation facility was constructed at the Pensacola, Florida manufacturing site to provide the plant with electricity and steam. We financed the construction by placing the co-generation facility in a trust that was funded by a syndicate of commercial banks. We make monthly operating lease payments and the lease term is co-terminus with the amended credit facility.

        In connection with the completion of the external financing agreement for Astaris which expires in September of 2005, we contractually agreed to provide Astaris with funding in the event the joint venture fails to meet certain financial benchmarks. During the second quarter of 2002, we contributed $12 million to the joint venture under this agreement. We anticipate that an additional contribution of approximately $15 million will be required in the second half of 2002. We believe that this obligation is not likely to have a significant impact on our consolidated financial position, liquidity or profitability.

        As of August 31, 2002, Fitch Ratings rated our senior secured debt B and the senior secured bank loan BB-, Standard and Poor's rated our senior unsecured debt BB- and the secured bank loan BB, and Moody's rated our senior unsecured debt B2, the senior secured notes B1 and the secured bank loan Ba3.

        We believe that our cash flow from operations and available borrowing capacity under the amended credit facility provide sufficient resources to finance our operations and planned capital needs for the next 12 months.

Self-Insurance

        We maintain self-insurance reserves to cover our estimated future legal costs and settlements related to workers' compensation, product, general, auto and operations liability claims that are less than policy deductible amounts or not covered by insurance. We also have purchased commercial insurance in order to reduce our exposure to such claims.

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        Self-insured losses are accrued based upon estimates of the aggregate liability for uninsured claims incurred using certain actuarial assumptions followed in the insurance industry and our historical experience. The majority of our self-insurance reserves and a significant portion of our commercial insurance are associated with estimated product liabilities that we inherited in the spinoff from Monsanto Company in 1997 and products that are no longer produced.

        As previously indicated, we recorded a charge in the fourth quarter of 2001 of $20 million ($13 million aftertax) to cost of goods sold to increase our self-insurance reserves. This charge was necessary to bring the aggregate self-insurance liability to an appropriate balance based upon recent loss experience and recently updated actuarial assumptions. Cash payments for self-insured risks were $24 million in 2001, $50 million in 2000 and $25 million in 1999. Based upon recent history and current actuarial assumptions, it is expected that annual cash requirements for self-insurance risks will approximate the level experienced in 2001 for the foreseeable future.

Legal Matters

        Because of the size and nature of our business, we are a party to numerous legal proceedings. Most of these proceedings have arisen in the ordinary course of business and involve claims for money damages. In addition, at the time of the spinoff, we assumed liabilities related to specified legal proceedings from the former Monsanto Company (now known as Pharmacia Corporation) under an agreement known as the Distribution Agreement. As a result, although Monsanto remains the named defendant, we are required to manage the litigation and indemnify Monsanto for costs, expenses and judgments arising from the litigation. While the results of litigation cannot be predicted with certainty, we do not believe, based upon currently available facts, that the ultimate resolution of any of these pending matters will have a material adverse effect on our financial position or liquidity in any one year. However, resolution in those cases involving the alleged discharge of polychlorinated biphenyls ("PCBs") from the Anniston, Alabama plant site may have a material adverse effect on our net income in a given year, although it is impossible at this time to estimate the range or amount of any such liability. In addition, there can be no assurance that any final judgment against us, if upheld on appeal, will not have a material adverse effect on our financial position and liquidity. See "Risk Factors—Risks Relating to Our Business—Legal proceedings and other claims could impose substantial costs on us" and "Business—Legal Proceedings—Anniston, Alabama Cases".

Derivative Financial Instruments

        Our business operations give rise to market risk exposures that result from changes in currency exchange rates, interest rates and certain commodity prices. To manage the volatility relating to these exposures, we enter into various hedging transactions that enable us to alleviate the adverse effects of financial market risk. Our hedging transactions are carried out under policies and procedures approved by the Audit and Finance Committee of the Board of Directors, which do not permit the purchase or holding of any derivative financial instruments for trading purposes. Our Consolidated Financial Statements include a discussion of our accounting policies for financial instruments.

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Foreign Currency Exchange Rate Risk

        We manufacture and sell our products in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchange rates. We use foreign currency hedging instruments to manage the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business. We primarily use forward exchange contracts and purchased options to hedge these risks with maturities of less than 18 months. We also enter into certain foreign currency derivative instruments primarily to protect against exposure related to intercompany financing transactions. Corporate policy prescribes the range of allowable hedging activity and the instruments that are permitted for use. Because the counterparties to these contracts are major international financing institutions, credit risk arising from these contracts is not significant, and we do not anticipate any counterparty losses.

        At December 31, 2001, we had currency forward contracts to purchase and sell $301 million of currencies, principally the U.S. dollar, euro, Swiss Franc and United Kingdom Pound-Sterling, with average maturities of 7 months.

        Based on our overall currency rate exposure at December 31, 2001, including derivative and other foreign currency sensitive instruments, a near-term change in currency rates, within a 95 percent confidence level based on historical currency rate movements, would not materially affect our financial statements.

Interest Rate Risk

        Interest rate risk is primarily related to the changes in fair value of fixed-rate long-term debt and short-term, floating rate debt. We believe our current debt structure appropriately protects us from changes in interest rates and are not actively using any contracts to manage interest rate risk. Based on our overall interest rate exposure at December 31, 2001, a near-term change in interest rates, within a 95 percent confidence level based on historical interest rate movements, would not materially affect our financial statements. This is consistent with the overall interest rate exposure at December 31, 2000.

Commodity Price Risk

        Certain raw materials and energy sources used by us are subject to price volatility caused by weather, crude oil prices, supply conditions, political and economic variables and other unpredictable factors. We periodically use forward and option contracts to manage the volatility related to anticipated energy and raw material purchases.

Recently Issued Accounting Standards

        Effective January 1, 2002, we adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets," which provide guidance related to accounting for business combinations and goodwill. The adoption of SFAS No. 141 did not have a material effect on our financial statements. In accordance with SFAS No. 142, we discontinued the amortization of goodwill and identifiable intangible assets that have indefinite useful lives. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. Goodwill will be assessed annually for impairment. This statement also required certain intangible assets that did not meet the criteria for recognition apart from goodwill to be subsumed into goodwill. During the quarter ended March 31, 2002, we subsumed into goodwill $74 million of intangible assets net of related deferred tax liabilities representing assembled workforce and noncontractual customer relationships that did not meet the separability criteria under SFAS No. 141, "Business Combinations."

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        Fair value measurements of the reporting units were estimated by a third-party specialist utilizing both an income and market multiple approach. Based on this analysis, we recorded an impairment loss of $167 million ($167 million aftertax) for the Resins and Additives business in the Specialty Products segment due to declining estimates of future results given current economic and market conditions. This goodwill is non-deductible for tax purposes. The impairment charge is reflected as the cumulative effect of change in accounting principle in the accompanying statement of consolidated income (loss).

        In July 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The statement addresses accounting and reporting requirements for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement obligations. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We are evaluating SFAS No. 143 to determine the effects, if any, on our consolidated financial statements.

        Effective January 1, 2002, we adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS No. 144 did not have a material effect on our consolidated financial statements.

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THE EXCHANGE OFFER

General

        We are offering to exchange up to $223,000,000 in aggregate principal amount of new 11.25% senior secured notes for the same aggregate principal amount of outstanding 11.25% senior secured notes, properly tendered before the expiration date and not withdrawn. We are making the exchange offer for all of the outstanding notes. Your participation in the exchange offer is voluntary and you should carefully consider whether to accept this offer.

        On the date of this prospectus, $223,000,000 in aggregate principal amount of our 11.25% senior secured notes is outstanding. We are sending this prospectus, together with the letter of transmittal, on approximately                        , 2002, to all holders of outstanding notes that we are aware of. Our obligations to accept outstanding notes for exchange pursuant to the exchange offer are limited by the conditions listed under "—Conditions to the Exchange Offer" below.

        We currently expect that each of the conditions will be satisfied and that no waivers will be necessary.

Purpose of the Exchange Offer

        SOI Funding Corp. issued and sold $223,000,000 in aggregate principal amount of the outstanding 11.25% senior secured notes on July 9, 2002 in a transaction exempt from the registration requirements of the Securities Act, and, on July 25, 2002, we assumed SOI Funding's obligations under the outstanding notes. Because the transaction was exempt under the Securities Act, you may re-offer, resell or otherwise transfer the outstanding notes only if registered under the Securities Act or if an applicable exemption from the registration and prospectus delivery requirements of the Securities Act is available.

        In connection with the issuance and sale of the outstanding notes, we and the subsidiary guarantors entered into a registration rights agreement, which requires us to consummate this exchange offer by December 23, 2002. If we are unable to complete the exchange offer, or have a shelf registration statement declared effective, by December 23, 2002, the interest rate on the outstanding notes will increase by 25 basis points per annum, which rate shall further increase by 25 basis points per annum for each subsequent 90-day period during which such registration default continues (up to a maximum of 100 basis points per annum) until we complete the exchange offer or have the shelf registration statement declared effective.

        In addition, there are circumstances under which we are required to use our best efforts to file a shelf registration statement with respect to resales of the outstanding notes. We have filed a copy of the registration rights agreement as an exhibit to the registration statement that this prospectus forms a part of and that has been filed with the SEC.

        We are making the exchange offer to satisfy our obligations under the registration rights agreement. Otherwise, we are not required to file any registration statement to register any outstanding notes. Holders of outstanding notes that do not tender their outstanding notes or whose outstanding notes are tendered but not accepted will have to rely on exemptions to registration requirements under the securities laws, including the Securities Act, if they wish to sell their outstanding notes.

Terms of the Exchange

        We are offering to exchange, upon the terms of this prospectus and the letter of transmittal, $1,000 in principal amount of new 11.25% senior secured notes for each $1,000 in principal amount of the outstanding 11.25% senior secured notes. The terms of the new notes are the same in all material respects, including principal amount, interest rate, maturity and ranking, as the terms of the outstanding notes for which they may be exchanged pursuant to the exchange offer, except that the

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offering of the new notes has been registered under the Securities Act and, therefore, the new notes will not be subject to restrictions on transfer applicable to the outstanding notes and will be entitled to registration rights only under limited circumstances. The new notes will evidence the same indebtedness as the outstanding notes and will be entitled to the benefits of the indenture. Please refer to the section in this prospectus entitled "Description of Notes" for a more complete discussion of the terms of the notes.

        The exchange offer is not conditioned upon any minimum aggregate amount of outstanding notes being tendered for exchange.

        We have not requested, and do not intend to request, an interpretation by the staff of the SEC as to whether the new notes issued pursuant to the exchange offer in exchange for the outstanding notes may be offered for sale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act. Instead, based on an interpretation by the staff in a series of no-action letters issued to third parties, we believe that new notes issued in the exchange offer in exchange for outstanding notes may be offered for sale, resold and otherwise transferred by any holder of new notes (other than any holder which is an affiliate of ours or a broker-dealer that purchased outstanding notes from us to resell pursuant to Rule 144A under the Securities Act or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the new notes are acquired in the ordinary course of the holder's business and the holder has no arrangement or understanding with any person to participate in the distribution of the new notes and neither the holder nor any other person is participating in or intends to participate in a distribution of the new notes. Because the SEC has not considered our exchange offer in the context of a no-action letter, we cannot assure you that the staff would make a similar determination with respect to the exchange offer. Any holder that is an affiliate of ours or that tenders in the exchange offer for the purpose of participating in a distribution of the new notes may be deemed to have received restricted securities and will not be allowed to rely on this interpretation by the staff and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

        If you participate in the exchange offer, you must acknowledge, among other things, that you are not participating in, and do not intend to participate in, a distribution of the new notes. If you are a broker-dealer that receives new notes for your own account in exchange for outstanding notes, where your outstanding notes were acquired by you as a result of your market-making activities or other trading activities, you must acknowledge that you will deliver a prospectus in connection with any resale of the new notes. Please refer to the section in this prospectus entitled "Plan of Distribution" for a more complete discussion of your ability to resell the new notes.

        You will not be required to pay brokerage commissions or fees or, if you comply with the instructions in the letter of transmittal, transfer taxes with respect to the exchange of the outstanding notes in the exchange offer.

Expiration Date; Extension; Termination; Amendment

        The exchange offer will expire at 5:00 p.m., New York City time, on                        , 2002, unless we have extended the period of time that the exchange offer is open, but in no event will we extend the expiration date of the exchange offer past December 23, 2002. The expiration date will be at least 20 business days after the beginning of the exchange offer as required by Rule 14e-1(a) under the Exchange Act. We reserve the right to extend the period of time that the exchange offer is open, and delay acceptance for exchange of any outstanding notes, by giving oral or written notice to the exchange agent and by timely public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During any extension, all outstanding notes previously tendered will remain subject to the exchange offer unless properly withdrawn.

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        We also reserve the right to:

•

end or amend the exchange offer and not to accept for exchange any outstanding notes not previously accepted for exchange upon the occurrence of any of the events specified below under "—Conditions to the Exchange Offer" that have not been waived by us; and

•

amend the terms of the exchange offer in any manner which, in our good faith judgment, is advantageous to you, whether before or after any tender of the outstanding notes.

        If any termination or amendment occurs, we will notify the exchange agent and will either issue a press release or give oral or written notice to you as promptly as practicable.

Procedures for Tendering Outstanding Notes

        Your tender to us of your outstanding notes and our acceptance of the notes will constitute a binding agreement between you and us on the terms contained in this prospectus and in the letter of transmittal.

        You will tender outstanding notes by:

•

properly completing and signing the letter of transmittal or a facsimile copy of the letter, and delivering the letter, together with the certificate or certificates representing the outstanding notes being tendered and any required signature guarantees and any other documents required by the letter of transmittal, to the exchange agent at its address listed below on or before the expiration date; or

•

complying with the procedure for book-entry transfer described below; or

•

complying with the guaranteed delivery procedures described below.

        If your outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender the notes, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, before completing and executing the letter of transmittal and delivering the outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.

The method of delivering the outstanding notes, letters of transmittal and all of the required documents is at the election and risk of the holder. If delivery is by mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, sufficient time should be allowed to insure timely delivery. No notes or letters of transmittal should be sent to us.

        If tendered outstanding notes are registered in the name of the person who signs the letter of transmittal and the new notes to be issued in exchange for the tendered notes are to be issued in the name of the registered holder, the signature of the signer need not be guaranteed.

        In addition, if any untendered outstanding notes are to be reissued in the name of the registered holder, the signature need not be guaranteed. A registered holder shall include any participant in The Depository Trust Company ("DTC") whose name appears on a security listing as an owner of outstanding notes.

        In any other case, the tendered outstanding notes must be endorsed or accompanied by written instruments of transfer, in form satisfactory to us and duly executed by the registered holder. The signature of the endorsement or instrument of transfer must be guaranteed by an eligible institution. The following are considered eligible institutions:

•

a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc.;

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•

a clearing agency;

•

an insured credit union;

•

a savings association or a commercial bank; or

•

a trust company having an office or correspondent in the United States.

        If the new notes and/or outstanding notes not exchanged are to be delivered to an address other than that of the registered holder appearing on the note registrar for the outstanding notes, the signature in the letter of transmittal must be guaranteed by an eligible institution.

        We understand that the exchange agent has confirmed with DTC that any financial institution that is a participant in DTC's system may use its Automated Tender Offer Program to tender outstanding notes. We further understand that the exchange agent will request, within two business days after the date the exchange offer commences, that DTC establish an account relating to the outstanding notes for the purpose of facilitating the exchange offer, and any participant may make book-entry delivery of outstanding notes by causing DTC to transfer the outstanding notes into the exchange agent's account in accordance with the Automated Tender Offer Program procedures for transfer. However, the exchange of the outstanding notes will only be made after timely confirmation of the book-entry transfer and timely receipt by the exchange agent of an agent's message, an appropriate letter of transmittal with any registered signature guarantee, and any other documents required. The term "agent's message" means a message, transmitted by DTC and received by the exchange agent and forming part of a book-entry confirmation, stating that DTC has received an express acknowledgment from a participant tendering outstanding notes that are the subject of the book-entry confirmation and that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce such agreement against the participant.

        If you want to tender outstanding notes in the exchange offer and time will not permit a letter of transmittal or outstanding notes to reach the exchange agent before the expiration date or you cannot comply with the procedure for book-entry transfer on a timely basis, a tender may be effected if the exchange agent has received at its address listed below before the expiration date, a letter, telegram or facsimile transmission from an eligible institution listing your name and address, the names in which the outstanding notes are registered and, if possible, the certificate number of the outstanding notes to be tendered, and stating that the tender is being made by the letter, telegram or facsimile transmission and guaranteeing that within three business days after the expiration date, the outstanding notes in proper form for transfer, or a confirmation of book-entry transfer of the outstanding notes into the exchange agent's account at DTC, will be delivered by the eligible institution, together with a properly completed and duly executed letter of transmittal and any other required documents. Unless outstanding notes being tendered by the method described in the preceding sentence are deposited with the exchange agent within the time period described in the preceding sentence and accompanied or preceded by a properly completed letter of transmittal and any other required documents, we may, at our option, reject the tender. You may obtain copies of the notice of guaranteed delivery from the exchange agent.

        Your tender will be deemed to have been received when the exchange agent receives:

•

your properly completed and duly signed letter of transmittal accompanied by the outstanding notes, or a confirmation of book-entry transfer of such outstanding notes into the exchange agent's account at DTC; or

•

a notice of guaranteed delivery or letter, telegram or facsimile transmission to similar effect from an eligible institution.

        We will issue new notes in exchange for outstanding notes tendered by means of a notice of guaranteed delivery or letter, telegram or facsimile transmission to similar effect by an eligible

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institution only when the exchange agent receives (1) the letter of transmittal and any other required documents and (2) the tendered outstanding notes.

        We will determine all questions regarding the validity, form, eligibility, time of receipt and acceptance of outstanding notes tendered for exchange. You should be aware that:

•

We reserve the absolute right to reject any and all tenders of any particular outstanding notes not properly tendered or not to accept any particular outstanding notes which acceptance might, in our judgment or that of our counsel, be unlawful.

•

We reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular outstanding notes either before or after the expiration date, including the right to waive the ineligibility of any holder that seeks to tender outstanding notes in the exchange offer.

•

Our interpretation of the terms and conditions of the exchange offer, including the letter of transmittal and the instructions, shall be final and binding on all parties.

•

Unless waived, any defects or irregularities in connection with tenders of outstanding notes for exchange must be cured within a reasonable period of time as we shall determine.

•

Neither we, the exchange agent nor any other person shall have any duty to give notification of any defect or irregularity with respect to any tender of outstanding notes for exchange.

        If the letter of transmittal is signed by a person or persons other than the registered holder or holders of outstanding notes, the outstanding notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders appear on the outstanding notes.

        If the letter of transmittal or any outstanding notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, they should indicate they are acting in that capacity when signing, and, unless waived by us, you should provide evidence of their authority to act in that capacity.

        If you tender, you will be representing to us that:

•

the new notes you acquire pursuant to the exchange offer are being acquired in the ordinary course of business of the person receiving new notes, whether or not the person is the holder;

•

you are not an affiliate of ours;

•

you are not participating in, and do not intend to participate in, and have no arrangement or understanding with any person to participate in, a distribution of the outstanding notes or the new notes; and

•

if you are a broker or dealer registered under the Exchange Act, you will receive the new notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities or other trading activities. You must acknowledge that you will deliver a prospectus in connection with any resale of the new notes. Please refer to the section in this prospectus entitled "Plan of Distribution" for a more complete discussion of your ability to resell the new notes.

Terms and Conditions of the Letter of Transmittal

        By signing and returning the letter of transmittal you will be agreeing to the following terms and conditions, which are part of the exchange offer.

•

You are exchanging, assigning and transferring the outstanding notes to us and irrevocably constitute and appoint the exchange agent as your agent and attorney-in-fact to cause the outstanding notes to be assigned, transferred and exchanged.

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•

You represent and warrant that you have full power and authority to tender, exchange, assign and transfer the outstanding notes and acquire new notes issuable upon the exchange of tendered outstanding notes.

•

When we accept outstanding notes for exchange, we will acquire good and unencumbered title to the tendered outstanding notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim.

•

You will, upon request, execute and deliver any additional documents deemed by the exchange agent or us to be necessary or desirable to complete the exchange, assignment and transfer of tendered outstanding notes or transfer ownership of such outstanding notes on the account books maintained by DTC.

        Your acceptance of any tendered outstanding notes and our issuance of new notes in exchange for the outstanding notes will constitute performance in full by us of our obligations under the registration rights agreement to complete the exchange offer.

        All authority conferred by you will survive your death or incapacity and every obligation of yours will be binding upon your heirs, legal representatives, successors, assigns, executors and administrators. You will also make the representations described above under "—Procedures for Tendering Outstanding Notes."

Withdrawal Rights

        You may withdraw your tender of outstanding notes at any time before 5:00 p.m., New York City time, on the expiration date.

        For a withdrawal to be effective, the exchange agent must receive a written notice of withdrawal, sent by telegram, facsimile transmission, receipt confirmed by telephone, or letter, before the expiration date. Any notice of withdrawal must:

•

specify the name of the person that tendered the outstanding notes to be withdrawn;

•

identify the outstanding notes to be withdrawn, including the certificate number or numbers and principal amount of such outstanding notes;

•

specify the principal amount of outstanding notes to be withdrawn;

•

include a statement that the holder is withdrawing its election to have the outstanding notes exchanged;

•

be signed by the holder in the same manner as the original signature on the letter of transmittal by which the outstanding notes were tendered or as otherwise described above, including any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee under the indenture register the transfer of the outstanding notes into the name of the person withdrawing the tender; and

•

specify the name in which any of the outstanding notes are to be registered, if different from that of the person that tendered the outstanding notes.

        The exchange agent will return the properly withdrawn outstanding notes promptly following receipt of notice of withdrawal. If outstanding notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn outstanding notes or otherwise comply with DTC's procedures.

        Any outstanding notes withdrawn will not have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the holder without cost to the holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. In the case of

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outstanding notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to its book-entry transfer procedures, the outstanding notes will be credited to an account with DTC specified by the holder, as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding notes may be retendered by following one of the procedures described under "—Procedures for Tendering Outstanding Notes" above at any time on or before the expiration date.

Acceptance of Outstanding Notes for Exchange; Delivery of New Notes

        Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the exchange date, all outstanding notes properly tendered and will issue the new notes promptly after the acceptance. However, please refer to the section in this prospectus entitled "—Conditions to the Exchange Offer" below for a discussion of the conditions under which we may end the exchange offer and reject for exchange any outstanding notes. For purposes of the exchange offer, we will be deemed to have accepted properly tendered outstanding notes for exchange when we give notice of acceptance to the exchange agent.

        For each outstanding note accepted for exchange, the holder of the outstanding note will receive a new note having a principal amount at maturity equal to that of the surrendered outstanding note.

        In all cases, we will issue new notes for outstanding notes that are accepted for exchange pursuant to the exchange offer only after the exchange agent timely receives certificates for the outstanding notes or a book-entry confirmation of the outstanding notes into the exchange agent's account at DTC, a properly completed and duly executed letter of transmittal and all other required documents.

Conditions to the Exchange Offer

        We will not be required to accept for exchange, or to issue new notes in exchange for, any outstanding notes and may end or amend the exchange offer, by notice to the exchange agent or by a timely press release, if at any time before the acceptance of the outstanding notes for exchange or the exchange of the new notes for the outstanding notes, any of the following conditions exist:

•

any action or proceeding is instituted or threatened in any court or by or before any governmental agency or regulatory authority or any injunction, order or decree is issued, in each case, with respect to the exchange offer that, in our sole judgment, might materially impair our ability to proceed with the exchange offer or have a material adverse effect on the contemplated benefits of the exchange offer to us; or

•

any change, or any development involving a prospective change, shall have occurred or be threatened in our business, properties, assets, liabilities, financial condition, operations, results of operations or prospects that is or may be adverse to us, or we become aware of facts that have or may have adverse significance with respect to the value of the outstanding notes or the new notes or that may materially impair the contemplated benefits of the exchange offer to us; or

•

any law, rule or regulation or applicable interpretation of the staff of the SEC is issued or promulgated that, in our good faith determination, does not permit us to effect the exchange offer; or

•

any governmental approval has not been obtained, which we think is necessary for the completion of the exchange offer; or

•

there shall have been proposed, adopted or enacted any law, statute, rule or regulation, or an amendment to any existing law, statute, rule or regulation, which might materially impair our ability to proceed with the exchange offer or have a material adverse effect on the contemplated benefits of the exchange offer to us; or

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•

there shall occur a change in the current interpretation by the staff of the SEC that permits the new notes issued pursuant to the exchange offer in exchange for outstanding notes to be offered for resale, resold and otherwise transferred by holders, other than any holder that is a broker-dealer or an affiliate of ours within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the new notes are acquired in the ordinary course of the holders' business and the holders have no arrangement with any person to participate in the distribution of such new notes.

        We reserve the right to end the exchange offer and reject for exchange any outstanding notes upon the occurrence of any of the preceding conditions. In addition, we may amend the exchange offer at any time before the expiration date if any of these conditions exist.

        In addition, we will reject for exchange any outstanding notes tendered, and no new notes will be issued in exchange for any outstanding notes, if at the time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939. If any stop order is in effect we will be required to use our best efforts to obtain its withdrawal at the earliest possible time.

        The exchange offer is not conditioned upon any minimum principal amount of outstanding notes being tendered for exchange.

Exchange Agent

        We have appointed HSBC Bank USA as the exchange agent for the exchange offer. You should direct all executed letters of transmittal to the exchange agent at the addresses listed below:

	By Mail, Hand or Overnight Delivery:
	HSBC Bank USA Lower Level One Hanson Place Brooklyn, New York 11243 Attention: Issuer Services
By Facsimile Transmission: (Eligible Institutions Only)		Confirm by Telephone:

        You should direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery to the exchange agent at the address and telephone number listed above.

Delivery to an address other than as listed above, or transmissions of instructions by a facsimile number other than as listed above, will not constitute a valid delivery.

Solicitation of Tenders; Fees and Expenses

        We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. However, we will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection with the exchange offer.

        We will pay the estimated cash expenses to be incurred in connection with the exchange offer. We estimate that those expenses will be, in the aggregate, approximately $300,000, including fees and

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expenses of the exchange agent and trustee, registration fees, accounting, legal and printing expenses and other related fees and expenses.

        Neither the delivery of this prospectus nor any exchange made under this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the respective dates as of which information is given in this prospectus. The exchange offer is not being made to, nor will tenders be accepted from or on behalf of, holders of outstanding notes in any jurisdiction in which the making of the exchange offer or the acceptance of the outstanding notes would not be in compliance with the laws of that jurisdiction. However, we may, at our discretion, take any action as we may deem necessary to make the exchange offer in any jurisdiction and extend the exchange offer to holders of outstanding notes in the jurisdiction concerned.

Transfer Taxes

        We will pay all transfer taxes, if any, applicable to the exchange of outstanding notes under the exchange offer. If, however, certificates representing new notes or outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of any person other than the registered holder of the outstanding notes tendered, or if tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of outstanding notes in the exchange offer, then the amount of the transfer taxes whether imposed on the registered holder or any other person, will be payable by the tendering holder. If satisfactory evidence of payment of the taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of the transfer taxes will be billed directly to the tendering holder.

Accounting Treatment

        The new notes will be recorded at the carrying value of the outstanding notes as reflected in our accounting records on the date the exchange offer is completed. Accordingly, we will not recognize any gain or loss for accounting purposes upon the exchange of new notes for outstanding notes. We will amortize the expenses incurred in connection with the issuance of the new notes over the term of the new notes.

Consequences of Failure to Exchange

        If you do not exchange your outstanding notes for new notes pursuant to the exchange offer, you will continue to be subject to the restrictions on transfer of the outstanding notes as described in the legend on the notes. In general, the outstanding notes may be offered or sold only if registered under the Securities Act, unless they are sold under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the outstanding notes under the Securities Act. However, under limited circumstances we may be required to file with the SEC a shelf registration statement to cover resales of the outstanding notes by the holders of notes who satisfy conditions relating to the provision of information in connection with the shelf registration statement. Please refer to the section in this prospectus entitled "Exchange Offer; Registration Rights" for a more complete discussion of these registration rights.

        Your participation in the exchange offer is voluntary, and you should carefully consider whether to participate. We urge you to consult your financial and tax advisors in making a decision whether or not to tender your outstanding notes. Please refer to the section in this prospectus entitled "Certain United States Federal Tax Considerations" for a more complete discussion of the tax consequences of participating in the exchange offer.

        As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding notes pursuant to the terms of, this exchange offer, we will have fulfilled a covenant contained in the registration rights agreement. If you do not tender your outstanding notes in the exchange offer, you

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will be entitled to all the rights and limitations applicable to the outstanding notes under the indenture, except for any rights under the registration rights agreement that by their terms end or cease to have further effectiveness as a result of the making of this exchange offer. To the extent that outstanding notes are tendered and accepted in the exchange offer, the trading market for untendered, or tendered but unaccepted, outstanding notes could be adversely affected. Please refer to the section in this prospectus entitled "Risk Factors—If you do not exchange your outstanding notes for new notes, your notes will continue to have restrictions on transfer" for an additional discussion of the consequences of not participating in the exchange offer.

        We may in the future seek to acquire, subject to the terms of the indenture, untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The terms of these purchases or offers may differ from the terms of the exchange offer.

Resale of New Notes

        As noted above, we are making the exchange offer in reliance on the position of the staff of the SEC in interpretive letters addressed to third parties in other transactions. However, we have not sought an interpretive letter from the staff and we cannot assure you that the staff would make a similar determination with respect to the exchange offer as it has in past interpretive letters to third parties. Any holder who is an affiliate of ours or who has an arrangement or understanding with respect to the distribution of the new notes to be acquired pursuant to the exchange offer, or any broker-dealer who purchased outstanding notes from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act:

•

cannot rely on the applicable interpretations of the staff; and

•

must comply with the registration and prospectus delivery requirements of the Securities Act.

        A broker-dealer who holds outstanding notes that were acquired for its own account as a result of market-making or other trading activities may be deemed to be an underwriter within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes. Each broker-dealer that receives new notes for its own account in exchange for outstanding notes, where the outstanding notes were acquired by a broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of the new notes. A secondary resale transaction in the United States by a holder using the exchange offer to participate in a distribution of outstanding notes must be covered by an effective registration statement containing the selling security holder information required by Item 507 of Regulation S-K. Please refer to the section in this prospectus entitled "Plan of Distribution" for a more complete discussion of your ability to resell the new notes.

        In addition, to comply with the securities laws of some jurisdictions, the new notes may be offered or sold only if they have been registered or qualified for sale in the jurisdiction or an exemption from registration or qualification is available and is complied with. We have agreed, pursuant to the registration rights agreement and subject to specified limitations in the registration rights agreement, to register or qualify the new notes for offer or sale under the securities or blue sky laws of these jurisdictions as any holder of the new notes reasonably requests. Registration or qualification may require the imposition of restrictions or conditions, including suitability requirements for offerees or purchasers, in connection with the offer or sale of any new notes.

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BUSINESS

General

        Solutia Inc. and its subsidiaries make and sell a variety of high-performance chemical-based materials. Using our world-class skills, we create solutions for industrial and individual consumers in household goods, construction, vehicles, industrial products and pharmaceuticals. We have organized our business in three segments: Performance Films, Specialty Products and Integrated Nylon.

        Our Performance Films segment manufactures SAFLEX® plastic interlayer, which is used to make laminated glass for windshields. This product is also marketed to the automotive industry for side and rear windows, both under the product category of Enhanced Protective Glass and under the VANCEVA™ brand design systems. We also brand plastic interlayer under the KEEPSAFE®, KEEPSAFE MAXIMUM® and VANCEVA™ marks for architectural applications. In addition, we produce custom-coated window films, branded as LLUMAR® and VISTA®, for after-market automotive and architectural applications; and industrial films for use in high-tech electronic display applications.

        Our Specialty Products segment produces a variety of branded resins and additives used to produce high performance coatings for various materials such as metal, wood and plastic; and adhesives. We provide process research, process development and scale-up services for the pharmaceutical industry. In addition, we produce specialty chemicals such as DEQUEST® water treatment chemicals, THERMINOL® heat transfer fluids and SKYDROL® aviation hydraulic fluids.

        Our Integrated Nylon segment produces an integrated family of nylon products, including VYDYNE® and ASCEND® nylon polymers; nylon fibers such as WEAR-DATED® and ULTRON® brands used in carpet; ACRILAN® acrylic fibers; and chemical intermediates.

        Solutia was incorporated in Delaware in April 1997 to hold most of the chemical businesses of the former Monsanto Company, now known as Pharmacia Corporation. On September 1, 1997, Monsanto distributed all of the outstanding shares of our common stock as a dividend to Monsanto's stockholders, and we became an independent publicly-held company listed on the New York Stock Exchange under the symbol "SOI". We refer to this event as the "spinoff" in this document.

Competitive Strengths

        Leading market positions.    We have leading market positions for most of our principal products. For example, we are the leading global producer of polyvinyl butyral ("PVB"), the specialty resin used in the production of laminated safety glass. We are the only significant manufacturer of, or have leading positions in, a number of niche products in our Specialty Products segment. These products, including SKYDROL® aviation hydraulic fluids, THERMINOL® heat transfer fluids and DEQUEST® phosphonates water treatment fluids, benefit from distinct technical capabilities, unique properties and superior customer service. We are also the second largest North American producer of nylon fibers, which we competitively market on a branded and non-branded basis.

        Industry-leading technical and product development capabilities.    Our strong research and product development capabilities have resulted in the development of new products in many of our business segments. For example, in January 2002 at the North American International Auto Show in Detroit, Ford Motor Company and General Motors Corporation both unveiled concept vehicles that incorporate VANCEVA™ colored glass interlayer produced by our Performance Films business. These products enable designers to customize vehicles by color matching or contrasting the glass with a vehicle's paint. Our Specialty Products segment has developed low temperature vapor phase heat transfer fluids for processing of temperature sensitive polymers and developed biodegradable chelates and scale inhibitors to meet market needs for more environmentally friendly products. Our Integrated Nylon segment has introduced a new wear-resistant staple fiber system for carpet under the TRAFFIC CONTROL FIBER SYSTEM® brand name.

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        Diverse business mix and high quality customer base.    We have a broad portfolio of products that are sold into a diverse array of applications and end-markets, including the automotive products, commercial carpet, architectural and pharmaceutical industries. Our customers represent the world's leading manufacturers in the industries we serve. These customers include DaimlerChrysler, General Motors, Ford, BMW, Weather-Shield, PPG and Pilkington, which purchase laminated safety glass manufactured with our PVB film. In our Specialty Products segment we have been awarded leading supplier status by customers such as Boeing for our aviation fluids. Additionally, as the second largest U.S. manufacturer of nylon 6,6, we supply leading national carpet manufacturers such as Mohawk, Shaw and Beaulieu. Our 10 largest customers have been with us for over 20 years and no single customer represents 10% or more of our net sales in 2001. We believe our broad product portfolio, diverse end markets and loyal, high quality customers lessen the impact of cyclicality within any one market on our combined operations.

        An increasingly global presence.    In addition to supplying our products to a wide variety of industries and customers, we have further reduced risk by geographically diversifying our business. We sell our products in more than 80 countries worldwide. Our sales for non-U.S. markets, including Europe, Canada, Latin America and Asia, have increased from 29% in 1998 to approximately 43% in 2001. Our products are sold globally through both a direct sales force and distributors.

        Strong management team with extensive industry experience.    Our senior management team consists of professionals with long-term experience within our company or broad talents and expertise in the chemical industry. Our 8 senior executives have an average of over 26 years of experience in the chemical industry. Moreover, our senior management team is supported by business unit managers who have extensive experience within their respective industry segments.

Business Strategy and Financial Objectives

        Expand high margin, high growth businesses.    We plan to expand and grow our Performance Films and selected Specialty Products businesses through product development, new product introductions and prudent capital investments. In 2001, we introduced the VANCEVA™ brand of Advanced Solutions for Glass, which enables us to collaborate with customers to meet their specific needs for color, design and acoustic glazing in both automotive and architectural applications. We continue to work for the adoption of Enhanced Protective Glass ("EPG") in all glass openings of automobiles. EPG is currently a standard or an optional feature on 24 car models incorporating our SAFLEX® interlayer. In the rapidly evolving architectural segment, we created the Solutia Architectural Glazing Solutions Center to anticipate and satisfy developing needs. In the electronics sector, we are focusing on market-expanding opportunities in the growing electronic displays segment. In addition, we have dedicated resources to further building our world-leading LLUMAR® brand of window films in global markets.

        We plan to grow our state-of-the-art Pharmaceutical Services business through our unique combination of scientific expertise, efficient process management and unparalleled service. We significantly increased our sales in this business in 2001 and continue to view this area as a future growth opportunity. On May 31, 2002, we acquired Axio Research Corporation to complement our Pharmaceutical Services offerings. Axio is a contract research organization providing clinical trial design and data management to a wide range of clients including pharmaceutical, biotechnology and medical device companies as well as academic and government research groups. Our Resins and Additives business is backed by our global manufacturing and strong technical support capabilities. We continue to introduce technical solutions and provide application support to meet the rising demand for environmentally friendly coatings technologies. In Industrial Products, we continue to leverage our market-leading brands and pursue niche opportunities in new geographic markets.

        Optimize cash flow generation from our Integrated Nylon segment.    Our strategy is to maximize the value of our nylon businesses by leveraging our integrated position, aggressively managing our costs, as

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we have done through workforce reductions and improved operating efficiencies, and building on our leading brand names, such as WEAR-DATED®. For example, during the past several years, we extended our WEAR-DATED® brand to two new product lines: DURASOFT®, which offers exceptional softness and durability; and THERMASEALED®, which uses new technology to combine the look and feel of wool carpets with the reliability of nylon 6,6.

        Continue to improve our cost structure and capital efficiency.    We intend to continue to manage costs and capital effectively. Through headcount reductions and restructuring activities completed at the end of the first quarter of 2002, we achieved annual cost savings of $60 million. We currently expect to achieve our goal of approximately $100 million in annual savings, relative to our 2000 costs, by the end of 2002. In addition, we reduced our capital expenditures for 2001 to $94 million from $221 million in 2000, and we expect that the level of capital expenditures in 2002 will be similar to or less than the amount spent in 2001. We believe these reductions in capital expenditure will improve our capital efficiency while allowing us to selectively invest in growth segments, take advantage of new markets and continue our product development efforts. In addition, we are continuing to efficiently manage working capital by maintaining inventory levels that are consistent with current market demand.

        Reduce debt.    We intend to use a significant portion of our cash flow from operations to reduce indebtedness. In addition, we plan to actively pursue divestments of non-strategic businesses and use proceeds from such divestitures to reduce debt, as was the case with our recent sale of our 50% interest in the Advanced Elastomer Systems joint venture for approximately $102 million.

        Re-establish an investment grade rating.    We are committed to the goal of re-establishing our investment grade rating, through the execution of the business strategies and financial objectives discussed above.

Our Business Segments

Performance Films

        Our Performance Films business is a leading global manufacturer of plastic interlayer for laminated safety glass. Performance Films products are used in automotive windshields and architectural applications and for electronic displays. Our products impart measurable benefits to glass: enhanced protection from shattering, noise reduction and UV protection. Our interlayer is marketed under the SAFLEX® and KEEPSAFE® families of products. Automobiles manufactured throughout the world are required to have laminated glass for their windshields. In addition to windshields, we also sell our interlayer for side and rear windows of automobiles as Enhanced Protective Glass, or EPG. Our window films for aftermarket installation on automobiles and buildings include the following leading brands: LLUMAR®, VISTA®, FORMULAONE PERFORMANCE AUTOMOTIVE FILMS® and GILA®. Our newest brand, VANCEVA™, combines our expertise in plastic interlayer products with our technology to add new features to film, such as design, color and enhanced sound protection, which provide new solutions for architectural and automotive glass systems. We also manufacture industrial films for use in high-tech electronic display applications. Our electronic display films offer electric conductivity and design capabilities.

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Major End-Use Markets	Major Products	Major End-Use Products & Applications	Major Competitors	Major Raw Materials	Major Plants
Construction and Home Furnishings	Polyvinyl butyral for KEEPSAFE® SAFLEX INSIDE® (used in Europe) and KEEPSAFE MAXIMUM® laminated window glass; VANCEVA™ design films; LLUMAR® and VISTA® professional window films and GILA® retail window films	Products to increase the safety, security, sound attenuation, energy efficiency and ultraviolet protection of architectural glass for residential and commercial structures; after—market films for solar control, security and safety	DuPont; HT Troplast Materials Science Corp. (MSC); Lintec; 3M	Butyraldehyde; ethanol; polyvinyl alcohol; vinyl acetate monomer; polyester film	Ghent, Belgium; Springfield, MA; Trenton, MI; Martinsville, VA
Vehicles	SAFLEX® plastic interlayer for windshields and for side and rear windows of vehicles; VANCEVA™ design films; LLUMAR®, FORMULAONE PERFORMANCE AUTOMOTIVE FILMS® and GILA® retail window films	Products to increase the safety, security, sound attenuation and ultraviolet protection of automotive glass	DuPont; Sekisui MSC; Lintec; Madico; 3M	Butyraldehyde; ethanol; polyvinyl alcohol; vinyl acetate monomer; polyester film	Ghent, Belgium; Springfield, MA; Trenton, MI; Martinsville, VA
Industrial Applications	Industrial films; release liners and deep-dyed films	Window films for architectural and automotive applications	3M; Lintec; MSC; Southwall; Rexam	Ethanol; formaldehyde; maleic anhydride; melamine; polyester film	Martinsville, VA
Electronics	Performance films; conductive and anti-reflective coated films	Computer touch-screens; electroluminescent displays for hand-held electronics and watches; cathode ray tube and LCD monitors	3M; Lintec; MSC; Southwall; Sheldahl	Ethanol; formaldehyde; maleic anhydride; melamine; polyester film	Martinsville, VA; Canoga Park, CA

Specialty Products

        Our Specialty Products business comprises Functional Solutions (formerly known as Resins and Additives and Industrial Products) and Pharmaceutical Services. Our Resins and Additives products include a diverse array of ingredients that provide durability to paints and other coatings; technical resins for specialty applications; and pressure-sensitive adhesives. We produce a range of environmentally friendly products, including waterborne alkyd resins for liquid coatings and solid resins for powder coatings. These products have experienced higher growth rates than solvent-based resins due to substitution trends in the United States and Europe. Pharmaceutical Services provides seamless development services—from process research to small scale-up manufacturing—for leading pharmaceutical and biotechnology companies. Pharmaceutical Services was formed by the acquisition of CarboGen and AMCIS in the first quarter of 2000. Our Industrial Products portfolio contains high-performance products, many of which are market leaders—including SKYDROL® aviation hydraulic fluids, THERMINOL® heat transfer fluids and DEQUEST® phosphonates water-treatment fluids.

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Major End-Use Markets	Major Products	Major End-Use Products & Applications	Major Competitors	Major Raw Materials	Major Plants
Capital Equipment	THERMINOL® heat transfer fluids; DEQUEST® water treatment chemicals	Heat transfer fluids; water treatment; oil field chemicals	Dow Chemical Co.; Nippon Steel Chemical Co.; Rhodia; Bayer	Benzene; phenol; phosphorus trichloride	Alvin, TX; Anniston, AL; Newport, Wales (U.K.)
Industrial Applications	MODAFLOW® flow and leveling agents; RESIMENE® crosslinkers; MAPRENAL® and MADURIT® resins; GELVA® pressure sensitive adhesives; chlorobenzenes	Coatings and adhesives; caulks and sealants; paints; coated fabric; wire and cable; liquid coating systems; fiberboard; technical laminates; paper coatings; packaging; medical devices; tapes and graphic arts; herbicides	Cytec Industries; Neste Akzo Nobel; Bayer; National Starch	Acrylate esters; butanol; formaldehyde; melamine; benzene; chlorine	Springfield, MA; Rayong, Thailand; Frankfurt-Fechenheim, Germany; Romano d'Ezzelino, Italy; Sauget, IL; Anniston, AL; Ghent, Belgium; Trenton, MI
Aviation/ Transportation	SKYDROL® aviation hydraulic fluids; SKYKLEEN® aviation solvents	Hydraulic fluids for commercial aircraft; environmentally friendly solvents for aviation maintenance	ExxonMobil	Phosphorus oxychloride; methanol	St. Louis, MO
Vehicles	MODAFLOW® flow and leveling agents; RESIMENE® crosslinkers; VIACRYL®, MACRYNAL®, VIALKYD®, DUROXYN®, VIAKTIN®, VIAMIN® and HOSTAFLEX® resins; RESYDROL® waterborne resins; ALFTALAT®, SYNTHACRYL® and VIAKTIN® solid resins; CLEAR PASS® and SPRAY GUARD® truck mud flap liners	Coatings and adhesives; caulks and sealants; paints; coated fabric; wire and cable; automotive, industrial and decorative coatings; environmentally friendly coatings; spray suppression on trucks	Cytec Industries; DSM; Cray Valley/Total; UCB	Acrylate esters; butanol; formaldehyde; melamine; methanol; terephthalic acid; polyethylene	Springfield, MA; Frankfurt- Fechenheim, Hamburg and Wiesbaden, Germany; Rayong, Thailand; Romano d'Ezzelino, Italy; Ghent, Belgium; St. Louis, MO
Construction and Home Furnishings	ASTROTURF® and CLEAN MACHINE® door mats	Entrance matting	Elecster; Fichet; HBN-Teknik	Polyethylene	St. Louis, MO; Ghent, Belgium
Pharmaceuticals	Services for process research and development, small scale-up manufacturing and small volume licensed production	New pharmaceuticals	Rhodia ChiRex; Albany Molecular Research; Pharma-Eco; Evotec		Aarau, Bubendorf and Friborg, Switzerland

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Integrated Nylon

        We are one of the world's few fully integrated producers of nylon 6,6, from intermediates to polymers, plastics, and fibers. Our nylon and acrylic fibers are used to make consumer goods such as wear-resistant carpeting, vibrant upholstery fabrics and tires. Many of our fibers are sold under widely recognized brand names such as WEAR-DATED® carpet and upholstery for consumers, and ULTRON® carpet for commercial markets. We expect that our branded products, which are principally distributed through nationally-recognized outlets such as Home Depot, Lowe's and Carpet One, will represent approximately 50% of our carpet fiber sales in 2002. We also produce nylon 6,6 resin, sold under the VYDYNE® and ASCEND® brand names, to the engineered thermoplastic and polymer markets. These resins are principally used to manufacture automotive products. Our intermediate products are used as feedstock for fiber and resin production and are also sold on the merchant market.

Major End-Use Markets	Major Products	Major End-Use Products & Applications	Major Competitors	Major Raw Materials	Major Plants
Construction and Home Furnishings	Nylon carpet staple; nylon bulk continuous filament; ACRILAN® acrylic fiber; ASCEND® nylon polymer	WEAR-DATED® residential and ULTRON® commercial carpet; WEAR-DATED® upholstery fabrics; blankets; non-woven reinforcement and linings	DuPont; Honeywell; BASF	Acrylonitrile; ammonia; cyclohexane; propylene	Pensacola, FL; Greenwood, SC; Decatur and Foley, AL
Personal Products	ACRILAN® acrylic fiber; ASCEND® nylon polymer	Sweaters; knit apparel; half-hose; active wear; craft yarns; hand-knit yarns; apparel; dental floss; intimate apparel	Acordis; DuPont; Radici	Acrylonitrile; ammonia; cyclohexane; propylene	Pensacola, FL; Decatur, AL; Greenwood, SC
Vehicles	Nylon filament; VYDYNE® nylon molding resins; ASCEND® nylon polymer; ACRILAN® acrylic fiber	Tires; brakes; convertible tops; automotive interior, exterior and under-the-hood molded parts	Acordis; DuPont; Rhodia; Asahi Chemical; DUSA	Acrylonitrile; ammonia; cyclohexane; propylene	Pensacola, FL; Decatur, AL; Greenwood, SC
Industrial Applications	ACRILAN® acrylic fiber; ASCEND® nylon polymer; industrial nylon fiber	Conveyer belts; awnings and outdoor furniture; nylon film cooking bags; specialized food packaging	Acordis; DuPont; Honeywell; BASF	Acrylonitrile; ammonia; cyclohexane; propylene	Pensacola, FL; Decatur, AL; Greenwood, SC
Intermediate Chemicals	Nylon salt; adipic acid; hexamethyl-enediamine; acrylonitrile	Nylon and acrylic fiber; nylon and ABS plastics	DuPont; Rhodia; BASF; Asahi Chemical	Natural gas; propylene; cyclohexane	Decatur, AL; Alvin, TX; Greenwood, SC; Pensacola, FL

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Principal Equity Affiliates

        We participate in a number of joint ventures in which we share management control with other companies. Our equity earnings (loss) from affiliates were $(13) million in 2001, $35 million in 2000 and $36 million in 1999. Principal joint ventures include Flexsys, L.P. and Astaris LLC. During the first quarter of 2002, we sold our 50% interest in the Advanced Elastomer Systems joint venture to a division of ExxonMobil Corporation for approximately $102 million, which represented a modest gain. The net sales proceeds from the transaction were used to reduce outstanding debt, fund operations and for other general corporate purposes.

        Flexsys, headquartered in Belgium, is a leading supplier of process chemicals to the rubber industry. Its product line includes a number of branded accelerators (SANTOCURE®, THIOFIDE® and THIOTAX®), pre-vulcanization inhibitors (SANTOGARD®), antidegradants and antioxidants (FLECTOL® and SANTOWHITE®) and insoluble sulphur (CRYSTEX®). Flexsys is a 50/50 joint venture with Akzo Nobel N.V.

        Astaris, headquartered in the United States, sells phosphorus and phosphate salts. Its product line includes a number of branded products such as LEVN-LITE®, PAN-O-LITE® and LEVERAGE® phosphate, which are sold into the bakery markets. The business also services the pharmaceutical, meat and poultry and industrial marketplaces. Astaris is a 50/50 joint venture with FMC Corporation.

Industry Overview

Performance Films

        The principal material used to produce laminated safety glass for automotive and architectural applications is polyvinyl butyral ("PVB") resin. PVB resin is used to manufacture PVB sheet, which has a number of properties, such as high tensile strength, impact resistance, transparency and elasticity, that make it particularly useful in the production of safety glass. PVB sheet acts as an interlayer that adheres tightly to glass so that even if the glass is broken, the glass adheres to the interlayer preventing shattering.

        Production of laminated safety glass accounts for substantially all of the consumption of PVB resin. Future demand for PVB resin will, therefore, depend primarily upon automobile and truck production and architectural uses. PVB resin used for non-sheet applications accounts for less than 10% of total PVB volume in the United States and is used for a variety of applications, including wash primers (for metal surfaces) and other surface coatings, specialty adhesive formulations, and inks and other applications.

        PVB sheet produced by companies such as Solutia is supplied to glass laminators such as PPG Industries Inc., Pilkington, and Guardian Industries. The global PVB industry is relatively consolidated, with Solutia, Dupont and Sekisui accounting for over 80% of global capacity. We believe that we have the largest market share in the industry.

        The principal use for laminated safety glass is in windshields for automobiles and other vehicles (both OEM and replacement applications). The OEM market accounts for approximately 60% of demand, with the remaining 40% sold in the replacement market. OEM market use is influenced by general economic conditions and demand for new automobiles and trucks, while the replacement market is governed by factors such as miles driven, road conditions, weather (especially harsh winters) and consumer durables spending. There is potential for increased use of safety glass in automobiles in side and rear windows, as this market is currently served by tempered glass. The use of laminated safety glass in side and rear auto windows enhances features such as safety, security, and noise reduction.

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        In the architectural market, glass laminators purchase PVB sheet for production of architectural and security glass. In addition to enhancing safety and security, laminated safety glass dampens and reduces noise transmission, decreases ultraviolet radiation transmission, improves building aesthetics, and provides thermal insulation. In recent years, natural disasters such as Hurricane Andrew have demonstrated the need for safety glass in hurricane-prone areas. Dade, Broward, Monroe and Palm Beach counties in southern Florida have passed window impact standards to limit property damage, as well as the damage caused from flying glass shards, which are a major source of injury in hurricanes. Laminated safety glass is also increasingly being used in airport terminals, government and commercial office buildings, stadiums, museums, correctional facilities and shopping malls for security purposes.

Specialty Products

        Acrylic resins are high performance thermosetting resins used in coatings applications. These resins are principally used in automotive and architectural coatings to provide durability, appearance and scratch resistance properties. Acrylic resins come in both liquid and powder forms. Consumption of acrylic resins is highly dependent upon regional economic conditions. Our MACRYNAL® and VIACRYL® acrylic resins are used in liquid coatings for automotive OEM coatings, automotive refinish coatings and industrial OEM coatings applications around the world. In addition, our SYNTHACRYL® acrylic powder coating resins are used in a variety of powder coatings applications.

        Epoxy resins are high-performance thermosetting resins. High-performance coatings continue to be the primary application worldwide for electrical-electronic laminates, corrosion resistant coatings (for industrial equipment, bridges, and marine coatings), flooring and paving applications, composites and tooling and molding products are the other major end uses. Epoxy resins are often more expensive than other solutions, but provide superior adhesion, flexibility and corrosion resistance when applied to metal surfaces. In 1999, the estimated epoxy resins production value for the United States, Western Europe and Japan was approximately $1.3 billion. We participate in the epoxy resin market with our environmentally friendly waterborne resins and conventional solvent borne resin sold under the BECKOPOX® trade name.

        Alkyd surface coatings continue to be the largest type of coating used in the world, despite the increasing use of other film formers. The success of alkyd resin systems is a result of their relatively low cost, versatility and long familiarity with users. Alkyds are used extensively in architectural coatings, product finishes and special-purpose coatings. Our VIALKYD® conventional alkyd resins and RESYDROL® more environmentally friendly waterborne alkyd resins are sold into the alkyd coatings market. Polyesters, also referred to as oil-free alkyds, are made in the same equipment as alkyds and use many of the same raw materials. Polyesters are used in industrial baking finishes and in powder coatings. In 2000, approximately 1,575 million pounds of alkyd resins were consumed globally, mainly in alkyd surface coatings, but also as modifiers. With respect to the polyester resins market, we sell DUROFTAL® polyester resins for liquid coatings applications. Our ALFTALAT® polyester powder resins are used in environmentally friendly powder coatings, which has a growth rate that is higher than conventional liquid coatings in a number of world areas.

        Amino resins are thermosetting polymers. The most important amino compounds are urea and melamine. Urea resins are relatively inexpensive to produce, light in color and fast-curing, with excellent hardness and arc resistance. Melamine resins are higher-priced than urea resins, but they exhibit superior surface hardness and are more resistant to breakdown under high temperature and moisture conditions. Urea resins offer lower cost and room-temperature cure capability, and are used primarily for wood adhesives in particleboard production. Melamine resins offer superior moisture and heat resistance and hardness, and are used primarily in surface coatings and decorative laminates. The market for laminates is expected to grow faster than the market for surface coatings, primarily because of flooring applications.

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        In surface coatings, melamine formaldehyde ("MF") resins are used mainly as cross-linking agents with alkyd, acrylic or polyester resins. The largest end-market is automobiles, where they are used in primers, base coats and clear coats. In addition to the automobile market, demand for MF resins is heavily influenced by construction and remodeling activity. MF resins are also used as crosslinkers in coatings for industrial applications, metal containers and cans for food and beverages. We are a major producer of melamine crosslinking resins for use in surface coatings, and our RESIMENE® and MAPRENAL® melamine crosslinkers are used in a variety of surface coatings applications around the world. In the laminates and paper market, we participate through sales of our branded MADURIT®, RESIMENE® and MAPRENAL® melamine resins.

        Pharmaceutical outsourcing is growing at 8 to 10% per year. This is being driven by the focus of pharmaceutical companies on discovering and marketing drugs and outsourcing the manufacturing process development. Competition and patent expirations are forcing companies to move faster and there is a need for better screening and data management tools. Our Pharmaceutical Services provides the services and tools to assist pharmaceutical companies. In 2000, there were over 6,600 new drug candidates. The worldwide pharmaceuticals market reached $220 billion in 2000, according to IMSHealth.com. Research and development investment spending is growing at greater than 8% per year.

        In addition, a number of our specialty products business operate in niche markets such as industrial water treatment, functional fluids, plastic products and chlorobenzenes. We believe that demand for these products is relatively stable due to the overall lack of readily available substitutes that meet all of our customers' requirements for performance and reliability addressed by these special applications. The various markets for our specialty products, while not large compared to our total sales, grow at rates at or above those of gross domestic product in the United States or Europe.

Integrated Nylon

        Nylon fibers is a $16.9 billion global industry, which has grown at a compound annual growth rate of 1.7% over the 1995-2000 period. Hosiery, sportswear and industrial applications represent significant markets in nearly all regions of the world. Nylon carpet represents a substantial market in the United States and Western Europe. In addition, the demand for bulked continuous filament carpet yarn for hotel and conference centers in developing regions has been growing in recent years.

        There are two principle forms of nylon (nylon 6 and nylon 6,6), which account for approximately 98% of total nylon production. The somewhat different physical properties of nylon 6 and 6,6 are not considered important in most end-use applications and nylon 6 and 6,6 can be used interchangeably. Nylon 6 is produced from caprolactam and nylon 6,6 is produced from adipic acid and hexamethylenediamine.

        In 2000, over 9 billion pounds of nylon fibers were produced. Nylon 6 fibers accounted for 62%, and nylon 6,6 fibers accounted for 38%, of that supply. Nylon fiber manufacturing centers in the United States, Western Europe and Japan produced a combined 49% of the world's total supply in 2000, down from 55% in 1995. Production is expected to grow at an annual rate of 1.5% and demand is expected to grow 2.3% through 2005.

        While the United States' and Western Europe's production was essentially stagnant over the period and Japan's output declined, production grew in most other regions of the world, specifically Asia (excluding Japan). There, output increased by 359,000 tons during 1995-2000 as these Asian countries expanded textile production for both the export and domestic markets as well as various industrial applications. In Eastern Europe, socioeconomic and political instability during the 1990s reduced nylon fiber production from 18% of the world's supply in 1988 to under 5% in 1998. However, with most of the rationalization of outdated facilities now completed, nylon fiber production is recovering as the economies of the various nations stabilize.

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        According to SRI Consulting, the eleven largest producers of nylon fiber account for slightly more than 50% of the world's 11.6 billion pounds of capacity. SRI Consulting ranks us as the second largest nylon fiber producer in the world with an estimated 6% share of total capacity and the second largest nylon producer in the United States with an estimated 22% market share.

Sale of Products

        We sell our products directly to end users in various industries, principally by using our own sales force, and, to a lesser extent, by using distributors. Our marketing and distribution practices do not result in unusual working capital requirements on a consolidated basis. We maintain inventories of finished goods, goods in process and raw materials to meet customer requirements and our scheduled production. In general, we do not manufacture our products against a backlog of firm orders; we schedule production to meet the level of incoming orders and the projections of future demand. We are not generally dependent upon one or a group of customers, and we have no material contracts with the government of the United States, or any state or local, or foreign government. In general, our sales are not subject to seasonality. While no single customer or customer group accounts for 10 percent or more of our net sales, sales to the carpet mill industry and the European auto glass industry each represent a significant portion of our net sales.

Competition

        The global markets in which our chemical businesses operate are highly competitive. We expect competition from other manufacturers of the same products and from manufacturers of different products designed for the same uses as ours to continue in both U.S. and ex-U.S. markets. Depending on the product involved, we encounter various types of competition, including price, delivery, service, performance, product innovation, product recognition and quality. Overall, we regard our principal product groups as competitive with many other products of other producers and believe that we are an important producer of many of these product groups. For information regarding competition in specific markets, see the charts under "Our Business Segments" above.

Raw Materials and Energy Resources

        We purchase large amounts of commodity raw materials, including propylene, cyclohexane, benzene and natural gas. We typically purchase major requirements for key raw materials pursuant to medium-term contracts. We are not dependent on any one supplier for a material amount of our raw materials or energy requirements, but we obtain certain important raw materials from a few major suppliers. In general, where we have limited sources of raw materials, we have developed contingency plans to minimize the effect of any interruption or reduction in supply. For information about specific raw materials, see the charts under "Our Business Segments" above.

        While temporary shortages of raw materials and energy may occasionally occur, these items are generally sufficiently available to cover our current and projected requirements. However, their continuing availability and price may be affected by unscheduled plant interruptions and domestic and world market conditions, political conditions and governmental regulatory actions. The effect of any future raw material and energy shortages on our business as a whole or in specific world areas cannot be accurately predicted.

Patents and Trademarks

        We own a large number of patents that relate to a wide variety of products and processes and have pending a substantial number of patent applications. In addition, we are licensed under a small number of patents owned by others. We own a considerable number of established trademarks in many countries under which we market our products. These patents and trademarks in the aggregate are of

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material importance to our operations and to our Performance Films, Specialty Products and Integrated Nylon segments.

Research and Development

        Research and development constitute an important part of our activities. Our expenses for research and development amounted to approximately $58 million in 2001, $67 million in 2000, and $58 million in 1999, or about 2 percent of sales on average. We focus our research and development expenditures on process improvements and selected product development.

        Our Performance Films segment launched the VANCEVA™ brand of Advanced Solutions for Glass™ products to meet the needs of the architectural and automotive markets. In addition, this segment added several new products to its line of solar control and security films for aftermarket applications. Our Specialty Products segment developed low temperature vapor phase heat transfer fluid for processing of temperature sensitive polymers and developed biodegradable chelates and scale inhibitors to meet market needs for more environmentally friendly products. Our Integrated Nylon segment introduced a new wear-resistant staple fiber system for carpet under the TRAFFIC CONTROL FIBER SYSTEM® brand name. This segment also introduced a new technology called VYDYNE® 2000, offering whiter and improved grades of VYDYNE® engineering thermoplastic resins.

Environmental Matters

        Our operations are subject to a number of laws and government regulations concerning environmental matters and employee safety and health in the United States and other countries. U.S. environmental legislation that has a particular impact on us includes the Toxic Substances Control Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Safe Drinking Water Act; and the Comprehensive Environmental Response, Compensation & Liability Act (commonly known as "Superfund"). We are also subject to the Occupational Safety and Health Act and regulations of the Occupational Safety and Health Administration concerning employee safety and health matters. The U.S. Environmental Protection Agency, OSHA and other federal agencies have the authority to promulgate regulations that have an impact on our operations. In addition to these federal activities, various states have been delegated certain authority under several of these federal statutes. Many state and local governments have adopted environmental and employee safety and health laws and regulations, many of which meet federal requirements for delegation of federal mandates to state entities. State or federal agencies having lead enforcement authority may seek fines and penalties for violation of these laws and regulations.

        Expenditures in 2001 were approximately $7 million for environmental capital projects and approximately $122 million for the management of environmental programs, including the operation and maintenance of facilities for environmental control, of which $40 million was charged against recorded environmental liabilities. During 2002 and 2003, we estimate that we will spend a total of approximately $26 million on additional capital projects for environmental protection and that expenses for the management of environmental programs in 2002 and 2003 will decrease slightly from the 2001 levels.

        With respect to environmental remediation obligations, our policy is to accrue costs for remediation of contaminated sites in the accounting period in which the obligation becomes probable and the cost is reasonably estimable. Significant adjustments to these obligations resulted in the 2001 fourth quarter charges of $34 million ($22 million aftertax) to increase our environmental reserves. This action was required in order to reflect revised estimates for changed circumstances relating to the ultimate outcome of previously known environmental matters. These revised estimates were based upon agreements completed with environmental authorities and the availability of new information from

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recently completed environmental studies. These events and activities help to better define and quantify our ultimate liability for these matters.

        At the time of the spinoff, we assumed liabilities related to specified Superfund proceedings from the former Monsanto Company (now Pharmacia Corporation) under the Distribution Agreement between Monsanto and us. As a result, while Monsanto remains the named potentially responsible party or defendant for actions that occurred before September 1, 1997, we manage these proceedings and litigation against Monsanto and indemnify it for any costs, expenses and judgments arising from these proceedings.

        Our estimates of our liabilities for Superfund sites are based on evaluations of currently available facts with respect to each individual site and take into consideration factors such as existing technology, laws and agency policy and prior experience in remediation of contaminated sites. As assessments and remediation activities progress at individual sites, these liabilities are reviewed periodically and adjusted to reflect additional technical, engineering and legal information that becomes available. We had an accrued liability of $25 million as of June 30, 2002, for Superfund sites. Major Superfund sites in this category include the noncompany-owned sites at Brio and MOTCO in Texas, and Fike/Artel in West Virginia, which account for $17 million of the accrued amount. We spent approximately $8 million in 2001 for remediation of Superfund sites. Similar amounts can be expected in future years.

        We had an accrued liability of $56 million as of June 30, 2002, for plants no longer in operation and third-party sites for which we assumed responsibility under the Distribution Agreement entered into with Monsanto. Our estimate of our liability related to these sites is based on evaluations of currently available facts with respect to each individual site. The estimate takes into consideration factors such as existing technology, laws and agency policy, and prior experience in remediation of contaminated sites. We spent $16 million in 2001 for remediation of these sites. Similar amounts can be expected in future years.

        We had an accrued liability of $82 million as of June 30, 2002, for solid and hazardous waste remediation, and for post-closure costs at our operating locations. We recognize certain post-closure costs over the estimated remaining useful life of the related facilities. We spent $16 million in 2001 for remediation of these facilities. Similar amounts can be expected in future years.

        Uncertainties related to all of our environmental liabilities include evolving government policy and regulations, discovery of unknown conditions, the method and extent of remediation and future changes in technology. Because of these uncertainties, we estimate that potential future expenses associated with these liabilities could be an additional $20 million to $30 million. Although the ultimate costs and results of remediation of contaminated sites cannot be predicted with certainty, they are not expected to result in a material adverse effect on our consolidated financial position, liquidity or profitability in any one year. However, there can be no guarantee that material costs will not result.

Employee Relations

        On June 30, 2002, we had approximately 9,200 employees worldwide. In general, satisfactory relations have prevailed between our employees and us. We use self-directed work teams, incentive programs and other initiatives to keep employees actively involved in the success of the business. Approximately 25 percent of our workforce is represented by various labor unions.

International Operations

        We and our subsidiaries are engaged in manufacturing, sales and research and development in areas outside the United States. Approximately 43 percent of our consolidated sales in 2001 were made into markets outside the United States, including Europe, Canada, Latin America and Asia. Our Performance Films and Specialty Products segments are particularly dependent on their international

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operations. Approximately one-half of the 2001 sales of the Performance Films segment and two-thirds of the 2001 sales of the Specialty Products segment were made into markets outside the United States. Identifiable assets of the non-United States operations represented approximately 26 percent of total identifiable assets at December 31, 2001.

        Operations outside the United States are potentially subject to a number of risks and limitations that are not present in domestic operations, including trade restrictions, investment regulations, governmental instability and other potentially detrimental governmental practices or policies affecting companies doing business abroad.

        Operations outside the United States are also subject to fluctuations in currency values. The functional currency of each of our non-United States operations is the local currency. Exchange rates between these currencies and U.S. dollars have fluctuated significantly in recent years and may do so in the future. In addition, we generate revenue from export sales and operations conducted outside the United States that may be denominated in currencies other than the relevant functional currency.

Properties

        Our general offices are located in a leased facility in St. Louis County, Missouri. Our principal European offices are located in Louvain La Neuve, Belgium, on land leased from the University of Louvain. We also have research laboratories, research centers and manufacturing locations worldwide. Information about our major manufacturing locations worldwide and segments that used these locations on January 1, 2001, appears in the charts under "—Our Business Segments" above.

        Our principal plants are suitable and adequate for their use. Utilization of these facilities varies with seasonal, economic and other business conditions, but none of our principal plants are substantially idle. Our facilities generally have sufficient capacity for existing needs and expected near-term growth. We have plans in place to expand facilities that we anticipate will reach capacity in the next two to three years.

        We own most of our principal plants. However, at Antwerp, Belgium and Sao Jose dos Campos, Brazil, both of which are Monsanto sites, we own certain buildings and production equipment and lease the underlying land. We also lease the land for our Vianova Resins facilities at Suzano, Brazil and Frankfurt-Fechenheim, Germany from Clariant. In addition, we lease the buildings for our pharmaceuticals services unit, including the main production site in Aarau, Switzerland.

        Monsanto and we have operating agreements with respect to each of the two Monsanto facilities listed above and our Chocolate Bayou facility in Alvin, Texas. Under these operating agreements, we are the guest and Monsanto is the operator at the facilities except the Chocolate Bayou facility at which Monsanto is the guest and we are the operator. The initial term of each of the operating agreements is 20 years. After the initial term, the operating agreements continue indefinitely unless either party terminates on at least 24 months' prior written notice. Each of the operating agreements also provides that, under certain circumstances, either the operator or the guest may terminate the operating agreement before the expiration of its initial term. We operate several facilities for other third parties, principally within the Chocolate Bayou; Sauget, Illinois; Pensacola, Florida; Trenton, Michigan and Newport, Wales (U.K.) sites, under long-term lease and operating agreements.

        In connection with the amendment on July 25, 2002 of our revolving credit facility, we granted mortgages on our facilities located in Decatur, Alabama; Pensacola, Florida; Indian Orchard, Massachusetts; Trenton, Michigan; Greenwood, South Carolina; Chocolate Bayou, Texas; and Martinsville, Virginia. The bank obligations are secured by a first-priority lien on all of the second-priority facilities collateral. This first-priority lien is limited in amount to 15% of our consolidated net tangible assets as of the most recent relevant test date, presently $284.9 million (the "non-shared first lien amount"). The non-shared first lien amount may be further increased from time to time as our

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tangible asset base grows. The remaining value of the second-priority facilities collateral provides a second-priority lien to equally and ratably secure the bank obligations, our outstanding publicly traded notes and the notes. In addition, there is a mechanics' lien that Fluor Daniel, a division of Fluor Enterprises, Inc., has filed against our Chocolate Bayou (Alvin, Texas) facility in the amount of approximately $42 million in connection with Fluor Daniel's claim against us for the alleged non-payment of certain labor and materials charges relating to the construction of our acrylonitrile facility.

Legal Proceedings

        Because of the size and nature of our business, we are a party to numerous legal proceedings. Most of these proceedings have arisen in the ordinary course of business and involve claims for money damages. In addition, at the time of the spinoff, we assumed liabilities related to specified legal proceedings from the former Monsanto Company (now known as Pharmacia Corporation) under an agreement known as the Distribution Agreement. As a result, although Monsanto remains the named defendant, we are required to manage the litigation and indemnify Monsanto for costs, expenses and judgments arising from the litigation. While the results of litigation cannot be predicted with certainty, we do not believe, based upon currently available facts, that the ultimate resolution of any of these pending matters will have a material adverse effect on our financial position or liquidity in any one year. However, resolution in those cases described below involving the alleged discharge of polychlorinated biphenyls ("PCBs") from the Anniston, Alabama plant site may have a material adverse effect on our net income in a given year, although it is impossible at this time to estimate the range or amount of any such liability. In addition, there can be no assurance that any final judgment against us, if upheld on appeal, will not have a material adverse effect on our financial position and liquidity. See "Risk Factors—Risks Relating to Our Business—Legal proceedings and other claims could impose substantial costs on us."

        The following paragraphs describe several pending proceedings to which we are a party or to which Monsanto is a party and for which we assumed any liabilities.

Anniston, Alabama Cases

        (1)  Monsanto is a defendant in an action brought in Circuit Court in Shelby County, Alabama on behalf of a purported class of property owners along waterways near the plant. Plaintiffs seek compensatory and punitive damages in an unspecified amount for an alleged increased risk of physical injury or illness, emotional distress caused by fear of future injury or illness, medical monitoring and diminishment in the value of their properties and their riparian rights. On October 5, 1999, the trial court granted Solutia's motion for summary judgment, holding that plaintiffs had, in an action not involving Monsanto or Solutia, recovered for the damages they claim in this action. In addition, the court found that plaintiffs' claims were barred by the statute of limitations. Plaintiffs timely filed their appeal with the Alabama Supreme Court. On May 4, 2001, the Alabama Supreme Court issued an opinion affirming in part and reversing in part the order of the trial court. The Alabama Supreme Court held that summary judgment was properly granted with respect to claims relating to the period up to the date of settlement of the previous action. However, the Alabama Supreme Court held that plaintiffs were permitted to maintain the claims relating to the period from the settlement of the prior action until the filing of the instant action. These claims are now back before the Circuit Court.

        (2)  Monsanto and Solutia are named as defendants in fourteen cases in Circuit Court in Calhoun County, Alabama and one case in United States District Court for the Northern District of Alabama brought on behalf of 3,536 individuals who own or rent homes, own or operate businesses, attend churches, or who have otherwise resided or visited in neighborhoods near the Anniston plant, and four commercial entities which own property near the Anniston plant or have conducted business on and near property owned by the plant. One of the cases pending in Circuit Court in Calhoun County has

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been brought on behalf of a purported class of all Alabama residents who have been exposed to PCBs or other materials allegedly released from the Anniston plant. Plaintiffs seek compensatory and punitive damages in an unspecified amount or, for some plaintiffs, in the amount of $3 million for each individual and injunctive relief requiring us to remove alleged contamination. The individual plaintiffs claim to have suffered permanent adverse health effects and fear future disease. They assert the need for medical monitoring, diminution in the value of their properties in the case of residential and commercial property owners and commercial losses in the case of business owners. Because of significant pretrial publicity in Calhoun County, venue in four of those cases, brought on behalf of 3,501 plaintiffs, has been transferred to Circuit Court in Etowah County, Alabama. These four cases, sometimes referred to as Abernathy v. Monsanto or Bowie v. Monsanto, have been consolidated for trial of each individual claim, not as a class action. Because of the number of plaintiffs in the consolidated action, trial is proceeding in phases. Sixteen individual plaintiffs and one business entity were selected by plaintiffs to participate in a "Phase I" trial, and on February 22, 2002, a jury returned a verdict of liability for the plaintiffs on claims of property damage and exposure to PCBs. The trial court did not submit the issue of compensatory damages for these claims to the jury for determination. Instead, the court has proceeded to hear damage evidence for each plaintiff making these claims. Personal injury claims have not been addressed. Punitive damages, if any, will be determined at the end of the trial of all claims.

        On February 25, 2002, the jury determined that the circumstances in Anniston constitute a public nuisance. On February 26, 2002, the Attorney General of Alabama and the district attorneys of Calhoun, Shelby, St. Clair and Talladega Counties intervened to seek an order directing defendants to fund an investigation of the extent of the impact of PCBs in those counties, and setting a schedule and procedures for a cleanup. On February 28, 2002, the Alabama Department of Environmental Management ("ADEM") intervened to assure that decisions reached by the court have a sound scientific basis. The court has completed hearing evidence on the claims for an injunction directing defendants to implement a cleanup in Anniston and has referred the matter to a Special Master for a recommendation. On March 25, 2002, the EPA filed a Partial Consent Decree in U.S. District Court for the Northern District of Alabama. ADEM and others have filed objections to the decree, but we expect it to be approved by the court by the end of the year. Pursuant to the decree, we have agreed to conduct a remedial investigation and feasibility study, which will provide the information upon which the EPA will base its decision on the appropriate remedial action to address PCBs in Anniston. We have argued that the filing of the decree in federal court has preempted the state court's jurisdiction over any cleanup in Anniston.

        Venue in two additional cases brought on behalf of four plaintiffs in Calhoun County has been transferred to Circuit Court in Jefferson County, Alabama. Venue in one additional action brought on behalf of two plaintiffs in Calhoun County has been transferred to Circuit Court in Dekalb County, Alabama. These cases are currently inactive.

        (3)  Monsanto and Solutia were named as defendants in a case sometimes referred to as Tolbert vs. Monsanto filed in United States District Court for the Northern District of Alabama on behalf of a total of 1,116 plaintiffs who claimed to be "minor children or persons under the age of twenty-one years" who resided near the Anniston plant. Plaintiffs allege they were exposed to PCBs and suffer from unspecified physical injuries and emotional distress. They seek compensatory and punitive damages in unspecified amounts and request medical testing, monitoring and treatment, as well as unspecified injunctive relief. On January 28, 2002, plaintiffs filed an amended complaint that added approximately 14,000 plaintiffs, bringing the total number of plaintiffs in this case to approximately 15,000. Trial is not expected to commence before February 2003.

        (4)  Solutia, Monsanto and Pharmacia Corporation are named as defendants in an action called Oliver v. Monsanto, filed on behalf of a single plaintiff in U.S. District Court for the Northern District of Alabama. Plaintiff alleges that she has been exposed to PCBs from the Anniston plant and that

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PCBs are present on her property. Plaintiff seeks compensatory and punitive damages in an unspecified amount and claims entitlement to medical monitoring.

        We believe that there are meritorious defenses to all these matters, including lack of any physical injury or property damage to plaintiffs, lack of any imminent or substantial endangerment to health or the environment and lack of negligence or improper conduct on the part of Monsanto or us. See "Risk Factors—Risks Relating to our Business—Legal proceedings and other claims could impose substantial costs on us."

Penndot Case

        Monsanto is one of several defendants added on February 7, 1997, to Pennsylvania Department of General Services, et al. v. United States Mineral Products Company, et al., a case then pending in the Commonwealth Court of Pennsylvania. This action was originally filed against United States Mineral Products Company in 1990 by the Commonwealth of Pennsylvania, seeking damages caused by the presence of asbestos fireproofing in the Transportation and Safety Building ("T & S Building"), which was part of the Commonwealth's Capital Complex in Harrisburg, Pennsylvania. In June 1994 a fire broke out in the T & S Building. Testing following the fire revealed the presence of low levels of PCBs at various locations in the building, which the Commonwealth alleges necessitated its demolition. The Commonwealth seeks recovery of costs it allegedly incurred in testing, monitoring, cleanup, demolition and relocation caused by the alleged contamination. In addition, the Commonwealth seeks the cost of constructing a new building on the site of the T & S Building. On August 23, 2000, the jury returned a verdict of $90 million against Monsanto. The trial court reduced the verdict to $45 million to account for a settlement reached with the Commonwealth by a codefendant during trail. Prejudgment interest in an amount to be determined by the court will be added to the verdict. We believe that there are meritorious defenses, including lack of any hazard or danger to occupants of or visitors to the T&S Building caused by the presence of PCBs; a determination by the Pennsylvania Department of Health that the building was safe for use and occupancy; the failure of the Commonwealth to act prudently following the fire to mitigate its alleged damages; the impropriety of using replacement cost as a measure of damages; and the fact that most of plaintiffs' damages would have been incurred during the removal of asbestos fireproofing and the installation of fire sprinklers required to comply with the 1987 Harrisburg Fire Safety Code, and thus cannot be attributed to the presence of PCBs. We have filed several post-trial motions that the Commonwealth Court has not yet ruled on. We will continue to vigorously pursue all available remedies.

Other Cases

        We were named as the defendant in Fluor Daniel Corporation v. Solutia Inc., filed on February 8, 2001, in United States District Court for the Southern District of Texas, Galveston Division. Fluor Daniel Corporation ("Fluor") was the main contractor for construction of a new acrylonitrile manufacturing facility located at our Chocolate Bayou, Texas facility. Fluor sought damages of approximately $65 million to $70 million based on allegations of delays/disruption in the construction schedule, change orders, and entitlement to a bonus under contract provisions. Trial began on September 3, 2002. On September 13, the jury rendered a verdict against us. The verdict was based on two mutually exclusive theories. The verdict on the theory of breach of contract was for $4.85 million and on the theory of quantum meruit was for $34.51 million. No judgment has been entered on the verdict. On the same date, the court entered an order requiring the parties to mediate their dispute before a court-designated mediator. We intend to vigorously pursue all available post-verdict remedies.

        On December 4, 1998, the EPA issued a notice of violation to Solutia, the former Monsanto Company (now Pharmacia Corporation) and P4 Production, L.L.C., alleging violations of the Wyoming Environmental Quality Act, the Wyoming Air Quality Standards and Regulations and a permit issued in 1994 by the Wyoming Department of Environmental Quality to Sweetwater Resources, Inc., a former

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subsidiary of the former Monsanto, for a coal coking facility in Rock Springs, Wyoming. This facility is currently owned by P4 Production, a joint venture which the new Monsanto Company now both operates and controls. Despite the sale of substantially all of Solutia's interest in P4 Production, we continue to be a party to this litigation. On November 22, 1999, the United States, on behalf of the EPA, filed an action in the United States District Court for the District of Wyoming against P4 Production, Solutia and the former Monsanto Company, demanding $2.5 million as well as injunctive relief ensuring compliance with the permit requirements. Solutia and the former Monsanto Company filed a complaint for declaratory relief against the EPA, arguing that the EPA's action was precluded by the doctrine of res judicata. On March 29, 2002, the court denied the motions for summary judgment by both the companies and the United States on the issue of the applicability of this doctrine. On August 12, 2002, the United States filed a motion for partial summary judgment on its action for liability.

Risk Management

        We have evaluated risk retention and insurance levels for product liability, property damage and other potential areas of risk. We will continue to devote significant effort to maintaining and improving safety and internal control programs, which reduce our exposure to certain risks. We actively participate in the safety and health Voluntary Protection Program ("VPP") administered by the OSHA for sites in the United States, and implemented by Solutia for sites outside the United States. Currently, ten of our U.S. sites qualify for the OSHA VPP "Star" designation, a rating designating full compliance. Three of our ex-U.S. sites, two in Europe and one in Canada, have achieved the Solutia "Star" designation, which is an internal equivalent to the OSHA designation.

        Our management decides the amount of insurance coverage to purchase from unaffiliated companies and the appropriate amount of risk to retain and/or co-insure based on the cost and availability of insurance and the likelihood of a loss. Management believes that the levels of risk that we have retained are consistent with those of other companies in the chemical industry. There can be no assurance that we will not incur losses beyond the limits, or outside the coverage, of our insurance. We do not expect our consolidated financial position, profitability and liquidity to be affected materially by the levels of risk retention that we accept.

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MANAGEMENT

Directors and Executive Officers

        Information about our directors and executive officers appears below.

Name	Age	Position
John C. Hunter III	55	Director, Chairman, President and Chief Executive Officer
Paul Donovan	55	Director
Paul H. Hatfield	66	Director
Robert H. Jenkins	59	Director
Frank A. Metz, Jr.	68	Director
J. Patrick Mulcahy	58	Director
Sally G. Narodick	57	Director
William D. Ruckelshaus	70	Director
John B. Slaughter	68	Director
Karl R. Barnickol	61	Senior Vice President, General Counsel and Secretary
Robert A. Clausen	57	Senior Vice President and Chief Financial Officer
Sheila B. Feldman	47	Vice President, Human Resources and Public Affairs
Gerald R. Hayden	56	Vice President, Corporate Services
Victoria M. Holt	44	Vice President and General Manager, Performance Films
Monika Riese-Martin	46	Vice President and General Manager, Functional Solutions
John F. Saucier	49	Vice President and General Manager, Integrated Nylon

        A brief biography of each director and executive officer follows.

        Mr. Hunter has been Chairman and Chief Executive Officer of Solutia Inc. since 1999 and President since 1997. He was Chief Operating Officer from 1997 to 1999. From 1995 to 1997, he was President of the Fibers Business Unit of Monsanto Company. Mr. Hunter is a Director of Penford Corporation. He is also on the Board of Directors of Missouri Baptist Hospital.

        Mr. Donovan has been Senior Vice President and Chief Financial Officer of Wisconsin Energy Corporation since 1999. He was Executive Vice President and Chief Financial Officer of Sundstrand Corporation from 1990 to 1999. He is a Director of AMCORE Financial, Inc. and Woodward Governor Company.

        Mr. Hatfield has been a Principal of Hatfield Capital Group since 1997. He was Chairman of the Board, President and Chief Executive Officer of Petrolite Corporation from 1995 to 1997. Mr. Hatfield is a Director of Penford Corporation and Maritz, Inc.

        Mr. Jenkins was Chairman of the Board and Chief Executive Officer of Sundstrand Corporation from 1997 to 1999. He was President and Chief Executive Officer of Sundstrand Corporation from 1995 to 1997. Mr. Jenkins is a Director of AK Steel Holdings Corporation, CLARCOR Inc., Pella Corporation, Sentry Insurance and Visteon Corporation.

        Mr. Metz was Senior Vice President, Finance and Planning, and Chief Financial Officer of International Business Machines Corporation from 1986 to 1993 and a Director from 1991 to 1993. Mr. Metz is a Director of Allegheny Energy, Inc.

        Mr. Mulcahy has been Chief Executive Officer, Energizer Holdings, Inc. since 2000. He was Chairman and Chief Executive Officer of Eveready Battery Company Inc., a subsidiary of Ralston Purina Company, from 1987 to 2000, and a corporate officer of Ralston Purina Company from 1984 to

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2000. He served as Co-Chief Executive Officer and Co-President of Ralston Purina Company from 1997 to 1999. Mr. Mulcahy is a Director of Energizer Holdings, Inc.

        Ms. Narodick is an educational technology and e-learning consultant. She was Chief Executive Officer of Apex Learning, Inc., an Internet educational software company, from its founding in 1998 until her retirement in 2000. Previously, she served as an education technology consultant, both independently and for the Consumer Division of IBM from 1996 to 1998. Ms. Narodick was Chair and Chief Executive Officer of Edmark Corporation from 1989 to 1996. She is a Director of Penford Corporation, Puget Sound Energy, Inc. and Click2learn, Inc.

        Mr. Ruckelshaus has been Strategic Director, Madrona Venture Group since 1999. He has also been a Principal of Madrona Investment Group L.L.C. since 1996. From 1988 to 1997, Mr. Ruckelshaus was Chairman of Browning-Ferris Industries, Inc. and Chief Executive Officer from 1988 to 1995. He was Of Counsel to Perkins Coie from 1985 to 1988. He served as Administrator of the Environmental Protection Agency from 1983 to 1985. Mr. Ruckelshaus is a Director of Cummins Engine Co., Inc., Nordstrom, Inc., Pharmacia Corporation and Weyerhaeuser Company.

        Dr. Slaughter has been the President and Chief Executive Officer of the National Action Council for Minorities in Engineering, Inc. (NACME), a non-profit corporation, since 2000. From 1999 to 2000, he was the Irving R. Melbo Professor of Leadership in Education at the University of Southern California and President Emeritus of Occidental College, where he served as President from 1988 to 1999. He was the Director of the National Science Foundation from 1980 to 1982. Dr. Slaughter is a Director of International Business Machines Corporation and Northrop Grumman Corp. He is a Fellow of the American Academy of Arts and Sciences, the American Association for the Advancement of Science and the Institute of Electrical and Electronic Engineers. He is also a member of the National Academy of Engineering.

        Mr. Barnickol has been Senior Vice President, General Counsel and Secretary of Solutia Inc. since 1997. He was the Associate General Counsel and Assistant Secretary of Monsanto from 1985 to 1997.

        Mr. Clausen has been Senior Vice President and Chief Financial Officer of Solutia Inc. since 1997. He was the President of Monsanto Business Services from 1994 to 1997.

        Ms. Feldman has been Vice President, Human Resources and Public Affairs since 1999. From 1997 to 1999 she was Vice President, Human Resources. From 1995 to 1997, she was Director of Human Resources for Monsanto Business Services and Monsanto Stewardship.

        Mr. Hayden has been Vice President, Corporate Services since 2001. He was Director, Customer Operations of Solutia Inc. from 1997 to 2001.

        Ms. Holt has been Vice President and General Manager, Performance Films since 2001. She was Vice President and General Manager, Saflex from 1999 to 2001. She was Vice President and General Manager, Acrilan Business Unit from 1997 to 1998, and Business Director of Monsanto's Acrilan Unit from 1996 to 1997.

        Ms. Riese-Martin became Vice President and General Manager, Functional Solutions in 2002. She was Vice President and General Manager, Aqualon Division of Hercules Inc. from 1998 to 2002. She was Business Director, Hercules Inc. from 1996 to 1998.

        Mr. Saucier has been Vice President and General Manager, Integrated Nylon since 2001. He was Vice President, Strategic Planning, Mergers and Acquisitions of Solutia Inc. from 1997 to 2001.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

        The following is a summary of important terms of our material indebtedness. We have previously filed copies of the credit agreement and indentures relating to our U.S. dollar denominated notes and debentures with the SEC. You should refer to those agreements for the complete terms of the indebtedness.

Our Amended Credit Facility

        On July 25, 2002, we and our bank syndicate amended our revolving credit facility. The amendment extends the maturity of the facility until August 2004. It also reduces the facility from $800 million to $600 million and separates the facility into a $300 million term loan and a $300 million revolving credit facility. The term loan has scheduled payment obligations as follows: $25 million at December 31, 2002; $50 million at December 31, 2003; $25 million at June 30, 2004; and the remainder at maturity. The amended credit facility requires us to cash collateralize certain outstanding letters of credit. Fees, expenses and other costs associated with the amended credit facility and cash collateralization of letters of credit totaled approximately $50 million. The amended credit facility is available for working capital and other general corporate purposes.

Guarantees

        Our obligations and the obligations of our subsidiary borrowers under the amended credit facility are guaranteed by Solutia Inc., CPFilms Inc., Monchem International Inc., Monchem, Inc., Solutia Systems, Inc. (the "subsidiary guarantors") and each of our subsequently acquired or organized domestic subsidiaries, subject to certain exceptions.

Collateral

        Borrowings under the amended credit facility as well as the beneficiaries of the Astaris support agreement, the lessee under the co-generation facility at Pensacola, Florida and holders of certain designated letters of credit are secured by (1) liens on all of our inventory and receivables and those of the subsidiary guarantors, (2) pledges of 100 percent of the stock of Monchem, Inc. and Solutia Systems, Inc. and 65 percent of the voting stock and 100 percent of all other stock of Monchem International, Inc., (3) liens on intercompany debt of and held by Monchem, Inc., Monchem International, Inc. and Solutia Systems, Inc., (4) pledges of 65 percent of the voting stock (and 100 percent of all other stock) of Solutia Europe, S.A./N.V. and Solutia U. K. Holdings Limited, (5) a lien on certain principal properties, (6) a lien on certain intellectual property; and (7) liens on property, plant and equipment, inventory, receivables and certain intellectual property of four European subsidiaries. The aggregate amount of our obligations entitled to the benefit of the lien on such principal properties is limited to 15 percent of its net tangible assets, as determined at the date that the lien was granted.

        In addition, borrowings under the amended credit facility are secured by liens shared equally and ratably with the holders of our outstanding publicly traded notes and senior secured notes described below. These include a lien on (1) certain other principal properties, (2) 100 percent of the stock of CPFilms Inc., and (3) pledges of intercompany debt of CPFilms Inc; and a second priority lien shared equally and ratably on the principal properties on which the banks have a first priority lien. The amended credit facility also contains customary representations and warranties and affirmative and negative covenants.

Interest

        Borrowings under the amended credit facility bear interest at a floating rate based on LIBOR, plus an applicable margin. The margin for LIBOR loans is 5.75 percent and will increase by 50 basis points

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in July 2003 and an additional 50 basis points in January 2004. A premium in the amount of 2 percent of the principal repaid on the term loan will apply until July 25, 2003, and a premium of 1 percent will apply to such principal payments thereafter.

Covenants

        The amended credit facility requires us to meet certain financial tests, including, but not limited to, maximum leverage and minimum interest coverage ratios. In addition, the amended credit facility contains certain covenants which, among other things, limit the incurrence of additional debt, aggregate capital expenditures, guarantees, liens, investments, asset sales, dividends, restricted payments, acquisitions, mergers and consolidations, change of business, transactions with affiliates, prepayments of debt, repurchases of stock and redemptions of certain other indebtedness and other matters customarily restricted in such agreements.

6.50% Notes due 2002, 7.375% Debentures due 2027, 6.72% Debentures due 2037 and
6.25% Notes due 2005

        On October 21, 1997, we sold $150 million aggregate principal amount of our 6.50% Notes due 2002, $300 million aggregate principal amount of our 7.375% Debentures due 2027 and $150 million aggregate principal amount of our 6.72% Debentures due 2037, all of which remain outstanding. The notes and debentures are payable semi-annually on April 15 and October 15. The 6.50% Notes due 2002 will mature on October 15, 2002. In connection with the offering of the outstanding notes, we made an irrevocable deposit with the trustee for the 6.50% Notes due 2002 to repay these notes at their maturity date. The 6.72% Debentures due 2037 give the holders the right to require us to repurchase the debentures on October 15, 2004 at a price equal to 100% of the principal amount thereof, together with any accrued interest.

        In addition, in February 2000, we consummated the sale of €200 million aggregate principal amount of our 6.25% Notes due 2005, the proceeds of which we used to refinance outstanding commercial paper.

        As of the effective date of the amended and restated credit agreement, all of the above notes and debentures are secured pari passu by a second-priority lien on the collateral that is securing these notes.

Astaris Support Agreement

        In April 2000, Astaris LLC, a joint venture between Solutia and FMC Corporation, started operations to manufacture and market phosphorus chemicals. In connection with the completion of an external financing agreement for Astaris, which expires in September 2005, we agreed to provide Astaris with funding if the joint venture fails to meet specific EBITDA benchmarks. During 2001, we contributed $31 million to the joint venture under our agreement. We anticipate a contribution of up to $25 million will be required in 2002.

Pensacola, Florida Co-generation Facility Lease

        In 1993, a co-generation facility was constructed at our Pensacola, Florida manufacturing site to provide the plant with electricity and steam. We financed the construction by placing the co-generation facility in a trust that was funded by a syndicate of commercial banks. We make monthly operating lease payments under the lease, which expires in August 2002. We expect to extend the term of the lease to terminate upon the expiration of the proposed refinancing of our existing credit facility. As of June 14, 2002, the trust had approximately $32 million of outstanding debt with this syndicate of banks.

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DESCRIPTION OF NOTES

        The outstanding notes were, and the new notes will be, issued under an indenture dated as of July 9, 2002, between SOI Funding Corp. ("Funding Corp.") and HSBC Bank USA, as trustee (the "Trustee"), as amended and supplemented by the First Supplemental Indenture dated as of July 25, 2002, among the Company, the Trustee and the Subsidiary Guarantors named therein (as amended and supplemented, the "Indenture"). The following is a summary of the material terms and provisions of the notes and the Security Documents. The terms of the notes include those set forth in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), as in effect on the date of the Indenture. The notes are subject to all such terms, and prospective purchasers of the notes are referred to the Indenture and the Trust Indenture Act for a statement of such terms. The Security Documents referred to below under the caption "—Security" define the terms of the security interests that will secure the notes.

        Definitions of certain terms are set forth under "Certain Definitions" and throughout this description. For the purposes of this "Description of Notes," (1) the "Company" means Solutia Inc. and not any of its Subsidiaries and (2) the "notes" means the outstanding notes or the new notes, as the case may be, or, if the context requires, both. Capitalized terms that are used but not otherwise defined herein have the meanings assigned to them in the Indenture, and those definitions are incorporated herein by reference.

General

        The notes will mature on July 15, 2009 and bear interest at the rate of interest per annum indicated on the cover page of this prospectus. Interest on the notes accrues from the Issue Date, and is payable semiannually in arrears on January 15 and July 15 of each year, commencing January 15, 2003. We will make each interest payment to the holders of record of the notes at the close of business on the December 31 or June 30 preceding such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

        Principal and interest is payable at the office or agency of the Company maintained for that purpose, which initially is the office of the Trustee in The City of New York; provided that all payments with respect to Global Notes, the holders of which have given wire transfer instructions on or prior to the relevant record date, will be required to be made by wire transfer of immediately available funds and, at the option of the Company, payment of interest on notes not in global form may be made by check mailed to the address of the Person entitled thereto as it appears in the register of the notes maintained by the Registrar. Initially, the Trustee will also act as Paying Agent and Registrar for the notes.

Additional Notes

        Subject to the covenants described below, the Company may issue additional notes ("Additional Notes") under the Indenture having the same terms in all respects as the notes (or in all respects except for the payment of interest scheduled and paid prior to the date of issuance of the notes). The notes and any Additional Notes would be treated as a single class for all purposes under the Indenture. Unless the context otherwise requires, references to the notes include the Additional Notes.

Ranking

        The notes are secured obligations of the Company. The notes rank pari passu in right of payment with all unsubordinated Indebtedness of the Company and rank senior in right of payment to all future Indebtedness of the Company that by its terms is junior or subordinated in right of payment to the notes.

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The Guarantees

        The notes are guaranteed (the "Subsidiary Guarantees") by each Subsidiary of the Company that guarantees the Company's obligations under the Credit Facility (the "Subsidiary Guarantors"). Initially, the Subsidiary Guarantors are CPFilms Inc., Monchem, Inc., Monchem International, Inc. and Solutia Systems, Inc. The Subsidiary Guarantors do not currently guarantee our other senior notes. See "Description of Certain Other Indebtedness."

        Each of the Subsidiary Guarantors (so long as it remains a Restricted Subsidiary) unconditionally guarantees on a joint and several basis all of the Company's obligations under the notes, including its obligations to pay principal, interest, premium, if any, with respect to the notes. The Subsidiary Guarantees are general secured obligations of the Subsidiary Guarantors and rank pari passu with all existing and future Indebtedness of the Subsidiary Guarantors that is not, by its terms, expressly subordinated in right of payment to the Guarantees. The obligations of each Subsidiary Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, will result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment or distribution under a Subsidiary Guarantee shall be entitled to a contribution from each other Subsidiary Guarantor in an amount pro rata, based on the net assets of each Subsidiary Guarantor, determined in accordance with GAAP. Except as provided in "Repurchase at Option of Holders—Asset Sales" below, the Company is not restricted from selling or otherwise disposing of any of the Subsidiary Guarantors.

        The Indenture requires that each existing and future domestic Restricted Subsidiary that guarantees any other Indebtedness of the Company be a Subsidiary Guarantor. The Company is permitted to cause any Unrestricted Subsidiary to be a Subsidiary Guarantor.

        A sale of assets or Capital Stock of a Subsidiary Guarantor or Restricted Subsidiary may constitute an Asset Disposition subject to the provisions contained under the caption "—Repurchase at Option of Holders—Asset Sales," and a consolidation, merger or sale of all or substantially all of the assets of a Subsidiary Guarantor must also comply with the provisions described under "Consolidation, Merger and Sale of Assets."

        The Indenture provides that:

          (i)  in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all the Capital Stock of any Subsidiary Guarantor to any person that is not an Affiliate of the Company, such Subsidiary Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "Repurchase at Option of Holders—Asset Sales";

        (ii)  upon the release or discharge of the Guarantee that resulted in the creation of the Subsidiary Guarantee of such Subsidiary Guarantor, except a discharge or release by or as a result of payment under such Subsidiary Guarantee, such Subsidiary Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee; and

        (iii)  upon the designation of any Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the terms of the Indenture, such Subsidiary Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee.

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Security

Collateral Agreement

        Pursuant to the Security Documents, the notes and the Subsidiary Guarantees are secured by:

•

a first-priority lien, shared with the holders of the Bank Obligations and the holders of the outstanding publicly traded debt securities that we have issued or guaranteed (the "Existing Public Notes," and together with the Bank Obligations, the "Other Secured Obligations;" the holders of Other Secured Obligations and the notes are collectively referred to as the "Secured Parties") on:



•

our production facilities located in Pensacola, Florida and Martinsville, Virginia,



•

100% of the stock of CPFilms Inc., and



•

all intercompany Indebtedness of CPFilms Inc. (collectively, the "First Priority Collateral"), and




•

a second-priority lien on the following assets on which the Bank Obligations have a first priority lien:



•

65% of the voting stock (and 100% of the other Capital Stock) of Monchem International, Inc. and 100% of the Capital Stock of all of the Subsidiary Guarantors (other than CPFilms Inc.),



•

all intercompany Indebtedness of and held by the Subsidiary Guarantors (other than CPFilms Inc.),



•

substantially all of the Company and its Subsidiary Guarantors' accounts receivable and inventory and certain intellectual property,



•

65% of the voting stock (and 100% of the other Capital Stock) of Solutia Europe S.A./N.V. and Solutia U.K. Holdings Limited (collectively, the "Second Priority Bank Collateral"), and




•

a second-priority lien, shared with all of the holders of the Other Secured Obligations, on our production facilities at:



•

Chocolate Bayou, Texas



•

Decatur, Alabama



•

Indian Orchard, Massachusetts



•

Greenwood, South Carolina



•

Trenton, Michigan (collectively, the "Second Priority Facilities Collateral," and together with the First Priority Collateral and the Second Priority Bank Collateral, the "Collateral").

        The holders of the Bank Obligations also have the benefit of a first priority lien on the Second Priority Facilities Collateral that is limited in amount to 15% of Solutia's Consolidated Net Tangible Assets from time to time, which as of the most recent relevant test date, or September 30, 2001, was $284.9 million (the "Non-Shared First Lien Amount"). The Non-Shared First Lien Amount may be further increased from time to time as Solutia's Consolidated Net Tangible Assets grow. After giving pro forma effect to the application of the net proceeds of the offering of the outstanding notes, the aggregate principal amount of Other Secured Obligations outstanding as of June 30, 2002 would have been $1,209 million.

        The Liens securing the notes and Subsidiary Guarantees on the First Priority Collateral and the Second Priority Facilities Collateral will be released when the liens on such collateral securing the Bank Obligations have been permanently released. The Liens securing the notes and Subsidiary Guarantees

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on the Second Priority Bank Collateral will be released if (1) the Liens on such collateral securing the Bank Obligations have been released and (2) our entire Credit Facility is unsecured and the revolving credit facility thereunder (a) is in a minimum amount of $50 million and (b) has a tenor of no less than 364 days.

        There can be no assurance that the proceeds from the sale of the Collateral in whole or in part following a Default or Event of Default would be sufficient to satisfy payments due on the notes. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral can be sold in a short period of time, if ever.

        To the extent that third parties enjoy Liens permitted by the Security Documents and the Indenture, such third parties will have rights and remedies with respect to the assets subject to such Liens that, if exercised, could adversely affect the value of the Collateral or the ability of the Collateral Agent, acting on behalf of the Secured Parties, to realize or foreclose on the Collateral. In addition, the ability of the Collateral Agent, acting on behalf of the Secured Parties, to realize upon the collateral may be subject to certain bankruptcy law limitations in the event of a bankruptcy. See "Certain Bankruptcy Limitations."

Intercreditor Agreements

        Solutia, the administrative agent under the Credit Facility, the representatives of the other Bank Obligations, a collateral agent (the "Collateral Agent") and certain other parties entered into the intercreditor agreements (collectively, the "Intercreditor Agreement").

        Pursuant to the terms of the Intercreditor Agreement, the Collateral Agent was appointed as collateral agent for each of the Secured Parties and holds the liens and security interests in the Collateral granted pursuant to the Security Documents with sole authority to exercise remedies under the Security Documents. The Collateral Agent acts as mortgagee under all mortgages, beneficiary under all deeds of trust and as secured party under the applicable security agreements, follows the instructions provided to it under the Intercreditor Agreement and carries out certain other duties.

        Pursuant to the Intercreditor Agreement, the second-priority Liens securing the notes and the Subsidiary Guarantees are expressly junior to the first-priority Liens on the Second Priority Bank Collateral and the Second Priority Facilities Collateral. In addition, under the Intercreditor Agreement, the Liens securing the notes and the Subsidiary Guarantees may not be enforced by the holders of the notes at any time when any Bank Obligations are outstanding, except for certain limited exceptions. Amendments or waivers by the holders of the Bank Obligations shall also be effective as to the Liens securing the notes and the Subsidiary Guarantees. Except for any time on and after certain events of default with respect to our debt obligations (each a "Triggering Event") have occurred, the holders of the Bank Obligations will control the disposition of the Collateral, and will receive any proceeds from sales of the Collateral (even, with respect to the Second Priority Facilities Collateral, from and after the time when proceeds in excess of the Non-Shared First Lien Amount are generated from such sales) until the Bank Obligations are repaid in full. If a Triggering Event has occurred and is continuing, all proceeds of the First Priority Collateral and all proceeds of the Second Priority Facilities Collateral in excess of the Non-Shared First Lien Amount will be equally and ratably shared among all holders of the notes and the Other Secured Obligations. Sale proceeds from the Second Priority Bank Collateral will be distributed first to the holders of the Bank Obligations until the Bank Obligations are discharged in full and second to the holders of the notes.

        If the Liens on the Bank Obligations have been released but the Liens securing the notes and the Subsidiary Guarantees on the Second Priority Bank Collateral remain outstanding, the Intercreditor Agreement provides that the Collateral Agent will be entitled to, subject to the provisions of the Indenture and the Security Documents, subordinate the Liens securing the notes and the Subsidiary

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Guarantees to any Liens that are subsequently attached to the Second Priority Bank Collateral for the benefit of the Bank Obligations.

        On and after the occurrence of a Triggering Event, Collateral may not be sold without the consent of, among other parties, a majority in principal amount of the notes; however, Collateral may be sold in a foreclosure, regardless of whether such consent is given.

        Whether prior to or after the discharge of the Bank Obligations, we will be entitled to release an asset included in the Collateral securing the notes and the Subsidiary Guarantees under any one or more of the following circumstances:

        (1)  to enable us to consummate asset dispositions permitted under "Repurchase at Option of Holders—Asset Sales";

        (2)  if we provide substitute Collateral with at least an equivalent fair value, as determined in good faith by the Board of Directors;

        (3)  if all of the stock of any of our Subsidiaries that is pledged to the Collateral Agent is released or if any Subsidiary Guarantor is released from its Subsidiary Guarantee, that Subsidiary's assets will also be released; or

        (4)  as described in "—Modification and Waiver" below.

        The Collateral securing the notes and the Subsidiary Guarantees will also be released upon (1) payment in full of the principal of, accrued and unpaid interest on the notes and the Subsidiary Guarantees that are due and payable at or prior to the time such principal, accrued and unpaid interest are paid and (2) a defeasance and discharge of the Indenture as described below under "—Defeasance and Discharge."

Certain Bankruptcy Limitations

        The right of the Collateral Agent to repossess and dispose of, or otherwise exercise remedies in respect of, the Collateral upon the occurrence of an Event of Default is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against the Company prior to the Collateral Agent having repossessed and disposed of, or otherwise exercised remedies in respect of, the Collateral. Under the United States Bankruptcy Code, a secured creditor such as the Collateral Agent is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, the United States Bankruptcy Code permits the debtor to continue to retain and to use collateral even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to circumstances, but it is intended in general to protect the value of the secured creditor's interest in the collateral and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments with respect to the notes could be delayed following commencement of a bankruptcy case, whether or when the Collateral Agent could repossess or dispose of the Collateral or whether or to what extent holders of the notes would be compensated for any delay in payment or loss of value of the Collateral.

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Optional Redemption

        At any time on or prior to July 15, 2005, the Company may at its option on any one or more occasions redeem notes (including Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of notes (including Additional Notes, if any) issued under the Indenture at a redemption price of 111.25% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of one or more Public Equity Offerings; provided that:

        (1)  at least 65% of the aggregate principal amount of notes (including Additional Notes, if any) issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding notes held by the Company and its Subsidiaries); and

        (2)  the redemption occurs within 90 days of the date of the closing of such Public Equity Offering.

Selection and Notice

        If fewer than all the notes issued under the Indenture are to be redeemed at any time, the Trustee will select notes for redemption on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any note is to be redeemed in part only, the notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed. A new note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest stops accruing on notes or portions of them called for redemption.

Repurchase at Option of Holders

Change of Control

        Upon the occurrence of a Change of Control, each holder of notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, thereon to the date of purchase (the "Change of Control Payment") on a date that is not more than 90 days after the occurrence of such Change of Control (the "Change of Control Payment Date"). Within 30 days following any Change of Control, the Company will mail, or at the Company's request the Trustee will mail, a notice to each holder offering to repurchase the notes held by such holder pursuant to the procedures specified in such notice. The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control.

        On the Change of Control Payment Date, the Company will, to the extent lawful,

•

accept for payment all notes or portions thereof properly tendered and not withdrawn pursuant to the Change of Control Offer,



•

deposit with the applicable Paying Agent an amount equal to the aggregate Change of Control Payments in respect of all notes or portions thereof so tendered, and

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•

deliver or cause to be delivered to the Trustee the notes so accepted together with an Officers' Certificate stating the aggregate principal amount of notes or portions thereof being purchased by the Company.

        The Paying Agent will promptly mail (or deliver by wire transfer) to each holder of notes so tendered the Change of Control Payment for such notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each such note will be in a principal amount of $1,000 or an integral multiple thereof.

        A failure by the Company to comply with the provisions of the two preceding paragraphs will constitute an Event of Default under the Indenture. Except as described above with respect to a Change of Control, the Indenture will not contain provisions that permit the holders of the notes to require that the Company purchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. See "—Events of Default."

        There can be no assurance that the Company will have the financial resources to purchase the notes, particularly if a Change of Control triggers a similar repurchase requirement for, or results in the acceleration of, other Indebtedness. The Credit Facility will provide that certain events constituting a Change of Control could result in the acceleration of the maturity of, the Credit Facility. Future Indebtedness might contain similar provisions. If a Change of Control occurs, the Company could try to refinance the Credit Facility and any such future Indebtedness. Accordingly, the Company might not be able to fulfill its obligation to repurchase any notes if a Change of Control occurs. See "Risk Factors—Risk Factors Relating to the Notes—We may not have the ability to raise funds to purchase notes upon a change of control as required by the indenture."

        The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer at the same or a higher purchase price, at the same times and otherwise in substantial compliance with the requirements applicable to a Change of Control Offer otherwise required to be made by the Company and purchases all notes validly tendered and not withdrawn under such Change of Control Offer.

"Change of Control" means the occurrence of any of the following:

        (1)  any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of securities representing 50% or more of the voting power of all Capital Stock of Solutia; or

        (2)  Continuing Directors shall cease to constitute at least a majority of the directors constituting the Board of Directors; or

        (3)  the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of Solutia and its Restricted Subsidiaries taken as a whole to any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act); or

        (4)  Solutia consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, Solutia, in any such event pursuant to a transaction in which any of the outstanding Capital Stock of Solutia is converted into or exchanged for cash, securities or other property, other than any such transaction where the Capital Stock of Solutia outstanding immediately prior to such transaction is converted into or exchanged for Capital Stock (other than Disqualified Stock) of the surviving or transferee Person representing at least a majority of the

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voting power of all Capital Stock of such surviving or transferee Person immediately after giving effect to such issuance; or

        (5)  the adoption by the stockholders of Solutia of a plan or proposal for the liquidation or dissolution of the Company.

        The phrase "all or substantially all" the assets of Solutia will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of "all or substantially all" the assets of Solutia has occurred, in which case a holder's ability to obtain the benefit of a Change of Control Offer may be impaired.

Asset Sales

        The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

          (i)  the Company and/or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as conclusively evidenced by an Officers' Certificate delivered to the Trustee, or, if such Asset Sale involves aggregate consideration in excess of $20 million, a resolution of the Board of Directors that is set forth in an Officers' Certificate delivered to the Trustee) of the assets or Capital Stock issued or sold or otherwise disposed of,

        (ii)  at least 75% of the consideration therefor received by the Company and/or such Restricted Subsidiary is in the form of cash or Cash Equivalents, and

        (iii)  if such Asset Sale involves the transfer of Collateral, (a) it complies with the applicable provisions of the Security Documents and (b) all consideration received in such Asset Sale (including Additional Assets) shall, if applicable, be expressly made subject to the Lien under the Security Documents;

provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than Subordinated Debt) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee to the extent they are promptly converted or monetized by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision.

        Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option:

        (a)  to permanently repay Applicable Pari Passu Indebtedness (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings); or

        (b)  to acquire Additional Assets (to the extent otherwise permitted by the Indenture) or make a capital expenditure, in each case, in a Permitted Business (or enter into a binding commitment for any such acquisition or expenditure); provided that such binding commitment shall be treated as a permitted application of Net Proceeds from the date of such commitment until and only until the earlier of (x) the date on which such expenditure or acquisition is consummated and (y) the 180th day following the expiration of the aforementioned 360 day period. If the acquisition or expenditure contemplated by such binding commitment is not consummated on or before such 180th day and the Company shall not have applied such Net Proceeds pursuant to clause (a) above

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on or before such 180th day, such commitment shall be deemed not to have been a permitted application of Net Proceeds at any time.

        Pending the final application of any such Net Proceeds, the Company may temporarily reduce the revolving Indebtedness under the Credit Facility or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds under the Indenture exceeds $25 million, the Company will be required to make an offer to all holders of notes issued under the Indenture (an "Asset Sale Offer") to purchase the maximum principal amount of notes and, if the Company is required to do so under the terms of any other Indebtedness ranking pari passu with such notes, such other Indebtedness on a pro rata basis with the notes, that may be purchased out of the Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, thereon, to the date of purchase in accordance with the procedures set out in the Indenture. To the extent that the aggregate amount of notes (and any other pari passu Indebtedness subject to such Asset Sale Offer) tendered pursuant to such Asset Sale Offers is less than the Excess Proceeds, the Company may, subject to the other terms of the Indenture, use any remaining Excess Proceeds for any purpose not prohibited by the Indenture. If the aggregate principal amount of notes surrendered by holders thereof in connection with any Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the notes to be purchased on a pro rata basis. Upon completion of the offer to purchase made under the Indenture, the amount of Excess Proceeds that was the subject of such offer to purchase shall be reset at zero.

Certain Covenants

Restricted Payments

        The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

        (1)  declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Capital Stock, other than:

(x)

dividends or distributions payable in Qualified Capital Stock of the Company, and



(y)

dividends or distributions payable to the Company or any Restricted Subsidiary of the Company;

        (2)  purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company, other than any such Capital Stock owned by the Company or any of its Restricted Subsidiaries;

        (3)  make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Debt of the Company or any Restricted Subsidiary, other than Indebtedness owed to the Company or any Restricted Subsidiary, except, in each case, payment of interest or principal at Stated Maturity; or

        (4)  make any Restricted Investment

        (all such payments and other actions set forth in clauses (1) through (4) above (other than any exception thereto) being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment (the amount of any such Restricted Payment, if other than cash, shall be the fair market value (as conclusively evidenced by a resolution of the Board of

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Directors) of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment):

        (a)  no Default or Event of Default shall have occurred and be continuing after giving effect thereto; and

        (b)  the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the most recently ended four full fiscal quarters for which financial statements have been filed with the SEC pursuant to the covenant described below under the caption "—Reports" immediately preceding the date of such Restricted Payment, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock"; and

        (c)  such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries on or after the Issue Date (excluding Restricted Payments permitted by clause (b), (d) or (e) of the next succeeding paragraph), is less than the sum, without duplication, of:

          (i)  50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the Issue Date to the end of the Company's most recently ended fiscal quarter for which financial statements have been filed with the SEC pursuant to the covenant described below under the caption "—Reports" at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

        (ii)  100% of the aggregate net cash proceeds received by the Company from the issue or sale after the Issue Date of Qualified Capital Stock of the Company or of debt securities of the Company or any of its Restricted Subsidiaries that have been converted into or exchanged for such Qualified Capital Stock of the Company, plus

        (iii)  to the extent that any Restricted Investment that was made after the Issue Date and was included in the calculation of aggregate Restricted Payments under this clause (c) is sold for cash or otherwise liquidated, repaid or otherwise reduced, including by way of dividend or distribution (to the extent not included in calculating Consolidated Net Income), for cash, the lesser of (A) the cash return with respect to such Restricted Investment (less the cost of disposition, if any) or (B) the initial amount of such Restricted Investment, plus

        (iv)  an amount equal to the sum of (A) the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loans or other transfers of assets (to the extent not included in calculating Consolidated Net Income), in each case, to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries and (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary;

provided, however, that the foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount of Restricted Investments previously made after the Issue Date by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary that were included in the calculation above of aggregate Restricted Payments under this clause (c).

        The foregoing provisions will not prohibit the following Restricted Payments:

        (a)  the payment of any dividend within 90 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture;

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        (b)  dividends or distributions by any Wholly-Owned Restricted Subsidiary of the Company payable to the Company or another Wholly-Owned Restricted Subsidiary of the Company;

        (c)  so long as no Default or Event of Default has occurred and is continuing, the payment of cash dividends on any series of Disqualified Stock issued after the Issue Date in an aggregate amount not to exceed the cash received by the Company since the Issue Date upon issuance of such Disqualified Stock;

        (d)  the redemption, repurchase, retirement or other acquisition of any Capital Stock of the Company, any Restricted Subsidiary or any Joint Venture (or the acquisition of all the outstanding Capital Stock of any Person that conducts no operations and has no assets or liabilities other than the ownership of Capital Stock in a Joint Venture) in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary or Joint Venture of the Company) of, Qualified Capital Stock of the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from (and shall not previously have been included in) clause (c)(ii) of the preceding paragraph;

        (e)  the defeasance, redemption or repurchase of Subordinated Debt with the net cash proceeds from an incurrence of Permitted Refinancing or in exchange for or out of the net cash proceeds from the substantially concurrent sale (other than to a Subsidiary or Joint Venture of the Company) of Qualified Capital Stock of the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from (and shall not previously have been included in) clause (c)(ii) of the preceding paragraph;

        (f)    the repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Subsidiary of the Company held by any member of the Company's (or any of its Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock in reliance on this clause (f) shall not exceed $5 million in any calendar year;

        (g)  payments by the Company made pursuant to the Astaris Support Agreement as such agreement is in effect on the Issue Date or as such agreement may be amended, modified, supplemented or replaced, in whole or in part; provided that the aggregate amount of payments made in reliance on this clause (g) shall in no event exceed the maximum aggregate amount of payments required to be made by the Company after the Issue Date under the Astaris Support Agreement as in effect on the Issue Date;

        (h)  repurchases of shares of preferred stock of Solutia Management Company, Inc. in accordance with the terms of its Stockholders Agreement, dated as of December 29, 1998, in an amount not to exceed $1.5 million in the aggregate;

        (i)    Restricted Payments comprised of payments of dividends on, or repurchases of, the Company's common stock, in an aggregate amount not to exceed the lower of (x) $10.0 million per calendar year and (y) $0.04 per share; provided that no Default or Event of Default shall have occurred and be continuing after giving effect to such Restricted Payment;

        (j)    notwithstanding anything to the contrary contained herein, repurchases of Capital Stock deemed to occur upon the exercise of stock options, to the extent such repurchases represent a portion of the exercise price thereof or withholding of applicable taxes thereon and the purchase price, or applicable withholding taxes, for such repurchases is paid solely in Qualified Capital Stock; and

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        (k)  additional Restricted Payments in an aggregate amount not to exceed $25.0 million.

        If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Capital Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Capital Stock of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the first paragraph of this covenant.

        Prior to the first time the notes are rated Investment Grade, the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant (except to the extent such Investments were repaid to the Company or a Restricted Subsidiary in cash). All such outstanding Investments will be deemed to constitute Investments in an amount equal to the fair market value of such Investments at the time of such designation, as conclusively determined by the Board of Directors. Such designation will only be permitted if any such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. In the case of any designation by the Company of a Person as an Unrestricted Subsidiary on the first day that such Person is a Subsidiary of the Company in accordance with the provisions of the Indenture, such designation shall be deemed to have occurred for all purposes of the Indenture simultaneously with, and automatically upon, such Person becoming a Subsidiary.

Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock

        The Company will not

•

and will not permit any of its Restricted Subsidiaries to, incur any Indebtedness (including Acquired Debt);



•

and will not permit any of its Restricted Subsidiaries to, issue any Disqualified Stock (including Acquired Disqualified Stock); and



•

permit any of its Restricted Subsidiaries that are not Subsidiary Guarantors to issue any shares of Preferred Stock (including Acquired Preferred Stock);

provided, however, that the Company and the Subsidiary Guarantors may incur Indebtedness (including Acquired Debt) and the Company and the Subsidiary Guarantors may issue shares of Disqualified Stock (including Acquired Disqualified Stock) if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which financial statements have been filed with the SEC pursuant to the covenant described below under "—Reports" immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period, with any letters of credit and bankers' acceptances being deemed to have an aggregate principal amount of Indebtedness equal to the maximum amount available thereunder.

        The immediately preceding paragraph will not apply to:

          (i)  (I) the incurrence by the Company or any Subsidiary Guarantor of Indebtedness pursuant to the Credit Facility in an aggregate principal amount at any time outstanding not to exceed the lesser of (x) $800 million and (y) the aggregate amount of the Credit Facility as specified in the

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Assumption Documentation, less the aggregate principal amount of all mandatory repayments applied to (a) repay loans (other than revolving credit loans) outstanding thereunder or (b) permanently reduce the revolving credit commitments thereunder (and the corresponding guarantees of the Subsidiary Guarantors thereunder) and (II) the incurrence by any Foreign Subsidiary of Indebtedness pursuant to the Credit Facility in an aggregate principal amount not to exceed the aggregate principal amount of Indebtedness incurred by Foreign Subsidiaries under the Credit Facility on the Assumption Date; provided, however, that if the Company or a Subsidiary Guarantor transfers any material assets to a Foreign Subsidiary that is a borrower under the Credit Facility, then, at the time of such transfer, there shall be deemed to be an incurrence of Indebtedness that is not permitted by this clause (i)(II) in the amount of Indebtedness that is outstanding under this clause (i)(II) at the time of such transfer;

        (ii)  the incurrence by the Company and the Subsidiary Guarantors of Indebtedness represented by the notes (not including any Additional Notes) and Subsidiary Guarantees thereof, including any exchange notes issued for the notes issued on the Issue Date;

        (iii)  the Existing Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness of the type described in clause (i), (ii), (v), (ix) or (x) of this covenant);

        (iv)  the incurrence by the Company or any of its Restricted Subsidiaries of any Permitted Refinancing in exchange for, or the Net Proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness that was permitted to be incurred under (A) the Fixed Charge Coverage Ratio test set forth above or (B) clauses (ii) and (iii) above, clause (xi) below or this clause (iv);

        (v)  the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (i) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, then (other than intercompany notes that constitute Collateral) such Indebtedness is expressly subordinated by its terms to the prior payment in full in cash of all Obligations with respect to the notes or the Subsidiary Guarantee, as the case may be, and (ii)(A) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary shall be deemed, in each case, to constitute a simultaneous incurrence of such Indebtedness that is not permitted by this clause (v) by the Company or such Restricted Subsidiary, as the case may be;

        (vi)  the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations that are incurred for the purpose of (A) fixing or hedging interest rate or currency risk with respect to any fixed or floating rate Indebtedness that is permitted by the Indenture to be outstanding which is designed solely to protect the Company or any Restricted Subsidiary against fluctuations in foreign currency exchange rates; provided that such Hedging Obligation does not increase the principal amount of any such Indebtedness other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnitees and compensation payable thereunder or (B) managing fluctuations in the price or cost of energy, raw materials, manufactured products or related commodities; provided that such obligations are entered into for valid business purposes other than speculative purposes (as determined by the Company's or such Restricted Subsidiary's principal financial officer in the exercise of his or her good faith business judgment);

      (vii)  the issuance by any of the Company's Restricted Subsidiaries of shares of Preferred Stock to the Company or a Wholly Owned Restricted Subsidiary; provided that (A) any subsequent issuance or transfer of Capital Stock that results in such Preferred Stock being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary or (B) the transfer or other

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disposition by the Company or a Wholly Owned Restricted Subsidiary of any such shares to a Person other than the Company or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to constitute an issuance of such Preferred Stock by such Subsidiary on such date that is not permitted by this clause (vii);

      (viii)  the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by worker's compensation claims and other statutory or regulatory obligations, self-insurance obligations, tender, bid, performance, government contract, surety or appeal bonds, standby letters of credit and warranty and contractual service obligations of like nature, trade letters of credit or documentary letters of credit, in each case to the extent incurred in the ordinary course of business of the Company or such Restricted Subsidiary;

        (ix)  the incurrence of Indebtedness by Foreign Subsidiaries (not including Indebtedness incurred pursuant to clause (i)(II) above) in the aggregate principal amount (or accreted value, as applicable) at any time outstanding and incurred in reliance upon this clause (ix), does not exceed $25 million;

        (x)  the Guarantee by the Company or any Subsidiary Guarantor of Indebtedness of the Company or a Restricted Subsidiary that was permitted to be incurred by another provision of this covenant;

        (xi)  Acquired Debt or Acquired Disqualified Stock; provided that such Indebtedness or Disqualified Stock was not incurred in connection with or in contemplation of such Person becoming a Restricted Subsidiary; and provided further that immediately after giving effect to such incurrence, the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which financial statements have been filed with the SEC pursuant to the covenant described below under "—Reports" immediately preceding the date of such incurrence would have been at least 2 to 1, determined on a pro forma basis (including giving pro forma effect to the applicable transaction related thereto);

      (xii)  Indebtedness consisting of take-or-pay obligations contained in supply agreements entered into in the ordinary course of business;

      (xiii)  the incurrence by the Company and the Subsidiary Guarantors of Purchase Money Obligations and Capital Lease Obligations in an aggregate principal amount not to exceed $50 million at any one time outstanding;

      (xiv)  Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, contribution, earnout, adjustment of purchase price or similar obligation, in each case, incurred or assumed in connection with the disposition of any business, assets or Capital Stock of a Restricted Subsidiary;

      (xv)  Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, that such Indebtedness is extinguished within three business days of incurrence; and

      (xvi)  the incurrence by the Company or any Subsidiary Guarantor of Indebtedness or the issuance of Disqualified Stock, the aggregate principal amount (or accreted value, as applicable) or liquidation preference of which, together with all other Indebtedness and Disqualified Stock at the time outstanding and incurred in reliance on this clause (xvi), does not exceed $50 million.

        For purposes of determining compliance with this covenant, in the event that an item of Indebtedness or Preferred Stock meets the criteria of more than one of the categories of permitted Indebtedness described in clauses (i) through (xvi) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify on the date of

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incurrence (and from time to time reclassify in whole or in part) such item of Indebtedness or Preferred Stock in any matter that complies with this covenant and such Indebtedness or Preferred Stock will be treated as having been incurred pursuant to the clauses or the first paragraph hereof, as the case may be, designated by the Company (provided that all Indebtedness under the Credit Facility shall at all times be deemed to have been incurred pursuant to clause (i) of this covenant). The amount of Indebtedness issued at a price which is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in accordance with GAAP.

Limitation on Liens

        The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien, except Permitted Liens, on any asset now owned or hereafter acquired, or any income or profits therefrom, unless all payments due under the Indenture and the notes are secured on an equal and ratable basis with the obligations so secured (or, if such obligations are subordinated by their terms to the notes or the Subsidiary Guarantees, prior to the obligations so secured) until such time as such obligations are no longer secured by a Lien.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

        The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any restriction on the ability of any Restricted Subsidiary to:

          (i)  (a)    pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries:

        (1)  on its Capital Stock, or

        (2)  with respect to any other interest or participation in, or measured by, its profits, or

            (b)    pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;

        (ii)  make loans or advances to the Company or any of its Restricted Subsidiaries; or

        (iii)  transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries;

except for such restrictions existing under or by reason of:

        (a)  existing agreements as in effect on the Issue Date, including any amendment, modification or supplement thereof provided that such amendment, modification or supplement is materially no more restrictive than such existing agreement as in effect on the Issue Date;

        (b)  Indebtedness permitted by the Indenture to be incurred containing restrictions on the ability of Restricted Subsidiaries to consummate transactions of the types described in clause (i), (ii) or (iii) above not materially more restrictive than those contained in the Indenture and the Security Documents;

        (c)  the Indenture and the Security Documents;

        (d)  applicable law;

        (e)  existing restrictions with respect to a Person acquired by the Company or any of its Restricted Subsidiaries (except to the extent such restrictions were put in place in connection with or in contemplation of such acquisition), which restrictions are not applicable to any

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Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;

        (f)    customary non-assignment provisions in leases and other agreements entered into in the ordinary course of business;

        (g)  construction loans and purchase money obligations (including Capital Lease Obligations) for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so constructed or acquired;

        (h)  in the case of clause (iii) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages;

        (i)    a Permitted Refinancing; provided that the restrictions contained in the agreements governing such Permitted Refinancing are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

        (j)    any restriction with respect to shares of Capital Stock of a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of such shares of Capital Stock or any restriction with respect to the assets of a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of such assets or all or substantially all the Capital Stock of such Restricted Subsidiary pending the closing of such sale or disposition; and

        (k)  the Credit Facility and related documentation as the same is in effect on the Assumption Date and as amended, modified, extended, renewed, refunded, refinanced, restated or replaced from time to time; provided that the Credit Facility and related documentation as so amended, modified, extended, reviewed, refunded, refinanced, restated or replaced is not materially more restrictive, taken as a whole, as to the matters enumerated above than the Credit Facility and related documentation as in effect on the Assumption Date.

        For purposes of determining compliance with this covenant, in the event that a restriction meets the criteria of more than one of the categories of permitted restrictions described in clauses (a) through (k) above, the Company shall, in its sole discretion, classify such restriction in any matter that complies with this covenant and such restriction will be treated as existing pursuant to the clauses designated by the Company.

Limitation on Sale and Lease-Back Transactions

        The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Lease-Back Transaction; provided that the Company or any Restricted Subsidiary may enter into a Sale and Lease-Back Transaction if:

        (a)  the Company or such Restricted Subsidiary, as the case may be, could have:

          (i)  incurred Indebtedness in an amount equal to the Attributable Debt relating to such Sale and Lease-Back Transaction pursuant to the covenant described under the caption "Certain Covenants—Limitations on Incurrence of Additional Indebtedness and Issuance of Preferred Stock", and

        (ii)  incurred a Lien to secure such Indebtedness pursuant to the covenant described under the caption "Certain Covenants—Limitations on Liens" without securing the notes; and

        (b)  the gross cash proceeds of such Sale and Lease-Back Transaction are at least equal to the fair market value of the property that is the subject of such Sale and Lease-Back Transaction.

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Line of Business

        The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole.

Transactions with Affiliates

        The Company will not, and will not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) the terms of such Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate of the Company and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction involving aggregate consideration in excess of $10 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction involving aggregate consideration in excess of $25 million, an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an investment banking firm of national standing; provided that:

          (i)  transactions or payments pursuant to any employment arrangements or employee, officer or director benefit plans or arrangements entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

        (ii)  transactions between or among the Company and/or its Restricted Subsidiaries;

        (iii)  customary loans, advances, fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries;

        (iv)  transactions pursuant to any contract or agreement in effect on the Issue Date, as the same may be amended, modified or replaced from time to time, so long as any such contract or agreement as so amended, modified or replaced is, taken as a whole, no less favorable to the Company and its Restricted Subsidiaries in any material respect than the contract or agreement as in effect on the Issue Date;

        (v)  any Restricted Payment of the type described in clause (1) or (2) of the first paragraph of the covenant described under "—Restricted Payments;" and

        (vi)  any transaction entered into on an arm's-length basis in the ordinary course of business between the Company or any of its Restricted Subsidiaries, on the one hand, and any Joint Venture, on the other hand; provided, that any such transaction (or series of related transactions) that involves $25 million or more in the aggregate shall be subject to prior approval by the disinterested members of the Board of Directors,

in each case, shall be deemed not to be Affiliate Transactions and therefore (except as otherwise specified in such clauses) not subject to the requirements of clauses (i) and (ii) of the initial paragraph above.

Creation of Subsidiaries; Guarantees by Restricted Subsidiaries

        The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to Guarantee or secure the payment of any other Indebtedness of the Company or any of

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its Restricted Subsidiaries unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Subsidiary Guarantee of the payment of the notes by such Restricted Subsidiary; provided that this paragraph shall not be applicable to:

          (i)  any Guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary;

        (ii)  to the extent permitted under "—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock," Guarantees of Indebtedness of a Restricted Subsidiary that is a Foreign Subsidiary by a Restricted Subsidiary that is a Foreign Subsidiary; or

        (iii)  any Guarantee arising under or in connection with performance bonds, indemnity bonds, surety bonds or letters of credit or bankers' acceptances.

        If the Guaranteed Indebtedness is subordinated in right of payment to the notes or any Subsidiary Guarantee, as applicable, pursuant to a written agreement to that effect, the Guarantee of such guaranteed Indebtedness must be subordinated in right of payment to the Subsidiary Guarantee to at least the extent that the Guaranteed Indebtedness is subordinated to the notes.

Reports

        Whether or not the Company and the Subsidiary Guarantors are then subject to Section 13(a) or 15(d) of the Exchange Act, the Company and the Subsidiary Guarantors will electronically file with the SEC, so long as the notes are outstanding, the annual reports, quarterly reports and other periodic reports that the Company and the Subsidiary Guarantors would be required to file with the SEC pursuant to Section 13(a) or 15(d) if the Company and the Subsidiary Guarantors were so subject, and such documents will be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which the Company and the Subsidiary Guarantors would be required so to file such documents if the Company and the Subsidiary Guarantors were so subject, unless, in any case, such filings are not then permitted by the SEC.

        If such filings with the SEC are not then permitted by the SEC, or such filings are not generally available on the Internet free of charge, the Company and the Subsidiary Guarantors will, without charge to the holders, within 15 days of each Required Filing Date, transmit by mail to Holders, as their names and addresses appear in the note register, and file with the Trustee copies of the annual reports, quarterly reports and other periodic reports that the Company and the Subsidiary Guarantors would be required to file with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company and the Subsidiary Guarantors were subject to such Section 13(a) or 15(d) and, promptly upon written request, supply copies of such documents to any prospective holder or beneficial owner at the Company's cost.

        In addition, the Company and the Subsidiary Guarantors will, for so long as any notes remain outstanding, furnish to the holders of the notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Impairment of Security Interest

        Except as provided in the Security Documents, the Company will not, and will not permit any Restricted Subsidiary to, take, or knowingly or negligently omit to take, any action, which action or omission might or would have the result of materially impairing the security interest in favor of the Collateral Agent on behalf of the Trustee and the holders of the notes with respect to the Collateral, and the Company will not, and will not permit any Subsidiary Guarantor to, grant to any Person (other

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than the Collateral Agent for its benefit and the ratable benefit of the Trustee and the holders of the notes) any interest whatsoever in the Collateral (other than as permitted by the Security Documents).

Applicability of Certain Covenants if Notes Rated Investment Grade

        Notwithstanding the foregoing, from and after the first date when the notes are rated Investment Grade, (i) the Company's obligations to comply with the provisions of the Indenture described above under the captions "Repurchase at Option of Holders—Asset Sales" and "Certain Covenants—Restricted Payments," "—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock," "—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries," "—Limitation on Sale and Lease-Back Transactions," "—Lines of Business" and "—Transactions with Affiliates," and clause (3) of "Consolidation, Merger and Sale of Assets" will terminate and cease to have any further effect and (ii) the following paragraph entitled "Restriction on Sale and Leaseback Transactions" shall apply.

        In addition to the foregoing, from and after the first date when the notes are rated Investment Grade, the Company shall be subject to the following "Restriction on Sale and Lease-Back Transactions" covenant:

        The Company will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction (except a lease for a temporary period not exceeding three years) after the Issue Date covering any Principal Property, which was or is owned or leased by the Company or a Restricted Subsidiary and which has been or is to be sold or transferred more than 120 days after the acquisition or completion of construction and commencement of full operation thereof, unless (a) the Attributable Debt in respect thereto and all other Sale and Lease-Back Transactions entered into after the date of the Indenture (other than those the proceeds of which are applied to reduce Indebtedness under (b) below), plus the aggregate amount of then outstanding secured Indebtedness not otherwise permitted or excepted without equally and ratably securing the notes, does not exceed 15% of the Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries or (b) an amount equal to the fair value of the Principal Property leased is applied within 120 days to the voluntary retirement of the note or other Indebtedness maturing more than one year thereafter.

Consolidation, Merger and Sale of Assets

        The Company may not consolidate with or merge with or into, or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its assets in one or more related transactions to, any Person, or permit any Person to merge with or into it unless each of the following conditions is satisfied:

        (1)  immediately after giving effect to such transaction and any related incurrence of Indebtedness or issuance of Disqualified Stock, no Default or Event of Default shall have occurred and be continuing;

        (2)  either (i) the Company shall be the continuing Person, or (ii) the entity formed by such consolidation or into which the Company is merged, or the Person to which such properties and assets will have been conveyed, transferred or leased, assumes the Company's obligation as to the due and punctual payment of the principal of (and premium, if any, on) and interest, if any, on the notes and the performance and observance of every covenant to be performed by the Company under the Indenture, the notes and the Security Documents; any such entity will be organized under the laws of the United States, one of the States thereof or the District of Columbia;

        (3)  the Company or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made, except with respect to a consolidation or merger of the

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Company with or into a Person that has no outstanding Indebtedness, will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, have a Fixed Charge Coverage Ratio of at least 2 to 1; and

        (4)  the Company has delivered to the Trustee an Officers' Certificate and opinion of counsel stating that the transaction complies with these conditions.

        The foregoing shall not prohibit the merger or consolidation of a Wholly Owned Restricted Subsidiary with the Company; provided that, in connection with any such merger or consolidation, no consideration, other than Qualified Capital Stock in the surviving Person or the Company, shall be issued or distributed to the holders of Capital Stock of the Company.

        No Subsidiary Guarantor will be permitted to:

•

consolidate with or merge with or into any Person; or



•

sell, convey, transfer or dispose of, all or substantially all its assets as an entirety or substantially as an entirety, in one transaction or a series of related transactions, to any Person; or



•

permit any Person to merge with or into the Subsidiary Guarantor unless:

        (A)  the other Person is the Company or any Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor or becomes a Subsidiary Guarantor concurrently with the transaction; or

        (B)  either (x) the Subsidiary Guarantor is the continuing Person or (y) the resulting, surviving or transferee Person expressly assumes by supplemental indenture all of the obligations of the Subsidiary Guarantor under its Subsidiary Guarantee; and

        (2)  immediately after giving effect to the transaction, no Default has occurred and is continuing;

        or

        (C)  the transaction constitutes a sale or other disposition (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (in each case other than to the Company or a Restricted Subsidiary) otherwise permitted by the Indenture.

        The sale, assignment, transfer, conveyance or other disposition by the Company of all or substantially all its property or assets taken as a whole to one or more of the Company's Subsidiaries shall not relieve the Company from its obligations under the Indenture and the notes. In addition, the Company will not lease all or substantially all its assets in one or more related transactions to another Person.

Events of Default

        Each of the following constitutes an "Event of Default" with respect to the notes:

        (1)  default for 30 days in the payment when due of interest on the notes;

        (2)  default in payment when due of the principal of or premium, if any, on the notes issued thereunder, at maturity or otherwise;

        (3)  failure by the Company to comply with the provisions described under the captions "Repurchase at Option of Holders—Change of Control," "—Asset Sales" or "Consolidation, Merger and Sale of Assets";

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        (4)  failure by the Company for 90 days after receipt of notice by the Trustee or holders of at least 25% in principal amount of the then outstanding notes issued thereunder to comply with any of the other agreements in the Indenture, the notes or the Security Documents;

        (5)  any default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries (or any Indebtedness for money borrowed Guaranteed by the Company or any of its Significant Subsidiaries if the Company or a Significant Subsidiary does not perform its payment obligations under such Guarantee within any grace period provided for in the documentation governing such Guarantee), whether such Indebtedness or Guarantee exists on the Issue Date or is thereafter created, which default (a) constitutes a Payment Default or (b) results in the acceleration of such Indebtedness prior to its Stated Maturity, and in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or that has been so accelerated, aggregates $35 million or more;

        (6)  failure by the Company or any of its Significant Subsidiaries to pay a final judgment or final judgments aggregating in excess of $35 million, which judgment or judgments are not paid, discharged or stayed, for a period of 60 days;

        (7)  certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries;

        (8)  any failure to perform or comply with the provisions of the Indenture, except as otherwise provided herein; and

        (9)  any Subsidiary Guarantee or any Security Document (or any security interest created thereby) shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or the Company or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under any Subsidiary Guarantee or any Security Document.

        If an Event of Default (other than an Event of Default specified in clause (7) above that occurs with respect to the Company or any Subsidiary Guarantor) occurs and is continuing under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the holders), may, and the Trustee at the request of such holders shall, declare the principal of and premium, if any, and accrued interest, if any, on the notes to be immediately due and payable. Upon a declaration of acceleration, such principal, premium, if any, and accrued interest, if any, shall be immediately due and payable. If an Event of Default specified in clause (7) above occurs with respect to the Company or any Subsidiary Guarantor, the principal of and premium, if any, and accrued interest, if any, on the notes then outstanding shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder.

        The holders of at least a majority in principal amount of the outstanding notes, by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if:

          (i)  all existing Events of Default, other than the nonpayment of the principal of and premium, if any, and interest, if any, on such notes that have become due solely by such declaration of acceleration, have been cured or waived; and

        (ii)  the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

For information as to the waiver of defaults, see "Modification and Waiver."

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        The holders of at least a majority in aggregate principal amount of the outstanding notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of holders of the notes not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from holders of the notes. A holder may not pursue any remedy with respect to the Indenture or the notes unless:

        (1)  the holder gives the Trustee written notice of a continuing Event of Default;

        (2)  the holders of at least 25% in aggregate principal amount of outstanding notes make a written request to the Trustee to pursue the remedy;

        (3)  such holder or holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense;

        (4)  the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

        (5)  during such 60-day period, the holders of at least a majority in aggregate principal amount of the outstanding notes do not give the Trustee a direction that is inconsistent with the request.

        However, such limitations do not apply to the right of any holder of a note to receive payment of the principal of or premium, if any, or interest, if any, on such note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the notes, which right shall not be impaired or affected without the consent of the holder.

        The Indenture will require an officer of the Company to certify, on or before a date not more than 120 days after the end of each fiscal year, that the officer has conducted or supervised a review of the activities of the Company and its Restricted Subsidiaries and the Company's and its Restricted Subsidiaries' performance under the Indenture and that, to the best of such officer's knowledge, based upon such review, the Company has fulfilled all obligations thereunder or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. The Company will also be obligated to notify the Trustee promptly of any default or defaults in the performance of any covenants or agreements under the Indenture.

Modification and Waiver

        The Indenture permits the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the notes, to execute supplemental Indentures adding any provisions to or changing or eliminating any provision of the Indenture or any Security Document or modifying the rights of such holders (it being understood that the provisions of the Security Documents which may by their terms be amended or waived without the consent of the noteholders do not require the consent of the noteholders contemplated hereby). However, no modification or amendment may, without the consent of each holder affected thereby,

        (1)  change the Stated Maturity of the principal of, or any installment of interest on, any note or alter the provisions with respect to redemption,

        (2)  reduce the principal amount of or premium, if any, or interest, if any, on any note,

        (3)  reduce any amount payable upon the occurrence of an Event of Default,

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        (4)  after the obligation has arisen to make a Change of Control Offer or an Asset Sale Offer, amend, change or modify in any material respect the obligation of the Company to make and complete such Change of Control Offer or make and complete such Asset Sale Offer,

        (5)  change the place or currency of payment of principal of or premium, if any, or interest, if any, on any note,

        (6)  impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any note,

        (7)  reduce the above-stated percentage of outstanding notes the consent of whose holders is necessary to modify or amend the Indenture,

        (8)  waive a default in the payment of principal of or premium, if any, or interest, if any, on the notes (except as set forth under the caption "Events of Default"),

        (9)  reduce the percentage or aggregate principal amount of outstanding notes the consent of whose holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults,

        (10) modify or change any provision of the Indenture affecting the ranking of the notes or the Subsidiary Guarantees in a manner adverse to the holders of the notes, or

        (11) release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture other than in accordance with the provisions of the Indenture, or amend or modify any provision relating to such release.

        Modification and amendment of the Indenture or any Security Document may be made by the Company and the Trustee without the consent of any holder (including entering into the Security Documents on the Assumption Date), for any of the following purposes:

          (i)  to cure any ambiguity, omission, defect or inconsistency in the Indenture or any Security Document;

        (ii)  to provide for the assumption by a successor of the Company of its obligations under the Indenture or any Security Document;

        (iii)  to provide for uncertificated notes, subject to certain conditions;

        (iv)  to secure the notes under the Indenture, to add Subsidiary Guarantees with respect to the notes, or to confirm and evidence the release, termination or discharge of any such security or Subsidiary Guarantee when such release, termination or discharge is permitted by the Indenture;

        (v)  to add to the covenants of the Company for the benefit of the holders of the notes or to surrender any right or power conferred upon the Company;

        (vi)  to provide for or confirm the issuance of Additional Notes;

      (vii)  to make any other change that does not adversely affect the rights of any holder;

      (viii)  to comply with any requirement of the SEC in connection with qualification of the Indenture under the Trust Indenture Act or otherwise; or

        (ix)  to add or release Collateral as permitted under the terms of the Indenture or the Security Documents.

Defeasance and Discharge

        The Company may discharge their obligations under the notes and the Indenture by irrevocably depositing in trust with the Trustee money or U.S. Government Obligations sufficient to pay principal

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of interest on the notes to maturity or redemption within one year, subject to meeting certain other conditions.

        The Indenture provides that the Company may elect either (i) to defease and be discharged from any and all obligations with respect to all or a portion of the notes of any series (except for, among other matters, the obligations to register the transfer of or exchange notes, replace temporary or mutilated, destroyed, lost or stolen notes of such series, maintain an office or agency in respect of such notes and hold moneys for payment in trust) ("legal defeasance"); or (ii) to be released from their obligations with respect to the covenants described under the captions "The Guarantees," "Repurchase at Option of Holders—Asset Sales," "Certain Covenants—Restricted Payments," "—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock," "—Limitation on Liens," "—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries," "—Limitation on Sale and Lease-Back Transactions," "—Line of Business," "—Transactions with Affiliates," "—Guarantees by Restricted Subsidiaries," "—Reports," "Applicability of Covenants if Notes are Rated Investment Grade—Restriction on Sale and Lease-Back Transactions" and under clauses (1) and (3) of "—Consolidation, Merger and Sale of Assets" (and the events listed in clauses (5), (6) and (8) under "—Events of Default" will no longer constitute Events of Default), and any omission to comply with such obligations will not constitute a Default or an Event of Default with respect to such notes ("covenant defeasance"), in either case upon the irrevocable deposit by the Company with the Trustee (or other qualifying trustee), in trust, of (i) an amount in cash; (ii) U.S. Government Obligations that, through the payment of principal and interest in accordance with their terms, will provide money in an amount; or (iii) a combination thereof in an amount, sufficient to pay the principal of (and premium, if any, on) and interest, if any, to Stated Maturity (or redemption) on such notes, on the scheduled due dates therefor.

        Such a trust may only be established if, among other things, the Company has delivered to the Trustee an opinion of counsel to the effect that the holders of such notes will not recognize income, gain or loss for United States federal income tax purposes as a result of such legal defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion, in the case of defeasance under clause (i) above, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. The defeasance would in each case be effective when 91 days have passed since the date of the deposit in trust.

        In the case of either discharge or defeasance, the Subsidiary Guarantees, if any, will terminate.

Concerning the Trustee

        The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

        The holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the applicable Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will not be under any obligation to exercise any rights or powers under the Indenture at the request of any holder of notes, unless such holder shall have offered to the applicable Trustee security and indemnity satisfactory to it against any loss, liability or expense.

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No Personal Liability of Directors, Officers, Employees and Stockholders

        No director, officer, employee, incorporator, member of the Board of Directors or holder of Capital Stock of the Company or any Subsidiary Guarantor, as such, will have any liability for any obligations of the Company and the Subsidiary Guarantors under the notes, the Subsidiary Guarantees, the Indenture or the Security Documents or for any claim based on, in respect of, or by reason of, such obligations. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. This waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

Payment, Transfer and Exchange

        The Company will be required to maintain an office or agency at which the principal of and premium, if any, and interest, if any, on the notes will be payable. The Company will initially designate the office of the agent of the Trustee in New York City as an office where such principal, premium and interest will be payable. The Company may from time to time designate additional offices or agencies, approve a change in the location of any office or agency and rescind the designation of any office or agency.

        All moneys paid by the Company to the Trustee or a Paying Agent for the payment of principal of (or premium, if any, on) or interest, if any, on any notes that remain unclaimed for two years after such principal, premium or interest becomes due and payable will be repaid to the Company, and the holder of such notes will (subject to applicable abandoned property or similar laws) thereafter, as an unsecured general creditor, look only to the Company.

        Subject to the terms of the Indenture, notes may be presented for registration of transfer and for exchange (i) at each office or agency required to be maintained by the Company, as described above, and (ii) at each other office or agency that the Company may designate from time to time for such purposes. Registration of transfers and exchanges will be effected if the transfer agent is satisfied with the evidence of ownership and identity of the Person making the request and if the transfer form thereon is duly executed and the transfer agent is otherwise satisfied that the transfer is being made in accordance with the Indenture and applicable law. See "—Book-Entry, Delivery and Form" and "Transfer Restrictions" for a description of additional transfer restrictions applicable to the notes.

        No service charge will be made for any registration of transfer or exchange of notes, but the Company may require payment of any tax or other governmental charge payable in connection therewith.

Governing Law

        The Indenture, including any Subsidiary Guarantees, and the notes shall be governed by, and construed in accordance with, the laws of the State of New York.

Certain Definitions

"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

"Acquired Disqualified Stock" means, with respect to any specified Person, Disqualified Stock of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Disqualified Stock incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person.

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"Acquired Preferred Stock" means, with respect to any specified Person, Preferred Stock of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Preferred Stock incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person.

"Additional Assets" means (a) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary from any Person other than the Company or an Affiliate of the Company, (b) any controlling interest or joint venture interest in another business or (c) any other asset (other than securities, cash, Cash Equivalents, or other current assets) to be owned by the Company or any Restricted Subsidiary.

"Affiliate" of any specified Person means any other Person directly or indirectly, through one or more intermediaries, controlling or controlled by or under direct or indirect common control with such specified Person. For the purpose of this definition, "control" when used with respect to any specified Person means the possession, direct or indirect, of the power to manage or direct or cause the direction of the management and policies of such Person directly or indirectly, whether through the ownership of voting stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Applicable Pari Passu Indebtedness" in respect of any asset that is the subject of an Asset Sale means (i) at a time when such asset is included in the Collateral (x) Indebtedness under Bank Obligations that is secured at such time by Collateral or (y) Pari Passu Indebtedness of the Company or the Restricted Subsidiaries that have a Stated Maturity prior to the Stated Maturity of the notes and (ii) at a time when such asset is not included in the Collateral, any Indebtedness (a) under the Credit Facility and (b) any other Indebtedness (other than Subordinated Debt) of the Company or a Restricted Subsidiary that has a Stated Maturity prior to the Stated Maturity of the notes.

"Asset Sale" means (i) the sale, lease, conveyance or other disposition (other than the creation of a Lien) of any assets (other than the disposition of inventory or equipment in the ordinary course of business consistent with industry practices or the disposition of Cash Equivalents) (provided that the sale, conveyance or other disposition of all or substantially all the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "Repurchase at the Option of Holders—Change of Control" and/or the provisions described above under the caption "Consolidation, Merger and Sale of Assets" and not by the provisions of the Asset Sale covenant), (ii) the sale by the Company or any of its Restricted Subsidiaries of Capital Stock of any of the Company's Restricted Subsidiaries, Unrestricted Subsidiaries or Joint Ventures and (iii) the issuance by any of the Company's Restricted Subsidiaries of Capital Stock of such Restricted Subsidiary, in the case of each of the foregoing clauses (i), (ii) or (iii), whether in a single transaction or a series of related transactions (A) that have a fair market value in excess of $10 million or (B) for Net Proceeds in excess of $10 million. Notwithstanding the foregoing: (a) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (b) an issuance of Capital Stock by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (c) Sale and Lease-Back Transactions; and (d) Restricted Payments permitted by the covenant described under "Certain Covenants—Restricted Payments" and Permitted Investments will not be deemed to be an Asset Sale.

"Assumption Date" means July 25, 2002.

"Astaris Support Agreement" means the guaranty agreement, dated September 14, 2000, made by the Company in favor of Astaris LLC, a limited liability company organized and existing under the laws of Delaware ("Astaris") and in favor of the lenders under the five-year credit agreement dated September 14, 2000 under which Astaris is the borrower and Bank of America, N.A. is the administrative agent, as such agreement may be modified, amended, restated or replaced; provided that

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the terms of any such modification, amendment, restatement or replacement do not materially increase the Company's or any Restricted Subsidiary's obligations thereunder and such terms (including as to tenor) are not more onerous from a financial perspective, taken as a whole, to the Company and the Restricted Subsidiaries.

"Attributable Debt" means, with respect to any Sale and Lease-Back Transaction, the amount determined by multiplying the greater, at the time such arrangement is entered into, of (1) the fair value of the real property subject to such arrangement (as determined by the Company) or (2) the net proceeds of the sale of such real property to the lender or investor, by a fraction of which the numerator is the unexpired initial term of the lease of such real property as of the date of determination and of which the denominator is the full initial term of such lease. Sale and Lease-Back Transactions with respect to facilities financed with Industrial Development Bonds (whether or not tax exempt) are excepted from the calculation made pursuant to this definition.

"Bank Obligations" means the Obligations of the Company and the Restricted Subsidiaries under the Credit Facility, the Co-Generation Facility, the Astaris Support Agreement, the Designated Letters of Credit and Hedging Obligations in respect of such Designated Letters of Credit.

"Board of Directors" means the board of directors of the Company or any duly authorized committee thereof.

"Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP.

"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person and (v) all warrants, options or other rights to acquire any item listed in (i) through (iv) of this definition.

"Cash Equivalents" means (a) United States dollars, (b) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (c) demand deposits, time deposits and certificates of deposit with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year from the date of acquisition and overnight bank deposits, in each case with any bank or trust company organized or licensed under the laws of the United States or any State thereof having capital, surplus and undivided profits in excess of $250 million, (d) repurchase obligations with a term of not more than seven days for underlying securities of the type described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above, (e) commercial paper rated at least P-1 or Al-1 by Moody's or S&P, respectively, (f) investments in any U.S. dollar-denominated money market fund as defined by Rule 2a-7 of the General Rules and Regulations promulgated under the Investment Company Act of 1940 and (g) in the case of a Foreign Subsidiary, substantially similar investments denominated in foreign currencies (including similarly capitalized foreign banks).

"Co-Generation Facility" means the co-generation lease facility for the Company's co-generation facility in Pensacola, Florida, as such lease facility may be amended, restated, modified or replaced.

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"Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus in each case, without duplication:

          (i)  provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period to the extent that such provision for taxes was included in computing such Consolidated Net Income;

        (ii)  the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income;

        (iii)  depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income; and

        (iv)  any non-cash charges reducing Consolidated Net Income for such period (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period); minus

        (v)  any non-cash items increasing Consolidated Net Income for such period (without duplication, excluding any reversal of a reserve for cash expenses, if the establishment of such reserve had previously decreased Consolidated Net Income).

in each case, on a consolidated basis and determined in accordance with GAAP.

        Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person.

"Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

          (i)  the Net Income of any Person that is not a Restricted Subsidiary shall be included only to the extent of the lesser of (x) the amount of dividends or distributions paid in cash (but not by means of a loan) to the referent Person or a Restricted Subsidiary thereof or (y) the referent Person's (or, subject to clause (ii), a Restricted Subsidiary of the referent Person's) proportionate share of the Net Income of such other Person;

        (ii)  the Net Income (but not loss) of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders; and

        (iii)  the cumulative effect of a change in accounting principles shall be excluded.

"Consolidated Net Tangible Assets" means, as of any date, the aggregate amount of assets (less applicable reserves and other properly deductible items) of the Company and its Restricted Subsidiaries after deducting therefrom (a) all current liabilities of the Company and its Restricted Subsidiaries as of such date (excluding any such current liabilities that are, by their terms, extendible or renewable at the option of the Company or the applicable Restricted Subsidiary to a date more than 12 months after such date) and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and

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expense and other like intangibles, all as set forth on the most recent balance sheet of the Company and its Restricted Subsidiaries and computed in accordance with GAAP.

"Continuing Director" means, as of the date of determination, any Person who:

          (i)  was a member of the Board of Directors on the Issue Date; or

        (ii)  was nominated for election or elected to the Board of Directors with the affirmative vote of at least a majority of the Continuing Directors who were members of the Board of Directors at the time of such nomination or election.

"Credit Facility" means, prior to the Assumption Date, the Existing Credit Facility, and thereafter, one or more credit agreements to be dated as of the Assumption Date by and among the Company, the Subsidiary Guarantors and the other parties thereto, including any related notes, instruments and agreements executed in connection therewith, as amended, restated, modified, extended, renewed, refunded, replaced or refinanced, in whole or in part, from time to time, whether or not with the same lenders or agent.

"Default" means any event that is, or with the giving of notice or the lapse of time, or both, would constitute an Event of Default.

"Designated Letters of Credit" means letters of credit for the account of the Company, which may have been issued, or may in the future be issued, by the lenders that are party to the Credit Facility (but which letters of credit are not issued pursuant to the Credit Facility), and which are or will be identified in the Collateral Documents.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the notes mature; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the date on which the notes mature shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Repurchase at Option of Holder—Asset Sales" and "—Change of Control" covenants described above and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such notes as are required pursuant to such covenants. The "liquidation preference" of any Disqualified Stock shall be the amount payable thereon upon liquidation prior to any payment to holders of common stock or, if none, the amount payable by the issuer thereof upon maturity or mandatory redemption.

"Existing Credit Facility" means the $800,000,000 Amended and Restated Five Year Credit Agreement, dated as of November 23, 1999 (as the same may have been or will be amended, restated or otherwise modified, the "Credit Agreement"), among the Company, as borrower, the lenders from time to time party thereto, Bank of America N.A., as Syndication Agent and Citibank, N.A., as Administrative Agent,

"Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries in existence, and considered Indebtedness of the Company or any of its Restricted Subsidiaries, on the Issue Date, until such amounts are repaid, including all reimbursement obligations with respect to letters of credit outstanding as of the date of the Indenture.

"Existing Notes Indenture" means the indenture dated as of October 1, 1997 between the Company and The Chase Manhattan Bank.

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"Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries or any other applicable Person incurs, assumes or redeems any Indebtedness (other than revolving credit borrowings) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption or redemption of Indebtedness or such issuance or redemption of Disqualified Stock or Preferred Stock as if the same had occurred at the beginning of the applicable four-quarter reference period.

        In addition, for purposes of making the computation referred to above:

          (i)  acquisitions that have been made by the Company or any of its Restricted Subsidiaries or any other applicable Person, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period;

        (ii)  the Consolidated Cash Flow and Fixed Charges attributable to operations or businesses disposed of prior to the Calculation Date, shall be excluded, but, in the case of such Fixed Charges, only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date; and

        (iii)  if since the beginning of the four-quarter reference period any Person was designated as an Unrestricted Subsidiary or redesignated as or otherwise became a Restricted Subsidiary, such event shall be deemed to have occurred on the first day of the four-quarter reference period.

"Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of:

          (i)  the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, determined in accordance with GAAP;

        (ii)  all commissions, discounts and other fees and charges incurred in respect of letters of credit or bankers' acceptance financings, determined in accordance with GAAP, and net payments or receipts (if any) pursuant to Hedging Obligations of the types described in clauses (i) through (iii) of the definition thereof to the extent such Hedging Obligations relate to Indebtedness that is not itself a Hedging Obligation;

        (iii)  the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period;

        (iv)  any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon);

        (v)  amortization or write-off of debt discount in connection with any Indebtedness of the Company and its Restricted Subsidiaries, on a consolidated basis in accordance with GAAP other than amortization of deferred financing costs incurred on or prior to the Issue Date; and

        (vi)  the product of (a) all dividend payments (other than any payments to the referent Person or any of its Restricted Subsidiaries and any dividends payable in the form of Qualified Capital Stock) on any series of Preferred Stock or Disqualified Stock of such Person and its Restricted Subsidiaries, times (b) (x) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person,

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expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP or (y) if the dividends are deductible by such Person for income tax purposes, one.

"Foreign Subsidiary" means any Restricted Subsidiary that is not organized under the laws of the United States, any State thereof or the District of Columbia.

"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, as in effect on the Issue Date.

"Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or Disqualified Stock of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or Disqualified Stock of such other Person (including those arising by virtue of partnership arrangements) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or Disqualified Stock of the payment thereof or to protect such obligee against loss in respect thereof in whole or in part (including by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, to maintain financial statement conditions or otherwise); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.

"Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, (ii) forward foreign exchange contracts or currency swap agreements, (iii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency values and (iv) commodity price protection agreements or commodity price hedging agreements designed to manage fluctuations in prices or costs in energy, raw materials, manufactured products or related commodities.

"incur" means, with respect to any Indebtedness, to incur, create, issue, assume or Guarantee such Indebtedness. If any Person becomes a Restricted Subsidiary on any date after the Issue Date (including by redesignation of an Unrestricted Subsidiary), the Indebtedness and Capital Stock of such Person outstanding on such date will be deemed to have been Incurred by such Person on such date for purposes of the covenant described under "Certain Covenants—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock" but will not be considered the sale or issuance of Capital Stock for purposes of the covenant described under "Repurchase at Option of Holders—Asset Sales." The accretion of original issue discount or payment of interest in kind will not be considered an incurrence of Indebtedness.

"Indebtedness" means, with respect to any Person,

•

any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments;



•

letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances;



•

Capital Lease Obligations and Attributable Debt in respect of Sale and Lease-Back Transactions;



•

the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; and



•

net Hedging Obligations,

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if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability on a balance sheet of such Person prepared in accordance with GAAP, as well as

•

all indebtedness of others secured by a Lien on any asset of such Person whether or not such indebtedness is assumed by such Person; provided that, for purposes of determining the amount of any Indebtedness of the type described in this clause, if recourse with respect to such Indebtedness is limited to such asset, the amount of such Indebtedness shall be limited to the lesser of the fair market value of such asset or the amount of such Indebtedness; and



•

to the extent not otherwise included, the Guarantee by such Person of any indebtedness of the types described above of any other Person.

The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

"Industrial Development Bonds" means obligations issued or guaranteed by, or supported by the full faith and credit of, a State, a Commonwealth, a Territory, or a possession of the United States of America, or any political subdivision or governmental authority of any of the foregoing, or the District of Columbia.

"Investment Grade" means a rating of BBB- or higher by S&P and Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's.

"Investments" means, with respect to any Person, all investments by such Person in another Person (including an Affiliate of such Person) in the form of direct or indirect loans, advances or extensions of credit to such other Person (including any Guarantee by such Person of the Indebtedness or Disqualified Stock of such other Person) or capital contributions or purchases or other acquisitions for consideration of Indebtedness, Capital Stock or other securities of such other Person, together with all items that are or would be classified as investments of such investing Person on a balance sheet prepared in accordance with GAAP; provided that:

        (w)  investments made in connection with a bankruptcy proceeding in substitution of the Company's interest as a creditor in such proceeding;

        (x)  trade credit and accounts receivable in the ordinary course of business;

        (y)  commissions, loans, advances, fees and compensation paid in the ordinary course of business to officers, directors and employees; and

        (z)  reimbursement obligations in respect of letters of credit and tender, bid, performance, government contract, surety and appeal bonds,

in each case solely with respect to obligations of the Company or any of its Restricted Subsidiaries shall not be considered Investments.

"Issue Date" means July 9, 2002, the date on which the outstanding notes were initially issued under the Indenture.

"Joint Venture" means any joint venture between the Company or any Restricted Subsidiary and any other Person, whether or not such joint venture is a Subsidiary of the Company or any Restricted Subsidiary.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected

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under applicable law (including any conditional sale or other title retention agreement, and any lease in the nature thereof) or the assignment or conveyance of any right to receive income therefrom.

"Moody's" means Moody's Investors Service, Inc. and its successors.

"Net Income" means, with respect to any Person, the net income (loss) of such Person, determined, in accordance with GAAP and before any reduction in respect of Preferred Stock dividends, excluding, however,

          (i)  any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with

        (a)  any Asset Sale or any disposition pursuant to a Sale and Lease-Back Transaction or

        (b)  the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

        (ii)  any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

"Net Proceeds" means the aggregate cash proceeds (excluding any proceeds deemed to be "cash" pursuant to the covenant described above under "Repurchase at Option of Holders—Asset Sales") received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses incurred as a result thereof, (ii) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts required to be applied to the repayment of Indebtedness (other than Indebtedness under the Credit Facility) secured by a Lien on any asset sold in such Asset Sale, or which must by the terms of such Lien or by applicable law be repaid out of the proceeds of such Asset Sale, (iv) all payments made with respect to liabilities directly associated with the assets which are the subject of the Asset Sale, including, without limitation, trade payables and other accrued liabilities and (v) any reserves for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP and any reserve for future liabilities established in accordance with GAAP; provided that the reversal of any such reserve that reduced Net Proceeds when issued shall be deemed a receipt of Net Proceeds in the amount of such proceeds on such day.

"Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness and in all cases whether direct or indirect, absolute or contingent, now outstanding or hereafter created, assumed or incurred and including, without limitation, interest accruing subsequent to the filing of a petition in bankruptcy or the commencement of any insolvency, reorganization or similar proceedings at the rate provided in the relevant documentation, whether or not an allowed claim, and any obligation to redeem or defease any of the foregoing.

"Officers" means any of the following: Chairman, President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary, Controller or any Senior Vice President.

"Officers' Certificate" means a certificate signed by two Officers.

"Pari Passu Indebtedness" means any Indebtedness of the Company or a Subsidiary Guarantor that is not subordinated to the notes or such Subsidiary Guarantor's Subsidiary Guarantee, as the case may be.

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"Payment Default" means, with respect to any Indebtedness, a failure to pay principal of such Indebtedness at its Stated Maturity after giving effect to any applicable grace period provided in the instrument(s) governing such Indebtedness.

"Permitted Business" means the business of manufacturing, selling, and providing research and development services and support for, pharmaceuticals and chemical-based materials and any business reasonably related, incidental, complementary or ancillary thereto.

"Permitted Investments" means:

        (a)  any Investment in the Company or in a Restricted Subsidiary of the Company that is engaged in a Permitted Business;

        (b)  any Investment in Cash Equivalents;

        (c)  any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment: (i) such Person becomes a Restricted Subsidiary of the Company engaged in a Permitted Business or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company engaged in a Permitted Business;

        (d)  any non-cash consideration received as consideration in an Asset Sale that was made pursuant to and in compliance with the provisions described under the caption "Repurchase at Option of Holders—Asset Sales";

        (e)  any acquisition of assets or Capital Stock solely in exchange for, or out of the net cash proceeds of a substantially concurrent, issuance of Capital Stock (other than Disqualified Stock) of the Company;

        (f)    Hedging Obligations entered into in the ordinary course of business and otherwise permitted under the Indenture;

        (g)  any Investment received by the Company or any Restricted Subsidiary as consideration for the settlement of any litigation, arbitration or claim in bankruptcy or in partial or full satisfaction of accounts receivable owed by a financially troubled Person to the extent reasonably necessary in order to prevent or limit any loss by the Company or any of its Restricted Subsidiaries in connection with such accounts receivable;

        (h)  payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

        (i)    loans and advances to directors, employees and officers of the Company and its Restricted Subsidiaries for bona fide business purposes or to purchase Capital Stock of the Company not in excess of $10 million at any one time outstanding;

        (j)    advances to customers of the Company and its Subsidiaries that are made in the ordinary course of business and are consistent with past practice in an aggregate amount not to exceed at any time outstanding $5 million; and

        (k)  Investments in an aggregate amount, taken together with all other Investments made in reliance on this clause (k), not to exceed at any time outstanding $25 million (after giving effect to any reductions in the aggregate amount of such Investments as a result of the disposition thereof, including through liquidation, repayment or other reduction, including by way of dividend or distribution, for cash, the aggregate amount of such reductions not to exceed the aggregate amount of such Investments outstanding and previously made pursuant to this clause (k)).

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"Permitted Liens" means:

        (1)  Liens in favor of the Company or any Subsidiary Guarantor;

        (2)  Liens securing the notes and the Subsidiary Guarantees;

        (3)  Liens on property of a Person existing at the time it becomes a Subsidiary or at the time it is merged into or consolidated with the Company or a Subsidiary; provided that such Liens were in existence prior to the contemplation of such merger, consolidation or acquisition and do not extend to any assets of the Company or its Restricted Subsidiaries other than those of the Person merged into or consolidated with the Company or that becomes a Restricted Subsidiary of the Company;

        (4)  Liens on property (together with general intangibles and proceeds related to such property) existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such acquisition;

        (5)  Liens (including the interest of a lessor under a capital lease) on any asset (together with general intangibles and proceeds related to such property) existing at the time of acquisition thereof or incurred within 180 days following the time of acquisition or completion of construction thereof, whichever is later, to secure or provide for the payment of all or any part of the purchase price (or construction price) thereof (including obligations of the lessee under any such capital lease);

        (6)  Liens imposed by law, such as laborers', other employees', vendors', materialmen's, carriers', warehousemen's and mechanics' Liens on the property of the Company or any Restricted Subsidiary, including Liens arising out of letters of credit issued to secure the Company's obligations thereunder;

        (7)  easements, building restrictions, rights-of-ways, irregularities of title and such other encumbrances or charges not interfering in any material respect with the ordinary conduct of business of the Company or any of its Restricted Subsidiaries;

        (8)  Leases, subleases or licenses by the Company or any of its Restricted Subsidiaries as lessor, sublessor or licensor in the ordinary course of business and otherwise permitted by the Indenture;

        (9)  Liens securing reimbursement obligations with respect to commercial letters of credit obtained in the ordinary course of business which encumber documents and other property or assets relating to such letters of credit and products and proceeds thereof;

        (10) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of nondelinquent customs duties in connection with the importation of goods;

        (11) Liens encumbering customary initial deposits and margin deposits, netting provisions and setoff rights, in each case securing Indebtedness under Hedging Obligations that are permitted to be incurred under clause (vi) of the covenant de scribed under "Certain Covenants—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock";

        (12) Liens incurred in the ordinary course of business to secure nondelinquent obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or its Restricted Subsidiaries, including Liens securing letters of credit issued to secure the Company's obligations thereunder, or any tender, bid, performance, government contract, surety or appeal bonds or other obligations of a like nature for which a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made;

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        (13) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any Restricted Subsidiary in the ordinary course of business in accordance with industry practice;

        (14) Liens arising by reason of deposits necessary to qualify the Company or any Restricted Subsidiary to conduct business, maintain self insurance or comply with any law;

        (15) Liens upon any Principal Property to the extent such Liens are or would have been permitted by the provisions of the Existing Notes Indenture as such Existing Notes Indenture is in effect on the Issue Date without equally and ratably securing any other Indebtedness of the Company;

        (16) Liens securing or permitted by the Bank Obligations on any tangible or intangible asset or property of the Company or any Restricted Subsidiary other than Principal Property, whether such asset or property is real, personal or mixed, to the extent such Liens are or would have been permitted by the provisions of the Existing Notes Indenture as such Existing Notes Indenture is in effect on the Issue Date without equally and ratably securing any other Indebtedness of the Company; provided, that any such Lien on such asset or property shall also be granted for the benefit of the holders of the notes and the Subsidiary Guarantees and such Lien shall be inferior only to Liens securing the Bank Obligations and any intercreditor agreement or other agreement pertaining to relative rights in such Collateral shall not be any less favorable than the Intercreditor Agreement as in effect at such time or as last in effect; provided, further, that notwithstanding the immediately preceding proviso, the Credit Facility shall be allowed to be secured by Liens on assets or property of Foreign Subsidiaries that secure the Credit Facility on the Assumption Date without securing the notes and the Subsidiary Guarantees;

        (17) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings, prejudgment Liens that are being contested in good faith by appropriate proceedings and Liens arising out of judgments or awards against the Company or any Restricted Subsidiary with respect to which the Company or such Restricted Subsidiary at the time shall be prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; provided that in each case any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor;

        (18) Liens securing assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets;

        (19) Liens resulting from the deposit of funds or evidences of Indebtedness in trust for the purpose of (A) defeasing Indebtedness of the Company or any of its Restricted Subsidiaries having an aggregate principal amount at any one time outstanding of no more than $20 million (so long as such defeasance and related repayment of Indebtedness is in compliance with the covenant described under "Certain Covenants—Restricted Payments") or (B) defeasing Indebtedness ranking pari passu with the notes; provided that the notes are defeased concurrently with such Indebtedness;

        (20) customary Liens for the fees, costs and expenses of trustees and escrow agents pursuant to any indenture, escrow agreement or similar agreement establishing a trust or escrow arrangement, and Liens pursuant to merger agreements, stock purchase agreements, asset sale agreements, option agreements and similar agreements in respect of the disposition of property or assets of the Company or any Restricted Subsidiary on the property to be disposed of, to the extent such dispositions are permitted hereunder;

        (21) Liens on assets (other than Principal Property) of the Company or any Restricted Subsidiary arising as a result of a Sale and Lease-Back Transaction with respect to such assets;

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provided that the proceeds from such Sale and Lease-Back Transaction are applied to the repayment of Indebtedness or acquisition of Additional Assets or the making of capital expenditures pursuant to the covenant described above under the caption "—Repurchase at Option of Holders—Asset Sales";

        (22) Liens existing on the Issue Date, other than Liens securing Indebtedness under the Bank Obligations;

        (23) the interest of a lessor or licensor under an operating lease or license under which the Company or any of its Restricted Subsidiaries is lessee, sublessee or licensee, including protective financing statement filings;

        (24) any extension, renewal, substitution or replacement (or successive extensions, renewals, substitutions or replacements), as a whole or in part, of any of the Liens described in clauses (1) through (23) of this definition; provided that such extension, renewal or replacement Lien shall be limited to the same property or assets that secured the Lien being so extended, renewed or replaced;

        (25) other Liens on assets of the Company or any Restricted Subsidiary of the Company securing Indebtedness or other obligations to be outstanding having an aggregate principal amount at any one time outstanding not to exceed $10 million;

        (26) licenses or leases by the Company or any of its Restricted Subsidiaries as licensor or lessor in the ordinary course of business and otherwise permitted by the Indenture for patents, copyrights, trademarks, trade names and other intellectual property; and

        (27) netting provisions and setoff rights in favor of counterparties to agreements creating Hedging Obligations.

"Permitted Refinancing" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used solely to extend, refinance, renew, replace, defease or refund, other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that:

          (i)  the principal amount (or liquidation preference in the case of Preferred Stock) of such Permitted Refinancing (or if such Permitted Refinancing is issued at a discount, the initial issuance price of such Permitted Refinancing) does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of any premiums paid and reasonable expenses incurred in connection therewith);

        (ii)  such Permitted Refinancing has a Stated Maturity date later than the Stated Maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

        (iii)  if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated by its terms in right of payment to the notes or the Subsidiary Guarantees, such Permitted Refinancing has a Stated Maturity date later than the Stated Maturity date of, and is subordinated by its terms in right of payment to, the notes on subordination terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

        (iv)  such Indebtedness is incurred by the Company or a Subsidiary Guarantor if the Company or a Subsidiary Guarantor is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

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        (v)  such Indebtedness is incurred by the Company or a Restricted Subsidiary if a Restricted Subsidiary that is not a Subsidiary Guarantor is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

        Notwithstanding the foregoing, the Company shall be allowed to modify, amend or replace its Obligations under the Astaris Support Agreement; provided that the terms of any such modification, amendment or replacement do not materially increase the Company's or any Restricted Subsidiary's obligations thereunder and such terms (including as to tenure) are not more onerous from a financial perspective, taken as a whole, to the Company and the Restricted Subsidiaries.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or other entity of any kind.

"Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of preferred or preference stock of such Person which is outstanding or issued on or after the date of the Indenture.

"Principal Property" means any building, structure or other facility used primarily for manufacturing and located in the United States (excluding its territories and possessions, but including Puerto Rico), the gross book value of which on the date as of which the determination is being made is an amount which exceeds 3% of Consolidated Net Tangible Assets, other than any such building, structure or other facility or any portion thereof (i) which is financed by Industrial Development Bonds or (ii) which, in the opinion of the Board of Directors of the Company, is not of material importance to the total business conducted by the Company and its Restricted Subsidiaries taken as a whole.

"Public Equity Offering" means any underwritten public offering of common stock of the Company generating gross proceeds to the Company of at least $50 million.

"Purchase Money Obligations" means Indebtedness of the Company or a Subsidiary Guarantor incurred in the ordinary course of business for the purpose of financing all or any part of the purchase price, cost of installation, construction or improvement of an asset; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost, (2) such Indebtedness shall not be secured by any asset other than the asset being financed, or in the case of real property or fixtures, the real property or fixtures to which such asset is attached and (3) such Indebtedness shall be incurred within 180 days after the acquisition of such asset by the Company or such Subsidiary Guarantor, or such installation, construction or improvement.

"Qualified Capital Stock" shall mean all Capital Stock of a Person other than Disqualified Stock of such Person.

"Restricted Investment" means an Investment other than a Permitted Investment.

"Restricted Subsidiary" of the Company means (a) prior to the first time that the notes are rated Investment Grade, any Subsidiary of the Company that is not an Unrestricted Subsidiary and (b) from and after the first time that the notes are rated Investment Grade, any Subsidiary of the Company (whether or not the Company has previously designated such Subsidiary as an Unrestricted Subsidiary) (1) more than 50% of whose net sales and operating revenues during the preceding four calendar quarters were derived in, or more than 50% of whose operating properties are located in, the United States (excluding its territories and possessions, but including Puerto Rico) or (2) more than 50% of whose assets consist of securities of other Restricted Subsidiaries or (3) which owns a Principal Property, except that certain export sales, banking, insurance, finance, real estate, construction and unconsolidated Subsidiaries do not constitute Restricted Subsidiaries so long as they shall not own any Principal Property. Unless the context otherwise requires, each reference to a "Restricted Subsidiary" shall refer to a Subsidiary of the Company.

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"S&P" means Standard & Poor's Rating Group and its successors.

"Sale and Lease-Back Transaction" means any arrangement with any Person (other than the Company or a Subsidiary), or to which any such Person is a party, providing for the leasing, pursuant to a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP, to the Company or a Restricted Subsidiary of any property or asset which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person (other than the Company or a Subsidiary) to which funds have been or are to be advanced by such Person.

"Security Documents" mean, collectively:

        (1)  the Intercreditor Agreement; and

        (2)  all security agreements, mortgages, deeds of trust, pledges, collateral assignments and other agreements or instruments evidencing or creating any security in favor of any Trustee and any holders of the notes in any or all of the Collateral,

in each case as amended from time to time in accordance with its terms and the terms of the Indenture.

"Significant Subsidiary" means any Restricted Subsidiary of the Company that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as amended, as such Regulation is in effect on the Issue Date.

"Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness (or any later date established by any amendment to such original documentation) and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

"Subordinated Debt" means Indebtedness that is by its terms subordinated to the notes and the Subsidiary Guarantees, as applicable.

"Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) or (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).

"Subsidiary Guarantor" means any Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, in each case, until the Subsidiary Guarantee of such Person is released in accordance with the provisions of the Indenture.

"Treasury Securities" means obligations issued or guaranteed by the United States government or any agency thereof.

"Unrestricted Subsidiary" means (i) each of Solutia Chemical Co., Ltd., Suzhou, Solutia Hellas EPE, Solutia Management Company, Inc., Solutia Netherlands Holding B.V., Solutia Netherlands International B.V., Solutia Kimyasak pazarlama ve Ticaret Limited Sirketi, Solutia Therminal Co., Ltd., Suzhou, Solutia UK Capital Limited, Solutia GOM India Coatings Materials Private Limited, Vianova Resins, Inc., Vianova Resins N.V./S.A., Vianova Resins Canada Inc., Vianova Resins, Resinas Quimicas Limitada, Viking Finance III B.V., Viking Resins Germany Holdings GmbH & Co. KG, Viking Resins Group Holding B.V. and Zweite Viking Resins Germany 2 GmbH and (ii) any Subsidiary of the

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Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that

        (a)  any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated or any of its Subsidiaries shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation,

        (b)  such designation would be permitted under the covenant described above under the caption "Certain Covenants—Restricted Payments," and

        (c)  if applicable, the Investment and the incurrence of Indebtedness referred to in clause (a) of this proviso would be permitted under the covenants described above under the captions "—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock" and "—Restricted Payments."

        Any such designation by the Board of Directors pursuant to clause (i) above shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenants described above under the caption "—Restricted Payments" and "—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock."

        If at any time the Company or any Restricted Subsidiary Guarantees any Indebtedness of such Unrestricted Subsidiary or makes any other Investment in such Unrestricted Subsidiary and such incurrence of Indebtedness or Investment would not be permitted under the covenants described above under the caption "Certain Covenants—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock" and "—Restricted Payments," it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described above under the caption "Certain Covenants—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock," the Company shall be in default of such covenant). The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described above under the caption "—Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock" and (ii) no Default or Event of Default would be in existence following such designation.

"Value" means, with respect to a Sale and Lease-Back Transaction, the amount equal to the greater of (i) the net proceeds of the sale or transfer of the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value, in the opinion of the Board of Directors, of such property at the time of entering into such Sale and Lease-Back Transaction, in either case divided first by the number of full years of the term of the lease and then multi plied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

          (i)  the sum of the products obtained by multiplying

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        (a)  the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by

        (b)  the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by

        (ii)  the then outstanding principal amount of such Indebtedness.

"Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all the outstanding Capital Stock of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all the outstanding Capital Stock of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person.

Book-Entry; Delivery and Form

        The certificates representing the notes will be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (the "Global Notes") and will be deposited with the Trustee as custodian for, and registered in the name of a nominee of, DTC.

        Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants).

        So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Indenture and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Indenture.

        Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

        The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants.

        Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds.

        The Company expects that DTC will take any action permitted to be taken by a holder of notes (including the presentation of notes for exchange as described below) only at the direction of one or

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more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants.

        The Company understands that: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies and certain other organizations that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants").

        Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in a Global Note among participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

        If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days, the Company will issue Certificated Notes in exchange for the Global Notes. Holders of an interest in a Global Note may receive Certificated Notes in accordance with the DTC's rules and procedures in addition to those provided for under the Indenture.

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EXCHANGE OFFER; REGISTRATION RIGHTS

        Solutia, the subsidiary guarantors and the initial purchasers of the outstanding notes entered into a registration rights agreement relating to the outstanding notes. Pursuant to the registration rights agreement, we and the subsidiary guarantors agreed, at our cost, for the benefit of the holders of the outstanding notes, to:

•

no later than September 23, 2002, file a registration statement with the SEC with respect to a registered offer to exchange the outstanding notes for our new notes having terms substantially identical in all material respects to the outstanding notes (except that the new notes will not contain terms with respect to transfer restrictions);



•

use our respective best efforts to cause the exchange offer registration statement to be declared effective under the Securities Act not later than November 22, 2002; and



•

use our respective best efforts to cause the exchange offer to be consummated not later than December 23, 2002.

        Upon the effectiveness of the exchange offer registration statement, we and the subsidiary guarantors will offer the new notes in exchange for the surrender of the outstanding notes. We and the subsidiary guarantors will keep the exchange offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders. For each outstanding note surrendered to us pursuant to the exchange offer, the holder of such outstanding note will receive a new note having a principal amount equal to that of the surrendered outstanding note. Interest on each new note will accrue from the last interest payment date on which interest was paid on the outstanding note surrendered in exchange therefor or, if no interest has been paid on such outstanding note, from the date of its original issue.

        Under existing SEC interpretations, the new notes will be freely transferable by holders other than our affiliates after the exchange offer without further registration under the Securities Act if the holder of the new notes represents that it is acquiring the new notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the new notes and that it is not our affiliate, as such terms are interpreted by the SEC; provided that broker-dealers receiving new notes in the exchange offer will have a prospectus delivery requirement with respect to resales of such new notes. While the SEC has not taken a position with respect to this particular transaction, under existing SEC interpretations relating to transactions structured substantially like the exchange offer, participating broker-dealers may fulfill their prospectus delivery requirements with respect to new notes (other than a resale of an unsold allotment from the original sale of the outstanding notes) with the prospectus contained in the exchange offer registration statement. Under the registration rights agreement, we are required to allow participating broker-dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the exchange offer registration statement in connection with the resale of such new notes for 180 days following the effective date of such exchange offer registration statement (or such shorter period during which participating broker-dealers are required by law to deliver such prospectuses).

        A holder of outstanding notes (other than certain specified holders) who wishes to exchange such outstanding notes for new notes in the exchange offer will be required to represent that any new notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the exchange offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the new notes and that it is not our "affiliate", as defined in Rule 405 of the Securities Act, or if it is our affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If a holder is a broker-dealer that will receive new notes for its own account in exchange for outstanding notes that were acquired as a result of market-making or other trading activities, it will be

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required to acknowledge that it will deliver a prospectus in connection with any resale of such new notes.

        In the event that:

•

applicable interpretations of the staff of the SEC do not permit us and the subsidiary guarantors to effect such an exchange offer; or



•

for any other reason the exchange offer is not consummated by December 23, 2002; or



•

prior to the 20th day following consummation of the exchange offer:



•

the initial purchasers so request with respect to outstanding notes not eligible to be exchanged for new notes in the exchange offer;



•

any holder of outstanding notes notifies us that it is not eligible to participate in the exchange offer; or



•

an initial purchaser notifies us that it will not receive freely tradeable new notes in exchange for outstanding notes constituting any portion of an unsold allotment,

we and the subsidiary guarantors will, subject to certain conditions, at our cost:

•

as promptly as practicable, file a shelf registration statement covering resales of the outstanding notes or the new notes, as the case may be;



•

use our respective best efforts to cause the shelf registration statement to be declared effective under the Securities Act; and



•

keep the shelf registration statement effective until the earliest of (A) the time when the notes covered by the shelf registration statement can be sold pursuant to Rule 144 without any limitations under clauses (c), (e), (f) and (h) of Rule 144, (B) two years from the effective date of the shelf registration statement (or until one year from the effective date of the shelf registration statement if the shelf registration statement is filed at the request of an initial purchaser) and (C) the date on which all notes registered thereunder are disposed of in accordance therewith.

        We and the subsidiary guarantors will, in the event a shelf registration statement is filed, among other things, provide to each holder for whom such shelf registration statement was filed copies of the prospectus which forms a part of the shelf registration statement, notify each such holder when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the outstanding notes or the new notes, as the case may be. A holder selling such outstanding notes or new notes pursuant to the shelf registration statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the registration rights agreements which are applicable to such holder (including certain indemnification obligations).

        In the event that:

•

on or before September 23, 2002, neither the exchange offer registration statement nor the shelf registration statement has been filed with the SEC;



•

on or before November 22, 2002, the exchange offer registration statement has not been declared effective;



•

on or before December 23, 2002, neither the exchange offer has been consummated nor the shelf registration statement has been declared effective; or

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•

after either the exchange offer registration statement or the shelf registration statement has been declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) in connection with resales of outstanding notes or new notes in accordance with and during the periods specified in the registration rights agreements,

(each such event a "registration default") additional interest will accrue on the aggregate principal amount of notes and the new notes (in addition to the stated interest on the outstanding notes and the new notes) from and including the date on which any such registration default has occurred to but excluding the date on which all registration defaults have been cured. Additional interest will accrue at an initial rate of 0.25% per annum, which rate shall increase by 0.25% per annum for each subsequent 90-day period during which such registration default continues up to a maximum of 1.00% per annum.

        The summary herein of certain provisions of the registration rights agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which has been filed with the registration statement of which this prospectus forms a part.

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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

        The following general discussion summarizes certain U.S. federal income tax aspects of the exchange offer to Holders of the outstanding notes. This discussion is a summary for general information purposes only, is limited to the federal income tax consequences of the exchange offer to those Holders who acquired the notes at original issuance, and does not consider all aspects of the outstanding notes and new notes. This discussion does not consider the impact, if any, of a Holder's personal circumstances on the tax consequences of the exchange offer to such Holder. This discussion also does not address the U.S. federal income tax consequences to Holders subject to special treatment under the U.S. federal income tax laws, such as dealers in securities or foreign currency, tax exempt entities, banks, thrifts, insurance companies, persons that hold the outstanding notes as part of a "straddle," a "hedge" against currency risk, a "conversion transaction," or other risk reduction transaction, or persons that have a "functional currency" other than the U.S. dollar, and investors in entities treated as partnerships, pass-through entities, or entities disregarded for federal income tax purposes. In addition, this discussion does not describe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction or any federal estate taxes. The discussion below assumes the notes are held as capital assets within the meaning of Code section 1221.

        This discussion is based upon the Internal Revenue Code, Treasury Regulations promulgated thereunder, Internal Revenue Service ("IRS") rulings and pronouncements and judicial decisions now in effect, all of which are subject to change, possibly on a retroactive basis. The Company has not and will not seek any rulings or opinions from the IRS or counsel with respect to the matters discussed below. The Company can give no assurance that the IRS will not take positions concerning the federal income tax consequences of the exchange offer which are different from those discussed herein.

This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances of Holders. Holders of the outstanding notes are strongly urged to consult their own tax advisors as to the specific tax consequences to them of the exchange offer and with respect to the ownership of the notes, including the application of U.S. federal income tax laws, as well as the laws of any state, local or foreign jurisdiction, to the exchange offer in light of their particular situation.

The Exchange of Notes

        The exchange of outstanding notes for new notes under the terms of the exchange offer would not constitute a taxable exchange. As a result, (1) a Holder would not recognize taxable gain or loss as a result of exchanging outstanding notes for new notes under the terms of the exchange offer, (2) the holding period of the new notes would include the holding period of the outstanding notes exchanged for the new notes and (3) the adjusted tax basis for the new notes would be the same as the adjusted tax basis, immediately before the exchange, of the outstanding notes exchanged for the new notes. The exchange offer is not expected to result in any United States federal income tax consequences to a nonexchanging Holder.

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PLAN OF DISTRIBUTION

        Based on interpretations by the staff set forth in no-action letters issued to third parties, we believe that a holder, other than a person that is an affiliate of ours within the meaning of Rule 405 under the Securities Act or a broker dealer registered under the Exchange Act that purchases notes from us to resell in compliance with Rule 144A under the Securities Act or any other exemption, that exchanges outstanding notes for new notes in the ordinary course of business and that is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the new notes will be allowed to resell the new notes to the public without further registration under the Securities Act and without delivering to the purchasers of the new notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires new notes in the exchange offer for the purpose of distributing or participating in a distribution of the new notes, such holder cannot rely on the position of the staff enunciated in Exxon Capital Holdings Corporation or similar no-action or interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction, and such secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of new notes obtained by such holder in exchange for outstanding notes acquired by such holder directly from us or an affiliate thereof, unless an exemption from registration is otherwise available.

        As contemplated by the above no-action letters and the registration rights agreement, each holder accepting the exchange offer is required to represent to us in the letter of transmittal that they:

•

are not an affiliate of ours;



•

are not participating in, and do not intend to participate in, and have no arrangement or understanding with any person to participate in, a distribution of the outstanding notes or the new notes;



•

are acquiring the new notes in the ordinary course of business; and



•

if they are a broker dealer, they will receive the new notes for their own account in exchange for the outstanding notes that were acquired as a result of market-making activities or other trading activities. Each broker dealer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes.

        Any broker dealer registered under the Exchange Act who holds outstanding notes that were acquired for its own account as a result of market-making activities or other trading activities, other than outstanding notes acquired directly from us or any affiliate of ours, may exchange such outstanding notes for new notes pursuant to the exchange offer; however, such broker dealer may be deemed an underwriter within the meaning of the Securities Act and, therefore, must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the new notes received by it in the exchange offer, which prospectus delivery requirement may be satisfied by the delivery by such broker dealer of this prospectus, as it may be amended or supplemented from time to time. We have agreed to use our reasonable best efforts to cause the registration statement, of which this prospectus is a part, to remain continuously effective for a period of 180 days from the exchange date, and to make this prospectus, as amended or supplemented, available to any such broker dealer for use in connection with resales. Any broker dealer participating in the exchange offer will be required to acknowledge that it will deliver a prospectus in connection with any resales of new notes received by it in the exchange offer. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act, a broker dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.

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        We will not receive any proceeds from any sale of new notes by a broker dealer. Registered notes received by broker dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker dealers and/or the purchasers of any such new notes. Any broker dealer that resells new notes that were received by it for its own account in the exchange offer and any broker dealer that participates in a distribution of such new notes may be deemed to be an underwriter within the meaning of the Securities Act and any profit on any such resale of new notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act.

        We have agreed to pay all expenses incident to the exchange offer, other than commissions and concessions of broker dealers, and will indemnify the holders of the outstanding notes, including any broker dealers, against certain liabilities, including liabilities under the Securities Act.

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LEGAL MATTERS

        The validly of the new notes will be passed upon for us by Winston & Strawn, Chicago, Illinois.

EXPERTS

        The consolidated financial statements as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 included elsewhere in this prospectus, and the related financial statement schedule listed in Item 14 from our annual report on Form 10-K for the year ended December 31, 2001 incorporated in this prospectus by reference have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports included and incorporated by reference herein (which reports express an unqualified opinion and include an explanatory paragraph referring to a change in accounting principle) and have been so included and incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

        We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our filings are available over the Internet at http://www.sec.gov. You may also read and copy any document we file at the SEC public reference room at:

450 Fifth Street, N.W.
Washington, D.C. 20549

        You may call the SEC at 1-800-SEC-0330 for further information about the operation of the public reference room.

        Our common stock is quoted on the New York Stock Exchange under the symbol "SOI," and our SEC filings can also be read at:

New York Stock Exchange
20 Broad Street
New York, New York 10005

        The SEC allows us to "incorporate by reference" the information we file with them. This means that we can disclose important information to you by referring you to the documents containing that information. The information incorporated by reference is considered part of this prospectus. Any information we file with the SEC later will automatically update and, to the extent inconsistent, supersede the information in this prospectus. We incorporate by reference the documents listed below:

•

Our annual report on Form 10-K for the year ended December 31, 2001 filed on March 7, 2002, as amended by Amendment No. 1 on Form 10-K/A filed on May 3, 2002;



•

Our quarterly reports on Form 10-Q for the quarters ended March 31, 2002 filed on April 26, 2002 and June 30, 2002 filed on August 1, 2002;



•

Our current reports on Form 8-K filed January 25, 2002, June 18, 2002, July 3, 2002 and September 17, 2002; and



•

Our Form 10 filed on August 7, 1997, and amended on August 19, 1997, for a description of our common stock.

        We also incorporate by reference any future filings we make with the SEC, under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we have sold all the offered securities to which this prospectus relates or the offering is otherwise terminated.

        You may request a copy of these filings, at no cost, by writing to us at the following address or telephoning us at (314) 674-4520:

Solutia Inc.
Investor Relations
P.O. Box 66760
St. Louis, Missouri 63166-6760

129

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page Number
Audited Annual Financial Statements
Report of Independent Auditors	F-2
Statement of Consolidated Income (Loss) for the years ended December 31, 2001, 2000 and 1999	F-3
Statement of Consolidated Comprehensive Income (Loss) for the years ended December 31, 2001, 2000 and 1999	F-3
Statement of Consolidated Financial Position as of December 2001 and 2000	F-4
Statement of Consolidated Cash Flow for the years ended December 31, 2001, 2000 and 1999	F-5
Statement of Consolidated Shareholders' Equity (Deficit) for the years ended December 31, 2001, 2000 and 1999	F-6
Notes to Consolidated Financial Statements	F-7
Unaudited Interim Financial Statements
Statement of Consolidated Income (Loss) for the six months ended June 30, 2002, and 2001	F-47
Statement of Consolidated Comprehensive Loss for the six months ended June 30, 2002, and 2001	F-48
Statement of Consolidated Financial Position as of June 30, 2002 and December 31, 2001	F-49
Statement of Consolidated Cash Flow for the six months ended June 30, 2002, and 2001	F-50
Notes to Consolidated Financial Statements	F-51

F-1

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of Solutia Inc.:

        We have audited the accompanying statements of consolidated financial position of Solutia Inc. and subsidiaries (the Company) as of December 31, 2001 and 2000, and the related statements of consolidated income (loss), comprehensive income (loss), cash flow, and shareholders' equity (deficit) for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

        As discussed in the notes to the consolidated financial statements, the Company was required to adopt Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective January 1, 2001.

	/s/  DELOITTE & TOUCHE LLP Deloitte & Touche LLP
St. Louis, Missouri March 4, 2002 (June 4, 2002 as to Note 19 and June 17, 2002 as to Note 20)

F-2

SOLUTIA INC.

STATEMENT OF CONSOLIDATED INCOME (LOSS)

			Year Ended December 31,
			2001			2000			1999
			(Dollars in millions, except per share amounts)
Net Sales			$	2,817		$	3,185		$	2,830
Cost of goods sold				2,388			2,699			2,178
Gross Profit				429			486			652
Marketing expenses				175			165			153
Administrative expenses				160			173			122
Technological expenses				66			91			80
Amortization expense				34			33			3
Operating Income (Loss)				(6	)		24			294
Equity earnings (loss) from affiliates—net of tax				(13	)		35			36
Interest expense				(90	)		(83	)		(40	)
Gain on sale of Polymer Modifiers business				—			73			—
Other income (expense)—net				32			(8	)		13
Income (Loss) Before Income Taxes				(77	)		41			303
Income taxes (benefit)				(18	)		(8	)		97
Net Income (Loss)			$	(59	)	$	49		$	206
Basic Earnings (Loss) Per Share			$	(0.57	)	$	0.46		$	1.86
Diluted Earnings (Loss) Per Share			$	(0.57	)	$	0.46		$	1.80
	Weighted average equivalent shares (in millions):
	Basic			103.9			105.9			110.8
	Effect of dilutive securities:
		Common share equivalents—common stock issuable upon exercise of outstanding stock options		—			1.6			3.8
	Diluted			103.9			107.5			114.6

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

	Year Ended December 31,
	2001			2000			1999
	(Dollars in millions)
Net Income (Loss)	$	(59	)	$	49		$	206
Other Comprehensive Income (Loss):
Currency translation adjustments		(37	)		(86	)		(44	)
Cumulative effect of accounting change, net of tax of $(1)		2			—			—
Net loss on derivative instruments, net of tax of $2		(3	)		—			—
Minimum pension liability adjustments, net of tax of $(2) in 2001, $(4) in 2000, and $2 in 1999		2			7			(4	)
Comprehensive Income (Loss)	$	(95	)	$	(30	)	$	158

See accompanying Notes to Consolidated Financial Statements.

F-3

SOLUTIA INC.

STATEMENT OF CONSOLIDATED FINANCIAL POSITION

		As of December 31,
		2001			2000
		(Dollars in millions, except per share amounts)
ASSETS
Current Assets:
Cash and cash equivalents		$	23		$	19
Trade receivables, net of allowances of $22 in 2001 and $12 in 2000			352			406
Miscellaneous receivables			105			109
Prepaid expenses			15			17
Deferred income tax benefit			123			107
Inventories			303			357
Total Current Assets			921			1,015
Property, Plant and Equipment:
Land			58			60
Buildings			425			421
Machinery and equipment			3,006			2,982
Construction in progress			51			62
Total property, plant and equipment			3,540			3,525
Less accumulated depreciation			2,397			2,320
Net Property, Plant and Equipment			1,143			1,205
Investments in Affiliates			313			351
Goodwill, net of accumulated amortization of $45 in 2001 and $24 in 2000			386			421
Identified Intangible Assets, net of accumulated amortization of $28 in 2001 and $16 in 2000			224			217
Long-Term Deferred Income Tax Benefit			254			190
Other Assets			167			182
Total Assets		$	3,408		$	3,581
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	233		$	359
Wages and benefits			56			45
Postretirement liabilities			82			78
Miscellaneous accruals			362			373
Short-term debt			683			494
Total Current Liabilities			1,416			1,349
Long-Term Debt			627			784
Postretirement Liabilities			947			941
Other Liabilities			531			541
Shareholders' Equity (Deficit):
Common stock (authorized, 600,000,000 shares, par value $0.01)
	Issued: 118,400,635 shares in 2001 and 2000		1			1
	Net deficiency of assets at spinoff		(113	)		(113	)
	Treasury stock, at cost (13,921,604 and 15,484,194 shares in 2001 and 2000, respectively)		(257	)		(296	)
Unearned ESOP shares			(1	)		(9	)
Accumulated other comprehensive income (loss)			(144	)		(108	)
Reinvested earnings			401			491
Total Shareholders' Equity (Deficit)			(113	)		(34	)
Total Liabilities and Shareholders' Equity (Deficit)		$	3,408		$	3,581

See accompanying Notes to Consolidated Financial Statements.

F-4

SOLUTIA INC.

STATEMENT OF CONSOLIDATED CASH FLOW

				Year Ended December 31,
				2001			2000			1999
				(Dollars in millions)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES:
Net income (loss)				$	(59	)	$	49		$	206
Adjustments to reconcile to Cash From Operations:
	Items that did not use (provide) cash:
		Depreciation and amortization			184			191			151
		Amortization of deferred credits			(14	)		(12	)		(10	)
		Restructuring expenses and other unusual items			127			195			63
		Net pretax gains from asset disposals			(36	)		(79	)		(8	)
		Changes in assets and liabilities:
			Income and deferred taxes		(48	)		(11	)		64
			Trade receivables		47			69			(18	)
			Inventories		57			(18	)		42
			Accounts payable		(125	)		41			(20	)
			Other assets and liabilities		(89	)		(181	)		(106	)
Cash From Operations					44			244			364
INVESTING ACTIVITIES:
Property, plant and equipment purchases					(94	)		(221	)		(257	)
Acquisition and investment payments, net of cash acquired					(35	)		(110	)		(835	)
Property disposals and investment proceeds					43			220			30
Cash Used in Investing Activities					(86	)		(111	)		(1,062	)
FINANCING ACTIVITIES:
Net change in short-term debt obligations					41			(22	)		511
Net change in long-term debt obligations					—			(13	)		201
Treasury stock purchases					—			(106	)		(79	)
Dividend payments					(4	)		(4	)		(4	)
Common stock issued under employee stock plans					13			4			8
Other financing activities					(4	)		(1	)		—
Cash From (Used in) Financing Activities					46			(142	)		637
Increase (Decrease) in Cash and Cash Equivalents					4			(9	)		(61	)
CASH AND CASH EQUIVALENTS:
Beginning of year					19			28			89
End of year				$	23		$	19		$	28

        The effect of exchange rate changes on cash and cash equivalents was not material. Cash payments for interest (net of amounts capitalized) were $90 million in 2001, $88 million in 2000, and $41 million in 1999. Cash payments for income taxes were $24 million in 2001, $17 million in 2000, and $43 million in 1999. Cash payments for the management of environmental programs which were charged against recorded environmental liabilities were $40 million in 2001, $29 million in 2000, and $22 million in 1999.

See accompanying Notes to Consolidated Financial Statements.

F-5

SOLUTIA INC.

STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (DEFICIT)

		Year Ended December 31,
		2001			2000			1999
		(Dollars in millions)
COMMON STOCK:
Balance, January 1		$	1		$	1		$	1
Balance, December 31		$	1		$	1		$	1
NET DEFICIENCY OF ASSETS AT SPINOFF:
Balance, January 1		$	(113	)	$	(113	)	$	(113	)
Balance, December 31		$	(113	)	$	(113	)	$	(113	)
TREASURY STOCK:
Balance, January 1		$	(296	)	$	(209	)	$	(143	)
	Shares purchased (0 shares in 2001, 7,717,300 shares in 2000, 3,781,700 shares in 1999)		—			(106	)		(79	)
	Net shares issued under employee stock plans (1,562,590 shares in 2001, 1,092,870 shares in 2000, 551,613 shares in 1999)		39			19			13
Balance, December 31		$	(257	)	$	(296	)	$	(209	)
UNEARNED ESOP SHARES:
Balance, January 1		$	(9	)	$	(18	)	$	(25	)
	Amortization of ESOP balance		8			9			7
Balance, December 31		$	(1	)	$	(9	)	$	(18	)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
	ACCUMULATED CURRENCY ADJUSTMENT:
	Balance, January 1		(101	)		(15	)		29
	Currency translation adjustments		(37	)		(86	)		(44	)
	Balance, December 31		(138	)		(101	)		(15	)
	MINIMUM PENSION LIABILITY:
	Balance, January 1		(7	)		(14	)		(10	)
	Minimum pension liability adjustments		2			7			(4	)
	Balance, December 31		(5	)		(7	)		(14	)
	DERIVATIVE INSTRUMENTS:
	Balance, January 1		—			—			—
	Cumulative effect of accounting change		2			—			—
	Net losses on derivative instruments		(3	)		—			—
	Balance, December 31		(1	)		—			—
Balance, December 31		$	(144	)	$	(108	)	$	(29	)
REINVESTED EARNINGS:
Balance, January 1		$	491		$	450		$	254
	Net income (loss)		(59	)		49			206
	Employee stock plans		(27	)		(4	)		(6	)
	Dividends		(4	)		(4	)		(4	)
Balance, December 31		$	401		$	491		$	450
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)		$	(113	)	$	(34	)	$	82

See accompanying Notes to Consolidated Financial Statements.

F-6

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts)

1.    Significant Accounting Policies

Nature of Operations

        Solutia Inc. and its subsidiaries make and sell a variety of high-performance chemical-based materials. Solutia is a world leader in performance films for laminated safety glass and after-market applications; resins and additives for high-value coatings; process development and scale-up services for pharmaceutical fine chemicals; specialties such as water treatment chemicals, heat transfer fluids and aviation hydraulic fluid and an integrated family of nylon products including high-performance polymers and fibers.

        Prior to September 1, 1997, Solutia was a wholly-owned subsidiary of the former Monsanto Company (now known as Pharmacia Corporation). On September 1, 1997, Monsanto distributed all of the outstanding shares of common stock of the Company as a dividend to Monsanto stockholders (the spinoff). As a result of the spinoff, on September 1, 1997, Solutia became an independent publicly-held company listed on the New York Stock Exchange and its operations ceased to be owned by Monsanto. Net deficiency of assets of $113 million resulted from the spinoff.

Basis of Consolidation

        The consolidated financial statements include the accounts of Solutia and its majority-owned subsidiaries. Other companies in which Solutia has a significant interest (20 to 50 percent) are included in "Investments in Affiliates" in the Statement of Consolidated Financial Position. Solutia's share of these companies' net earnings or losses is reflected in "Equity Earnings (Loss) from Affiliates" in the Statement of Consolidated Income (Loss).

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and that affect revenues and expenses during the period reported. Estimates are adjusted when necessary to reflect actual experience. Significant estimates were used to account for restructuring reserves, environmental reserves, self-insurance reserves, employee benefit plans, asset impairments and contingencies.

Cash and Cash Equivalents

        Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when purchased.

Inventory Valuation

        Inventories are stated at cost or market, whichever is less. Actual cost is used to value raw materials and supplies. Standard cost, which approximates actual cost, is used to value finished goods and goods in process. Standard cost includes direct labor and raw materials, and manufacturing overhead based on practical capacity. The cost of certain inventories (62 percent as of December 31, 2001) is determined by the last-in, first-out (LIFO) method, which generally reflects the effects of

F-7

inflation or deflation on cost of goods sold sooner than other inventory cost methods. The cost of other inventories generally is determined by the first-in, first-out (FIFO) method.

Property, Plant and Equipment

        Property, plant and equipment are recorded at cost. The cost of plant and equipment is depreciated over weighted average periods of 20 years for buildings and 12 years for machinery and equipment, by the straight-line method.

Intangible Assets

        The cost of intangible assets is amortized on a straight-line basis over the estimated periods benefited, generally 20 years for goodwill and periods ranging from 5 to 20 years for identified intangible assets.

Impairment of Long-Lived Assets

        Impairment tests of long-lived assets are made when conditions indicate a possible loss. Impairment tests are based on a comparison of undiscounted cash flows to the recorded value of the asset. If an impairment is indicated, the asset value is written down to its fair value based upon market prices or, if not available, upon discounted cash value, at an appropriate discount rate.

Environmental Remediation

        Costs for remediation of waste disposal sites are accrued in the accounting period in which the obligation is probable and when the cost is reasonably estimable. Postclosure costs for hazardous and other waste facilities at operating locations are accrued over the estimated life of the facility as part of its anticipated closure cost. Environmental liabilities are not discounted, and they have not been reduced for any claims for recoveries from insurance or third parties. In those cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectability of such amounts is probable, the amounts are reflected as receivables in the consolidated financial statements.

Self-Insurance

        Solutia maintains self-insurance reserves to cover its estimated future legal costs and settlements related to workers' compensation, product, general, auto and operations liability claims that are less than policy deductible amounts or not covered by insurance. The Company also has purchased commercial insurance in order to reduce its exposure to such claims. Self-insured losses are accrued based upon estimates of the aggregate liability for uninsured claims incurred using certain actuarial assumptions followed in the insurance industry and the Company's historical experience.

Revenue Recognition

        The Company's revenue-earning activities involve delivering or producing goods, and revenues are considered to be earned when the Company has completed the process by which it is entitled to such revenues. The following criteria are used for revenue recognition: persuasive evidence of an

F-8

arrangement exists, delivery has occurred, selling price is fixed or determinable and collection is reasonably assured. In the case of the pharmaceutical services businesses, revenues are primarily recorded on a percentage of completion method.

Derivative Financial Instruments

        Currency forward contracts are used to manage currency exposures for financial instruments denominated in currencies other than the entity's functional currency. Natural gas contracts are used to manage some of the exposure for the cost of natural gas. Gains and losses on contracts that are designated and effective as hedges are included in net income (loss) and offset the exchange gain or loss of the transaction being hedged.

        Major currencies affecting the Company's business are the U.S. dollar, the British pound sterling, the euro, the Canadian dollar and the Brazilian real. Currency restrictions are not expected to have a significant effect on Solutia's cash flow, liquidity or capital resources.

Income Taxes

        Solutia accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities at enacted rates.

Currency Translation

        The local currency has been used as the functional currency for nearly all worldwide locations. The financial statements for most of Solutia's ex-U.S. operations are translated into U.S. dollars at current or average exchange rates. Unrealized currency translation adjustments in the Statement of Consolidated Financial Position are accumulated in equity.

Earnings (Loss) per Share

        Basic earnings (loss) per share is a measure of operating performance that assumes no dilution from securities or contracts to issue common stock. Diluted earnings (loss) per share is a measure of operating performance by giving effect to the dilution that would occur if securities or contracts to issue common stock were exercised or converted. At December 31, 2001, 1.2 million common share equivalents were excluded because the effect would be antidilutive.

New Accounting Pronouncements

        Effective January 1, 2002, Solutia adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets," which provide guidance related to accounting for business combinations and goodwill. The adoption of SFAS No. 141 did not have a material effect on Solutia's financial statements. Solutia has not completed its evaluation of SFAS No. 142 and, therefore, has not determined the final impact that the adoption of this standard will have on its financial position and results of operations. However, preliminary valuation work indicates that there is a potential goodwill impairment in the Company's Resins and Additives business. While the second step of the evaluation process is yet to be finalized, it is likely that a pretax impairment charge in the range of

F-9

$100 million to $200 million will be required. In addition, the Company expects annual amortization expense will be reduced by approximately $20 million to $25 million aftertax. See Footnote 19.

        In July 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The statement addresses accounting and reporting requirements for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement obligations. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Solutia is evaluating SFAS No. 143 to determine the effects, if any, on its consolidated financial statements.

        Effective January 1, 2002, Solutia adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS No. 144 did not have a material effect on Solutia's consolidated financial statements.

Reclassifications

        Certain reclassifications to prior years' financial information have been made to conform to the 2001 presentation. These reclassifications included amounts related to employee stock plans which were previously classified as a reduction of net deficiency of assets at spinoff that have been reclassified to reinvested earnings.

2.    Acquisitions and Divestitures

        During the third quarter of 2000, Solutia completed the sale of its Polymer Modifiers business and related manufacturing facilities to Ferro Corporation for approximately $130 million. As a result of this transaction, Solutia recognized a $73 million pretax gain ($46 million aftertax). Solutia's results of operations included net sales of approximately $90 million in 2000 and $145 million in 1999 and operating income of approximately $16 million in 2000 and $36 million in 1999 from the Polymer Modifiers business.

        During the second quarter of 2000, Solutia recognized a $15 million pretax gain ($9 million aftertax) on the sale of substantially all of its minority interest in P4 Production L.L.C., a phosphorus manufacturing venture. The results of operations from Solutia's minority interest in P4 Production L.L.C. were not material to Solutia's consolidated results of operations.

        During the first quarter of 2000, Solutia completed two acquisitions in the Specialty Products segment, which provide custom process and technology services to the global pharmaceutical industry. In the first acquisition, which closed on February 10, Solutia acquired CarboGen Holdings AG. CarboGen is a leading process research and development firm. In the second acquisition, which closed on March 24, Solutia purchased AMCIS AG. AMCIS serves the global pharmaceutical industry by developing production processes and by manufacturing active ingredients for clinical trials and small-volume commercial drugs. The combined purchase price for these acquisitions was approximately $118 million, which was financed with commercial paper and the assumption of debt.

        Both of the acquisitions have been accounted for using the purchase method. The allocations of the purchase price to the assets and liabilities acquired resulted in current assets of $17 million, non-current assets of $27 million, goodwill of $57 million, other intangible assets of $41 million, current

F-10

liabilities of $21 million and non-current liabilities of $3 million. Goodwill is being amortized over its estimated useful life of 20 years, and other intangible assets are being amortized over their estimated useful lives, which average 18 years.

        Results of operations for CarboGen and AMCIS were included in Solutia's results of operations from the acquisition dates. The results of operations for the acquired businesses were not material to Solutia's consolidated results of operations for 2000.

        On December 22, 1999, Solutia acquired Vianova Resins from Morgan Grenfell Private Equity Ltd. for approximately 1.2 billion deutsche marks (approximately $617 million), which was financed with commercial paper and the assumption of debt. Vianova Resins is a leading European producer of resins and additives for coatings and technical applications for the specialty, industrial and automotive sectors.

        The acquisition has been accounted for using the purchase method. The allocation of the purchase price to the assets and liabilities acquired resulted in current assets of $192 million, non-current assets of $227 million, goodwill of $321 million, other intangible assets of approximately $163 million, current liabilities of $99 million and non-current liabilities of $187 million. Goodwill is being amortized over its estimated useful life of 20 years, and other intangible assets are being amortized over their estimated useful lives, which average 19 years.

        On May 25, 1999, Solutia acquired CPFilms Inc. from Akzo Nobel N.V. for approximately $200 million, which was financed with commercial paper. CPFilms is a leading manufacturer and marketer of window film and other high-technology film products for automotive and architectural after-markets and a variety of other specialty film applications. The acquisition has been accounted for using the purchase method. The allocation of the purchase price to the identifiable assets and liabilities acquired resulted in goodwill of approximately $80 million. Goodwill and other intangible assets are being amortized over their estimated useful lives of 20 years. CPFilms' results of operations from May 25, 1999, through 31, 1999, were included in Solutia's Statement of Consolidated Income for the year ended December 31, 1999.

        The following unaudited pro forma condensed information for the year ended December 31, 1999, gives effect to the acquisitions of CPFilms and Vianova Resins, and the associated debt financing, as if the acquisitions and the financing had occurred as of the beginning of the periods presented.

	For the Year Ended December 31, 1999
	(Unaudited)
Net sales	$	3,357
Net income		203
Basic earnings per share		1.83
Diluted earnings per share		1.77

3.    Restructuring and Business Combination Reserves

        During the fourth quarter of 2000, Solutia recorded restructuring charges of $53 million ($33 million aftertax) to cost of goods sold for costs associated with work force reductions and closure of certain non-strategic facilities. During 2001, Solutia reduced its workforce by approximately

F-11

700 positions. Additionally, Solutia eliminated more than 750 contractor positions during 2001. Approximately 90 percent of the workforce reductions affected North American business and manufacturing operations, and approximately 10 percent affected European, Asian and Latin American operations and sales offices. Management positions represented approximately one-third of the workforce reductions. During the fourth quarter of 2001, Solutia determined that the original provision taken for its 2001 restructuring program was insufficient to cover its total costs. Actual costs to terminate certain European and North American management employees and certain employee benefit costs for involuntary terminations were higher than the original estimates. As a result, Solutia recorded additional restructuring charges of $9 million ($6 million aftertax) to cost of goods sold to cover these higher costs. The restructuring actions contemplated by this reserve were completed by the end of 2001. Certain severance payments owed to individuals terminated late in the fourth quarter of 2001 have been included in accrued liabilities and will be paid in their entirety during the first quarter of 2002. The closure of non-strategic facilities is not anticipated to have a significant impact on future operations.

        The following table summarizes the 2000 restructuring charge and amounts utilized to carry out those plans:

		Employment Reductions			Shutdown of Facilities			Total
Balance at January 1, 2000		$	—		$	—		$	—
	Charges taken		50			3			53
	Amounts utilized		—			(3	)		(3	)
Balance at December 31, 2000		$	50		$	—		$	50
	Charges taken		9			—			9
	Amounts utilized		(59	)		—			(59	)
Balance at December 31, 2001		$	—		$	—		$	—

        During the second quarter of 2000, Solutia completed plans to integrate Vianova Resins operations with Solutia's resins business and service organizations and recorded a liability of $11 million to accrue for costs of integration, in accordance with Emerging Issues Task Force Issue 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." The integration plans included employment reductions primarily from Vianova Resins service organizations located in more than 10 countries. In addition, the plans included amounts to shut down certain Vianova Resins sales offices. During the first half of 2001, Solutia completed the integration actions of shutting down certain Vianova Resins sales offices at a cost of approximately $1 million and reduced its workforce by approximately 130 positions at a cost of approximately $10 million.

F-12

        The following table summarizes the Vianova Resins integration costs and amounts utilized to carry out those plans:

		Employment Reductions			Shutdown of Facilities			Total
Balance at January 1, 2000		$	—		$	—		$	—
	Charges taken		10			1			11
	Amounts utilized		(2	)		—			(2	)
Balance at December 31, 2000		$	8		$	1		$	9
	Amounts utilized		(8	)		(1	)		(9	)
Balance at December 31, 2001		$	—		$	—		$	—

        As part of the integration of Vianova Resins with Solutia's resins businesses, Solutia identified excess production capacity for certain Solutia resins products that will allow for the consolidation of production facilities. As a result, Solutia decided to exit its operations at the Port Plastics site in Addyston, Ohio. An $8 million ($5 million aftertax) charge to cost of goods sold was recorded in the second quarter of 2000 to carry out the exit plan. The charge included $2 million to write down plant assets to their fair value of approximately $1 million, $2 million of dismantling costs and $4 million of estimated costs for which Solutia is contractually obligated under an operating agreement. Fair value was determined by discounting future cash flows using an appropriate discount rate. Under the operating agreement, Solutia is required to provide 24 months notice of intent to exit and to pay contractually obligated costs for an additional 18 months thereafter to a third-party operator. The contractually obligated costs represent direct manufacturing, overhead, utilities and severance. The financial impact will not be material to Solutia as production will be shifted to other production facilities.

        The following table summarizes the 2000 restructuring charge and amounts utilized to carry out those plans:

		Shutdown of Facilities		Asset Writedowns			Other Costs		Total
Balance at January 1, 2000		$	—	$	—		$	—	$	—
	Charges taken		2		2			4		8
	Amounts utilized		—		(2	)		—		(2	)
Balance at December 31, 2000		$	2	$	—		$	4	$	6
	Amounts utilized		—		—			—		—
Balance at December 31, 2001		$	2	$	—		$	4	$	6

        In February 1999, Integrated Nylon's ammonia unit experienced the failure of certain equipment critical to the production process. Based on an analysis of the economics of purchased ammonia and the cost to repair the equipment, Solutia decided to exit the ammonia business. A $28 million ($18 million aftertax) charge to cost of goods sold was recorded in the first quarter of 1999 to implement the exit plan. The charge included $2 million to write down the assets to their fair value of approximately $4 million, $4 million of dismantling costs and $22 million of costs for which Solutia is

F-13

contractually obligated under an operating agreement. During the first quarter of 2000, Solutia entered into an agreement for the dismantling of those assets by a third-party and as a result, transferred the liability for dismantling to the third-party. During the third quarter of 2000, Solutia reached an agreement with the plant operator for the final settlement of the contractually obligated costs. As a result, Solutia transferred the liability for the contractually obligated costs to accrued liabilities. Net sales for the ammonia business were $1 million for the year ended December 31, 1999. Operating income for that period was minimal.

        The following table summarizes the 1999 restructuring charge and amounts utilized to carry out those plans:

		Shutdown of Facilities			Asset Writedowns			Other Costs			Total
Balance at January 1, 1999		$	—		$	—		$	—		$	—
	Charges taken		4			2			22			28
	Amounts utilized		—			(2	)		(6	)		(8	)
Balance at December 31, 1999		$	4		$	—		$	16		$	20
Amounts utilized			(4	)		—			(16	)		(20	)
Balance at December 31, 2000		$	—		$	—		$	—		$	—

4.    Asset Impairments

        During the fourth quarter of 2000, Solutia recorded a $76 million ($47 million aftertax) impairment charge to cost of goods sold primarily to write down certain non-performing and non-strategic fiber spinning, drawing and packaging equipment which supports several of Integrated Nylon's product lines. Solutia also recorded an impairment charge to cost of goods sold of $15 million ($10 million aftertax) to write down chlorobenzenes' production equipment in the Specialty Products segment. The impairments were indicated by 2000 operating losses and projections of continued losses primarily because of the noncompetitive cost positions these businesses have and the competitive market conditions that they face. The carrying values of the assets were written down as determined by discounting expected future cash flows, using an appropriate discount rate. The assumptions used in the cash flow projections were not materially different from the market conditions experienced in 2000. These conditions are not expected to improve significantly in the foreseeable future. The cash flow assumptions included a declining demand and market share combined with decreased operating margins. Lower operating margins reflect the non-competitive cost position of these businesses and the impact of lower selling prices associated with an extremely competitive operating environment.

        During the second quarter of 2000, Solutia recorded a $6 million ($4 million aftertax) impairment charge to administrative expenses for the write down of capitalized software costs related to the formation of the Astaris joint venture. The software had previously been fully dedicated to Solutia's Phosphorus Derivatives business. Impairment was indicated by a significant change in the extent and manner in which Astaris was expected to utilize the asset under a transition services agreement. The carrying value of the asset was written down to its estimated fair value, as determined by discounting expected future cash flows, using an appropriate discount rate.

F-14

        An impairment charge of $6 million ($4 million aftertax) was recorded in the first quarter of 1999 to cost of goods sold primarily to write down a bulk continuous filament spinning machine as a result of management's decision to shut down the equipment due to a noncompetitive cost position. The adjusted carrying value of the machine was $0.5 million at the time of the write down. The charge was due to a review under SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of," which indicated that the carrying amount of the assets exceeded the identifiable, undiscounted cash flows related to the assets. Fair value of the assets was determined based on estimates of market prices for the machinery. Operating income derived from the machinery was minimal in the year ended December 31, 1999.

5.    Risk Management Activities

        Effective January 1, 2001, Solutia adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which requires that all derivative instruments be reported on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The cumulative effect of adopting SFAS No. 133 as of January 1, 2001, resulted in a cumulative addition to other comprehensive income (loss) of $2 million aftertax, principally attributable to unrealized gains in commodity cash flow hedges.

        Solutia's business operations give rise to market risk exposures that result from changes in currency exchange rates, interest rates and certain commodity prices. To manage the volatility relating to these exposures, Solutia enters into various hedging transactions that enable it to alleviate the adverse effects of financial market risk. Designation is performed on a specific exposure basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. Solutia's hedging transactions are carried out under policies and procedures approved by the Audit and Finance Committee of the Board of Directors, which do not permit the purchase or holding of any derivative financial instruments for trading purposes.

Foreign Currency Exchange Rate Risk

        Solutia manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. Solutia uses foreign currency hedging instruments to manage the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business. Solutia primarily uses forward exchange contracts and purchased options to hedge these risks with maturities of less than 18 months.

        Solutia also enters into certain foreign currency derivative instruments primarily to protect against exposure related to intercompany financing transactions. Solutia has chosen not to designate these instruments as hedges and to allow the gains and losses that arise from marking the contracts to market to be recorded in other income (expense)—net in the period. The net impact of the related gains and losses was not material.

        In addition, Solutia uses forward exchange contracts which are designated and qualify as cash flow hedges. These are intended to offset the effect of exchange rate fluctuations on certain forecasted equipment purchases. Gains and losses on these instruments to the extent that the hedge is effective

F-15

are deferred in other comprehensive income (loss) until the related depreciation of equipment purchased is recognized in earnings. The earnings impact is reported in cost of goods sold to match the classification of depreciation. At December 31, 2001, all hedges were determined to be effective.

        No cash flow hedges were discontinued during the year due to changes in expectations on the original forecasted transactions. Foreign currency hedging activity is not material to Solutia's financial statements.

Interest Rate Risk

        Interest rate risk is primarily related to the changes in fair value of fixed-rate long-term debt and short-term, floating rate debt. Solutia believes its current debt structure appropriately protects the Company from changes in interest rates and is not actively using any contracts to manage interest rate risk.

Commodity Price Risk

        Certain raw materials and energy sources used by Solutia are subject to price volatility caused by weather, crude oil prices, supply conditions, political and economic variables and other unpredictable factors. Solutia periodically uses forward and option contracts to manage the volatility related to anticipated energy and raw material purchases with maturities up to 18 months. These market instruments are designated as cash flow hedges. The mark-to-market gain or loss on qualifying hedges is included in other comprehensive income (loss) to the extent effective, and reclassified into cost of goods sold in the period during which the hedged transaction affects earnings. The mark-to-market gains or losses on ineffective portions of hedges are recognized in cost of goods sold immediately. For the year ended December 31, 2001, the net impact on other comprehensive income (loss) included approximately $4 million aftertax for unrealized losses on cash flow hedges partially offset by reclassifications out of other comprehensive income (loss) of approximately $1 million aftertax for realized losses on cash flow hedges. Solutia estimates that approximately $2 million of existing net unrealized losses will be reclassified to cost of goods sold within 12 months.

F-16

Credit Risk

        Credit risk arising from the inability of a counterparty to meet the terms of Solutia's financial instrument contracts is generally limited to the amounts, if any, by which the counterparty's obligations exceed the obligations of the Company. It is Solutia's policy to enter into financial instruments with a diversity of creditworthy counterparties. Therefore, Solutia does not expect to incur material credit losses on its risk management or other financial statement instruments.

6.    Investments in Affiliates

        In January of 2002, Solutia signed an agreement to sell its 50 percent interest in the Advanced Elastomer Systems joint venture to ExxonMobil Chemical Company, a division of Exxon Mobil Corporation and Exxon Chemical Asset Management Partnership, a subsidiary of Exxon Mobil Corporation for approximately $100 million. The sale is expected to close during the first quarter of 2002 and result in a modest gain. Solutia will use the net sales proceeds to pay down debt.

        In April 2000, Astaris LLC, a joint venture between Solutia and FMC Corporation, started operations to manufacture and market phosphorus chemicals. Solutia contributed its Phosphorus Derivatives business to the joint venture in exchange for a 50 percent ownership share. Net assets contributed to the venture totaled approximately $87 million. During the third quarter of 2000, Solutia received $85 million from Astaris representing a cash distribution and repayment of working capital loans. In connection with the external financing agreement for Astaris completed during the third quarter of 2000, Solutia contractually agreed to provide Astaris with funding in the event the joint venture fails to meet certain financial benchmarks. During 2001, Solutia contributed $31 million to Astaris under this agreement. Solutia anticipates a contribution of up to $25 million will be required in 2002.

        At December 31, 2001, Solutia's investments in affiliates consisted principally of its 50 percent interests in the Flexsys, Advanced Elastomers Systems and Astaris joint ventures for which Solutia uses the equity method of accounting. Solutia received dividends from affiliates of approximately $30 million in 2001, $45 million in 2000 and $60 million in 1999. Summarized combined financial information for 100 percent of the Flexsys, AES and Astaris joint ventures is as follows:

		2001			2000		1999
Results of operations:
	Net sales	$	1,241		$	1,247	$	869
	Gross profit		226			327		267
	Operating income (loss)		(63	)		138		108
	Net income (loss)		(48	)		95		85
Financial position:
	Current assets	$	493		$	552
	Noncurrent assets		768			744
	Current liabilities		498			347
	Noncurrent liabilities		205			334

F-17

7.    Inventory Valuation

        The components of inventories were:

	2001			2000
Finished goods	$	209		$	305
Goods in process		107			105
Raw materials and supplies		100			108
Inventories, at FIFO cost		416			518
Excess of FIFO over LIFO cost		(113	)		(161	)
Total	$	303		$	357

        Inventories at FIFO approximate current cost. The effects of LIFO inventory liquidations were not significant.

8.    Income Taxes

        The components of income (loss) before income taxes were:

	2001			2000			1999
United States	$	(154	)	$	(23	)	$	224
Outside United States		77			64			79
Total	$	(77	)	$	41		$	303

        The components of income tax expense (benefit) charged to operations were:

		2001			2000			1999
Current:
	U.S. federal	$	(30	)	$	(63	)	$	48
	U.S. state		—			(2	)		6
	Outside United States		46			34			20
			16			(31	)		74
Deferred:
	U.S. federal		(3	)		46			18
	U.S. state		(13	)		(7	)		—
	Outside United States		(18	)		(16	)		5
			(34	)		23			23
Total		$	(18	)	$	(8	)	$	97

        During 2000, Germany reduced its corporate tax rate effective January 1, 2001. In accordance with SFAS No. 109, "Accounting for Income Taxes," Solutia recognized $7 million of income to record the net effect of the change on deferred income tax assets and liabilities. This adjustment is included as part of the deferred tax provision above.

F-18

        Factors causing Solutia's effective tax rate to differ from the U.S. federal statutory rate were:

	2001		2000		1999
U.S. federal statutory rate	(35	)%	35	%	35	%
U.S. state income taxes	(11	)	(15	)	2
Tax benefit of foreign sales corporation	(2	)	(13	)	(2	)
Taxes related to foreign income, net of credits	(11	)	(17	)	(1	)
Valuation allowances	25		32		—
Income from equity affiliates recorded net of tax	4		(37	)	(4	)
Other	7		(6	)	2
Effective Income Tax Rate	(23	)%	(21	)%	32	%

        Deferred income tax balances were related to:

	2001			2000
Property	$	(200	)	$	(173	)
Postretirement benefits		369			377
Restructuring reserves		3			29
Environmental liabilities		67			64
Intangible assets		(59	)		(66	)
Inventory		17			—
Tax credit carryforward		54			—
Valuation allowances		(32	)		(13	)
Net operating losses		31			9
Other		32			(30	)
Net Deferred Tax Assets	$	282		$	197

        At December 31, 2001, foreign tax credit carryforwards available to reduce possible future U.S. income taxes amounted to approximately $54 million, all of which will expire in 2004 through 2006. Valuation allowances have been provided for the foreign tax credit carryforwards that are not likely to be utilized. At December 31, 2001, various state and foreign net operating loss carryforwards are available to offset future taxable income. These net operating losses expire in years after 2004 or have an indefinite carryforward period. Income taxes and remittance taxes have not been recorded on $92 million in undistributed earnings of subsidiaries, either because any taxes on dividends would be offset substantially by foreign tax credits or because Solutia intends to reinvest those earnings indefinitely. It is not practicable to estimate the tax effect of remitting these earnings to the United States.

9.    Debt Obligations

        Solutia's debt obligations include borrowings against the $800 million, five-year revolving credit facility ($800 million facility) with a syndicate of commercial banks, notes and debentures. The weighted average interest rate on total debt outstanding at December 31, 2001, was 6.1 percent and was 6.7 percent at December 31, 2000.

F-19

Debt Maturing in One Year

        At December 31, 2001, debt maturing in one year consisted of borrowings of $533 million from the $800 million facility and $150 million of 6.5 percent notes due in October of 2002. Weighted average interest rates on borrowings from the $800 million facility were 4.5 percent during 2001. Weighted average interest rates on commercial paper balances were 6.6 percent during 2000 and 5.5 percent in 1999. The $800 million facility is available for working capital, commercial paper support and other general corporate purposes. The $800 million facility expires in August of 2002.

        The $800 million facility contains various covenants that, among other things, restrict Solutia's ability to merge with another entity and require Solutia to meet certain leverage and interest coverage ratios. During the first quarter of 2001, Solutia completed an amendment of the $800 million facility that modified the financial covenants. A 60-day waiver of the financial covenants was received on September 17, 2001, for the third quarter of 2001. Without the waiver, Solutia would not have been in compliance with the leverage coverage ratio. In November 2001, Solutia completed an amendment of the $800 million facility that modified financial covenants and collateralized borrowings. Four domestic subsidiaries are guarantors of the amended facility. Borrowings under the amended facility are secured by liens on Solutia's inventory and receivables and those of its material domestic subsidiaries and one foreign subsidiary, pledges of 65 percent of the voting stock of two foreign subsidiaries and a lien on specified principal properties. The aggregate amount of Solutia's obligations entitled to the benefit of the lien on specified properties will not exceed $236 million. Solutia does not anticipate that future borrowings will be significantly limited by the terms of these amendments.

        The $800 million credit facility expires in August of 2002 and $150 million of 6.5 percent notes mature in October of 2002. Solutia plans to refinance the $800 million facility with a combination of unsecured long-term notes, a secured term loan and a revolving credit facility. Interest rates will be commensurate with Solutia's credit rating. Proceeds of the refinancing will be used to repay outstanding borrowings under the $800 million facility and $150 million of 6.5 percent notes and for other general corporate purposes. The refinancing is expected to be completed in the first half of 2002. Inability to complete this refinancing or a similar financing vehicle prior to August 2002 would have a material adverse affect on Solutia's liquidity.

F-20

Long-Term Debt

        Long-term debt consisted of the following:

	2001			2000
6.5% notes due 2002	$	150		$	150
7.375% debentures due 2027		300			300
6.72% debentures due 2037		150			150
6.25% euro notes due 2005		177			186
Other		3			1
Unamortized debt discount		(3	)		(3	)
		777			784
Less: Current portion of long-term debt		(150	)		—
Total	$	627		$	784

        The notes and debentures are unsecured obligations. Interest is payable semiannually, on April 15 and October 15 of each year. The holders of the 2037 debentures have the right to require repayment on October 15, 2004. The notes and debentures contain provisions that, among other things, restrict Solutia's ability to create liens on assets and its ability to enter into sale and leaseback transactions.

10.    Fair Values of Financial Instruments

        The estimated fair value of Solutia's long-term debt was $553 million as of December 31, 2001, and $685 million as of December 31, 2000. These estimates compare with the recorded amount of $627 million in 2001 and $784 million in 2000.

        The recorded amounts of cash, trade receivables, third-party guarantees, accounts payable and short-term debt approximate their fair values at both December 31, 2001, and December 31, 2000. The estimated fair value of the Company's foreign currency forward contracts on intercompany financing transactions and natural gas contracts was approximately $5 million at December 31, 2001. Notional amounts for purchase contracts were $308 million at December 31, 2001, and $286 million at December 31, 2000, and for sell contracts the notional amounts were $301 million at December 31, 2001, and $265 million at December 31, 2000.

        Fair values are estimated by the use of quoted market prices, estimates obtained from brokers and other appropriate valuation techniques and are based upon information available as of December 31, 2001, and December 31, 2000. The fair-value estimates do not necessarily reflect the values Solutia could realize in the current market.

11.    Postretirement Benefits

        Pension benefits are based on the employee's age, years of service and/or compensation level. The qualified pension plan is funded in accordance with Solutia's long-range projections of the plan's financial conditions. These projections take into account benefits earned and expected to be earned, anticipated returns on pension plan assets and income tax and other regulations. Prior to the spinoff, the majority of Solutia's employees participated in Monsanto's noncontributory pension plans. In

F-21

conjunction with the spinoff, Solutia assumed pension liabilities and received related assets from those plans for its applicable active employees and for certain former employees who left Monsanto in earlier years.

        The majority of Solutia's employees also participate in benefit programs that provide certain health care and life insurance benefits for retired employees. Substantially all regular, full-time U.S. employees and certain employees in other countries may become eligible for these benefits if they reach retirement age while employed by Solutia and have the required years of service. These postretirement benefits are unfunded and are generally based on the employee's age, years of service and/or compensation level. The costs of postretirement benefits are accrued by the date the employees become eligible for the benefits. In connection with the spinoff, Solutia assumed retiree medical liabilities for its applicable active employees and for approximately two-thirds of the retired U.S. employees of Monsanto.

        For 2001, 2000, and 1999, Solutia's pension and healthcare and other benefit costs were as follows:

	Pension Benefits									Healthcare and Other Benefits
	2001			2000			1999			2001			2000			1999
Service costs for benefits earned	$	31		$	32		$	38		$	10		$	10		$	11
Interest cost on benefit obligation		123			131			132			53			53			49
Assumed return on plan assets		(145	)		(144	)		(153	)		—			—			—
Prior service costs		21			21			21			(15	)		(18	)		(18	)
Transition asset		(2	)		(10	)		(10	)		—			—			—
Recognized net (gain)/loss		(8	)		4			(3	)		10			7			6
Settlement		1			(23	)		—			—			—			—
Total	$	21		$	11		$	25		$	58		$	52		$	48

F-22

        Components of the changes in fair value of plan assets, changes in the benefit obligation and the funding status of Solutia's postretirement plans were as follows:

		Pension Benefits						Healthcare and Other Benefits
		2001			2000			2001			2000
Changes in Fair Value of Plan Assets
	Fair value of plan assets at January 1	$	1,724		$	1,973		$	—		$	—
	Actual return on plan assets		(81	)		92			—			—
	Employer contributions		6			22			—			—
	Settlements		—			(37	)		—			—
	Benefits paid		(265	)		(326	)		—			—
	Fair value of plan assets at December 31	$	1,384		$	1,724		$	—		$	—
Changes in Benefit Obligation
	Benefit obligation at January 1	$	1,746		$	1,833		$	732		$	720
	Service costs		31			32			10			10
	Interest cost		123			131			53			53
	Participant contributions		—			—			9			7
	Actuarial losses		69			111			79			51
	Settlements		—			(37	)		—			(17	)
	Benefits paid		(265	)		(326	)		(95	)		(92	)
	Plan amendments		2			2			19			—
	Benefit obligation at December 31	$	1,706		$	1,746		$	807		$	732

        Plan assets consist principally of common stocks and U.S. government and corporate obligations. Contributions to the pension benefit plans were neither required nor made in 2001 and 2000 because Solutia's principal pension plan is adequately funded, using assumed returns.

        The funded status of Solutia's postretirement benefit plans at December 31, 2001, and 2000 was as follows:

	Pension Benefits						Healthcare and Other Benefits
	2001			2000			2001			2000
Funded Status	$	(322	)	$	(22	)	$	(807	)	$	(732	)
Unrecognized actuarial (gain)/loss		8			(294	)		136			65
Unrecognized prior service costs		115			135			(107	)		(141	)
Additional liability		(39	)		(13	)		—			—
Unrecognized transition (gain)/loss		—			(5	)		—			—
Accrued net liability at December 31	$	(238	)	$	(199	)	$	(778	)	$	(808	)

F-23

        The accrued net liability was included in:

	Pension Benefits						Healthcare and Other Benefits
	2001			2000			2001			2000
Current postretirement liabilities	$	—		$	—		$	(82	)	$	(78	)
Long-term postretirement liabilities		(251	)		(211	)		(696	)		(730	)
Less: Other assets		13			12			—			—
Accrued net liability	$	(238	)	$	(199	)	$	(778	)	$	(808	)

        Certain of Solutia's pension benefit plans are unfunded and therefore have accumulated benefit obligations in excess of plan assets. Information regarding these unfunded plans was as follows:

	2001		2000
Projected benefit obligation	$	24	$	25
Accumulated benefit obligation		22		23
Fair value of plan assets		—		—

        The significant actuarial assumptions used to estimate the projected benefit obligation for the Company's principal pension, healthcare and other benefit plans were as follows:

	Pension Benefits				Healthcare and Other Benefits
	2001		2000		2001		2000
Discount rate	7.00	%	7.25	%	7.00	%	7.25	%
Assumed long-term rate of return on plan assets	9.50	%	9.50	%	—		—
Annual rates of salary increase (for plans that base benefits on final compensation level)	4.00	%	4.25	%	—		—
Assumed trend rate for healthcare costs	—		—		5.25	%	5.00	%
Ultimate trend rate for healthcare costs	—		—		5.25	%	5.00	%

        A 1 percent change in the assumed health care cost trend rates would have the following effect as of December 31, 2001:

	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation		9		(10	)

F-24

12.    Employee Savings Plans

        In connection with the spinoff, Monsanto common stock held by the Monsanto Employee Stock Ownership Plan (ESOP) and related Monsanto ESOP borrowings were allocated between Solutia and Monsanto. As a result of this allocation, Solutia received 2.4 million shares of Monsanto common stock and assumed $29 million of ESOP debt to third parties. Simultaneously, Solutia created its own ESOP, established a trust to hold the Monsanto shares, and issued a $29 million loan to the trust. The trust used the proceeds of the loan to repay the assumed third-party debt. Subsequent to the spinoff, the ESOP trust was required by government regulations to divest its holdings of Monsanto common stock and to use the proceeds to acquire Solutia common stock. The divestiture of Monsanto common stock and the purchase of Solutia common stock were completed in early 1998. At inception, the trust held 10,737,097 shares of Solutia common stock. As of December 31, 2001, there have been 10,303,561 shares allocated to participants.

        Substantially all U.S. employees of Solutia are eligible to participate in the Solutia Inc. Savings and Investment Plan, a 401(k) plan. Shares held in the ESOP are used to make Solutia's matching contribution to eligible participants' accounts under this plan. The number of shares released is computed on each pay date based on a formula that considers the participant contribution, the Solutia matching rate, and Solutia's closing stock price. Shares allocated to participant accounts totaled 1,160,203 shares in 2001, 1,314,341 shares in 2000, and 979,439 shares in 1999, leaving 433,536 unallocated shares as of December 31, 2001. The value of these contributions was $15 million in 2001, $17 million in 2000, and $18 million in 1999. Solutia will fulfill future matching obligations with remaining unallocated shares in the ESOP and the use of treasury stock or open market purchases of the Company's stock. Unallocated shares held by the ESOP are considered outstanding for earnings (loss) per share calculations. Compensation expense is equal to the cost of the shares allocated to participants, less dividends paid on the shares held by the ESOP. Information regarding the ESOP follows:

	2001		2000		1999
Total ESOP expense	$	8	$	10	$	8
Interest portion of total ESOP expense		1		1		2
Cash contributions		7		10		10

13.    Stock Option Plans

        Solutia has two stock-based incentive plans under which awards are being granted to officers and employees, the Solutia Inc. 2000 Stock-Based Incentive Plan and the Solutia Inc. 1997 Stock-Based Incentive Plan. The 2000 plan authorizes up to 5,400,000, and the 1997 plan up to 7,800,000, shares of Solutia common stock for grants of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards and bonus stock awards. The shares used may be newly issued shares, treasury shares or a combination. Under both plans, the exercise price of a stock option must be no less than the fair market value of Solutia's common stock on the option grant date. Additionally, the plans provide that the term of any stock option granted may not exceed 10 years. At December 31, 2001, approximately 3,101,380 shares from the 2000 plan and 139,731 shares from the 1997 plan remained available for grants.

        During 2001, non-qualified options to purchase 468,000 shares of Solutia common stock were granted under the plans to current executive officers and other senior executives as a group, and

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non-qualified stock options to purchase 1,269,250 shares were granted to other employees at an average exercise price of $13.68 per share. Total shares covered by options granted under the plans to current executive officers and other senior executives as a group totaled 2,567,000 and other employees totaled 7,900,518, through December 31, 2001. The options granted to Solutia's executive officers and other senior executives are primarily performance options that become exercisable upon the earlier of achievement of specified share price targets or the ninth anniversary of the option grant. The options granted to the other management employees are time-based. They generally become exercisable in thirds, one-third on each of the first three anniversaries of the option grant date.

        The Solutia Inc. Non-Employee Director Compensation Plan provides incentives to non-employee members of Solutia's board of directors. This plan authorizes up to 400,000 shares for grants of non-qualified stock options and for grants of deferred shares in payment of all or a portion of the annual retainer for the non-employee directors. Only treasury shares may be used. Under this plan, the exercise price of a stock option must be no less than the fair market value of Solutia's common stock on the grant date and the term of any stock option granted under the plan may not exceed 10 years. At December 31, 2001, 236,551 shares of Solutia's common stock remained available for grants under the plan. Shares covered by options granted to non-employee directors totaled 25,167 in 2001, 25,167 in 2000, and 34,333 in 1999.

        As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," Solutia has elected to continue following the guidance of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," for measurement and recognition of stock-based transactions with employees. Accordingly, no compensation cost has been recognized for Solutia's option plans. Had the determination of compensation cost for these plans been based on the fair value at the grant dates for awards under these plans, consistent with the method of SFAS No. 123, Solutia's net income (loss) would have been reduced to the pro forma amounts indicated below:

		2001			2000		1999
Net Income (loss):
	As reported	$	(59	)	$	49	$	206
	Pro forma		(67	)		42		187
Diluted earnings (loss) per share:
	As reported	$	(0.57	)	$	0.46	$	1.80
	Pro forma		(0.64	)		0.39		1.63

        Compensation expense resulting from the fair value method of SFAS No. 123 may not be representative of compensation expense to be incurred on a pro forma basis in future years. The fair value of each option grant is estimated on the date of grant by use of the Black-Scholes option-pricing model.

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        The following weighted-average assumptions were used for grants of Solutia options in 2001, 2000 and 1999:

	2001	2000	1999
Expected dividend yield	0.2%	0.2%	0.2%
Expected volatility	40.0%	34.0%	34.0%
Risk-free interest rates	4.6%	5.8%	6.0%
Expected option lives (years)	5.0	5.0	5.0

        The weighted-average fair values of options granted were $5.57 in 2001, $5.30 in 2000, and $8.05 in 1999.

        A summary of the status of Solutia's stock option plans for years ended December 31, 2001, 2000 and 1999 follows:

			Outstanding
		Exercisable Shares	Shares		Weighted-Average Exercise Price
December 31, 1998		17,116,842	25,857,105		$	14.79
	Granted		2,054,658		$	20.61
	Exercised		(678,710	)		10.93
	Expired		(495,232	)		18.43
December 31, 1999		18,852,246	26,737,821		$	15.27
	Granted		1,912,043		$	13.98
	Exercised		(379,687	)		6.74
	Expired		(1,279,514	)		17.21
December 31, 2000		23,590,921	26,990,663		$	15.21
	Granted		1,762,417		$	13.68
	Exercised		(1,796,038	)		6.14
	Expired		(1,278,013	)		16.32
December 31, 2001		21,993,759	25,679,029		$	15.68

        The following table summarizes information about stock options outstanding at December 31, 2001:

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Options Outstanding:

Range of Exercise Prices		Shares	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price
$	3 to 7	2,650,148	1.8	$	5.97
	8 to 11	58,246	6.6		10.80
	12 to 15	4,425,852	7.9		13.52
	16 to 18	12,430,225	5.0		16.43
	19 to 22	5,888,303	6.3		19.69
	23 to 29	226,255	6.4		27.65
$	3 to 29	25,679,029	5.5	$	15.68

Options Exercisable:

Range of Exercise Prices		Shares	Weighted-Average Exercise Price
$	3 to 7	2,650,148	$	5.97
	8 to 11	33,967		10.11
	12 to 15	1,581,669		12.98
	16 to 18	12,430,225		16.43
	19 to 22	5,079,495		19.58
	23 to 29	218,255		27.61
$	3 to 29	21,993,759	$	15.75

14.    Capital Stock

        Solutia's board of directors declared a dividend of one preferred stock purchase right for each share of Solutia's common stock issued in the distribution of shares by Monsanto to its shareholders on the effective date of the spinoff and authorized the issuance of one right for each share of common stock issued after the effective date of the spinoff until the earlier of the date the rights become exercisable and the termination date of the rights plan. If a person or group acquires beneficial ownership of 20 percent or more, or announces a tender offer that would result in beneficial ownership of 20 percent or more, of Solutia's outstanding common stock, the rights become exercisable. Then, for every right held, the owner will be entitled to purchase one one-hundredth of a share of a series of preferred stock for $125. If Solutia is acquired in a business combination transaction while the rights are outstanding, for every right held, the holder will be entitled to purchase, for $125, common shares of the acquiring company having a market value of $250. In addition, if a person or group acquires beneficial ownership of 20 percent or more of Solutia's outstanding common stock, for every right held, the holder (other than such person or members of such group) will be entitled to purchase, for $125, a number of shares of Solutia's common stock having a market value of $250. Furthermore, at any time after a person or group acquires beneficial ownership of 20 percent or more (but less than 50 percent) of Solutia's outstanding common stock, Solutia's board of directors may, at its option, exchange part or all of the rights (other than rights held by the acquiring person or group) for shares of Solutia's

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common stock on a one-share-for-every-one-right basis. At any time prior to the acquisition of such a 20 percent position, Solutia can redeem each right for $0.01. The board of directors is also authorized to reduce the aforementioned 20 percent thresholds to not less than 10 percent. The rights expire in the year 2007.

        The Company has 10 million shares of preferred stock, par value $0.01 per share, authorized. As of December 31, 2001, there were no preferred shares issued or outstanding.

15.    Commitments and Contingencies

        Commitments, principally in connection with uncompleted additions to property, were approximately $8 million at December 31, 2001. Solutia was contingently liable as a guarantor principally in connection with bank loans totaling approximately $9 million at December 31, 2001. In addition, as of December 31, 2001, the Company was contingently liable under letters of credit, primarily related to environmental remediation, totaling $65 million. Solutia's future minimum payments under noncancelable operating leases and unconditional purchase obligations are $21 million for 2002, $22 million for 2003, $20 million for 2004, $18 million for 2005, $16 million for 2006, and $100 million thereafter.

        Solutia has entered into agreements with customers to supply a guaranteed quantity of certain products annually at prices specified in the agreements. In return, the customers have advanced funds to Solutia to cover the costs of expanding capacity to provide the guaranteed supply. Solutia has recorded the advances as deferred credits and amortizes the amounts to income as the customers purchase the products. The unamortized deferred credits were approximately $175 million at December 31, 2001, and approximately $171 million at December 31, 2000.

        In connection with the completion of the external financing agreement for Astaris which expires in September of 2005, Solutia contractually agreed to provide Astaris with funding in the event the joint venture fails to meet certain financial benchmarks. During 2001, Solutia contributed $31 million to the joint venture under this agreement. Solutia anticipates a contribution of up to $25 million will be required in 2002. Solutia believes that this obligation is not likely to have a significant impact on its consolidated financial position, liquidity or profitability.

        In 1993, a co-generation facility was constructed at the Pensacola, Florida manufacturing site to provide the plant with electricity and steam. Solutia financed the construction by placing the co-generation facility in a trust that was funded by a syndicate of commercial banks. Solutia makes monthly operating lease payments and the lease term expires in August 2002. Solutia expects to exercise its option to purchase the co-generation facility from the trust for approximately $32 million with proceeds from the anticipated refinancing during 2002.

        The more significant concentrations in Solutia's trade receivables at year-end were:

	2001		2000
U.S. chemical industry	$	53	$	51
U.S. carpet industry		33		42
European glass industry		39		38
European chemical industry		81		101

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        Management does not anticipate losses on its trade receivables in excess of established allowances.

        Solutia's Statement of Consolidated Financial Position included accrued liabilities of $173 million at December 31, 2001, and $181 million at December 31, 2000, for the remediation of identified waste disposal sites. Expenditures related to remediation activities were $40 million in 2001, $29 million in 2000 and $22 million in 1999. Solutia expects to incur expenditures in the range of $30 million to $40 million annually for remediation activities for the foreseeable future.

        Uncertainties related to all of Solutia's environmental liabilities include evolving government policy and regulations, the method and extent of remediation and future changes in technology. Because of these uncertainties, Solutia estimates that potential future expenses associated with these liabilities could be an additional $20 million to $30 million. Although the ultimate costs and results of remediation of contaminated sites cannot be predicted with certainty, they are not expected to have a material, adverse effect on Solutia's consolidated financial position, liquidity or profitability in any one year.

        On April 14, 2001, Solutia reached an agreement to settle the claims brought by 1,596 plaintiffs in one of the actions pending in the U.S. District Court for the Northern District of Alabama. The settlement agreement was approved by the court and did not have a material adverse effect on Solutia's consolidated financial position, liquidity or profitability.

        A mechanics' lien in the amount of approximately $42 million was filed on the Chocolate Bayou plant in Alvin, Texas. This lien arises out of a dispute with the contractor, Fluor Daniel, over the construction of Solutia's new acrylonitrile plant. The contractor also alleges a constitutional lien on such property pursuant to the Texas Constitution.

        On October 12, 2000, the printing ink resins unit and a small phenolics production unit at Wiesbaden, Germany were severely damaged by an explosion and fire. No fatalities, serious injuries or environmental damage resulted from the incident. During the first quarter of 2001, Solutia finalized insurance recoveries and, accordingly, recognized a $28 million gain ($17 million aftertax) in other income (expense)—net from the insurance settlements in excess of the net book value of the plant assets and associated losses.

        During the first quarter of 1999, Solutia recorded a $29 million ($18 million aftertax) charge to cost of goods sold to increase reserves related to the anticipated settlement of two lawsuits brought against Monsanto, for which Solutia assumed responsibility in the 1997 spinoff from Monsanto, relating to the alleged discharge of polychlorinated biphenyls ("PCBs") from the Anniston, Alabama plant site, and to environmental remediation of the allegedly affected areas. During the third quarter of 2000, Solutia paid approximately $23 million for the settlement of these actions. The remainder of the reserve was established to cover costs associated with environmental remediation of the allegedly affected areas.

        Because of the size and nature of its business, Solutia is a party to numerous legal proceedings. Most of these proceedings have arisen in the ordinary course of business and involve claims for money damages. In addition, at the time of the spinoff, Solutia assumed from Monsanto, under the Distribution Agreement, liabilities related to specified legal proceedings. As a result, although Monsanto remains the named defendant, Solutia is required to manage the litigation and indemnify

F-30

Monsanto for costs, expenses and judgments arising from the litigation. Such matters arise out of the normal course of business and relate to product liability; government regulation, including environmental issues; employee relations and other issues. Certain of the lawsuits and claims seek damages in very large amounts. Although the results of litigation cannot be predicted with certainty, management's belief is that the final outcome of such litigation, except as noted below, will not have a material adverse effect on Solutia's consolidated financial position, liquidity or profitability in any one year.

        Monsanto manufactured PCBs at the Anniston, Alabama plant from 1935 to 1971. Solutia is defending a number of actions in state and federal court in Alabama relating to the alleged emission of PCBs and other allegedly hazardous materials from that plant. Plaintiffs claim to suffer from various personal injuries and are allegedly fearful of future illness. Some claim property damage. To date we have settled approximately 5,900 PCB claims relating to Anniston. Four cases originally filed on behalf of approximately 3,500 plaintiffs were consolidated and a trial of the claims of 16 individuals and one business from that group of plaintiffs is in progress. Plaintiffs in the current trial are claiming property damage and mental anguish and are seeking compensatory and punitive damages and injunctive relief. The jury in that case has returned a verdict finding Solutia liable to plaintiffs on theories of negligence, wantonness, suppression, nuisance, trespass and outrage. The issue of damages has not yet been submitted to the jury. The jury also determined that the circumstances in Anniston constitute a public nuisance. The Alabama Attorney General and the District Attorneys in four counties around Anniston intervened in this matter as plaintiffs for the public nuisance count. They seek an order compelling Solutia to pay for a study of the impact of PCBs in the area, and formulating a plan and setting a schedule for cleanup. In addition, the Alabama Department of Environmental Management intervened in this matter to assure that any decision reached has a sound scientific basis. Another Anniston case pending in federal court in Birmingham, Alabama, filed on behalf of 1,116 minor plaintiffs, now involves approximately 15,000 adult and minor plaintiffs. Those plaintiffs claim to suffer unspecified injuries and assert their right to medical monitoring and testing, and seek compensatory and punitive damages in unspecified amounts. The case is scheduled to go to trial in or after February 2003. Liability, if any, that may result from litigation against Solutia is not determinable. These cases are being vigorously defended. Management does not believe that the ultimate resolution of these cases will have a material adverse impact on its consolidated financial position or liquidity. However, it is possible that a resolution of these cases may have a material adverse impact on Solutia's net income in a given year, although it is impossible at this time to estimate the range or amount of any such liability.

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16.    Supplemental Data

        Supplemental income statement data were:

		2001		2000		1999
Raw material and energy costs		$	1,216	$	1,300	$	984
Employee compensation and benefits			779		824		728
Taxes other than income			119		113		92
Rent expense			37		38		26
Provision for doubtful accounts			11		11		—
Technological expenses:
	Research and development		58		67		58
	Engineering, commercial development and patent		8		24		22
Total technological expenses			66		91		80
Interest expense:
	Total interest cost		92		101		53
	Less capitalized interest		2		18		13
Net interest expense			90		83		40

17.    Segment and Geographic Data

        Effective January 1, 2001, Solutia reorganized its management structure from a centralized organization to a decentralized organization. This change redefined segment profitability as the costs for certain functional services, which were previously managed centrally, are now reflected in the operating segments. In addition, certain product groups have been moved between operating segments in recognition of the new management structure and related product management responsibilities. Financial data for prior periods have been restated to conform to the current presentation.

        Solutia's management is organized around four strategic business platforms: Performance Films, Resins and Additives, Specialties and Integrated Nylon. Resins and Additives and Specialties have been aggregated into the Specialty Products reportable segment because of their similar economic characteristics, as well as their similar products and services, production processes, types of customers and methods of distribution. Solutia's reportable segments and their major products are as follows:

Performance Films	Specialty Products	Integrated Nylon
SAFLEX® plastic interlayer KEEPSAFE®, SAFLEX INSIDE® (in Europe only) and KEEPSAFE MAXIMUM® glass for residential security and hurricane protection windows	Resins and additives, including ALFTALAT® polyester resins, RESIMENE® and MAPRENAL® crosslinkers, SYNTHACRYL® acrylic resins and GELVA® pressure-sensitive adhesives	Nylon intermediate "building block" chemicals

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LLUMAR®, VISTA® and GILA® professional and after-market window films VANCEVA™ design enhanced security and sound attenuation films	Industrial products, including THERMINOL® heat transfer fluids, DEQUEST® water treatment chemicals, SKYDROL® hydraulic fluids and SKYKLEEN® cleaning fluids for aviation and chlorobenzenes	Merchant polymer and nylon extrusion polymers, including VYDYNE® and ASCEND® Carpet fibers, including the WEAR-DATED® and ULTRON® brands
Conductive and anti-reflective coated films and deep-dyed films	Pharmaceutical services, including process research, process development services, scale-up capabilities and small scale manufacturing for the pharmaceutical industry	Industrial nylon fibers ACRILAN® acrylic fibers for apparel, upholstery fabrics, craft yarns and other applications

        Accounting policies of the segments are the same as those used in the preparation of Solutia's consolidated financial statements. Solutia evaluates the performance of its operating segments based on segment earnings before interest expense and income taxes (EBIT), which includes marketing, administrative, technological, and amortization expenses and other non-recurring charges such as restructuring and asset impairment charges that can be directly attributable to the operating segment. Certain expenses and other items that are managed outside of the segments are excluded. These unallocated items consist primarily of corporate expenses, equity earnings (loss) from affiliates, interest expense, other income—net and expense items, and certain non-recurring items such as gains and losses on asset dispositions and restructuring charges that are not directly attributable to the operating segment. Solutia accounts for intersegment sales at agreed upon transfer prices. Intersegment sales are eliminated in consolidation. Segment assets consist primarily of customer receivables, raw materials and finished goods inventories, fixed assets, goodwill and identified intangible assets directly associated with the production processes of the segment (direct fixed assets). Segment depreciation and amortization are based upon direct tangible and intangible assets. Unallocated assets consist primarily of deferred taxes, certain investments in equity affiliates and indirect fixed assets.

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        Solutia's 2001, 2000 and 1999 segment information follows:

		Year Ended December 31,
		2001							2000									1999
		Net Sales		Intersegment Sales		Profit			Net Sales			Intersegment Sales			Profit			Net Sales			Intersegment Sales			Profit
Segment:
	Performance Films	$	591	$	—	$	61		$	692		$	—		$	106		$	669		$	—		$	126
	Specialty Products		918		—		77			1,004			—			32			760			2			119
	Integrated Nylon		1,308		—		11			1,490			1			(29	)		1,407			4			161
Segment totals			2,817		—		149			3,186			1			109			2,836			6			406
Reconciliation to consolidated totals:
	Sales eliminations									(1	)		(1	)					(6	)		(6	)
	Corporate expenses						(121	)								(107	)								(111	)
	Equity earnings (loss) from affiliates						(13	)								37									38
	Interest expense						(90	)								(83	)								(40	)
	Gain on sale of Polymer Modifiers business						—									73									—
	Other income (expense)—net						(2	)								12									10
Consolidated totals:
Net sales		$	2,817	$	—				$	3,185		$	—					$	2,830		$	—
Income (loss) before income taxes						$	(77	)							$	41								$	303

		Year Ended December 31,
		2001						2000						1999
		Assets		Capital Expen- ditures		Depreciation and Amortization		Assets		Capital Expen- ditures		Depreciation and Amortization		Assets		Capital Expen- ditures		Depreciation and Amortization
Segment:
	Performance Films	$	561	$	39	$	38	$	565	$	28	$	44	$	663	$	21	$	42
	Specialty Products		1,076		35		59		1,144		31		61		1,274		20		29
	Integrated Nylon		901		20		83		1,102		159		83		1,089		210		79
Segment totals		$	2,538	$	94	$	180	$	2,811	$	218	$	188	$	3,026	$	251	$	150
Reconciliation to consolidated totals:
	Unallocated amounts		870		—		4		770		3		3		744		6		1
Consolidated totals		$	3,408	$	94	$	184	$	3,581	$	221	$	191	$	3,770	$	257	$	151

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        Solutia's geographic information for 2001, 2000 and 1999 follows:

	Net Sales						Long-Lived Assets
	2001		2000		1999		2001		2000
U.S.	$	1,618	$	1,939	$	1,992	$	846	$	899
Other countries		1,199		1,246		838		297		306
Consolidated totals	$	2,817	$	3,185	$	2,830	$	1,143	$	1,205

18.    Quarterly Data—Unaudited

			First Quarter		Second Quarter		Third Quarter		Fourth Quarter			Total Year
Net Sales		2001 2000	$ $	747 846	$ $	737 834	$ $	690 774	$ $	643 731		$ $	2,817 3,185
Gross Profit (Loss)		2001 2000		128 199		128 158		129 143		44 (14	)		429 486
Operating Income (Loss)		2001 2000		21 79		22 37		24 35		(73 (127	) )		(6 24	)
Net Income (Loss)		2001 2000		22 51		13 4		7 78		(101 (84	) )		(59 49	)
Basic Earnings (Loss) per Share		2001 2000		0.21 0.47		0.13 0.04		0.07 0.75		(0.97 (0.82	) )		(0.57 0.46	)
Diluted Earnings (Loss) per Share		2001 2000		0.21 0.46		0.12 0.04		0.07 0.74		(0.97 (0.81	) )		(0.57 0.46	)
Common Stock Price:
	2001	High Low		14.85 12.06		15.07 12.03		14.14 11.25		14.28 11.71			15.07 11.25
	2000	High Low		17.19 11.63		15.56 11.25		15.69 10.38		13.00 10.88			17.19 10.38

        Net income in the first quarter of 2001 includes an aftertax gain of $17 million from an insurance settlement associated with the explosion and fire that destroyed the Vianova printing inks and phenolics production facility in Wiesbaden, Germany. Net loss in the fourth quarter of 2001 includes aftertax charges of $96 million to cover Solutia's share of restructuring costs at its Astaris and Flexsys joint ventures, increases to environmental and self-insurance reserves, additional severance costs and the write down of certain non-performing assets.

        Net income in the second quarter of 2000 includes special net aftertax charges of $31 million principally associated with the formation and start-up of the Astaris joint venture and Solutia's share of restructuring and asset impairment charges recorded by the Flexsys joint venture. Net income in the

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third quarter of 2000 includes a $46 million aftertax gain on sale of the Polymer Modifiers business and income of $7 million recorded in income taxes related to changes in German income tax laws. Net loss in the fourth quarter of 2000 includes restructuring and asset impairment charges of $96 million aftertax.

        Under SFAS No. 128, "Earnings per Share," the quarterly and total year calculations of basic and diluted earnings (loss) per share are based on weighted average shares outstanding for that quarterly or total year period, respectively. As a result, the sum of diluted earnings (loss) per share for the quarterly periods may not equal total year earnings (loss) per share.

19.    Subsequent Event

Goodwill and Other Intangible Assets

        Effective January 1, 2002, Solutia adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." In accordance with SFAS No. 142, Solutia discontinued the amortization of goodwill and identifiable intangible assets that have indefinite useful lives. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. Goodwill will be assessed annually for impairment. This statement also required certain intangible assets that did not meet the criteria for recognition apart from goodwill, to be subsumed into goodwill. During the quarter ended March 31, 2002, Solutia subsumed into goodwill $74 million of intangible assets net of related deferred tax liabilities representing assembled workforce and noncontractual customer relationships that did not meet the separability criteria under SFAS No. 141, "Business Combinations."

        Fair value measurements of the reporting units were estimated by a third-party specialist utilizing both an income and market multiple approach. Based on this analysis, Solutia recorded an impairment loss of $167 million for the Resins and Additives business in the Specialty Products segment due to declining estimates of future results given current economic and market conditions. This goodwill is non-deductible for tax purposes.

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        Net income (loss) and earnings (loss) per share for the years ended December 31, 2001, 2000 and 1999 adjusted to exclude the non-amortization provisions of SFAS No. 142, net of tax, are as follows:

		2001			2000		1999
Net income (loss):
	Net income (loss)	$	(59	)	$	49	$	206
	Goodwill amortization		22			22		2
	Subsumed intangible assets amortization		7			6		—
	Trademark amortization		2			1		1
	Equity method goodwill amortization		2			3		2
Adjusted net income (loss)		$	(26	)	$	81	$	211

		2001			2000		1999
Basic earnings (loss) per share:
	Net income	$	(0.57	)	$	0.46	$	1.86
	Goodwill amortization		0.21			0.21		0.02
	Subsumed intangible assets amortization		0.07			0.05		—
	Trademark amortization		0.02			0.01		0.01
	Equity method goodwill amortization		0.02			0.03		0.01
Adjusted basic earnings (loss) per share		$	(0.25	)	$	0.76	$	1.90

		2001			2000		1999
Diluted earnings (loss) per share:
	Net income	$	(0.57	)	$	0.46	$	1.80
	Goodwill amortization		0.21			0.20		0.02
	Subsumed intangible assets amortization		0.07			0.05		—
	Trademark amortization		0.02			0.01		0.01
	Equity method goodwill amortization		0.02			0.03		0.01
Adjusted diluted earnings (loss) per share		$	(0.25	)	$	0.75	$	1.84

F-37

20.    Subsequent Event

Consolidating Condensed Financial Statements

        CP Films, Inc., Monchem, Inc., Monchem International, Inc., and Solutia Systems, Inc., wholly-owned subsidiaries of the Company, (Guarantors), will guarantee the senior secured notes to be issued in an anticipated offering. The Guarantors will fully and unconditionally guarantee the securities issued on a joint and several basis. The following consolidating condensed financial statements present, in separate columns, financial information for: Solutia Inc. on a parent only basis carrying its investment in subsidiaries under the equity method; Guarantors on a combined, or where appropriate, consolidated basis, carrying investments in subsidiaries who do not guarantee the debt (Non-Guarantors) under the equity method; Non-Guarantors on a combined, or where appropriate, consolidated basis; eliminating adjustments; and consolidated totals as of December 31, 2001 and 2000, and for the years ended December 31, 2001, 2000 and 1999. The eliminating adjustments primarily reflect intercompany transactions, such as interest income and expense, accounts receivable and payable, advances, short and long-term debt, royalties and profit in inventory eliminations. The Company has not presented separate financial statements and other disclosures concerning the Guarantors as management has determined that such information is not material to potential investors.

F-38

SOLUTIA INC.

CONSOLIDATING STATEMENT OF INCOME (LOSS)

Year Ended December 31, 2001

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Sales	$	1,898		$	144		$	1,256		$	(481	)	$	2,817
Cost of goods sold		1,783			62			1,038			(495	)		2,388
Gross Profit		115			82			218			14			429
Marketing expenses		123			17			35			—			175
Administrative expenses		94			7			59			—			160
Technological expenses		54			2			10			—			66
Amortization expense		—			6			28			—			34
Operating Income (Loss)		(156	)		50			86			14			(6	)
Equity earnings (loss) from affiliates—net of tax		165			54			(4	)		(228	)		(13	)
Interest expense		(152	)		(7	)		(140	)		209			(90	)
Other income (expense)—net		(19	)		126			149			(224	)		32
Income (Loss) Before Income Taxes		(162	)		223			91			(229	)		(77	)
Income taxes (benefit)		(103	)		54			31			—			(18	)
Net Income (Loss)	$	(59	)	$	169		$	60		$	(229	)	$	(59	)

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31, 2001

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Income (Loss)	$	(59	)	$	169		$	60		$	(229	)	$	(59	)
Other Comprehensive Income (Loss):
Currency translation adjustments		(37	)		(45	)		(12	)		57			(37	)
Cumulative effect of accounting change, net of tax		2			—			—			—			2
Net loss on derivative instruments, net of tax		(3	)		—			—			—			(3	)
Minimum pension liability adjustments, net of tax		2			—			—			—			2
Comprehensive Income (Loss)	$	(95	)	$	124		$	48		$	(172	)	$	(95	)

F-39

SOLUTIA INC.

CONSOLIDATING STATEMENT OF INCOME

Year Ended December 31, 2000

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Sales	$	2,235		$	143		$	1,292		$	(485	)	$	3,185
Cost of goods sold		2,085			52			1,062			(500	)		2,699
Gross Profit		150			91			230			15			486
Marketing expenses		139			15			12			(1	)		165
Administrative expenses		113			6			54			—			173
Technological expenses		71			2			18			—			91
Amortization expense		—			7			29			(3	)		33
Operating Income (Loss)		(173	)		61			117			19			24
Equity earnings (loss) from affiliates—net of tax		229			40			(9	)		(225	)		35
Interest expense		(141	)		(9	)		(141	)		208			(83	)
Other income—net		61			137			91			(224	)		65
Income (Loss) Before Income Taxes		(24	)		229			58			(222	)		41
Income taxes (benefit)		(73	)		45			21			(1	)		(8	)
Net Income	$	49		$	184		$	37		$	(221	)	$	49

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31, 2000

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Income	$	49		$	184		$	37		$	(221	)	$	49
Other Comprehensive Income (Loss):
Currency translation adjustments		(86	)		(76	)		(28	)		104			(86	)
Cumulative effect of accounting change, net of tax		—												—
Net loss on derivative instruments, net of tax		—			—			—			—			—
Minimum pension liability adjustments, net of tax		7			—			—			—			7
Comprehensive Income (Loss)	$	(30	)	$	108		$	9		$	(117	)	$	(30	)

F-40

SOLUTIA INC.

CONSOLIDATING STATEMENT OF INCOME

Year Ended December 31, 1999

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Sales	$	2,376		$	74		$	708		$	(328	)	$	2,830
Cost of goods sold		1,932			11			575			(340	)		2,178
Gross Profit		444			63			133			12			652
Marketing expenses		146			12			(6	)		1			153
Administrative expenses		88			4			30			—			122
Technological expenses		76			1			3			—			80
Amortization expense		1			(3	)		3			2			3
Operating Income		133			49			103			9			294
Equity earnings from affiliates— net of tax		178			71			2			(215	)		36
Interest expense		(103	)		(12	)		(21	)		96			(40	)
Other income—net		25			72			29			(113	)		13
Income Before Income Taxes		233			180			113			(223	)		303
Income taxes		27			38			34			(2	)		97
Net Income	$	206		$	142		$	79		$	(221	)	$	206

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Year Ended December 31, 1999

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Income	$	206		$	142		$	79		$	(221	)	$	206
Other Comprehensive Income (Loss):
Currency translation adjustments		(44	)		(36	)		(11	)		47			(44	)
Cumulative effect of accounting change, net of tax		—			—			—			—			—
Net loss on derivative instruments, net of tax		—			—			—			—			—
Minimum pension liability adjustments, net of tax		(4	)		—			—			—			(4	)
Comprehensive Income	$	158		$	106		$	68		$	(174	)	$	158

F-41

SOLUTIA INC.

CONSOLIDATING BALANCE SHEET

December 31, 2001

		Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations			Consolidated Solutia Inc.
		(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents		$	3		$	1	$	19	$	—		$	23
Trade receivables, net			(5	)		178		179		—			352
Intercompany receivables			2,899			3,354		133		(6,386	)		—
Miscellaneous receivables			77			—		28		—			105
Prepaid expenses			12			—		3		—			15
Deferred income tax benefit			95			—		21		7			123
Inventories			160			23		138		(18	)		303
Total current assets			3,241			3,556		521		(6,397	)		921
Property, Plant and Equipment:
Land			18			—		40		—			58
Buildings			274			22		129		—			425
Machinery and equipment			2,527			51		428		—			3,006
Construction in progress			18			20		13		—			51
Total property, plant and equipment			2,837			93		610		—			3,540
Less accumulated depreciation			2,070			14		313		—			2,397
Net property, Plant and Equipment			767			79		297		—			1,143
Investments in Affiliates			3,139			206		26		(3,058	)		313
Goodwill, net			2			72		312		—			386
Identified Intangible Assets, net			33			26		165		—			224
Long-Term Deferred Income Tax Benefit			242			—		12		—			254
Intercompany Advances			128			2,010		1,812		(3,950	)		—
Other Assets			136			—		31		—			167
	Total Assets	$	7,688		$	5,949	$	3,176	$	(13,405	)	$	3,408
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	160		$	8	$	65	$	—		$	233
Intercompany payables			3,271			2,995		120		(6,386	)		—
Wages and benefits			26			—		30		—			56
Postretirement liabilities			81			—		1		—			82
Miscellaneous accruals			210			11		141		—			362
Short-term debt			683			—		—		—			683
Intercompany short-term debt			189			31		112		(332	)		—
Total Current Liabilities			4,620			3,045		469		(6,718	)		1,416
Long-Term Debt			448			—		179		—			627
Intercompany Long-Term Debt			1,494			45		2,080		(3,619	)		—
Postretirement Liabilities			921			—		26		—			947
Other Liabilities			318			6		207		—			531
Shareholders' Equity (Deficit):
Common stock			1			—		—		—			1
	Net deficiency (excess) of assets at spinoff and subsidiary capital		(113	)		2,853		215		(3,068	)		(113	)
	Treasury stock		(257	)		—		—		—			(257	)
Unearned ESOP shares			(1	)		—		—		—			(1	)
Accumulated other comprehensive loss			(144	)		—		—		—			(144	)
Reinvested earnings			401			—		—		—			401
Total Shareholders' Equity (Deficit)			(113	)		2,853		215		(3,068	)		(113	)
Total Liabilities and Shareholders' Equity (Deficit)		$	7,688		$	5,949	$	3,176	$	(13,405	)	$	3,408

F-42

SOLUTIA INC.

CONSOLIDATING BALANCE SHEET

December 31, 2000

		Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations			Consolidated Solutia Inc.
		(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents		$	11		$	—	$	8	$	—		$	19
Trade receivables, net			4			213		189		—			406
Intercompany receivables			1,619			1,991		177		(3,787	)		—
Miscellaneous receivables			75			—		34		—			109
Prepaid expenses			16			—		1		—			17
Deferred income tax benefit			87			—		14		6			107
Inventories			218			23		133		(17	)		357
Total current assets			2,030			2,227		556		(3,798	)		1,015
Property, Plant and Equipment:
Land			18			—		42		—			60
Buildings			272			22		127		—			421
Machinery and equipment			2,515			49		418		—			2,982
Construction in progress			38			12		12		—			62
Total property, plant and equipment			2,843			83		599		—			3,525
Less accumulated depreciation			2,018			9		293		—			2,320
Net property, Plant and Equipment			825			74		306		—			1,205
Investments in Affiliates			3,041			188		37		(2,915	)		351
Goodwill, net			2			76		343		—			421
Identified Intangible Assets, net			5			28		184		—			217
Long-Term Deferred Income Tax Benefit			185			—		5		—			190
Intercompany Advances			134			1,978		1,421		(3,533	)		—
Other Assets			138			—		44		—			182
	Total Assets	$	6,360		$	4,571	$	2,896	$	(10,246	)	$	3,581
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	255		$	11	$	93	$	—		$	359
Intercompany payables			1,947			1,712		128		(3,787	)		—
Wages and benefits			19			—		26		—			45
Postretirement liabilities			76			—		2		—			78
Miscellaneous accruals			201			10		162		—			373
Short-term debt			484			—		10		—			494
Intercompany short-term debt			197			27		179		(403	)		—
Total Current Liabilities			3,179			1,760		600		(4,190	)		1,349
Long-Term Debt			598			—		186		—			784
Intercompany Long-Term Debt			1,404			77		1,656		(3,137	)		—
Postretirement Liabilities			916			—		25		—			941
Other Liabilities			297			6		238		—			541
Shareholders' Equity (Deficit):
Common stock			1			—		—		—			1
	Net deficiency (excess) of assets at spinoff and subsidiary capital		(113	)		2,728		191		(2,919	)		(113	)
	Treasury stock		(296	)		—		—		—			(296	)
Unearned ESOP shares			(9	)		—		—		—			(9	)
Accumulated other comprehensive loss			(108	)		—		—		—			(108	)
Reinvested earnings			491			—		—		—			491
Total Shareholders' Equity (Deficit)			(34	)		2,728		191		(2,919	)		(34	)
Total Liabilities and Shareholders' Equity (Deficit)		$	6,360		$	4,571	$	2,896	$	(10,246	)	$	3,581

F-43

SOLUTIA INC.

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW

Year Ended December 31, 2001

	Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations		Consolidated Solutia Inc.
	(Dollars in millions)
Cash From (Used In) Operations		(130	)	159		16		(1	)		44
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(41	)	(11	)	(42	)	—			(94	)
Acquisition and investment payments, net of cash acquired		(33	)	—		(2	)	—			(35	)
Property disposals and investment proceeds		8		—		35		—			43
Cash Used In Investing Activities		(66	)	(11	)	(9	)	—			(86	)
FINANCING ACTIVITIES:
Net change in short-term debt obligations		48		—		(7	)	—			41
Common stock issued under employee stock plans		13		—		—		—			13
Other financing activities		(9	)	—		1		—			(8	)
Changes in investments and advances from (to) affiliates		136		(147	)	10		1			—
Cash From (Used In) Financing Activities		188		(147	)	4		1			46
Increase (Decrease) in Cash and Cash Equivalents		(8	)	1		11		—			4
CASH AND CASH EQUIVALENTS:
Beginning of year		11		—		8		—			19
End of period	$	3		1		19		—		$	23

F-44

SOLUTIA INC.

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW

Year Ended December 31, 2000

	Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations		Consolidated Solutia Inc.
	(Dollars in millions)
Cash From (Used In) Operations		(90	)	169		172		(7	)		244
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(177	)	(11	)	(33	)	—			(221	)
Acquisition and investment payments, net of cash acquired		(4	)	—		(106	)	—			(110	)
Property disposals and investment proceeds		188		—		32		—			220
Cash From (Used In) Investing Activities		7		(11	)	(107	)	—			(111	)
FINANCING ACTIVITIES:
Net change in short-term debt obligations		(25	)	—		3		—			(22	)
Common stock issued under employee stock plans		4		—		—		—			4
Other financing activities		(313	)	—		189		—			(124	)
Changes in investments and advances from (to) affiliates		294		(36	)	(265	)	7			—
Cash Used In Financing Activities		(40	)	(36	)	(73	)	7			(142	)
Increase (Decrease) in Cash and Cash Equivalents		(123	)	122		(8	)	—			(9	)
CASH AND CASH EQUIVALENTS:
Beginning of year		134		(122	)	16		—			28
End of period	$	11		—		8		—		$	19

F-45

SOLUTIA INC.

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW

Year Ended December 31, 1999

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Cash From (Used In) Operations	$	274		$	108		$	(15	)	$	(3	)		364
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(240	)		(2	)		(15	)		—			(257	)
Acquisition and investment payments, net of cash acquired		(186	)		—			(649	)		—			(835	)
Property disposals and investment proceeds		18			—			12			—			30
Cash Used In Investing Activities		(408	)		(2	)		(652	)		—			(1,062	)
FINANCING ACTIVITIES:
Net change in short-term debt obligations		511			—			—			—			511
Common stock issued under employee stock plans		8			—			—			—			8
Other financing activities		118			—			—			—			118
Changes in investments and advances from (to) affiliates		(411	)		(228	)		636			3			—
Cash From (Used In) Financing Activities		226			(228	)		636			3			637
Increase (Decrease) in Cash and Cash Equivalents		92			(122	)		(31	)		—			(61	)
CASH AND CASH EQUIVALENTS:
Beginning of year		42			—			47			—			89
End of period	$	134			(122	)		16			—		$	28

*        *        *        *        *

F-46

SOLUTIA INC.

STATEMENT OF CONSOLIDATED INCOME (LOSS)

			Six Months Ended June 30,
			2002			2001
			(Dollars in millions, except per share amounts)
Net Sales			$	1,390		$	1,484
Cost of goods sold				1,131			1,228
Gross Profit				259			256
Marketing expenses				89			91
Administrative expenses				71			74
Technological expenses				31			32
Amortization expense				2			16
Operating Income				66			43
Equity earnings from affiliates—net of tax				12			12
Interest expense				(44	)		(44	)
Other income—net				9			37
Income Before Income Taxes				43			48
Income taxes				6			13
Income Before Cumulative Effect of Change in Accounting Principle				37			35
Cumulative Effect of Change in Accounting Principle				(167	)		—
Net Income (Loss)			$	(130	)	$	35
Basic Earnings (Loss) Per Share:
Income Before Cumulative Effect of Change in Accounting Principle			$	0.35		$	0.34
Cumulative Effect of Change in Accounting Principle			$	(1.59	)	$	—
Basic Earnings (Loss) Per Share			$	(1.24	)	$	0.34
Diluted Earnings (Loss) Per Share:
Income Before Cumulative Effect of Change in Accounting Principle			$	0.35		$	0.33
Cumulative Effect of Change in Accounting Principle			$	(1.59	)	$	—
Diluted Earnings (Loss) Per Share			$	(1.24	)	$	0.33
Weighted average equivalent shares (in millions):
	Basic			104.7			103.6
	Effect of dilutive securities:
		Common share equivalents—common shares issuable upon exercise of outstanding stock options		0.4			1.3
Diluted				105.1			104.9

See accompanying Notes to Consolidated Financial Statements

F-47

SOLUTIA INC.

STATEMENT OF CONSOLIDATED COMPREHENSIVE LOSS

	Six Months Ended June 30,
	2002			2001
	(Dollars in millions)
Net Income (Loss)	$	(130	)	$	35
Other Comprehensive Income (Loss):
Currency translation adjustments		82			(60	)
Unrealized investment gain (loss), net of tax		—			—
Net unrealized loss on derivative instruments, net of tax		—			(2	)
Net realized (gain) loss on derivative instruments, net of tax		1			(2	)
Comprehensive Income (Loss)	$	(47	)	$	(29	)

See accompanying Notes to Consolidated Financial Statements

F-48

SOLUTIA INC.

STATEMENT OF CONSOLIDATED FINANCIAL POSITION

	June 30, 2002			December 31, 2001
	(Dollars in millions, except per share amounts)
ASSETS
Current Assets:
Cash and cash equivalents	$	13		$	23
Trade receivables, net of allowance of $18 in 2002 and $22 in 2001		439			352
Miscellaneous receivables		115			105
Prepaid expenses		10			15
Deferred income tax benefit		121			123
Inventories		327			303
Total Current Assets		1,025			921
Property, Plant and Equipment:
Land		62			58
Buildings		437			425
Machinery and equipment		3,056			3,006
Construction in progress		51			51
Total Property, Plant and Equipment		3,606			3,540
Less Accumulated Depreciation		2,469			2,397
Net Property, Plant and Equipment		1,137			1,143
Investments in Affiliates		221			313
Goodwill, Net		324			386
Identified Intangible Assets, Net		74			194
Long-Term Deferred Income Tax Benefit		236			254
Other Assets		183			197
Total Assets	$	3,200		$	3,408
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable	$	272		$	233
Wages and benefits		51			56
Postretirement liabilities		93			82
Miscellaneous accruals		343			362
Short-term debt		576			683
Total Current Liabilities		1,335			1,416
Long-Term Debt		646			627
Postretirement Liabilities		937			947
Other Liabilities		440			531
Shareholders' Deficit:
Common stock (authorized, 600,000,000 shares, par value $0.01) Issued: 118,400,635 shares in 2002 and 2001		1			1
Net deficiency of assets at spinoff		(113	)		(113	)
Treasury stock, at cost (13,597,101 shares in 2002 and 13,921,604 shares in 2001)		(250	)		(257	)
Unearned ESOP Shares		—			(1	)
Accumulated Other Comprehensive Loss		(62	)		(144	)
Reinvested Earnings		266			401
Shareholders' Deficit		(158	)		(113	)
Total Liabilities and Shareholders' Deficit	$	3,200		$	3,408

See accompanying Notes to Consolidated Financial Statements

F-49

SOLUTIA INC.

STATEMENT OF CONSOLIDATED CASH FLOW

			Six Months Ended June 30,
			2002			2001
			(Dollars in millions)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES:
Net income (loss)			$	(130	)	$	35
Adjustments to reconcile to Cash From Operations:
	Cumulative effect of change in accounting principle			167			—
	Depreciation and amortization			76			90
	Amortization of deferred credits			(7	)		(7	)
	Net pretax gains from asset disposals			(6	)		(31	)
	Changes in assets and liabilities:
		Income and deferred taxes		61			(7	)
		Trade receivables		(87	)		(25	)
		Inventories		(24	)		1
		Accounts payable		41			(45	)
		Other assets and liabilities		(42	)		(93	)
Cash From Operations				49			(82	)
INVESTING ACTIVITIES:
Property, plant and equipment purchases				(31	)		(43	)
Acquisition and investment payments, net of cash acquired				(17	)		(18	)
Property disposals and investment proceeds				100			32
Cash From Investing Activities				52			(29	)
FINANCING ACTIVITIES:
Net change in short-term debt obligations				(109	)		103
Common stock issued under employee stock plans				2			8
Other financing activities				(4	)		(2	)
Cash From Financing Activities				(111	)		109
Decrease in Cash and Cash Equivalents				(10	)		(2	)
CASH AND CASH EQUIVALENTS:
Beginning of Year				23			19
End of Period			$	13		$	17

See accompanying Notes to Consolidated Financial Statements

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SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

1.    Basis of Presentation

        Solutia Inc. and its subsidiaries make and sell a variety of high-performance chemical-based materials. Solutia is a world leader in performance films for laminated safety glass and after-market applications; resins and additives for high-value coatings; process development and scale-up services for pharmaceutical fine chemicals; specialties such as water treatment chemicals, heat transfer fluids and aviation hydraulic fluid and an integrated family of nylon products including high-performance polymers and fibers.

        These financial statements should be read in conjunction with the audited financial statements and notes to consolidated financial statements included in Solutia's 2001 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 7, 2002. A summary of our critical accounting policies is presented on page 13 of our most recent Form 10-K. There have been no material changes in the accounting policies followed by Solutia during fiscal year 2002 except for those changes described in Note 6.

        The accompanying unaudited consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the financial position, results of operations, comprehensive income (loss), and cash flows for the interim periods reported. Such adjustments are of a normal, recurring nature. The results of operations for the three-month and six-month periods ended June 30, 2002, are not necessarily indicative of the results to be expected for the full year.

        Certain reclassifications to prior year's financial information have been made to conform to the 2002 presentation.

2.    Acquisitions

        On May 31, 2002, Solutia acquired Axio Research Corporation (Axio) for approximately $5 million, which was financed with cash from operations. Axio is a contract research organization providing clinical trial design and data management to a wide range of clients including pharmaceutical, biotechnology and medical device companies as well as academic and government research groups. Axio will complement the Pharmaceutical service offering within the Specialty Products segment. The allocation of the purchase price to assets and liabilities acquired resulted in current assets of $1 million, non-current assets of $1 million, goodwill of $4 million and current liabilities of $1 million. Axio's results of operations were included in Solutia's results of operations from the acquisition date and were not material to Solutia's consolidated results of operations for the six month period ended June 30, 2002.

3.    Restructuring Reserves

        As part of the integration of Vianova Resins with Solutia's resins businesses, Solutia identified excess production capacity for certain Solutia resins products that will allow for the consolidation of production facilities. As a result, Solutia decided to exit its operations at the Port Plastics site in Addyston, Ohio. An $8 million ($5 million aftertax) charge to cost of goods sold was recorded in the second quarter of 2000 to carry out the exit plan. The charge included $2 million to write down plant assets to their fair value of approximately $1 million, $2 million of dismantling costs and $4 million of estimated costs for which Solutia is contractually obligated under an operating agreement. Fair value was determined by discounting future cash flows using an appropriate discount rate based on the

F-51

Company's cost of capital. Under the operating agreement, Solutia was required to provide 24 months notice of intent to exit and to pay contractually obligated costs for an additional 18 months thereafter to a third-party operator. Solutia provided notice of intent to exit on June 30, 2000, and exited the site in June of 2002. The contractually obligated costs represent direct manufacturing, overhead, utilities and severance. The financial impact will not be material to Solutia as production will be shifted to other production facilities.

        The following table summarizes the 2000 restructuring charge and amounts utilized to carry out those plans:

		Shutdown of Facilities		Asset Write-Downs			Other Costs		Total
		(Dollars in millions)
Balance at January 1, 2000		$	—	$	—		$	—	$	—
	Charges taken		2		2			4		8
	Amounts utilized		—		(2	)		—		(2	)
Balance at December 31, 2000			2		—			4		6
	Amounts utilized		—		—			—		—
Balance at December 31, 2001			2		—			4		6
	Amounts utilized		—		—			—		—
Balance at March 31, 2002			2		—			4		6
	Amounts utilized		—		—			—		—
Balance at June, 2002		$	2	$	—		$	4	$	6

4.    Inventory Valuation

        The components of inventories as of June 30, 2002, and December 31, 2001, were as follows:

	June 30, 2002			December 31, 2001
Finished goods	$	225		$	209
Goods in process		110			107
Raw materials and supplies		103			100
Inventories, at FIFO cost		438			416
Excess of FIFO over LIFO cost		(111	)		(113	)
Total	$	327		$	303

5.    Contingencies

        Because of the size and nature of its business, Solutia is a party to numerous legal proceedings. Most of these proceedings have arisen in the ordinary course of business and involve claims for money damages. In addition, at the time of the spinoff, Solutia assumed from the former Monsanto Company (now known as Pharmacia Corporation), under a distribution agreement, liabilities related to specified legal proceedings. As a result, although Pharmacia remains a defendant, Solutia is required to manage the litigation and indemnify Pharmacia for costs, expenses and judgments arising from the litigation.

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Such matters arise out of the normal course of business and relate to product liability; government regulation, including environmental issues; employee relations and other issues. Certain of the lawsuits and claims seek damages in significant amounts. Although the results of litigation cannot be predicted with certainty, management's belief is that the final outcome of such litigation, except as noted below, will not have a material adverse effect on Solutia's consolidated financial position, liquidity or profitability in any one year.

        Solutia's Annual Report on Form 10-K for the year ended December 31, 2001, describes four consolidated cases, sometimes referred to as Abernathy v. Monsanto or Bowie v. Monsanto, which have been in trial in Circuit Court for Etowah County, Alabama. The trial court departed from its announced schedule and did not submit the issue of compensatory damages for the 17 Phase I trial plaintiffs to the jury for determination. If damages are awarded against Solutia in these cases, it would appeal on all available grounds. Solutia believes that it has meritorious grounds for appeal; however, there can be no guarantee any such appeal would be successful. Also, in order to appeal any lower court judgment, Solutia would be required to post a surety bond. Such a bond is often required to be collateralized.

        Pharmacia is our co-defendant in the Abernathy or Bowie cases. Pharmacia has agreed to obtain a surety bond if it is able to do so on commercially reasonable terms if needed and if Solutia does not obtain the bond. If Pharmacia obtains an appeal bond without providing collateral, any decisions regarding management or settlement of this litigation would be jointly controlled by Solutia, Pharmacia, and Monsanto (the new company which Pharmacia has announced plans to spin off on August 13, 2002) with each company having an equal vote. If such a bond is required to be secured by collateral, Solutia would have the right to provide the collateral and control any settlement decisions regarding these cases. If Solutia does not provide the required collateral, then Monsanto would have the option to provide the collateral and would then control any settlement decisions regarding these cases. If Monsanto does not provide the required collateral, then Pharmacia would provide the necessary collateral and would assume control of any settlement decisions in these cases.

        Management does not believe that the ultimate resolution of the matters related to Anniston, Alabama will have a material adverse impact on its consolidated financial position or liquidity. However, it is possible that a resolution of these cases may have a material adverse impact on Solutia's net income in a given year, although it is impossible at this time to estimate the range or amount of any such liability.

        In connection with the agreement described above relating to obtaining a surety bond in the Abernathy v. Monsanto litigation, if one is necessary, Solutia has agreed to an amendment, dated as of July 1, 2002, to the distribution agreement with Pharmacia. The amendment provides that Solutia accepts the substitution of Monsanto in place of Pharmacia as the entity that will, generally, in the first instance, perform many of the obligations of Pharmacia under the distribution agreement. Pharmacia, however, has agreed to remain primarily liable under the distribution agreement for the performance of those obligations. The amendment to the distribution agreement also provides that Solutia will indemnify Monsanto with respect to the liabilities assumed by Solutia under the distribution agreement.

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6.    Goodwill and Other Intangible Assets

        Effective January 1, 2002, Solutia adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." In accordance with SFAS No. 142, Solutia discontinued the amortization of goodwill and identifiable intangible assets that have indefinite useful lives. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. Goodwill will be assessed annually for impairment. This statement also required certain intangible assets that did not meet the criteria for recognition apart from goodwill, to be subsumed into goodwill. During the quarter ended March 31, 2002, Solutia subsumed into goodwill $74 million of intangible assets net of related deferred tax liabilities representing assembled workforce and noncontractual customer relationships that did not meet the separability criteria under SFAS No. 141, "Business Combinations."

F-54

        Net income (loss) and earnings (loss) per share for the three and six months ended June 30, 2002 and 2001, adjusted to exclude the non-amortization provisions of SFAS No. 142, net of tax, are as follows:

		Three Months Ended June 30,				Six Months Ended June 30,
		2002		2001		2002			2001
Net income (loss):
	Income before cumulative effect of change in accounting principle	$	23	$	13	$	37		$	35
	Goodwill amortization		—		5		—			10
	Subsumed intangible assets amortization		—		2		—			3
	Equity method goodwill amortization		—		1		—			1
	Trademark amortization		—		—		—			1
	Cumulative effect of change in accounting principle		—		—		(167	)		—
Adjusted net income (loss)		$	23	$	21	$	(130	)	$	50

		Three Months Ended June 30,				Six Months Ended June 30,
		2002		2001		2002			2001
Basic earnings (loss) per share:
	Income before cumulative effect of change in accounting principle	$	0.22	$	0.13	$	0.35		$	0.34
	Goodwill amortization		—		0.05		—			0.10
	Subsumed intangible assets amortization		—		0.02		—			0.03
	Equity method goodwill amortization		—		0.01		—			0.01
	Trademark amortization		—		—		—			0.01
	Cumulative effect of change in accounting principle		—		—		(1.59	)		—
Adjusted basic earnings (loss) per share		$	0.22	$	0.21	$	(1.24	)	$	0.49

		Three Months Ended June 30,				Six Months Ended June 30,
		2002		2001		2002			2001
Diluted earnings (loss) per share:
	Income before cumulative effect of change in accounting principle	$	0.22	$	0.12	$	0.35		$	0.33
	Goodwill amortization		—		0.05		—			0.10
	Subsumed intangible assets amortization		—		0.02		—			0.03
	Equity method goodwill amortization		—		0.01		—			0.01
	Trademark amortization		—		—		—			0.01
	Cumulative effect of change in accounting principle		—		—		(1.59	)		—
Adjusted diluted earnings (loss) per share		$	0.22	$	0.20	$	(1.24	)	$	0.48

F-55

        Identified intangible assets are as follows:

		Gross Carrying Value		June 30, 2002 Accumulated Amortization			Net Carrying Value
Amortized intangible assets:
	Contractual customer relationships	$	26	$	(4	)	$	22
	Patents		7		(2	)		5
	Employment agreements		5		(1	)		4
	Other		6		(4	)		2
Total amortized intangible assets		$	44	$	(11	)	$	33
Unamortized intangible assets:
	Trademarks	$	47	$	(6	)	$	41
Total unamortized intangible assets		$	47	$	(6	)	$	41
Total identified intangible assets		$	91	$	(17	)	$	74

		Gross Carrying Value		December 31, 2001 Accumulated Amortization			Net Carrying Value
Intangible assets:
	Customer relationships	$	149	$	(14	)	$	135
	Trademarks		45		(6	)		39
	Assembled workforce		10		(2	)		8
	Patents		7		(2	)		5
	Employment agreements		5		—			5
	Other		6		(4	)		2
Total intangible assets		$	222	$	(28	)	$	194

        The Company's second quarter acquisition of Axio (see Note 2), resulted in goodwill of approximately $4 million. Intangible asset amortization expense was $1 million for the quarter ended June 30, 2002, and $2 million for the six months ended June 30, 2002. As a result of adoption of SFAS No. 142, there have been no changes to amortizable lives or methods, except for trademarks, which have indefinite lives as defined under the new standard. Trademarks are associated with products and tradenames of the Company and are expected to provide benefits beyond the foreseeable future. Amortization expense for the net carrying amount of intangible assets is estimated to be $4 million in 2002, $4 million in 2003, $4 million in 2004, $4 million in 2005 and $4 million in 2006.

F-56

        Goodwill as allocated by reportable segment is as follows:

		Performance Films			Specialty Products			Integrated Nylon		Total
Gross goodwill, December 31, 2001		$	84		$	347		$	—	$	431
Accumulated amortization			(11	)		(34	)		—		(45	)
Net goodwill, December 31, 2001		$	73		$	313		$	—	$	386
Intangible assets and related accounts subsumed:
	Noncontractual customer relationships		—			114			—		114
	Assembled workforce		—			8			—		8
	Deferred tax liabilities		—			(48	)		—		(48	)
Goodwill acquired			—			4			—		4
Impairment loss			—			(167	)		—		(167	)
Translation			—			27			—		27
Goodwill, June 30, 2002		$	73		$	251		$	—	$	324

        Fair value measurements of the reporting units were estimated by a third-party specialist utilizing both an income and market multiple approach. Based on this analysis, Solutia recorded an impairment loss of $167 million during the first quarter of 2002 for the Resins and Additives business in the Specialty Products segment due to declining estimates of future results given current economic and market conditions. This goodwill is non-deductible for tax purposes. The impairment charge is reflected as the cumulative effect of change in accounting principle in the accompanying statement of consolidated income (loss).

7.    Investments In Affiliates

        During the first quarter of 2002, Solutia sold its 50 percent interest in the Advanced Elastomer Systems joint venture to ExxonMobil Chemical Company, a division of Exxon Mobil Corporation and Exxon Chemical Asset Management Partnership, a subsidiary of Exxon Mobil Corporation for approximately $102 million. The sale resulted in a gain of $5 million ($3 million aftertax).

8.    Segment Data

        Solutia's management is organized around four strategic business platforms: Performance Films, Resins and Additives, Specialties and Integrated Nylon. Resins and Additives and Specialties have been aggregated into the Specialty Products reportable segment because of their similar economic

F-57

characteristics, as well as their similar products and services, production processes, types of customers and methods of distribution. Solutia's reportable segments and their major products are as follows:

Performance Films	Specialty Products	Integrated Nylon
SAFLEX® plastic interlayer KEEPSAFE®, SAFLEX INSIDE® (in Europe only) and KEEPSAFE MAXIMUM® glass for residential security and hurricane protection windows	Resins and additives, including ALFTALAT® polyester resins, RESIMENE® and MAPRENAL® crosslinkers, SYNTHACRYL® acrylic resins and GELVA® pressure-sensitive adhesives	Nylon intermediate "building block" chemicals Merchant polymer and nylon extrusion polymers, including VYDYNE® and ASCEND®
LLUMAR®, VISTA® and GILA® professional and after-market window films VANCEVA™ design enhanced security and sound attenuation films	Industrial products, including THERMINOL® heat transfer fluids, DEQUEST® water treatment chemicals, SKYDROL® hydraulic fluids and SKYKLEEN® cleaning fluids for aviation and chlorobenzenes	Carpet fibers, including the WEAR-DATED® and ULTRON VIP® brands Industrial nylon fibers
Conductive and anti-reflective coated films and deep-dyed films	Pharmaceutical services, including process research, process development services, scale-up capabilities and small scale manufacturing for the pharmaceutical industry	ACRILAN® acrylic fibers for apparel, upholstery fabrics, craft yarns and other applications

        Accounting policies of the segments are the same as those used in the preparation of Solutia's consolidated financial statements. Solutia evaluates the performance of its operating segments based on segment earnings before interest expense and income taxes (EBIT), which includes marketing, administrative, technological, and amortization expenses and other non-recurring charges such as restructuring and asset impairment charges that can be directly attributable to the operating segment. Certain expenses and other items that are managed outside of the segments are excluded. These unallocated items consist primarily of corporate expenses, equity earnings from affiliates, interest expense, other income—net and expense items, and certain non-recurring items such as gains and losses on asset dispositions and restructuring charges that are not directly attributable to the operating segment. Solutia accounts for intersegment sales at agreed upon transfer prices. Intersegment sales are eliminated in consolidation. Segment assets consist primarily of customer receivables, raw materials and finished goods inventories, fixed assets, goodwill and identified intangible assets directly associated with the production processes of the segment (direct fixed assets). Segment depreciation and amortization are based upon direct tangible and intangible assets. Unallocated assets consist primarily of deferred taxes, certain investments in equity affiliates and indirect fixed assets.

F-58

        Segment data for the three and six months ended June 30, 2002, and 2001, were as follows:

		Three Months Ended June 30,
		2002									2001
		Net Sales			Intersegment Sales			Profit			Net Sales		Intersegment Sales		Profit
Segment:
	Performance Films	$	155		$	—		$	21		$	159	$	—	$	20
	Specialty Products		242			1			21			234		—		14
	Integrated Nylon		340			—			12			344		—		9
Segment totals			737			1			54			737		—		43
Reconciliation to consolidated totals:
	Sales eliminations		(1	)		(1	)					—		—
	Corporate expenses								(15	)						(16	)
	Equity earnings from affiliates								3							7
	Interest expense								(19	)						(22	)
	Other income—net								3							2
Consolidated totals:
Net sales		$	736		$	—					$	737	$	—
Income before income taxes								$	26						$	14

		Six Months Ended June 30,
		2002									2001
		Net Sales			Intersegment Sales			Profit			Net Sales		Intersegment Sales		Profit
Segment:
	Performance Films	$	297		$	—		$	40		$	310	$	—	$	36
	Specialty Products (a)		458			1			41			485		—		63
	Integrated Nylon		636			—			19			689		—		4
Segment totals			1,391			1			100			1,484		—		103
Reconciliation to consolidated totals:
	Sales eliminations		(1	)		(1	)					—		—		(26	)
	Corporate expenses								(32	)						12
	Equity earnings from affiliates								11							(44	)
	Interest expense								(44	)						3
	Other income—net (b)								8
Consolidated totals:
Net sales		$	1,390		$	—					$	1,484	$	—
Income before income taxes								$	43						$	48

(a)

Specialty Products profit for the six months ended June 30, 2001, includes a gain from an insurance settlement associated with the explosion and fire that destroyed the Vianova printing

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inks and phenolics production facility in Wiesbaden, Germany ($28 million pretax, $17 million aftertax).

(b)

Other income—net for the six months ended June 30, 2002, includes a gain from the sale of Solutia's 50 percent interest in the Advanced Elastomer Systems joint venture to ExxonMobil Chemical Company, a division of Exxon Mobil Corporation and Exxon Chemical Asset Management Partnership, a subsidiary of Exxon Mobil Corporation ($5 million pretax, $3 million aftertax).

9.    Subsequent Events

Amended Credit Facility

        On July 25, 2002, Solutia and its bank syndicate amended Solutia's revolving credit facility. The amendment extends the maturity of the facility until August 2004. It also reduces the facility from $800 million to $600 million and separates the facility into a $300 million term loan and a $300 million revolving credit facility. The term loan has scheduled payment obligations as follows: $25 million at December 31, 2002; $50 million at December 31, 2003; $25 million at June 30, 2004; and the remainder at maturity.

        Borrowings under the amended credit facility bear interest at a floating rate based on LIBOR, plus an applicable margin. The margin for LIBOR loans is 5.75 percent and will increase by 50 basis points in July 2003 and an additional 50 basis points in January 2004. A premium in the amount of 2 percent of the principal repaid on the term loan will apply until July 25, 2003, and a premium of 1 percent will apply to such principal payments thereafter. The amended credit facility is available for working capital and other general corporate purposes.

Senior Secured Notes

        On July 9, 2002, SOI Funding Corp. ("SOI Funding"), a special purpose entity, offered 223,000 units (the "Units"), comprising $223 million aggregate principal amount of its 11.25 percent Senior Secured Notes (the "Notes") due 2009 and warrants to purchase a total of 5,533,522 shares of Solutia's common stock.

        The Units were offered and sold only to "Qualified Institutional Buyers" as defined under Rule 144A under the Securities Act of 1933 (the "Act"), and outside the United States in accordance with Regulation S under the Act. Cash proceeds from the sale of the Units net of estimated fees were approximately $193 million. These net offering proceeds were placed in escrow pending Solutia's amendment of its credit facilities, as described under "Amended Credit Facility" above, and assumption of SOI Funding's obligations under the Notes. Both of these events occurred on July 25, 2002, at which time the net offering proceeds were released to Solutia. Solutia deposited approximately $155 million of the proceeds with the trustee for the $150 million of 6.5 percent notes due October 15, 2002 to pay the principal and interest at maturity. The remaining proceeds were used to pay fees, expenses and other costs related to the amended credit facility, cash collateralize certain outstanding letters of credit and repay a portion of borrowings under Solutia's amended credit facility.

F-60

        Each warrant entitles the holder to purchase 24.814 shares of Solutia's common stock at an exercise price of $7.59 per share, subject to adjustment under certain circumstances. Solutia recorded the warrants at their estimated fair value of approximately $19 million on the date of issuance based on the application of the Black-Scholes option pricing model which incorporates current stock price, expected dividend yield, expected stock price volatility, expected interest rates and the expected holding period of the warrants. The warrants will be exercisable at any time after their separation from the Notes and before their expiration on July 15, 2009.

        Solutia's obligations and the obligations of its subsidiary borrowers under the amended credit facility and the senior secured notes are guaranteed by Solutia Inc., CPFilms Inc., Monchem International Inc., Monchem, Inc., Solutia Systems, Inc. and each of Solutia's subsequently acquired or organized domestic subsidiaries, subject to certain exceptions. The notes and the guarantees are secured by either first or second priority liens on all of the domestic collateral securing Solutia's bank obligations.

10.    Consolidating Condensed Financial Statements

        CPFilms, Inc., Monchem, Inc., Monchem International, Inc., and Solutia Systems, Inc., wholly-owned subsidiaries of the Company (the "Guarantors"), are guarantors of the amended credit facility and the Notes issued in a private placement offering (see Note 9). The Guarantors will fully and unconditionally guarantee the Notes on a joint and several basis. The following consolidating condensed financial statements present, in separate columns, financial information for: Solutia Inc. on a parent only basis carrying its investment in subsidiaries under the equity method; Guarantors on a combined, or where appropriate, consolidated basis, carrying investments in subsidiaries who do not guarantee the debt (the "Non-Guarantors") under the equity method; Non-Guarantors on a combined, or where appropriate, consolidated basis; eliminating adjustments; and consolidated totals as of June 30, 2002 and December 31, 2001, and for the six months ended June 30, 2002 and 2001. The eliminating adjustments primarily reflect intercompany transactions, such as interest income and expense, accounts receivable and payable, advances, short and long-term debt, royalties and profit in inventory eliminations. The Company has not presented separate financial statements and other disclosures concerning the Guarantors as management has determined that such information is not material to potential investors.

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SOLUTIA INC.

CONSOLIDATING STATEMENT OF LOSS

Six Months Ended June 30, 2002

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Sales	$	927		$	83		$	634		$	(254	)	$	1,390
Cost of goods sold		831			37			522			(259	)		1,131
Gross Profit		96			46			112			5			259
Marketing expenses		57			9			23			—			89
Administrative expenses		44			4			25			(2	)		71
Technological expenses		25			1			5			—			31
Amortization expense		—			—			2			—			2
Operating Income (Loss)		(30	)		32			57			7			66
Equity earnings (loss) from affiliates—net of tax		(45	)		(139	)		—			196			12
Interest expense		(75	)		(3	)		(57	)		91			(44	)
Other income—net		14			52			44			(101	)		9
Income (Loss) Before Income Taxes		(136	)		(58	)		44			193			43
Income taxes (benefit)		(7	)		—			14			(1	)		6
Income (Loss) Before Cumulative effect of Change in Accounting Principle		(129	)		(58	)		30			194			37
Cumulative Effect of Change in Accounting Principle		(1	)		—			(166	)		—			(167	)
Net Loss	$	(130	)	$	(58	)	$	(136	)	$	194		$	(130	)

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Quarter Ended June 30, 2002

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Income	$	(130	)	$	(58	)	$	(136	)	$	194		$	(130	)
Other Comprehensive Income (Loss):
Currency translation adjustments		82			81			13			(94	)		82
Unrealized investment gains, net of tax		—			—			—			—			—
Net realized loss on derivative instruments, net of tax		1			—			—			—			1
Comprehensive Income (Loss)	$	(47	)	$	23		$	(123	)	$	100		$	(47	)

F-62

SOLUTIA INC.

CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 2001

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Sales	$	1,006		$	80		$	658		$	(260	)	$	1,484
Cost of goods sold		918			34			544			(268	)		1,228
Gross Profit		88			46			114			8			256
Marketing expenses		73			9			9			—			91
Administrative expenses		46			4			24			—			74
Technological expenses		27			1			4			—			32
Amortization expense		(6	)		3			19			—			16
Operating Income (Loss)		(52	)		29			58			8			43
Equity earnings from affiliates— net of tax		156			47			—			(191	)		12
Interest expense		(74	)		(4	)		(69	)		103			(44	)
Other income (expense)—net		(10	)		67			91			(111	)		37
Income Before Income Taxes		20			139			80			(191	)		48
Income taxes (benefit)		(15	)		—			28			—			13
Net Income	$	35		$	139		$	52		$	(191	)	$	35

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Six Months Ended June 30, 2001

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia Inc.
	(Dollars in millions)
Net Income	$	35		$	139		$	52		$	(191	)	$	35
Other Comprehensive Income (Loss):
Currency translation adjustments		(60	)		(62	)		(17	)		79			(60	)
Net unrealized loss on derivative instruments, net of tax		(2	)		—			—			—			(2	)
Net realized (gain) loss on derivative instruments, net of tax		(2	)		—			—			—			(2	)
Comprehensive Income (Loss)	$	(29	)	$	77		$	35		$	(112	)	$	(29	)

F-63

SOLUTIA INC.

CONSOLIDATING BALANCE SHEET

June 30, 2002

		Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations			Consolidated Solutia Inc.
		(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents		$	2		$	1	$	10	$	—		$	13
Trade receivables, net			15			202		222		—			439
Intercompany receivables			(34	)		532		146		(644	)		—
Miscellaneous receivables			83			—		32		—			115
Prepaid expenses			4			1		5		—			10
Deferred income tax benefit			94			—		20		7			121
Inventories			159			23		166		(21	)		327
	Total current assets		323			759		601		(658	)		1,025
Property, Plant and Equipment:
Land			17			—		45		—			62
Buildings			272			23		142		—			437
Machinery and equipment			2,514			64		478		—			3,056
Construction in progress			25			10		16		—			51
Total property, plant and equipment			2,828			97		681		—			3,606
Less accumulated depreciation			2,095			17		357		—			2,469
Net property, Plant and Equipment			733			80		324		—			1,137
Investments in Affiliates			3,073			77		29		(2,958	)		221
Goodwill			—			72		252		—			324
Identified Intangible Assets, net			3			26		45		—			74
Long-Term Deferred Income Tax Benefit			219			—		17		—			236
Intercompany Advances			128			2,085		1,445		(3,658	)		—
Other Assets			150			—		33		—			183
	Total Assets	$	4,629		$	3,099	$	2,746	$	(7,274	)	$	3,200
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	178		$	12	$	82	$	—		$	272
Intercompany payables			364			134		146		(644	)		—
Wages and benefits			25			—		26		—			51
Postretirement liabilities			92			—		1		—			93
Miscellaneous accruals			180			12		151		—			343
Short-term debt			525			—		51		—			576
Intercompany short-term debt			285			27		347		(659	)		—
Total Current Liabilities			1,649			185		804		(1,303	)		1,335
Long-Term Debt			448			—		198		—			646
Intercompany Long-Term Debt			1,500			34		1,465		(2,999	)		—
Postretirement Liabilities			907			—		30		—			937
Other Liabilities			283			4		153		—			440
Shareholders' Equity (Deficit):
Common stock			1			—		—		—			1
	Net (deficiency) excess of assets at spinoff and subsidiary capital		(113	)		2,876		96		(2,972	)		(113	)
	Treasury stock		(250	)		—		—		—			(250	)
Accumulated other comprehensive loss			(62	)		—		—		—			(62	)
Reinvested earnings			266			—		—		—			266
Total Shareholders' Equity (Deficit)			(158	)		2,876		96		(2,972	)		(158	)
Total Liabilities and Shareholders' Equity (Deficit)		$	4,629		$	3,099	$	2,746	$	(7,274	)	$	3,200

F-64

SOLUTIA INC.

CONSOLIDATING BALANCE SHEET

December 31, 2001

		Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations			Consolidated Solutia Inc.
		(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents		$	3		$	1	$	19	$	—		$	23
Trade receivables, net			(5	)		178		179		—			352
Intercompany receivables			2,899			3,354		133		(6,386	)		—
Miscellaneous receivables			77			—		28		—			105
Prepaid expenses			12			—		3		—			15
Deferred income tax benefit			95			—		21		7			123
Inventories			160			23		138		(18	)		303
Total current assets			3,241			3,556		521		(6,397	)		921
Property, Plant and Equipment:
Land			18			—		40		—			58
Buildings			274			22		129		—			425
Machinery and equipment			2,527			51		428		—			3,006
Construction in progress			18			20		13		—			51
Total property, plant and equipment			2,837			93		610		—			3,540
Less accumulated depreciation			2,070			14		313		—			2,397
Net property, Plant and Equipment			767			79		297		—			1,143
Investments in Affiliates			3,139			206		26		(3,058	)		313
Goodwill, net			2			72		312		—			386
Identified Intangible Assets, net			3			26		165		—			194
Long-Term Deferred Income Tax Benefit			242			—		12		—			254
Intercompany Advances			128			2,010		1,812		(3,950	)		—
Other Assets			166			—		31		—			197
	Total Assets	$	7,688		$	5,949	$	3,176	$	(13,405	)	$	3,408
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	160		$	8	$	65	$	—		$	233
Intercompany payables			3,271			2,995		120		(6,386	)		—
Wages and benefits			26			—		30		—			56
Postretirement liabilities			81			—		1		—			82
Miscellaneous accruals			210			11		141		—			362
Short-term debt			683			—		—		—			683
Intercompany short-term debt			189			31		112		(332	)		—
Total Current Liabilities			4,620			3,045		469		(6,718	)		1,416
Long-Term Debt			448			—		179		—			627
Intercompany Long-Term Debt			1,494			45		2,080		(3,619	)		—
Postretirement Liabilities			921			—		26		—			947
Other Liabilities			318			6		207		—			531
Shareholders' Equity (Deficit):
Common stock			1			—		—		—			1
	Net deficiency (excess) of assets at spinoff and subsidiary capital		(113	)		2,853		215		(3,068	)		(113	)
	Treasury stock		(257	)		—		—		—			(257	)
Unearned ESOP shares			(1	)		—		—		—			(1	)
Accumulated other comprehensive loss			(144	)		—		—		—			(144	)
Reinvested earnings			401			—		—		—			401
Total Shareholders' Equity (Deficit)			(113	)		2,853		215		(3,068	)		(113	)
Total Liabilities and Shareholders' Equity (Deficit)		$	7,688		$	5,949	$	3,176	$	(13,405	)	$	3,408

F-65

SOLUTIA INC.

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2002

	Parent Only Solutia Inc.			Guarantors			Non- Guarantors			Eliminations		Consolidated Solutia Inc.
	(Dollars in millions)
Cash From Operations	$	(39	)	$	63		$	25		$	—	$	49
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(15	)		(4	)		(12	)		—		(31	)
Acquisition and investment payments, net of cash acquired		(17	)		—			—			—		(17	)
Property disposals and investment proceeds		101			—			(1	)		—		100
Cash From Investing Activities		69			(4	)		(13	)		—		52
FINANCING ACTIVITIES:
Net change in short-term debt obligations		(157	)		—			48			—		(109	)
Common stock issued under employee stock plans		2			—			—			—		2
Other financing activities		(4	)		—			—			—		(4	)
Changes in investments and advances from (to) affiliates		128			(59	)		(69	)		—		—
Cash From Financing Activities		(31	)		(59	)		(21	)		—		(111	)
Decrease in Cash Equivalents		(1	)		—			(9	)		—		(10	)
CASH AND CASH EQUIVALENTS:
Beginning of year		3			1			19			—		23
End of period	$	2		$	1		$	10		$	—	$	13

F-66

SOLUTIA INC.

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW

Six Months Ended June 30, 2001

	Parent Only Solutia Inc.			Guarantors		Non- Guarantors		Eliminations	Consolidated Solutia Inc.
	(Dollars in millions)
Cash From Operations		(130	)	78		(29	)	—		(82	)
INVESTING ACTIVITIES:
Property, plant and equipment purchases		(16	)	(6	)	(21	)	—		(43	)
Acquisition and investment payments, net of cash acquired		(18	)	—		—		—		(18	)
Property disposals and investment proceeds		(5	)	—		37		—		32
Cash From (Used In) Investing Activities		(39	)	(6	)	16		—		(29	)
FINANCING ACTIVITIES:
Net change in short-term debt obligations		106		—		(3	)	—		103
Common stock issued under employee stock plans		8		—		—		—		8
Other financing activities		(2	)	—		—		—		(2	)
Changes in investments and advances from (to) affiliates		50		(72	)	21		—		—
Cash From (Used In) Financing Activities		162		(72	)	18		—		109
Increase (Decrease) in Cash and Cash Equivalents		(7	)	—		5		—		(2	)
CASH AND CASH EQUIVALENTS:
Beginning of year		11		—		8		—		19
End of period	$	4		—		13		—	$	17

F-67

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

        Section 145 of the General Corporation Law of the State of Delaware permits indemnification of directors, officers, employees and agents of corporations under specified conditions and subject to specified limitations.

        Solutia Inc.'s articles of incorporation and by-laws and the by-laws of its Guarantor Subsidiaries provide for indemnification of any director or officer to the fullest extent permitted by the General Corporation Law of the State of Delaware.

        In addition, Solutia maintains directors' and officers' liability insurance for the benefit of its directors and officers and for the benefit of the directors and officers of Solutia's subsidiaries.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

        The following documents are filed herewith or incorporated herein by reference.

Exhibit Number	Description of Exhibits
3.1	Restated Certificate of Incorporation of Solutia Inc. as of October 28, 1997 (incorporated by reference to Exhibit 3(a) of Solutia Inc.'s Form S-1 Registration Statement (No. 333-363555), filed on September 25, 1997)
3.2	By-Laws of Solutia Inc. (incorporated by reference to Exhibit 3(b) of Solutia Inc.'s Form 10-K for the year ended December 31, 2001 (File No. 011-13255))
3.3	Restated Certificate of Incorporation of CPFilms Inc., as amended (incorporated by reference to Exhibit 3.2(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.4	By-Laws of CPFilms Inc., as amended and restated (incorporated by reference to Exhibit 3.2(ii) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.5	Certificate of Incorporation of Monchem, Inc. (incorporated by reference to Exhibit 3.3(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.6	By-Laws of Monchem, Inc., as amended and restated (incorporated by reference to Exhibit 3.3(ii) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.7	Certificate of Incorporation of Monchem International, Inc., as amended (incorporated by reference to Exhibit 3.4(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.8	By-Laws of Monchem International, Inc., as amended and restated (incorporated by reference to Exhibit 3.4(ii)of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.9	Certificate of Incorporation of Solutia Systems, Inc. (incorporated by reference to Exhibit 3.5(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)

II-1

3.10	By-Laws of Solutia Systems, Inc. (incorporated by reference to Exhibit 3.5(ii) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
4.1	Form of Solutia Inc.'s 11.25% Senior Secured Notes due 2009 (included in Exhibit 4.2)
4.2	Indenture, dated as of July 9, 2002, between SOI Funding Corp., as issuer, and HSBC Bank USA, as trustee
4.3	First Supplemental Indenture, dated as of July 25, 2002, among Solutia Inc., SOI Funding Corp., the subsidiary guarantors named therein and HSBC Bank USA
4.4	Registration Rights Agreement, dated as of July 9, 2002, among Solutia Inc., the subsidiary guarantors named therein and the initial purchasers named therein
4.5	Rights Agreement (incorporated by reference to Exhibit 4 of Solutia Inc.'s Registration Statement on Form 10 (File No. 0001-13255) filed on August 7, 1997)
4.6	Amendment to Rights Agreement, dated as of November 1, 2001 and Certificate regarding Change of Rights Agent (incorporated by reference from Solutia's Form S-3 Registration Statement (No. 333-75812), filed December 21, 2001)
4.7	Second Amended and Restated Credit Agreement, dated as of July 25, 2002, among Solutia Inc., as borrower, the initial lenders named therein, Bank of America, N.A., as syndication agent, and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10(c) of Solutia Inc.'s Form 10-Q for the quarterly period ended June 30, 2002 (File No. 001-13255))
4.8	Restated Intercreditor and Collateral Agency Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Bank of America, N.A. and Citibank, N.A.
4.9	Restated Security and Guarantee Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein and Citibank, N.A.
4.10	Intercreditor and Collateral Trust Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Bank of America, N.A., Citibank, N.A. and HSBC Bank USA
4.11	Sharing Security Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein and HSBC Bank USA
4.12	Junior Intercreditor Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Citibank, N.A. and HSBC Bank USA
4.13	Junior Security Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Citibank, N.A. and HSBC Bank USA
5.1	Opinion of Winston & Strawn
12.1	Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 99(a) of Solutia Inc.'s Form 10-Q for the quarterly period ended June 30, 2002 (File No. 001-13255))
23.1	Consent of Deloitte & Touche LLP
23.2	Consent of Winston & Strawn (included in Exhibit 5.1)
24.1	Powers of Attorney for Solutia Inc.

II-2

24.2	Powers of Attorney for CPFilms Inc.
24.3	Powers of Attorney for Monchem Inc.
24.4	Powers of Attorney for Monchem International, Inc.
24.5	Powers of Attorney for Solutia Systems, Inc.
25.1	Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of HSBC Bank USA, relating to the Indenture and the issuance of Solutia Inc.'s 11.25% Senior Secured Notes due 2009
99.1	Form of Letter of Transmittal
99.2	Form of Notice of Guaranteed Delivery
99.3	Form of Instruction to Registered Holder and/or Depository Trust Company Participant from Beneficial Owner

ITEM 22. UNDERTAKINGS

        (1)  Solutia Inc. hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933 (the "Securities Act"), each filing of Solutia's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")(and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (2)  Solutia hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request.

        (3)  Solutia hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective.

        (4)  Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Solutia pursuant to the foregoing provisions, or otherwise, Solutia has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Solutia of expenses incurred or paid by a director, officer or controlling person of Solutia in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Solutia will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Solutia Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on the 17th day of September, 2002.

SOLUTIA INC.
By:	/s/  ROBERT A. CLAUSEN Robert A. Clausen Senior Vice President and Chief Financial Officer

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated:

Signature	Title	Date
* John C. Hunter III	Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)	September 17, 2002
/s/  ROBERT A. CLAUSEN Robert A. Clausen	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	September 17, 2002
/s/  J. M. SULLIVAN James M. Sullivan	Vice President and Controller (Principal Accounting Officer)	September 17, 2002
* Paul Donovan	Director	September 17, 2002
* Paul H. Hatfield	Director	September 17, 2002
* Robert H. Jenkins	Director	September 17, 2002
* Frank A. Metz, Jr.	Director	September 17, 2002
* J. Patrick Mulcahy	Director	September 17, 2002

II-4

* Sally G. Narodick	Director	September 17, 2002
* William D. Ruckelshaus	Director	September 17, 2002
* John B. Slaughter	Director	September 17, 2002

*

Karl R. Barnickol, by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals which have been filed as an Exhibit to this Registration Statement.

/s/  KARL R. BARNICKOL

Karl R. Barnickol
(Attorney-in-Fact)

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, CPFilms Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on the 17th day of September, 2002.

CPFILMS INC.
By:	*
	Ken Vickers President

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated:

Signature	Title	Date
* Ken Vickers	President and Director (Principal Executive Officer)	September 17, 2002
* Philip Solomon	Vice President, Treasurer, Assistant Secretary and Director (Principal Accounting and Financial Officer)	September 17, 2002
* G. Bruce Greer, Jr.	Director	September 17, 2002
* Victoria M. Holt	Director	September 17, 2002
* J. F. Quinn	Director	September 17, 2002

*

Karl R. Barnickol, by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals which have been filed as an Exhibit to this Registration Statement.

/s/  KARL R. BARNICKOL

Karl R. Barnickol
(Attorney-in-Fact)

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Monchem, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on the 17th day of September, 2002.

MONCHEM, INC.
By:	*
	C. Kevin Wison President

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated:

Signature	Title	Date
* C. Kevin Wison	President and Director (Principal Executive Officer)	September 17, 2002
* J. F. Quinn	Vice President, Treasurer, Assistant Secretary and Director (Principal Financial and Accounting Officer)	September 17, 2002
* James M. Sullivan	Director	September 17, 2002

*

Karl R. Barnickol, by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals which have been filed as an Exhibit to this Registration Statement.

/s/  KARL R. BARNICKOL

Karl R. Barnickol
(Attorney-in-Fact)

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Monchem International, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on the 17th day of September, 2002.

MONCHEM INTRNATIONAL, INC.
By:	*
	C. Kevin Wilson President

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated:

Signature	Title	Date
* C. Kevin Wilson	President and Director (Principal Executive Officer)	September 17, 2002
* James M. Sullivan	Vice President, Treasurer and Director (Principal Financial and Accounting Officer)	September 17, 2002
* J. F. Quinn	Director	September 17, 2002

*

Karl R. Barnickol, by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals which have been filed as an Exhibit to this Registration Statement.

/s/  KARL R. BARNICKOL

Karl R. Barnickol
(Attorney-in-Fact)

II-8

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Solutia Systems, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri on, the 17th day of September, 2002.

SOLUTIA SYSTEMS, INC.
By:	*
	C. Kevin Wilson President

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated:

Signature	Title	Date
* C. Kevin Wilson	President and Director (Principal Executive Officer)	September 17, 2002
* J. F. Quinn	Treasurer and Director (Principal Financial and Accounting Officer)	September 17, 2002
* Frank Riddick, Jr.	Director	September 17, 2002

*

Karl R. Barnickol, by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals which have been filed as an Exhibit to this Registration Statement.

/s/  KARL R. BARNICKOL

Karl R. Barnickol
(Attorney-in-Fact)

II-9

Exhibit Number	Description of Exhibits
3.1	Restated Certificate of Incorporation of Solutia Inc. as of October 28, 1997 (incorporated by reference to Exhibit 3(a) of Solutia Inc.'s Form S-1 Registration Statement (No. 333-363555), filed on September 25, 1997)
3.2	By-Laws of Solutia Inc. (incorporated by reference to Exhibit 3(b) of Solutia Inc.'s Form 10-K for the year ended December 31, 2001 (File No. 011-13255))
3.3	Restated Certificate of Incorporation of CPFilms Inc., as amended (incorporated by reference to Exhibit 3.2(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.4	By-Laws of CPFilms Inc., as amended and restated (incorporated by reference to Exhibit 3.2(ii) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.5	Certificate of Incorporation of Monchem, Inc. (incorporated by reference to Exhibit 3.3(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.6	By-Laws of Monchem, Inc., as amended and restated (incorporated by reference to Exhibit 3.3(ii) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.7	Certificate of Incorporation of Monchem International, Inc., as amended (incorporated by reference to Exhibit 3.4(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.8	By-Laws of Monchem International, Inc., as amended and restated (incorporated by reference to Exhibit 3.4(ii)of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.9	Certificate of Incorporation of Solutia Systems, Inc. (incorporated by reference to Exhibit 3.5(i) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
3.10	By-Laws of Solutia Systems, Inc. (incorporated by reference to Exhibit 3.5(ii) of Solutia Inc.'s Form S-3 Registration Statement (No. 333-89818) filed on June 5, 2002)
4.1	Form of Solutia Inc.'s 11.25% Senior Secured Notes due 2009 (included in Exhibit 4.2)
4.2	Indenture, dated as of July 9, 2002, between SOI Funding Corp., as issuer, and HSBC Bank USA, as trustee
4.3	First Supplemental Indenture, dated as of July 25, 2002, among Solutia Inc., SOI Funding Corp., the subsidiary guarantors named therein and HSBC Bank USA
4.4	Registration Rights Agreement, dated as of July 9, 2002, among Solutia Inc., the subsidiary guarantors named therein and the initial purchasers named therein
4.5	Rights Agreement (incorporated by reference to Exhibit 4 of Solutia Inc.'s Registration Statement on Form 10 (File No. 0001-13255) filed on August 7, 1997)
4.6	Amendment to Rights Agreement, dated as of November 1, 2001 and Certificate regarding Change of Rights Agent (incorporated by reference from Solutia's Form S-3 Registration Statement (No. 333-75812), filed December 21, 2001)

II-10

4.7	Second Amended and Restated Credit Agreement, dated as of July 25, 2002, among Solutia Inc., as borrower, the initial lenders named therein, Bank of America, N.A., as syndication agent, and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10(c) of Solutia Inc.'s Form 10-Q for the quarterly period ended June 30, 2002 (File No. 001-13255))
4.8	Restated Intercreditor and Collateral Agency Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Bank of America, N.A. and Citibank, N.A.
4.9	Restated Security and Guarantee Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein and Citibank, N.A.
4.10	Intercreditor and Collateral Trust Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Bank of America, N.A., Citibank, N.A. and HSBC Bank USA
4.11	Sharing Security Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein and HSBC Bank USA
4.12	Junior Intercreditor Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Citibank, N.A. and HSBC Bank USA
4.13	Junior Security Agreement, dated as of July 25, 2002, among Solutia Inc., the subsidiary guarantors named therein, Citibank, N.A. and HSBC Bank USA
5.1	Opinion of Winston & Strawn
12.1	Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 99(a) of Solutia Inc.'s Form 10-Q for the quarterly period ended June 30, 2002 (File No. 001-13255))
23.1	Consent of Deloitte & Touche LLP
23.2	Consent of Winston & Strawn (included in Exhibit 5.1)
24.1	Powers of Attorney for Solutia Inc.
24.2	Powers of Attorney for CPFilms Inc.
24.3	Powers of Attorney for Monchem Inc.
24.4	Powers of Attorney for Monchem International, Inc.
24.5	Powers of Attorney for Solutia Systems, Inc.
25.1	Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of HSBC Bank USA, relating to the Indenture and the issuance of Solutia Inc.'s 11.25% Senior Secured Notes due 2009
99.1	Form of Letter of Transmittal
99.2	Form of Notice of Guaranteed Delivery
99.3	Form of Instruction to Registered Holder and/or Depository Trust Company Participant from Beneficial Owner

II-11

QuickLinks

SUMMARY
RISK FACTORS
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
RATIO OF EARNINGS TO FIXED CHARGES
CAPITALIZATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE EXCHANGE OFFER
MANAGEMENT
DESCRIPTION OF CERTAIN INDEBTEDNESS
DESCRIPTION OF NOTES
EXCHANGE OFFER; REGISTRATION RIGHTS
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
STATEMENT OF CONSOLIDATED INCOME (LOSS)
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
STATEMENT OF CONSOLIDATED CASH FLOW
STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY (DEFICIT)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF INCOME (LOSS)  Year Ended December 31, 2001
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2001
CONSOLIDATING STATEMENT OF INCOME Year Ended December 31, 2000
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2000
CONSOLIDATING STATEMENT OF INCOME Year Ended December 31, 1999
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME Year Ended December 31, 1999
CONSOLIDATING BALANCE SHEET December 31, 2001
CONSOLIDATING BALANCE SHEET December 31, 2000
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW Year Ended December 31, 2001
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW Year Ended December 31, 2000
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW Year Ended December 31, 1999
STATEMENT OF CONSOLIDATED INCOME (LOSS)
STATEMENT OF CONSOLIDATED COMPREHENSIVE LOSS
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
STATEMENT OF CONSOLIDATED CASH FLOW
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF LOSS Six Months Ended June 30, 2002
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) Quarter Ended June 30, 2002
CONSOLIDATING STATEMENT OF INCOME Six Months Ended June 30, 2001
CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) Six Months Ended June 30, 2001
CONSOLIDATING BALANCE SHEET June 30, 2002
CONSOLIDATING BALANCE SHEET December 31, 2001
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Six Months Ended June 30, 2002
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW Six Months Ended June 30, 2001
PART II

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 22. UNDERTAKINGS

SIGNATURES

EX-4.2

                                                                     EXHIBIT 4.2

================================================================================

                                SOI FUNDING CORP.


                        (may be assumed by SOLUTIA INC.)


                                       and


                            HSBC BANK USA, as Trustee


                     --------------------------------------

                                    INDENTURE

                            Dated as of July 9, 2002

                     --------------------------------------


                      11.25% Senior Secured Notes Due 2009


================================================================================



                              CROSS-REFERENCE TABLE



  TIA                                                                                Indenture
Section                                                                               Section
- -------                                                                          -----------------
                                                                               
310 (a)(1)...............................................................         7.10
    (a)(2)...............................................................         7.10
    (a)(3)...............................................................         N.A.
    (a)(4)...............................................................         N.A.
    (a)(5)...............................................................         N.A.
    (b)..................................................................         7.08; 7.10; 11.02
    (b)(1)...............................................................         7.10
    (c)..................................................................         N.A.
311 (a)..................................................................         7.11
    (b)..................................................................         7.11
    (c)..................................................................         N.A.
312 (a)..................................................................         2.06
    (b)..................................................................         11.03
    (c)..................................................................         11.03
313 (a)..................................................................         7.06
    (b)(1)...............................................................         N.A.
    (b)(2)...............................................................         7.06
    (c)..................................................................         7.06; 11.02
    (d)..................................................................         7.06
314 (a)..................................................................         4.06; 4.19; 11.02
    (b)..................................................................         N.A.
    (c)(1)...............................................................         11.04
    (c)(2)...............................................................         11.04
    (c)(3)...............................................................         N.A.
    (d)..................................................................         N.A.
    (e)..................................................................         11.05
    (f)..................................................................         N.A.
315 (a)..................................................................         7.01(b)
    (b)..................................................................         7.05; 11.02
    (c)..................................................................         7.01(a)
    (d)..................................................................         7.01(c)
    (e)..................................................................         6.12
316 (a)(last sentence)...................................................         2.10
    (a)(1)(A)............................................................         6.05
    (a)(1)(B)............................................................         6.04
    (a)(2)...............................................................         N.A.
    (b)..................................................................         6.08
    (c)..................................................................         8.04
317 (a)(1)...............................................................         6.09
    (a)(2)...............................................................         6.10
    (b)..................................................................         2.05; 7.12
318 (a)..................................................................         11.01


- ----------
N.A. means Not Applicable
Note:  This Cross-Reference Table shall not, for any purpose, be deemed to be a
       part of this Indenture



                                TABLE OF CONTENTS



                                                                                                 Page
                                                                                                 ----
                                                                                                
                                   ARTICLE ONE

                   DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  Definitions..........................................................................1
SECTION 1.02.  Incorporation by Reference of Trust Indenture Act...................................30
SECTION 1.03.  Rules of Construction...............................................................31

                                   ARTICLE TWO

                                 THE SECURITIES

SECTION 2.01.  Amount of Notes.....................................................................31
SECTION 2.02.  Form and Dating.....................................................................32
SECTION 2.03.  Execution and Authentication........................................................32
SECTION 2.04.  Registrar and Paying Agent..........................................................33
SECTION 2.05.  Paying Agent To Hold Money in Trust.................................................34
SECTION 2.06.  Noteholder Lists....................................................................34
SECTION 2.07.  Transfer and Exchange...............................................................34
SECTION 2.08.  Replacement Notes...................................................................35
SECTION 2.09.  Outstanding Notes...................................................................35
SECTION 2.10.  Treasury Notes......................................................................36
SECTION 2.11.  Temporary Notes.....................................................................36
SECTION 2.12.  Cancellation........................................................................36
SECTION 2.13.  Defaulted Interest..................................................................37
SECTION 2.14.  CUSIP Number........................................................................37
SECTION 2.15.  Deposit of Moneys...................................................................37
SECTION 2.16.  Book-Entry Provisions for Global Notes..............................................38
SECTION 2.17.  Special Transfer Provisions.........................................................40
SECTION 2.18.  Computation of Interest.............................................................41

                                  ARTICLE THREE

                                   REDEMPTION

SECTION 3.01.  Election To Redeem; Notices to Trustee..............................................41
SECTION 3.02.  Selection by Trustee of Notes To Be Redeemed........................................42
SECTION 3.03.  Notice of Redemption................................................................42
SECTION 3.04.  Effect of Notice of Redemption......................................................43


                                       -i-




                                                                                                 Page
                                                                                                 ----
                                                                                                
SECTION 3.05.  Deposit of Redemption Price.........................................................43
SECTION 3.06.  Notes Redeemed in Part..............................................................44
SECTION 3.07.  Special Mandatory Redemption; Notices to Trustee and Securities Intermediary........44
SECTION 3.08.  Notice of Special Mandatory Redemption to Holders...................................44
SECTION 3.09.  Effect of Notice of Special Mandatory Redemption....................................45
SECTION 3.10.  Deposit of Special Mandatory Redemption Price.......................................45

                                  ARTICLE FOUR

                                    COVENANTS

SECTION 4.01.  Payment of Notes....................................................................45
SECTION 4.02.  Maintenance of Office or Agency.....................................................46
SECTION 4.03.  Legal Existence.....................................................................46
SECTION 4.04.  Maintenance of Properties; Insurance; Compliance with Law...........................47
SECTION 4.05.  Waiver of Stay, Extension or Usury Laws.............................................47
SECTION 4.06.  Compliance Certificate..............................................................48
SECTION 4.07.  Taxes...............................................................................48
SECTION 4.08.  Repurchase at the Option of Holders upon Change of Control..........................49
SECTION 4.09.  Limitation on Incurrence of Additional Indebtedness and Issuance of Preferred Stock.51
SECTION 4.10.  Limitation on Restricted Payments...................................................55
SECTION 4.11.  Limitation on Liens.................................................................59
SECTION 4.12.  Limitation on Asset Sales...........................................................59
SECTION 4.13.  Limitation on Dividend and Other Payment Restrictions Affecting Restricted
                  Subsidiaries.....................................................................63
SECTION 4.14.  Limitation on Transactions with Affiliates..........................................65
SECTION 4.15.  Limitation on Sale and Leaseback Transactions.......................................66
SECTION 4.16.  [Reserved]..........................................................................67
SECTION 4.17.  Line of Business....................................................................67
SECTION 4.18.  Reports to Holders..................................................................67
SECTION 4.19.  Creation of Subsidiaries; Guarantees by Restricted Subsidiaries.....................68
SECTION 4.20.  Covenants Applicable if Notes Rated Investment Grade................................69


                                      -ii-




                                                                                                 Page
                                                                                                 ----
                                                                                                
                                  ARTICLE FIVE

                              SUCCESSOR CORPORATION

SECTION 5.01.  Consolidation, Merger and Sale of Assets............................................70
SECTION 5.02.  Successor Person Substituted........................................................72

                                   ARTICLE SIX

                              DEFAULTS AND REMEDIES

SECTION 6.01.  Events of Default...................................................................72
SECTION 6.02.  Acceleration of Maturity; Rescission................................................73
SECTION 6.03.  Other Remedies......................................................................74
SECTION 6.04.  Waiver of Past Defaults and Events of Default.......................................75
SECTION 6.05.  Control by Majority.................................................................75
SECTION 6.06.  Limitation on Suits.................................................................76
SECTION 6.07.  No Personal Liability of Directors, Officers, Employees and Stockholders............76
SECTION 6.08.  Rights of Holders To Receive Payment................................................77
SECTION 6.09.  Collection Suit by Trustee..........................................................77
SECTION 6.10.  Trustee May File Proofs of Claim....................................................77
SECTION 6.11.  Priorities..........................................................................78
SECTION 6.12.  Undertaking for Costs...............................................................78

                                  ARTICLE SEVEN

                                     TRUSTEE

SECTION 7.01.  Duties of Trustee...................................................................79
SECTION 7.02.  Rights of Trustee...................................................................80
SECTION 7.03.  Individual Rights of Trustee........................................................81
SECTION 7.04.  Trustee's Disclaimer................................................................81
SECTION 7.05.  Notice of Defaults..................................................................81
SECTION 7.06.  Reports by Trustee to Holders.......................................................82
SECTION 7.07.  Compensation and Indemnity..........................................................82
SECTION 7.08.  Replacement of Trustee..............................................................83
SECTION 7.09.  Successor Trustee by Consolidation, Merger, etc.....................................84
SECTION 7.10.  Eligibility; Disqualification.......................................................84
SECTION 7.11.  Preferential Collection of Claims Against Company...................................85
SECTION 7.12.  Paying Agents.......................................................................85


                                      -iii-




                                                                                                 Page
                                                                                                 ----
                                                                                               
                                  ARTICLE EIGHT

                             MODIFICATION AND WAIVER

SECTION 8.01.  Without Consent of Noteholders......................................................85
SECTION 8.02.  With Consent of Noteholders.........................................................86
SECTION 8.03.  Compliance with Trust Indenture Act.................................................88
SECTION 8.04.  Revocation and Effect of Consents...................................................88
SECTION 8.05.  Notation on or Exchange of Notes....................................................89
SECTION 8.06.  Trustee To Sign Amendments, etc.....................................................89

                                  ARTICLE NINE

                       DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 9.01.  Discharge of Indenture..............................................................89
SECTION 9.02.  Legal Defeasance....................................................................91
SECTION 9.03.  Covenant Defeasance.................................................................91
SECTION 9.04.  Conditions to Defeasance or Covenant Defeasance.....................................92
SECTION 9.05.  Deposited Money and U.S. Government Obligations To Be Held in Trust;
                  Other Miscellaneous Provisions...................................................94
SECTION 9.06.  Reinstatement.......................................................................94
SECTION 9.07.  Moneys Held by Paying Agent.........................................................95
SECTION 9.08.  Moneys Held by Trustee..............................................................95

                                   ARTICLE TEN

                             GUARANTEE OF SECURITIES

SECTION 10.01. Guarantee...........................................................................96
SECTION 10.02. Execution and Delivery of Subsidiary Guarantee......................................97
SECTION 10.03. Release of Subsidiary Guarantors....................................................97
SECTION 10.04. Waiver of Subrogation...............................................................98
SECTION 10.05. Notice to Trustee...................................................................98

                                 ARTICLE ELEVEN

                               SECURITY DOCUMENTS

SECTION 11.01. Security Documents..................................................................99
SECTION 11.02. Recording and Opinions.............................................................100


                                      -iv-




                                                                                                 Page
                                                                                                 ----
                                                                                               
SECTION 11.03. Release of Collateral..............................................................100
SECTION 11.04. Certificates of the Company........................................................100
SECTION 11.05. Certificates of the Trustee........................................................101
SECTION 11.06. Authorization of Actions To Be Taken by the Trustee Under the Security Documents...101
SECTION 11.07. Authorization of Receipt of Funds by the Trustee Under the Security Documents......101
SECTION 11.08. Termination of Security Interest...................................................102
SECTION 11.09. Security Documents.................................................................102


                                 ARTICLE TWELVE

                                  MISCELLANEOUS

SECTION 12.01. Trust Indenture Act Controls.......................................................102
SECTION 12.02. Notices............................................................................102
SECTION 12.03. Communications by Holders with Other Holders.......................................105
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.................................105
SECTION 12.05. Statements Required in Certificate and Opinion.....................................105
SECTION 12.06. Rules by Trustee and Agents........................................................106
SECTION 12.07. Business Days; Legal Holidays......................................................106
SECTION 12.08. Governing Law......................................................................106
SECTION 12.09. No Adverse Interpretation of Other Agreements......................................106
SECTION 12.10. Successors.........................................................................106
SECTION 12.11. Multiple Counterparts..............................................................106
SECTION 12.12. Table of Contents, Headings, etc...................................................106
SECTION 12.13. Separability.......................................................................107

                                    EXHIBITS

Exhibit A.     Form of Note.......................................................................A-1
Exhibit B.     Form of Legend for Rule 144A Notes and Other Notes That Are Restricted Notes.......B-1
Exhibit C.     Form of Legend for Regulation S Note...............................................C-1
Exhibit D.     Form of Legend for Global Note.....................................................D-1
Exhibit E.     Form of Certificate To Be Delivered in Connection with
                  Transfers Pursuant to Regulation S..............................................E-1
Exhibit F.     Form of Guarantee..................................................................F-1
Exhibit G.     Form of Junior Security Agreement..................................................G-1
Exhibit H.     Form of Junior Intercreditor Agreement.............................................H-1


                                       -v-


          INDENTURE, dated as of July 9, 2002, between SOI FUNDING CORP., a
Delaware corporation, as issuer ("SOI FUNDING"), and HSBC BANK USA, a New York
banking corporation, as trustee (the "TRUSTEE").

          References herein to the "COMPANY" refer to (i) prior to the
Assumption Date SOI Funding and (ii) on and after the Assumption Date, Solutia
Inc.

          On and after the Assumption Date, the Notes will be Guaranteed by the
Subsidiary Guarantors.

          Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Notes.

                                   ARTICLE ONE

                   DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  DEFINITIONS.

          "ACQUIRED DEBT" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person, merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.

          "ACQUIRED DISQUALIFIED STOCK" means, with respect to any specified
Person, Disqualified Stock of any other Person existing at the time such other
Person is merged with or into or becomes a Subsidiary of such specified Person,
including, without limitation, Disqualified Stock incurred in connection with,
or in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person.

          "ACQUIRED PREFERRED STOCK" means, with respect to any specified
Person, Preferred Stock of any other Person existing at the time such other
Person is merged with or into or becomes a Subsidiary of such specified Person,
including, without limitation, Preferred Stock incurred in connection with, or
in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person.

          "ADDITIONAL ASSETS" means (a) Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary from any Person other than the
Company or an Affiliate of the



                                       -2-

Company, (b) any controlling interest or joint venture interest in another
business or (c) any other asset (other than securities, cash, Cash Equivalents
or other current assets) to be owned by the Company or any Restricted
Subsidiary.

          "ADDITIONAL NOTES" has the meaning set forth in Section 2.01.

          "AFFILIATE" of any specified Person means any other Person directly or
indirectly, through one or more intermediaries, controlling or controlled by or
under direct or indirect common control with such specified Person. For the
purpose of this definition, "control" when used with respect to any specified
Person means the possession, direct or indirect, of the power to manage or
direct or cause the direction of the management and policies of such Person
directly or indirectly, whether through the ownership of voting stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.

          "AFFILIATE TRANSACTION" has the meaning set forth in Section 4.14.

          "AGENT" means any Registrar, Paying Agent, or agent for service or
notices and demands.

          "AGENT MEMBERS" has the meaning set forth in Section 2.16.

          "AMEND" means amend, modify, supplement, restate or amend and restate,
including successively; and "AMENDING" and "AMENDED" have correlative meanings.

          "APPLICABLE PARI PASSU INDEBTEDNESS" in respect of any asset that is
the subject of an Asset Sale means (i) at a time when such asset is included in
the Collateral (x) Indebtedness under Bank Obligations that is secured at such
time by Collateral or (y) Pari Passu Indebtedness of the Company or its
Restricted Subsidiaries that has a Stated Maturity prior to the Stated Maturity
of the Notes and (ii) at a time when such asset is not included in the
Collateral, any Indebtedness (a) under the Credit Facility and (b) any other
Indebtedness (other than Subordinated Debt) of the Company or a Restricted
Subsidiary that has a Stated Maturity prior to the Stated Maturity of the Notes.

          "ASSET SALE" means (i) the sale, lease, conveyance or other
disposition (other than the creation of a Lien) of any assets (other than the
disposition of inventory or equipment in the ordinary course of business
consistent with industry practices or the disposition of Cash Equivalents)
(PROVIDED that the sale, conveyance or other disposition of all or substantially
all the assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by Section 4.08 and/or Section 5.01 and not by Section 4.12),
(ii) the sale by the Company or any of its Restricted Subsidiaries of Capital
Stock of any of the Company's Restricted Subsidiaries, Unrestricted Subsidiaries
or Joint Ventures and (iii) the issuance by any of the Company's



                                       -3-

Restricted Subsidiaries of Capital Stock of such Restricted Subsidiary, in the
case of each of the foregoing clauses (i), (ii) or (iii), whether in a single
transaction or a series of related transactions (A) that has a fair market value
in excess of $10 million or (B) for Net Proceeds in excess of $10 million.
Notwithstanding the foregoing: (a) a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary PROVIDED that such assets (to the extent constituting
Collateral) shall remain subject to the Lien of the Security Documents; (b) an
issuance of Capital Stock by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary PROVIDED that such assets (to the extent
constituting Collateral) shall remain subject to the Lien of the Security
Documents; (c) Sale and Lease-Back Transactions; and (d) Restricted Payments
permitted by Section 4.10 and Permitted Investments will not be deemed to be an
Asset Sale.

          "ASSET SALE OFFER" has the meaning set forth in Section 4.12.

          "ASSUMPTION DATE" means the date and time of the Solutia Assumption.

          "ASSUMPTION DOCUMENTATION" means the Supplemental Indenture, the
Opinions of Counsel, the Officers' Certificate and the other documents referred
to in the Escrow Agreement pursuant to which the Solutia Assumption shall occur.

          "ASTARIS SUPPORT AGREEMENT" means the guaranty agreement, dated
September 14, 2000, made by Solutia in favor of Astaris LLC, a limited liability
company organized and existing under the laws of Delaware ("ASTARIS"), and in
favor of the lenders under the five-year credit agreement dated September 14,
2000 under which Astaris is the borrower and Bank of America, N.A. is the
administrative agent, as such agreement may be modified, amended, restated or
replaced; PROVIDED that the terms of any such modification, amendment,
restatement or replacement do not materially increase Solutia's or any
Restricted Subsidiary's obligations thereunder and such terms (including as to
tenor) are not more onerous from a financial perspective, taken as a whole, to
Solutia and the Restricted Subsidiaries.

          "ATTRIBUTABLE DEBT" means, with respect to any Sale and Lease-Back
Transaction, the amount determined by multiplying the greater, at the time such
arrangement is entered into, of (1) the fair value of the real property subject
to such arrangement (as determined by the Company) or (2) the net proceeds of
the sale of such real property to the lender or investor, by a fraction of which
the numerator is the unexpired initial term of the lease of such real property
as of the date of determination and of which the denominator is the full initial
term of such lease. Sale and Lease-Back Transactions with respect to facilities
financed with Industrial Development Bonds (whether or not tax exempt) are
excepted from the calculation made pursuant to this definition.

          "BANK OBLIGATIONS" means the Obligations of Solutia and its Restricted
Subsidiaries under the Credit Facility, the Co-Generation Facility, the Astaris
Support Agreement,



                                       -4-

the Designated Letters of Credit and Hedging Obligations in of such Designated
Letters of Credit.

          "BANKRUPTCY LAW" means Title 11 of the United States Code entitled
"Bankruptcy" or any other law relating to bankruptcy, insolvency, winding up,
liquidation, reorganization or relief of debtors, whether in effect on the date
hereof or hereafter.

          "BOARD OF DIRECTORS" means the board of directors of Solutia or any
duly authorized committee thereof.

          "BUSINESS DAY" or "BUSINESS DAY" has the meaning set forth in Section
12.07.

          "CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.

          "CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person and (v) all warrants,
options or other rights to acquire any item listed in (i) through (iv) of this
definition.

          "CASH EQUIVALENTS" means (a) United States dollars, (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than one year from the date of acquisition, (c) demand deposits, time
deposits and certificates of deposit with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year from the date of acquisition and overnight bank deposits, in each case with
any bank or trust company organized or licensed under the laws of the United
States or any State thereof having capital, surplus and undivided profits in
excess of $250 million, (d) repurchase obligations with a term of not more than
seven days for underlying securities of the type described in clauses (b) and
(c) above entered into with any financial institution meeting the qualifications
specified in clause (c) above, (e) commercial paper rated at least P-1 or Al-1
by Moody's or S&P, respectively, (f) investments in any U.S. dollar-denominated
money market fund as defined by Rule 2a-7 of the General Rules and Regulations
promulgated under the Investment Company Act of 1940 and (g) in the case of a
Foreign Subsidiary, substantially similar investments denominated in foreign
currencies (including similarly capitalized foreign banks).



                                       -5-

          "CHANGE OF CONTROL" means the occurrence of any of the following:

     (1)  any "person" or "group" (as such terms are used in Sections 13(d) and
          14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
          defined in Rules 13d-3 and l3d-5 under the Exchange Act, except that a
          Person shall be deemed to have "beneficial ownership" of all
          securities that such Person has the right to acquire, whether such
          right is exercisable immediately or only after the passage of time),
          directly or indirectly, of securities representing 50% or more of the
          voting power of all Capital Stock of Solutia; or

     (2)  Continuing Directors shall cease to constitute at least a majority of
          the directors constituting the Board of Directors; or

     (3)  the sale, lease, transfer, conveyance or other disposition (other than
          by way of merger or consolidation), in one or a series of related
          transactions, of all or substantially all of the assets of Solutia and
          its Restricted Subsidiaries taken as a whole to any "person" or
          "group" (as such terms are used in Sections 13(d) and 14(d) of the
          Exchange Act); or

     (4)  Solutia consolidates with, or merges with or into, any Person, or any
          Person consolidates with, or merges with or into, Solutia, in any such
          event pursuant to a transaction in which any of the outstanding
          Capital Stock of Solutia is converted into or exchanged for cash,
          securities or other property, other than any such transaction where
          the Capital Stock of Solutia outstanding immediately prior to such
          transaction is converted into or exchanged for Capital Stock (other
          than Disqualified Stock) of the surviving or transferee Person
          representing at least a majority of the voting power of all Capital
          Stock of such surviving or transferee Person immediately after giving
          effect to such issuance; or

     (5)  the adoption by the stockholders of Solutia of a plan or proposal for
          the liquidation or dissolution of Solutia or, prior to the Solutia
          Assumption, the adoption by the Company of a plan or proposal for the
          liquidation or dissolution, prior to the Assumption Date, of the
          Company.

          "CHANGE OF CONTROL OFFER" has the meaning set forth in Section 4.08.

          "CHANGE OF CONTROL PAYMENT" has the meaning set forth in Section 4.08.

          "CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth in Section
4.08.

          "CLEARSTREAM" has the meaning set forth in Section 2.16.



                                       -6-

          "CO-GENERATION FACILITY" means the co-generation lease facility for
Solutia's co-generation facility in Pensacola, Florida, as such lease facility
may be amended, restated, modified or replaced.

          "COLLATERAL" means, collectively, all of the property and assets that
are from time to time subject to or required to be subject to the Liens created
under the Security Documents.

          "COLLATERAL AGENT" has the meaning set forth in the Security
Documents.

          "COLLATERAL TRUST" has the meaning set forth in the Security
Documents.

          "COLLATERAL TRUSTEE" shall have the meaning assigned to such term in
the Sharing Intercreditor Agreement.

          "COMMISSION" means the Securities and Exchange Commission.

          "COMPANY" means the party named as such in the first paragraph of this
Indenture and further defined in the second paragraph hereof, until a successor
replaces such party pursuant to Article Five and thereafter means the successor.

          "CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period, plus in each
case, without duplication:

     (i)       provision for taxes based on income or profits of such Person and
     its Restricted Subsidiaries for such period to the extent that such
     provision for taxes was included in computing such Consolidated Net Income;

     (ii)      the Fixed Charges of such Person and its Restricted Subsidiaries
     for such period, to the extent that such Fixed Charges were deducted in
     computing such Consolidated Net Income;

     (iii)     depreciation and amortization (including amortization of goodwill
     and other intangibles but excluding amortization of prepaid cash expenses
     that were paid in a prior period) of such Person and its Restricted
     Subsidiaries for such period to the extent that such depreciation and
     amortization were deducted in computing such Consolidated Net Income; and

     (iv)      any non-cash charges reducing Consolidated Net Income for such
     period (excluding any such non-cash charge to the extent that it represents
     an accrual of or reserve for cash expenses in any future period or
     amortization of a prepaid cash expense that was paid in a prior period);
     MINUS



                                       -7-

     (v)       any non-cash items increasing Consolidated Net Income for such
     period (without duplication, excluding any reversal of a reserve for cash
     expenses, if the establishment of such reserve had previously decreased
     Consolidated Net Income),

in each case, on a consolidated basis and determined in accordance with GAAP.

          Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization of, a Restricted Subsidiary
of the referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person.

          "CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that:

     (i)       the Net Income of any Person that is not a Restricted Subsidiary
     shall be included only to the extent of the lesser of (x) the amount of
     dividends or distributions paid in cash (but not by means of a loan) to the
     referent Person or a Restricted Subsidiary thereof or (y) the referent
     Person's (or, subject to clause (ii), a Restricted Subsidiary of the
     referent Person's) proportionate share of the Net Income of such other
     Person;

     (ii)      the Net Income (but not loss) of any Restricted Subsidiary shall
     be excluded to the extent that the declaration or payment of dividends or
     similar distributions by that Restricted Subsidiary of that Net Income is
     not at the date of determination permitted without any prior governmental
     approval (that has not been obtained) or, directly or indirectly, by
     operation of the terms of its charter or any agreement, instrument,
     judgment, decree, order, statute, rule or governmental regulation
     applicable to that Subsidiary or its stockholders; and

     (iii)     the cumulative effect of a change in accounting principles shall
     be excluded.

          "CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date, the
aggregate amount of assets (less applicable reserves and other properly
deductible items) of the Company and its Restricted Subsidiaries after deducting
therefrom (a) all current liabilities of the Company and its Restricted
Subsidiaries as of such date (excluding any such current liabilities that are,
by their terms, extendible or renewable at the option of the Company or the
applicable Restricted Subsidiary to a date more than 12 months after such date)
and (b) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles,



                                       -8-

all as set forth on the most recent balance sheet of the Company and its
Restricted Subsidiaries and computed in accordance with GAAP.

          "CONTINUING DIRECTOR" means, as of the date of determination, any
Person who:

     (i)       was a member of the Board of Directors on the Issue Date; or

     (ii)      was nominated for election or elected to the Board of Directors
     with the affirmative vote of at least a majority of the Continuing
     Directors who were members of the Board of Directors at the time of such
     nomination or election.

          "CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office as of the date hereof is listed in Section 12.02.

          "COVENANT DEFEASANCE" has the meaning set forth in Section 9.03.

          "CREDIT FACILITY" means, prior to the Assumption Date, the Existing
Credit Facility, and thereafter, one or more credit agreements to be dated as of
the Assumption Date by and among Solutia, the Subsidiary Guarantors and the
other parties thereto, including any related notes, instruments and agreements
executed in connection therewith, as amended, restated, modified, extended,
renewed, refunded, replaced or refinanced, in whole or in part, from time to
time, whether or not with the same lenders or agent.

          "DEADLINE" means August 9, 2002 or such earlier time that Solutia
determines not to refinance its Credit Facility in the manner described in the
Offering Memorandum.

          "DEFAULT" means any event that is, or with the giving of notice or the
lapse of time, or both, would constitute, an Event of Default.

          "DEPOSITORY" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.

          "DESIGNATED LETTERS OF CREDIT" means letters of credit for the account
of Solutia, which may have been issued, or may in the future be issued, by the
lenders that are party to the Credit Facility (but which letters of credit are
not issued pursuant to the Credit Facility), and which are or will be identified
in the Security Documents.

          "DISINTERESTED MEMBER" means, with respect to any transaction or
series of related transactions, a member of the Board of Directors of the
Company who (1) does not have any material direct or indirect financial interest
in or with respect to such transaction or series



                                       -9-

of related transactions and (2) is not an Affiliate, officer, director or an
employee of any person (other than the Company or any Restricted Subsidiary) who
has any direct or indirect financial interest in or with respect to such
transaction or series of related transactions.

          "DISQUALIFIED STOCK" means any Capital Stock of any Person that, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the Notes mature (or in the case of the Company only, on or
prior to the earlier of the Assumption Date and the Special Mandatory Redemption
Date); PROVIDED that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the date on which the
Notes mature shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained in
Section 4.10 and Section 4.08 and such Capital Stock specifically provides that
such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Notes as are required
pursuant to such Sections. The "liquidation preference" of any Disqualified
Stock shall be the amount payable thereon upon liquidation prior to any payment
to holders of common stock or, if none, the amount payable by the issuer thereof
upon maturity or mandatory redemption.

          "ESCROW AGREEMENT" means the escrow and pledge agreement, dated as of
July 9, 2002, among SOI Funding Corp., Solutia Inc., the Trustee and the
Securities Intermediary.

          "ESCROW ASSETS" means the property of the Company held by the
Securities Intermediary pursuant to the Escrow Agreement.

          "EUROCLEAR" has the meaning set forth in Section 2.16.

          "EVENT OF DEFAULT" has the meaning set forth in Section 6.01.

          "EXCESS PROCEEDS" has the meaning set for in Section 4.12.

          "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.

          "EXCHANGE SECURITIES" has the meaning provided in the Registration
Rights Agreement.



                                      -10-

          "EXISTING CREDIT FACILITY" means the $800 million Amended and Restated
Five Year Credit Agreement, dated as of November 23, 1999 (as the same may have
been or will be amended, restated or otherwise modified), among Solutia, as
borrower, the lenders from time to time party thereto, Bank of America N.A., as
syndication agent, and Citibank, N.A., as administrative agent.

          "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries in existence, and considered Indebtedness of the Company
or any of its Restricted Subsidiaries, on the Issue Date, until such amounts are
repaid, including all reimbursement obligations with respect to letters of
credit outstanding as of the date of this Indenture.

          "EXISTING NOTES INDENTURE" means the indenture dated as of October 1,
1997 between Solutia and The Chase Manhattan Bank.

          "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries or any other applicable Person
incurs, assumes or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems Disqualified Stock or Preferred Stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"),
then the Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect
to such incurrence, assumption or redemption of Indebtedness or such issuance or
redemption of Disqualified Stock or Preferred Stock as if the same had occurred
at the beginning of the applicable four-quarter reference period.

          In addition, for purposes of making the computation referred to above:

     (i)       acquisitions that have been made by the Company or any of its
     Restricted Subsidiaries or any other applicable Person, including through
     mergers or consolidations and including any related financing transactions,
     during the four-quarter reference period or subsequent to such reference
     period and on or prior to the Calculation Date shall be deemed to have
     occurred on the first day of the four-quarter reference period;

     (ii)      the Consolidated Cash Flow and Fixed Charges attributable to
     operations or businesses disposed of prior to the Calculation Date shall be
     excluded, but, in the case of such Fixed Charges, only to the extent that
     the obligations giving rise to such Fixed Charges will not be obligations
     of the referent Person or any of its Restricted Subsidiaries following the
     Calculation Date; and



                                      -11-

     (iii)     if since the beginning of the four-quarter reference period any
     Person was designated as an Unrestricted Subsidiary or redesignated as or
     otherwise became a Restricted Subsidiary, such event shall be deemed to
     have occurred on the first day of the four-quarter reference period.

          "FIXED CHARGES" means, with respect to any Person for any period, the
sum, without duplication, of:

     (i)       the consolidated interest expense of such Person and its
     Restricted Subsidiaries for such period, whether paid or accrued,
     determined in accordance with GAAP;

     (ii)      all commissions, discounts and other fees and charges incurred in
     respect of letters of credit or bankers' acceptance financings, determined
     in accordance with GAAP, and net payments or receipts (if any) pursuant to
     Hedging Obligations of the types described in clauses (i) through (iii) of
     the definition thereof to the extent such Hedging Obligations relate to
     Indebtedness that is not itself a Hedging Obligation;

     (iii)     the consolidated interest expense of such Person and its
     Restricted Subsidiaries that was capitalized during such period;

     (iv)      any interest expense on Indebtedness of another Person that is
     Guaranteed by such Person or one of its Restricted Subsidiaries or secured
     by a Lien on assets of such Person or one of its Restricted Subsidiaries
     (whether or not such Guarantee or Lien is called upon);

     (v)       amortization or write-off of debt discount in connection with any
     Indebtedness of the Company and its Restricted Subsidiaries, on a
     consolidated basis in accordance with GAAP, other than amortization of
     deferred financing costs incurred on or prior to the Issue Date; and

     (vi)      the product of (a) all dividend payments (other than any payments
     to the referent Person or any of its Restricted Subsidiaries and any
     dividends payable in the form of Qualified Capital Stock) on any series of
     Preferred Stock or Disqualified Stock of such Person and its Restricted
     Subsidiaries, times (b) (x) a fraction, the numerator of which is one and
     the denominator of which is one minus the then current combined federal,
     state and local statutory tax rate of such Person, expressed as a decimal,
     in each case, on a consolidated basis and in accordance with GAAP, or (y)
     if the dividends are deductible by such Person for income tax purposes,
     one.

          "FOREIGN SUBSIDIARY" means any Restricted Subsidiary that is not
organized under the laws of the United States, any State thereof or the District
of Columbia.



                                      -12-

          "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, as in effect on the Issue Date.

          "GLOBAL NOTES" has the meaning set forth in Section 2.16.

          "GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or Disqualified
Stock of any other Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or Disqualified Stock of such other Person (including those
arising by virtue of partnership arrangements) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
Disqualified Stock of the payment thereof or to protect such obligee against
loss in respect thereof in whole or in part (including by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, to
maintain financial statement conditions or otherwise); PROVIDED that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.

          "HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) forward foreign
exchange contracts or currency swap agreements, (iii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency values and (iv) commodity price protection agreements or
commodity price hedging agreements designed to manage fluctuations in prices or
costs in energy, raw materials, manufactured products or related commodities.

          "HOLDER" or "NOTEHOLDER" means the person in whose name a Note is
registered on the Registrar's books.

          "INCUR" means, with respect to any Indebtedness, to incur, create,
issue, assume or Guarantee such Indebtedness. If any Person becomes a Restricted
Subsidiary on any date after the Issue Date (including by redesignation of an
Unrestricted Subsidiary), the Indebtedness and Capital Stock of such Person
outstanding on such date will be deemed to have been Incurred by such Person on
such date for purposes of Section 4.09 but will not be considered the sale or
issuance of Capital Stock for purposes of Section 4.12. The accretion of
original issue discount or payment of interest in kind will not be considered an
incurrence of Indebtedness.



                                      -13-

          "INDEBTEDNESS" means, with respect to any Person,

          (1)  any indebtedness of such Person, whether or not contingent, in
     respect of borrowed money or evidenced by bonds, notes, debentures or
     similar instruments;

          (2)  letters of credit (or reimbursement agreements in respect
     thereof) or bankers' acceptances;

          (3)  Capital Lease Obligations and Attributable Debt in respect of
     Sale and Lease-Back Transactions;

          (4)  the balance deferred and unpaid of the purchase price of any
     property, except any such balance that constitutes an accrued expense or
     trade payable; and

          (5)  net Hedging Obligations,

if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability on a balance sheet
of such Person prepared in accordance with GAAP, as well as

          (a)  all indebtedness of others secured by a Lien on any asset of such
     Person whether or not such indebtedness is assumed by such Person; PROVIDED
     that, for purposes of determining the amount of any Indebtedness of the
     type described in this clause, if recourse with respect to such
     Indebtedness is limited to such asset, the amount of such Indebtedness
     shall be limited to the lesser of the fair market value of such asset or
     the amount of such Indebtedness; and

          (b)  to the extent not otherwise included, the Guarantee by such
     Person of any indebtedness of the types described above of any other
     Person.

The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.

          "INDENTURE" means this Indenture as amended, restated or supplemented
from time to time.

          "INDEPENDENT FINANCIAL ADVISOR" means an investment banking firm of
national reputation in the United States which, in the judgment of the majority
of the Disinterested Members of the Board of Directors of the Company, is
independent and qualified to perform the task for which it is to be engaged.



                                      -14-

          "INDUSTRIAL DEVELOPMENT BONDS" means obligations issued or guaranteed
by, or supported by the full faith and credit of, a State, a Commonwealth, a
Territory or a possession of the United States of America, or any political
subdivision or governmental authority of any of the foregoing, or the District
of Columbia.

          "INITIAL PLACEMENT" has the meaning provided in the Registration
Rights Agreement.

          "INITIAL PURCHASERS" means Salomon Smith Barney Inc., Banc of America
Securities LLC, J.P. Morgan Securities Inc., Banc One Capital Markets, Inc.,
HSBC Securities (USA), Inc., SG Cowen Securities Corporation, and U.S. Bancorp
Piper Jaffray Inc.

          "INTEREST" means, with respect to the Notes, interest and Liquidated
Damages.

          "INTEREST PAYMENT DATE" means July 15 and January 15 of each year.

          "INVESTMENT GRADE" means a rating of BBB- or higher by S&P and Baa3 or
higher by Moody's or the equivalent of such ratings by S&P or Moody's.

          "INVESTMENTS" means, with respect to any Person, all investments by
such Person in another Person (including an Affiliate of such Person) in the
form of direct or indirect loans, advances or extensions of credit to such other
Person (including any Guarantee by such Person of the Indebtedness or
Disqualified Stock of such other Person) or capital contributions or purchases
or other acquisitions for consideration of Indebtedness, Capital Stock or other
securities of such other Person, together with all items that are or would be
classified as investments of such investing Person on a balance sheet prepared
in accordance with GAAP; PROVIDED that:

          (w)  investments made in connection with a bankruptcy proceeding in
     substitution of the Company's interest as a creditor in such proceeding;

          (x)  trade credit and accounts receivable in the ordinary course of
     business;

          (y)  commissions, loans, advances, fees and compensation paid in the
     ordinary course of business to officers, directors and employees; and

          (z)  reimbursement obligations in respect of letters of credit and
     tender, bid, performance, government contract, surety and appeal bonds,

in each case solely with respect to obligations of the Company or any of its
Restricted Subsidiaries, shall not be considered Investments.

          "ISSUE DATE" means the date hereof, the date of initial issuance of
the Notes.



                                      -15-

          "JOINT VENTURE" means any joint venture between the Company or any
Restricted Subsidiary and any other Person, whether or not such joint venture is
a Subsidiary of the Company or any Restricted Subsidiary.

          "JUNIOR INTERCREDITOR AGREEMENT" has the meaning set forth in the
definition of Security Documents.

          "JUNIOR SECURITY AGREEMENT" has the meaning set forth in the
definition of Security Documents.

          "JUNIOR SECURITY DOCUMENTS" means the Junior Intercreditor Agreement
and the Junior Security Agreement, in each case, as defined below.

          "LEGAL DEFEASANCE" has the meaning set forth in Section 9.02.

          "LEGAL HOLIDAY" has the meaning set forth in Section 12.07.

          "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, and any
lease in the nature thereof), or the assignment or conveyance of any right to
receive income therefrom.

          "LIQUIDATED DAMAGES" has the meaning assigned to such term in EXHIBIT
A.

          "MATURITY DATE" when used with respect to any Note, means the date on
which the principal amount of such Note becomes due and payable as therein or
herein provided.

          "MOODY'S" means Moody's Investors Service, Inc. and its successors.

          "NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined, in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however,

     (i)       any gain or loss, together with any related provision for taxes
     on such gain or loss, realized in connection with

                    (a)  any Asset Sale or any disposition pursuant to a Sale
            and Lease-Back Transaction or

                    (b)  the disposition of any securities by such Person or any
            of its Restricted Subsidiaries or the extinguishment of any
            Indebtedness of such Person or any of its Restricted Subsidiaries;
            and



                                      -16-

     (ii)      any extraordinary gain or loss, together with any related
     provision for on such extraordinary gain or loss.

          "NET PROCEEDS" means the aggregate cash proceeds (excluding any
proceeds deemed to be "cash" pursuant to Section 4.12 received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of (i) the direct
out-of-pocket costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees and sales commissions) and any
relocation expenses incurred as a result thereof, (b) taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness (other than Indebtedness under the
Credit Facility) secured by a Lien on any asset sold in such Asset Sale, or
which must by the terms of such Lien or by applicable law be repaid out of the
proceeds of such Asset Sale, (iv) all payments made with respect to liabilities
directly associated with the assets which are the subject of the Asset Sale,
including, without limitation, trade payables and other accrued liabilities, and
(v) any reserves for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP and any reserve for future
liabilities established in accordance with GAAP; PROVIDED that the reversal of
any such reserve that reduced Net Proceeds when issued shall be deemed a receipt
of Net Proceeds in the amount of such proceeds on such day.

          "NON-U.S. PERSON" means a Person who is not a U.S. person, as defined
in Regulation S.

          "NOTES" means the 11.25% Senior Secured Notes Due 2009 issued by the
Company, including, without limitation, the Exchange Securities, treated as a
single class of securities, as amended from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.

          "OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness and in all cases whether direct or
indirect, absolute or contingent, now outstanding or hereafter created, assumed
or incurred and including, without limitation, interest accruing subsequent to
the filing of a petition in bankruptcy or the commencement of any insolvency,
reorganization or similar proceedings at the rate provided in the relevant
documentation, whether or not an allowed claim, and any obligation to redeem or
defease any of the foregoing.

          "OFFERING MEMORANDUM" means the offering memorandum dated July 2, 2002
relating to the offering of Units issued on the Issue Date.



                                      -17-

          "OFFICERS" means any of the following: Chairman, President, Chief
Executive Officer, Treasurer, Chief Financial Officer, Secretary, Controller or
any Senior Vice President.

          "OFFICERS' CERTIFICATE" means a certificate signed by two Officers.

          "OPINION OF COUNSEL" means a written opinion from legal counsel (who
may be counsel to the Company or the Subsidiary Guarantors) stating the matters
required by Section 12.05 and delivered to the Trustee.

          "PARI PASSU INDEBTEDNESS" means any Indebtedness of the Company or a
Subsidiary Guarantor that is not subordinated to the Notes or such Subsidiary
Guarantor's Subsidiary Guarantee, as the case may be.

          "PAYING AGENT" has the meaning set forth in Section 2.04.

          "PAYMENT DEFAULT" means, with respect to any Indebtedness, a failure
to pay principal of such Indebtedness at its Stated Maturity after giving effect
to any applicable grace period provided in the instrument(s) governing such
Indebtedness.

          "PERMITTED BUSINESS" means the business of manufacturing, selling, and
providing research and development services and support for, pharmaceuticals and
chemical-based materials and any business reasonably related, incidental,
complementary or ancillary thereto.

          "PERMITTED INVESTMENTS" means:

          (a)  any Investment in the Company or in a Restricted Subsidiary of
     the Company that is engaged in a Permitted Business;

          (b)  any Investment in Cash Equivalents;

          (c)  any Investment by the Company or any Subsidiary of the Company in
     a Person, if as a result of such Investment: (i) such Person becomes a
     Restricted Subsidiary of the Company engaged in a Permitted Business or
     (ii) such Person is merged, consolidated or amalgamated with or into, or
     transfers or conveys substantially all its assets to, or is liquidated
     into, the Company or a Restricted Subsidiary of the Company engaged in a
     Permitted Business;

          (d)  any non-cash consideration received as consideration in an Asset
     Sale that was made pursuant to and in compliance with the provisions
     described in Section 4.12;



                                      -18-

          (e)  any acquisition of assets or Capital Stock solely in exchange
     for, or out of the net cash proceeds of a substantially concurrent issuance
     of, Capital Stock (other than Disqualified Stock) of the Company;

          (f)  Hedging Obligations entered into in the ordinary course of
     business and otherwise permitted under this Indenture;

          (g)  any Investment received by the Company or any Restricted
     Subsidiary as consideration for the settlement of any litigation,
     arbitration or claim in bankruptcy or in partial or full satisfaction of
     accounts receivable owed by a financially troubled Person to the extent
     reasonably necessary in order to prevent or limit any loss by the Company
     or any of its Restricted Subsidiaries in connection with such accounts
     receivable;

          (h)  payroll, travel and similar advances to cover matters that are
     expected at the time of such advances ultimately to be treated as expenses
     for accounting purposes and that are made in the ordinary course of
     business;

          (i)  loans and advances to directors, employees and officers of the
     Company and its Restricted Subsidiaries for bona fide business purposes or
     to purchase Capital Stock of the Company not in excess of $10 million at
     any one time outstanding;

          (j)  advances to customers of the Company and its Subsidiaries that
     are made in the ordinary course of business and are consistent with past
     practice in an aggregate amount not to exceed at any time outstanding $5
     million; and

          (k)  Investments in an aggregate amount, taken together with all other
     Investments made in reliance on this clause (k), not to exceed at any time
     outstanding $25 million (after giving effect to any reductions in the
     aggregate amount of such Investments as a result of the disposition
     thereof, including through liquidation, repayment or other reduction,
     including by way of dividend or distribution, for cash, the aggregate
     amount of such reductions not to exceed the aggregate amount of such
     Investments outstanding and previously made pursuant to this clause (k)).

          "PERMITTED LIENS" means:

          (1)  Liens in favor of the Company or any Subsidiary Guarantor;

          (2)  Liens securing the Notes and the Subsidiary Guarantees;

          (3)  Liens on property of a Person existing at the time it becomes a
     Subsidiary or at the time it is merged into or consolidated with the
     Company or a Subsidiary; PROVIDED



                                      -19-

     that such Liens were in existence prior to the contemplation of such
     merger, consolidation or acquisition and do not extend to any assets of the
     Company or its Restricted Subsidiaries other than those of the Person
     merged into or consolidated with the Company or that becomes a Restricted
     Subsidiary of the Company;

          (4)  Liens on property (together with general intangibles and
     proceeds related to such property) existing at the time of acquisition
     thereof by the Company or any Restricted Subsidiary of the Company;
     PROVIDED that such Liens were in existence prior to the contemplation of
     such acquisition;

          (5)  Liens (including the interest of a lessor under a capital lease)
     on any asset (together with general intangibles and proceeds related to
     such property) existing at the time of acquisition thereof or incurred
     within 180 days following the time of acquisition or completion of
     construction thereof, whichever is later, to secure or provide for the
     payment of all or any part of the purchase price (or construction price)
     thereof (including obligations of the lessee under any such capital lease);

          (6)  Liens imposed by law, such as laborers', other employees',
     vendors', materialmen's, carriers', warehousemen's and mechanics' Liens on
     the property of the Company or any Restricted Subsidiary, including Liens
     arising out of letters of credit issued to secure the Company's obligations
     thereunder;

          (7)  easements, building restrictions, rights-of-ways, irregularities
     of title and such other encumbrances or charges not interfering in any
     material respect with the ordinary conduct of business of the Company or
     any of its Restricted Subsidiaries;

          (8)  leases, subleases or licenses by the Company or any of its
     Restricted Subsidiaries as lessor, sublessor or licensor in the ordinary
     course of business and otherwise permitted by this Indenture;

          (9)  Liens securing reimbursement obligations with respect to
     commercial letters of credit obtained in the ordinary course of business
     which encumber documents and other property or assets relating to such
     letters of credit and products and proceeds thereof;

          (10) Liens in favor of customs and revenue authorities arising as a
     matter of law to secure payment of nondelinquent customs duties in
     connection with the importation of goods;

          (11) Liens encumbering customary initial deposits and margin
     deposits, netting provisions and setoff rights, in each case securing
     Indebtedness under Hedging Obligations that are permitted to be incurred
     under clause (vi) of Section 4.09;



                                      -20-

          (12) Liens incurred in the ordinary course of business to secure
     nondelinquent obligations arising from statutory, regulatory, contractual
     or warranty requirements of the Company or its Restricted Subsidiaries,
     including Liens securing letters of credit issued to secure the Company's
     obligations thereunder, or any tender, bid, performance, government
     contract, surety or appeal bonds or other obligations of a like nature for
     which a reserve or other appropriate provision, if any, as shall be
     required by GAAP shall have been made;

          (13) Liens arising out of consignment or similar arrangements for the
     sale of goods entered into by the Company or any Restricted Subsidiary in
     the ordinary course of business in accordance with industry practice;

          (14) Liens arising by reason of deposits necessary to qualify the
     Company or any Restricted Subsidiary to conduct business, maintain
     self-insurance or comply with any law;

          (15) Liens upon any Principal Property to the extent such Liens are
     or would have been permitted by the provisions of the Existing Notes
     Indenture (as such Existing Notes Indenture is in effect on the Issue Date)
     without equally and ratably securing any other Indebtedness of the Company;

          (16) Liens securing, or permitted by, the Bank Obligations on any
     tangible or intangible asset or property of the Company or any Restricted
     Subsidiary other than Principal Property, whether such asset or property is
     real, personal or mixed, to the extent such Liens are or would have been
     permitted by the provisions of the Existing Notes Indenture (as such
     Existing Notes Indenture is in effect on the Issue Date) without equally
     and ratably securing any other Indebtedness of the Company; PROVIDED that
     any such Lien on such asset or property shall also be granted for the
     benefit of the Holders of the Notes and the Subsidiary Guarantees and such
     Lien shall be inferior only to Liens securing the Bank Obligations and any
     intercreditor agreement or other agreement pertaining to relative rights in
     such Collateral shall not be any less favorable than the Junior
     Intercreditor Agreement as in effect at such time or as last in effect;
     PROVIDED, FURTHER, that notwithstanding the immediately preceding proviso,
     the Credit Facility shall be allowed to be secured by Liens on assets or
     property of Foreign Subsidiaries that secure the Credit Facility on the
     Assumption Date without securing the Notes and the Subsidiary Guarantees;

          (17) Liens for taxes, assessments or governmental charges or claims
     that are not yet delinquent or that are being contested in good faith by
     appropriate proceedings, prejudgment Liens that are being contested in good
     faith by appropriate proceedings and Liens arising out of judgments or
     awards against the Company or any Restricted Subsidiary with respect to
     which the Company or such Restricted Subsidiary at the



                                      -21-

     time shall be prosecuting an appeal or proceedings for review and with
     respect to which it shall have secured a stay of execution pending such
     appeal or proceedings for review; PROVIDED that in each case any reserve or
     other appropriate provision as shall be required in conformity with GAAP
     shall have been made therefor;

          (18) Liens securing assets under construction arising from progress
     or partial payments by a customer of the Company or its Restricted
     Subsidiaries relating to such property or assets;

          (19) Liens resulting from the deposit of funds or evidences of
     Indebtedness in trust for the purpose of (A) defeasing Indebtedness of the
     Company or any of its Restricted Subsidiaries having an aggregate principal
     amount at any one time outstanding of no more than $20 million (so long as
     such defeasance and related repayment of Indebtedness is in compliance with
     Section 4.10) or (B) defeasing Indebtedness ranking PARI PASSU with the
     Notes; PROVIDED that the Notes are defeased concurrently with such
     Indebtedness;

          (20) customary Liens for the fees, costs and expenses of trustees and
     escrow agents pursuant to any indenture, escrow agreement or similar
     agreement establishing a trust or escrow arrangement, and Liens pursuant to
     merger agreements, stock purchase agreements, asset sale agreements, option
     agreements and similar agreements in respect of the disposition of property
     or assets of the Company or any Restricted Subsidiary on the property to be
     disposed of, to the extent such dispositions are permitted by this
     Indenture;

          (21) Liens on assets (other than Principal Property) of the Company
     or any Restricted Subsidiary arising as a result of a Sale and Lease-Back
     Transaction with respect to such assets; PROVIDED that the proceeds from
     such Sale and Lease-Back Transaction are applied to the repayment of
     Indebtedness or acquisition of Additional Assets or the making of capital
     expenditures pursuant to Section 4.12;

          (22) Liens existing on the Issue Date, other than Liens securing
     Indebtedness under the Bank Obligations;

          (23) the interest of a lessor or licensor under an operating lease or
     license under which the Company or any of its Restricted Subsidiaries is
     lessee, sublessee or licensee, including protective financing statement
     filings;

          (24) any extension, renewal, substitution or replacement (or
     successive extensions, renewals, substitutions or replacements), as a whole
     or in part, of any of the Liens described in clauses (1) through (23) of
     this definition; PROVIDED that such extension,


                                      -22-

     renewal or replacement Lien shall be limited to the same property or assets
     that secured the Lien being so extended, renewed or replaced;

          (25) other Liens on assets of the Company or any Restricted
     Subsidiary of the Company securing Indebtedness or other obligations to be
     outstanding having an aggregate principal amount at any one time
     outstanding not to exceed $10 million;

          (26) licenses or leases by the Company or any of its Restricted
     Subsidiaries as licensor or lessor in the ordinary course of business and
     otherwise permitted by this Indenture for patents, copyrights, trademarks,
     trade names and other intellectual property; and

          (27) netting provisions and setoff rights in favor of counterparties
     to agreements creating Hedging Obligations.

          "PERMITTED REFINANCING" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used solely to extend, refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Restricted Subsidiaries; PROVIDED
that:

     (i)       the principal amount (or liquidation preference in the case of
     Preferred Stock) of such Permitted Refinancing (or if such Permitted
     Refinancing is issued at a discount, the initial issuance price of such
     Permitted Refinancing) does not exceed the principal amount of the
     Indebtedness so extended, refinanced, renewed, replaced, defeased or
     refunded (plus the amount of any premiums paid and reasonable expenses
     incurred in connection therewith);

     (ii)      such Permitted Refinancing has a Stated Maturity date later than
     the Stated Maturity date of, and has a Weighted Average Life to Maturity
     equal to or greater than the Weighted Average Life to Maturity of, the
     Indebtedness being extended, refinanced, renewed, replaced, defeased or
     refunded;

     (iii)     if the Indebtedness being extended, refinanced, renewed,
     replaced, defeased or refunded is subordinated by its terms in right of
     payment to the Notes or the Subsidiary Guarantees, such Permitted
     Refinancing has a Stated Maturity date later than the Stated Maturity date
     of, and is subordinated by its terms in right of payment to, the Notes on
     subordination terms at least as favorable to the Holders of Notes as those
     contained in the documentation governing the Indebtedness being extended,
     refinanced, renewed, replaced, defeased or refunded;



                                      -23-

     (iv)      such Indebtedness is incurred by the Company or a Subsidiary
     Guarantor if the Company or a Subsidiary Guarantor is the obligor on the
     Indebtedness being extended, refinanced, renewed, replaced, defeased or
     refunded; and

     (v)       such Indebtedness is incurred by the Company or a Restricted
     Subsidiary if a Restricted Subsidiary that is not a Subsidiary Guarantor is
     the obligor on the Indebtedness being extended, refinanced, renewed,
     replaced, defeased or refunded.

          Notwithstanding the foregoing, Solutia shall be allowed to modify,
amend or replace its Obligations under the Astaris Support Agreement; PROVIDED
that the terms of any such modification, amendment or replacement do not
materially increase Solutia's or any Restricted Subsidiary's obligations
thereunder and such terms (including as to tenor) are not more onerous from a
financial perspective, taken as a whole, to Solutia and its Restricted
Subsidiaries.

          "PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or other entity of any kind.

          "PHYSICAL NOTES" means certificated Notes in registered form in
substantially the form set forth in EXHIBIT A.

          "PREFERRED STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of preferred or preference stock of such Person
which is outstanding or issued on or after the date of this Indenture.

          "PRINCIPAL" of a Note means the principal of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to become due
at the relevant time.

          "PRINCIPAL PROPERTY" means any building, structure or other facility
used primarily for manufacturing and located in the United States (excluding its
territories and possessions, but including Puerto Rico), the gross book value of
which on the date as of which the determination is being made is an amount which
exceeds 3% of Consolidated Net Tangible Assets, other than any such building,
structure or other facility or any portion thereof (i) which is financed by
Industrial Development Bonds or (ii) which, in the opinion of the Board of
Directors of the Company, is not of material importance to the total business
conducted by the Company and its Restricted Subsidiaries taken as a whole.

          "PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Rule 144A Notes and Other Notes that are Restricted Notes in the form set forth
in EXHIBIT B.



                                      -24-

          "PUBLIC EQUITY OFFERING" means any underwritten public offering of
common stock of Solutia generating gross proceeds to Solutia of at least $50
million.

          "PURCHASE AGREEMENT" means the purchase agreement, dated as of July 2,
2002 among SOI Funding, Solutia, the Subsidiary Guarantors and the Initial
Purchasers.

          "PURCHASE MONEY OBLIGATIONS" means Indebtedness of the Company or a
Subsidiary Guarantor incurred in the ordinary course of business for the purpose
of financing all or any part of the purchase price or cost of installation,
construction or improvement of an asset; PROVIDED, HOWEVER, that (1) the amount
of such Indebtedness shall not exceed such purchase price or cost, (2) such
Indebtedness shall not be secured by any asset other than the asset being
financed, or in the case of real property or fixtures, the real property or
fixtures to which such asset is attached and (3) such Indebtedness shall be
incurred within 180 days after the acquisition of such asset by the Company or
such Subsidiary Guarantor, or such installation, construction or improvement.

          "QUALIFIED CAPITAL STOCK" shall mean all Capital Stock of a Person
other than Disqualified Stock of such Person.

          "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A promulgated under the Securities Act.

          "REDEMPTION DATE" when used with respect to any Note to be redeemed
pursuant to paragraph 5 of the Notes means the date fixed for such redemption
pursuant to the terms of the Notes.

          "REGISTRAR" has the meaning set forth in Section 2.04.

          "REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement dated as of the Issue Date among Solutia, the Subsidiary Guarantors
named therein and the Initial Purchasers.

          "REGULATION S" means Regulation S promulgated under the Securities
Act.

          "REGULATION S GLOBAL NOTE" has the meaning set forth in Section 2.16.

          "REGULATION S NOTES" has the meaning set forth in Section 2.02.

          "RESPONSIBLE OFFICER" shall mean, when used with respect to the
Trustee, any officer in the Corporate Trust Department of the Trustee including
any vice president, assistant vice president or any other officer of the Trustee
who customarily performs functions similar to those performed by the Persons who
at the time shall be such officers, respectively,



                                      -25-

and to whom any corporate trust matter is referred because of such officer's
knowledge of and familiarity with the particular subject.

          "RESTRICTED GLOBAL NOTE" has the meaning set forth in Section 2.16.

          "RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.

          "RESTRICTED NOTE" has the same meaning as "Restricted Security" set
forth in Rule 144(a)(3) promulgated under the Securities Act; PROVIDED that the
Trustee shall be entitled to request and conclusively rely upon an Opinion of
Counsel with respect to whether any Note is a Restricted Note.

          "RESTRICTED SUBSIDIARY" of the Company means (a) prior to the first
time that the Notes are rated Investment Grade, any Subsidiary of the Company
that is not an Unrestricted Subsidiary and (b) from and after the first time
that the Notes are rated Investment Grade, any Subsidiary of the Company
(whether or not the Company has previously designated such Subsidiary as an
Unrestricted Subsidiary) (1) more than 50% of whose net sales and operating
revenues during the preceding four calendar quarters were derived in, or more
than 50% of whose operating properties are located in, the United States
(excluding its territories and possessions, but including Puerto Rico) or (2)
more than 50% of whose assets consist of securities of other Restricted
Subsidiaries or (3) which owns a Principal Property, except that certain export
sales, banking, insurance, finance, real estate, construction and unconsolidated
Subsidiaries do not constitute Restricted Subsidiaries so long as they shall not
own any Principal Property. Unless the context otherwise requires, each
reference to a "Restricted Subsidiary" shall refer to a Subsidiary of the
Company.

          "RULE 144" means Rule 144 promulgated under the Securities Act.

          "RULE 144A" means Rule 144A promulgated under the Securities Act.

          "RULE 144A NOTES" has the meaning set forth in Section 2.02.

          "S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.

          "SEC" means the U.S. Securities and Exchange Commission

          "SALE AND LEASE-BACK TRANSACTION" means any arrangement with any
Person (other than the Company or a Subsidiary), or to which any such Person is
a party, providing for the leasing, pursuant to a capital lease that would at
such time be required to be capitalized on a balance sheet in accordance with
GAAP, to the Company or a Restricted Subsidiary of



                                      -26-

any property or asset which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such Person or to any other Person
(other than the Company or a Subsidiary) to which funds have been or are to be
advanced by such Person.

          "SECURITIES ACCOUNT CONTROL AGREEMENT" means the securities account
control agreement dated July 9, 2002 among SOI Funding, the Securities
Intermediary and the Trustee.

          "SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto.

          "SECURITIES INTERMEDIARY" means Citibank, N.A.

          "SECURITY DOCUMENTS" means (1) prior to the Assumption Date, the
Escrow Agreement and the Securities Account Control Agreement and (2) from and
after the Solutia Assumption (i) the Intercreditor and Collateral Trust
Agreement to be dated as of the date of the Solutia Assumption by and among
Solutia, CPFilms Inc, a Delaware corporation ("CPF"), Citibank, N.A., as
administrative agent under the Solutia Credit Agreement referred to therein,
Bank of America, N.A., as administrative agent under the Astaris Credit
Agreement referred to therein, Citibank, N.A., as agent under the Co-gen
Participation Agreement referred to therein, Citibank, N.A., as collateral agent
under the Non-Sharing Intercreditor Agreement referred to therein, and HSBC Bank
USA, as collateral trustee (the "COLLATERAL TRUSTEE"), (the "SHARING
INTERCREDITOR AGREEMENT"), (ii) the Security Agreement dated as of the date of
the Solutia Assumption between the Company, CPF and the Collateral Trustee (the
"SHARING SECURITY AGREEMENT"); (iii) the Sharing Mortgages (as defined in the
Sharing Intercreditor Agreement), and any modifications or confirmations
thereto: Decatur, Alabama; Pensacola, Florida; Indian Orchard, Massachusetts;
Trenton, Michigan; Greenwood, South Carolina; Alvin, Texas; and Martinsville,
Virginia; (iv) the Junior Intercreditor Agreement substantially in the form of
EXHIBIT G dated as of the Assumption Date (the "JUNIOR INTERCREDITOR AGREEMENT")
among Solutia, the Subsidiary Guarantors, Citibank, N.A. and the Trustee; and
(vii) the Junior Security Agreement dated as of the Assumption Date
substantially in the form of EXHIBIT H (the "JUNIOR SECURITY AGREEMENT") among
Soluta Inc., the Subsidiary Guarantors, Citibank, N.A. and the Trustee, and all
other mortgages, deeds of trust, pledge agreements, collateral assignments,
security agreements, fiduciary transfers, debentures, fiduciary assignments or
other instruments evidencing or creating any security interests or Liens in
favor of the Trustee, in each case as amended, replaced, modified, or restated
from time to time in accordance with its terms and the terms of this Indenture.

          "SHARING SECURITY DOCUMENTS" means the Sharing Intercreditor
Agreement, the Sharing Security Agreement and the Sharing Mortgages.



                                      -27-

          "SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the
Company that would be a "significant subsidiary" as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as
amended, as such Regulation is in effect on the Issue Date.

          "SOLUTIA" means Solutia, Inc., a Delaware corporation.

          "SOLUTIA ASSUMPTION" means the assumption by Solutia and the
Subsidiary Guarantors of the obligations of SOI Funding under this Indenture and
the Notes, in accordance with the terms of the Escrow Agreement.

          "SPECIAL MANDATORY REDEMPTION DATE" means the 20th day after the
Deadline (or if such day is not a Business Day, the first Business Day
thereafter (as evidenced in a written statement to that effect delivered to the
Trustee)).

          "SPECIAL MANDATORY REDEMPTION PRICE" means (a) $206,702,624.80 (which
amount is equal to 103% of the original issue amount of the Units
($200,682,160.00)) plus (b) the accrued and unpaid interest on the Notes from
and including the Issue Date to but excluding the Special Mandatory Redemption
Date.

          "SPECIAL REDEMPTION TRIGGER" has the meaning set forth in
Section 3.07.

          "STATED MATURITY" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness (or any later date established by any amendment to
such original documentation) and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

          "SUBORDINATED DEBT" means Indebtedness that is by its terms
subordinated to the Notes and the Subsidiary Guarantees, as applicable.

          "SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) or (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries such Person (or any combination thereof).



                                      -28-

          "SUBSIDIARY GUARANTEE" means a guarantee of the Notes by a Subsidiary
Guarantor.

          "SUBSIDIARY GUARANTOR" means any Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture, in each case,
until the Subsidiary Guarantee of such Person is released in accordance with the
provisions of this Indenture.

          "SURVIVING PERSON" has the meaning set forth in Section 5.01.

          "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.03).

          "TRUSTEE" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.

          "UNITS" means the 223,000 units issued on the Issue Date pursuant to
the Offering Memorandum comprising $223 million aggregate principal amount of
Notes and 223,000 warrants to purchase an aggregate of 5,533,522 shares of
common stock of Solutia, par value $.01 per share.

          "UNRESTRICTED SUBSIDIARY" means (i) each of Solutia Chemical Co.,
Ltd., Suzhou, Solutia Hellas EPE, Solutia Management Company, Inc., Solutia
Netherlands Holding B.V., Solutia Netherlands International B.V., Solutia
Kimyasak pazarlama ve Ticaret Limited Sirketi, Solutia Therminal Co., Ltd.,
Suzhou, Solutia UK Capital Limited, Solutia GOM India Coatings Materials Private
Limited, Vianova Resins, Inc., Vianova Resins N.V./S.A., Vianova Resins Canada
Inc., Vianova Resins, Resinas Quimicas Limitada, Viking Finance III B.V., Viking
Resins Germany Holdings GmbH & Co. KG, Viking Resins Group Holding B.V. and
Zweite Viking Resins Germany 2 GmbH, (ii) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
resolution and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED that

          (a)  any Guarantee by the Company or any Restricted Subsidiary of any
     Indebtedness of the Subsidiary being so designated or any of its
     Subsidiaries shall be deemed an "incurrence" of such Indebtedness and an
     "Investment" by the Company or such Restricted Subsidiary (or both, if
     applicable) at the time of such designation,

          (b)  such designation would be permitted by Section 4.10, and



                                      -29-

          (c)  if applicable, the Investment and the incurrence of Indebtedness
     referred to in clause (a) of this proviso would be permitted by Section
     4.09 and Section 4.10.

          Any such designation by the Board of Directors pursuant to clause (i)
above shall be evidenced to the Trustee by filing with the Trustee a certified
copy of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by Section 4.09 and Section 4.10.

          If at any time the Company or any Restricted Subsidiary Guarantees any
Indebtedness of such Unrestricted Subsidiary or makes any other Investment in
such Unrestricted Subsidiary and such incurrence of Indebtedness or Investment
would not be permitted by Section 4.09 and Section 4.10, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date in Section 4.09, the Company shall be
in default of such Section). The Board of Directors may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted by Section 4.09 and (ii) no Default or Event of Default would be in
existence following such designation.

          "U.S. GOVERNMENT OBLIGATIONS" shall mean securities that are (1)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as full faith and
credit obligation by the United States of America, that, in either case, are not
callable or redeemable at the option of the issuer thereof and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligations or a specific payment of
interest on or principal of any such U.S. Government Obligations held by such
custodian for the account of the holder of a depository receipt; PROVIDED that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt for
any amount received by the custodian in respect of the U.S. Government
Obligations or the specific payment of interest on or principal of the U.S.
Government Obligations evidenced by such depository receipt.

          "VALUE" means, with respect to a Sale and Lease-Back Transaction, the
amount equal to the greater of (i) the net proceeds of the sale or transfer of
the property leased pursuant to such Sale and Lease-Back Transaction or (ii) the
fair value, in the opinion of the Board of Directors, of such property at the
time of entering into such Sale and Lease-Back Transaction,



                                      -30-

in either case divided first by the number of full years of the term of the
lease and then multiplied by the number of full years of such term remaining at
the time of determination, without regard to any renewal or extension options
contained in the lease.

          "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:

     (i)       the sum of the products obtained by multiplying

                    (a)  the amount of each then remaining installment, sinking
          fund, serial maturity or other required payment of principal,
          including payment at final maturity, in respect thereof, by

                    (b)  the number of years (calculated to the nearest
          one-twelfth) that will elapse between such date and the making of such
          payment, by

     (ii)      the then outstanding principal amount of such Indebtedness.

          "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all the outstanding Capital Stock of which (other than
directors' qualifying shares) shall at the time be owned by such Person or by
one or more Wholly Owned Restricted Subsidiaries of such Person or by such
Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

SECTION 1.02.  INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.

          Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:

          "indenture securities" means the Notes.

          "indenture securityholder" means a Holder or Noteholder.

          "indenture to be qualified" means this Indenture.

          "obligor on this indenture securities" means the Company, the
     Subsidiary Guarantors or any other obligor on the Notes.

          All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by Commission rule
have the meanings therein assigned to them.



                                      -31-

SECTION 1.03.  RULES OF CONSTRUCTION.

          Unless the context otherwise requires:

          (1)  a term has the meaning assigned to it herein, whether defined
     expressly or by reference;

          (2)  "or" is not exclusive;

          (3)  words in the singular include the plural, and in the plural
     include the singular;

          (4)  words used herein implying any gender shall apply to both
     genders;

          (5)  "herein," "hereof" and other words of similar import refer to
     this Indenture as a whole and not to any particular Article, Section or
     other subsection;

          (6)  unless otherwise specified herein, all accounting terms used
     herein shall be interpreted, all accounting determinations hereunder shall
     be made, and all financial statements required to be delivered hereunder
     shall be prepared in accordance with GAAP as in effect from time to time,
     applied on a basis consistent with the most recent audited consolidated
     financial statements of the Company;

          (7)  "$," "U.S. Dollars" and "United States Dollars" each refer to
     United States dollars, or such other money of the United States that at the
     time of payment is legal tender for payment of public and private debts;
     and

          (8)  whenever in this Indenture there is mentioned, in any context,
     principal, interest or any other amount payable under or with respect to
     any Note, such mention shall be deemed to include mention of the payment of
     Liquidated Damages to the extent that, in such context, Liquidated Damages
     are, were or would be payable in respect thereof.

                                   ARTICLE TWO

                                 THE SECURITIES

SECTION 2.01.  AMOUNT OF NOTES.

          The Trustee shall initially authenticate Notes for original issue on
the Issue Date in an aggregate principal amount of $223 million upon a written
order of the Company in



                                      -32-

the form of an Officers' Certificate of the Company (other than as provided in
Section 2.08). The Trustee shall authenticate additional Notes ("ADDITIONAL
NOTES") thereafter in unlimited amount (so long as permitted by the terms of
this Indenture, including, without limitation, Section 4.09) for original issue
upon a written order of the Company in the form of an Officers' Certificate in
aggregate principal amount as specified in such order (other than as provided in
Section 2.08). Each such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated.

SECTION 2.02.  FORM AND DATING.

          The Notes and the Trustee's certificate of authentication with respect
thereto shall be substantially in the form set forth in EXHIBIT A, which is
incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Company is subject. Without limiting the generality of the foregoing, Notes
offered and sold to Qualified Institutional Buyers in reliance on Rule 144A
("RULE 144A NOTES") shall bear the legend and include the form of assignment set
forth in EXHIBIT B, Notes offered and sold in offshore transactions in reliance
on Regulation S ("REGULATION S NOTES") shall bear the legend and include the
form of assignment set forth in EXHIBIT C. Each Note shall be dated the date of
its authentication.

          The terms and provisions contained in the Notes shall constitute, and
are expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
agree to be bound thereby.

          The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar.

SECTION 2.03.  EXECUTION AND AUTHENTICATION.

          The Notes shall be executed on behalf of the Company by its Chairman
of the Board, its President or one of its Vice Presidents. The signature of any
of these officers on the Notes may be manual or facsimile.

          If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless.

          No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such



                                      -33-

Note has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Note shall have been authenticated and delivered hereunder but
never issued and sold by the Company, and the Company shall deliver such Note to
the Trustee for cancellation as provided in Section 2.12, for all purposes of
this Indenture such Note shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.

          The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
Each Paying Agent is designated as an authenticating agent for purposes of this
Indenture.

          The Notes shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.

SECTION 2.04.  REGISTRAR AND PAYING AGENT.

          The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange (the "REGISTRAR"), and an
office or agency where Notes may be presented for payment (the "PAYING AGENT")
and an office or agency where notices and demands to or upon the Company, if
any, in respect of the Notes and this Indenture may be served. The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may have one or more additional Paying Agents. The term "Paying Agent"
includes any additional Paying Agent. Neither the Company nor any Affiliate
thereof may act as Paying Agent.

          The Company shall enter into an appropriate agency agreement, which
shall incorporate the provisions of the TIA, with any Agent that is not a party
to this Indenture. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.

          The Company initially appoints the Trustee as Registrar, Paying Agent
and Agent for service of notices and demands in connection with the Notes and
this Indenture.



                                      -34-

SECTION 2.05.  PAYING AGENT TO HOLD MONEY IN TRUST.

          Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes (whether such money has been
paid to it by the Company or any other obligor on the Notes or the Subsidiary
Guarantors), and the Company and the Paying Agent shall notify the Trustee of
any default by the Company (or any other obligor on the Notes) in making any
such payment. Money held in trust by the Paying Agent need not be segregated
except as required by law and in no event shall the Paying Agent be liable for
any interest on any money received by it hereunder. The Company at any time may
require the Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed and the Trustee may at any time during the continuance
of any Event of Default specified in Section 6.01(1) or (2), upon written
request to the Paying Agent, require such Paying Agent to pay forthwith all
money so held by it to the Trustee and to account for any funds disbursed. Upon
making such payment, the Paying Agent shall have no further liability for the
money delivered to the Trustee.

SECTION 2.06.  NOTEHOLDER LISTS.

          The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Noteholders.

SECTION 2.07.  TRANSFER AND EXCHANGE.

          Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar with a request from the Holder of such Notes to register a transfer or
to exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer as requested. Every
Note presented or surrendered for registration of transfer or exchange shall be
duly endorsed or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorneys duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall issue and execute and the Trustee
shall authenticate new Notes (and the Subsidiary Guarantors shall execute the
guarantee thereon) evidencing such transfer or exchange at the Registrar's
request. No service charge shall be made to the Noteholder for any registration
of transfer or exchange. The Company may require from the Noteholder payment of
a sum sufficient to cover any transfer taxes or other governmental charge that
may be imposed in relation to a transfer or exchange, but this provision shall
not apply to any exchange pursuant to Section 2.11, 3.06, 4.08, 4.12 or 8.05 (in
which events the Company shall be responsible



                                      -35-

for the payment of such taxes). The Registrar shall not be required to exchange
or register a transfer of any Note for a period of 15 days immediately preceding
the mailing of notice of redemption of Notes to be redeemed or of any Note
selected, called or being called for redemption except the unredeemed portion of
any Note being redeemed in part.

          Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.

          Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Company's compliance with or have
any responsibility with respect to the Company's compliance with any Federal or
state securities laws.

SECTION 2.08.  REPLACEMENT NOTES.

          If a mutilated Note is surrendered to the Registrar or the Trustee, or
if the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Note (and the Subsidiary Guarantors shall execute the guarantee
thereon) if the Holder of such Note furnishes to the Company and the Trustee
evidence reasonably acceptable to them of the ownership and the destruction,
loss or theft of such Note and if the requirements of Section 8-405 of the New
York Uniform Commercial Code as in effect on the date of this Indenture are met.
If required by the Trustee or the Company, an indemnity bond shall be posted,
sufficient in the judgment of all to protect the Company, the Subsidiary
Guarantors, the Trustee or any Paying Agent from any loss that any of them may
suffer if such Note is replaced. The Company may charge such Holder for the
Company' reasonable out-of-pocket expenses in replacing such Note and the
Trustee may charge the Company for the Trustee's expenses (including, without
limitation, attorneys' fees and disbursements) in replacing such Note. Every
replacement Note shall constitute a contractual obligation of the Company.

SECTION 2.09.  OUTSTANDING NOTES.

          The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those canceled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.01
and 9.02, on or after the date on which the conditions set forth in Section 9.01
or 9.02 have been satisfied, those Notes theretofore authenticated and delivered
by the Trustee hereunder and (d) those described in this Section 2.09 as not
outstanding. Subject to Section 2.10, a Note does not cease to be outstanding
because the Company or one of its Affiliates holds the Note.



                                      -36-

          If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser in whose hands such Note is a
legal, valid and binding obligation of the Company.

          If the Paying Agent holds, in its capacity as such, on any Maturity
Date, money sufficient to pay all accrued interest and principal with respect to
the Notes payable on that date and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture, then on and after
that date such Notes cease to be outstanding and interest on them ceases to
accrue.

SECTION 2.10.  TREASURY NOTES.

          In determining whether the Holders of the required principal amount of
Notes have concurred in any declaration of acceleration or notice of default or
direction, waiver or consent or any amendment, modification or other change to
this Indenture, Notes owned by the Company or any other Affiliate of the Company
shall be disregarded as though they were not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent or any amendment, modification or other change
to this Indenture, only Notes as to which a Responsible Officer of the Trustee
has actually received an Officers' Certificate stating that such Notes are so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee established to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Notes and that the
pledgee is not an Issuer, a Subsidiary Guarantor, any other obligor on the Notes
or any of their respective Affiliates.

SECTION 2.11.  TEMPORARY NOTES.

          Until definitive Notes are prepared and ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.

SECTION 2.12.  CANCELLATION.

          The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) dispose of such canceled



                                      -37-

Notes in its customary manner. The Company may not reissue or resell, or issue
new Notes to replace, Notes that the Company has redeemed or paid, or that have
been delivered to the Trustee for cancellation.

SECTION 2.13.  DEFAULTED INTEREST.

          If the Company defaults on a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the payment date. The Company
shall fix such special record date and payment date in a manner satisfactory to
the Trustee. At least 10 days before such special record date, the Company shall
mail to each Noteholder a notice that states the special record date, the
payment date and the amount of defaulted interest, and interest payable on
defaulted interest, if any, to be paid. The Company may make payment of any
defaulted interest in any other lawful manner not inconsistent with the
requirements (if applicable) of any securities exchange on which the Notes may
be listed and, upon such notice as may be required by such exchange, if, after
written notice given by the Company to the Trustee of the proposed payment
pursuant to this sentence, such manner of payment shall be deemed practicable by
the Trustee.

SECTION 2.14.  CUSIP NUMBER.

          The Company in issuing the Notes may use a "CUSIP" number, and if so,
such CUSIP number shall be included in notices of redemption or exchange as a
convenience to Holders; PROVIDED that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any such CUSIP number used by the Company in
connection with the issuance of the Notes and of any change in the CUSIP number.

SECTION 2.15.  DEPOSIT OF MONEYS.

          Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole Holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall be
payable, either in person or by mail, at the office of the Paying Agent.



                                      -38-

SECTION 2.16.  BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.

          (a)  Rule 144A Notes shall be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "RESTRICTED
GLOBAL NOTE"). Regulation S Notes initially shall be represented by one or more
Notes in registered, global form without interest coupons (collectively, the
"REGULATION S GLOBAL NOTE," and, together with the Restricted Global Note and
any other global notes representing Notes, the "GLOBAL NOTES"). The Global Notes
shall bear legends as set forth in EXHIBIT D. The Global Notes initially shall
(i) be registered in the name of the Depository or the nominee of such
Depository, in each case for credit to an account of an Agent Member (or, in the
case of the Regulation S Global Notes, of Euroclear System ("EUROCLEAR") and
Clearstream Banking Luxembourg ("CLEARSTREAM")), (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
EXHIBIT B with respect to Restricted Global Notes and EXHIBIT C with respect to
Regulation S Global Notes.

          Members of, or direct or indirect participants in, the Depository
("AGENT MEMBERS") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of the Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Note.

          (b)  Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective Interests
of beneficial owners in the Global Notes may be transferred or exchanged for
Physical Notes in accordance with the rules and procedures of the Depository and
the provisions of Section 2.17. In addition, a Global Note shall be exchangeable
for Physical Notes if (i) the Depository (x) notifies the Company that it is
unwilling or unable to continue as depository for such Global Note and the
Company thereupon fails to appoint a successor depository or (y) has ceased to
be a clearing agency registered under the Exchange Act, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
such Physical Notes or (iii) there shall have occurred and be continuing an
Event of Default with respect to the Notes. In all cases, Physical Notes
delivered in exchange for any Global Note or beneficial interests therein shall
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the Depository (in accordance with its customary procedures).



                                      -39-

          (c)  In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.

          (d)  In connection with the transfer of Global Notes as an entirety
to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in writing in exchange for its beneficial
interest in the Global Notes, an equal aggregate principal amount of Physical
Notes of authorized denominations.

          (e)  Any Physical Note constituting a Restricted Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the Private Placement Legend or, in the case of the Regulation S
Global Note, the legend set forth in EXHIBIT C, in each case, unless the Company
determine otherwise in compliance with applicable law.

          (f)  On or prior to the 40th day after the later of the commencement
of the offering of the Notes represented by the Regulation S Global Note and the
issue date of such Notes (such period through and including such 40th day, the
"RESTRICTED PERIOD"), a beneficial interest in a Regulation S Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
corresponding Restricted Global Note only upon receipt by the Trustee of a
written certification from the transferor to the effect that such transfer is
being made (i)(a) to a Person that the transferor reasonably believes is a
Qualified Institutional Buyer in a transaction meeting the requirements of Rule
144A or (b) pursuant to another exemption from the registration requirements
under the Securities Act which is accompanied by an Opinion of Counsel regarding
the availability of such exemption and (ii) in accordance with all applicable
securities laws of any state of the United States or any other jurisdiction.

          (g)  Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Regulation S or Rule 144 (if available) and that, if such transfer occurs
prior to the expiration of the Restricted Period, the interest transferred will
be held immediately thereafter through Euroclear or Clearstream.



                                      -40-

          (h)  Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.

          (i)  The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.

SECTION 2.17.  SPECIAL TRANSFER PROVISIONS.

          (a)  TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration or any proposed registration of transfer of a Note
constituting a Restricted Note to a QIB (excluding transfers to Non-U.S.
Persons):

          (i)  the Registrar shall register the transfer if such transfer is
     being made by a proposed transferor who has checked the box provided for on
     such Holder's Note stating, or to a transferee who has advised the Company
     and the Registrar in writing, that it is purchasing the Note for its own
     account or an account with respect to which it exercises sole investment
     discretion and that it and any such account is a QIB within the meaning of
     Rule 144A, and is aware that the sale to it is being made in reliance on
     Rule 144A and acknowledges that it has received such information regarding
     the Company as it has requested pursuant to Rule 144A or has determined not
     to request such information and that it is aware that the transferor is
     relying upon its foregoing representations in order to claim the exemption
     from registration provided by Rule 144A; and

          (ii) if the proposed transferee is an Agent Member, and the Notes to
     be transferred consist of Physical Notes which after transfer are to be
     evidenced by an interest in the Global Note, upon receipt by the Registrar
     of instructions given in accordance with the Depository's and the
     Registrar's procedures, the Registrar shall reflect on its books and
     records the date and an increase in the principal amount of the Global Note
     in an amount equal to the principal amount of the Physical Notes to be
     transferred, and the Trustee shall cancel the Physical Notes so
     transferred.

          (b)  PRIVATE PLACEMENT LEGEND. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver



                                      -41-

Notes that do not bear the Private Placement Legend. Upon the registration of
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (ii) such Note
has been sold pursuant to an effective registration statement under the
Securities Act and the Registrar has received an Officers' Certificate from the
Company to such effect.

          (c)  GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.

          The Registrar shall retain for a period of two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 or this Section 2.17. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable notice to the Registrar.

SECTION 2.18.  COMPUTATION OF INTEREST.

          Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months and actual days elapsed.

                                  ARTICLE THREE

                                   REDEMPTION

SECTION 3.01.  ELECTION TO REDEEM; NOTICES TO TRUSTEE.

          If the Company elects to redeem Notes pursuant to paragraph 5 of the
Notes, at least 35 days prior to the Redemption Date (unless a shorter notice
shall be agreed to in writing by the Trustee) but not more than 65 days before
the Redemption Date, the Company shall notify the Trustee in writing of the
Redemption Date, the principal amount of Notes to be redeemed and the redemption
price, and deliver to the Trustee an Officers' Certificate stating that such
redemption will comply with the conditions contained in paragraph 5 of the
Notes. Notice given to the Trustee pursuant to this Section 3.01 may not be
revoked after the time that notice is given to Noteholders pursuant to Section
3.03.



                                      -42-

SECTION 3.02.  SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.

          The Trustee shall select the Notes to be redeemed, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Notes are not so listed, either on a PRO RATA basis or by
lot, or such other method as the Trustee shall deem fair and appropriate;
PROVIDED that, in the case of a redemption pursuant to paragraph 5(a) of the
Notes, the Trustee shall select the Notes only on a PRO RATA basis or on as
nearly a PRO RATA basis as is practicable (subject to procedures of the
Depository). The Trustee shall promptly notify the Company of the Notes selected
for redemption and, in the case of any Notes selected for partial redemption,
the principal amount thereof to be redeemed. The Trustee may select for
redemption portions of the principal of the Notes that have denominations larger
than $1,000. Notes and portions thereof the Trustee selects shall be redeemed in
amounts of $1,000 or whole multiples of $1,000. For all purposes of this
Indenture unless the context otherwise requires, provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.

SECTION 3.03.  NOTICE OF REDEMPTION.

          At least 30 days, and no more than 60 days, before a Redemption Date,
the Company shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder of Notes to be redeemed at his or her last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.04.

          The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:

          (1)  the Redemption Date;

          (2)  the redemption price and the amount of premium and accrued
     interest to be paid;

          (3)  if any Note is being redeemed in part, the portion of the
     principal amount of such Note to be redeemed and that, after the Redemption
     Date and upon surrender of such Note, a new Note or Notes in principal
     amount equal to the unredeemed portion will be issued;

          (4)  the name and address of the Paying Agent;

          (5)  that Notes called for redemption must be surrendered to the
     Paying Agent to collect the redemption price;



                                      -43-

          (6)  that unless the Company defaults in making the redemption
     payment, interest on Notes called for redemption ceases to accrue on and
     after the Redemption Date;

          (7)  that paragraph 5 of the Notes is the provision of the Notes
     pursuant to which the redemption is occurring; and

          (8)  the aggregate principal amount of Notes that are being
     redeemed.

          At the Company's written request made at least five Business Days
prior to the date on which notice is to be given, the Trustee shall give the
notice of redemption in the Company's name and at the Company's sole expense.

SECTION 3.04.  EFFECT OF NOTICE OF REDEMPTION.

          Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including any premium, plus interest accrued to the
Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid at
the redemption price, including any premium, plus interest accrued to the
Redemption Date; PROVIDED that if the Redemption Date is after a regular record
date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Holder of the redeemed Notes registered on the relevant record
date; and PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday,
payment shall be made on the next succeeding Business Day and no interest shall
accrue for the period from such Redemption Date to such succeeding Business Day.

SECTION 3.05.  DEPOSIT OF REDEMPTION PRICE.

          On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Company shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the redemption price of, including premium, if
any, and accrued interest on all Notes to be redeemed on that date other than
Notes or portions thereof called for redemption on that date which have been
delivered by the Company to the Trustee for cancellation.

          On and after any Redemption Date, if money sufficient to pay the
redemption price of, including premium, if any, and accrued interest on Notes
called for redemption shall have been made available in accordance with the
immediately preceding paragraph, the Notes called for redemption will cease to
accrue interest and the only right of the Holders of such Notes will be to
receive payment of the redemption price of and, subject to the first proviso in
Section 3.04, accrued and unpaid interest on such Notes to the Redemption Date.
If any Note surrendered for redemption shall not be so paid, interest will be
paid, from the Redemption Date until such redemption payment is made, on the
unpaid principal of the Note and any interest



                                      -44-

not paid on such unpaid principal, each case at the rate and in the manner
provided in the Notes.

SECTION 3.06.  NOTES REDEEMED IN PART.

          Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for the Holder thereof a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.

SECTION 3.07.  SPECIAL MANDATORY REDEMPTION; NOTICES TO TRUSTEE AND SECURITIES
               INTERMEDIARY.

          If the Solutia Assumption has not occurred on or before the Deadline
(the "SPECIAL REDEMPTION TRIGGER"), the Company will promptly notify the Trustee
thereof and deliver to the Trustee an Officers' Certificate stating that such
redemption will comply with the conditions contained in paragraph 6 of the Notes
and setting forth the Special Mandatory Redemption Price applicable to such
Special Mandatory Redemption. Simultaneously with the giving of such notice by
the Company to the Trustee, the Company shall notify the Securities Intermediary
thereof pursuant to Section 3(a) of the Escrow Agreement.

SECTION 3.08.  NOTICE OF SPECIAL MANDATORY REDEMPTION TO HOLDERS.

          Upon the occurrence of the Special Redemption Trigger, notice of the
Special Mandatory Redemption will be promptly mailed by first class mail by the
Company to each Holder of Notes at his or her last address as the same appears
on the registry books maintained by the Registrar pursuant to Section 2.04 and
to the Trustee and the Securities Intermediary.

          The notice shall state that all the Notes will be redeemed (including
the CUSIP numbers thereof) and shall state:

          (1)  the Special Mandatory Redemption Date;

          (2)  the Special Mandatory Redemption Price;

          (3)  the name and address of the Paying Agent;

          (4)  that Notes must be surrendered to the Paying Agent to collect the
     redemption price;

          (5)  that unless the Company defaults in making the redemption
     payment, interest on the Notes ceases to accrue on and after the Special
     Mandatory Redemption Date; and



                                      -45-

          (6)  that paragraph 6 of the Notes is the provision pursuant to which
     the Notes are being redeemed.

SECTION 3.09.  EFFECT OF NOTICE OF SPECIAL MANDATORY REDEMPTION.

          Once the notice of redemption described in Section 3.08 is mailed, the
Notes will become due and payable on the Special Mandatory Redemption Date at
the Special Mandatory Redemption Price. Upon surrender to the Paying Agent, the
Notes shall be paid at the Special Mandatory Redemption Price; PROVIDED that if
the Special Mandatory Redemption Date is a Legal Holiday, payment shall be made
on the next succeeding Business Day and no interest shall accrue for the period
from such Special Mandatory Redemption Date to such succeeding Business Day.

SECTION 3.10.  DEPOSIT OF SPECIAL MANDATORY REDEMPTION PRICE.

          On or prior to 10:00 A.M., New York City time, on the Special
Mandatory Redemption Date, the Company shall direct the Securities Intermediary,
pursuant to Section 3(a) of the Escrow Agreement, to deposit with the Paying
Agent the applicable Special Mandatory Redemption Price.

          On and after the Special Mandatory Redemption Date, if money
sufficient to pay the applicable Special Mandatory Redemption Price shall have
been made available in accordance with the immediately preceding paragraph, the
Notes will cease to accrue interest and the only right of the Holders of the
Notes will be to receive payment of the Special Mandatory Redemption Price. If
any Note surrendered for redemption shall not be so paid, interest will be paid,
from the Special Mandatory Redemption Date until such redemption payment is
made, on the unpaid principal of the Note and any interest not paid on such
unpaid principal, in each case at the rate and in the manner provided in the
Notes.

                                  ARTICLE FOUR

                                    COVENANTS

SECTION 4.01.  PAYMENT OF NOTES.

          The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and this Indenture. An
installment of principal or interest shall be considered paid on the date it is
due if the Trustee or Paying Agent holds on that date money designated for and
sufficient to pay such installment.



                                      -46-

          The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.

SECTION 4.02.  MAINTENANCE OF OFFICE OR AGENCY.

          (a)  The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee or Registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.

          (b)  The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.

          (c)  The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.04.

SECTION 4.03.  LEGAL EXISTENCE.

          Subject to Article Five, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its legal
existence, and the corporate, partnership or other existence of each Restricted
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Restricted Subsidiary and the
material rights (charter and statutory), and franchises of the Company and the
Restricted Subsidiaries; PROVIDED that the Company shall not be required to
preserve any such right, franchise, or the corporate, partnership or other
existence of any of its Restricted Subsidiaries if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Restricted Subsidiaries taken
as a whole, and that the loss thereof is not adverse in any material respect to
the Holders.



                                      -47-

SECTION 4.04.  MAINTENANCE OF PROPERTIES; INSURANCE; COMPLIANCE WITH LAW.

          (a)  The Company shall, and shall cause each of its Restricted
Subsidiaries to, at all times cause all material properties used or useful in
the conduct of their respective businesses to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment, and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereto; PROVIDED,
HOWEVER, that nothing in this Section 4.04(a) shall prevent the Company or any
of its Restricted Subsidiaries from discontinuing the operation and maintenance
of any of such material properties if such discontinuance is, in the reasonable
judgment of the Company, desirable in the conduct of the business of the Company
and its Subsidiaries taken as a whole.

          (b)  The Company shall maintain insurance, and cause each of its
Restricted Subsidiaries to maintain insurance, with financially sound and
reputable insurers, with respect to such of its properties, against such risks,
casualties and contingencies and in such types and amounts as are consistent
with sound business practice, it being understood that this paragraph (b) shall
not prevent the use of deductible or excess loss insurance and shall not prevent
(i) the Company or any of its Subsidiaries from acting as a self-insurer or
maintaining insurance with another Subsidiary or Subsidiaries of the Company so
long as such action is consistent with sound business practice or (ii) the
Company from obtaining and owning insurance policies covering activities of its
Subsidiaries.

          (c)  The Company shall, and shall cause each of its Restricted
Subsidiaries to comply with all statutes, laws, ordinances or government rules
and regulations to which they are subject, non-compliance with which would
materially adversely affect the business, financial condition or results of
operations of the Company and its Restricted Subsidiaries taken as a whole.

SECTION 4.05.  WAIVER OF STAY, EXTENSION OR USURY LAWS.

          The Company and each of the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon, or
plead (as a defense or otherwise) or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
which would prohibit or forgive any of the Company and the Subsidiary Guarantors
from paying all or any portion of the principal of, premium, if any, and/or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that they may lawfully do so) each of the
Company and the Subsidiary Guarantors hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to



                                      -48-

the Trustee, but will suffer permit the execution of every such power as though
no such law had been enacted.

SECTION 4.06.  COMPLIANCE CERTIFICATE.

          (a)  The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, a certificate of an Officer (as enumerated by
Section 314(a)(4) of the TIA) stating that the Officer has conducted or
supervised a review of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under this Indenture during such fiscal year, and further stating, as to each
such Officer signing such certificate, that, to the best of such Officers'
knowledge, based upon such review, the Company has fulfilled all obligations
under this Indenture or, if there has been a Default under this Indenture that
is continuing, a description of the event and what action the Company and the
Subsidiary Guarantors are taking or propose to take with respect thereto.

          (b)  The Company will deliver to the Trustee, within 30 days after the
occurrence thereof, a certificate of an Officer detailing any continuing Default
of which such Officer is aware, its status and what action the Company is taking
or proposes to take with respect to such Default.

          (c)  The Company will provide written notice to the Trustee of any
change in its fiscal year.

          (d)  Solutia shall promptly notify the Trustee the first time the
Notes are rated Investment Grade; PROVIDED, HOWEVER, that the failure to deliver
such notice shall in no event be deemed a Default or an Event of Default.

SECTION 4.07.  TAXES.

          The Company shall, and shall cause each of its Restricted Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings,
PROVIDED HOWEVER that the Company and its Restricted Subsidiaries shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment or governmental levies whose amount, applicability or validity is
being contested in good faith by appropriate proceedings or which is not of
material importance to the business, operations, financial conditions or results
of operations of the Company and its Subsidiaries, taken as a whole.



                                      -49-

SECTION 4.08.  REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL.

          (a)  Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, thereon to the date of purchase (the "CHANGE OF CONTROL
PAYMENT") on a date that is not more than 90 days after the occurrence of such
Change of Control (the "CHANGE OF CONTROL PAYMENT DATE"). Within 30 days
following any Change of Control, the Company will mail, or at the Company's
request the Trustee will mail, a notice to each Holder offering to repurchase
the Notes held by such Holder pursuant to the procedures specified in such
notice.

          (b)  Within 30 days following the date on which a Change of Control
occurs, the Company shall send (or request in writing that the Trustee send), by
first-class mail, postage prepaid, a notice to each Holder of Notes at its last
registered address and, if given by the Company, the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to the Holders shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer. Such notice shall state:

     (1)  that the Change of Control Offer is being made pursuant to this
          Section 4.08 and that all Notes validly tendered and not withdrawn
          will be accepted for payment;

     (2)  the Change of Control Payment and the Change of Control Payment Date
          (which shall be no earlier than 30 days nor later than 60 days from
          the date such notice is mailed, other than as may be required by law);

     (3)  that any Note not tendered will continue to accrue interest;

     (4)  that, unless the Company defaults in making payment therefor, any Note
          accepted for payment pursuant to the Change of Control Offer shall
          cease to accrue interest after the Change of Control Payment Date;

     (5)  that Holders electing to have a Note purchased pursuant to a Change of
          Control Offer will be required to surrender the Note, with the form
          entitled "Option of Holder to Elect Purchase" on the reverse of the
          Note completed, to the Paying Agent and Registrar for the Notes at the
          address specified in the notice prior to the close of business on the
          third Business Day prior to the Change of Control Payment Date;



                                      -50-

     (6)  that Holders will be entitled to withdraw their election if the Paying
          Agent receives, not later than the second Business Day prior to the
          Change of Control Payment Date, a telegram, telex, facsimile
          transmission or letter setting forth the name of the Holder, the
          principal amount of the Notes the Holder delivered for purchase and a
          statement that such Holder is withdrawing its election to have such
          Note purchased;

     (7)  that Holders whose Notes are purchased only in part will be issued new
          Notes in a principal amount equal to the unpurchased portion of the
          Notes surrendered; PROVIDED, HOWEVER, that each Note purchased and
          each new Note issued shall be in a principal amount of $1,000 or
          integral multiples thereof; and

     (8)  the circumstances and relevant facts regarding such Change of Control.

          (c)  On the Change of Control Payment Date, the Company will, to the
extent lawful: (x) accept for payment all Notes or portions of Notes properly
tendered in the Change of Control Offer; (y) deposit with the Paying Agent an
amount equal to the Change of Control Payment for all Notes or portions of Notes
tendered; and (z) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions of Notes being purchased by the Company.

          (d)  The Paying Agent will promptly mail to each Holder of Notes
tendered the Change of Control Payment for them, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any. Upon the payment of the Change of Control Payment, the
Trustee shall return the Notes purchased to the Company for cancellation. For
purposes of this Section 4.08, the Trustee shall act as the Paying Agent.

          (e)  Notwithstanding the foregoing, the Company will not be required
to make a Change of Control Offer, as provided above, if, in connection with or
in contemplation of any Change of Control, it or a third party has made an offer
to purchase (an "ALTERNATE OFFER") any and all Notes validly tendered at a cash
price equal to or higher than the Change of Control Payment and has purchased
all Notes properly tendered and not withdrawn in accordance with the terms of
such Alternate Offer.

          (f)  The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.08, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of this Section 4.08 by virtue thereof.



                                      -51-

SECTION 4.09.  LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE
               OF PREFERRED STOCK.

          Prior to the Assumption Date, the Company will not incur any
Indebtedness (including Acquired Debt) or issue any Disqualified Stock, except
for the Notes.

          From and after the Assumption Date:

          (1)  the Company will not, and will not permit any of its Restricted
     Subsidiaries to, incur any Indebtedness (including Acquired Debt);

          (2)  the Company will not, and will not permit any of its Restricted
     Subsidiaries to, issue any Disqualified Stock (including Acquired
     Disqualified Stock); and

          (3)  the Company will not permit any of its Restricted Subsidiaries
     that are not Subsidiary Guarantors to issue any shares of Preferred Stock
     (including Acquired Preferred Stock);

PROVIDED, HOWEVER, that the Company and the Subsidiary Guarantors may incur
Indebtedness (including Acquired Debt) and the Company and the Subsidiary
Guarantors may issue shares of Disqualified Stock (including Acquired
Disqualified Stock) if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which financial statements have
been filed with the SEC pursuant to Section 4.18 immediately preceding the date
on which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2 to 1, determined on a PRO FORMA basis
(including a PRO FORMA application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period, with
any letters of credit and bankers' acceptances being deemed to have an aggregate
principal amount of Indebtedness equal to the maximum amount available
thereunder.

          The immediately preceding paragraph will not apply to:

     (i)       (I) the incurrence by the Company or any Subsidiary Guarantor of
     Indebtedness pursuant to the Credit Facility in an aggregate principal
     amount at any time outstanding not to exceed the lesser of (x) $800 million
     and (y) the aggregate amount of the Credit Facility as specified in the
     Assumption Documentation, less the aggregate principal amount of all
     mandatory repayments applied to (a) repay loans (other than revolving
     credit loans) outstanding thereunder or (b) permanently reduce the
     revolving credit commitments thereunder (and the corresponding guarantees
     of the Subsidiary Guarantors thereunder) and (II) the incurrence by any
     Foreign Subsidiary of Indebtedness pursuant to the Credit Facility in an
     aggregate principal amount not to exceed



                                      -52-

     the aggregate principal amount of Indebtedness incurred by Foreign
     Subsidiaries under the Credit Facility on the Assumption Date; PROVIDED,
     HOWEVER, that if the Company or a Subsidiary Guarantor transfers any
     material assets to a Foreign Subsidiary that is a borrower under the Credit
     Facility, then, at the time of such transfer, there shall be deemed to be
     an incurrence of Indebtedness that is not permitted by this clause (i)(II)
     in the amount of Indebtedness that is outstanding under this clause (i)(II)
     at the time of such transfer;

     (ii)      the incurrence by the Company and the Subsidiary Guarantors of
     Indebtedness represented by the Notes (not including any Additional Notes)
     and Subsidiary Guarantees thereof, including any Exchange Securities issued
     for the Notes issued on the Issue Date;

     (iii)     the Existing Indebtedness of the Company and its Restricted
     Subsidiaries (other than Indebtedness of the type described in clause (i),
     (ii), (v), (ix) or (x) of this Section 4.09);

     (iv)      the incurrence by the Company or any of its Restricted
     Subsidiaries of any Permitted Refinancing in exchange for, or the Net
     Proceeds of which are used to extend, refinance, renew, replace, defease or
     refund, Indebtedness that was permitted to be incurred under (A) the Fixed
     Charge Coverage Ratio test set forth above or (B) clauses (ii) and (iii)
     above, clause (xi) below or this clause (iv);

     (v)       the incurrence by the Company or any of its Restricted
     Subsidiaries of intercompany Indebtedness between or among the Company and
     any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the
     Company or any Subsidiary Guarantor is the obligor on such Indebtedness,
     then (other than intercompany notes that constitute Collateral) such
     Indebtedness is expressly subordinated by its terms to the prior payment in
     full in cash of all Obligations with respect to the Notes or the Subsidiary
     Guarantee, as the case may be, and (ii) (A) any subsequent issuance or
     transfer of Capital Stock that results in any such Indebtedness being held
     by a Person other than the Company or a Restricted Subsidiary and (B) any
     sale or other transfer of any such Indebtedness to a Person that is not
     either the Company or a Restricted Subsidiary shall be deemed, in each
     case, to constitute a simultaneous incurrence of such Indebtedness that is
     not permitted by this clause (v) by the Company or such Restricted
     Subsidiary, as the case may be;

     (vi)      the incurrence by the Company or any Restricted Subsidiary of
     Hedging Obligations that are incurred for the purpose of (A) fixing or
     hedging interest rate or currency risk with respect to any fixed or
     floating rate Indebtedness that is permitted by this Indenture to be
     outstanding which is designed solely to protect the Company or any
     Restricted Subsidiary against fluctuations in foreign currency exchange
     rates; PROVIDED



                                      -53-

     that such Hedging Obligation does not increase the principal amount of any
     such Indebtedness other than as a result of fluctuations in foreign
     currency exchange rates or interest rates or by reason of fees, indemnities
     and compensation payable thereunder or (B) managing fluctuations in the
     price or cost of energy, raw materials, manufactured products or related
     commodities; PROVIDED that such obligations are entered into for valid
     business purposes other than speculative purposes (as determined by the
     Company's or such Restricted Subsidiary's principal financial officer in
     the exercise of his or her good faith business judgment);

     (vii)     the issuance by any of the Company's Restricted Subsidiaries of
     shares of Preferred Stock to the Company or a Wholly Owned Restricted
     Subsidiary; PROVIDED that (A) any subsequent issuance or transfer of
     Capital Stock that results in such Preferred Stock being held by a Person
     other than the Company or a Wholly Owned Restricted Subsidiary or (B) the
     transfer or other disposition by the Company or a Wholly Owned Restricted
     Subsidiary of any such shares to a Person other than the Company or a
     Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
     constitute an issuance of such Preferred Stock by such Subsidiary on such
     date that is not permitted by this clause (vii);

     (viii)    the incurrence by the Company or any of its Restricted
     Subsidiaries of Indebtedness represented by worker's compensation claims
     and other statutory or regulatory obligations, self-insurance obligations,
     tender, bid, performance, government contract, surety or appeal bonds,
     standby letters of credit and warranty and contractual service obligations
     of like nature, trade letters of credit or documentary letters of credit,
     in each case to the extent incurred in the ordinary course of business of
     the Company or such Restricted Subsidiary;

     (ix)      the incurrence of Indebtedness by Foreign Subsidiaries (not
     including Indebtedness incurred pursuant to clause (i)(II) above), the
     aggregate principal amount (or accreted value, as applicable) at any time
     outstanding and incurred in reliance upon this clause (ix), does not exceed
     $25 million;

     (x)       the Guarantee by the Company or any Subsidiary Guarantor of
     Indebtedness of the Company or a Restricted Subsidiary that was permitted
     to be incurred by another provision of this Section 4.09;

     (xi)      Acquired Debt or Acquired Disqualified Stock; PROVIDED that such
     Indebtedness or Disqualified Stock was not incurred in connection with or
     in contemplation of such Person becoming a Restricted Subsidiary; and
     PROVIDED FURTHER that immediately after giving effect to such incurrence,
     the Fixed Charge Coverage Ratio for the Company's most recently ended four
     full fiscal quarters for which financial statements have been filed with
     the SEC pursuant to Section 4.18 immediately preceding



                                      -54-

     the date of such incurrence would have been at least 2 to 1, determined on
     a PRO FORMA basis (including giving PRO FORMA effect to the applicable
     transaction related thereto);

     (xii)     Indebtedness consisting of take-or-pay obligations contained in
     supply agreements entered into in the ordinary course of business;

     (xiii)    the incurrence by the Company and the Subsidiary Guarantors of
     Purchase Money Obligations and Capital Lease Obligations in an aggregate
     principal amount not to exceed $50 million at any one time outstanding;

     (xiv)     Indebtedness arising from agreements of the Company or a
     Restricted Subsidiary providing for indemnification, contribution, earnout,
     adjustment of purchase price or similar obligation, in each case, incurred
     or assumed in connection with the disposition of any business, assets or
     Capital Stock of a Restricted Subsidiary;

     (xv)      Indebtedness arising from the honoring by a bank or other
     financial institution of a check, draft or similar instrument drawn against
     insufficient funds in the ordinary course of business; PROVIDED, that such
     Indebtedness is extinguished within three business days of incurrence; and

     (xvi)     the incurrence by the Company or any Subsidiary Guarantor of
     Indebtedness or the issuance of Disqualified Stock, the aggregate principal
     amount (or accreted value, as applicable) or liquidation preference of
     which, together with all other Indebtedness and Disqualified Stock at the
     time outstanding and incurred in reliance on this clause (xvi), does not
     exceed $50 million.

          For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness or Preferred Stock meets the criteria of more
than one of the categories of permitted Indebtedness described in clauses (i)
through (xvi) above or is entitled to be incurred pursuant to the first
paragraph of this Section 4.09, the Company shall, in its sole discretion,
classify on the date of incurrence (and from time to time reclassify in whole or
in part) such item of Indebtedness or Preferred Stock in any matter that
complies with this Section 4.09 and such Indebtedness or Preferred Stock will be
treated as having been incurred pursuant to the clauses or the first paragraph
hereof, as the case may be, designated by the Company (PROVIDED that all
Indebtedness under the Credit Facility shall at all times be deemed to have been
incurred pursuant to clause (i) of this Section 4.09). The amount of
Indebtedness issued at a price which is less than the principal amount thereof
shall be equal to the amount of the liability in respect thereof determined in
accordance with GAAP.



                                      -55-

SECTION 4.10.  LIMITATION ON RESTRICTED PAYMENTS.

          Prior to the Assumption Date, the Company will not make any Restricted
Payments (as defined below) or any Permitted Investments, except to the extent
necessary to consummate the Solutia Assumption, perform its obligations under
the Escrow Agreement and the transactions contemplated thereby, including any
Investments deemed to exist by virtue of the Escrow Agreement.

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:

          (1)  declare or pay any dividend or make any distribution on account
     of the Company's or any of its Restricted Subsidiaries' Capital Stock,
     other than:

                 (x)     dividends or distributions payable in Qualified Capital
          Stock of the Company, and

                 (y)     dividends or distributions payable to the Company or
          any Restricted Subsidiary of the Company;

          (2)  purchase, redeem or otherwise acquire or retire for value any
     Capital Stock of the Company, other than any such Capital Stock owned by
     the Company or any of its Restricted Subsidiaries;

          (3)  make any principal payment on, or purchase, redeem, defease or
     otherwise acquire or retire for value, any Subordinated Debt of the Company
     or any Restricted Subsidiary, other than Indebtedness owed to the Company
     or any Restricted Subsidiary, except, in each case, payment of interest or
     principal at Stated Maturity; or

          (4)  make any Restricted Investment

(all such payments and other actions set forth in clauses (1) through (4) above
(other than any exception thereto) being collectively referred to as "RESTRICTED
PAYMENTS"), unless, at the time of and after giving effect to such Restricted
Payment (the amount of any such Restricted Payment, if other than cash, shall be
the fair market value (as conclusively evidenced by a resolution of the Board of
Directors) of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment):

          (a)  no Default or Event of Default shall have occurred and be
     continuing after giving effect thereto; and

          (b)  the Company would, at the time of such Restricted Payment and
     after giving PRO FORMA effect thereto as if such Restricted Payment had
     been made at the beginning



                                      -56-

     of the most recently ended four full fiscal quarters for which financial
     statements have been filed with the SEC pursuant to Section 4.18
     immediately preceding the date of such Restricted Payment, have been
     permitted to incur at least $1.00 of additional Indebtedness pursuant to
     the Fixed Charge Coverage Ratio test set forth in the first paragraph of
     Section 4.09; and

          (c)  such Restricted Payment, together with the aggregate of all other
     Restricted Payments made by the Company and its Restricted Subsidiaries on
     or after the Issue Date (excluding Restricted Payments permitted by clause
     (b), (d) or (e) of the next succeeding paragraph), is less than the sum,
     without duplication, of:

          (i)       50% of the Consolidated Net Income of the Company for the
          period (taken as one accounting period) from the Issue Date to the end
          of the Company's most recently ended fiscal quarter for which
          financial statements have been filed with the SEC pursuant to Section
          4.18 at the time of such Restricted Payment (or, if such Consolidated
          Net Income for such period is a deficit, less 100% of such deficit),
          PLUS

          (ii)      100% of the aggregate net cash proceeds received by the
          Company from the issue or sale after the Issue Date of Qualified
          Capital Stock of the Company or of debt securities of the Company or
          any of its Restricted Subsidiaries that have been converted into or
          exchanged for such Qualified Capital Stock of the Company, PLUS

          (iii)     to the extent that any Restricted Investment that was made
          after the Issue Date and was included in the calculation of aggregate
          Restricted Payments under this clause (c) is sold for cash or
          otherwise liquidated, repaid or otherwise reduced, including by way of
          dividend or distribution (to the extent not included in calculating
          Consolidated Net Income), for cash, the lesser of (A) the cash return
          with respect to such Restricted Investment (less the cost of
          disposition, if any) or (B) the initial amount of such Restricted
          Investment, PLUS

          (iv)      an amount equal to the sum of (A) the net reduction in
          Investments in Unrestricted Subsidiaries resulting from dividends,
          repayments of loans or other transfers of assets (to the extent not
          included in calculating Consolidated Net Income), in each case, to the
          Company or any Restricted Subsidiary from Unrestricted Subsidiaries
          and (B) the portion (proportionate to the Company's equity interest in
          such Subsidiary) of the fair market value of the net assets of an
          Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
          designated a Restricted Subsidiary;



                                      -57-

          PROVIDED, HOWEVER, that the foregoing sum shall not exceed, in the
          case of any Unrestricted Subsidiary, the amount of Restricted
          Investments previously made after the Issue Date by the Company or any
          Restricted Subsidiary in such Unrestricted Subsidiary that were
          included in the calculation above of aggregate Restricted Payments
          under this clause (c).

          The foregoing provisions of this Section 4.10 will not prohibit the
following Restricted Payments:

          (a)  the payment of any dividend within 90 days after the date of
     declaration thereof, if at said date of declaration such payment would have
     complied with the provisions of this Indenture;

          (b)  dividends or distributions by any Wholly-Owned Restricted
     Subsidiary of the Company payable to the Company or another Wholly-Owned
     Restricted Subsidiary of the Company;

          (c)  so long as no Default or Event of Default has occurred and is
     continuing, the payment of cash dividends on any series of Disqualified
     Stock issued after the Issue Date in an aggregate amount not to exceed the
     cash received by the Company since the Issue Date upon issuance of such
     Disqualified Stock;

          (d)  the redemption, repurchase, retirement or other acquisition of
     any Capital Stock of the Company, any Restricted Subsidiary or any Joint
     Venture (or the acquisition of all the outstanding Capital Stock of any
     Person that conducts no operations and has no assets or liabilities other
     than the ownership of Capital Stock in a Joint Venture) in exchange for, or
     out of the net cash proceeds of the substantially concurrent sale (other
     than to a Subsidiary or Joint Venture of the Company) of, Qualified Capital
     Stock of the Company; PROVIDED that the amount of any such net cash
     proceeds that are utilized for any such redemption, repurchase, retirement
     or other acquisition shall be excluded from (and shall not previously have
     been included in) clause (c)(ii) of the preceding paragraph;

          (e)  the defeasance, redemption or repurchase of Subordinated Debt
     with the net cash proceeds from an incurrence of Permitted Refinancing or
     in exchange for or out of the net cash proceeds from the substantially
     concurrent sale (other than to a Subsidiary or Joint Venture of the
     Company) of Qualified Capital Stock of the Company; PROVIDED that the
     amount of any such net cash proceeds that are utilized for any such
     redemption, repurchase, retirement or other acquisition shall be excluded
     from (and shall not previously have been included in) clause (c)(ii) of the
     preceding paragraph;



                                      -58-

          (f)  the repurchase, redemption or other acquisition or retirement for
     value of any Capital Stock of the Company or any Subsidiary of the Company
     held by any member of the Company's (or any of its Subsidiaries')
     management pursuant to any management equity subscription agreement or
     stock option agreement; PROVIDED that the aggregate price paid for all such
     repurchased, redeemed, acquired or retired Capital Stock in reliance on
     this clause (f) shall not exceed $5 million in any calendar year;

          (g)  payments by the Company made pursuant to the Astaris Support
     Agreement as such agreement is in effect on the Issue Date or as such
     agreement may be amended, modified, supplemented or replaced, in whole or
     in part; PROVIDED that the aggregate amount of payments made in reliance on
     this clause (g) shall in no event exceed the maximum aggregate amount of
     payments required to be made by the Company after the Issue Date under the
     Astaris Support Agreement as in effect on the Issue Date;

          (h)  repurchases of shares of preferred stock of Solutia Management
     Company, Inc. in accordance with the terms of its stockholders agreement,
     dated as of December 29, 1998, in an amount not to exceed $1.5 million in
     the aggregate;

          (i)  Restricted Payments comprised of payments of dividends on, or
     repurchases of, the Company's common stock, in an aggregate amount not to
     exceed the lower of (x) $10 million per calendar year and (y) $0.04 per
     share; PROVIDED that no Default or Event of Default shall have occurred and
     be continuing after giving effect to such Restricted Payment;

          (j)  notwithstanding anything to the contrary contained herein,
     repurchases of Capital Stock deemed to occur upon the exercise of stock
     options, to the extent such repurchases represent a portion of the exercise
     price thereof or withholding of applicable taxes thereon and the purchase
     price, or applicable withholding taxes, for such repurchases is paid solely
     in Qualified Capital Stock; and

          (k)  additional Restricted Payments in an aggregate amount not to
     exceed $25 million.

          If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Capital Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Capital Stock of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the first paragraph of this Section 4.10.



                                      -59-

          Prior to the first time the Notes are rated Investment Grade, the
Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary
if such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this Section 4.10 (except
to the extent such Investments were repaid to the Company or a Restricted
Subsidiary in cash). All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the fair market value of such
Investments at the time of such designation, as conclusively determined by the
Board of Directors. Such designation will only be permitted if any such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. In the
case of any designation by the Company of a Person as an Unrestricted Subsidiary
on the first day that such Person is a Subsidiary of the Company in accordance
with the provisions of this Indenture, such designation shall be deemed to have
occurred for all purposes of this Indenture simultaneously with, and
automatically upon, such Person becoming a Subsidiary.

SECTION 4.11.  LIMITATION ON LIENS.

          Prior to the Assumption Date, the Company will not, directly or
indirectly, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind upon any of its assets, now owned or
hereafter acquired, or upon any income or profits therefrom or assign any rights
to receive income therefrom, other than as contemplated by the Escrow Agreement.

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien, except Permitted Liens, on any asset
now owned or hereafter acquired, or any income or profits therefrom, unless all
payments due under this Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured (or, if such obligations are
subordinated by their terms to the Notes or the Subsidiary Guarantees, prior to
the obligations so secured) until such time as such obligations are no longer
secured by a Lien.

SECTION 4.12.  LIMITATION ON ASSET SALES.

          (a)  Prior to the Assumption Date, the Company will not consummate an
Asset Sale except to the extent necessary to consummate the transactions
contemplated by the Escrow Agreement, including the Solutia Assumption and the
related release to Solutia of the Escrow Assets.

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:



                                      -60-

          (i)       the Company and/or such Restricted Subsidiary, as the case
          may be, receives consideration at the time of such Asset Sale at least
          equal to the fair market value (as conclusively evidenced by an
          Officers' Certificate delivered to the Trustee or, if such Asset Sale
          involves aggregate consideration in excess of $20 million, a
          resolution of the Board of Directors that is set forth in an Officers'
          Certificate delivered to the Trustee) of the assets or Capital Stock
          issued or sold or otherwise disposed of,

          (ii)      at least 75% of the consideration therefor received by the
          Company and/or such Restricted Subsidiary is in the form of cash or
          Cash Equivalents, and

          (iii)     if such Asset Sale involves the transfer of Collateral, (a)
          it complies with the applicable provisions of the Security Documents
          and (b) all consideration received in such Asset Sale (including
          Additional Assets) shall, if applicable, be expressly made subject to
          the Lien under the Security Documents;

PROVIDED that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than Subordinated Debt) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from further liability and
(y) any securities, notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee, to the extent they are promptly
converted or monetized by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received), shall be deemed to be cash for purposes of
this provision.

          Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option:

          (a)  to permanently repay Applicable Pari Passu Indebtedness (and to
     correspondingly reduce commitments with respect thereto in the case of
     revolving borrowings); or

          (b)  to acquire Additional Assets (to the extent otherwise permitted
     by this Indenture) or make a capital expenditure, in each case, in a
     Permitted Business (or enter into a binding commitment for any such
     acquisition or expenditure); PROVIDED that such binding commitment shall be
     treated as a permitted application of Net Proceeds from the date of such
     commitment until and only until the earlier of (x) the date on which such
     expenditure or acquisition is consummated and (y) the 180th day following
     the expiration of the aforementioned 360 day period. If the acquisition or
     expenditure contemplated by such binding commitment is not consummated on
     or before such 180th day and the Company shall not have applied such Net
     Proceeds pursuant to



                                      -61-

     clause (a) above on or before such 180th day, such commitment shall be
     deemed not to have been a permitted application of Net Proceeds at any
     time.

          Pending the final application of any such Net Proceeds, the Company
may temporarily reduce the revolving Indebtedness under the Credit Facility or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"EXCESS PROCEEDS." On any date that the aggregate amount of Excess Proceeds
under this Indenture exceeds $25 million (an "ASSET SALE OFFER TRIGGER DATE"),
the Company will be required to make an offer to all Holders of Notes issued
under this Indenture (an "ASSET SALE OFFER") to purchase the maximum principal
amount of Notes and, if the Company is required to do so under the terms of any
other Indebtedness ranking PARI PASSU with such Notes ("OTHER INDEBTEDNESS"),
such other Indebtedness on a PRO RATA basis with the Notes that may be purchased
out of the Excess Proceeds, at a purchase price in cash in an amount equal to
100% of the principal amount thereof plus accrued and unpaid interest, if any,
thereon, to the date of purchase in accordance with the procedures set out in
this Indenture. To the extent that the aggregate amount of Notes (and any Other
Indebtedness subject to such Asset Sale Offer) tendered pursuant to such Asset
Sale Offers is less than the Excess Proceeds, the Company may, subject to the
other terms of this Indenture, use any remaining Excess Proceeds for any purpose
not prohibited by this Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof in connection with any Asset Sale Offer exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a PRO RATA basis. Upon completion of the offer to purchase made
under this Indenture, the amount of Excess Proceeds that was the subject of such
offer to purchase shall be reset at zero.

          (b)  The Company shall mail (or cause the Trustee to mail) a notice of
a Asset Sale Offer by first-class mail, postage prepaid, to the record Holders
as shown on the register of Holders within 30 days following the Asset Sale
Offer Trigger Date, with a copy, if such notice is being mailed by the Company,
to the Trustee, containing all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Asset Sale Offer and shall state
the following terms:

          (1)  that the Asset Sale Offer is being made pursuant to this Section
               4.12, that all Notes tendered will be accepted for payment;
               PROVIDED, HOWEVER, that if the aggregate principal amount of
               Notes and other Indebtedness tendered in a Asset Sale Offer plus
               accrued interest at the expiration of such offer exceeds the
               Excess Proceeds, the Company shall select on a PRO RATA basis,
               the Notes and Other Indebtedness to be purchased (with such
               adjustments as may be deemed appropriate by the



                                      -62-

               Company so that only Notes in denominations of $1,000, as
               applicable, or multiples thereof shall be purchased);

          (2)  the offer price (including the amount of accrued interest) and
               the Asset Sale Offer date of payment ("ASSET SALE OFFER PAYMENT
               DATE"), which shall be not less than 30 nor more than 60 days
               following the date notice of the applicable Asset Sale Offer is
               mailed;

          (3)  that any Note not tendered will continue to accrue interest;

          (4)  that, unless the Company defaults in making payment therefor, any
               Note accepted for payment pursuant to the Asset Sale Offer shall
               cease to accrue interest after the Asset Sale Offer Payment Date;

          (5)  that Holders electing to have a Note purchased pursuant to an
               Asset Sale Offer will be required to surrender such Note, with
               the form entitled "Option of Holder to Elect Purchase" on the
               reverse of the Note completed, to the Paying Agent at the address
               specified in the notice prior to the close of business on the
               third Business Day prior to the Asset Sale Offer Payment Date;

          (6)  that Holders will be entitled to withdraw their election if the
               Paying Agent receives, not later than the second Business Day
               prior to the Asset Sale Offer Payment Date, a telegram, telex,
               facsimile transmission or letter setting forth the name of such
               Holder, the principal amount of the Notes such Holder delivered
               for purchase and a statement that such Holder is withdrawing his
               election to have such Note purchased; and

          (7)  that Holders whose Notes are purchased only in part will be
               issued new Notes in a principal amount equal to the unpurchased
               portion of the Note surrendered; PROVIDED, HOWEVER, that each
               Note purchased and each new Note issued shall be in a principal
               amount of $1,000 or integral multiples thereof.

          (c)  On or before the Asset Sale Offer Payment Date, the Company shall
(1) accept for payment Notes or portions thereof (in integral multiples of
$1,000) validly tendered pursuant to the Asset Sale Offer, (2) deposit with the
Paying Agent an amount sufficient to pay the purchase price plus accrued and
unpaid interest, if any, of all Notes to be purchased and (3) deliver or cause
to be delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions of Notes
being purchased by the Company. Upon receipt by the Paying Agent of the monies
specified in clause (b) above and a copy of the Officers' Certificate specified
in clause (3) above, the Paying



                                      -63-

Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued and unpaid interest, if any, out
of the funds deposited with the Paying Agent in accordance with the preceding
sentence. The Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to such Holders new Notes equal in principal amount
to any unpurchased portion of the Notes surrendered, if any. Upon the payment of
the purchase price for the Notes accepted for purchase, the Trustee shall return
the Notes purchased to the Company for cancellation. Any monies remaining after
the purchase of Notes pursuant to a Asset Sale Offer shall be returned within
three business days by the Trustee to the Company except with respect to monies
owed as obligations to the Trustee pursuant to Article Seven. For purposes of
this Section 4.12, the Trustee shall act as the Paying Agent.

          (d)  To the extent the amount of Notes tendered pursuant to any Asset
Sale Offer is less than the amount of Net Cash Proceeds subject to such Asset
Sale Offer, the Company may use any remaining portion of such Net Cash Proceeds
not required to fund the repurchase of tendered Notes for any purpose not
prohibited by the Indenture and the amount of Excess Proceeds shall be reset to
zero.

          (e)  The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 4.12, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the provisions of this Section 4.12 by virtue thereof.

SECTION 4.13.  LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
               RESTRICTED SUBSIDIARIES.

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any restriction on the
ability of any Restricted Subsidiary to:

     (i)       (a)  pay dividends or make any other distributions to the Company
     or any of its Restricted Subsidiaries

               (1)  on its Capital Stock, or

               (2)  with respect to any other interest or participation in, or
          measured by, its profits, or



                                      -64-

               (b)  pay any Indebtedness owed to the Company or any of its
     Restricted Subsidiaries;

     (ii)      make loans or advances to the Company or any of its Restricted
     Subsidiaries; or

     (iii)     transfer any of its properties or assets to the Company or any of
     its Restricted Subsidiaries;

except for such restrictions existing under or by reason of:

          (a)  existing agreements as in effect on the Issue Date, including any
     amendment, modification or supplement thereof PROVIDED that such amendment,
     modification or supplement is materially no more restrictive than such
     existing agreement as in effect on the Issue Date;

          (b)  Indebtedness permitted by this Indenture to be incurred
     containing restrictions on the ability of Restricted Subsidiaries to
     consummate transactions of the types described in clause (i), (ii) or (iii)
     above not materially more restrictive than those contained in this
     Indenture and the Security Documents;

          (c)  this Indenture and the Security Documents;

          (d)  applicable law;

          (e)  existing restrictions with respect to a Person acquired by the
     Company or any of its Restricted Subsidiaries (except to the extent such
     restrictions were put in place in connection with or in contemplation of
     such acquisition), which restrictions are not applicable to any Person, or
     the properties or assets of any Person, other than the Person, or the
     property or assets of the Person, so acquired;

          (f)  customary non-assignment provisions in leases and other
     agreements entered into in the ordinary course of business;

          (g)  construction loans and Purchase Money Obligations (including
     Capital Lease Obligations) for property acquired in the ordinary course of
     business that impose restrictions of the nature described in clause (iii)
     above on the property so constructed or acquired;

          (h)  in the case of clause (iii) above, restrictions contained in
     security agreements or mortgages securing Indebtedness of a Restricted
     Subsidiary to the extent such restrictions restrict the transfer of the
     property subject to such security agreements or mortgages;



                                      -65-

          (i)  a Permitted Refinancing; PROVIDED that the restrictions contained
     in the agreements governing such Permitted Refinancing are not materially
     more restrictive, taken as a whole, than those contained in the agreements
     governing the Indebtedness being refinanced;

          (j)  any restriction with respect to shares of Capital Stock of a
     Restricted Subsidiary imposed pursuant to an agreement entered into for the
     sale or disposition of such shares of Capital Stock or any restriction with
     respect to the assets of a Restricted Subsidiary imposed pursuant to an
     agreement entered into for the sale or disposition of such assets or all or
     substantially all the Capital Stock of such Restricted Subsidiary pending
     the closing of such sale or disposition; and

          (k)  the Credit Facility and related documentation as the same is in
     effect on the Assumption Date and as amended, modified, extended, renewed,
     refunded, refinanced, restated or replaced from time to time; PROVIDED that
     the Credit Facility and related documentation as so amended, modified,
     extended, reviewed, refunded, refinanced, restated or replaced is not
     materially more restrictive, taken as a whole, as to the matters enumerated
     above than the Credit Facility and related documentation as in effect on
     the Assumption Date.

          For purposes of determining compliance with this Section 4.13, in the
event that a restriction meets the criteria of more than one of the categories
of permitted restrictions described in clauses (a) through (k) above, the
Company shall, in its sole discretion, classify such restriction in any matter
that complies with this Section 4.13 and such restriction will be treated as
existing pursuant to the clauses designated by the Company.

SECTION 4.14.  LIMITATION ON TRANSACTIONS WITH AFFILIATES.

          Prior to the Assumption Date, the Company will not enter into or
suffer to exist any Affiliate Transaction (as defined below) other than to the
extent necessary to consummate the Solutia Assumption and the transactions
contemplated thereby.

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make any contract, agreement, understanding, loan,
advance or Guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "AFFILIATE TRANSACTION"), unless (i) the terms of such Affiliate
Transaction are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained in a comparable
arm's-length transaction with a Person that is not an Affiliate of the Company
and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $10 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying



                                      -66-

that such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the Disinterested
Members of the Board of Directors and (b) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $25 million, an
opinion as to the fairness to the Company or such Restricted Subsidiary of such
Affiliate Transaction from a financial point of view issued by an investment
banking firm of national standing; PROVIDED that:

          (i)       transactions or payments pursuant to any employment
          arrangements or employee, officer or director benefit plans or
          arrangements entered into by the Company or any of its Restricted
          Subsidiaries in the ordinary course of business;

          (ii)      transactions between or among the Company and/or its
          Restricted Subsidiaries;

          (iii)     customary loans, advances, fees and compensation paid to,
          and indemnity provided on behalf of, officers, directors, employees or
          consultants of the Company or any of its Restricted Subsidiaries;

          (iv)      transactions pursuant to any contract or agreement in effect
          on the Issue Date, as the same may be amended, modified or replaced
          from time to time, so long as any such contract or agreement as so
          amended, modified or replaced is, taken as a whole, no less favorable
          to the Company and its Restricted Subsidiaries in any material respect
          than the contract or agreement as in effect on the Issue Date;

          (v)       any Restricted Payment of the type described in clause (1)
          or (2) of the first paragraph of Section 4.10; and

          (vi)      any transaction entered into on an arm's-length basis in the
          ordinary course of business between the Company or any of its
          Restricted Subsidiaries, on the one hand, and any Joint Venture, on
          the other hand; PROVIDED, that any such transaction (or series of
          related transactions) that involves $25 million or more in the
          aggregate shall be subject to prior approval by the Disinterested
          Members of the Board of Directors,

in each case, shall be deemed not to be Affiliate Transactions and therefore
(except as otherwise specified in such clauses) not subject to the requirements
of clauses (i) and (ii) of the initial paragraph above.

SECTION 4.15.  LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.

          Prior to the Assumption Date, the Company will not enter into any Sale
and Leaseback Transaction.



                                      -67-

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback
Transaction; PROVIDED that the Company or any Restricted Subsidiary may enter
into a Sale and Leaseback Transaction if:

          (a)  the Company or such Restricted Subsidiary, as the case may be,
     could have:

          (i)       incurred Indebtedness in an amount equal to the Attributable
          Debt relating to such Sale and Leaseback Transaction pursuant to
          Section 4.09 and

          (ii)      incurred a Lien to secure such Indebtedness pursuant to
          Section 4.11 without securing the Notes; and

          (b)  the gross cash proceeds of such Sale and Leaseback Transaction
     are at least equal to the fair market value of the property that is the
     subject of such Sale and Leaseback Transaction.

SECTION 4.16. [RESERVED].

SECTION 4.17.  LINE OF BUSINESS.

          Prior to the Assumption Date, the Company will not engage in any line
of business other than as necessary to perform its obligations under this
Indenture, the Escrow Agreement and the Solutia Assumption.

          From and after the Assumption Date, the Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in any business other than
Permitted Businesses, except to such extent as would not be material to the
Company and its Subsidiaries taken as a whole.

SECTION 4.18.  REPORTS TO HOLDERS.

          Whether or not the Company and the Subsidiary Guarantors are then
subject to Section 13 (a) or 15(d) of the Exchange Act, from and after the
Assumption Date, the Company and the Subsidiary Guarantors will electronically
file with the SEC, so long as the Notes are outstanding, the annual reports,
quarterly reports and other periodic reports that the Company and the Subsidiary
Guarantors would be required to file with the SEC pursuant to Section 13(a) or
15 (d) if the Company and the Subsidiary Guarantors were so subject, and such
documents will be filed with the SEC on or prior to the respective dates (the
"REQUIRED FILING DATES") by which the Company and the Subsidiary Guarantors
would be required so to file



                                      -68-

such documents if the Company and the Subsidiary Guarantors were so subject,
unless, in any case, such filings are not then permitted by the SEC.

          If such filings with the SEC are not then permitted by the SEC, or
such filings are not generally available on the Internet free of charge, from
and after the Assumption Date, the Company and the Subsidiary Guarantors will,
without charge to the Holders, within 15 days of each Required Filing Date,
transmit by mail to Holders, as their names and addresses appear in the note
register, and file with the Trustee copies of the annual reports, quarterly
reports and other periodic reports that the Company and the Subsidiary
Guarantors would be required to file with the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act if the Company and the Subsidiary Guarantors were
subject to such Section 13(a) or 15(d) and, promptly upon written request,
supply copies of such documents to any prospective Holder or beneficial owner at
the Company's cost.

          In addition, from and after the Solutia Assumption, the Company and
the Subsidiary Guarantors will, for so long as any Notes remain outstanding,
furnish to the Holders of the Notes and to securities analysts and prospective
investors, upon their request, the information if any, required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.

SECTION 4.19.  CREATION OF SUBSIDIARIES; GUARANTEES BY RESTRICTED SUBSIDIARIES.

          (a)  Prior to the Assumption Date, the Company will not create or
acquire any Subsidiaries.

          (b)  From and after the Assumption Date, the Company will not permit
any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or
indirectly, to Guarantee or secure the payment of any other Indebtedness of the
Company or any of its Restricted Subsidiaries unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Subsidiary Guarantee of the payment of the Notes by such
Restricted Subsidiary; PROVIDED that this Section 4.19(b) shall not be
applicable to:

     (i)       any Guarantee of any Restricted Subsidiary that existed at the
     time such Person became a Restricted Subsidiary and was not incurred in
     connection with, or in contemplation of, such Person becoming a Restricted
     Subsidiary;

     (ii)      to the extent permitted under Section 4.09, Guarantees of
     Indebtedness of a Restricted Subsidiary that is a Foreign Subsidiary by a
     Restricted Subsidiary that is a Foreign Subsidiary; or



                                      -69-

     (iii)     any Guarantee arising under or in connection with performance
     bonds, indemnity bonds, surety bonds or letters of credit or bankers'
     acceptances.

          (c)  If the Guaranteed Indebtedness is subordinated in right of
payment to the Notes or any Subsidiary Guarantee, as applicable, pursuant to a
written agreement to that effect, the Guarantee of such guaranteed Indebtedness
must be subordinated in right of payment to the Subsidiary Guarantee to at least
the extent that the Guaranteed Indebtedness is subordinated to the Notes.

SECTION 4.20.  COVENANTS APPLICABLE IF NOTES RATED INVESTMENT GRADE.

          Notwithstanding anything in this Indenture, from and after the first
date when the Notes are rated Investment Grade, the Company's obligations to
comply with the provisions of the Indenture described under Sections 4.08, 4.09,
4.10, 4.13, 4.14, 4.15, 4.17 and Section 5.01(3) will terminate and cease to
have any further effect.

          In addition to the foregoing, from and after the first date when the
Notes are rated Investment Grade, the following shall apply:

          The Company will not, nor will it permit any Restricted Subsidiary to,
     enter into any Sale and Lease-Back Transaction (except a lease for a
     temporary period not exceeding three years) after the Issue Date covering
     any Principal Property, which was or is owned or leased by the Company or a
     Restricted Subsidiary and which has been or is to be sold or transferred
     more than 120 days after the acquisition or completion of construction and
     commencement of full operation thereof, unless (a) the Attributable Debt in
     respect thereto and all other Sale and Lease-Back Transactions entered into
     after the date of the Indenture (other than those the proceeds of which are
     applied to reduce Indebtedness under (b) below), plus the aggregate amount
     of then outstanding secured Indebtedness not otherwise permitted or
     excepted without equally and ratably securing the Notes, does not exceed
     15% of the Consolidated Net Tangible Assets of the Company and its
     Restricted Subsidiaries or (b) an amount equal to the fair value of the
     Principal Property leased is applied within 120 days to the voluntary
     retirement of the Note or other Indebtedness maturing more than one year
     thereafter.



                                      -70-

                                  ARTICLE FIVE

                              SUCCESSOR CORPORATION

SECTION 5.01.  CONSOLIDATION, MERGER AND SALE OF ASSETS.

          Except in connection with the Solutia Assumption and the related
release of the Escrow Assets or the redemption of the Notes, prior to the
Assumption Date the Company will not, in a single transaction or a series of
related transactions, consolidate or merge with or into (whether or not the
Company is the surviving entity) or transfer all or substantially all of its
properties or assets to another Person.

          Except in connection with the Solutia Assumption, from and after the
Assumption Date, the Company may not consolidate with or merge with or into, or
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of its assets in one or more related transactions to, any Person, or permit any
Person to merge with or into it unless each of the following conditions is
satisfied:

          (1)  immediately after giving effect to such transaction and any
     related incurrence of Indebtedness or issuance of Disqualified Stock, no
     Default or Event of Default shall have occurred and be continuing;

          (2)  either (i) the Company shall be the continuing Person, or (ii)
     the entity formed by such consolidation or into which the Company is
     merged, or the Person to which such properties and assets will have been
     conveyed, transferred or leased, assumes the Company's obligation as to the
     due and punctual payment of the principal of (and premium, if any, on) and
     interest, if any, on the Notes and the performance and observance of every
     covenant to be performed by the Company under this Indenture, the Notes and
     the Security Documents; any such entity will be organized under the laws of
     the United States, one of the States thereof or the District of Columbia;

          (3)  the Company or the entity or the Person formed by or surviving
     any such consolidation or merger (if other than the Company), or to which
     such sale, assignment, transfer, conveyance or other disposition shall have
     been made, except with respect to a consolidation or merger of the Company
     with or into a Person that has no outstanding Indebtedness, will, at the
     time of such transaction and after giving PRO FORMA effect thereto as if
     such transaction had occurred at the beginning of the applicable
     four-quarter period, have a Fixed Charge Coverage Ratio of at least 2 to 1;
     and

          (4)  the Company has delivered to the Trustee an Officers' Certificate
     and Opinion of Counsel stating that the transaction complies with these
     conditions.



                                      -71-

          The foregoing shall not prohibit the merger or consolidation of a
Wholly Owned Restricted Subsidiary with the Company; PROVIDED that, in
connection with any such merger or consolidation, no consideration, other than
Qualified Capital Stock in the Surviving Person or the Company, shall be issued
or distributed to the holders of Capital Stock of the Company.

          No Subsidiary Guarantor will be permitted to:

     (i)       consolidate with or merge with or into any Person; or

     (ii)      sell, convey, transfer or dispose of, all or substantially all
     its assets as an entirety or substantially as an entirety, in one
     transaction or a series of related transactions, to any Person; or

     (iii)     permit any Person to merge with or into the Subsidiary Guarantor
unless:

          (A)  the other Person is the Company or any Wholly Owned Restricted
     Subsidiary that is a Subsidiary Guarantor or becomes a Subsidiary Guarantor
     concurrently with the transaction; or

          (B)  (1)  either (x) the Subsidiary Guarantor is the continuing Person
     or (y) the resulting, surviving or transferee Person expressly assumes by
     supplemental indenture all of the obligations of the Subsidiary Guarantor
     under its Subsidiary Guarantee; and

               (2)  immediately after giving effect to the transaction, no
     Default has occurred and is continuing;

     or

          (C)  the transaction constitutes a sale or other disposition
     (including by way of consolidation or merger) of the Subsidiary Guarantor
     or the sale or disposition of all or substantially all the assets of the
     Subsidiary Guarantor (in each case other than to the Company or a
     Restricted Subsidiary) otherwise permitted by this Indenture.

          The sale, assignment, transfer, conveyance or other disposition by the
Company of all or substantially all its property or assets taken as a whole to
one or more of the Company's Subsidiaries shall not relieve the Company from its
obligations under this Indenture and the Notes. In addition, the Company will
not lease all or substantially all its assets in one or more related
transactions to another Person.



                                      -72-

SECTION 5.02.  SUCCESSOR PERSON SUBSTITUTED.

          Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of either the Company or any Restricted
Subsidiary in accordance with Section 5.01 above, the successor corporation
formed by such consolidation or into which the Company is merged or to which
such transfer is made shall succeed to, and be substituted for, and may exercise
every right and power the Company or such Restricted Subsidiary under this
Indenture with the same effect as if such successor corporation had been named
as the Company or such Restricted Subsidiary herein, and thereafter the
predecessor corporation shall be relieved of all obligations and covenants under
this Indenture and the Notes.

                                   ARTICLE SIX

                              DEFAULTS AND REMEDIES

SECTION 6.01.  EVENTS OF DEFAULT.

          Each of the following constitutes an "EVENT OF DEFAULT" with respect
to the Notes:

          (1)  default for 30 days in the payment when due of interest on the
     Notes;

          (2)  default in payment when due of the principal of or premium, if
     any, on the Notes, at maturity or otherwise;

          (3)  failure by the Company to comply with the provisions in Section
     4.08, Section 4.12 or Section 5.01;

          (4)  failure by the Company for 90 days after receipt of notice by the
     Trustee or Holders of at least 25% in principal amount of the then
     outstanding Notes issued thereunder to comply with any of the other
     agreements in this Indenture, the Notes or the Security Documents;

          (5)  any default occurs under any mortgage, indenture or instrument
     under which there may be issued or by which there may be secured or
     evidenced any Indebtedness for money borrowed by the Company or any of its
     Significant Subsidiaries (or any Indebtedness for money borrowed Guaranteed
     by the Company or any of its Significant Subsidiaries if the Company or a
     Significant Subsidiary does not perform its payment obligations under such
     Guarantee within any grace period provided for in the documentation
     governing such Guarantee), whether such Indebtedness or Guarantee exists on
     the Issue Date or is thereafter created, which default (a) constitutes a
     Payment



                                      -73-

     Default or (b) results in the acceleration of such Indebtedness prior
     to its Stated Maturity, and in each case, the principal amount of any such
     Indebtedness, together with the principal amount of any other such
     Indebtedness under which there has been a Payment Default or that has been
     so accelerated, aggregates $35 million or more;

          (6)  failure by the Company or any of its Significant Subsidiaries to
     pay a final judgment or final judgments aggregating in excess of $35
     million, which judgment or judgments are not paid, discharged or stayed,
     for a period of 60 days;

          (7)  (A) a court having jurisdiction over the Company or any of its
     applicable Significant Subsidiaries enters (x) a decree or order for relief
     in respect of the Company or any of its Significant Subsidiaries in an
     involuntary case or proceeding under any applicable federal or state
     bankruptcy, insolvency, reorganization or other similar law or (y) a decree
     or order adjudging the Company or any of its Significant Subsidiaries a
     bankrupt or insolvent, or approving as properly filed a petition seeking
     reorganization, arrangement, adjustment or composition of or in respect of
     the Company or any of its Significant Subsidiaries under any applicable
     federal or state law, or appointing a custodian, receiver, liquidator,
     assignee, trustee, sequestrator or other similar official of the Company or
     any of its Significant Subsidiaries or of any substantial part of its
     property, or ordering the winding up or liquidation of its affairs, and the
     continuance of any such decree or order for relief or any such other decree
     or order unstayed and in effect for a period of 60 consecutive days or (B)
     the Company or any Significant Subsidiary (i) commences a voluntary case
     under any applicable bankruptcy, insolvency or other similar law now or
     hereafter in effect, or consents to the entry of an order for relief in an
     involuntary case under any such law, (ii) consents to the appointment of or
     taking possession by a receiver, liquidator, assignee, custodian, trustee,
     sequestrator or similar official of the Company or any Significant
     Subsidiary or for all or substantially all the property and assets of the
     Company or any Significant Subsidiary or (iii) effects any general
     assignment for the benefit of creditors; or

          (8)  any Subsidiary Guarantee or any Security Document (or any
     security interest created thereby) shall be held in any judicial proceeding
     to be unenforceable or invalid or shall cease for any reason to be in full
     force and effect or the Company or any Subsidiary Guarantor, or any Person
     acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its
     obligations under any Subsidiary Guarantee or any Security Document.

SECTION 6.02.  ACCELERATION OF MATURITY; RESCISSION.

          If an Event of Default (other than an Event of Default specified in
6.01(7) occurs with respect to the Company or any Subsidiary Guarantor) occurs
and is continuing under this Indenture, the Trustee or the Holders of at least
25% in aggregate principal amount of the



                                      -74-

Notes then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal of and premium, if any, and accrued
interest, if any, on the Notes to be immediately due and payable. Upon a
declaration of acceleration, such principal, premium, if any, and accrued
interest, if any, shall be immediately due and payable. If an Event of Default
specified in 6.01(7) occurs with respect to the Company or any Subsidiary
Guarantor, the principal of and premium, if any, and accrued interest, if any,
on the Notes then outstanding shall become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.

          The Holders of at least a majority in principal amount of the
outstanding Notes, by written notice to the Company and to the Trustee, may
waive all past defaults and rescind and annul a declaration of acceleration and
its consequences if:

     (i)       all existing Events of Default, other than the nonpayment of the
     principal of and premium, if any, and interest, if any, on such Notes that
     have become due solely by such declaration of acceleration, have been cured
     or waived; and

     (ii)      the rescission would not conflict with any judgment or decree of
     a court of competent jurisdiction.

SECTION 6.03.  OTHER REMEDIES.

          If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.

          The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative. Any costs
associated with actions taken by the Trustee under this Section 6.03 shall be
reimbursed to the Trustee by the Company.



                                      -75-

SECTION 6.04.  WAIVER OF PAST DEFAULTS AND EVENTS OF DEFAULT.

          Provided the Notes are not then due and payable by reason of a
declaration of acceleration, the Holders of a majority in principal amount of
Notes at the time outstanding may on behalf of the Holders of all the Notes
waive any past Default with respect to such Notes and its consequences by
providing written notice thereof to the Company and the Trustee, except a
Default (1) in the payment of interest on or the principal of any Note or (2) in
respect of a covenant or provision hereof which under this Indenture cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. In the case of any such waiver, the Company, the Trustee and the
Holders of the Notes will be restored to their former positions and rights under
this Indenture, respectively; PROVIDED that no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.

SECTION 6.05.  CONTROL BY MAJORITY.

          The Holders of at least a majority in aggregate principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders of the Notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of the Notes. A
Holder may not pursue any remedy with respect to this Indenture or the Notes
unless:

          (1)  the Holder gives the Trustee written notice of a continuing Event
     of Default;

          (2)  the Holders of at least 25% in aggregate principal amount of
     outstanding Notes make a written request to the Trustee to pursue the
     remedy;

          (3)  such Holder or Holders offer the Trustee indemnity satisfactory
     to the Trustee against any costs, liability or expense;

          (4)  the Trustee does not comply with the request within 60 days after
     receipt of the request and the offer of indemnity; and

          (5)  during such 60-day period, the Holders of at least a majority in
     aggregate principal amount of the outstanding Notes do not give the Trustee
     a direction that is inconsistent with the request.



                                      -76-

          However, such limitations do not apply to the right of any Holder of a
Note to receive payment of the principal of or premium, if any, or interest, if
any, on such Note or to bring suit for the enforcement of any such payment, on
or after the due date expressed in the Notes, which right shall not be impaired
or affected without the consent of the Holder.

SECTION 6.06.  LIMITATION ON SUITS.

          A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:

          (1)  the Holder gives the Trustee written notice of a continuing Event
     of Default;

          (2)  the Holders of at least 25% in aggregate principal amount of
     outstanding Notes make a written request to the Trustee to pursue the
     remedy;

          (3)  such Holder or Holders offer the Trustee indemnity satisfactory
     to the Trustee against any costs, liability or expense;

          (4)  the Trustee does not comply with the request within 60 days after
     receipt of the request and the offer of indemnity; and

          (5)  during such 60-day period, the Holders of at least a majority in
     aggregate principal amount of the outstanding Notes do not give the Trustee
     a direction that is inconsistent with the request.

          A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.

SECTION 6.07.  NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
               STOCKHOLDERS.

          No director, officer, employee, incorporator, member of the Board of
Directors or holder of Capital Stock of the Company or any Subsidiary Guarantor,
as such, will have any liability for any obligations of the Company and the
Subsidiary Guarantors under the Notes, the Subsidiary Guarantees, this Indenture
or the Security Documents or for any claim based on, in respect of, or by reason
of, such obligations. Each Holder of Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. This waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.



                                      -77-

SECTION 6.08.  RIGHTS OF HOLDERS TO RECEIVE PAYMENT.

          Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of the principal of or premium, if any,
or interest, if any, on such Note or to bring suit for the enforcement of any
such payment, on or after the due date expressed in the Notes shall not be
impaired or affected without the consent of the Holder.

SECTION 6.09.  COLLECTION SUIT BY TRUSTEE.

          If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any Subsidiary Guarantor (or any other obligor on the Notes) for the
whole amount of unpaid principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate set forth in the Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

SECTION 6.10.  TRUSTEE MAY FILE PROOFS OF CLAIM.

          The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07) and the Noteholders allowed in any
judicial proceedings relative to the Company or any Subsidiary Guarantor (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent that any such charges and
expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07.

          Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Noteholder thereof, or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceedings. All rights of
action and claims under this Indenture or the Notes may be prosecuted and
enforced by the Trustee without the possession of any of the Notes thereof in



                                      -78-

any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Noteholders in respect of which
such judgment has been recovered.

SECTION 6.11.  PRIORITIES.

          If the Trustee collects any money pursuant to this Article Six, it
shall pay out the money in the following order:

          FIRST: to the Trustee for amounts due under Section 7.07;

          SECOND: to Noteholders for amounts due and unpaid on the Notes for
     principal, premium, if any, and interest (including Liquidated Damages, if
     any) as to each, ratably, without preference or priority of any kind,
     according to the amounts due and payable on the Notes; and

          THIRD: to the Company or, to the extent the Trustee collects any
     amount from any Subsidiary Guarantor, to such Subsidiary Guarantor.

          The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.11.

SECTION 6.12.  UNDERTAKING FOR COSTS.

          In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.12 does not apply to a suit by the Trustee, a suit by a
Noteholder pursuant to Section 6.08 or a suit by Noteholders of more than 10% in
principal amount of the Notes then outstanding.



                                      -79-

                                  ARTICLE SEVEN

                                     TRUSTEE

SECTION 7.01.  DUTIES OF TRUSTEE.

          (a)  If an Event of Default actually known to a Responsible Officer of
the Trustee has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the same circumstances in the conduct of his or her own affairs.

          The Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Notes and this Indenture.

          (b)  Except during the continuance of an Event of Default:

          (1)  The Trustee need perform only those duties that are specifically
     set forth in this Indenture and no others.

          (2)  In the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture but, in
     the case of any such certificates or opinions which by any provision hereof
     are specifically required to be furnished to the Trustee, the Trustee shall
     be under a duty to examine the same to determine whether or not they
     conform on their face to the requirements of this Indenture (but need not
     confirm or investigate the accuracy of mathematical calculations or other
     facts stated therein). Whenever in the administration of this Indenture the
     Trustee shall deem it desirable that a matter be proved or established
     prior to taking, suffering or omitting any action hereunder, the Trustee
     (unless other evidence be herein specifically prescribed) may, in the
     absence of bad faith on its part, conclusively rely upon an Officers'
     Certificate, subject to the requirement in the preceding sentence, if
     applicable.

          (c)  The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

          (1)  This paragraph does not limit the effect of paragraph (b) of this
     Section 7.01.



                                      -80-

          (2)  The Trustee shall not be liable for any error of judgment made in
     good faith, unless it is proved that the Trustee was negligent in
     ascertaining the pertinent facts.

          (3)  The Trustee shall not be liable with respect to any action it
     takes or omits to take in good faith in accordance with a direction
     received by it pursuant to the terms hereof.

          (4)  No provision of this Indenture shall require the Trustee to
     expend or risk its own funds or otherwise incur any financial liability in
     the performance of any of its rights, powers or duties if it shall have
     reasonable grounds for believing that repayment of such funds or adequate
     indemnity satisfactory to it against such risk or liability is not
     reasonably assured to it.

          (d)  Whether or not therein expressly so provided, paragraphs (a),
(b), (c) and (e) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.

          (e)  The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction.

          (f)  The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Subsidiary Guarantor. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by the law.

SECTION 7.02.  RIGHTS OF TRUSTEE.

          Subject to Section 7.01:

          (1)  The Trustee may conclusively rely on any document (whether in its
     original or facsimile form) reasonably believed by it to be genuine and to
     have been signed or presented by the proper person. The Trustee need not
     investigate any fact or matter stated in the document.

          (2)  Before the Trustee acts or refrains from acting, it may require
     an Officers' Certificate or an Opinion of Counsel, or both, which shall
     conform to the provisions of Section 12.05. The Trustee shall be protected
     and shall not be liable for any action it takes or omits to take in good
     faith in reliance on such certificate or opinion.



                                      -81-

          (3)  The Trustee may act through its attorneys and agents and shall
     not be responsible for the misconduct or negligence of any agent appointed
     by it with due care.

          (4)  The Trustee shall not be liable for any action it takes or omits
     to take in good faith which it reasonably believes to be authorized or
     within its rights or powers; PROVIDED that the Trustee's conduct does not
     constitute gross negligence or bad faith.

          (5)  The Trustee may consult with counsel of its selection, and the
     advice or opinion of such counsel as to matters of law shall be full and
     complete authorization and protection from liability in respect of any
     action taken, omitted or suffered by it hereunder in good faith and in
     accordance with the advice or opinion of such counsel.

          (6)  The rights, privileges, protections, immunities and benefits
     given to the Trustee, including, without limitation, its right to be
     indemnified, are extended to, and shall be enforceable by, the Trustee in
     each of its capacities hereunder, and each agent, custodian and other
     person employed to act hereunder.

SECTION 7.03.  INDIVIDUAL RIGHTS OF TRUSTEE.

          The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the either of the Company or any Subsidiary
Guarantor, or any Affiliates thereof, with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights. The Trustee,
however, shall be subject to Sections 7.10 and 7.11.

SECTION 7.04.  TRUSTEE'S DISCLAIMER.

          The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes or any Guarantee,
it shall not be accountable for the Company's or any Subsidiary Guarantor's use
of the proceeds from the sale of Notes or any money paid to the Company or any
Subsidiary Guarantor pursuant to the terms of this Indenture and it shall not be
responsible for any statement in the Notes, Guarantee or this Indenture other
than its certificate of authentication.

SECTION 7.05.  NOTICE OF DEFAULTS.

          If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall give to each Noteholder a notice of the Default
within 90 days after it occurs in the manner and to the extent provided in the
TIA and otherwise as provided in this Indenture. Except in the case of a Default
in payment of the principal of or interest on any Note (including payments
pursuant to a redemption or repurchase of the Notes pursuant to the provisions



                                      -82-

of this Indenture), the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders.

SECTION 7.06.  REPORTS BY TRUSTEE TO HOLDERS.

          If required by TIA Section 313(a), within 60 days after May 15 of any
year, commencing 2002 the Trustee shall mail to each Noteholder a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c) and TIA Section 313(d).

          Reports pursuant to this Section 7.06 shall be transmitted by mail:

          (1)  to all Holders of Notes, as the names and addresses of such
     Holders appear on the Registrar's books; and

          (2)  to such Holders of Notes as have, within the two years preceding
     such transmission, filed their names and addresses with the Trustee for
     that purpose.

          A copy of each report at the time of its mailing to Noteholders shall
be filed with the Commission and each stock exchange on which the Notes are
listed. The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange or delisted therefrom.

SECTION 7.07.  COMPENSATION AND INDEMNITY.

          The Company and the Subsidiary Guarantors shall pay to the Trustee and
Agents from time to time reasonable compensation for their services hereunder
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust). The Company and the
Subsidiary Guarantors shall reimburse the Trustee and Agents upon request for
all reasonable disbursements, expenses and advances incurred or made by them in
connection with the Trustee's duties under this Indenture, including the
reasonable compensation, disbursements and expenses of the Trustee's agents and
external counsel, except any expense disbursement or advance as may be
attributable to its negligence or bad faith.

          The Company and the Subsidiary Guarantors, jointly and severally,
shall fully indemnify each of the Trustee and any predecessor Trustee for, and
hold each of them harmless against, any and all loss, damage, claim, liability
or expense, including without limitation taxes (other than taxes based on the
income of the Trustee or such Agent) and reasonable attorneys' fees and expenses
incurred by each of them in connection with the acceptance or performance of its
duties under this Indenture including the reasonable costs and expenses of
defending



                                      -83-

itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder (including, without
limitation, settlement costs). The Trustee or Agent shall notify the Company and
the Subsidiary Guarantors in writing promptly of any claim of which a
Responsible Officer of the Trustee has actual knowledge asserted against the
Trustee or Agent for which it may seek indemnity; PROVIDED that the failure by
the Trustee or Agent to so notify the Company and the Subsidiary Guarantors
shall not relieve the Company and Subsidiary Guarantors of their obligations
hereunder except to the extent the Company and the Subsidiary Guarantors are
actually prejudiced thereby. In the event that a conflict of interest exists,
the Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel.

          Notwithstanding the foregoing, the Company and the Subsidiary
Guarantors need not reimburse the Trustee for any expense or indemnify it
against any loss or liability to have been incurred by the Trustee through its
own negligence or bad faith.

          To secure the payment obligations of the Company and the Subsidiary
Guarantors in this Section 7.07, the Trustee shall have a lien prior to the
Notes on all money or property held or collected by the Trustee except for
Escrow Assets and such money or property held in trust to pay principal of and
interest on particular Notes.

          The obligations of the Company and the Subsidiary Guarantors under
this Section 7.07 to compensate and indemnify the Trustee, Agents and each
predecessor Trustee and to pay or reimburse the Trustee, Agents and each
predecessor Trustee for expenses, disbursements and advances shall be joint and
several liabilities of the Company and each of the Subsidiary Guarantors and
shall survive the resignation or removal of the Trustee and the satisfaction,
discharge or other termination of this Indenture, including any termination or
rejection hereof under any Bankruptcy Law.

          When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

          For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to this Article Seven.

SECTION 7.08.  REPLACEMENT OF TRUSTEE.

          The Trustee may resign by so notifying the Company and the Subsidiary
Guarantors in writing. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by notifying the Company and the
removed Trustee in writing and may appoint a successor Trustee with the
Company's written consent, which consent shall not be unreasonably withheld. The
Company may remove the Trustee at its election if:



                                      -84-

          (1)  the Trustee fails to comply with Section 7.10;

          (2)  the Trustee is adjudged a bankrupt or an insolvent;

          (3)  a receiver or other public officer takes charge of the Trustee or
     its property; or

          (4)  the Trustee otherwise becomes incapable of acting.

          If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.

          If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Notes may petition
at the expense of the Company any court of competent jurisdiction for the
appointment of a successor Trustee.

          If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07, transfer all property held by it as Trustee to the successor Trustee, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession to
each Noteholder. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.

SECTION 7.09.  SUCCESSOR TRUSTEE BY CONSOLIDATION, MERGER, ETC.

          If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10, the successor corporation without any
further act shall be the successor Trustee; PROVIDED such entity shall be
otherwise qualified and eligible under this Article Seven.

SECTION 7.10.  ELIGIBILITY; DISQUALIFICATION.

          This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
(together with its corporate parent) shall have a combined capital and surplus
of at least $100 million as set forth in the most recent



                                      -85-

applicable published annual report of condition. The Trustee shall comply with
TIA Section 310(b), including the provision in Section 310(b)(1).

SECTION 7.11.  PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

          The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.

SECTION 7.12.  PAYING AGENTS.

          The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:

          (A)  that it will hold all sums held by it as agent for the payment of
     principal of, or premium, if any, or interest on, the Notes (whether such
     sums have been paid to it by the Company or by any obligor on the Notes) in
     trust for the benefit of Holders of the Notes or the Trustee;

          (B)  that it will at any time during the continuance of any Event of
     Default, upon written request from the Trustee, deliver to the Trustee all
     sums so held in trust by it together with a full accounting thereof; and

          (C)  that it will give the Trustee written notice within three (3)
     Business Days of any failure of the Company (or by any obligor on the
     Notes) in the payment of any installment of the principal of, premium, if
     any, or interest on, the Notes when the same shall be due and payable.

                                  ARTICLE EIGHT

                             MODIFICATION AND WAIVER

SECTION 8.01.  WITHOUT CONSENT OF NOTEHOLDERS.

          (a)  The Company and Trustee may modify and amend this Indenture or
any Security Document without the consent of any Holder (including entering into
the Security Documents on the Assumption Date), for any of the following
purposes:

          (i)  to cure any ambiguity, omission, defect or inconsistency in
     this Indenture or any Security Document;



                                      -86-

         (ii)  to provide for the assumption by a successor of the Company of
     its obligations under this Indenture or any Security Document;

        (iii)  to provide for uncertificated Notes, subject to certain
     conditions;

         (iv)  to secure the Notes under this Indenture, to add Subsidiary
     Guarantees with respect to the Notes, or to confirm and evidence the
     release, termination or discharge of any such security or Subsidiary
     Guarantee when such release, termination or discharge is permitted
     elsewhere in this Indenture;

          (v)  to add to the covenants of the Company for the benefit of the
     Holders of the Notes or to surrender any right or power conferred upon the
     Company;

         (vi)  to provide for or confirm the issuance of Additional Notes;

        (vii)  to make any other change that does not adversely affect the
     rights of any Holder;

       (viii)  to comply with any requirement of the SEC in connection with
     qualification of this Indenture under the Trust Indenture Act or otherwise;
     or

         (ix)  to add or release Collateral as permitted under the terms of
     this Indenture or the Security Documents.

          (b)  On the Assumption Date, SOI Funding, Solutia, the Subsidiary
Guarantors and Trustee (without notice to or the consent of any Holder) shall
enter into the supplemental indenture attached as Exhibit B to the Escrow
Agreement (the "ASSUMPTION DATE SUPPLEMENTAL INDENTURE"), pursuant to which
Solutia will assume the obligations of SOI Funding hereunder, and the Subsidiary
Guarantors shall each execute the notation of guarantee in the form of Exhibit F
and deliver same to the Trustee. In addition (without notice to or consent of
any Holder), the Trustee and the other parties thereto shall enter into the
Junior Security Agreement and the Junior Intercreditor Agreement, substantially
in the forms attached hereto as EXHIBIT G and EXHIBIT H, respectively.

SECTION 8.02.  WITH CONSENT OF NOTEHOLDERS.

          (a)  The Company and the Trustee, with the consent of the Holders of
not less than a majority in aggregate principal amount of the Notes, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any provision of this Indenture or any Security Document or
modifying the rights of such Holders (it being understood that the provisions of
the Security Documents which may by their terms be amended



                                      -87-

or waived without the consent of the Noteholders do not require the consent of
the Noteholders contemplated hereby).

          (b)  However, no modification or amendment may, without the consent of
each Holder affected thereby,

          (1)  change the Stated Maturity of the principal of, or any
     installment of interest on, any Note or alter the provisions with respect
     to redemption,

          (2)  reduce the principal amount of or premium, if any, or interest,
     if any, on any Note,

          (3)  reduce any amount payable upon the occurrence of an Event of
     Default,

          (4)  after the obligation has arisen to make a Change of Control Offer
     or an Asset Sale Offer, amend, change or modify in any material respect the
     obligation of the Company to make and complete such Change of Control Offer
     or make and complete such Asset Sale Offer,

          (5)  change the place or currency of payment of principal of or
     premium, if any, or interest, if any, on any Note,

          (6)  impair the right to institute suit for the enforcement of any
     payment on or after the Stated Maturity (or, in the case of a redemption,
     on or after the Redemption Date) of any Note,

          (7)  reduce the above-stated percentage of outstanding Notes the
     consent of whose Holders is necessary to modify or amend this Indenture,

          (8)  waive a default in the payment of principal of or premium, if
     any, or interest, if any, on the Notes (except as set forth under Section
     6.01),

          (9)  reduce the percentage or aggregate principal amount of
     outstanding Notes the consent of whose Holders is necessary for waiver of
     compliance with certain provisions of this Indenture or for waiver of
     certain defaults,

          (10) modify or change any provision of this Indenture affecting the
     ranking of the Notes or the Subsidiary Guarantees in a manner adverse to
     the Holders of the Notes, or

          (11) release any Subsidiary Guarantor from any of its obligations
     under its Subsidiary Guarantee or this Indenture other than in accordance
     with the other provisions of this Indenture, or amend or modify any
     provision relating to such release.



                                      -88-

          (c)  It shall not be necessary for the consent of the Holders under
this Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

          (d)  After an amendment, supplement or waiver under Section 8.01 or
this Section 8.02 becomes effective, the Company shall mail to the Holders a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.

          (e)  Upon the written request of the Company accompanied by a board
resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06, the Trustee shall join with
the Company in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture, in which case the Trustee may, but shall not be obligated
to, enter into such supplemental indenture.

SECTION 8.03.  COMPLIANCE WITH TRUST INDENTURE ACT.

          Every amendment or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect.

SECTION 8.04.  REVOCATION AND EFFECT OF CONSENTS.

          (a)  After an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note.

          (b)  The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Noteholders entitled to consent to any
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Noteholders at
such record date (or their duly designated proxies), and only such Persons,
shall be entitled to consent to such amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Noteholders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date unless the consent of the requisite
number of Noteholders has been obtained.



                                      -89-

          (c)  After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (9) of Section 8.02. In that case the amendment,
supplement, waiver or other action shall bind each Noteholder who has consented
to it and every subsequent Noteholder or portion of a Note that evidences the
same debt as the consenting Holder's Note.

SECTION 8.05.  NOTATION ON OR EXCHANGE OF NOTES.

          If an amendment, supplement, or waiver changes the terms of a Note,
the Trustee (in accordance with the specific written direction of the Company)
shall request the Holder of the Note (in accordance with the specific written
direction of the Company) to deliver it to the Trustee. In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Noteholder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue, the Subsidiary
Guarantors shall endorse, and the Trustee shall authenticate a new Note that
reflects the changed terms. Failure to make the appropriate notation or issue a
new Note shall not affect the validity and effect of such amendment, supplement
or waiver.

SECTION 8.06.  TRUSTEE TO SIGN AMENDMENTS, ETC.

          The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article Eight if the amendment, supplement or waiver does not
affect the rights, duties, liabilities or immunities of the Trustee. If it does
affect the rights, duties, liabilities or immunities of the Trustee, the Trustee
may, but need not, sign such amendment, supplement or waiver. In signing or
refusing to sign such amendment, supplement or waiver the Trustee shall be
entitled to receive and, subject to Section 7.01, shall be fully protected in
relying upon an Officers' Certificate and an Opinion of Counsel stating, in
addition to the matters required by Section 12.04, that such amendment,
supplement or waiver is authorized or permitted by this Indenture and is a
legal, valid and binding obligation of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary Guarantors in
accordance with its terms (subject to customary exceptions).

                                  ARTICLE NINE

                       DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 9.01.  DISCHARGE OF INDENTURE.

          Upon the request of the Company, this Indenture will cease to be of
further effect and the Trustee, at the expense of the Company, will execute
proper instruments acknowledging



                                      -90-

satisfaction and discharge of the Notes and this Indenture and the Guarantees
when:

     (1)  either:

          (a)  all the Notes theretofore authenticated and delivered (other than
               destroyed, lost or stolen Notes that have been replaced or paid
               and Notes that have been subject to defeasance pursuant to
               Section 9.02 or 9.03) have been delivered to the Trustee for
               cancellation; or

          (b)  all Notes not theretofore delivered to the Trustee for
               cancellation:

          (i)       have become due and payable by the mailing of a notice of
                    redemption or otherwise;

          (ii)      will become due and payable within one year; or

          (iii)     are to be called for redemption within 12 months under
                    arrangements reasonably satisfactory to the Trustee for
                    the giving of notice of redemption by the Trustee in the
                    name, and at the reasonable expense, of the Company;

               and the Company has irrevocably deposited or caused to be
               deposited with the Trustee funds in trust for the purpose in an
               amount sufficient to pay and discharge the entire Indebtedness on
               the Notes not theretofore delivered to the Trustee for
               cancellation, for principal (and premium, if any) and interest on
               the Notes to the date of such deposit (in case of Notes that have
               become due and payable) or to the Stated Maturity or redemption
               date, as the case may be;

     (2)  the Company has paid or caused to be paid all sums payable under this
          Indenture by the Company; and

     (3)  the Company has delivered to the Trustee an Officers' Certificate and
          an Opinion of Counsel, each stating that all conditions precedent
          provided in this Indenture relating to the satisfaction and discharge
          of the Notes and this Indenture and the Guarantees of the Notes have
          been complied with.

          After such delivery, the Trustee upon request of the Company shall
acknowledge in writing the discharge of the Company's and the Subsidiary
Guarantors' obligations under the Notes, the Guarantees and this Indenture
except for those surviving obligations specified below.



                                      -91-

          Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company in Sections 7.07, 9.05 and 9.06 shall survive such
satisfaction and discharge.

SECTION 9.02.  LEGAL DEFEASANCE.

          The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Subsidiary Guarantors discharged with
respect to the outstanding Notes on a date the conditions set forth in Section
9.04 are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, such
Legal Defeasance means that the Company will be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes and to
have satisfied all its other obligations under such Notes and this Indenture
insofar as such Notes are concerned (and the Trustee, at the expense of the
Company, shall, subject to Section 9.06, execute instruments in form and
substance reasonably satisfactory to the Trustee and Company acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of outstanding Notes to
receive solely from the trust funds described in Section 9.04 and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (B) the Company's
obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06,
2,07, 2.08, 2.11, 4.02, 4.03 and 4.05, (C) the rights, powers, trusts, duties,
and immunities of the Trustee hereunder (including claims of, or payments to,
the Trustee under or pursuant to Section 7.07) and the Company's obligations in
connection therewith and (D) this Article Nine.

          Concurrently with any Legal Defeasance, the Company may, at its
further option, cause to be terminated, as of the date on which such Legal
Defeasance occurs, all of the obligations under any or all of the Guarantees, if
any, then existing and obtain the release of the Guarantee(s) of any or all
Subsidiary Guarantors. In order to exercise such option regarding a Guarantee,
the Company shall provide the Trustee with written notice of its desire to
terminate such Guarantee prior to the delivery of the Opinion of Counsel
referred to in clause (f) of Section 9.04.

          Subject to compliance with this Article Nine, the Company may exercise
its option under this Section 9.02 with respect to the Notes notwithstanding the
prior exercise of its option under Section 9.03 below with respect to the Notes.

SECTION 9.03.  COVENANT DEFEASANCE.

          The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Subsidiary Guarantors under Sections
10.01, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17, 4.18, 4.19, 4.20 (except
for obligations mandated by the TIA) and clauses (1) and (3) of Section 5.01
released with respect to the outstanding Notes on a date the



                                      -92-

conditions set forth in Section 9.04 are satisfied (hereinafter, "COVENANT
DEFEASANCE"). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may fail to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company's exercise of the
option in this Section 9.03, subject to the satisfaction of the conditions set
forth in Section 9.04, Sections 6.01(5), (6) and (8) shall not constitute Events
of Default.

          Concurrently with any Covenant Defeasance, the Company may, at its
further option, cause to be terminated, as of the date on which such Covenant
Defeasance occurs, all of the obligations under any or all of the Guarantees, if
any, then existing and obtain the release of the Guarantee(s) of any or all
Subsidiary Guarantors. In order to exercise such option regarding a Guarantee,
the Company shall provide the Trustee with written notice of its desire to
terminate such Guarantee prior to the delivery of the Opinion of Counsel
referred to in clause (g) of Section 9.04.

          Notwithstanding any discharge or release of any obligations under this
Indenture pursuant to Section 9.02 or this Section 9.03, the Company's
obligations in Sections 2.04, 2.06, 2.07, 2.08, 7.07, 9.05, 9.06 and 9.08 shall
survive until such time as the Notes have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 9.05 and 9.08 shall survive.

SECTION 9.04.  CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.

          The following shall be the conditions to application of Section 9.02
or Section 9.03 to the outstanding Notes:

     (a)  (1) the Company has irrevocably deposited or caused to be deposited in
          trust for the benefit of the Noteholders with the Trustee or a Paying
          Agent or a trustee satisfactory to the Trustee and the Company, under
          the terms of an irrevocable trust agreement in form and substance
          satisfactory to the Trustee and any such Paying Agent, (x) money in an
          amount sufficient, or (y) U.S. Government Obligations that shall be
          payable as to principal and interest in such amounts and at such times
          as are sufficient, in the opinion of a nationally recognized firm of
          independent public accountants or Independent Financial Advisors
          expressed in a written certification thereof delivered to the Trustee
          (without consideration of any reinvestment of such interest), or (z) a
          combination thereof in an amount, sufficient to pay the principal of
          (and premium, if any, on) and interest,



                                      -93-

          if any, to Stated Maturity (or redemption) on such Notes, on the
          scheduled due dates therefor, (2) the trustee of the irrevocable trust
          has been irrevocably instructed to pay such money or the proceeds of
          such U.S. Government Obligations to the Trustee and (3) the Trustee or
          Paying Agent shall have been irrevocably instructed in writing to
          apply the deposited money and the proceeds from U.S. Government
          Obligations in accordance with the terms of this Indenture and the
          terms of the Notes to the payment of principal of and interest on the
          Notes;

     (b)  the deposit described in clause (a) above will not result in a breach
          or violation of, or constitute a Default under, any other agreement or
          instrument to which either the Company is a party or by which it is
          bound;

     (c)  no Default has occurred and is continuing (1) as of the date of such
          deposit (other than a Default resulting from the borrowing of funds to
          be applied to such deposit and the grant of any Lien securing such
          borrowing) or (2) insofar as clause (7) or (8) of Section 6.01 is
          concerned at any time during the period ending on the 91st day after
          the date of such deposit or, if longer, ending on the day following
          the expiration of the longest preference period applicable to the
          Company in respect of such deposit (it being understood that the
          condition in this clause (c) is a condition subsequent and will not be
          deemed satisfied until the expiration of such period);

     (d)  the Company has paid or caused to be paid all sums currently due and
          payable by the Company under this Indenture and under the Notes;

     (e)  the Company has delivered to the Trustee an Officers' Certificate and
          an Opinion of Counsel, each stating that all conditions precedent
          provided for in this Indenture relating to the termination by the
          Company of its obligations have been complied with;

     (f)  in the case of an election under Section 9.02 or 9.03, the Company has
          delivered to the Trustee an Opinion of Counsel to the effect that the
          Holders of such Notes will not recognize income, gain or loss for
          United States federal income tax purposes as a result of such legal
          defeasance or covenant defeasance and will be subject to United States
          federal income tax on the same amounts, in the same manner and at the
          same times as would have been the case if such defeasance or covenant
          defeasance had not occurred, and such opinion, in the case of
          defeasance under Section 9.02, must refer to and be based upon a
          ruling of the Internal Revenue Service or a change in applicable
          United States federal income tax law occurring after the date of the
          Indenture. The defeasance would



                                      -94-

          in each case be effective when 91 days have passed since the date of
          the deposit in trust.

SECTION 9.05.  DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
               TRUST; OTHER MISCELLANEOUS PROVISIONS.

          All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, but such money need not be segregated from other funds
except to the extent required by law.

          The Company and the Subsidiary Guarantors shall (on a joint and
several basis) pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.04 or the principal, premium, if any, and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.

          Anything in this Article Nine to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon a request of
the Company any money or U.S. Government Obligations held by it as provided in
Section 9.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.

SECTION 9.06.  REINSTATEMENT.

          If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Subsidiary Guarantor's obligations under
this Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article Nine until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 9.01; PROVIDED that if the
Company or the Subsidiary Guarantors have made any payment of principal of,
premium, if any, or accrued interest on any Notes because of the reinstatement
of their obligations, the Company or the Subsidiary Guarantors, as the case may
be, shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.



                                      -95-

SECTION 9.07.  MONEYS HELD BY PAYING AGENT.

          In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.04, to the Company
upon a request of the Company (or, if such moneys had been deposited by the
Subsidiary Guarantors, to such Subsidiary Guarantors), and thereupon such Paying
Agent shall be released from all further liability with respect to such moneys.

SECTION 9.08.  MONEYS HELD BY TRUSTEE.

          Any moneys deposited with the Trustee or any Paying Agent or then held
by the Company or the Subsidiary Guarantors in trust for the payment of the
principal of, or premium, if any, or interest on any Note that are not applied
but remain unclaimed by the Holder of such Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Note shall
have respectively become due and payable shall be repaid to the Company (or, if
appropriate, the Subsidiary Guarantors) upon a request of the Company, or if
such moneys are then held by the Company or the Subsidiary Guarantors in trust,
such moneys shall be released from such trust; and the Holder of such Note
entitled to receive such payment shall thereafter, as an unsecured general
creditor, look only to the Company and the Subsidiary Guarantors for the payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; PROVIDED that the Trustee or any such
Paying Agent, before being required to make any such repayment, may, at the
expense of the Company and the Subsidiary Guarantors, either mail to each
Noteholder affected, at the address shown in the register of the Notes
maintained by the Registrar pursuant to Section 2.04, or cause to be published
once a week for two successive weeks, in a newspaper published in the English
language, customarily published each Business Day and of general circulation in
the City of New York, New York, a notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such mailing or publication, any unclaimed balance of such moneys
then remaining will be repaid to the Company. After payment to the Company or
the Subsidiary Guarantors or the release of any money held in trust by the
Company or any Subsidiary Guarantors, as the case may be, Noteholders entitled
to the money must look only to the Company and the Subsidiary Guarantors for
payment as general creditors unless applicable abandoned property law designates
another Person.



                                      -96-

                                   ARTICLE TEN

                             GUARANTEE OF SECURITIES

SECTION 10.01. GUARANTEE.

          From and after the Assumption Date and subject to the provisions of
this Article Ten, the Subsidiary Guarantors, by execution of the Assumption Date
Supplemental Indenture, jointly and severally, guarantee to each Holder (i) the
due and punctual payment of the principal of and interest on each Note, when and
as the same shall become due and payable, whether at maturity, by acceleration
or otherwise, the due and punctual payment of interest on the overdue principal
of and interest on the Notes, to the extent lawful, and the due and punctual
payment of all other obligations and due and punctual performance of all
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of such Note, this Indenture and the Registration Rights Agreement,
and (ii) in the case of any extension of time of payment or renewal of any Notes
or any of such other obligations, that the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
at stated maturity, by acceleration or otherwise. From and after the Assumption
Date, each Subsidiary Guarantor, by execution of the Assumption Date
Supplemental Indenture, agrees that its obligations hereunder shall be absolute
and unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Note or this Indenture, any failure
to enforce the provisions of any such Note, this Indenture or the Registration
Rights Agreement, any waiver, modification or indulgence granted to the Company
with respect thereto by the Holder of such Note, or any other circumstances
which may otherwise constitute a legal or equitable discharge of a surety or
such Subsidiary Guarantor.

          Each Subsidiary Guarantor hereby waives diligence, presentment, demand
for payment, filing of claims with a court in the event of merger or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest or notice with respect to any such Note or the Indebtedness evidenced
thereby and all demands whatsoever, and covenants that this Guarantee will not
be discharged as to any such Note except by payment in full of the principal
thereof and interest thereon. Each Subsidiary Guarantor hereby agrees that, as
between such Subsidiary Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (ii) in
the event of any declaration of acceleration of such obligations as provided in
Article Six, such obligations (whether or not due and payable) shall forthwith
become due and payable by each Subsidiary Guarantor for the purpose of this
Guarantee.



                                      -97-

          The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of any Holder under the Subsidiary Guarantees.

SECTION 10.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.

          To further evidence the Subsidiary Guarantee set forth in Section
10.01, each Subsidiary Guarantor hereby agrees, on the Assumption Date, that a
notation of such Subsidiary Guarantee, substantially in the form included in
EXHIBIT F hereto, shall be endorsed on each Note authenticated and delivered by
the Trustee on the Assumption Date and such Subsidiary Guarantee shall be
executed by either manual or facsimile signature of an Officer or an Officer of
a general partner, as the case may be, of each Subsidiary Guarantor. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.

          Each of the Subsidiary Guarantors hereby agrees that its Guarantee set
forth in Section 10.01 shall be in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Guarantee.

          If an Officer of a Subsidiary Guarantor whose signature is on this
Indenture or a Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which such Guarantee is endorsed or at any time
thereafter, such Subsidiary Guarantor's Guarantee of such Note shall be valid
nevertheless.

          The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Subsidiary Guarantor.

SECTION 10.03. RELEASE OF SUBSIDIARY GUARANTORS.

          The Guarantee of any Subsidiary Guarantor will be automatically and
unconditionally released and discharged upon any of the following:

     (A)  any transfer, to any Person not an Affiliate of the Company, of all of
          the Capital Stock held by the Company or any of its Restricted
          Subsidiaries in such Subsidiary Guarantor (which transfer is made in
          accordance with this Indenture and, if the Company or any of its
          Restricted Subsidiaries intends to comply with Section 4.12 by making
          an investment or expenditure in Replacement Assets, the Company or
          such Restricted Subsidiary delivers to the Trustee a written agreement
          that it will make such investment or expenditure within the time frame
          set forth in Section 4.12); or



                                      -98-

     (B)  the designation of such Subsidiary Guarantor as an Unrestricted
          Subsidiary in accordance with the provisions of this Indenture;

and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with and that such release is authorized and permitted hereunder.

          The Trustee shall execute any documents reasonably requested by either
the Company or a Subsidiary Guarantor in order to evidence the release of such
Subsidiary Guarantor from its obligations under its Guarantee endorsed on the
Notes and under this Article Ten.

SECTION 10.04. WAIVER OF SUBROGATION.

          Each Subsidiary Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Subsidiary
Guarantor's obligations under its Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or Note on account of such claim or other rights. If any amount shall be
paid to any Subsidiary Guarantor in violation of the preceding sentence and the
Notes shall not have been paid in full, such amount shall have been deemed to
have been paid to such Subsidiary Guarantor for the benefit of, and held in
trust for the benefit of, the Holders of the Notes, and shall forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Notes, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Subsidiary Guarantor acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated by this
Indenture and that the waiver set forth in this Section 10.06 is knowingly made
in contemplation of such benefits.

SECTION 10.05. NOTICE TO TRUSTEE.

          The Company or any Subsidiary Guarantor shall give prompt written
notice to the Trustee of any fact known to the Company or any such Subsidiary
Guarantor which would prohibit the making of any payment to or by the Trustee at
its Corporate Trust Office in respect of the Guarantees. Notwithstanding the
provisions of this Article Ten or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee in respect of



                                      -99-

the Guarantees, unless and until the Trustee shall have received written notice
thereof from the Company no later than one Business Day prior to such payment;
and, prior to the receipt of any such written notice, the Trustee, subject to
the provisions of this Section 10.05, and subject to the provisions of Sections
7.01 and 7.02, shall be entitled in all respects to assume that no such facts
exist; PROVIDED, HOWEVER, that if the Trustee shall not have received the notice
referred to in this Section 10.07 at least one Business Day prior to the date
upon which by the terms hereof any such payment may become payable for any
purpose under this Indenture (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Note), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it less than one Business Day prior to such date.

                                 ARTICLE ELEVEN

                               SECURITY DOCUMENTS

SECTION 11.01. SECURITY DOCUMENTS.

          The due and punctual payment of the principal of and interest on the
Notes when and as the same shall be due and payable, whether on an Interest
Payment Date, at maturity, by acceleration, repurchase, redemption, special
redemption or otherwise, and interest on the overdue principal of and interest
on the Notes and performance of all other obligations of the Company and the
Subsidiary Guarantors to the Holders or the Trustee under this Indenture and the
Notes, according to the terms hereunder or thereunder, shall be secured as
provided in the Security Documents. Each Holder, by its acceptance of the Notes,
consents and agrees to the terms of the Security Documents (including, without
limitation, the provisions providing for foreclosure and release of Collateral)
as the same may be in effect or may be amended from time to time in accordance
with their terms and authorizes and directs the Collateral Agent and the
Collateral Trustee, with respect to the Sharing Securities Documents, to enter
into such security documents and to perform their obligations and exercise their
rights thereunder in accordance therewith. The Company shall deliver to the
Trustee copies of all documents delivered to the Collateral Agent and the
Collateral Trustee pursuant to the Security Documents, and shall do or cause to
be done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Security Documents, to assure and confirm to
the Trustee, the Collateral Agent and the Collateral Trustee the security
interest in the Collateral contemplated hereby, by the Security Documents or any
part thereof, as from time to time constituted, so as to render the same
available for the security and benefit of this Indenture and of the Notes
secured thereby, according to the intent and purposes herein and therein
expressed. The Company shall take, upon request of the Trustee, any and all
actions



                                      -100-

reasonably required to cause the Security Documents to create and maintain, as
security for the obligations of the Company hereunder, a valid and enforceable
perfected lien on and security interest in all the Collateral, in favor of the
Collateral Agent for the benefit of the Holders and other Persons for whose
benefit the Collateral Agent or Trustee, as applicable, acts pursuant to the
Security Documents.

SECTION 11.02. RECORDING AND OPINIONS.

          (a)  The Company and, if applicable, the Subsidiary Guarantors shall
take or cause to be taken all action required to perfect, maintain, preserve and
protect the Lien on and security interest in the Collateral granted by the
Security Documents (subject only to Permitted Liens), including without
limitation, the filing of financing statements, continuation statements, Sharing
Mortgages and any instruments of further assurance, in such manner and in such
places as may be required by law fully to preserve and protect the rights of the
Holders and the Trustee under this Indenture and the Security Documents to all
property comprising the Collateral. The Company and the Subsidiary Guarantors
shall from time to time promptly pay all financing, continuation statement and
mortgage recording, registration and/or filing fees, charges and taxes relating
to this Indenture and the Security Documents, any amendments thereto and any
other instruments of further assurance required hereunder or pursuant to the
Security Documents. The Trustee shall have no obligation to, nor shall it be
responsible for any failure to, so register, file or record.

          (b)  The Company shall at all times comply with the provisions of TIA
Section 314(b), whether or not the TIA is then applicable to the obligations of
the Company and, if applicable, the Subsidiary Guarantors under this Indenture.

SECTION 11.03. RELEASE OF COLLATERAL.

          (a)  Collateral may (and, as applicable, shall) be released or
substituted only in accordance with the terms of the Security Documents.

          (b)  The release of any Collateral from the terms of this Indenture
and the Security Documents shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms of the Security Documents.

SECTION 11.04. CERTIFICATES OF THE COMPANY.

          To the extent applicable, the Company shall comply (or cause
compliance) with TIA Section 313(b), relating to reports, and TIA Section
314(d), relating to the release of property or securities from the lien and
security interest of the Security Documents and relating to the substitution
therefor of any property or securities to be subjected to the lien and security
interest



                                      -101-

of the Security Documents. Any certificate or opinion required by TIA Section
314(d) may be made by an Officer of the Company except in cases where TIA
Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Collateral Agent in the exercise of
reasonable care.

SECTION 11.05. CERTIFICATES OF THE TRUSTEE.

          In the event that the Company wish to release Collateral in accordance
with the Security Documents and have delivered the certificates and documents
required by the Security Documents and Sections 11.03 and 11.04 hereof, the
Trustee shall determine whether it has received all documentation required by
TIA Section 314(d) in connection with such release and, based on the Opinion of
Counsel delivered pursuant to Section 12.04(2), shall deliver a certificate to
the Collateral Agent setting forth such determination. The Trustee, however,
shall have no duty to confirm the legality or validity of such documents, its
sole duty being to certify that it has received such documentation which on
their face conform to Section 314(d) of the TIA.

SECTION 11.06. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
               SECURITY DOCUMENTS.

          Subject to the provisions of Sections 7.01 and 7.02 hereof, the
Trustee may, in its sole discretion and without the consent of the Holders of
Notes, direct, on behalf of the Holders of Notes, the Collateral Trustee or the
Collateral Agent, as the case may be, to take all actions it deems necessary or
appropriate in order to (a) enforce any of the terms of the Security Documents
and (b) collect and receive any and all amounts payable in respect of the
obligations of the Company hereunder. The Trustee shall have power to institute
and maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation of
the Security Documents or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders or to the Trustee).

SECTION 11.07. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
               SECURITY DOCUMENTS.

          The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture and the Security Documents.



                                      -102-

SECTION 11.08. TERMINATION OF SECURITY INTEREST.

          Upon the payment in full of all obligations of the Company under this
Indenture and the Notes, or upon Legal Defeasance, the Trustee shall, at the
request of the Company, deliver a certificate to the Collateral Agent stating
that such obligations have been paid in full.

SECTION 11.09. SECURITY DOCUMENTS.

          By their acceptance of the Notes, upon the Solutia Assumption, the
Holders hereby authorize and instruct the Trustee to enter into, for its benefit
and the benefit of the Noteholders, the Junior Security Agreement and the Junior
Intercreditor Agreement, substantially in the forms attached as Exhibits G and
H, respectively.

                                 ARTICLE TWELVE

                                  MISCELLANEOUS

SECTION 12.01. TRUST INDENTURE ACT CONTROLS.

          If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.

          The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

SECTION 12.02. NOTICES.

          Except for notice or communications to Holders, any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:



                                      -103-

          If to the Company:

                   SOI Funding Corp.
                   6525 Morrison Boulevard, Suite 318
                   Charlotte, NC  28211
                   Attn:  Douglas K. Johnson
                   Telephone: (704) 365-0569
                   Facsimile: (704) 365-1362

          With a copy to:

                   Tannenbaum Helpern Syracuse & Hirschtritt LLP
                   900 Third Avenue
                   New York, NY  10022
                   Attn:  Stephen Rosenberg
                   Telephone: (212) 508-6700
                   Facsimile: (212) 371-1084

          With a copy to:

                   Solutia Inc.
                   575 Maryville Centre Drive
                   P.O. Box 66760
                   St. Louis, MO  63166-6760 (if by courier, zip code 63141)
                   Attn:  General Counsel
                   Telephone: (314) 674-1000
                   Facsimile: (314) 674-2721

          With a copy to:

                   Winston & Strawn
                   35 West Wacker Drive
                   Chicago, IL  60601
                   Attn:  R. Cabell Morris
                   Telephone:   (312) 558-5600
                   Facsimile:   (312) 558-5700



                                      -104-

          If to the Trustee, Registrar or Paying Agent:

                   Mailing Address:
                   HSBC Bank USA
                   Issuer Services
                   452 Fifth Avenue
                   New York, NY 10018
                   Attention: Harriet Drandoff

                   Fax Number:  (212) 525-1300

                   Delivery Address:
                   HSBC Bank USA
                   Issuer Services
                   10 East 40th Street, 14th Floor
                   New York, NY 10016
                   Attention: Harriet Drandoff

                   Fax Number:  (212) 525-1300

          Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.

          The Company, the Subsidiary Guarantors or the Trustee by written
notice to the others may designate additional or different addresses for
subsequent notices or communications.

          Any notice or communication mailed to a Noteholder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar.

          Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.

          In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.



                                      -105-

SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.

          Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).

SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

          Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company or
such Subsidiary Guarantor shall furnish to the Trustee:

          (1)  an Officers' Certificate (which shall include the statements set
     forth in Section 12.05 below) stating that, in the opinion of the signers,
     all conditions precedent, if any, provided for in this Indenture relating
     to the proposed action have been complied with; and

          (2)  an Opinion of Counsel (which shall include the statements set
     forth in Section 12.05 below) stating that, in the opinion of such counsel,
     all such conditions precedent have been complied with.

SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.

          Each certificate and opinion with respect to compliance by or on
behalf of the Company or any Subsidiary Guarantor with a condition or covenant
provided for in this Indenture shall include:

          (1)  a statement that the Person making such certificate or opinion
     has read such covenant or condition;

          (2)  a brief statement as to the nature and scope of the examination
     or investigation upon which the statements or opinions contained in such
     certificate or opinion are based;

          (3)  a statement that, in the opinion of such Person, it or he has
     made such examination or investigation as is necessary to enable it or him
     to express an informed opinion as to whether or not such covenant or
     condition has been complied with; and

          (4)  a statement as to whether or not, in the opinion of such Person,
     such covenant or condition has been complied with.



                                      -106-

SECTION 12.06. RULES BY TRUSTEE AND AGENTS.

          The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for their
functions.

SECTION 12.07. BUSINESS DAYS; LEGAL HOLIDAYS.

          A "BUSINESS DAY" or "BUSINESS DAY" is a day that is not a Legal
Holiday. A "LEGAL HOLIDAY" is a Saturday, a Sunday or other day on which (i)
commercial banks in the City of New York are authorized or required by law to
close or (ii) the New York Stock Exchange is not open for trading. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.

SECTION 12.08. GOVERNING LAW.

          This Indenture, the Notes and the Guarantees shall be governed by and
construed in accordance with the laws of the State of New York, but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.

SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

          This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.

SECTION 12.10. SUCCESSORS.

          All agreements of the Company and the Subsidiary Guarantors in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee, any additional trustee and any Paying Agents in this Indenture
shall bind its successor.

SECTION 12.11. MULTIPLE COUNTERPARTS.

          The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.

SECTION 12.12. TABLE OF CONTENTS, HEADINGS, ETC.

          The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be



                                      -107-

considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.

SECTION 12.13. SEPARABILITY.

          Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.


                            [Signature Pages Follow]



          IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed all as of the date and year first written above.

                                         SOI FUNDING CORP.


                                         By:  /s/ Douglas K. Johnson
                                             -----------------------------------
                                             Name: Douglas K. Johnson
                                             Title: President



                                         HSBC BANK USA, as Trustee


                                         By: /s/ Harriet Drandoff
                                             -----------------------------------
                                             Name: Harriet Drandoff
                                             Title: Vice President



                                                                       EXHIBIT A

          CUSIP

                                SOI FUNDING CORP.
                        (may be assumed by SOLUTIA INC.)

No.                                                               $


                       11.25% SENIOR SECURED NOTE DUE 2009

          SOI FUNDING CORP., a Delaware corporation, as issuer (the "COMPANY"),
for value received, promises to pay to CEDE & CO. or registered assigns the
principal sum of [                            ] on July 15, 2009.

          Interest Payment Dates: July 15 and January 15.

          Record Dates: June 30 and December 31.

          Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.

                                       A-1


          IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by one of its duly authorized officers.

                                         SOI FUNDING CORP.


                                         By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                       A-2


                          Certificate of Authentication

          This is one of the 11.25% Senior Secured Notes Due 2009 referred to in
the within-mentioned Indenture.

                                         HSBC BANK USA, as Trustee


                                         By:
                                             -----------------------------------

Dated:

                                       A-3


                            [FORM OF REVERSE OF NOTE]

                                SOI FUNDING CORP.

                       11.25% SENIOR SECURED NOTE DUE 2009

          1.   INTEREST. SOI FUNDING CORP., a Delaware corporation, as issuer
(the "COMPANY"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the face
hereof at a rate of 11.25% per annum. Interest hereon will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including July 9, 2002 to but excluding the
date on which interest is paid. Interest shall be payable in arrears on each
July 15 and January 15, commencing July 15, 2003. Interest will be computed on
the basis of a 360-day year of twelve 30-day months and actual days elapsed. The
Company shall pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at the rate borne by the Notes.

          2.   METHOD OF PAYMENT. The Company will pay interest hereon (except
defaulted interest) to the Persons who are registered Holders at the close of
business on June 30 or December 31 next preceding the interest payment date
(whether or not a Business Day). Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Interest may be paid by check
mailed to the Holder entitled thereto at the address indicated on the register
maintained by the Registrar for the Notes.

          3.   PAYING AGENT AND REGISTRAR. Initially, HSBC Bank USA (the
"TRUSTEE") will act as a Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice. Neither the Company nor any of its
Affiliates may act as Paying Agent or Registrar.

          4.   INDENTURE. The Company issued the Notes under an Indenture dated
as of July 9, 2002 (the "INDENTURE") between the Company and the Trustee. This
is one of an issue of Notes of the Company issued, or to be issued, under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb), as amended from time to time. The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of them. Capitalized and certain other terms used
herein and not otherwise defined have the meanings set forth in the Indenture.

          5.   OPTIONAL REDEMPTION. (a) At any time on or prior to July 15,
2005, the Company may at its option on any one or more occasions redeem Notes
(including Additional Notes, if any) in an aggregate principal amount not to
exceed 35% of the aggregate principal

                                       A-4


amount of Notes (including Additional Notes, if any) issued under the Indenture
at a redemption price of 111.250% of the principal amount, plus accrued and
unpaid interest, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings; PROVIDED that:

          (1)  at least 65% of the aggregate principal amount of Notes
     (including Additional Notes, if any) issued under the Indenture remains
     outstanding immediately after the occurrence of such redemption (excluding
     Notes held by the Company and its Subsidiaries); and

          (2)  the redemption occurs within 90 days of the date of the closing
     of such Public Equity Offering.

          (b)  The Trustee will select Notes called for redemption pursuant to
this paragraph 5 on a PRO RATA basis, by lot or by such method as the Trustee
shall deem fair and appropriate; PROVIDED that no Notes of $1,000 or less shall
be redeemed in part. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption pursuant to this
paragraph 5 become due on the date fixed for redemption. On and after the
redemption date, interest stops accruing on Notes or portions of them called for
redemption.

          6.   SPECIAL MANDATORY REDEMPTION. In the event that the Solutia
Assumption does not occur on or prior to the Deadline, the Company will, on a
day not more than 20 days following the Deadline (the "SPECIAL MANDATORY
REDEMPTION DATE") redeem all of the Notes (the "SPECIAL MANDATORY REDEMPTION")
at a redemption price equal to the sum of (a) $206,702,624.80 (which amount is
equal to 103% of the original issue amount of the Units ($200,682,160.00)) plus
(b) the accrued and unpaid interest on the Notes from and including the Issue
Date to but excluding the Special Mandatory Redemption Date. The "DEADLINE" is
August 9, 2002 or such earlier time that Solutia determines not to refinance its
Credit Facility in accordance with the refinancing plan described in the
Offering Memorandum.

          7.   NOTICE OF REDEMPTION. Except in the case of Special Mandatory
Redemption, notices of redemption shall be mailed by first class mail at least
30 but not more than 60 days before the redemption date to each Holder of Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. Notice of the Special Mandatory Redemption will
be mailed promptly to each Holder of Notes at its registered address, the
Trustee and the Securities Intermediary.

          8.   OFFERS TO PURCHASE. The Indenture provides that upon the
occurrence of a Change of Control or an Asset Sale and subject to further
limitations contained therein,

                                       A-5


the Company shall make an offer to purchase outstanding Notes in accordance with
the procedures set forth in the Indenture.

          9.   REGISTRATION RIGHTS. (a) Pursuant to an Exchange and Registration
Rights Agreement among Solutia, from and after the Solutia Assumption, the
Subsidiary Guarantors and the Initial Purchasers named therein (the
"REGISTRATION RIGHTS AGREEMENT"), Solutia will be obligated to consummate an
exchange offer pursuant to which the Holder of this Note shall have the right to
exchange this Note for Notes which have been registered under the Securities
Act, in like principal amount and having substantially identical terms as the
Notes. (b) If (i) within 60 days after the Assumption Date, neither the Exchange
Offer Registration Statement nor the Shelf Registration Statement has been filed
with the Commission; (ii) within 120 days after the Assumption Date, the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
applicable, has not been declared effective; (iii) within 150 days after the
Assumption Date, the Exchange Offer has not been consummated; or (iv) after
either the Exchange Offer Registration Statement or the Shelf Registration
Statement has been declared effective, such Registration Statement thereafter
ceases to be effective or usable (subject, in the case of the Shelf Registration
Statement, to the exceptions set forth in the Registration Rights Agreement) in
connection with resales of the Initial Placement or Exchange Securities in
accordance with and during the periods specified in Sections 2 and 3 of the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iv), a "REGISTRATION DEFAULT"), liquidated damages ("LIQUIDATED
DAMAGES") will accrue on the Initial Placement and the Exchange Securities from
and including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured.
Liquidated Damages will accrue at a rate equal to 0.25% per annum of the
aggregate principal amount of the Notes during the 90-day period immediately
following the occurrence of any Registration Default and shall increase by 0.25%
per annum for each subsequent 90-day period during which such Registration
Default continues, but in no event shall such Liquidated Damages exceed 1.00%
per annum.

          10.  DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Notes or portion of a Note selected for
redemption, or register the transfer of or exchange any Notes for a period of 15
days before a mailing of notice of redemption.

          11.  PERSONS DEEMED OWNERS. The registered Holder of this Note may be
treated as the owner of this Note for all purposes.

          12.  UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee will pay the money back to
the Company at its

                                       A-6


written request. After that, Holders entitled to the money must look to the
Company for payment as general creditors unless an "abandoned property" law
designates another Person.

          13.  AMENDMENT, SUPPLEMENT, WAIVER, ETC. The Company, the Subsidiary
Guarantors, if any, and the Trustee (if a party thereto) may, without the
consent of the Holders of any outstanding Notes, amend, waive or supplement the
Indenture or the Notes for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, maintaining the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, providing for the assumption by a successor to the Company of its
obligations under the Indenture or any Security Documents and making any change
that does not materially and adversely affect the rights of any Holder. Other
amendments and modifications of the Indenture or the Notes may be made by the
Company, the Subsidiary Guarantors, if any, and the Trustee with the consent of
the Holders of not less than a majority of the aggregate principal amount of the
outstanding Notes, subject to certain exceptions requiring the consent of the
Holders of the particular Notes to be affected.

          14.  RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, pay dividends on, redeem or repurchase
its Capital Stock, make certain investments, sell assets, create restrictions on
the payment of dividends or other amounts to the Company from its Restricted
Subsidiaries, enter into transactions with Affiliates, expand into unrelated
businesses, create liens, enter into sale and leaseback transactions or
consolidate, merge or sell all or substantially all of the assets of the Company
and its Restricted Subsidiaries and requires the Company to provide reports to
Holders of the Notes. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.

          15.  SUCCESSOR CORPORATION. When a successor corporation assumes all
the obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article Five of the Indenture, the
predecessor corporation will, except as provided in Article Five, be released
from those obligations.

          16.  DEFAULTS AND REMEDIES. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(7) of the
Indenture with respect to the Company or any Subsidiary Guarantor, if any)
occurs and is continuing, then, and in each and every such case, either the
Trustee, by notice in writing to the Company, or the Holders of not less than
25% of the principal amount of the Notes then outstanding, by notice in writing
to the Company and the Trustee, may, and the Trustee at the request of such
Holders shall, declare due and payable, if not already due and payable, the
principal of and any accrued and unpaid interest on all of the Notes; and upon
any such declaration all such amounts upon such Notes shall become and be
immediately due and payable, anything in the Indenture or in the Notes to the

                                       A-7


contrary notwithstanding. If an Event of Default specified in Section 6.01(7) of
the Indenture occurs with respect to the Company or any Subsidiary Guarantor,
then the principal of and any accrued and unpaid interest on all of the Notes
shall immediately become due and payable without any declaration or other act on
the part of the Trustee or any Holder. Holders may not enforce the Indenture or
the Notes except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal, premium, if any, or interest on the Notes or a
default in the observance or performance of any of the obligations of the
Company under Article Five of the Indenture) if it determines that withholding
notice is in their best interests.

          17.  TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.

          18.  NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, agent, member or stockholder or Affiliate of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes, the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. No past, present or future
director, officer, employee, incorporator, agent or stockholder or Affiliate of
any of the Subsidiary Guarantors, as such, shall have any liability for any
obligations of the Subsidiary Guarantors under the Guarantees, the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes and Guarantees by accepting a Note and a
Guarantee waives and releases all such liabilities. The waiver and release are
part of the consideration for issuance of the Notes and the Guarantees.

          19.  DISCHARGE. The Company's obligations pursuant to the Indenture
will be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of United States dollars or U.S.
Government Obligations sufficient to pay when due principal of and interest on
the Notes to maturity or redemption, as the case may be.

          20.  GUARANTEES. From and after the Solutia Assumption Date, the Note
will be entitled to the benefits of certain Guarantees made for the benefit of
the Holders. Reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and obligations thereunder of
the Subsidiary Guarantors, the Trustee and the Holders.

          21.  AUTHENTICATION. This Note shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Note.

                                       A-8


          22.  GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. The Trustee, the
Company and the Subsidiary Guarantors agree to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to the Indenture or the Notes.

          23.  ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

          The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:

                 SOI Funding Corp.
                 6525 Morrison Boulevard, Suite 318
                 Charlotte, NC 28211
                 Attn:  Douglas K. Johnson
                 Telephone: (704) 365-0569
                 Facsimile: (704) 365-1362

          With a copy to:

                 Tannenbaum Helpern Syracuse & Hirschtritt LLP
                 900 Third Avenue
                 New York, NY 10022
                 Attn:  Stephen Rosenberg
                 Telephone: (212) 508-6700
                 Facsimile: (212) 371-1084

          With a copy to:

                 Solutia Inc.
                 575 Maryville Centre Drive
                 P.O. Box 66760
                 St. Louis, MO 63166-6760 (if by courier, zip code 63141)
                 Attn:  General Counsel
                 Telephone: (314) 674-1000
                 Facsimile: (314) 674-2721

                                       A-9


          With a copy to:

                 Winston & Strawn
                 35 West Wacker Drive
                 Chicago, IL 60601
                 Attn:  R. Cabell Morris
                 Telephone:   (312) 558-5600
                 Facsimile:   (312) 558-5700

                                      A-10


                                   ASSIGNMENT

          I or we assign and transfer this Note to:

- --------------------------------------------------------------------------------
             (Insert assignee's social security or tax I.D. number)


- --------------------------------------------------------------------------------
             (Print or type name, address and zip code of assignee)

          and irrevocably appoint:

          Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.

Date:                       Your Signature:
      ----------------                     -------------------------------------
                                           (Sign exactly as your name appears on
                                           the other side of this Note)

Signature Guarantee:
                     ---------------------------------

                               SIGNATURE GUARANTEE

          Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                      A-11


                       OPTION OF HOLDER TO ELECT PURCHASE


          If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.08 or Section 4.12 of the Indenture, check the
appropriate box:

          ?    Section 4.08                 ?    Section 4.12

          If you want to have only part of the Note purchased by the Company
pursuant to Section 4.08 or Section 4.12 of the Indenture, state the amount you
elect to have purchased:

$________________________________________
     (multiple of $1,000)

Date:
     ------------------------------------


                        Your Signature:
                                       -----------------------------------------
                                       (Sign exactly as your name appears on the
                                       face of this Note)

- -----------------------------------------
         Signature Guaranteed


                               SIGNATURE GUARANTEE

          Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                      A-12


                                                                       EXHIBIT B

        [FORM OF LEGEND FOR 144A SECURITIES AND OTHER SECURITIES THAT ARE
                             RESTRICTED SECURITIES]

THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER:

     (1)  REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
     DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") or (B) IT IS
     ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
     REGULATION S UNDER THE SECURITIES ACT.

     (2)  AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
     (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
     SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
     THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
     144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
     OF REGULATION S UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
     REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH
     ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
     (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), OR (F)
     PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
     AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
     STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND

     (3)  AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
     INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
     LEGEND.

            AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF

                                       B-1


REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE GOVERNING THIS NOTE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING.

                                       B-2


        [FORM OF ASSIGNMENT FOR 144A SECURITIES AND OTHER SECURITIES THAT
                                       ARE
                             RESTRICTED SECURITIES]

          I or we assign and transfer this Note to:

- --------------------------------------------------------------------------------
             (Insert assignee's social security or tax I.D. number)

- --------------------------------------------------------------------------------
             (Print or type name, address and zip code of assignee)

          and irrevocably appoint:

          Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.

                                   [Check One]

          / /  (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by Rule 144A
thereunder.

          or

          / /  (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.

          If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 2.16 and 2.17 of the Indenture
shall have been satisfied.

Date:                    Your Signature:
      ----------------                   ------------------------------
                                         (Sign exactly as your name
                                         appears on the other side of this Note)


Signature Guarantee:
                     -----------------------------------------------------------

                               SIGNATURE GUARANTEE

          Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                       B-3


              TO BE COMPLETED BY TRANSFEROR IF (a) ABOVE IS CHECKED

          The transfer is being effected pursuant to and in accordance with Rule
144A under the Securities Act, and, accordingly, the transferor hereby further
certifies that the beneficial interest or certificated Note is being transferred
to a Person that the transferor reasonably believed and believes is purchasing
the beneficial interest or certificated Note for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such transfer is in compliance with any applicable securities
laws of any state of the United States. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or certificated Note will be subject to the restrictions on
transfer enumerated on the Rule 144A Notes and/or the certificated Note and in
the Indenture and the Securities Act.

Dated:
      -------------------         ----------------------------------------------
                                      NOTICE:  To be executed by an executive
                                               officer

                                       B-4


                                                                       EXHIBIT C

                     [FORM OF LEGEND FOR REGULATION S NOTE]

          THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS UNLESS REGISTERED UNDER THE ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.

                                       C-1


                   [FORM OF ASSIGNMENT FOR REGULATION S NOTE]

          I or we assign and transfer this Note to:

- --------------------------------------------------------------------------------
             (Insert assignee's social security or tax I.D. number)

- --------------------------------------------------------------------------------
             (Print or type name, address and zip code of assignee)

          and irrevocably appoint:

          Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.

                                   [Check One]

          / /  (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by Regulation S
thereunder.

          or

          / /  (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.

          If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 2.16 and 2.17 of the Indenture
shall have been satisfied.

Date:                   Your Signature:
      ----------------                 -------------------------------------
                                       (Sign exactly as your name appears on the
                                       face of this Note)

Signature Guarantee:
                     -----------------------------------------------------------

                               SIGNATURE GUARANTEE

          Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                       C-2


              TO BE COMPLETED BY TRANSFEROR IF (a) ABOVE IS CHECKED

          The transfer is being effected pursuant to and in accordance with Rule
903 or Rule 904 under the Securities Act and, accordingly, the transferor hereby
further certifies that (i) the transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the transferee
was outside the United States or such transferor and any Person acting on its
behalf reasonably believed and believes that the transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the restricted period under Regulation S, the transfer is not
being made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an initial purchaser). Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or certificated Note will be subject to the restrictions on transfer enumerated
on the Regulation S Notes and/or the certificated Note and in the Indenture and
the Securities Act.

Dated:
      ---------------------          -------------------------------------------
                                     NOTICE:  To be executed by an executive
                                              officer

                                       C-3


                                                                       EXHIBIT D

                        [FORM OF LEGEND FOR GLOBAL NOTE]

          Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Note) in substantially the following form:

          THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                                       D-1


                                                                       EXHIBIT E

                       Form of Certificate To Be Delivered
                          in Connection with Transfers
                            Pursuant to Regulation S
                    ----------------------------------------
HSBC Bank USA
425 Fifth Avenue
12th Floor
New York, NY 10018

Attention:  Issuer Services

                    ----------------------------------------
          Re:   SOI Funding Corp., a Delaware corporation, as issuer
                (the "Company"), 11.25% Senior Secured Notes Due 2009
                (the "Notes")

Dear Sirs:

          In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:

          (1)  the offer of the Notes was not made to a U.S. person or to a
     person in the United States;

          (2)  either (a) at the time the buy offer was originated, the
     transferee was outside the United States or we and any person acting on our
     behalf reasonably believed that the transferee was outside the United
     States, or (b) the transaction was executed in, on or through the
     facilities of a designated off-shore securities market and neither we nor
     any person acting on our behalf knows that the transaction has been
     pre-arranged with a buyer in the United States;

          (3)  no directed selling efforts have been made in the United States
     in contravention of the requirements of Rule 904(a) of Regulation S;

          (4)  the transaction is not part of a plan or scheme to evade the
     registration requirements of the Securities Act; and

                                       E-1


          (5)  we have advised the transferee of the transfer restrictions
     applicable to the Notes.

          You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.

                                         Very truly yours,

                                         [Name of Transferee]


                                         By:
                                             -----------------------------------

                                       E-2


                                                                       EXHIBIT F

                                   GUARANTEES


          From and after the Assumption Date, each of the undersigned (the
"Subsidiary Guarantors") hereby jointly and severally unconditionally
guarantees, to the extent set forth in the Indenture dated as of July 9, 2002 by
and among SOI Funding Corp., a Delaware corporation, as issuer (the "Company"),
whose obligations thereunder have been assumed (or are being assumed) by Solutia
Inc., a Delaware corporation, the Subsidiary Guarantors, as guarantors, and HSBC
Bank USA, as Trustee (as amended, restated or supplemented from time to time,
the "Indenture"), and subject to the Indenture, (a) the due and punctual payment
of the principal of, and premium, if any, and interest on the Notes, when and as
the same shall become due and payable, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on overdue principal of, and
premium and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Noteholders or the
Trustee, all in accordance with the terms set forth in Article Ten of the
Indenture, and (b) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.

          The obligations of the Subsidiary Guarantors to the Noteholders and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Ten of the Indenture, and reference is hereby made to the Indenture
for the precise terms and limitations of this Guarantee. Each Holder of the Note
to which this Guarantee is endorsed, by accepting such Note, agrees to and shall
be bound by such provisions.

                         [Signatures on Following Pages]

                                       F-1


          IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Guarantee to be signed by a duly authorized officer.

                                       F-2

EX-4.3

                                                                     EXHIBIT 4.3

                             SUPPLEMENTAL INDENTURE

          SUPPLEMENTAL INDENTURE, dated as of July 25, 2002 among Solutia Inc.,
a Delaware corporation ("SOLUTIA"), SOI Funding Corp., a Delaware corporation
("SOI FUNDING"), the Subsidiary Guarantors signatory hereto (the "SUBSIDIARY
GUARANTORS") and HSBC Bank USA, as trustee under the Indenture referred to below
(the "TRUSTEE").

                              W I T N E S S E T H :

          WHEREAS, SOI Funding and the Trustee heretofore executed and delivered
an Indenture, dated as of July 9, 2002 (as heretofore amended and supplemented,
the "INDENTURE"), providing for the issuance of the 11.25% Senior Secured Notes
due 2009 of SOI Funding (the "SECURITIES") (capitalized terms used herein but
not otherwise defined have the meanings ascribed thereto in the Indenture);

          WHEREAS, Article V of the Indenture provides that upon the execution
and delivery by Solutia to the Trustee of this Supplemental Indenture, Solutia
shall be the successor Company under the Indenture and the Securities and shall
succeed to, and be substituted for, and may exercise every right and power of,
SOI Funding under the Indenture and the Securities and SOI Funding shall be
discharged from all obligations and covenants under the Indenture and the
Securities;

          WHEREAS, Section 8.01(b) of the Indenture provides that SOI Funding
and the Trustee may amend the Indenture and the Securities without notice to or
consent of any Holders of the Securities by entering into a supplemental
indenture in order to provide for the assumption by Solutia of its obligations
under the Indenture or any Security Document; and

          WHEREAS, this Supplemental Indenture has been duly authorized by all
necessary corporate action on the part of each of Solutia, SOI Funding and the
Subsidiary Guarantors.

          NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
Solutia, SOI Funding and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders as follows:



                                    ARTICLE I

                         ASSUMPTION BY SUCCESSOR COMPANY

          Section 1.1.  ASSUMPTION OF THE SECURITIES. Solutia hereby expressly
assumes and agrees promptly to pay, perform and discharge when due each and
every debt (including accrued original issue discount on such debts, if any),
obligation, covenant and agreement incurred, made or to be paid, performed or
discharged by SOI Funding under the Indenture and the Securities.

          Solutia hereby agrees to be bound by all the terms, provisions and
conditions of the Indenture and the Securities and that it shall be the
successor Company and shall succeed to, and be substituted for, and may exercise
every right and power of, SOI Funding, as the predecessor Company, under the
Indenture and the Securities, all to the extent provided in and in accordance
with the terms and conditions of, the Indenture.

          Section 1.2.  DISCHARGE OF SOI FUNDING. SOI Funding is hereby
expressly discharged from all debts, obligations, covenants and agreements under
or relating to the Indenture and the Securities.

          Section 1.3.  TRUSTEE'S ACCEPTANCE. The Trustee hereby accepts this
Supplemental Indenture and agrees to perform the same under the terms and
conditions set forth in the Indenture.

                                   ARTICLE II

                                  MISCELLANEOUS

          Section 2.1.  EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution and
delivery of this Supplemental Indenture by Solutia, SOI Funding, the Subsidiary
Guarantors and the Trustee, the Indenture shall be supplemented in accordance
herewith, and this Supplemental Indenture shall form a part of the Indenture for
all purposes, and every Holder of Securities heretofore or hereafter
authenticated and delivered under the Indenture shall be bound thereby.
Notwithstanding any other provision of this Supplemental Indenture, this
Supplemental Indenture shall not be deemed to be effective unless and until the
Securities Intermediary (as defined in the Escrow Agreement) releases the
Solutia Amount (as defined in the Escrow Agreement) out of the Escrow Funds to
Solutia (or its designee) pursuant to Section 3(a) of the Escrow Agreement. In
the event that the Securities Intermediary does not so release the Solutia
Amount, this Supplemental Indenture shall automatically terminate and never take
force or effect.

          Section 2.2.  INDENTURE REMAINS IN FULL FORCE AND EFFECT. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.

          Section 2.3.  INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED TOGETHER.
This Supplemental Indenture is an indenture supplemental to and in
implementation of the

                                        2


Indenture, and the Indenture and this Supplemental Indenture shall henceforth be
read and construed together.

          Section 2.4.  CONFIRMATION AND PRESERVATION OF INDENTURE. The
Indenture as supplemented by this Supplemental Indenture is in all respects
confirmed and preserved.

          Section 2.5.  CONFLICT WITH TRUST INDENTURE ACT. If any provision of
this Supplemental Indenture limits, qualifies or conflicts with any provision of
the TIA that is required or deemed under the TIA to be part of and govern any
provision of this Supplemental Indenture, such provision of the TIA shall
control. If any provision of this Supplemental Indenture modifies or excludes
any provision of the TIA that may be so modified or excluded, the provision of
the TIA shall be deemed to apply to the Indenture as so modified or to be
excluded by this Supplemental Indenture, as the case may be.

          Section 2.6.  SEVERABILITY. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

          Section 2.7.  BENEFITS OF SUPPLEMENTAL INDENTURE. Nothing in this
Supplemental Indenture or the Securities, express or implied, shall give to any
Person, other than the parties hereto and thereto and their successors hereunder
and thereunder and the Holders of the Securities, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this Supplemental
Indenture or the Securities.

          Section 2.8.  SUCCESSORS. All agreements of Solutia in this
Supplemental Indenture shall bind its successors. All agreements of the Trustee
in this Supplemental Indenture shall bind its successors.

          Section 2.9.  CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture and the Securities relating to the
conduct or affecting the liability or affording protection to the Trustee,
whether or not elsewhere herein so provided.

          Section 2.10. GOVERNING LAW. This Supplemental Indenture shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.

          Section 2.11. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Supplemental Indenture, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

          Section 2.12. HEADINGS. The Article and Section headings herein are
inserted for convenience of reference only, are not intended to be considered a
part hereof and shall not modify or restrict any of the terms or provisions
hereof.

                                        3


          Section 2.13. THE TRUSTEE. The Trustee shall not be responsible in any
manner for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
are made by Solutia and SOI Funding.

                            [signature pages follow]

                                        4


          IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first written above.

                                   SOLUTIA INC.


                                   By: /s/ Kevin Wilson
                                       -----------------------------------------
                                       Name: C.K. Wilson
                                       Title: Vice President and Treasurer


                                   CPFILMS INC.


                                   By: /s/ R.A. Ringhofer
                                       -----------------------------------------
                                       Name: R.A. Ringhofer
                                       Title: Secretary


                                   MONCHEM, INC.


                                   By: /s/ Kevin Wilson
                                       -----------------------------------------
                                       Name: C.K. Wilson
                                       Title: President


                                   MONCHEM INTERNATIONAL, INC.


                                   By: /s/ Kevin Wilson
                                       -----------------------------------------
                                       Name: C.K. Wilson
                                       Title: President


                                   SOLUTIA SYSTEMS, INC.


                                   By: /s/ Kevin Wilson
                                       -----------------------------------------
                                       Name: C.K. Wilson
                                       Title: President



                                   SOI FUNDING CORP.


                                   By: /s/ Evelyn Echevarria
                                       -----------------------------------------
                                       Name: Evelyn Echevarria
                                       Title: Vice President


                                   HSBC BANK USA,
                                     as Trustee


                                   By: /s/ Harriet Drandoff
                                       -----------------------------------------
                                       Name: Harriet Drandoff
                                       Title: Vice President

EX-4.4

                                                                     EXHIBIT 4.4

                                  SOLUTIA INC.

                $223,000,000 11.25% SENIOR SECURED NOTES DUE 2009

                          REGISTRATION RIGHTS AGREEMENT

                                                              New York, New York
                                                                    July 9, 2002

Salomon Smith Barney Inc.
Banc of America Securities LLC
  As Representatives of the several Initial
  Purchasers named in Schedule I hereto
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Dear Sirs:

          SOI Funding Corp., a corporation organized under the laws of Delaware
("FUNDING CORP."), proposes, among other things, to issue and sell to the
several initial purchasers named in SCHEDULE I hereto (the "INITIAL
PURCHASERS"), for whom you are acting as representatives (the
"REPRESENTATIVES"), $223,000,000 aggregate principal amount of its 11.25% Senior
Secured Notes due 2009 (the "NOTES") upon the terms set forth in a purchase
agreement dated July 2, 2002 (the "PURCHASE AGREEMENT") relating to the initial
placement of the Notes (the "INITIAL PLACEMENT"). In connection with the
consummation of the refinancing plan of Solutia Inc., a Delaware corporation
("SOLUTIA"), as described in the Final Memorandum (as defined herein), Solutia
will assume the obligations of Funding Corp. under, among other instruments, the
Notes and the Indenture (as defined herein) (the "SOLUTIA ASSUMPTION"). Upon
consummation of the Solutia Assumption, Solutia's obligations under the Notes
will be unconditionally guaranteed (the "GUARANTEES" and together with the
Notes, the "SECURITIES") by each of Solutia's domestic subsidiaries named in
SCHEDULE II hereto (the "GUARANTORS"). To induce the Initial Purchasers to enter
into the Purchase Agreement and to satisfy a condition of your obligations
thereunder, the Issuers hereby agree with you for your benefit and the benefit
of the holders from time to time of Securities and Exchange Securities (as
defined below) (including the Initial Purchasers) (each a "HOLDER" and,
together, the "HOLDERS"), as follows:



                                       -2-

          1.     DEFINITIONS. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following defined terms shall have the following
respective meanings:

          "ACT" shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.

          "AFFILIATE" of, or person affiliated with, any specified Person shall
mean any Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, "control" of a Person shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled by" and "under common control with" shall have meanings correlative
to the foregoing.

          "ASSUMPTION DATE" shall have the meaning set forth in the preamble
hereto.

          "BROKER-DEALER" shall mean any broker or dealer registered as such
under the Exchange Act.

          "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.

          "COMMISSION" shall mean the Securities and Exchange Commission.

          "CONDUCT RULES" shall have the meaning set forth in Section 4(u)
hereof.

          "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.

          "EXCHANGE OFFER REGISTRATION PERIOD" shall mean the 180-day period
following the issuance of the Exchange Securities, exclusive of any period
during which any stop order shall be in effect suspending the effectiveness of
the Exchange Offer Registration Statement.

          "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean a registration
statement of the Issuers on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments thereto, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.



                                       -3-

          "EXCHANGE SECURITIES" shall mean debt securities of the Issuers
identical in all material respects to the Securities (except that the cash
interest and interest rate step-up provisions and the transfer restrictions
shall be modified or eliminated, as appropriate) and to be issued under the
Indenture.

          "EXCHANGING DEALER" shall mean any Holder (which may include any
Initial Purchaser) that is a Broker-Dealer and elects to exchange any Securities
that it acquired for its own account as a result of market-making activities or
other trading activities (but not directly from any Issuer or any Affiliate of
any Issuer) for Exchange Securities.

          "FINAL MEMORANDUM" shall have the meaning set forth in the Purchase
Agreement.

          "FUNDING CORP." shall have the meaning set forth in the preamble
hereto.

          "GUARANTEES" shall have the meaning set forth in the preamble hereto.

          "GUARANTORS" shall have the meaning set forth in the preamble hereto.

          "HOLDER" shall have the meaning set forth in the preamble hereto.

          "INDENTURE" shall mean the Indenture relating to the Securities to be
dated as of the date of original issuance of the Notes between Funding Corp. and
HSBC Bank USA, as trustee, as amended or supplemented from time to time in
accordance with the terms thereof.

          "INITIAL PLACEMENT" shall have the meaning set forth in the preamble
hereto.

          "INITIAL PURCHASERS" shall have the meaning set forth in the preamble
hereto.

          "ISSUERS" shall mean Solutia and the Guarantors.

          "LOSSES" shall have the meaning set forth in Section 6(d) hereof.

          "MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of Securities and Exchange Securities registered
under a Registration Statement.

          "MANAGING UNDERWRITERS" shall mean the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.

          "NOTES" shall have the meaning set forth in the preamble hereto.



                                       -4-

          "PERSON" shall mean an individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.

          "PROSPECTUS" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the Exchange Securities covered by
such Registration Statement, and all amendments and supplements thereto and all
material incorporated by reference therein.

          "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble
hereto.

          "REGISTERED EXCHANGE OFFER" shall mean the proposed offer of the
Issuers to the Holders of the Securities that are not prohibited by any law or
policy of the Commission from participating in such offer, to issue and deliver
a like aggregate principal amount of Exchange Securities in exchange for the
Securities.

          "REGISTRATION STATEMENT" shall mean any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the Exchange Securities pursuant to the provisions of this Agreement, any
amendments and supplements to such registration statement, including
post-effective amendments (in each case including the Prospectus contained
therein), all exhibits thereto and all material incorporated by reference
therein.

          "REPRESENTATIVES" shall have the meaning set forth in the preamble
hereto.

          "SECURITIES" shall mean the Notes and the Guarantees.

          "SECURITY DOCUMENTS" shall have the meaning set forth in the
Indenture.

          "SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 3 hereof.

          "SHELF REGISTRATION PERIOD" shall have the meaning set forth in
Section 3(b) hereof.

          "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Issuers pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities or Exchange Securities, as applicable, on
an appropriate form under Rule 415 under the Act, or any similar rule that may
be adopted by the Commission, amendments and



                                       -5-

supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.

          "SOLUTIA ASSUMPTION" shall have the meaning set forth in the preamble
hereto.

          "TRUSTEE" shall mean the trustee with respect to the Securities under
the Indenture.

          "UNDERWRITER" shall mean any Person deemed an "underwriter," under the
Act or the rules and regulations thereunder, of Securities or Exchange
Securities in connection with an offering thereof under a Shelf Registration
Statement.

          2.     REGISTERED EXCHANGE OFFER. (a) The Issuers shall prepare and,
not later than 60 days following the Assumption Date (or if such 60th day is not
a Business Day, the next succeeding Business Day), shall file with the
Commission the Exchange Offer Registration Statement with respect to the
Registered Exchange Offer. The Issuers shall use their respective best efforts
to cause the Exchange Offer Registration Statement to become effective under the
Act within 120 days of the Assumption Date (or if such 120th day is not a
Business Day, the next succeeding Business Day).

          (b)    Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuers shall promptly commence the Registered Exchange Offer and
shall keep the Registered Exchange Offer open for not less than 30 days (or
longer, if required by applicable law), it being the objective of such
Registered Exchange Offer to enable each Holder electing to exchange Securities
for Exchange Securities (assuming that such Holder is not an Affiliate of any
Issuer, acquires the Exchange Securities in the ordinary course of such Holder's
business, has no arrangements with any Person to participate in the distribution
of the Exchange Securities and is not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer) to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Act and without material restrictions under the
securities laws of a substantial proportion of the several states of the United
States.

          (c)    In connection with the Registered Exchange Offer, the Issuers
shall:

          (i)    mail to each Holder a copy of the Prospectus forming part of
     the Exchange Offer Registration Statement, together with an appropriate
     letter of transmittal and related documents;



                                       -6-

          (ii)   keep the Registered Exchange Offer open for not less than 30
     days after the date notice thereof is mailed to the Holders (or longer if
     required by applicable law);

          (iii)  use their respective best efforts to keep the Exchange Offer
     Registration Statement continuously effective under the Act, supplemented
     and amended as required under the Act, to ensure that it is available for
     sales of Exchange Securities by Exchanging Dealers during the Exchange
     Offer Registration Period;

          (iv)   utilize the services of a depositary for the Registered
     Exchange Offer with an address in the Borough of Manhattan in New York
     City, which may be the Trustee or an Affiliate of the Trustee;

          (v)    permit Holders to withdraw tendered Securities at any time
     prior to the close of business, New York time, on the last Business Day on
     which the Registered Exchange Offer is open;

          (vi)   if requested by the Commission, prior to effectiveness of the
     Exchange Offer Registration Statement, provide a supplemental letter to the
     Commission (A) stating that the Issuers are conducting the Registered
     Exchange Offer in reliance on the position of the Commission in EXXON
     CAPITAL HOLDINGS CORPORATION (pub. avail. May 13, 1988) and MORGAN STANLEY
     AND CO., INC. (pub. avail. June 5, 1991); and (B) including a
     representation that the Issuers have not entered into any arrangement or
     understanding with any Person to distribute the Exchange Securities to be
     received in the Registered Exchange Offer and that, to the best of the
     Issuers' information and belief, each Holder participating in the
     Registered Exchange Offer is acquiring the Exchange Securities in the
     ordinary course of business and has no arrangement or understanding with
     any Person to participate in the distribution of the Exchange Securities;
     and

          (vii)  comply in all respects with all applicable laws.

          (d)    As soon as practicable after the close of the Registered
Exchange Offer, the Issuers shall:

          (i)    accept for exchange all Securities tendered and not validly
     withdrawn pursuant to the Registered Exchange Offer;

          (ii)   deliver to the Trustee for cancellation in accordance with
     Section 4(s) hereof all Securities so accepted for exchange; and



                                       -7-

          (iii)  cause the Trustee promptly to authenticate and deliver to each
     Holder of Securities a principal amount of Exchange Securities equal to the
     principal amount of the Securities of such Holder so accepted for exchange.

          (e)    Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Registered Exchange Offer to
participate in a distribution of the Exchange Securities (x) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission in MORGAN STANLEY AND CO., INC. (pub. avail. June 5,
1991) and EXXON CAPITAL HOLDINGS CORPORATION (pub. avail. May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993
and similar no-action letters; and (y) must comply with the registration and
prospectus delivery requirements of the Act in connection with any secondary
resale transaction and must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or 508,
as applicable, of Regulation S-K under the Act if the resales are of Exchange
Securities obtained by such Holder in exchange for Securities acquired by such
Holder directly from any Issuer or one of its Affiliates. Accordingly, each
Holder participating in the Registered Exchange Offer shall be required to
represent to the Issuers that, at the time of the consummation of the Registered
Exchange Offer:

          (i)    any Exchange Securities received by such Holder will be
     acquired in the ordinary course of business;

          (ii)   such Holder will have no arrangement or understanding with any
     Person to participate in the distribution of the Securities or the Exchange
     Securities within the meaning of the Act; and

          (iii)  such Holder is not an Affiliate of any Issuer.

          (f)    If any Initial Purchaser determines that it is not eligible to
participate in the Registered Exchange Offer with respect to the exchange of
Securities constituting any portion of an unsold allotment, at the request of
such Initial Purchaser, the Issuers shall issue and deliver to such Initial
Purchaser or the Person purchasing Exchange Securities registered under a Shelf
Registration Statement as contemplated by Section 3 hereof from such Initial
Purchaser, in exchange for such Securities, a like principal amount of Exchange
Securities. The Issuers shall use their respective best efforts to cause the
CUSIP Service Bureau to issue the same CUSIP number for such Exchange Securities
as for Exchange Securities issued pursuant to the Registered Exchange Offer.

          3.     SHELF REGISTRATION. (a) If (i) due to any change in law or
applicable interpretations thereof by the Commission's staff, the Issuers
determine upon advice of their outside counsel that they are not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof; (ii)
for any other reason the Registered Exchange Offer is



                                       -8-

not consummated within 150 days after the Assumption Date; (iii) prior to the
20th day following consummation of the Registered Exchange Offer (A) any Initial
Purchaser so requests with respect to Securities that are not eligible to be
exchanged for Securities in the Registered Exchange Offer and that are held by
it following consummation of the Registered Exchange Offer; (B) any Holder
(other than an Initial Purchaser) is not eligible to participate in the
Registered Exchange Offer; or (C) in the case of any Initial Purchaser that
participates in the Registered Exchange Offer or acquires Exchange Securities
pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely
tradeable Exchange Securities in exchange for Securities constituting any
portion of an unsold allotment (it being understood that (x) the requirement
that an Initial Purchaser deliver a Prospectus containing the information
required by Item 507 or 508 of Regulation S-K under the Act in connection with
sales of Exchange Securities acquired in exchange for such Securities shall
result in such Exchange Securities being not "freely tradeable"; and (y) the
requirement that an Exchanging Dealer deliver a Prospectus in connection with
sales of Exchange Securities acquired in the Registered Exchange Offer in
exchange for Securities acquired as a result of market-making activities or
other trading activities shall not result in such Exchange Securities being not
"freely tradeable"), the Issuers shall effect a Shelf Registration Statement in
accordance with Section 3(b) hereof.

          (b)    (i) The Issuers shall as promptly as practicable (but in no
event more than 60 days after so required or requested pursuant to this Section
3), file with the Commission, and thereafter shall use their respective best
efforts to cause to be declared effective under the Act (within 120 days after
so required or requested pursuant to this Section 3), a Shelf Registration
Statement relating to the offer and sale of the Securities or the Exchange
Securities, as applicable, by the Holders thereof from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement; PROVIDED, HOWEVER, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Securities held
by it covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all of the provisions of this Agreement applicable to
such Holder; and PROVIDED, FURTHER, that with respect to Exchange Securities
received by an Initial Purchaser in exchange for Securities constituting any
portion of an unsold allotment, the Issuers may, if permitted by current
interpretations by the Commission's staff, file a post-effective amendment to
the Exchange Offer Registration Statement containing the information required by
Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of their
obligations under this subsection with respect thereto, and any such Exchange
Offer Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement.

          (ii)   The Issuers shall use their respective best efforts to keep the
Shelf Registration Statement continuously effective, supplemented and amended as
required by the Act, in order to permit the Prospectus forming part thereof to
be usable by Holders until the



                                       -9-

earliest of (A) the time when the Securities or Exchange Securities, as
applicable, covered thereby can be sold pursuant to Rule 144 under the Act
without any limitations under clauses (c), (e), (f) and (h) of Rule 144, (B) a
period of two years from the effective date of the Shelf Registration Statement
(or one year from the effective date of the Shelf Registration Statement if the
Shelf Registration Statement is filed at the request of an Initial Purchaser) or
(C) such shorter period that will terminate when all the Securities or Exchange
Securities, as applicable, covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (in any such case, such period
being called the "SHELF REGISTRATION PERIOD"). The Issuers shall be deemed not
to have used their respective best efforts to keep the Shelf Registration
Statement effective during the requisite period if any of them voluntarily takes
any action that would result in Holders of Securities or Exchange Securities
covered thereby not being able to offer and sell such Securities or Exchange
Securities during that period, unless (A) such action is required by applicable
law; or (B) such action is taken by such Issuer in good faith and for valid
business reasons (not including avoidance of its obligations hereunder),
including the acquisition or divestiture of assets, so long as the Issuers
thereafter comply with the requirements of Section 4(k) hereof, if applicable.

          4.     ADDITIONAL REGISTRATION PROCEDURES. In connection with any
Shelf Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:

          (a)    The Issuers shall:

                 (i)    furnish to each of you, not less than five Business Days
          prior to the filing thereof with the Commission, a copy of the
          Exchange Offer Registration Statement and the Shelf Registration
          Statement, as the case may be, and each amendment thereof and each
          amendment or supplement, if any, to the Prospectus included therein
          (including all documents incorporated by reference therein after the
          initial filing) and shall use their reasonable best efforts to reflect
          in each such document, when so filed with the Commission, such
          comments as you reasonably propose;

                 (ii)   in the case of an Exchange Offer Registration Statement,
          to the extent permitted by the Act, include the information set forth
          in ANNEX A hereto on the inside front cover of the Prospectus included
          in the Exchange Offer Registration Statement, in ANNEX B hereto in the
          forepart of the Exchange Offer Registration Statement in a section
          setting forth details of the Exchange Offer, in ANNEX C hereto in the
          underwriting or plan of distribution section of the Prospectus
          contained in the Exchange Offer Registration Statement, and in ANNEX D
          hereto in the letter of transmittal delivered pursuant to the
          Registered Exchange Offer;



                                      -10-

                 (iii)  in the case of an Exchange Offer Registration Statement,
          if requested by an Initial Purchaser, include the information required
          by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus
          contained in the Exchange Offer Registration Statement; and

                 (iv)   in the case of a Shelf Registration Statement, include
          the names of the Holders that propose to sell Securities or Exchange
          Securities pursuant to the Shelf Registration Statement as selling
          security holders.

          (b)    The Issuers shall advise you, the Holders of Securities or
     Exchange Securities covered by any Shelf Registration Statement and any
     Exchanging Dealer under any Exchange Offer Registration Statement that has
     provided in writing to any Issuer a telephone or facsimile number and
     address for notices, and, if requested by you or any such Holder or
     Exchanging Dealer, shall confirm such advice in writing (which notice
     pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
     to suspend the use of the Prospectus until the Issuers shall have remedied
     the basis for such suspension):

                 (i)    when a Registration Statement and any amendment thereto
          has been filed with the Commission and when the Registration Statement
          or any post-effective amendment thereto has become effective;

                 (ii)   of any request by the Commission for any amendment or
          supplement to the Registration Statement or the Prospectus or for
          additional information;

                 (iii)  of the issuance by the Commission of any stop order
          suspending the effectiveness of the Registration Statement or the
          initiation of any proceedings for that purpose;

                 (iv)   of the receipt by any Issuer of any notification with
          respect to the suspension of the qualification of the securities
          included therein for sale in any jurisdiction or the initiation of any
          proceeding for such purpose; and

                 (v)    of the happening of any event that requires any change
          in the Registration Statement or the Prospectus so that, as of such
          date, the statements therein are not misleading and do not omit to
          state a material fact required to be stated therein or necessary to
          make the statements therein (in the case of the Prospectus, in the
          light of the circumstances under which they were made) not misleading.



                                      -11-

          (c)    The Issuers shall use their respective reasonable best efforts
     to obtain the withdrawal of any order suspending the effectiveness of any
     Registration Statement or the qualification of the securities therein for
     sale in any jurisdiction at the earliest possible time.

          (d)    The Issuers shall furnish to each Holder of Securities or
     Exchange Securities covered by any Shelf Registration Statement, without
     charge, at least one copy of such Shelf Registration Statement and any
     post-effective amendment thereto, including all material incorporated
     therein by reference, and, if the Holder so requests in writing, all
     exhibits thereto (including exhibits incorporated by reference therein).

          (e)    The Issuers shall, during the Shelf Registration Period,
     deliver to each Holder of Securities or Exchange Securities covered by any
     Shelf Registration Statement, without charge, as many copies of the
     Prospectus (including each preliminary Prospectus) included in such Shelf
     Registration Statement and any amendment or supplement thereto as such
     Holder may reasonably request. The Issuers consent to the use of the
     Prospectus or any amendment or supplement thereto by each of the selling
     Holders of securities in connection with the offering and sale of the
     securities covered by the Prospectus, or any amendment or supplement
     thereto, included in the Shelf Registration Statement.

          (f)    The Issuers shall furnish to each Exchanging Dealer which so
     requests, without charge, at least one copy of the Exchange Offer
     Registration Statement and any post-effective amendment thereto, including
     all material incorporated by reference therein, and, if the Exchanging
     Dealer so requests in writing, all exhibits thereto (including exhibits
     incorporated by reference therein).

          (g)    The Issuers shall promptly deliver to each Initial Purchaser,
     each Exchanging Dealer and each other Person required to deliver a
     Prospectus during the Exchange Offer Registration Period, without charge,
     as many copies of the Prospectus included in such Exchange Offer
     Registration Statement and any amendment or supplement thereto as any such
     Person may reasonably request. The Issuers consent to the use of the
     Prospectus or any amendment or supplement thereto by any Initial Purchaser,
     any Exchanging Dealer and any such other Person that may be required to
     deliver a Prospectus following the Registered Exchange Offer in connection
     with the offering and sale of the Exchange Securities covered by the
     Prospectus, or any amendment or supplement thereto, included in the
     Exchange Offer Registration Statement.

          (h)    Prior to the Registered Exchange Offer or any other offering of
     Securities or Exchange Securities pursuant to any Registration Statement,
     the Issuers shall arrange, if necessary, for the qualification of the
     Securities or the Exchange



                                      -12-

     Securities for sale under the laws of such jurisdictions as any Holder
     shall reasonably request and will maintain such qualification in effect so
     long as required; PROVIDED that in no event shall any Issuer be obligated
     to qualify to do business in any jurisdiction where it is not then so
     qualified or to take any action that would subject it to service of process
     in suits, other than those arising out of the Initial Placement, the
     Registered Exchange Offer or any offering pursuant to a Shelf Registration
     Statement, in any such jurisdiction where it is not then so subject.

          (i)    The Issuers shall cooperate with the Holders to facilitate the
     timely preparation and delivery of certificates representing Exchange
     Securities or Securities to be issued or sold pursuant to any Registration
     Statement free of any restrictive legends and in such denominations and
     registered in such names as Holders may request.

          (j)    Upon the occurrence of any event contemplated by subsections
     (b)(ii) through (v) above, the Issuers shall promptly prepare a
     post-effective amendment to the applicable Registration Statement or an
     amendment or supplement to the related Prospectus or file any other
     required document so that, as thereafter delivered to Initial Purchasers of
     the Securities included therein, the Prospectus will not include an untrue
     statement of a material fact or omit to state any material fact necessary
     to make the statements therein, in the light of the circumstances under
     which they were made, not misleading. In such circumstances, the period of
     effectiveness of the Exchange Offer Registration Statement provided for in
     Section 2 hereof and the Shelf Registration Statement provided for in
     Section 3(b) hereof shall each be extended by the number of days from and
     including the date of the giving of a notice of suspension pursuant to
     Section 4(b) hereof to and including the date when the Initial Purchasers,
     the Holders and any known Exchanging Dealer shall have received such
     amended or supplemented Prospectus pursuant to this Section 4.

          (k)    Not later than the effective date of any Registration
     Statement, the Issuers shall provide a CUSIP number for the Securities or
     the Exchange Securities, as the case may be, registered under such
     Registration Statement and provide the Trustee with printed certificates
     for such Securities or Exchange Securities, in a form eligible for deposit
     with The Depository Trust Company.

          (l)    Solutia shall make generally available to its security holders
     as soon as practicable after the effective date of the applicable
     Registration Statement an earnings statement satisfying the provisions of
     Section 11(a) of the Act.

          (m)    The Issuers shall cause the Indenture to be qualified under the
     Trust Indenture Act in a timely manner.



                                      -13-

          (n)    The Issuers may require each Holder of securities to be sold
     pursuant to any Shelf Registration Statement to furnish to the Issuers such
     information regarding the Holder and the distribution of such securities as
     the Issuers may from time to time reasonably require for inclusion in such
     Registration Statement. The Issuers may exclude from such Shelf
     Registration Statement the Securities or Exchange Securities of any Holder
     that unreasonably fails to furnish such information within a reasonable
     time after receiving such request and the Issuers shall be under no further
     obligations to such Holder to include such Holder in a Shelf Registration
     Statement.

          (o)    In the case of any Shelf Registration Statement, the Issuers
     shall enter into such and take all other appropriate actions (including if
     requested an underwriting agreement in customary form) in order to expedite
     or facilitate the registration or the disposition of the Securities or
     Exchange Securities, and in connection therewith, if an underwriting
     agreement is entered into, cause the same to contain indemnification
     provisions and procedures no less favorable than those set forth in Section
     6 (or such other provisions and procedures acceptable to the Majority
     Holders and the Managing Underwriters, if any, with respect to all parties
     to be indemnified pursuant to Section 6.

          (p)    In the case of any Shelf Registration Statement, the Issuers
     shall:

                 (i)    subject to execution of a confidentiality agreement in
          form and substance reasonably acceptable to the Issuers and the
          Holders, make reasonably available for inspection by the Holders of
          Securities or Exchange Securities to be registered thereunder, any
          underwriter participating in any disposition pursuant to such Shelf
          Registration Statement, and any attorney, accountant or other agent
          retained by the Holders or any such underwriter all relevant financial
          and other records, pertinent corporate documents and properties of
          each Issuer;

                 (ii)   cause the officers, directors and employees of each
          Issuer to supply all relevant information reasonably requested by the
          Holders or any such underwriter, attorney, accountant or agent in
          connection with any such Shelf Registration Statement as is customary
          for similar due diligence examinations; PROVIDED, HOWEVER, that any
          information that is subject to the confidentiality agreement referred
          to in Section 4(p)(i) above shall be kept confidential by the Holders
          or any such underwriter, attorney, accountant or agent, unless such
          disclosure is made in connection with a court proceeding or required
          by law, or such information becomes available to the public generally
          or through a third party without an accompanying obligation of
          confidentiality;



                                      -14-

                 (iii)  make such representations and warranties to the Holders
          of Securities or Exchange Securities registered thereunder and the
          underwriters, if any, in form, substance and scope as are customarily
          made by issuers to underwriters in primary underwritten offerings and
          covering matters including, but not limited to, those set forth in the
          Purchase Agreement;

                 (iv)   obtain opinions of counsel to the Issuers and updates
          thereof (which counsel and opinions (in form, scope and substance)
          shall be reasonably satisfactory to the Managing Underwriters, if any)
          addressed to each selling Holder and the underwriters, if any,
          covering such matters as are customarily covered in opinions requested
          in underwritten offerings and such other matters as may be reasonably
          requested by such Holders and underwriters;

                 (v)    obtain "cold comfort" letters and updates thereof from
          the independent certified public accountants of Solutia (and, if
          necessary, any other independent certified public accountants of any
          Issuer or any subsidiary of any Issuer or of any business acquired by
          any Issuer for which financial statements and financial data are, or
          are required to be, included in the Shelf Registration Statement),
          addressed to each selling Holder of securities registered thereunder
          and the underwriters, if any, in customary form and covering matters
          of the type customarily covered in "cold comfort" letters in
          connection with primary underwritten offerings; and

                 (vi)   deliver such documents and certificates as may be
          reasonably requested by the Majority Holders and the Managing
          Underwriters, if any, including those to evidence compliance with
          Section 4(k) and with any customary conditions contained in the
          underwriting agreement or other agreement entered into by the Issuers.

     The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section
     4(p) shall be performed at each closing under any underwriting or similar
     agreement as and to the extent required thereunder.

          (q)    If a Registered Exchange Offer is to be consummated, upon
     delivery of the Securities by Holders to Solutia (or to such other Person
     as directed by Solutia) in exchange for the Exchange Securities, Solutia
     shall mark, or caused to be marked, on the Securities so exchanged that
     such Securities are being canceled in exchange for the Exchange Securities.
     In no event shall the Securities be marked as paid or otherwise satisfied.

          (r)    The Issuers will use their respective reasonable best efforts
     (i) if the Securities have been rated prior to the initial sale of such
     Securities pursuant to the



                                      -15-

     Purchase Agreement, to confirm such ratings will apply to the Securities or
     the Exchange Securities, as the case may be, covered by a Exchange Offer
     Registration Statement; or (ii) if the Securities were not previously
     rated, to cause the Securities covered by a Registration Statement to be
     rated with at least one nationally recognized statistical rating agency, if
     so requested by Majority Holders with respect to the related Registration
     Statement or by any Managing Underwriters.

          (s)    In the event that any Broker-Dealer shall underwrite any
     Securities or Exchange Securities or participate as a member of an
     underwriting syndicate or selling group or "assist in the distribution"
     (within the meaning of the Conduct Rules of the National Association of
     Securities Dealers, Inc. (the "CONDUCT RULES")) thereof, whether as a
     Holder or as an underwriter, a placement or sales agent or a broker or
     dealer in respect thereof, or otherwise, the Issuers shall assist such
     Broker-Dealer in complying with the requirements of such Conduct Rules,
     including, without limitation, by:

                 (i)    if such Conduct Rules shall so require, engaging a
          "qualified independent underwriter" (as defined in such Rules) to
          participate in the preparation of the Registration Statement, to
          exercise usual standards of due diligence with respect thereto and, if
          any portion of the offering contemplated by such Registration
          Statement is an underwritten offering or is made through a placement
          or sales agent, to recommend the yield of such Securities or Exchange
          Securities;

                 (ii)   indemnifying any such qualified independent underwriter
          to the extent of the indemnification of underwriters provided in
          Section 6 hereof; and

                 (iii)  providing such information to such Broker-Dealer as may
          be required in order for such Broker-Dealer to comply with the
          requirements of such Conduct Rules.

          (t)    The Issuers shall use their respective reasonable best efforts
     to take all other steps necessary to effect the registration of the
     Securities or the Exchange Securities, as the case may be, covered by a
     Registration Statement.

          5.     REGISTRATION EXPENSES. The Issuers shall bear all expenses
incurred in connection with the performance of their obligations under Sections
2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith.



                                      -16-

          6.     INDEMNIFICATION AND CONTRIBUTION. (a) The Issuers jointly and
severally agree to indemnify and hold harmless each Holder of Securities or
Exchange Securities, as the case may be, covered by any Registration Statement
(including each Initial Purchaser and each Affiliate thereof and, with respect
to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each Person who controls any such Holder within the meaning of either
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement as originally filed or in any amendment thereof, or
in any preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and jointly and
severally agree to reimburse each such indemnified party, as incurred, for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the Issuers will not be liable in any case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Issuers by or on behalf of any such Holder
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Issuers may otherwise have; PROVIDED, FURTHER,
HOWEVER, that with respect to any untrue statement or omission of material fact
made in any preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage or liability purchased the securities
concerned, to the extent that any such loss, claim, damage or liability of such
Holder occurs under the circumstance where it shall have been determined by a
court of competent jurisdiction by final and nonappealable judgment that (w) the
Issuers had previously furnished copies of the Prospectus to the Holders, (x)
delivery of the Prospectus was required by the Act to be made to such person,
(y) the untrue statement of omission of a material fact contained in such
preliminary prospectus was corrected in the Prospectus and (z) there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the Prospectus.

          The Issuers also jointly and severally agree to indemnify or
contribute as provided in Section 6(d) to Losses of each underwriter of
Securities or Exchange Securities, as the case may be, registered under a Shelf
Registration Statement, their directors, officers, employees or agents and each
Person who controls such underwriter on substantially the same basis as that of
the indemnification of the Initial Purchasers and the selling Holders provided



                                      -17-

in this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 4(p)
hereof.

          (b)    Each Holder of securities covered by a Registration Statement
(including each Initial Purchaser and each Affiliate thereof and, with respect
to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer) severally agrees to indemnify and hold harmless the Issuers,
each of their respective directors, each of their respective officers who signs
such Registration Statement, and each Person who controls any Issuer within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Issuers to each such Holder, but only with
reference to written information relating to such Holder furnished to the
Issuers by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.

          (c)    Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses;
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ (x) one separate counsel and (y) local counsel,
and the indemnifying party shall bear the reasonable fees, costs and expenses of
(x) such one separate counsel and (y) such local counsel if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest; (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party; (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action; or



                                      -18-

(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.

          (d)    In the event that the indemnity provided in paragraph (a) or
(b) of this Section is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party shall
have a joint and several obligation to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"LOSSES") to which such indemnified party may be subject in such proportion as
is appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Registration Statement which resulted in such Losses;
PROVIDED, HOWEVER, that in no case shall any Initial Purchaser or any subsequent
Holder of any Security or New Security be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such
Security, or in the case of a New Security, applicable to the Security that was
exchangeable into such New Security, as set forth on the cover page of the Final
Memorandum, nor shall any underwriter be responsible for any amount in excess of
the underwriting discount or commission applicable to the securities purchased
by such underwriter under the Registration Statement which resulted in such
Losses. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of such indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Issuers shall be
deemed to be equal to the sum of the total net proceeds from the Initial
Placement (before deducting expenses) as set forth on the cover page of the
Final Memorandum. Benefits received by the Initial Purchasers shall be deemed to
be equal to the total purchase discounts and commissions as set forth on the
cover page of the Final Memorandum, and benefits received by any other Holders
shall be deemed to be equal to the value of receiving Securities or Exchange
Securities, as applicable, registered under the Act. Benefits received by any
underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement which resulted in such Losses. Relative fault shall
be determined by reference to, among other things, whether any alleged untrue
statement or omission relates to information provided by the indemnifying



                                      -19-

party, on the one hand, or by the indemnified party, on the other hand, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
agree that it would not be just and equitable if contribution were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 6, each Person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
Person who controls any Issuer within the meaning of either the Act or the
Exchange Act, each officer of any Issuer who shall have signed the Registration
Statement and each director of any Issuer shall have the same rights to
contribution as the Issuers, subject in each case to the applicable terms and
conditions of this paragraph (d).

          (e)    The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Issuers or any of the officers, directors or controlling Persons referred to
in this Section 6 hereof, and will survive the sale by a Holder of securities
covered by a Registration Statement.

          7.     UNDERWRITTEN REGISTRATIONS. (a) If any of the Securities or
Exchange Securities, as the case may be, covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the Managing Underwriters
shall be selected by the Majority Holders.

          (b)    No Person may participate in any underwritten offering pursuant
to any Shelf Registration Statement, unless such Person (i) agrees to sell such
Person's Securities or Exchange Securities, as the case may be, on the basis
reasonably provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements; and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.

          8.     NO INCONSISTENT AGREEMENTS. No Issuer has, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.

          9.     AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be



                                      -20-

given, unless the Issuers have obtained the written consent of the Majority
Holders; PROVIDED that, with respect to any matter that directly or indirectly
affects the rights of any Initial Purchaser hereunder, the Issuers shall obtain
the written consent of each the Initial Purchasers against which such amendment,
qualification, supplement, waiver or consent is to be effective. Notwithstanding
the foregoing (except the foregoing proviso), a waiver or consent to departure
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose Securities or Exchange Securities, as the case may
be, are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of Securities or Exchange Securities,
as the case may be, being sold rather than registered under such Registration
Statement.

          10.    NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier or air courier guaranteeing overnight delivery:

          (a)    if to a Holder, at the most current address given by such
     holder to the Issuers in accordance with the provisions of this Section 10,
     which address initially is, with respect to each Holder, the address of
     such Holder maintained by the Registrar under the Indenture, with a copy in
     like manner to Salomon Smith Barney Inc.;

          (b)    if to you, initially at the respective addresses set forth in
     the Purchase Agreement; and

          (c)    if to the Issuers, initially at their address set forth in the
     Purchase Agreement.

          All such notices and communications shall be deemed to have been duly
given when received.

          The Initial Purchasers or the Issuers by notice to the other parties
may designate additional or different addresses for subsequent notices or
communications.

          11.    SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of each of the parties hereto,
including, without the need for an express assignment or any consent by the
Issuers thereto, subsequent Holders of Securities and the Exchange Securities.
The Issuers hereby agree to extend the benefits of this Agreement to any Holder
of Securities or the Exchange Securities, and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.

          12.    COUNTERPARTS. This Agreement may be in signed counterparts,
each of which shall an original and all of which together shall constitute one
and the same agreement.



                                      -21-

          13.    HEADINGS. The headings used herein are for convenience only and
shall not affect the construction hereof.

          14.    APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York.

          15.    SEVERABILITY. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

          16.    SECURITIES HELD BY THE ISSUERS, ETC. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or Exchange Securities is required hereunder, Securities or Exchange Securities,
as applicable, held by any Issuers or its Affiliates (other than subsequent
Holders of Securities or Exchange Securities if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Securities or
Exchange Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

          17.    SUBMISSION TO JURISDICTION. By the execution and delivery of
this Agreement, each Issuer submits to the non-exclusive jurisdiction of any
federal or state court in the State of New York in any suit or proceeding
arising out of or relating to this Agreement or brought under federal or state
securities laws.

          18.   TERMINATION. This Agreement shall automatically terminate if
Funding Corp. completes a Special Mandatory Redemption (as defined in the
Indenture).

                            [Signature Page Follows]



          If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Issuers and the several Initial Purchasers.

                                       Very truly yours,

                                       SOLUTIA INC.


                                       By  /s/ Kevin Wilson
                                           -------------------------------------
                                           Name: C.K. Wilson
                                           Title: Vice President and Treasurer


                                       MONCHEM INTERNATIONAL, INC.


                                       By  /s/ Kevin Wilson
                                           -------------------------------------
                                           Name: C.K. Wilson
                                           Title: President


                                       MONCHEM, INC.


                                       By  /s/ Kevin Wilson
                                           -------------------------------------
                                           Name: C.K. Wilson
                                           Title: President


                                       SOLUTIA SYSTEMS, INC.


                                       By  /s/ Kevin Wilson
                                           -------------------------------------
                                           Name: C.K. Wilson
                                           Title: President


                                       CPFILMS INC.


                                       By  /s/ P. Solomon
                                           -------------------------------------
                                           Name: P. Solomon
                                           Title: Vice President

                                       S-1


The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.

SALOMON SMITH BARNEY INC.
BANC OF AMERICA SECURITIES LLC


By:   SALOMON SMITH BARNEY INC.

      /s/ Aaron Dannenberg
      ---------------------------------
      Name: Aaron Dannenberg
      Title: Vice President


By:   BANC OF AMERICA SECURITIES LLC

      /s/ Mary Jane Goode
      ---------------------------------
      Name: Mary Jane Goode
      Title: Vice President


As Representatives of the several Initial
Purchasers named in Schedule I hereto.

                                       S-2


                                                                      SCHEDULE I

INITIAL PURCHASERS:

Salomon Smith Barney Inc.
Banc of America Securities LLC
J.P. Morgan Securities Inc.
HSBC Securities (USA), Inc.
Banc One Capital Markets, Inc.
US Bancorp Piper Jaffray, Inc.
SG Cowen Securities Corporation



                                                                     SCHEDULE II

GUARANTORS:

CPFilms Inc.
Monchem, Inc.
Solutia Systems, Inc.
Monchem International, Inc.



                                                                         ANNEX A

          Each Broker-Dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Broker-Dealer in connection with resales of
Exchange Securities received in exchange for Securities where such Securities
were acquired by such Broker-Dealer as a result of market-making activities or
other trading activities. The Issuers have agreed that, starting on the
Expiration Date (as defined herein) and ending on the close of business one year
after the Expiration Date, they will make this Prospectus available to any
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."



                                                                         ANNEX B

          Each Broker-Dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."



                                                                         ANNEX C

                              PLAN OF DISTRIBUTION

          Each Broker-Dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Broker-Dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Issuers have agreed
that, starting on the Expiration Date and ending on the close of business one
year after the Expiration Date, they will make this Prospectus, as amended or
supplemented, available to any Broker-Dealer for use in connection with any such
resale. In addition, until __________, 200__, all dealers effecting transactions
in the Exchange Securities may be required to deliver a prospectus.

          The Issuers will not receive any proceeds from any sale of Exchange
Securities by Brokers-Dealers. Exchange Securities received by Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Broker-Dealer and/or the purchasers of any such
Exchange Securities. Any Broker-Dealer that resells Exchange Securities that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Securities
may be deemed to be an "underwriter" within the meaning of the Act and any
profit of any such resale of Exchange Securities and any commissions or
concessions received by any such Persons may be deemed to be underwriting
compensation under the Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Act.

          For a period of one year after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Broker-Dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holder of the Securities) other than commissions or concessions of any brokers



                                       -2-

or dealers and will indemnify the holders of the Securities (including any
Broker-Dealers) against certain liabilities, including liabilities under the
Act.



                                                                         ANNEX D

/ /    CHECK HERE IF YOU ARE A BROKER-DEALER AND
       WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE
       PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
       OR SUPPLEMENTS THERETO.

       Name:      _________________________________________
       Address:   _________________________________________
                  _________________________________________

If the undersigned is not a Broker-Dealer, the undersigned represents that it
acquired the Exchange Securities in the ordinary course of its business, it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities and it has no arrangements or understandings with any Person to
participate in a distribution of the Exchange Securities. If the undersigned is
a Broker-Dealer that will receive Exchange Securities for its own account in
exchange for Securities, it represents that the Securities to be exchanged for
Exchange Securities were acquired by it as a result of market-making activities
or other trading activities and acknowledges that it will deliver a prospectus
in connection with any resale of such Exchange Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Act.

EX-4.8

                                                                     EXHIBIT 4.8

             RESTATED INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

          RESTATED INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT dated as of
July 25, 2002 between SOLUTIA INC., a Delaware corporation (the "COMPANY"); each
of the subsidiaries of the Company identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereto or that become "Subsidiary Guarantors"
hereunder pursuant to Section 6.09 after the date hereof (individually, a
"SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and,
together with the Company, the "SECURING PARTIES"); CITIBANK, N.A., as
administrative agent under the Solutia Credit Agreement referred to below, BANK
OF AMERICA, N.A., as administrative agent under the Astaris Credit Agreement
referred to below, CITIBANK, N.A., as agent for the purchasers under the Co-gen
Participation Agreement referred to below, and CITIBANK, N.A., as collateral
agent for the Secured Parties referred to below (in such capacity, together with
its successors in such capacity, the "COLLATERAL AGENT").

          The Company, certain lenders (the "SOLUTIA LENDERS") and Citibank,
N.A., as administrative agent (in such capacity, together with its successors in
such capacity, the "SOLUTIA ADMINISTRATIVE AGENT") are parties to a Second
Amended and Restated Credit Agreement dated as of July 25, 2002 (as modified and
supplemented and in effect from time to time, the "SOLUTIA CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by means of loans and letters of credit) to be made by said lenders to the
Company and the other borrowers referred to therein in an aggregate principal or
face amount not exceeding $600,000,000. In addition, the Company may from time
to time be obligated to various of the Solutia Lenders (or their affiliates) in
respect of one or more hedging agreements permitted under Section 6.02(g)(v) of
the Solutia Credit Agreement.

          Astaris LLC, a limited liability company organized under the laws of
Delaware ("ASTARIS"), certain lenders (the "ASTARIS LENDERS") and Bank of
America, N.A., as administrative agent (in such capacity, together with its
successors in such capacity, the "ASTARIS ADMINISTRATIVE AGENT"), are parties to
a Credit Agreement dated as of September 14, 2000 (as modified and supplemented
and in effect from time to time, the "ASTARIS CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for loans to be made by said
lenders to Astaris in an aggregate principal amount not exceeding $275,000,000.
The obligations of Astaris under the Astaris Credit Agreement have been
partially guaranteed by the Company pursuant to a Guaranty Agreement dated as of
September 14, 2000 (as modified and supplemented and in effect from time to
time, the "ASTARIS GUARANTY AGREEMENT") by the Company in favor of Astaris LLC
and in favor of the Astaris Lenders and the Astaris Administrative Agent.

          The Company, State Street Bank and Trust Company, as trustee (in such
capacity, together with its successors in such capacity, the "CO-GEN TRUSTEE"),
certain financial institutions named as purchasers therein (collectively, the
"CO-GEN PURCHASERS") and Citibank, N.A., as agent for the Co-gen Purchasers (in
such capacity, together with its successors in such capacity, the "CO-GEN
AGENT"), are parties to an Amended and Restated Participation Agreement dated as
of April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN PARTICIPATION AGREEMENT"), providing, subject to the terms and
conditions thereof, for loans and investments to be made by the Co-gen
Purchasers to the Co-gen Trustee in an aggregate principal amount not exceeding
$33,000,000. The obligations of the Co-gen Trustee under the

                       NON-SHARING INTERCREDITOR AGREEMENT


                                      - 2 -

Co-gen Participation Agreement have been guaranteed by the Company pursuant to
an Amended and Restated Instrument Guaranty dated as of April 24, 1998 (as
modified and supplemented and in effect from time to time, the "CO-GEN GUARANTY
AGREEMENT") by the Company in favor of the Co-gen Trustee and the Co-gen
Purchasers. In addition, the Co-gen Trustee, as lessor, and the Company, as
lessee, are party to an Amended and Restated Lease dated as of April 24, 1998
(as modified and supplemented and in effect from time to time, the "CO-GEN
LEASE") pursuant to which the Company agrees to make certain rent payments to
the Co-gen Trustee in consideration of the lease of the co-generation facility
referred to therein, which rent payments service the loans and investments made
by the Co-gen Purchasers.

          In addition, certain of the Solutia Lenders may have issued letters of
credit for the account of the Company or a Subsidiary, or may in the future
issue letters of credit for the account of the Company, which are or will be
identified in this Agreement as "Designated Letters of Credit" (as hereinafter
defined). It is contemplated that, in connection herewith, such Solutia Lenders
will execute and deliver a Letter of Credit Override Agreement providing for
certain common terms to be applicable to such letters of credit.

          In connection with the transactions described above, the Company, the
Subsidiary Guarantors, the Administrative Agents, the Co-gen Agent and the
Collateral Agent, have entered into an Intercreditor and Collateral Agency
Agreement dated as of November 15, 2001 (the "EXISTING NON-SHARING INTERCREDITOR
AGREEMENT").

          To induce the Solutia Lenders to enter into the Solutia Credit
Agreement as described above and to continue to extend credit under the Solutia
Credit Agreement, to induce the Astaris Lenders to enter into an Amendment No. 3
to the Astaris Credit Agreement and to continue to extend credit under the
Astaris Credit Agreement, to induce the Co-gen Purchasers to continue to extend
credit and make investments under the Co-gen Participation Agreement and to
induce the Solutia Lenders to extend credit in respect of Designated Letters of
Credit and hedging agreements, the Subsidiary Guarantors are continuing
(pursuant to the Non-Sharing Security and Guarantee Agreement referred to
herein) to guarantee the obligations of the Company under the Solutia Credit
Agreement and the Astaris Guaranty Agreement, the Co-gen Guaranty Agreement, the
Co-gen Lease and in respect of the Designated Letters of Credit and the Hedging
Obligations (as hereinafter defined), and the Securing Parties are similarly
continuing (pursuant to the Non-Sharing Security and Guarantee Agreement) their
liens on certain of their properties as collateral security for, INTER ALIA,
such obligations, and granting new liens on certain other of their properties as
collateral security for, INTER ALIA, such obligations.

          In connection with the foregoing, the parties hereto wish to reconfirm
the appointment of the Collateral Agent by the Administrative Agents, and the
Solutia Lenders and the Astaris Lenders, as applicable, for whom they act, and
by the Co-gen Agent and the Co-gen Purchasers for whom it acts, and for certain
other matters relating to the collateral security for the obligations of the
Securing Parties under the Credit Documents (as hereinafter defined), in each
case pursuant to the Existing Non-Sharing Intercreditor Agreement and, in that
connection, to amend and restate the Existing Non-Sharing Intercreditor
Agreement in its entirety. Accordingly, the parties hereto agree that the
Existing Non-Sharing Intercreditor Agreement shall be amended and restated as
follows:

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 3 -

          Section 1. DEFINITIONS. As used in this Agreement, the following terms
have the meanings specified below:

          "ADMINISTRATIVE AGENTS" means, collectively, the Solutia
Administrative Agent, together with its successors in such capacity, and the
Astaris Administrative Agent, together with its successors in such capacity.

          "COLLATERAL" means, collectively, the assets of the Securing Parties
that have been subjected to the Liens of the Non-Sharing Security Documents.

          "CREDIT AGREEMENTS " means, collectively, the Solutia Credit Agreement
and the Astaris Credit Agreement.

          "CREDIT DOCUMENTS" means, collectively, the Solutia Credit Agreement,
the Astaris Guaranty Agreement, the Co-gen Guaranty Agreement, the Co-gen Lease,
the Co-gen Participation Agreement, any agreement pursuant to which a Designated
Letter of Credit shall have been issued and the Security Documents.

          "DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.

          "DESIGNATED LETTER OF CREDIT" means, collectively, (a) each letter of
credit issued by a Solutia Lender for the account of the Company or a Subsidiary
that is identified in Schedule I hereto and (b) each letter of credit for the
account of the Company hereafter designated by the Company as a "Designated
Letter of Credit" for purposes hereof pursuant to a Designation Letter in the
form of Schedule II hereto delivered to the Collateral Agent in accordance with
Section 3.

          "DESIGNATED LETTER OF CREDIT OBLIGATIONS" has the meaning ascribed
thereto in the Non-Sharing Security and Guarantee Agreement.

          "EVENT OF DEFAULT" means any "Event of Default" under the Solutia
Credit Agreement, any default in the payment by the Company of any obligation
under the Astaris Guaranty Agreement, any default in payment by the Company of
any obligation under the Co-gen Lease or the Co-gen Guaranty Agreement and any
default by the Company in respect of any of its payment obligations under any
Designated Letter of Credit.

          "EXISTING NOTE INDENTURES" means, collectively, the indenture and/or
the fiscal agency agreement, as applicable, pursuant to which the following
notes or debentures of the Company or Solutia Europe S.A./N.V., as applicable,
have been issued: 6.50% notes due 2002, 7.375% debentures due 2027, 6.72%
debentures due 2037 and 6.25% euro notes due 2005, as in effect on the date
hereof and without giving effect to any modifications or supplements after the
date hereof.

          "HEDGING OBLIGATIONS" has the meaning ascribed thereto in the
Non-Sharing Security and Guarantee Agreement.

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 4 -

          "JUNIOR SECURITY DOCUMENTS" means, collectively, (i) the Junior
Intercreditor Agreement substantially in the form of Exhibit M to the Solutia
Credit Agreement between the Company, each of the Subsidiary Guarantors, the
Collateral Agent and HSBC Bank USA, as trustee under the 2009 Notes Indenture
referred to therein and (ii) and the Junior Security Agreement substantially in
the form of Exhibit N to the Solutia Credit Agreement between the Company, each
of the Subsidiary Guarantors, the Collateral Agent and HSBC Bank USA, as trustee
under said 2009 Notes Indenture.

          "LENDERS" means, collectively, the Solutia Lenders and the Astaris
Lenders.

          "LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including the lien or retained security title of a conditional vendor and any
mortgage, easement, right of way or other encumbrance on title to real property.

          "MAJORITY SOLUTIA LENDERS" means the Majority Lenders under and as
defined in the Solutia Credit Agreement.

          "MAKE-WHOLE OBLIGATIONS" has the meaning ascribed thereto in the
Non-Sharing Security and Guarantee Agreement.

          "NON-SHARING MORTGAGES" means, collectively, one or more instruments
of Mortgage, Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing executed by any Securing Party in favor of the Collateral Agent for the
benefit of the Secured Parties (or in favor a trustee for the benefit of the
Collateral Agent and the Secured Parties) and covering the facilities of the
Company located in Decatur, Alabama, Indian Orchard, Massachusetts, Trenton,
Michigan, Greenwood, South Carolina and Alvin, Texas, in each case as the same
shall be modified and supplemented and in effect from time to time.

          "NON-SHARING SECURITY DOCUMENTS" means, collectively, this Agreement,
the Non-Sharing Security and Guarantee Agreement, each Non-Sharing Mortgage, and
any other pledge agreements, security agreements, assignment agreements,
mortgages, deeds of trust or other instruments providing for collateral security
from time to time executed by any Securing Party in favor of the Collateral
Agent.

          "NON-SHARING SECURITY AND GUARANTEE AGREEMENT" means the Restated
Security and Guarantee Agreement dated as of July [___], 2002 between the
Securing Parties and the Collateral Agent, as the same shall be modified and
supplemented and in effect from time to time.

          "PERSON" means any individual, corporation (including a business
trust), company, voluntary association, partnership, limited liability company,
joint venture, trust, unincorporated organization or governmental authority or
other entity of whatever nature.

          "RELEVANT SHARING PERCENTAGE" means, at any time, the percentage
corresponding to the fraction (a) the numerator of which shall be each of the
following respectively (i) in the case of any Solutia Lender, the Solutia Credit
Agreement Obligations then held by such Solutia

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 5 -

Lender, (ii) in the case of any Astaris Lender, the Make-Whole Obligations then
held by such Astaris Lender that are due and payable, (iii) in the case of any
Co-gen Purchaser, the Synthetic Lease Obligations then held by such Co-gen
Purchaser, (iv) in the case of any issuer of Designated Letters of Credit,
Designated Letter of Credit Obligations then held by such issuer, (v) in the
case of any holder of Hedging Obligations, the Hedging Obligations then held by
such holder that are due and payable or (vi) in the case of any Term Loan
Facility Lender, the Term Loan Facility Obligations then held by such Term Loan
Facility Lender and (b) the denominator of which shall be the sum of (i) the
then-outstanding Solutia Credit Agreement Obligations, (ii) the then-outstanding
Make-Whole Obligations then due and payable, (iii) the then-outstanding
Synthetic Lease Obligations, (iv) the then-outstanding Designated Letter of
Credit Obligations, (v) the then-outstanding Hedging Obligations then due and
payable and (vi) the then-outstanding Term Loan Facility Obligations.

          "SECURED PARTIES" means, collectively, the Collateral Agent, the
Co-gen Agent, the Co-gen Purchasers, the Solutia Lenders, the Astaris Lenders,
the Administrative Agents and the Term Loan Facility Lenders (and, in respect of
any Hedging Obligations, any affiliate of a Solutia Lender that shall have
entered into the respective hedging agreement giving rise to such Hedging
Obligations).

          "SECURED OBLIGATIONS" has the meaning ascribed thereto in the
Non-Sharing Security and Guarantee Agreement.

          "SECURITY DOCUMENTS" means, collectively, the Non-Sharing Security
Documents and the Sharing Security Documents under and as defined in the Sharing
Intercreditor Agreement.

          "SHARING INTERCREDITOR AGREEMENT" means the Intercreditor and
Collateral Trust Agreement dated as of July [___], 2002 between the Company,
CPFilms Inc., Administrative Agents, the Co-gen Agent, the Collateral Agent and
HSBC Bank USA, as Collateral Trustee being executed and delivered by the parties
concurrently herewith, as the same shall be modified and supplemented and in
effect from time to time.

          "SOLUTIA CREDIT AGREEMENT OBLIGATIONS" has the meaning ascribed
thereto in the Non-Sharing Security and Guarantee Agreement.

          "SYNTHETIC LEASE OBLIGATIONS" has the meaning ascribed thereto in the
Non-Sharing Security and Guarantee Agreement.

          "TERM LOAN FACILITY LENDER" has the meaning ascribed thereto in the
Non-Sharing Security and Guarantee Agreement.

          "TERM LOAN FACILITY OBLIGATIONS" has the meaning ascribed thereto in
the Non-Sharing Security and Guarantee Agreement.

          "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
effect from time to time in the State of New York.

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 6 -

          Section 2. THE COLLATERAL AGENT.

          2.01. APPOINTMENT AND DUTIES OF THE COLLATERAL AGENT.

          (a) APPOINTMENT. Each Administrative Agent, on behalf of itself and
each of the Solutia Lenders and the Astaris Lenders, as applicable, for whom it
acts, and the Co-gen Agent, on behalf of itself and each Co-gen Purchaser, as
applicable, for whom it acts, hereby appoints, and continues the prior
appointment of, Citibank, N.A. to act as Collateral Agent hereunder and under
the other Security Documents, and hereby continues to authorize the Collateral
Agent to execute, deliver and perform, on behalf of each of the Secured Parties,
each Security Document to which the Collateral Agent is or is intended to be a
party and to take such actions on behalf of the Secured Parties under the
provisions of the Security Documents and to exercise such powers and perform
such duties as are expressly delegated to the Collateral Agent by the terms of
each Security Document, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
any Security Document, the Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein and in the other
Security Documents. Each Secured Party shall be bound by all of the agreements
of the Collateral Agent contained herein and in the other Security Documents.

          (b) COPIES OF DOCUMENTS TO BE FURNISHED TO SECURED PARTIES. The
Collateral Agent will forward to each Secured Party at its last address on the
records of the Collateral Agent promptly after the Collateral Agent's receipt
thereof a copy of each document furnished to the Collateral Agent under any
Security Document that relates to such Secured Party. The Collateral Agent will
forward to each Secured Party promptly upon such Secured Party's reasonable
request therefor a copy of any other document furnished to the Collateral Agent
under the Security Documents.

          2.02. RIGHTS OF COLLATERAL AGENT.

          (a) PERFORMANCE OF DUTIES THROUGH AGENTS. The Collateral Agent may
perform any of its duties under the Security Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties.

          (b) ABSENCE OF LIABILITY. Neither the Collateral Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it under or
in connection with this Agreement or any other Security Document (except for its
gross negligence, willful misconduct or bad faith or breach of its obligations
hereunder or under any other Non-Sharing Security Document), or (ii) responsible
in any manner to any Secured Party for any recitals, statements, representations
or warranties made by any Securing Party or any representative thereof or any
other Person contained in any Security Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Collateral Agent under or in connection with, any Security Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
the Collateral or any Security Document or for any failure of any Securing Party
to perform its obligations thereunder. Except as expressly provided herein or in
any other Security Document, the Collateral Agent shall not be under any
obligation to any Secured Party to ascertain or to inquire as to the observance
or performance of any of the agreements contained

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 7 -

in, or conditions of, any Security Document or to inspect the properties, books
or records of any Securing Party.

          (c) RELIANCE, ETC. The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any instruction, direction, order,
request, note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document reasonably believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel, independent accountants and other
experts. In connection with any request of any Secured Party, the Collateral
Agent shall be fully protected in relying on a certificate of such Secured
Party, that the Collateral Agent reasonably believes is authentic and that sets
forth and certifies the principal amount of the Secured Obligations held by such
Secured Party as of the date of such certificate, which certificate shall state
that the individual signing such certificate is an authorized representative of
such Secured Party and is authorized to direct the Collateral Agent under this
Agreement and shall state specifically the Security Document and provision
thereof pursuant to which the Collateral Agent is being directed to act.

          The Collateral Agent shall be fully justified in failing or refusing
to take any action hereunder or under any other Security Document (i) if such
action would, in the reasonable opinion of the Collateral Agent, be contrary to
law or the terms of the Security Documents, (ii) if such action is not
specifically provided for herein or in any other Security Document, or it shall
not have received any such advice or concurrence of the Secured Parties as it
deems appropriate, or (iii) if, in connection with the taking of any such action
that would constitute an exercise of remedies under any Security Document, it
shall not first be indemnified to its reasonable satisfaction by the Secured
Parties against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action, or refraining from
taking any action. The Collateral Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or under any other Security
Document in accordance with the instructions of the Majority Solutia Lenders,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all of the Secured Parties.

          (d) EFFECT OF AMBIGUOUS PROVISIONS. If, with respect to a proposed
action to be taken by it, the Collateral Agent shall determine in good faith
that the provisions of any Security Document relating to the functions or
responsibilities of the Collateral Agent are or may be ambiguous or
inconsistent, the Collateral Agent shall notify the respective Secured Party
affected thereby, identifying the proposed action and the provisions that it
considers are or may be ambiguous or inconsistent, and may decline to perform
such function or responsibility unless it has received the written confirmation
from such Secured Party, or from the other Secured Parties, concurring in the
circumstances that the action proposed to be taken by the Collateral Agent is
consistent with the terms of such Security Document or is otherwise appropriate.
The Collateral Agent shall be fully protected in acting or refraining from
acting upon the confirmation of the Secured Parties in this respect, and such
confirmation shall be binding upon all of the Secured Parties.

          (e) NOTICE OF DEFAULTS, ETC. The Collateral Agent shall not be deemed
to have actual, constructive, direct or indirect knowledge or notice of the
occurrence of any Default or Event of Default unless and until the Collateral
Agent has received notice or a certificate from a

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 8 -

Secured Party or the Company stating that a Default or Event of Default has
occurred. The Collateral Agent shall not have any obligation whatsoever either
prior to or after receiving such notice or certificate to inquire whether a
Default or Event of Default has in fact occurred and shall be entitled to rely
conclusively, and shall be fully protected in so relying, on any notice or
certificate so furnished to it. No provision of any Security Document shall
require the Collateral Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties under any
Security Document or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. In the
event that the Collateral Agent receives such a notice of the occurrence of any
Default or Event of Default, the Collateral Agent shall promptly give notice
thereof to the Secured Parties. The Collateral Agent shall take such action with
respect to such Default or Event of Default as requested by the Secured Parties,
and as otherwise provided herein.

          (f) NO REQUIREMENT TO EXERCISE RIGHTS. Except as otherwise
specifically provided hereby, the Collateral Agent need not exercise any rights,
powers or remedies under this Agreement or any of the other Security Documents,
give any consent under any of the Security Documents or release any Lien or
guarantee, unless it shall have been directed to do so in writing by, or, as
applicable, shall have received the written consent to the relevant action of,
the Majority Solutia Lenders.

          (g) PERFECTION, ETC. Except for actions expressly required hereunder
(excluding circumstances in which the Collateral Agent has the ability but not
an affirmative duty to act), nothing in this Agreement or any other Security
Document shall be interpreted as giving the Collateral Agent responsibility for
or any duty concerning the validity, perfection, priority or enforceability of
any lien or security interest in any Collateral or giving the Collateral Agent
any obligation to take any action to procure or maintain such validity,
perfection, priority or enforceability.

          2.03. INDEMNIFICATION AND FEES OF THE COLLATERAL AGENT.

          (a) INDEMNIFICATION. The Securing Parties jointly and severally agree
to indemnify and hold harmless the Collateral Agent and its directors, officers,
employees, agents and advisors from and against any and all claims, losses,
liabilities, obligations, damages and expenses (including reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against the
Collateral Agent or any such Person (hereinafter the "INDEMNIFICATION AMOUNT")
arising out of, related to or in connection with (i) this Agreement or any other
Security Document (including the enforcement of any Security Document) or (ii)
any refund or adjustment of any amount paid or payable to the Collateral Agent
under or in respect of any Security Document or any Collateral, or any interest
thereon, which may be ordered or otherwise required by any Person, except to the
extent such claims, losses, liabilities, damages and expenses are found by a
court of competent jurisdiction to have resulted from such Person's gross
negligence or willful misconduct. If the Securing Parties fail to pay on demand
the Indemnification Amount, interest will accrue thereon at a rate per annum
equal to that specified in Section 2.07(b) of the Solutia Credit Agreement from
the scheduled date for payment thereof until the actual date of payment and such
interest shall be added to the Indemnification Amount.

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 9 -

          (b) EXPENSES. The Securing Parties jointly and severally agree to pay
upon demand to the Collateral Agent the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and expenses of its
counsel (and any local counsel) and of any experts and agents, which the
Collateral Agent may incur in connection with (i) the administration of this
Agreement and the other Security Documents, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement (whether through negotiations,
legal proceedings or otherwise) of any of the rights of the Collateral Agent
under the Security Documents or (iv) the failure by any Securing Party or any
other Person (other than the Collateral Agent) to perform or observe any of the
provisions of the Security Documents.

          2.04. RESIGNATION OR REMOVAL OF THE COLLATERAL AGENT. The Collateral
Agent may resign upon not less than 30 days' prior written notice to the
Company, each Administrative Agent and the Co-gen Agent and may be removed at
any time with or without cause by the Majority Solutia Lenders or by the Company
with the prior written consent of the Majority Solutia Lenders, with any such
resignation or removal to become effective only upon the appointment of a
successor Collateral Agent under this Section 2.04. If the Collateral Agent
shall resign or be removed, then the Majority Solutia Lenders shall (and if no
such successor shall have been appointed within 60 days of the Collateral
Agent's resignation or removal, the Collateral Agent may) appoint a successor
agent for the Secured Parties, which successor agent shall be a bank or trust
company organized under the laws of the United States of America or a State
thereof and that has a combined capital and surplus of at least $500,000,000,
whereupon such successor agent shall succeed to the rights, powers and duties of
the "Collateral Agent" and the term "Collateral Agent" shall mean such successor
agent effective upon its appointment, and the former Collateral Agent's rights,
powers and duties as Collateral Agent shall be terminated, without any other or
further act or deed on the part of such former Collateral Agent (except that the
resigning Collateral Agent shall deliver all Collateral then in its possession
to the successor Collateral Agent) or any of the other Secured Parties. After
any retiring Collateral Agent's resignation or removal hereunder, the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was the Collateral Agent.

          2.05. INFORMATION AS TO SECURED PARTIES. The Company will at such
other times as shall be requested by the Collateral Agent, supply a list in form
and detail satisfactory to the Collateral Agent setting forth the principal of
and interest on the Secured Obligations held by each Secured Party as at a date
specified in such request. The Collateral Agent shall provide any such list to
any Secured Party upon request. The Collateral Agent shall be entitled to rely
upon such information, and such information shall be conclusive and binding for
all purposes of this Agreement, except to the extent the Collateral Agent shall
have been notified by a Secured Party that such information as set forth on any
such list is inaccurate.

          2.06. JUNIOR SECURITY DOCUMENTS. Each Administrative Agent, on behalf
of itself and each of the Solutia Lenders and the Astaris Lenders, as
applicable, for whom it acts, and the Co-gen Agent, on behalf of itself and each
Co-gen Purchaser, as applicable, for whom it acts, hereby authorizes the
Collateral Agent to execute and deliver the Junior Security Documents upon
request by the Company.

                       NON-SHARING INTERCREDITOR AGREEMENT



                                     - 10 -

          Section 3. DESIGNATION OF LETTERS OF CREDIT. As contemplated by the
definition of "Designated Letter of Credit" in Section 1, in the event that any
Solutia Lender shall after the date hereof issue any letter of credit for
account of the Company, the Company may, at the time of such issuance (but not
in any event later than 5 Business Days after such issuance) designate such
letter of credit as a "Designated Letter of Credit" hereunder by furnishing to
the Collateral Agent a Designation Letter in duplicate, in substantially the
form of Schedule II hereto, duly completed and executed by the Company, PROVIDED
that the Company may not designate any letter of credit pursuant to this
sentence if, after giving effect thereto, the sum of (i) the then aggregate
outstanding face amounts of all Designated Letters of Credit (including such
letter of credit) and (ii) the then aggregate outstanding principal amount of
all unreimbursed drawings under any letters of credit that at any time
constituted "Designated Letters of Credit" shall exceed $50,087,599. Upon
delivery of a Designation Letter with respect to a letter of credit, and
acceptance of such Designation Letter by the Collateral Agent, such letter of
credit shall become a "Designated Letter of Credit" under and for all purposes
of this Agreement and the other Security Documents.

          Section 4. REPRESENTATIONS AND WARRANTIES. Each Securing Party
represents and warrants to the Secured Parties that:

          (a) INCORPORATION; GOOD STANDING. Such Securing Party has been duly
     organized, is validly existing and in good standing as a corporation or
     other applicable entity under the laws of the jurisdiction of its
     organization, is duly qualified to transact business and is in good
     standing in each state where any Collateral is located except where failure
     to be so qualified would not have a Material Adverse Effect (as defined in
     the Solutia Credit Agreement).

          (b) CORPORATE AUTHORITY; NO BREACH. The execution, delivery and
     performance by such Securing Party of this Agreement and the other Security
     Documents to which it is a party, and the other transactions contemplated
     hereby and thereby, are within such Securing Party's corporate powers, have
     been duly authorized by all necessary corporate action, and do not
     contravene (i) such Securing Party's charter or bylaws or (ii) law or any
     contractual restriction binding on or affecting such Securing Party.

          (c) NO CONSENTS OR APPROVALS. No authorization or approval or other
     action by, and no notice to or filing with, any governmental authority or
     regulatory body or any other third party is required for the due execution,
     delivery and performance by the such Securing Party of this Agreement or
     the other Security Documents to which it is a party, other than those
     authorizations, approvals, notices, filings and actions that have been
     obtained, filed or taken on or before the date hereof by such Securing
     Party or the Company. No authorization or approval or other action by, and
     no notice to or filing with, any governmental authority or regulatory body
     or any other third party is required for the transactions contemplated
     thereby, except for (i) filings and recordings in respect of the Security
     Documents and (ii) the authorizations, approvals, actions, notices and
     filings (x) the failure to obtain would not have a Material Adverse Effect
     or (y) which have been duly obtained, taken, given or made and are in full
     force and effect.

                       NON-SHARING INTERCREDITOR AGREEMENT



                                     - 11 -

          (d) ENFORCEABLE OBLIGATIONS, ETC. This Agreement has been, and each of
     the other Security Documents to which it is a party when delivered
     hereunder will have been, duly executed and delivered by such Securing
     Party. This Agreement is, and each of the other Security Documents to which
     it is a party when delivered hereunder will be, the legal, valid and
     binding obligation of such Securing Party enforceable against such Securing
     Party in accordance with their respective terms.

          Section 5. APPLICATIONS

          5.01. APPLICATION OF PREPAYMENTS. As more fully provided in Section
2.10(h) of the Solutia Credit Agreement, optional and mandatory prepayments
and/or reduction of Commitments (as defined in the Solutia Credit Agreement)
described in subsections (e), (f) and (g) of Section 2.10 of the Solutia Credit
Agreement are to be applied as follows:

          FIRST, to the prepayment of the Term Advances (as defined in the
     Solutia Credit Agreement) and the Co-gen Instruments (as therein defined),
     and to the provision of cover for the Designated Letters of Credit as
     provided in Section 5.04 of the Non-Sharing Security and Guarantee
     Agreement, in each case ratably in accordance with the respective principal
     amounts thereof outstanding at the time of such prepayment (such
     outstanding amount, in the case of the Designated Letters of Credit, to be
     deemed to be equal to the Designated Letter of Credit Exposure (as defined
     in the Solutia Credit Agreement) at such time), and

          SECOND, after the payment in full of the Term Advances and the Co-gen
     Instruments, and the provision of full cover for the Designated Letters of
     Credit in an aggregate amount equal to the Designated Letter of Credit
     Exposure at such time, to first, prepay Revolving Credit Advances and
     second, provide cover for Letter of Credit Exposures as specified in
     subsection (i) of Section 2.10 of the Solutia Credit Agreement and, to the
     extent such prepayments are being made pursuant to subsection (e) or (f) of
     said Section 2.10 and result from (x) a Disposition (as therein defined) of
     any property constituting collateral security under any of the Security
     Documents or (y) a Casualty Event (as therein defined) affecting any such
     collateral security, the Revolving Credit Commitments (as therein defined)
     shall be automatically reduced by the amount of such prepayment.

          Notwithstanding any other provision herein or in the Solutia Credit
Agreement to the contrary, (1) if any amounts are due and payable under the
Solutia Credit Agreement, the Astaris Guaranty Agreement, the Co-gen
Participation Agreement, the Co-gen Guaranty Agreement, the Co-gen Lease or any
Hedging Agreements (as defined in the Solutia Credit Agreement), or in respect
of any Designated Letters of Credit, at the time of a Disposition or upon any
Capital Markets Transaction (as therein defined) then prepayments in accordance
with subsections (e), (f) and (g) of Section 2.10 of the Solutia Credit
Agreement are to be shared ratably by the Secured Parties in accordance with
their respective Relevant Prepayment Percentages (as therein defined) and the
Commitments shall be reduced only by the amount of prepayments allocable to the
Solutia Credit Agreement and (2) any Net Cash Proceeds received pursuant to
subsection (e) or (f) of said Section 2.10 which constitutes collateral under
the Co-gen Participation Agreement or the Co-gen Lease shall be applied first to
reduce the amounts

                       NON-SHARING INTERCREDITOR AGREEMENT



                                     - 12 -

outstanding under the Co-gen Instruments and thereafter to the repayment of the
Advances as described above.

          In the event that at the time of any prepayment required to be applied
to the Term Advances there shall be any Revolving Credit Advances outstanding,
any Term Lender shall have the right to refuse all or any portion of any
optional or mandatory prepayment pursuant to Section 2.10(a), (b), (e), (f) or
(g) of the Solutia Credit Agreement, and any amount so refused will be applied
to prepay the Revolving Credit Advances, but in each case without reduction of
any of the Revolving Credit Commitments.

          Anything in this Agreement to the contrary notwithstanding, to the
extent that any Net Cash Proceeds (as defined in the Solutia Credit Agreement)
of any property subject to the Lien of the Shared Security Documents shall be
received by the Company at a time when any Triggering Event (as defined in the
Sharing Intercreditor Agreement) shall have occurred and be continuing, such Net
Cash Proceeds shall be retained by, or remitted to, the Collateral Trustee for
application to the Sharing Obligations (as so defined) in accordance with the
requirements of Section 4.01 of the Sharing Intercreditor Agreement and shall
not be applied to the Advances under the Solutia Credit Agreement or the Co-gen
Instruments, or as cover for Designated Letters of Credit, as would otherwise be
required under subsection (h) of Section 2.10 of the Solutia Credit Agreement.

          5.02. APPLICATION OF PROCEEDS OF COLLATERAL. Except as otherwise
expressly provided herein or in any other Security Document, the proceeds of any
collection, sale or other realization pursuant to any of the Security Documents
of all or any part of the Collateral shall be applied by the Collateral Agent:

          FIRST, to the payment of the costs and expenses of such collection,
     sale or other realization, including reasonable out-of-pocket costs and
     expenses of the Collateral Agent and the reasonable fees and expenses of
     its agents and counsel, and all expenses incurred and advances made by the
     Collateral Agent in connection therewith;

          SECOND, to the payment of the Secured Obligations then due and
     payable, in each case equally and ratably (but subject, in the case of the
     Solutia Credit Agreement Obligations under and as defined in the Sharing
     Intercreditor Agreement, to the provisions of Section 5.03); and

          FINALLY, after application as provided in clauses "FIRST" and "SECOND"
     above, to the payment to the respective Securing Parties, or their
     respective successors or assigns, or as a court of competent jurisdiction
     may direct, of any surplus then remaining.

          5.03. CERTAIN SPECIAL ALLOCATIONS. Each Secured Party, by accepting
the benefits of the Non-Sharing Mortgages, hereby acknowledges that the
Non-Sharing Mortgages may, in certain circumstances, provide security for the
Secured Obligations on a basis other than in accordance with the Relevant
Sharing Percentages of the Secured Parties. Each Secured Party, by accepting the
benefits of the Non-Sharing Mortgages, nevertheless agrees that it is the intent
of the Secured Parties that any proceeds of any collection, sale or other
realization under the Non-Sharing Mortgages be shared among the Secured Parties
ratably in accordance with their

                       NON-SHARING INTERCREDITOR AGREEMENT



                                     - 13 -

Relevant Sharing Percentages. Accordingly, notwithstanding the provisions of
Section 5.02, any payments under clause SECOND of said Section 5.02 representing
proceeds of any collection, sale or other realization under the Non-Sharing
Mortgages shall be paid by the Collateral Agent to the Secured Parties ratably
in accordance with their Relevant Sharing Percentages, with the portion of such
payments made in respect of any Secured Obligations held by any Secured Party in
excess of such Secured Party's Relevant Sharing Percentage of the Secured
Obligations held by it (and accordingly remitted to the other Secured Parties
under this Section 5.03) constituting a purchase of participations by such
Secured Party of participations in the Secured Obligations held by each other
Secured Party.

          Section 6. MISCELLANEOUS.

          6.01. NOTICES, ETC. All notices and other communications provided for
hereunder shall be in writing, telecopied or delivered:

          (a) if to any of the Securing Parties, care of Solutia Inc., 575
     Maryville Centre Drive, St. Louis, Missouri 63141, Attention: Vice
     President and Treasurer, telephone number (314) 674-8250, telecopier number
     (314) 674-6755, with a copy in care of Solutia Inc., 575 Maryville Centre
     Drive, St. Louis, Missouri 63141, Attention: General Counsel, telephone
     number (314) 674-3586, telecopier number (314) 674-2721,

          (b) if to the Solutia Administrative Agent, at its address at
     Citibank, N.A., Two Penns Way, Suite 200, New Castle, Delaware 19720,
     Attention: Timothy Smith (or his successor), telephone number (302)
     894-6059, telecopier number (302) 894-6120;

          (c) if to the Astaris Administrative Agent, at its address at Bank of
     America, N.A., 101 North Tryon Street, Charlotte, North Carolina 28255,
     Attention: Ms. Kelly Weaver and Ms. Angela Berry, telephone number (704)
     388-6483, telecopier number (704) 409-0014;

          (d) if to the Co-gen Agent, at its address at Citibank, N.A., Bank
     Loan Syndications, Two Penns Way, Suite 200, New Castle, Delaware 19720,
     Attention: Brian Maxwell, telephone number (302) 894-6023, telecopier
     number (302) 894-6059; and

          (e) if to the Collateral Agent, at its address at Citibank, N.A., 388
     Greenwich Street, New York, New York 10013, Attention: Jim Simpson,
     telephone number (212) 816-8208, telecopier number (212) 816-8051.

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when delivered or telecopied, be effective when delivered or transmitted
by telecopier, respectively.

          6.02. WAIVERS. No failure on the part of the Collateral Agent or any
other Secured Party to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral
Agent, any Lender, or any Co-gen Purchaser of any right,

                       NON-SHARING INTERCREDITOR AGREEMENT



                                     - 14 -

power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are cumulative
and are not exclusive of any remedies provided by law.

          6.03. AMENDMENTS, ETC. Except as otherwise provided in any Security
Document, the terms of this Agreement and the other Security Documents may be
waived, altered or amended only by an instrument in writing duly executed by
each Securing Party and the Collateral Agent, with the consent of the Majority
Solutia Lenders, PROVIDED that

          (a) no such amendment shall adversely affect the relative rights of
     any Secured Party as against any other Secured Party without the prior
     written consent of such first Secured Party,

          (b) without the prior written consent of each of the Solutia Lenders,
     the Collateral Agent shall not release all or substantially all of the
     collateral under the Non-Sharing Security Documents or release all or
     substantially all of the Subsidiary Guarantors from their guarantee
     obligations under Section 2 of the Non-Sharing Security and Guarantee
     Agreement; PROVIDED that if any amounts are due and payable under the
     Astaris Guaranty Agreement, the Co-gen Guaranty Agreement, the Co-gen
     Lease, any Designated Letter of Credit, or any Hedging Agreement at the
     time of any such proposed release then the prior written consent of a
     majority in interest of the Astaris Lenders, the Co-gen Purchasers, the
     issuers of the Designated Letters of Credit and the holders of any Hedging
     Obligations, whichever of such obligations are then due and payable, will
     also be required to release all or substantially all of the collateral
     under the Non-Sharing Security Documents,

          (c) the Collateral Agent is authorized to release (and shall release)
     any Collateral that is either the subject of a disposition permitted under
     the Solutia Credit Agreement or to which the Majority Solutia Lenders shall
     have consented (and, in that connection, the Collateral Agent shall issue
     any direction to the Collateral Trustee under Section 7.02 of the Sharing
     Intercreditor Agreement as shall be required to effect any release of
     Shared Property under and as defined therein), and

          (d) the Collateral Agent is authorized to release (and shall release)
     any Subsidiary Guarantor from any of its guarantee obligations under
     Section 2 of the Non-Sharing Security and Guarantee Agreement to the extent
     such Subsidiary is the subject of a disposition permitted under the Solutia
     Credit Agreement or to which the Majority Solutia Lenders shall have
     consented and upon such release, the Collateral Agent is authorized to
     release (and shall release) any collateral security granted by such
     Subsidiary Guarantor under the Non-Sharing Security and Guarantee
     Agreement.

Any such amendment or waiver shall be binding upon the Collateral Agent, each
Secured Party and each Securing Party.

          6.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each Securing
Party, the Collateral Agent and each Secured Party (PROVIDED that no Securing
Party shall assign or transfer its rights

                       NON-SHARING INTERCREDITOR AGREEMENT



                                     - 15 -

or obligations hereunder without the prior written consent of the Collateral
Agent, each Administrative Agent and the Co-gen Agent).

          6.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

          6.06. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.

          6.07. JURISDICTION. Each of the Securing Parties hereby irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
Non-Sharing Security Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each of the Securing Parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Non-Sharing Security
Document shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or any other Non-Sharing
Security Document in the courts of any jurisdiction.

          6.08. CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

          6.09. ADDITIONAL SUBSIDIARY GUARANTORS. As contemplated by Section
6.01(l) of the Solutia Credit Agreement, new Domestic Subsidiaries of the
Company formed or acquired by the Company after the date hereof, and any
Domestic Subsidiary that ceases to be an "Immaterial Subsidiary" (as defined in
the Solutia Credit Agreement), are required to become a "Subsidiary Guarantor"
under this Agreement, by executing and delivering to the Collateral Agent and
Collateral Trustee (as defined in the Solutia Credit Agreement) a Guarantee
Assumption Agreement in the form of Exhibit J to the Solutia Credit Agreement.
Accordingly, upon the execution and delivery of any such Guarantee Assumption
Agreement by any such Subsidiary, such new Subsidiary shall automatically and
immediately, and without any further action on the part of any Person, become a
"Subsidiary Guarantor" and a "Securing Party" for all purposes of this
Agreement.

                       NON-SHARING INTERCREDITOR AGREEMENT



          IN WITNESS WHEREOF, the parties hereto have caused this Restated
Intercreditor and Collateral Agency Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.

                                 SOLUTIA INC.


                                 By: /s/ Kevin Wilson
                                     -------------------------------------------
                                     Name: Kevin Wilson
                                     Title: Vice President and Treasurer


                              SUBSIDIARY GUARANTORS

                                 CPFILMS INC.


                                 By: /s/ Kevin Wilson
                                     -------------------------------------------
                                     Name: Kevin Wilson
                                     Title: Attorney-in-Fact

                                 MONCHEM, INC.


                                 By: /s/ Kevin Wilson
                                     -------------------------------------------
                                     Name: Kevin Wilson
                                     Title: President

                                 MONCHEM INTERNATIONAL, INC.


                                 By: /s/ Kevin Wilson
                                     -------------------------------------------
                                     Name: Kevin Wilson
                                     Title: President

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 2 -

                                 SOLUTIA SYSTEMS, INC.


                                 By: /s/ Kevin Wilson
                                     -------------------------------------------
                                     Name: Kevin Wilson
                                     Title: President


                       ADMINISTRATIVE AGENTS

                                 CITIBANK, N.A., as Administrative Agent

                                 By: /s/ James N. Simpson
                                     -------------------------------------------
                                     Name: James N. Simpson
                                     Title: Vice President

                                 BANK OF AMERICA, N.A., as Administrative Agent


                                 By: /s/ Donald J. Chin
                                     -------------------------------------------
                                     Name: Donald J. Chin
                                     Title: Managing Director


                       CO-GEN AGENT

                                 CITIBANK, N.A., as Agent for the Co-gen
                                   Purchasers


                                 By: /s/ James N. Simpson
                                     -------------------------------------------
                                     Name: James N. Simpson
                                     Title: Vice President

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 3 -

                       COLLATERAL AGENT

                                 CITIBANK, N.A., as Collateral Agent

                                 By: /s/  James N. Simpson
                                     -------------------------------------------
                                     Name: James N. Simpson
                                     Title: Vice President

                       NON-SHARING INTERCREDITOR AGREEMENT



                                                                      SCHEDULE I

                          DESIGNATED LETTERS OF CREDIT

SOLUTIA INC. & CONSOLIDATED SUBSIDIARIES

STANDBY LETTERS OF CREDIT



BANK                  ISSUED ON BEHALF OF           AMOUNT          L/C NUMBER        EXPIRES
- ----------------------------------------------------------------------------------------------
                                                                         
Citibank              Solutia Inc.             $ 8,000,000      NY-00928-30030824    30-Apr-03
Citibank              Solutia Inc.             $     3,875      NY-00928-30027436    11-Feb-03
Citibank              Solutia Inc.             $     6,620      NY-00928-30028536    30-Sep-02
Citibank              Solutia Inc.             $     7,824      NY-00928-30025958    30-Sep-04
- ----------------------------------------------------------------------------------------------
SUB-TOTAL CITIBANK                             $ 8,018,319
- ----------------------------------------------------------------------------------------------

Chase Manhattan Bank  Solutia Inc.             $   750,000           P-392986        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $   480,000           P-392987        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $ 2,000,000           P-393627        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $ 6,000,000           P-393629        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $   227,105           P-395392        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $   750,000           P-349116        31-Dec-02
Chase Manhattan Bank  Solutia Inc.             $ 2,938,000           P-200112        30-Apr-03
Chase Manhattan Bank  Solutia Inc.             $ 2,107,000           P-200113        30-Apr-03
Chase Manhattan Bank  Solutia Inc.             $   768,000           P-200114        30-Apr-03
Chase Manhattan Bank  Solutia Inc.             $   852,000           P-200233        30-Apr-03
Chase Manhattan Bank  Solutia Inc.             $ 7,953,791           P-204020        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $ 3,177,062           P-204012        31-Aug-02
Chase Manhattan Bank  Solutia Inc.             $   121,583           P-205878        15-Oct-02
- ----------------------------------------------------------------------------------------------
SUB-TOTAL CHASE                                $28,124,541
- ----------------------------------------------------------------------------------------------

HSBC                  Solutia Inc.             $ 6,382,000         SDCMTN541972      30-Apr-03
HSBC                  Solutia UK Limited       $    24,517        102/13339798a      28-Feb-07
HSBC                  Solutia UK Limited       $   630,659         102/146377b       01-Jun-08
HSBC                  Solutia UK Limited       $   313,060           8852279           open
- ----------------------------------------------------------------------------------------------
SUB-TOTAL HSBC                                 $ 7,350,236
- ----------------------------------------------------------------------------------------------


BANK                    BENEFICIARY                                   PURPOSE
- -------------------------------------------------------------------------------------------------------------
                                                                
Citibank                Kemper Indemnity Insurance Company            Pollution Insurance
Citibank                Gas Authority of India (GAIL)                 Fin. Assurance
Citibank                Gas Authority of India (GAIL)                 Fin. Assurance
Citibank                Gas Authority of India (GAIL)                 Fin. Assurance
- -------------------------------------------------------------------------------------------------------------
SUB-TOTAL CITIBANK
- -------------------------------------------------------------------------------------------------------------

Chase Manhattan Bank    Texas Department of Health                    Fin. Assur. - Choc Bayou
Chase Manhattan Bank    Massachusetts Dept. of Environmental          Fin. Assur. - Indian Orchard
                        Protect.
Chase Manhattan Bank    New Jersey Dept. of Environmental Protection  Fin. Assur. - Delaware River
Chase Manhattan Bank    Florida Dept. of Environmental Regulation     Fin. Assur. - Pensacola
Chase Manhattan Bank    Florida Dept. of Environmental Regulation     Fin. Assur. - Pensacola
Chase Manhattan Bank    Texas Natural Res. Conservation Commission    Fin. Assur. - Choc Bayou
Chase Manhattan Bank    New Jersey Dept. of Environmental Protection  Fin. Assur. - Delaware River
Chase Manhattan Bank    Georgia Dept. of Natural Resources            Fin. Assur. - Augusta
Chase Manhattan Bank    Alabama Dept. of Environmental Management     Fin. Assur. - Anniston
Chase Manhattan Bank    Illinois Environmental Protection Agency      Fin. Assur.- Krummrich
Chase Manhattan Bank    CIGNA Insurance Company                       Liability - General/Product/Automobile
Chase Manhattan Bank    Pacific Employers Insurance Co. (CIGNA)       Workers Comp - All but MO, WV, MA
Chase Manhattan Bank    Shaffer Landfill Remedial Action              Fin. Assur. - Environmental Cleanup
- -------------------------------------------------------------------------------------------------------------
SUB-TOTAL CHASE
- -------------------------------------------------------------------------------------------------------------

HSBC                    Florida Dept. of Environmental Protection     Financial Assurance - Pensacola
HSBC                    Environment Agency for GBP15,550              Fin. Assurance
HSBC                    HM Customs for GBP400,000                     Fin. Assur. - Duties
HSBC                    HM Customs for GBP200,000                     Fin. Assur. - Duties
- -------------------------------------------------------------------------------------------------------------
SUB-TOTAL HSBC
- -------------------------------------------------------------------------------------------------------------


                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 2 -

                                                                     
Sumitomo Mitsui       Solutia Inc.             $   158,819     B/CGO-500852      06-Nov-02
Sumitomo Mitsui       Solutia Inc.             $ 5,000,000   LG/MIS/NY-431752    14-Aug-02
- ------------------------------------------------------------------------------------------
SUB-TOTAL SUMITOMO                             $ 5,158,819
- ------------------------------------------------------------------------------------------

KBC                   Solutia Europe S.A/N.V.  $   594,873      3019720143       01-Mar-08
KBC                   Solutia Europe S.A/N.V.  $   199,738      3019720648         open
KBC                   Solutia Europe S.A/N.V.  $    74,905      3019723274         open
KBC                   Solutia Europe S.A/N.V.  $   117,851       500322874         open
KBC                   Solutia Europe S.A/N.V.  $    21,870      3190826729         open
KBC                   Solutia Europe S.A/N.V.  $   249,688      3196014411         open
KBC                   Solutia Europe S.A/N.V.  $    27,167      3196625309         open
KBC                   Solutia Europe S.A/N.V.  $     4,200      3267502296       25-Sep-02
KBC                   Solutia Europe S.A/N.V.  $    38,562      3267521801       01-Nov-02
KBC                   Solutia Europe S.A/N.V.  $    74,402      3267592630       10-Sep-02
KBC                   Solutia Europe S.A/N.V.  $     2,242      3267575957       15-Sep-02
KBC                   Solutia Europe S.A/N.V.  $     1,873      3196573371       31-Mar-04
KBC                   Solutia Europe S.A/N.V.  $     2,996      3196573977       31-Oct-06
KBC                   Solutia Europe S.A/N.V.  $     1,311      3196574078       28-Apr-04
KBC                   Solutia Europe S.A/N.V.  $     2,097      3196574381       14-Apr-04
KBC                   Solutia Europe S.A/N.V.  $     1,873      3196719982       30-Sep-07
KBC                   Solutia Europe S.A/N.V.  $     7,491       500068957       31-May-10
KBC                   Solutia Europe S.A/N.V.  $     4,344       500095532       14-Dec-10
KBC                   Solutia Europe S.A/N.V.  $     2,696       500166260       30-Sep-10
KBC                   Solutia Europe S.A/N.V.  $     5,506       500305494       01-Apr-11
- ------------------------------------------------------------------------------------------
SUB-TOTAL KBC                                  $ 1,435,685
- ------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------
GRAND TOTAL                                    $50,087,599
- ------------------------------------------------------------------------------------------



                                                                
Sumitomo Mitsui         Tennessee Dept. of Environment and Conserv.   Fin. Assur. - Columbia, TN Plant
Sumitomo Mitsui         Ferro Corporation                             Pursuant to Asset Purchase Agreement
- -------------------------------------------------------------------------------------------------------------
SUB-TOTAL SUMITOMO
- -------------------------------------------------------------------------------------------------------------

KBC                     OVAM for BEF23,837,000                        Fin. Assur. - Ghent
KBC                     Douane Gent for BEF8,000,000                  Fin. Assur. - Duties
KBC                     Douane Gent for BEF3,000,000                  Fin. Assur. - Duties
KBC                     Douane Gent for EUR117,000                    Fin. Assur. - Duties
KBC                     Betz Dearborn                                 Fin. Assurance
KBC                     TVA Luxembourg for BEF10,000,000              Fin. Assur. - VAT
KBC                     Emirate BL Oil & Gas                          Fin. Assurance
KBC                     Misr Pour La Rayonne                          Fin. Assurance
KBC                     Lungi Zimmer for DEM74,880                    Fin. Assurance
KBC                     Kirishinefteorgsintez                         Fin. Assurance
KBC                     Messrs Misr Polyester Co.                     Fin. Assurance
KBC                     J. Lousse / Annbritt Aspholi for BEF75,000    Fin. Assurance
KBC                     Van Huyck / Kabir for BEF120,000              Fin. Assurance
KBC                     Biernaux / Soto for BEF52,500                 Fin. Assurance
KBC                     De Poorter / Russel - Jones for BEF84,000     Fin. Assurance
KBC                     De Coninck / Reuter for BEF75,000             Fin. Assurance
KBC                     MR. & MME Jensen-Ponce for BEF300,000         Fin. Assurance
KBC                     TIESA for BEF174,000                          Fin. Assurance
KBC                     Geenen-Hartwig for BEF108,000                 Fin. Assurance
KBC                     Grass-Chardon / Daniels for EUR5,466          Fin. Assurance
- -------------------------------------------------------------------------------------------------------------
SUB-TOTAL KBC
- -------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------
GRAND TOTAL
- -------------------------------------------------------------------------------------------------------------


                       NON-SHARING INTERCREDITOR AGREEMENT



                                                                     SCHEDULE II

                          [Form of Designation Letter]

                                       ____________ __, ____

Citibank, N.A., as Collateral
  Agent for the Secured Parties
  referred to below
2 Penns Way
New Castle, Delaware 19720

Attention: Timothy Smith

Ladies and Gentlemen:

          We refer to the Restated Intercreditor and Collateral Agency Agreement
(the "NON-SHARING INTERCREDITOR AGREEMENT") dated as of July [___], 2002 between
Solutia Inc. (the "COMPANY"), each of the Subsidiaries of the Company identified
under the caption "SUBSIDIARY GUARANTORS" on the signature pages thereto,
Citibank, N.A., as administrative agent under the Solutia Credit Agreement
referred to therein, Bank of America, as administrative agent under the Astaris
Credit Agreement referred to therein, Citibank, N.A., as agent for the
purchasers under the Co-gen Participation Agreement referred to therein and
Citibank, N.A., as collateral agent (in such capacity, together with its
successors in such capacity, the "COLLATERAL AGENT"). Terms defined in the
Non-Sharing Intercreditor Agreement are used herein as defined therein.

          The undersigned is delivering this Designation Letter pursuant to
Section 3 of the Non-Sharing Intercreditor Agreement and hereby designates
[identify letter of credit by (i) issuing bank, (ii) date of issuance, (iii)
amount and (iv) letter of credit number] (the "DESIGNATED LETTER OF CREDIT"), as
a "Designated Letter of Credit" under and for all purposes of the Non-Sharing
Intercreditor Agreement and the other Security Documents.

          In that connection, the Company hereby certifies that the sum of (i)
the aggregate face amounts of all Designated Letters of Credit (including such
letter of credit) outstanding on the date hereof and (ii) the then aggregate
principal amount of all unreimbursed drawings under any letters of credit that
at any time constituted "Designated Letters of Credit" outstanding on the date
hereof do not exceed $50,087,599.

                                   Very truly yours,

                                   SOLUTIA INC.


                                   By:
                                       -----------------------------------------

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 2 -

                                       Name:
                                       Title:


ACCEPTED:

CITIBANK, N.A., as Collateral Agent


By:
    --------------------------------
    Name:
    Title:

                       NON-SHARING INTERCREDITOR AGREEMENT



                                      - 3 -

                       NON-SHARING INTERCREDITOR AGREEMENT

EX-4.9

                                                                     EXHIBIT 4.9

                    RESTATED SECURITY AND GUARANTEE AGREEMENT

          RESTATED SECURITY AND GUARANTEE AGREEMENT dated as of July 25, 2002,
between SOLUTIA INC., a corporation duly organized and validly existing under
the laws of the State of Delaware (the "COMPANY"); each of the Subsidiaries of
the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto or that become "Subsidiary Guarantors" hereunder pursuant
to Section 7.11 after the date hereof (individually, a "SUBSIDIARY GUARANTOR"
and, collectively, the "SUBSIDIARY GUARANTORS" and, together with the Company,
individually a "SECURING PARTY" and, collectively, the "SECURING PARTIES"); and
Citibank, N.A., as collateral agent under the Non-Sharing Intercreditor
Agreement referred to below (in such capacity, together with its successors in
such capacity, the "COLLATERAL AGENT").

          The Company, certain lenders (the "SOLUTIA LENDERS") and Citibank,
N.A., as administrative agent (in such capacity, together with its successors in
such capacity, the "SOLUTIA ADMINISTRATIVE AGENT") are parties to a Second
Amended and Restated Credit Agreement dated as of July 25, 2002 (as modified and
supplemented and in effect from time to time, the "SOLUTIA CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by means of loans and letters of credit) to be made by said lenders to the
Company and the other borrowers referred to therein in an aggregate principal or
face amount not exceeding $600,000,000. In addition, the Company may from time
to time be obligated to various of the Solutia Lenders (or their affiliates) in
respect of one or more hedging agreements permitted under Section 6.02(g)(v) of
the Solutia Credit Agreement.

          Astaris LLC, a limited liability company organized under the laws of
Delaware ("ASTARIS"), certain lenders (the "ASTARIS LENDERS") and Bank of
America, N.A., as administrative agent (in such capacity, together with its
successors in such capacity, the "ASTARIS ADMINISTRATIVE AGENT" and, together
with the Solutia Administrative Agent, the "ADMINISTRATIVE AGENTS") are parties
to a Credit Agreement dated as of September 14, 2000 (as modified and
supplemented and in effect from time to time, the "ASTARIS CREDIT AGREEMENT"
and, together with the Solutia Credit Agreement, the "CREDIT AGREEMENTS"),
providing, subject to the terms and conditions thereof, for loans to be made by
said banks to Astaris in an aggregate principal amount not exceeding
$275,000,000. The obligations of Astaris under the Astaris Credit Agreement have
been partially guaranteed by the Company pursuant to a Guaranty Agreement dated
as of September 14, 2000 (as modified and supplemented and in effect from time
to time, the "ASTARIS GUARANTY AGREEMENT") by the Company in favor of Astaris
LLC and in favor of the Astaris Lenders and the Astaris Administrative Agent.

          The Company, State Street Bank and Trust Company, as trustee (in such
capacity, together with its successors in such capacity, the "CO-GEN TRUSTEE"),
certain financial institutions named as purchasers therein (collectively, the
"CO-GEN PURCHASERS") and Citibank, N.A., as agent for the Co-gen Purchasers (in
such capacity, together with its successors in such capacity, the "CO-GEN
AGENT"), are parties to an Amended and Restated Participation Agreement dated as
of April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN PARTICIPATION AGREEMENT"), providing, subject to the terms and
conditions thereof, for loans and investments to be made by the Co-gen
Purchasers to the Co-gen Trustee in an aggregate principal amount not exceeding
$33,000,000. The obligations of the Co-gen Trustee under the


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 2 -

Co-gen Participation Agreement have been guaranteed by the Company pursuant to
an Amended and Restated Instrument Guaranty dated as of April 24, 1998 (as
modified and supplemented and in effect from time to time, the "CO-GEN GUARANTY
AGREEMENT") by the Company in favor of the Co-gen Trustee and the Co-gen
Purchasers. In addition, the Co-gen Trustee, as lessor, and the Company, as
lessee, are party to an Amended and Restated Lease dated as of April 24, 1998
(as modified and supplemented and in effect from time to time, the "CO-GEN
LEASE") pursuant to which the Company agrees to make certain rent payments to
the Co-gen Trustee in consideration of the lease of the co-generation facility
referred to therein, which rent payments service the loans and investments made
by the Co-gen Purchasers.

          In addition, certain of the Solutia Lenders may have issued letters of
credit for the account of the Company or a Subsidiary, or may in the future
issue letters of credit for the account of the Company, which are or will be
identified in the below-referenced Non-Sharing Intercreditor Agreement as
"Designated Letters of Credit" which are entitled to the benefits of this
Agreement. It is contemplated that, in connection herewith, such Solutia Lenders
will execute and deliver a Letter of Credit Override Agreement (the "LETTER OF
CREDIT OVERRIDE AGREEMENT") providing for certain common terms to be applicable
to such letters of credit.

          In connection with the agreements described above, the Securing
Parties, each Administrative Agent, the Co-gen Agent and the Collateral Agent
have entered into a Restated Intercreditor and Collateral Agency Agreement dated
as of July [___], 2002 (as modified and supplemented and in effect from time to
time, the "NON-SHARING INTERCREDITOR AGREEMENT"), providing for the continuing
appointment of the Collateral Agent and for certain other matters relating to
the collateral security for the obligations of the Securing Parties hereunder
and under certain other agreements.

          In connection with the transactions described above, the Company, the
Subsidiary Guarantors and Citibank, N.A., as collateral agent, have also entered
into a Security and Guarantee Agreement dated as of November 15, 2001 (the
"EXISTING SECURITY AND GUARANTEE AGREEMENT").

          To induce the Solutia Lenders to enter into the Solutia Credit
Agreement as described above and to continue to extend credit under the Solutia
Credit Agreement, to induce the Astaris Lenders to enter into an Amendment No. 3
to the Astaris Credit Agreement and to continue to extend credit under the
Astaris Credit Agreement, to induce the Co-gen Purchasers to continue to extend
credit and make investments under the Co-gen Participation Agreement and to
induce the Solutia Lenders to extend credit in respect of Designated Letters of
Credit and hedging agreements, the Subsidiary Guarantors wish to continue their
guarantee (pursuant to the Existing Security and Guarantee Agreement) of the
obligations of the Company under the Solutia Credit Agreement and the Astaris
Guaranty Agreement, the Co-gen Guaranty Agreement, the Co-gen Lease and in
respect of the Designated Letters of Credit and the Hedging Obligations (as
hereinafter defined), and the Securing Parties wish to similarly continue their
liens (pursuant to the Existing Security and Guarantee Agreement) on certain of
their properties as collateral security for, INTER ALIA, such obligations and
granting new liens on certain other of their properties as collateral security
for, INTER ALIA, such obligations. Accordingly, the parties hereto agree that
the Existing Security and Guarantee Agreement shall be amended and restated as
follows:


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 3 -

          Section 1. DEFINITIONS. Terms defined in the Non-Sharing Intercreditor
Agreement are used herein as defined therein.

          (a) The terms "ACCOUNTS", "INVENTORY" and "INVESTMENT PROPERTY" have
the respective meanings ascribed thereto in Article 9 of the Uniform Commercial
Code. The term "FINANCIAL ASSETS" shall have the meaning ascribed thereto in
Article 8 of the Uniform Commercial Code.

          (b) In addition, as used herein:

          "ADVANCE" has the meaning assigned to such term in Section 1.01 of the
     Solutia Credit Agreement.

          "BORROWERS" has the meaning assigned to such term in Section 1.01 of
     the Solutia Credit Agreement.

          "COLLATERAL" has the meaning assigned to such term in Section 4.

          "COLLATERAL ACCOUNT" has the meaning assigned to such term in Section
     5.01.

          "COPYRIGHT COLLATERAL" means all material Copyrights, whether now
     owned or hereafter acquired by any Securing Party, including each Copyright
     identified in Annex 4.

          "COPYRIGHTS" means all copyrights, copyright registrations and
     applications for copyright registrations, including all renewals and
     extensions thereof, the right to recover for all past, present and future
     infringements thereof, and all other rights of any kind whatsoever accruing
     thereunder or pertaining thereto.

          "DESIGNATED LETTER OF CREDIT OBLIGATIONS" means all obligations of the
     Company in respect of Designated Letters of Credit, including, without
     limitation, any agreements, applications and other instruments entered into
     in connection with such Designated Letters of Credit.

          "DOCUMENT" has the meaning assigned to such term in Section 4(g).

          "DOMESTIC SUBSIDIARY" has the meaning assigned to such term in Section
     1.01 of the Solutia Credit Agreement.

          "EUROPE" means the countries of Austria, Benelux, Denmark, Finland,
     France, Germany, Greece, Ireland, Italy, Norway, Portugal, Spain, Sweden,
     Switzerland and the United Kingdom.

          "EXISTING MORTGAGED FACILITIES" means the facilities of the Company
     located in or near Decatur, Alabama, Indian Orchard, Massachusetts,
     Trenton, Michigan, Greenwood, South Carolina and Alvin, Texas.

          "GUARANTEED OBLIGATIONS" has the meaning ascribed thereto in
     Section 2.01.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 4 -

          "HEDGING OBLIGATIONS" means all obligations of the Company in respect
     of any interest rate protection agreement, foreign currency exchange
     agreement, commodity price protection agreement or other interest or
     currency exchange rate or commodity price hedging arrangement entered into
     with any Lender (or any affiliate thereof).

          For purposes hereof, it is understood that any Hedging Obligations to
     a Person arising under an agreement entered into at the time such Person
     (or an affiliate thereof) is a "Lender" party to the Solutia Credit
     Agreement shall nevertheless continue to constitute Hedging Obligations for
     purposes hereof, notwithstanding that such Person (or its affiliate) may
     have assigned all of its Advances and other interests in the Solutia Credit
     Agreement and, at the time a claim is to be made in respect of such Hedging
     Obligations, such Person (or its affiliate) is no longer a "Lender" party
     to the Solutia Credit Agreement.

          "INSTRUMENTS" has the meaning assigned to such term in Section 4(d).

          "INTELLECTUAL PROPERTY" means collectively, all Copyright Collateral,
     all Patent Collateral and all Trademark Collateral, together with (a) to
     the extent used in connection with production at the Mortgaged Facilities,
     all inventions, processes, software, production methods, proprietary
     information, know-how and trade secrets with respect to any of the
     foregoing; (b) all licenses or user or other agreements granted to any
     Securing Party with respect to any of the foregoing, including software
     licenses, in each case whether now or hereafter owned or used including the
     licenses or other agreements with respect to the Copyright Collateral, the
     Patent Collateral or the Trademark Collateral, listed in Annex 7 and (c) to
     the extent used in connection with production at the Mortgaged Facilities,
     all information, data, plans, blueprints, specifications, designs,
     drawings, recorded knowledge, surveys, engineering reports, test reports,
     manuals, materials standards, processing standards, performance standards,
     catalogs, computer and automatic machinery software and programs with
     respect to any of the foregoing.

          "ISSUERS" means, collectively, (a) the respective corporations,
     partnerships or other entities identified under the names of the Securing
     Parties on Annex 3 under the caption "Issuer" and (b) any other entity that
     shall at any time be a Subsidiary Guarantor that is not a Restricted
     Subsidiary.

          "MAKE-WHOLE OBLIGATIONS" means all obligations of the Company under
     the Astaris Guaranty Agreement as in effect on the date hereof and without
     giving effect to any amendments or supplements made to the Astaris Guaranty
     Agreement after the date hereof.

          "MARTINSVILLE FACILITY" means the production facility of CPFilms Inc.
     located in or near Martinsville, Virginia.

          "MORTGAGED FACILITIES" means the Existing Mortgaged Facilities and the
     New Mortgaged Facilities.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 5 -

          "NEW MORTGAGED FACILITIES" means the Martinsville Facility and the
     Pensacola Facility.

          "PATENT COLLATERAL" means all material Patents used in connection with
     production at the Mortgaged Facilities, whether now owned or hereafter
     acquired by any Securing Party, including each Patent identified in Annex
     5.

          "PATENTS" means to the extent used, registered or applied for in the
     United States of America or Europe all patents, including the inventions
     and improvements described and claimed therein together with the reissues,
     divisions, continuations, renewals, extensions and continuations-in-part
     thereof, all income, royalties, damages and payments now or hereafter due
     and/or payable under and with respect thereto, including damages and
     payments for past or future infringements thereof, the right to sue for
     past, present and future infringements thereof.

          "PLEDGED DEBT" means any Debt (as defined in the Solutia Credit
     Agreement) of any Domestic Subsidiary (other than a Restricted Subsidiary)
     held by any Securing Party.

          "PLEDGED STOCK" has the meaning assigned to such term in Section 4(a).

          "PENSACOLA FACILITY" means the manufacturing facility of the Company
     located in or near Pensacola, Florida.

          "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
     United States of America, or of any agency thereof, or obligations
     guaranteed as to principal and interest by the United States of America, or
     of any agency thereof, in either case maturing not more than 90 days from
     the date of acquisition thereof; (b) certificates of deposit or time
     deposits issued by any bank or trust company organized under the laws of
     the United States of America or any state thereof and having capital,
     surplus and undivided profits of at least $500,000,000, maturing not more
     than 90 days from the date of acquisition thereof; (c) fully collateralized
     repurchase agreements with a term of not more than 90 days for securities
     described in clause (a) of this definition and entered into with a
     financial institution satisfying the criteria described in clause (b) of
     this definition; and (d) commercial paper rated A-1 or better or P-1 by
     Standard & Poor's Ratings Services, a division of McGraw-Hill Companies,
     Inc., or Moody's Investors Services, Inc., respectively, maturing not more
     than 90 days from the date of acquisition thereof; in each case so long as
     the same (x) provide for the payment of principal and interest (and not
     principal alone or interest alone) and (y) are not subject to any
     contingency regarding the payment of principal or interest.

          "RESTRICTED ISSUERS" means, collectively, Monchem International, Inc.,
     a corporation duly organized and validly existing under the laws of the
     State of Delaware, Solutia Europe and Solutia UK Holdings Ltd., a
     corporation organized under the laws of England and Wales.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 6 -

          "RESTRICTED SUBSIDIARY" has the meaning assigned to such term in the
     Existing Notes Indentures, in each case as in effect on the date hereof and
     without giving effect to any modifications or supplements after the date
     hereof.

          "SECURED OBLIGATIONS" means, collectively, (a) in the case of the
     Company, the Solutia Credit Agreement Obligations, the Make-Whole
     Obligations, the Synthetic Lease Obligations, the Designated Letter of
     Credit Obligations, the Hedging Obligations and any Term Loan Facility
     Obligations, (b) in the case of the Subsidiary Guarantors, the obligations
     of the Subsidiary Guarantors in respect of the Guaranteed Obligations
     pursuant to Section 2.01 and (c) in the case of all Securing Parties, all
     present and future obligations of the Securing Parties to the Secured
     Parties, or any of them, hereunder.

          "SECURED PARTIES" means, collectively, the Collateral Agent, the
     Co-gen Agent, the Co-gen Purchasers, the Solutia Lenders, the Astaris
     Lenders, the Administrative Agents and the Term Loan Facility Lenders (and,
     in respect of any Hedging Obligations, any affiliate of a Solutia Lender
     that shall have entered into the respective hedging agreement giving rise
     to such Hedging Obligations).

          "SOLUTIA CREDIT AGREEMENT OBLIGATIONS" means the principal and
     interest on the Advances made by the Solutia Lenders to the Borrowers and
     all other amounts from time to time owing to the Solutia Lenders or the
     Administrative Agent by the Borrowers under the Loan Documents under and as
     defined in the Solutia Credit Agreement.

          "SOLUTIA EUROPE" means Solutia Europe S.A./N.V., a corporation
     organized under the laws of Belgium.

          "STOCK COLLATERAL" has the meaning assigned to such term in
     Section 4(a)(ii).

          "SYNTHETIC LEASE OBLIGATIONS" means all obligations of the Company
     under the Co-gen Guaranty Agreement, the Co-gen Lease and the other
     Operative Documents (as defined in the Co-gen Participation Agreement);
     PROVIDED that if such obligations exceed $33,000,000, then only the portion
     of such obligations that do not exceed $33,000,000, together with interest
     thereon at the rate specified in the Co-gen Participation Agreement, shall
     be deemed to be "Synthetic Lease Obligations".

          "TERM LOAN FACILITY" means any term loan facility satisfying the
     conditions set forth in Section 6.02(f)(x) of the Solutia Credit Agreement
     and designated by the Company at the time of such incurrence as a "Secured
     Obligation" hereunder.

          "TERM LOAN FACILITY LENDERS" means the lenders from time to time
     holding any Term Loan Facility Obligations.

          "TERM LOAN FACILITY OBLIGATIONS" means any Debt incurred by the
     Company under a Term Loan Facility.

          "TRADEMARK COLLATERAL" means all material Trademarks, whether now
     owned or hereafter acquired by any Securing Party, including each Trademark
     identified in


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 7 -

     Annex 6. Notwithstanding the foregoing, the Trademark Collateral does not
     and shall not include any Trademark that would be rendered invalid,
     abandoned, void or unenforceable by reason of its being included as part of
     the Trademark Collateral.

          "TRADEMARKS" means, to the extent used, registered or applied for in
     the United States of America or Europe, all trade names, trademarks and
     service marks, logos, trademark and service mark registrations, and
     applications for trademark and service mark registrations, including all
     renewals of trademark and service mark registrations, all rights
     corresponding thereto throughout the United States of America and Europe,
     the right to recover for all past, present and future infringements
     thereof, all other rights of any kind whatsoever accruing thereunder or
     pertaining thereto, together, in each case, with the product lines and
     goodwill of the business connected with the use of, and symbolized by, each
     such trade name, trademark and service mark.

          "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
     effect from time to time in the State of New York.

          Section 2. THE GUARANTEE.

          2.01 THE GUARANTEE. The Subsidiary Guarantors hereby jointly and
severally guarantee to each Solutia Lender (and, in respect of any Hedging
Obligations, any affiliate of a Solutia Lender that shall have entered into the
respective hedging agreement giving rise to such Hedging Obligations), each
Astaris Lender, each Administrative Agent, each Co-gen Purchaser and the Co-gen
Agent and their respective successors and assigns the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
Solutia Credit Agreement Obligations, the Make-Whole Obligations, the Synthetic
Lease Obligations, the Designated Letter of Credit Obligations and the Hedging
Obligations, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). The
Subsidiary Guarantors hereby further jointly and severally agree that if any
Borrower shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal.

          2.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Subsidiary
Guarantors under Section 2.01 are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the Solutia Credit Agreement, the Astaris Guaranty Agreement, the Co-gen
Guaranty Agreement, the Co-gen Lease, the Co-gen Participation Agreement, the
Designated Letters of Credit or any other agreement or instrument referred to
herein or therein, or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 2.02 that the obligations of the Subsidiary Guarantors hereunder shall
be absolute and unconditional, joint and several, under any and all
circumstances. Without limiting the generality of the


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 8 -

foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Subsidiary Guarantors hereunder
which shall remain absolute and unconditional as described above:

          (i) at any time or from time to time, without notice to the Subsidiary
     Guarantors, the time for any performance of or compliance with any of the
     Guaranteed Obligations shall be extended, or such performance or compliance
     shall be waived;

          (ii) any of the acts mentioned in any of the provisions of the Solutia
     Credit Agreement, the Astaris Guaranty Agreement, the Co-gen Guaranty
     Agreement, the Co-gen Lease, the Co-gen Participation Agreement, the
     Designated Letters of Credit or any other agreement or instrument referred
     to herein or therein shall be done or omitted;

          (iii) the maturity of any of the Guaranteed Obligations shall be
     accelerated, or any of the Guaranteed Obligations shall be modified,
     supplemented or amended in any respect, or any right under or in respect of
     the Solutia Credit Agreement, the Astaris Guaranty Agreement, the Co-gen
     Guaranty Agreement, the Co-gen Lease, the Co-gen Participation Agreement,
     the Designated Letters of Credit or any other agreement or instrument
     referred to herein or therein shall be waived or any other guarantee of any
     of the Guaranteed Obligations or any security therefor shall be released or
     exchanged in whole or in part or otherwise dealt with; or

          (iv) any lien or security interest granted to, or in favor of, the
     Collateral Agent or any other Secured Party as security for any of the
     Guaranteed Obligations shall fail to be perfected.

The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Collateral Agent, either Administrative Agent, any Solutia Lender, any Astaris
Lender, any Co-gen Purchaser or the Co-gen Agent exhaust any right, power or
remedy or proceed against any Borrower under or in respect of the Solutia Credit
Agreement, the Astaris Guaranty Agreement, the Co-gen Guaranty Agreement, the
Co-gen Lease, the Co-gen Participation Agreement, the Designated Letters of
Credit or any other agreement or instrument referred to herein or therein, or
against any other Person under any other guarantee of, or security for, any of
the Guaranteed Obligations.

          2.03 REINSTATEMENT. The obligations of the Subsidiary Guarantors under
this Section 2 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of any Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Subsidiary Guarantors jointly
and severally agree that they will indemnify each Administrative Agent, each
Solutia Lender, each Astaris Lender, each Co-gen Purchaser and the Co-gen Agent
on demand for all reasonable costs and expenses (including fees of counsel)
incurred by such Administrative Agent, such Lender, such Co-gen Purchaser or the
Co-gen Agent in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 9 -

          2.04 SUBROGATION. Until payment in full of all Guaranteed Obligations,
each Subsidiary Guarantor hereby waives all rights of subrogation or
contribution, whether arising by contract or operation of law (including any
such right arising under the Bankruptcy Code) or otherwise by reason of any
payment by it pursuant to the provisions of this Section 2.

          2.05 REMEDIES. The Subsidiary Guarantors jointly and severally agree
that, as between the Subsidiary Guarantors and the Solutia Lenders, the
obligations of any Borrower under the Solutia Credit Agreement may be declared
to be forthwith due and payable as provided in Article VII of the Solutia Credit
Agreement (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Article VII) for purposes of Section 2.01
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against such Borrower and that, in the event of such declaration (or such
obligations being deemed to have become automatically due and payable), such
obligations (whether or not due and payable by such Borrower) shall forthwith
become due and payable by the Subsidiary Guarantors for purposes of said Section
2.01.

          2.06 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Subsidiary Guarantor
hereby acknowledges that the guarantee in this Section 2 constitutes an
instrument for the payment of money, and consents and agrees that any Solutia
Lender or Astaris Lender, any Administrative Agent, any Co-gen Purchaser or the
Co-gen Agent, at its sole option, in the event of a dispute by such Subsidiary
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion action under New York CPLR Section 3213. In addition, each
Subsidiary Guarantor hereby agrees that in the event it shall fail to pay in
full any amount owing by it hereunder on the date upon which the same shall
become due (whether upon demand or otherwise), it shall be obligated to pay
interest at a rate per annum equal to that specified in Section 2.07(b) of the
Solutia Credit Agreement in respect of such amount for each day during the
period from and including the due date thereof to but excluding the date the
same shall be paid in full, such interest to be payable upon demand of such
Administrative Agent or the Co-gen Agent.

          2.07 CONTINUING GUARANTEE. The guarantee in this Section 2 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.

          2.08 RIGHTS OF CONTRIBUTION. The Company and the Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the payment
by such Subsidiary Guarantor of any Guaranteed Obligations, the Company and each
other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor
(but subject to the next sentence), pay to such Excess Funding Guarantor an
amount equal to such Subsidiary Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such Guaranteed Obligations. The payment obligation of the
Company and a Subsidiary Guarantor to any Excess Funding Guarantor under this
Section 2.08 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of the Company and such Subsidiary Guarantor
under the other provisions of this Section 2 and such Excess Funding Guarantor
shall


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 10 -

not exercise any right or remedy with respect to such excess until payment
and satisfaction in full of all of such obligations.

          For purposes of this Section 2.08, (i) "EXCESS FUNDING GUARANTOR"
means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has
paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations,
(ii) "EXCESS PAYMENT" means, in respect of any Guaranteed Obligations, the
amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of
such Guaranteed Obligations and (iii) "PRO RATA SHARE" means, for any Subsidiary
Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the
aggregate fair saleable value of all properties of such Subsidiary Guarantor
(excluding any shares of stock or other equity interest of any other Subsidiary
Guarantor) exceeds the amount of all the debts and liabilities of such
Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all properties of the Company and all of
the Subsidiary Guarantors exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Securing Parties hereunder) of the Company and
all of the Subsidiary Guarantors, determined (A) with respect to any Subsidiary
Guarantor that is a party hereto on the date hereof, as of the date hereof, and
(B) with respect to any other Subsidiary Guarantor, as of the date such
Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.

          2.09 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 2.01 would otherwise, taking into account the provisions of Section
2.08, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 2.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Administrative Agent, any Solutia
Lender, any Astaris Lender, any Co-gen Purchaser, the Co-gen Agent or any other
Person, be automatically limited and reduced to the highest amount that is valid
and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.

          Section 3. REPRESENTATIONS AND WARRANTIES. Each Securing Party
represents and warrants to the Secured Parties that:

          (a) TITLE AND PRIORITY. Such Securing Party is the sole beneficial
     owner of the Collateral in which it purports to grant a security interest
     pursuant to Section 4 and no Lien exists or will exist upon such Collateral
     at any time, except for Liens permitted under Section 6.02(a) of the
     Solutia Credit Agreement and except for such security interest in favor of
     the Collateral Agent for the benefit of the Secured Parties created
     pursuant hereto. The security interest created pursuant hereto constitutes
     a valid and perfected security interest in the Collateral in which such
     Securing Party purports to grant a security interest pursuant to Section 4,
     subject to no equal or prior Lien except as expressly permitted by said
     Section 6.02(a) of the Solutia Credit Agreement.


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                                     - 11 -

          (b) NAMES, ETC. The full and correct legal name, type of organization,
     jurisdiction of organization, organizational ID number (if applicable) and
     mailing address of each Securing Party as of the date hereof are correctly
     set forth in Annex 1. Annex 1 correctly specifies (x) the place of business
     of each Securing Party or, if such Securing Party has more than one place
     of business, the location of the chief executive office of such Securing
     Party, and (y) each location of the Securing Parties where in excess of
     $5,000,000 of Inventory as of March 31, 2002 of the Securing Parties is
     located.

          (c) CHANGES IN CIRCUMSTANCES. Such Securing Party has not (i) within
     the period of four months prior to the date hereof, changed its "location"
     (as defined in Section 9-307 of the Uniform Commercial Code), (ii) except
     as specified in Annex 1, heretofore changed its name, or (iii) except as
     specified in Annex 2, heretofore become a "new debtor" (as defined in
     Section 9-102(a)(56) of the Uniform Commercial Code) with respect to a
     currently effective security agreement previously entered into by any other
     Person.

          (d) PLEDGED STOCK. The Pledged Stock, if any, identified under the
     name of such Securing Party in Annex 3 is, and all other Pledged Stock in
     which such Securing Party shall hereafter grant a security interest
     pursuant to Section 4 will be, duly authorized, validly issued, fully paid
     and non-assessable and none of such Pledged Stock is or will be subject to
     any contractual restriction, or any restriction under the charter, by-laws
     or other organizational document of the respective Issuer of such Pledged
     Stock, upon the transfer of such Pledged Stock (except for any restriction
     contained herein or under such organizational documents).

          (e) OWNERSHIP OF PLEDGED STOCK. The Pledged Stock, if any, identified
     under the name of such Securing Party in Annex 3 constitutes (i) in the
     case of each Issuer other than a Restricted Issuer, 100% of all the issued
     and outstanding shares of capital stock of whatever class of such Issuer
     beneficially owned by such Securing Party on the date hereof (whether or
     not registered in the name of such Securing Party) and (ii) in the case of
     each Restricted Issuer, 65% of the issued and outstanding shares of voting
     stock of such Restricted Issuer (it being understood that, in the case of
     Solutia Europe, shares of treasury stock or stock of Solutia Europe held by
     Solutia Europe shall not be deemed to be outstanding) and 100% of all other
     issued and outstanding shares of capital stock of whatever class of such
     Restricted Issuer beneficially owned by such Securing Party on the date
     hereof (whether or not registered in the name of such Securing Party);
     Annex 3 correctly identifies, as at the date hereof, the respective Issuers
     of such Pledged Stock and the respective class and par value of the shares
     constituting such Pledged Stock and the respective number of shares (and
     registered owners thereof) represented by each such certificate.

          (f) FAIR LABOR STANDARDS ACT. Any goods now or hereafter produced by
     such Securing Party or any of its Subsidiaries in the United States of
     America included in the Collateral have been and will be produced in
     compliance with the requirements of the Fair Labor Standards Act, as
     amended.


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                                     - 12 -

          (g) INTELLECTUAL PROPERTY. Annexes 4, 5, and 6, respectively, set
     forth under the name of such Securing Party a complete and correct list of
     all material Copyrights, material Patents and material Trademarks (in each
     case to the extent encompassed within the definition of "Intellectual
     Property" in Section 1(b) hereof) owned by such Securing Party on the date
     hereof, and all registrations listed in Annexes 4, 5, and 6, are properly
     issued and in full force and effect. Annex 7 sets forth under the name of
     such Securing Party all licenses and other user agreements pursuant to
     which such Securing Party has been granted the right to use any Copyrights,
     Patents or Trademarks owned by others and material to the business of such
     Securing Party (and, in the case of Patents, used in connection with
     production at the Mortgaged Facilities).

          To such Securing Party's knowledge, (i) except as set forth in Annex
     4, 5 or 6, there is no violation by others of any right of such Securing
     Party with respect to any material Copyright, Patent or Trademark listed in
     Annexes 4, 5, and 6, respectively, under the name of such Securing Party
     and (ii) such Securing Party is not infringing in any material respect upon
     any copyright, patent or trademark of any other Person by virtue of the
     conduct of its business or, in the case of any such patent, use in
     connection with production at any of such Securing Party's facilities, as
     applicable; and no proceedings have been instituted or are pending against
     such Securing Party or, to such Securing Party's knowledge, threatened, and
     no claim against such Securing Party has been received by such Securing
     Party, alleging any such violation, except as may be set forth in Annex 7.

          As of the date hereof, such Securing Party does not own any Trademarks
     registered in the United States of America to which the last sentence of
     the definition of Trademark Collateral applies.

          Section 4. COLLATERAL. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Securing Party hereby pledges and grants to the
Collateral Agent, for the benefit of the Secured Parties as hereinafter
provided, a security interest in and to all of such Securing Party's right,
title and interest in the following property, whether now owned by such Securing
Party or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "COLLATERAL"):

          (a) the shares of voting stock of the Issuers identified in Annex 3
     under the name of such Securing Party and all other shares of capital stock
     of whatever class of the Issuers together with all rights, privileges,
     authority and power of such Issuer with respect to such shares, in each
     case together with the certificates, instruments and agreements, if any,
     evidencing the same (collectively, the "PLEDGED STOCK"), together with:

               (i) all shares, securities, moneys or property representing a
          dividend on any of the Pledged Stock, or representing a distribution
          or return of capital upon or in respect of the Pledged Stock, or
          resulting from a split-up, revision, reclassification or other like
          change of the Pledged Stock or otherwise received in


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 13 -

          exchange therefor, and any subscription warrants, rights, agreements
          or options issued to the holders of, or otherwise in respect of, the
          Pledged Stock; and

               (ii) without affecting the obligations of such Securing Party
          under any provision prohibiting such action hereunder or under the
          Solutia Credit Agreement, in the event of any consolidation or merger
          in which an Issuer is not the surviving corporation, all shares of
          each class of the capital stock of the successor corporation (unless
          such successor corporation is such Securing Party itself) formed by or
          resulting from such consolidation or merger (the Pledged Stock,
          together with all other certificates, shares, securities, properties
          or moneys as may from time to time be pledged hereunder pursuant to
          this clause (ii) and clause (i) above being herein collectively called
          the "STOCK COLLATERAL");

     PROVIDED that, notwithstanding the foregoing, the Stock Collateral of any
     Restricted Issuer shall be limited to 65% of the issued and outstanding
     shares of voting stock of such Restricted Issuer (it being understood that,
     in the case of Solutia Europe, shares of treasury stock or stock of Solutia
     Europe held by Solutia Europe shall not be deemed to be outstanding) and
     100% of all other issued and outstanding shares of capital stock of
     whatever class of such Issuer;

          (b) the Pledged Debt;

          (c) all Accounts and all Intellectual Property;

          (d) all instruments, chattel paper (whether tangible or electronic) or
     letters of credit (each as defined in the Uniform Commercial Code) of such
     Securing Party evidencing, representing, arising from or existing in
     respect of, relating to, securing or otherwise supporting the payment of,
     any of the Accounts, including (but not limited to) promissory notes,
     drafts, bills of exchange and trade acceptances (herein collectively called
     "INSTRUMENTS");

          (e) all Inventory;

          (f) each contract and other agreement of such Securing Party relating
     to the sale or other disposition of Inventory;

          (g) all documents of title (as defined in the Uniform Commercial Code)
     or other receipts of such Securing Party covering, evidencing or
     representing Inventory (herein collectively called "DOCUMENTS");

          (h) all rights, claims and benefits of such Securing Party against any
     Person arising out of, relating to or in connection with Inventory
     purchased by such Securing Party, including any such rights, claims or
     benefits against any Person storing or transporting such Inventory;

          (i) all Investment Property and Financial Assets contained in the
     Collateral Account;


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                                     - 14 -

          (j) the balance from time to time in the Collateral Account; and

          (k) all proceeds, products, offspring, accessions, rents, profits,
     income, benefits, substitutions and replacements of and to any of the
     Collateral and, to the extent related to any Collateral, all books,
     correspondence, credit files, records, invoices and other papers, including
     without limitation all tapes, cards, computer runs and other papers and
     documents in the possession or under the control of such Securing Party or
     any computer bureau or service company from time to time acting for such
     Securing Party;

PROVIDED that (i) Debt (as defined in the Existing Note Indentures), or shares
of stock, of any Restricted Subsidiary (as defined in the Existing Note
Indentures) owned or held by the Company or any other Restricted Subsidiary
shall not be included as part of the Collateral under this Agreement and (ii)
licenses and other user agreements pursuant to which any Securing Party has been
granted the right to use any Copyrights, Patents or Trademarks owned by others
shall be included in the Collateral only to the extent permitted under the
applicable instruments pursuant to which such licenses and user agreements are
created or granted.

          The Securing Parties hereto contemplate that the pledge of shares of
capital stock of Solutia Europe and Solutia UK Holdings Ltd. provided above may
be supplemented by one or more separate pledge agreements or confirmations or
restatements (to the extent such pledge agreement has heretofore been executed)
executed and delivered by the relevant Securing Parties in favor of the
Collateral Agent, which pledge agreements will provide for the pledge of shares
in accordance with the requirements of the law of Belgium or of England and
Wales, as applicable; upon the execution and delivery of any such pledge
agreement or confirmation or restatement, as applicable, (whether on the date
hereof or thereafter), the provisions of such pledge agreement or confirmation
or restatement, as applicable, shall supersede in their entirety the provisions
of this Agreement with respect to the shares of capital stock of Solutia Europe
or Solutia UK Holdings Ltd. pledged by such Securing Party hereunder.

          Section 5. CASH PROCEEDS OF COLLATERAL.

          5.01 COLLATERAL ACCOUNT. The Collateral Agent will cause to be
established at a banking institution to be selected by the Collateral Agent one
or more cash collateral accounts (collectively, the "COLLATERAL ACCOUNT"), which

          (i) to the extent of all Investment Property or Financial Assets
     (other than cash) shall be a "securities account" (as defined in Section
     8-501 of the Uniform Commercial Code) in respect of which the Collateral
     Agent shall be the "entitlement holder" (as defined in Section 8-102(a)(7)
     of the Uniform Commercial Code) and

          (ii) to the extent of any cash, shall be a deposit account in respect
     of which the Collateral Agent is the customer (as contemplated by Section
     9-104(a)(3) of the Uniform Commercial Code) and

into which there shall be deposited from time to time the cash proceeds of any
of the Collateral (including proceeds of insurance thereon) that the Collateral
Agent requests pursuant to Section 5.02 be delivered hereunder and into which a
Securing Party may from time to time


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                                     - 15 -

deposit any additional amounts that any of them wishes to pledge to the
Collateral Agent for the benefit of the Secured Parties as additional collateral
security hereunder. The balance from time to time in the Collateral Account
shall constitute part of the Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied as hereinafter provided. If at
any time following request by the Collateral Agent pursuant to Section 5.02 no
Event of Default shall be continuing, the Collateral Agent shall remit the
collected balance standing to the credit of the Collateral Account to or upon
the order of the respective Securing Party as such Securing Party through the
Company shall from time to time instruct, PROVIDED that at any time during the
continuance of an Event of Default, the Collateral Agent may (and, if instructed
by the Majority Solutia Lenders, shall) in its (or their) discretion apply or
cause to be applied (subject to collection) the balance from time to time
standing to the credit of the Collateral Account to the payment of any Secured
Obligation then due and payable in the manner specified in Section 6.09. In
addition, the Company may at any time request that the balance from time to time
standing to the credit of the Collateral Account be applied to the payment of
any Secured Obligations then due and payable in the manner specified in
Section 6.09. The balance from time to time in the Collateral Account shall be
subject to withdrawal only as provided herein.

          Notwithstanding anything herein to the contrary (i) amounts deposited
in the Collateral Account pursuant to Section 6.01(n) of the Solutia Credit
Agreement shall be subject to release by the Collateral Agent as provided
therein and (ii) upon the direction of the Solutia Administrative Agent, the
Collateral Agent shall release funds from the Collateral Account to the Company
or its Subsidiaries in accordance with such Section.

          5.02 PROCEEDS OF ACCOUNTS AND PLEDGED DEBT. If requested by the
Collateral Agent at any time after the occurrence and during the continuance of
an Event of Default, each Securing Party shall instruct (i) all account debtors
and other Persons obligated in respect of all Accounts to make all payments in
respect of the Accounts either (a) directly to the Collateral Agent (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of the Collateral Agent) or (b) to one or more
other banks in the United States of America (by instructing that such payments
be remitted to a post office box which shall be in the name and under the
control of the Collateral Agent) under arrangements, in form and substance
reasonably satisfactory to the Collateral Agent, pursuant to which such Securing
Party shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all proceeds of such payments directly to the
Collateral Agent for deposit into the Collateral Account and (ii) all Domestic
Subsidiaries obligated in respect of all Pledged Debt to make all payments in
respect of the Pledged Debt directly to the Collateral Agent. All payments made
to the Collateral Agent, as provided in the preceding sentence, shall be
immediately deposited in the Collateral Account. In addition to the foregoing,
each Securing Party agrees that, at any time after the occurrence and during the
continuance of an Event of Default, if the proceeds of any Collateral hereunder
(including the payments made in respect of Accounts and Pledged Debt) shall be
received by it, such Securing Party shall, upon the request of the Collateral
Agent, as promptly as possible deposit such proceeds into the Collateral
Account. Until so deposited, all such proceeds shall be held in trust by such
Securing Party for and as the property of the Collateral Agent and shall not be
commingled with any other funds or property of such Securing Party.


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                                     - 16 -

          5.03 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. The cash balance
standing to the credit of the Collateral Account shall be invested from time to
time in such Permitted Investments as the respective Securing Party through the
Company (or, after the occurrence and during the continuance of a Default, the
Collateral Agent) shall determine, which Permitted Investments shall be held in
the name and be under the control of the Collateral Agent (and, if the
Collateral Account is a securities account, credited to the Collateral Account),
PROVIDED that at any time after the occurrence and during the continuance of an
Event of Default, the Collateral Agent may (and, if instructed by the Majority
Solutia Lenders, shall) in its (or their) discretion at any time and from time
to time elect to liquidate any such Permitted Investments and to apply or cause
to be applied the proceeds thereof to the payment of the Secured Obligations
then due and payable in the manner specified in Section 6.09.

          5.04 COVER FOR DESIGNATED LETTERS OF CREDIT. In the event that the
Company shall be required pursuant to Section 2.10(i) of the Solutia Credit
Agreement, or pursuant to Section 5.01 of the Non-Sharing Intercreditor
Agreement or pursuant to the Letter of Credit Override Agreement, to provide
cover for Designated Letters of Credit, such cover shall be paid in cash to the
Collateral Agent and deposited by the Collateral Agent into a separate
sub-account in the Collateral Account and shall constitute collateral security
FIRST for the obligations of the Company in respect of the Designated Letters of
Credit outstanding from time to time and SECOND as collateral security for the
other Secured Obligations hereunder. Any amounts that remain in the Collateral
Account at the time that all obligations of the Securing Parties in respect of
Designated Letters of Credit have been paid in full, and all Designated Letters
of Credit expired or terminated, shall (x) if no Event of Default shall at the
time be continuing, be applied to the prepayment and/or reduction of commitments
as provided in Section 2.10(i) of the Solutia Credit Agreement and (y) if an
Event of Default shall at the time be continuing, be applied to the Secured
Obligations in accordance with the applicable provisions of the Security
Documents.

          Section 6. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 4, the Securing Parties
hereby jointly and severally agree with each Secured Party as follows:

          6.01 DELIVERY AND OTHER PERFECTION. Each Securing Party shall:

          (a) if any of the shares, securities, moneys or property required to
     be pledged by such Securing Party under clauses (a)(i) or (a)(ii) of
     Section 4 are received by such Securing Party forthwith, either (x)
     transfer and deliver to the Collateral Agent such shares or securities so
     received by such Securing Party (together with the certificates for any
     such shares and securities duly endorsed in blank or accompanied by undated
     stock powers duly executed in blank), all of which thereafter shall be held
     by the Collateral Agent, pursuant to the terms of this Agreement, as part
     of the Collateral or (y) take such other action as the Collateral Agent
     shall deem reasonably necessary or appropriate to duly record the Lien
     created hereunder in such shares, securities, moneys or property in said
     clauses (a)(i) and (a)(ii);

          (b) deliver and pledge to the Collateral Agent any and all Instruments
     constituting part of the Collateral in which such Securing Party purports
     to grant a security interest hereunder, endorsed and/or accompanied by such
     instruments of


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                                     - 17 -

     assignment and transfer in such form and substance as the Collateral Agent
     may request; PROVIDED, that so long as no Event of Default shall have
     occurred and be continuing, such Securing Party may retain for collection
     in the ordinary course any Instruments received by such Securing Party in
     the ordinary course of its business and the Collateral Agent shall,
     promptly upon request of such Securing Party through the Company, make
     appropriate arrangements for making any Instrument pledged by such Securing
     Party available to such Securing Party for purposes of presentation,
     collection or renewal (any such arrangement to be effected, to the extent
     deemed appropriate by the Collateral Agent, against trust receipt or like
     document);

          (c) deliver and pledge to the Collateral Agent any and all promissory
     notes or other instruments evidencing any of the Pledged Debt, endorsed
     and/or accompanied by such instruments of assignment and transfer in such
     form and substance as the Collateral Agent may request;

          (d) give, execute, deliver, file, register and record, authorize or
     obtain all such financing statements, notices, instruments, documents,
     agreements or other papers, and take such other action, as may be necessary
     or desirable (in the reasonable judgment of the Collateral Agent) to
     create, preserve, publish notice of, perfect, validate or preserve the
     priority of the security interest granted pursuant hereto or to enable the
     Collateral Agent to exercise and enforce its rights hereunder with respect
     to such pledge and security interest, including causing any or all of the
     Stock Collateral to be transferred of record into the name of the
     Collateral Agent or its nominee (and the Collateral Agent agrees that if
     any Stock Collateral is transferred into its name or the name of its
     nominee, the Collateral Agent will thereafter promptly give to the
     respective Securing Party copies of any notices and communications received
     by it with respect to the Stock Collateral pledged by such Securing Party
     hereunder), PROVIDED that notices to account debtors in respect of any
     Accounts or Instruments shall be subject to the provisions of clause (h)
     below;

          (e) keep accurate books and records relating to the Collateral, and
     stamp or otherwise mark such books and records in such manner as the
     Collateral Agent may reasonably require in order to reflect the security
     interests granted by this Agreement;

          (f) permit representatives of the Collateral Agent, upon reasonable
     notice, at any time during normal business hours to inspect and make
     abstracts from its books and records pertaining to the Collateral, and,
     during the continuance of an Event of Default, permit representatives of
     the Collateral Agent to be present at such Securing Party's place of
     business to receive copies of all communications and remittances relating
     to the Collateral, and forward copies of any notices or communications
     received by such Securing Party with respect to the Collateral, all in such
     manner as the Collateral Agent may reasonably require;

          (g) execute and deliver and, subject to the execution thereof by the
     Collateral Agent, cause to be filed, such continuation statements, and do
     such other acts and things, as may be necessary to maintain the perfection
     of the security interest granted pursuant hereto; and


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 18 -

          (h) without limiting the provisions of Section 5.02 hereof, upon the
     occurrence and during the continuance of any Default, upon request of the
     Collateral Agent, promptly notify (and such Securing Party hereby
     authorizes the Collateral Agent so to notify) each account debtor in
     respect of any Accounts or Instruments that such Collateral has been
     assigned to the Collateral Agent hereunder, and that any payments due or to
     become due in respect of such Collateral are to be made directly to the
     Collateral Agent.

          6.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise
permitted in Section 6.02(a) of the Solutia Credit Agreement, without the prior
written consent of the Collateral Agent, no Securing Party shall file or suffer
to be on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
for the benefit of the Secured Parties.

          6.03 PRESERVATION OF RIGHTS. The Collateral Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.

          6.04 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.

          (a) STOCK COLLATERAL.

          (1) PERCENTAGE PLEDGED. The Securing Parties will cause the Stock
     Collateral to constitute at all times (i) in the case of the Issuers other
     than Restricted Issuers, 100% of all the total number of shares of capital
     stock of each such Issuer then issued and outstanding and (ii) in the case
     of the Restricted Issuers, 65% of the total number of shares of the voting
     stock of the Restricted Issuers (it being understood that, in the case of
     Solutia Europe, shares of treasury stock or stock of Solutia Europe held by
     Solutia Europe shall not be deemed to be outstanding) and 100% of the total
     number of shares of all other classes of capital stock of each Restricted
     Issuer then issued and outstanding.

          (2) VOTING AND OTHER RIGHTS. So long as no Event of Default shall have
     occurred and be continuing, the Securing Parties shall have the right to
     exercise all voting, consensual and other powers of ownership pertaining to
     the Stock Collateral for all purposes not inconsistent with the terms of
     this Agreement, the Non-Sharing Intercreditor Agreement, the Solutia Credit
     Agreement or any other instrument or agreement referred to herein or
     therein, PROVIDED that the Securing Parties jointly and severally agree
     that they will not vote the Stock Collateral in any manner that results in
     a violation of the terms of this Agreement, the Non-Sharing Intercreditor
     Agreement, the Solutia Credit Agreement or any such other instrument or
     agreement; and the Collateral Agent shall execute and deliver to the
     Securing Parties or cause to be executed and delivered to the Securing
     Parties all such proxies, powers of attorney, dividend and other orders,
     and all such instruments, without recourse, as the Securing Parties may
     reasonably request for the purpose of enabling the Securing Parties to
     exercise the rights and powers that they are entitled to exercise pursuant
     to this Section 6.04(a)(2).


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                                     - 19 -

          (3) DIVIDENDS. Unless and until an Event of Default has occurred and
     is continuing, the Securing Parties shall be entitled to receive and retain
     any dividends on the Stock Collateral paid in cash out of earned surplus.

          (4) RIGHTS FOLLOWING DEFAULT. If any Event of Default shall have
     occurred, then so long as such Event of Default shall continue, and whether
     or not the Collateral Agent or any other Secured Party exercises any
     available right to declare any Secured Obligation due and payable or seeks
     or pursues any other relief or remedy available to it under applicable law
     or under or in respect of this Agreement, the Non-Sharing Intercreditor
     Agreement, the Solutia Credit Agreement, the Astaris Guaranty Agreement,
     the Co-gen Guaranty Agreement, the Co-gen Lease, the Designated Letters or
     Credit or any other agreement relating to such Secured Obligation, all
     dividends and other distributions on the Stock Collateral shall be paid
     directly to the Collateral Agent and retained by it in the Collateral
     Account as part of the Stock Collateral, subject to the terms of this
     Agreement, and, if the Collateral Agent shall so request in writing, the
     Securing Parties jointly and severally agree to execute and deliver to the
     Collateral Agent appropriate additional dividend, distribution and other
     orders and documents to that end, PROVIDED that if such Event of Default is
     cured, any such dividend or distribution theretofore paid to the Collateral
     Agent shall, upon request of the Securing Parties (except to the extent
     theretofore applied to the Secured Obligations), be returned by the
     Collateral Agent to the Securing Parties.

          (b) INTELLECTUAL PROPERTY.

          (1) For the purpose of enabling the Collateral Agent to exercise
     rights and remedies under Section 6.05 at such time as the Collateral Agent
     shall be lawfully entitled to exercise such rights and remedies, and for no
     other purpose, each Securing Party hereby grants to the Collateral Agent,
     to the extent assignable, an irrevocable, non-exclusive right (exercisable
     without payment of royalty or other compensation to such Securing Party) to
     use, assign, license or sublicense any of the Intellectual Property now
     owned or hereafter acquired by such Securing Party, wherever the same may
     be located, including in such right reasonable access to all media in which
     any of the Intellectual Property may be recorded or stored and to all
     computer programs used for the compilation or printout thereof.

          (2) Notwithstanding anything contained herein to the contrary, the
     Securing Parties will be permitted to exploit, use, enjoy, protect,
     license, sublicense, assign, sell, dispose of or take other actions with
     respect to the Intellectual Property in the ordinary course of the business
     of the Securing Parties. In furtherance of the foregoing, unless an Event
     of Default shall have occurred and be continuing the Collateral Agent shall
     from time to time, upon the request of the respective Securing Party,
     execute and deliver any instruments, certificates or other documents, in
     the form so requested, that such Securing Party through the Company shall
     have certified are appropriate (in its judgment) to allow it to take any
     action permitted above (including relinquishment of the right provided
     pursuant to clause (1) immediately above as to any specific Intellectual
     Property). Further, upon the payment in full of all of the Secured
     Obligations and cancellation, termination or expiration of the Commitments
     (as defined in the Solutia Credit


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                                     - 20 -

     Agreement), Letters of Credit (as so defined) and Designated Letters of
     Credit or earlier expiration of this Agreement or release of the
     Collateral, the Collateral Agent shall grant back to the Securing Parties
     the right granted pursuant to clause (1) immediately above. The exercise of
     rights and remedies under Section 6.05 by the Collateral Agent shall not
     terminate the rights of the holders of any licenses or sublicenses
     theretofore granted by the Securing Parties in accordance with the first
     sentence of this clause (2).

          (3) The Securing Parties will furnish to the Collateral Agent from
     time to time (but, unless a Default (as defined in the Solutia Credit
     Agreement) shall have occurred and be continuing, no more frequently than
     semi-annually) statements and schedules further identifying and describing
     the Copyright Collateral, the Patent Collateral and the Trademark
     Collateral, respectively, and such other reports in connection with the
     Copyright Collateral, the Patent Collateral and the Trademark Collateral as
     the Collateral Agent may reasonably request, all in reasonable detail; and
     promptly upon request of the Collateral Agent, following receipt by the
     Collateral Agent of any statements, schedules or reports pursuant to this
     clause (3), modify this Agreement by amending Annexes 4, 5 and/or 6, as the
     case may be, to include any Copyright, Patent or Trademark that becomes
     part of the Collateral under this Agreement.

          6.05 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing:

          (a) each Securing Party shall, at the request of the Collateral Agent,
     assemble the Collateral owned by it at such place or places, reasonably
     convenient to both the Collateral Agent and such Securing Party, designated
     in the Collateral Agent's request;

          (b) the Collateral Agent may make any reasonable compromise or
     settlement deemed desirable with respect to any of the Collateral and may
     extend the time of payment, arrange for payment in installments, or
     otherwise modify the terms of, any of the Collateral;

          (c) the Collateral Agent shall have all of the rights and remedies
     with respect to the Collateral of a secured party under the Uniform
     Commercial Code (whether or not the Uniform Commercial Code is in effect in
     the jurisdiction where the rights and remedies are asserted) and such
     additional rights and remedies to which a secured party is entitled under
     the laws in effect in any jurisdiction where any rights and remedies
     hereunder may be asserted, including the right, to the fullest extent
     permitted by applicable law, to exercise all voting, consensual and other
     powers of ownership pertaining to the Collateral as if the Collateral Agent
     were the sole and absolute owner thereof (and each Securing Party agrees to
     take all such action as may be appropriate to give effect to such right);

          (d) the Collateral Agent in its discretion may, in its name or in the
     name of any Securing Party or otherwise, demand, sue for, collect or
     receive any money or property at any time payable or receivable on account
     of or in exchange for any of the Collateral, but shall be under no
     obligation to do so; and


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 21 -

          (e) the Collateral Agent may, upon ten Business Days' prior written
     notice to the Securing Parties of the time and place, with respect to the
     Collateral or any part thereof which shall then be or shall thereafter come
     into the possession, custody or control of the Collateral Agent, the other
     Secured Parties or any of their respective agents, sell, lease, assign or
     otherwise dispose of all or any part of such Collateral, at such place or
     places as the Collateral Agent deems best, and for cash or for credit or
     for future delivery (without thereby assuming any credit risk), at public
     or private sale, without demand of performance or notice of intention to
     effect any such disposition or of the time or place thereof (except such
     notice as is required above or by applicable statute and cannot be waived),
     and the Collateral Agent or any other Secured Party or anyone else may be
     the purchaser, lessee, assignee or recipient of any or all of the
     Collateral so disposed of at any public sale (or, to the extent permitted
     by law, at any private sale) and thereafter, to the fullest extent
     permitted by law, hold the same absolutely, free from any claim or right of
     whatsoever kind, including any right or equity of redemption (statutory or
     otherwise), of the Securing Parties, any such demand, notice and right or
     equity being hereby expressly waived and released, to the fullest extent
     permitted by law. In the event of any sale, assignment, or other
     disposition of any of the Trademark Collateral, the goodwill connected with
     and symbolized by the Trademark Collateral subject to such disposition
     shall be included, and the Securing Parties shall supply to the Collateral
     Agent or its designee, for inclusion in such sale, assignment or other
     disposition, all Intellectual Property relating to such Trademark
     Collateral. The Collateral Agent may, without notice or publication,
     adjourn any public or private sale or cause the same to be adjourned from
     time to time by announcement at the time and place fixed for the sale, and
     such sale may be made at any time or place to which the sale may be so
     adjourned.

The proceeds of each collection, sale or other disposition under this
Section 6.05 shall be applied in accordance with Section 6.09.

          The Securing Parties recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral Agent may be compelled, with respect to any sale
of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Securing Parties acknowledge that any such private sales may be at prices and on
terms less favorable to the Collateral Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Collateral Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the Company or issuer
thereof to register it for public sale.

          6.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 6.05 are insufficient
to cover the costs and expenses of such realization and the payment in full of
the Secured Obligations, the Securing Parties shall remain liable for any
deficiency.

          6.07 LOCATIONS; NAMES. Without at least 30 days' prior written notice
to the Collateral Agent, no Securing Party shall change its "location" (as
defined in Section 9-307 of


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 22 -

the Uniform Commercial Code) or change its name from the name shown as its
current legal name on Annex 1.

          6.08 PRIVATE SALE. The Collateral Agent and the Secured Parties shall
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 6.05 conducted in a
commercially reasonable manner. Each Securing Party hereby waives any claims
against the Collateral Agent or any other Secured Party arising by reason of the
fact that the price at which the Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even if the
Collateral Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.

          6.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Collateral Agent under this Section 6, shall be applied by the Collateral
Agent in the manner set forth in Section 5.02 of the Non-Sharing Intercreditor
Agreement.

          6.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Collateral Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Collateral Agent is hereby appointed the attorney-in-fact of each
Securing Party for the purpose of carrying out the provisions of this Section 6
and taking any action and executing any instruments which the Collateral Agent
may reasonably deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Collateral Agent shall be entitled under this Section 6 to make collections in
respect of the Collateral, the Collateral Agent shall have the right and power
to receive, endorse and collect all checks made payable to the order of any
Securing Party representing any dividend, payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same.

          6.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Securing Party shall (i) file such financing
statements and other documents in such offices as the Collateral Agent may
request to perfect the security interests granted by Section 4 of this
Agreement, (ii) deliver to the Collateral Agent all certificates evidencing any
of the Pledged Stock, accompanied by undated stock powers duly executed in
blank, and, to the extent required by Section 4(b), all promissory notes and
other instruments evidencing any Pledged Debt identified in Annex 8 and (iii)
execute and deliver such short form assignments or security agreements relating
to Collateral consisting of the Intellectual Property as the Collateral Agent
may reasonably request. Without limiting the foregoing, each Securing Party
consents that Uniform Commercial Code financing statements may be filed
describing the Collateral as set forth in Section 4.

          6.12 TERMINATION. When all Secured Obligations shall have been paid in
full and the Commitments (as defined in the Solutia Credit Agreement) shall have
been cancelled or terminated, and all Letters of Credit and Designated Letters
of Credit shall have been terminated or expired, this Agreement shall terminate,
and the Collateral Agent shall forthwith cause to be


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 23 -

assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the respective Securing
Party. The Collateral Agent shall, at the expense of the Company, also execute
and deliver to the respective Securing Party upon such termination such Uniform
Commercial Code termination statements and such other documentation as shall be
reasonably requested by the respective Securing Party to effect the termination
and release of the Liens on the Collateral.

          6.13 FURTHER ASSURANCES. Each Securing Party agrees that, from time to
time upon the written request of the Collateral Agent, such Securing Party will
execute and deliver such further documents and do such other acts and things as
the Collateral Agent may reasonably request in order fully to effect the
purposes of this Agreement.

          Section 7. MISCELLANEOUS.

          7.01 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the respective parties hereto
pursuant to Section 6.01 of the Non-Sharing Intercreditor Agreement. All such
communications shall be deemed to have been given at the times specified in said
Section 6.01.

          7.02 NO WAIVER. No failure on the part of the Collateral Agent or any
other Secured Party to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any other Secured Party of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

          7.03 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Securing Party and the Collateral Agent in accordance with the provisions of
Section 6.03 of the Non-Sharing Intercreditor Agreement. Any such amendment or
waiver shall be binding upon the Collateral Agent, each Secured Party and each
Securing Party.

          7.04 EXPENSES. The Securing Parties jointly and severally agree to
reimburse each of the Collateral Agent and the other Secured Parties for all
reasonable costs and expenses of the Collateral Agent and the other Secured
Parties (including the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceeding
resulting therefrom, including all manner of participation in or other
involvement with (w) performance by the Collateral Agent of any obligations of
the Securing Parties in respect of the Collateral that the Securing Parties have
failed or refused to perform, (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Collateral Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 24 -

transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 7.04, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to
Section 4.

          7.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each Securing
Party, the Collateral Agent, each Secured Party and each holder of any of the
Secured Obligations (PROVIDED that no Securing Party shall assign or transfer
its rights or obligations hereunder without the prior written consent of the
Collateral Agent).

          7.06 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

          7.07 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.

          7.08 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

          7.09 AGENTS AND ATTORNEYS-IN-FACT. The Collateral Agent may employ
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the gross negligence or willful misconduct of any such agents or
attorneys-in-fact selected by it in good faith.

          7.10 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.

          7.11 ADDITIONAL SUBSIDIARY GUARANTORS. As contemplated by Section
6.01(l) of the Solutia Credit Agreement, new Domestic Subsidiaries of the
Company formed or acquired by the Company after the date hereof, and any
Domestic Subsidiary that ceases to be an "Immaterial Subsidiary" (as defined in
the Solutia Credit Agreement), are required to become a "Subsidiary Guarantor"
under this Agreement, by executing and delivering to the Collateral Agent and
the Collateral Trustee a Guarantee Assumption Agreement in the form of Exhibit J
to the Solutia Credit Agreement. Accordingly, upon the execution and delivery of
any such Guarantee Assumption Agreement by any such Subsidiary, such new
Subsidiary shall automatically and immediately, and without any further action
on the part of any Person, become a "Subsidiary Guarantor" and a "Securing
Party" for all purposes of this Agreement, and Annexes 1 through 7, inclusive,
hereto shall be deemed to be supplemented in the manner specified in such
Guarantee Assumption Agreement. In addition, upon execution and delivery of any
such Guarantee Assumption Agreement, the new Subsidiary Guarantor makes the
representations and warranties set forth in Section 3 of the Non-Sharing
Intercreditor Agreement.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 25 -

          IN WITNESS WHEREOF, the parties hereto have caused this Restated
Security and Guarantee Agreement to be duly executed and delivered as of the day
and year first above written.

                                  SOLUTIA INC.


                                  By: /s/ Kevin Wilson
                                      ------------------------------------------
                                      Name: Kevin Wilson
                                      Title: Vice President and Treasurer


                              SUBSIDIARY GUARANTORS

                                  CPFILMS INC.


                                  By: /s/ Kevin Wilson
                                      ------------------------------------------
                                      Name: Kevin Wilson
                                      Title: Attorney-in-Fact

                                  MONCHEM, INC.


                                  By: /s/ Kevin Wilson
                                      ------------------------------------------
                                      Name: Kevin Wilson
                                      Title: President

                                  MONCHEM INTERNATIONAL, INC.


                                  By: /s/ Kevin Wilson
                                      ------------------------------------------
                                      Name: Kevin Wilson
                                      Title: President


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                     - 26 -

                                  SOLUTIA SYSTEMS, INC.


                                  By: /s/ Kevin Wilson
                                     ------------------------------------------
                                     Name: Kevin Wilson
                                     Title: President

                              COLLATERAL AGENT

                                  CITIBANK, N.A., as Collateral Agent


                                  By: /s/ James N. Simpson
                                     ------------------------------------------
                                     Name: James N. Simpson
                                     Title: Vice President


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 1

                                 FILING DETAILS



- ------------------------------------------------------------------------------------------------------------------------------------
                     TYPE OF
                   ORGANIZATION                   ORGANIZATIONAL                   PLACE OF BUSINESS OR                   FORMER
CURRENT LEGAL     (CORPORATION,    JURISDICTION        ID                            LOCATION OF CHIEF      LOCATION       LEGAL
NAME (NO TRADE  LIMITED LIABILITY      OF            NUMBER       CURRENT MAILING       EXECUTIVE             OF          NAME(s)
    NAMES)        COMPANY, ETC.)   ORGANIZATION  (IF APPLICABLE)     ADDRESS             OFFICER             GOODS        (IF ANY)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
  Solutia Inc.     Corporation       Delaware       2735025      575 Maryville         575 Maryville       Alvin, TX       Queeny
                                                                 Centre Drive           Centre Drive       Cantonment,    Chemical
                                                                 St. Louis, MO         St. Louis, MO          FL          Company
                                                                     63141                 63141           Decatur, AL
                                                                                                           Foley, AL
                                                                                                           Greenwood,
                                                                                                               SC
                                                                                                          Springfield,
                                                                                                               MA
                                                                                                           St. Louis,
                                                                                                               MO
                                                                                                           Trenton, MI
- ------------------------------------------------------------------------------------------------------------------------------------
    Solutia        Corporation       Delaware       2976482      575 Maryville         575 Maryville           Not          None
 Systems, Inc.                                                    Centre Drive          Centre Drive       applicable
                                                                  St.Louis, MO         St. Louis, MO
                                                                     63141                 63141
- ------------------------------------------------------------------------------------------------------------------------------------
    Monchem        Corporation       Delaware       2735035      The Corporation       575 Maryville          Not           None
 International,                                                   Trust Company        Centre Drive        applicable
      Inc.                                                      1209 Orange Street     St. Louis, MO
                                                                 Wilmington, DE           63141
                                                                      19801

- ------------------------------------------------------------------------------------------------------------------------------------
 Monchem, Inc.     Corporation       Delaware       2735322      The Corporation       575 Maryville          Not           None
                                                                  Trust Company        Centre Drive        applicable
                                                                1209 Orange Street     St. Louis, MO
                                                                 Wilmington, DE           63141
                                                                     19801

- ------------------------------------------------------------------------------------------------------------------------------------
 CPFilms Inc.      Corporation       Delaware       0312016      4210 The Great       4210 The Great        Fieldale,    Courtaulds
                                                                     Road                  Road                VA        Performance
                                                                  Fieldale, VA          Fieldale, VA                     Films, Inc.
                                                                      24089               24089                            Martin
                                                                                                                         Processing,
                                                                                                                            Inc.
                                                                                                                             Hat
                                                                                                                        Corporation
                                                                                                                             of
                                                                                                                          America
- ------------------------------------------------------------------------------------------------------------------------------------



                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 2

                               "NEW DEBTOR" EVENTS

                                      None.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 3

                                  PLEDGED STOCK

                                  Solutia Inc.



- -----------------------------------------------------------------------------------------------------------
                                                                              NUMBER OF SHARES
        ISSUER               CERTIFICATE NO(s).    REGISTERED OWNER               PLEDGED
- -----------------------------------------------------------------------------------------------------------

                                                                
Monchem International, Inc.          3                Solutia Inc.       6.5 shares of common stock
                                                                         with par value $1.00 each

- -----------------------------------------------------------------------------------------------------------

Solutia Systems, Inc.                2                Solutia Inc.       100 shares of common stock
                                                                         with par value $0.01 each

- -----------------------------------------------------------------------------------------------------------


                           Monchem International, Inc.



- -----------------------------------------------------------------------------------------------------------
                                                                                    NUMBER OF SHARES
           ISSUER            CERTIFICATE NO(s).        REGISTERED OWNER                  PLEDGED
- -----------------------------------------------------------------------------------------------------------
                                                                       
Monchem, Inc.                        3           Monchem International, Inc.    10 shares of common stock
                                                                                with par value $1.00 each

- -----------------------------------------------------------------------------------------------------------

Solutia UK Holdings Ltd.             2           Monchem International, Inc.    4,602,926 ordinary shares
                                                                                of L0.01 each

- -----------------------------------------------------------------------------------------------------------

Solutia Europe             No certificates, but  Monchem International, Inc.    11,870 registered shares
S.A./N.V.                  shares are numbered                                  without nominal value
                           488,321 through
                           500,190

- ------------------------------------------------------------------------------------------------------------



                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 4

                 LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
                    APPLICATIONS FOR COPYRIGHT REGISTRATIONS

                                    [To Come]


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 5

                     LIST OF PATENTS AND PATENT APPLICATIONS

                                    [To Come]


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 6

                LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
                  TRADEMARK AND SERVICE MARK REGISTRATIONS AND
            APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS

                                    [To Come]


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                                                         ANNEX 7

                LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS

                                    [To Come]


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT


                                                                         ANNEX 8

                                  PLEDGED DEBT

                       [See Definition of "Pledged Debt"]

                                      None.


                  NON-SHARING SECURITY AND GUARANTEE AGREEMENT



                                      - 2 -


                          ANNEX 6 TO SECURITY AGREEMENT

EX-4.10

                                                                    EXHIBIT 4.10

                  INTERCREDITOR AND COLLATERAL TRUST AGREEMENT

          INTERCREDITOR AND COLLATERAL TRUST AGREEMENT dated as of July 25,
2002, between SOLUTIA INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "COMPANY"); CPFILMS INC. ("CPFILMS"
and, individually, a "SUBSIDIARY GUARANTOR"); each of the subsidiaries of the
Company that become "Subsidiary Guarantors hereunder pursuant to Section 8.13
after the date hereof (individually a "SUBSIDIARY GUARANTOR" and, collectively,
with CPFilms, the "SUBSIDIARY GUARANTORS" and, together with the Company, the
"GRANTORS"); CITIBANK, N.A., as administrative agent under the Solutia Credit
Agreement referred to below; BANK OF AMERICA, N.A., as administrative agent
under the Astaris Credit Agreement referred to below; CITIBANK, N.A., as agent
under the Co-gen Participation Agreement referred to below; CITIBANK, N.A., as
collateral agent under the Non-Sharing Intercreditor Agreement referred to
below; and HSBC Bank USA, a banking corporation and trust company duly organized
and validly existing under the laws of the State of New York, as collateral
trustee (in such capacity, together with its successors in such capacity, the
"COLLATERAL TRUSTEE") for the Sharing Secured Parties (as defined below).

          The Company, certain lenders (the "SOLUTIA LENDERS") and Citibank,
N.A., as administrative agent (in such capacity, together with its successors
and assigns, the "SOLUTIA ADMINISTRATIVE AGENT") are parties to a Second Amended
and Restated Credit Agreement dated as of July 25, 2002 (as modified and
supplemented and in effect from time to time, the "SOLUTIA CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by means of loans and letters of credit) to be made by said lenders to the
Company and the other borrowers referred to therein in an aggregate principal or
face amount not exceeding $600,000,000. In addition, the Company may from time
to time be obligated to various of the Solutia Lenders (or their affiliates) in
respect of one or more Hedging Agreements permitted under Section 6.02(g)(v) of
the Solutia Credit Agreement.

          Astaris LLC, a limited liability company organized under the laws of
Delaware ("ASTARIS"), certain lenders (the "ASTARIS LENDERS") and Bank of
America, N.A., as administrative agent (in such capacity, together with its
successors in such capacity, the "ASTARIS ADMINISTRATIVE AGENT"), are parties to
a Credit Agreement dated as of September 14, 2000 (as modified and supplemented
and in effect from time to time, the "ASTARIS CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for loans to be made by said
lenders to Astaris in an aggregate principal amount not exceeding $275,000,000.
The obligations of Astaris under the Astaris Credit Agreement have been
partially guaranteed by the Company pursuant to a Guaranty Agreement dated as of
September 14, 2000 (as modified and supplemented and in effect from time to
time, the "ASTARIS GUARANTY AGREEMENT") by the Company in favor of Astaris LLC
and in favor of the Astaris Lenders and the Astaris Administrative Agent.

          The Company, State Street Bank and Trust Company, as trustee (in such
capacity, together with its successors in such capacity, the "CO-GEN TRUSTEE"),
certain financial institutions named as purchasers therein (collectively, the
"CO-GEN PURCHASERS") and Citibank, N.A., as agent for the Co-gen Purchasers (in
such capacity, together with its successors in such capacity, the "CO-GEN
AGENT"), are parties to an Amended and Restated Participation Agreement dated as
of April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN PARTICIPATION AGREEMENT"), providing, subject to the terms and
conditions thereof, for loans and

                        SHARING INTERCREDITOR AGREEMENT



                                      - 2 -

investments to be made by the Co-gen Purchasers to the Co-gen Trustee in an
aggregate principal amount not exceeding $33,000,000. The obligations of the
Co-gen Trustee under the Co-gen Participation Agreement have been guaranteed by
the Company pursuant to an Amended and Restated Instrument Guaranty dated as of
April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN GUARANTY AGREEMENT") by the Company in favor of the Co-gen Trustee
and the Co-gen Purchasers. In addition, the Co-gen Trustee, as lessor, and the
Company, as lessee, are party to an Amended and Restated Lease dated as of April
24, 1998 (as modified and supplemented and in effect from time to time, the
"CO-GEN LEASE") pursuant to which the Company agrees to make certain rent
payments to the Co-gen Trustee in consideration of the lease of the
co-generation facility referred to therein, which rent payments service the
loans and investments made by the Co-gen Purchasers.

          In addition, certain of the Solutia Lenders may have issued letters of
credit for the account of the Company or a Subsidiary, or may in the future
issue letters of credit for the account of the Company, which are or will be
identified in this Agreement as "Designated Letters of Credit" (as hereinafter
defined). It is contemplated that, in connection herewith, such Solutia Lenders
will execute and deliver a Letter of Credit Override Agreement providing for
certain common terms to be applicable to such letters of credit.

          The Company is also party to (a) an Indenture dated as of October 1,
1997 (the "1997 NOTES INDENTURE") between the Company and JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank), as trustee, pursuant to which the
Company has issued its 6.50% Notes due 2002, 7.375% Debentures due 2027 and
6.72% Debentures due 2037 in an aggregate outstanding principal amount of
$600,000,000 as of the date hereof and (b) a Fiscal Agency Agreement dated as of
February 11, 2000 (the "EURO NOTES AGREEMENT") between Solutia Europe S.A./N.V.,
the Company and Kreidietbank S.A. Luxembourgeoise, as Fiscal Agent, pursuant to
which Solutia Europe S.A./N.V. has issued its 6.25% Notes due 2005, guaranteed
by the Company in an aggregate principal amount of EURO200,000,000 as of the
date hereof.

          Pursuant to the provisions of the 1997 Notes Indentures and the Euro
Notes Agreement, the Company in certain circumstances may not, and may not
permit any of its Restricted Subsidiaries (as defined therein) to, secure Debt
(as defined in the 1997 Notes Indenture and Euro Notes Agreement) with a lien on
any Principal Property (as defined below) or any shares of stock or indebtedness
of the Company or any such Restricted Subsidiary (such Principal Property,
shares and indebtedness being herein collectively referred to as the "SHARED
PROPERTY") without equally and ratably securing the notes, debentures and other
instruments issued under the 1997 Notes Indenture and the Euro Notes Agreement.

          Accordingly, to induce the Solutia Lenders to enter into the Solutia
Credit Agreement as described above and to continue to extend credit under the
Solutia Credit Agreement, to induce the Astaris Lenders to enter into an
Amendment No. 3 to the Astaris Credit Agreement and to continue to extend credit
under the Astaris Credit Agreement, to induce the Co-gen Purchasers to continue
to extend credit and make investments under the Co-gen Participation Agreement
and to induce the Solutia Lenders to extend credit in respect of Designated
Letters of Credit and hedging agreements, the parties hereto hereby agree as
follows:

                        SHARING INTERCREDITOR AGREEMENT



                                      - 3 -

          Section 1. DEFINITIONS, ETC.

          (a) DEFINED TERMS. As used in this Agreement, the following terms have
the meanings specified below:

          "ADMINISTRATIVE AGENTS" means collectively, the Solutia Administrative
     Agent, together with its successors in such capacity, and the Astaris
     Administrative Agent, together with its successors in such capacity.

          "ASTARIS ADMINISTRATIVE AGENT" has the meaning assigned to such term
     in the preamble to this Agreement.

          "ASTARIS COMMITMENTS" means the "Commitments" under and as defined in
     the Astaris Credit Agreement or, if no "Commitments" are then outstanding,
     then the aggregate unpaid principal amount of the "Advances" (under and as
     defined in the Astaris Credit Agreement) owing to the Astaris Lenders.

          "BANKRUPTCY EVENT" means, with respect to any Grantor, the institution
     of any proceeding by or against any Grantor seeking to adjudicate it a
     bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
     arrangement, adjustment, protection, relief, or composition of it or its
     debts under any law relating to bankruptcy, insolvency or reorganization or
     relief of debtors, or seeking the entry of an order for relief or the
     appointment of a receiver, trustee, custodian or other similar official for
     it or for any substantial part of its property and, in the case of any such
     proceeding instituted against it (but not instituted by it), either such
     proceeding shall remain undismissed or unstayed for a period of 60 days, or
     any of the actions sought in such proceeding (including the entry of an
     order for relief against, or the appointment of a receiver, trustee,
     custodian or other similar official for, it or for any substantial part of
     its property) shall occur; or any Grantor shall take any corporate action
     to authorize any of the actions set forth above.

          "CAPITALIZED LEASE OBLIGATION" means, with respect to any Person for
     any period, an obligation of such Person to pay rent or other amounts under
     a lease that is required to be capitalized for financial reporting purposes
     in accordance with GAAP; and the amount of such obligation shall be the
     capitalized amount shown on the balance sheet of such Person as determined
     in accordance with GAAP.

          "CO-GEN INSTRUMENTS" "means the "Instruments" under and as defined in
     the Co-gen Participation Agreement.

          "COLLATERAL AGENT" means Citibank, N.A., in its capacity as Collateral
     Agent under the Non-Sharing Intercreditor Agreement.

          "COLLATERAL TRUSTEE" has the meaning assigned to such term in the
     preamble to this Agreement.

          "COLLATERAL TRUSTEE'S FEES" means all fees, costs and expenses of the
     Collateral Trustee of the type described in Section 5.03.

                        SHARING INTERCREDITOR AGREEMENT



                                      - 4 -

          "COMPANY" has the meaning assigned to such term in the preamble to
     this Agreement.

          "CREDIT AGREEMENT OBLIGATIONS" means, collectively, (a) in the case of
     the Company, the Solutia Credit Agreement Obligations, the Make-Whole
     Obligations, the Synthetic Lease Obligations, the Designated Letter of
     Credit Obligations, the Hedging Obligations and Term Loan Facility
     Obligations, (b) in the case of the Subsidiary Guarantors, all present and
     future obligations of the Subsidiary Guarantors under the Non-Sharing
     Security and Guarantee Agreement and (c) in the case of both Grantors, all
     present and future obligations of the Grantors to the Credit Agreement
     Secured Parties hereunder.

          "CREDIT AGREEMENT SECURED PARTIES" means, collectively, the Collateral
     Agent, the Co-gen Agent, the Co-gen Purchasers, the Solutia Lenders, the
     Astaris Lenders, any Term Loan Facility Lenders and the Administrative
     Agents (and any affiliate of a Solutia Lender that shall have entered into
     the respective hedging agreement giving rise to such Hedging Obligations).

          "CREDIT AGREEMENTS" means, collectively the Solutia Credit Agreement,
     the Astaris Credit Agreement and the Co-gen Participation Agreement.

          "DEBT" of any Person means, without duplication: (a) indebtedness of
     such Person for borrowed money, (b) obligations of such Person evidenced by
     bonds, debentures, notes or other similar instruments, (c) obligations of
     such Person to pay the deferred purchase price of property or services
     (other than trade accounts payable arising, and accrued expenses incurred,
     in the ordinary course of business so long as such trade accounts payable
     are payable on customary trade terms or on other trade terms that are more
     advantageous to the Company), (d) Capitalized Lease Obligations of such
     Person and (e) obligations of such Person under direct or indirect
     guaranties in respect of, and obligations (contingent or otherwise) to
     purchase or otherwise acquire, or otherwise to assure a creditor against
     loss in respect of, indebtedness or obligations of others of the kinds
     referred to in clauses (a) through (d) above.

          "DEBT INSTRUMENTS" means, collectively, (i) the Solutia Credit
     Agreement, (ii) the Astaris Guarantee Agreement, (iii) the Co-gen
     Participation Agreement, (iv) the Co-gen lease, (v) the Co-gen Instruments,
     (vi) the L/C Agreements, (vii) each Hedging Agreement under which a Credit
     Agreement Obligation exists, (viii) any agreement pursuant to which a Term
     Loan Facility is established and (ix) each Existing Note Indenture and New
     Notes Indenture, and any notes or debentures issued thereunder.

          "DEFAULT RATE" means, with respect to any advance made by any Sharing
     Secured Party hereunder or under any other Sharing Security Document, the
     rate per annum at which interest would then be payable on past due
     Revolving Credit Base Rate Advances under Section 2.07(b) of the Solutia
     Credit Agreement.

          "DESIGNATED LETTER OF CREDIT" means, collectively, (a) each letter of
     credit issued by a Solutia Lender for the account of the Company or a
     Subsidiary that is identified in

                        SHARING INTERCREDITOR AGREEMENT



                                      - 5 -

     Appendix A hereto and (b) each letter of credit for the account of the
     Company hereafter designated by the Company as a "Designated Letter of
     Credit" pursuant to Section 3 of the Non-Sharing Intercreditor Agreement.

          "DESIGNATED LETTER OF CREDIT OBLIGATIONS" means all obligations of the
     Company in respect of Designated Letters of Credit, including any
     agreements, applications and other instruments entered into in connection
     with such Designated Letters of Credit.

          "DISTRIBUTION DATE" means the date on which any funds are distributed
     by the Collateral Trustee in accordance with the provisions of Section
     4.01.

          "EVENT OF DEFAULT" means (i) any "Event of Default" under and as
     defined in the Solutia Credit Agreement or the Co-gen Participation
     Agreement, (ii) any failure of the Company to pay amounts that become due
     and payable under the Astaris Guarantee, (iii) any failure of the Company
     to pay principal or interest when due and payable under any L/C Agreement
     or (iv) any "Event of Default" under and as defined in any Senior Notes
     Document.

          "EXISTING MORTGAGED FACILITIES" means the facilities of the Company
     located in or near Decatur, Alabama, Indian Orchard, Massachusetts,
     Trenton, Michigan, Greenwood, South Carolina and Alvin, Texas, each of
     which is subject to a Non-Sharing Mortgage in favor of the Collateral Agent
     as security, INTER ALIA, for the Non-Sharing Obligations.

          "EXISTING NOTES INDENTURES" means, collectively, the indenture and/or
     the fiscal agency agreement, as applicable, pursuant to which the following
     notes or debentures of the Company or Solutia Europe S.A./N.V., as
     applicable, have been issued: the 6.50% notes due 2002, the 7.375%
     debentures due 2027, the 6.72% debentures due 2037 and the 6.25% euro notes
     due 2005, as in effect on the date hereof and without giving effect to any
     modifications or supplements after the date hereof.

          "GAAP" means the generally accepted accounting principles in the
     United States of America.

          "GRANTORS" has the meaning assigned to such term in the preamble to
     this Agreement.

          "HEDGING AGREEMENT" means any interest rate protection agreement,
     foreign currency exchange agreement, commodity price protection agreement
     or other interest or currency exchange rate or commodity price hedging
     arrangement entered into with any Solutia Lender (or any affiliate
     thereof).

          "HEDGING OBLIGATIONS" means obligations of the Company under any
     Hedging Agreement.

          For purposes hereof, it is understood that any Hedging Obligations to
     a Person arising under an agreement entered into at the time such Person
     (or an affiliate thereof) is a "Lender" party to the Solutia Credit
     Agreement shall nevertheless continue to constitute

                        SHARING INTERCREDITOR AGREEMENT



                                      - 6 -

     Hedging Obligations for purposes hereof, notwithstanding that such Person
     (or its affiliate) may have assigned all of its Advances and other
     interests in the Solutia Credit Agreement and, at the time a claim is to be
     made in respect of such Hedging Obligations, such Person (or its affiliate)
     is no longer a "Lender" party to the Solutia Credit Agreement.

          "INDENTURE TRUSTEES" means (a) in the case of the Existing Notes
     Indentures, (i) JPMorgan Chase Bank (as successor to The Chase Manhattan
     Bank), in its capacity as indenture trustee under the Indenture dated as of
     October 1, 1997 relating to the Company's 6.50% notes due 2002, 7.375%
     debentures due 2027 and 6.72% debentures due 2037 and (ii) Kredietbank S.A.
     Luxembourgeoise, as Fiscal Agent, relating to Solutia Europe S.A./N.V.'s
     6.25% Notes due 2005, guaranteed by the Company (b) in the case of the 2009
     Notes Indenture, HSBC Bank USA, in its capacity as indenture trustee, and
     (c) in the case of any other New Notes Indenture, any indenture trustee or
     fiscal agent under such New Notes Indenture.

          "L/C AGREEMENTS" means the reimbursement agreements pursuant to which
     Designated Letters of Credit have been (or are in the future) issued.

          "LIEN" means any lien, security interest or other charge or
     encumbrance of any kind, or any other type of preferential arrangement,
     including the lien or retained security title of a conditional vendor and
     any easement, right of way or other encumbrance on title to real property.

          "MAKE-WHOLE OBLIGATIONS" means all obligations of the Company under
     the Astaris Guaranty Agreement as in effect on the date hereof and without
     giving effect to any amendments or supplements made to the Astaris Guaranty
     Agreement after the date hereof.

          "MARTINSVILLE FACILITY" means the production facility of CPFilms
     located in or near Martinsville, Virginia.

          "MORTGAGED FACILITIES" means the Existing Mortgaged Facilities and the
     New Mortgaged Facilities.

          "NEW MORTGAGED FACILITIES" means the Martinsville Facility and
     Pensacola Facility.

          "NEW NOTES INDENTURE" means any indenture pursuant to which any senior
     debt securities of the Company are issued which, at the time of such
     issuance, is designated by the Company as a "New Notes Indenture" pursuant
     to Section 7.03 for purposes hereof. The parties hereto acknowledge that
     the 2009 Notes Indenture is a "New Notes Indenture".

          "NEW NOTES INDENTURE DESIGNATION LETTER" has the meaning ascribed
     thereto in Section 7.03.

          "NON-SHARING INTERCREDITOR AGREEMENT" means the Restated Intercreditor
     and Collateral Agency Agreement dated as of July [___], 2002 between the
     Company, the Subsidiary Guarantors, the Solutia Administrative Agent, the
     Astaris Administrative

                        SHARING INTERCREDITOR AGREEMENT



                                      - 7 -

     Agent, the Co-gen Agent and the Collateral Agent, as the same shall be
     modified and supplemented and in effect from time to time.

          "NON-SHARING MORTGAGES" means, collectively, one or more instruments
     of Mortgage, Deed of Trust, Assignment of Rents, Security Agreement and
     Fixture Filing executed by the Company in favor of the Collateral Agent for
     the benefit of the holders of the Non-Sharing Obligations (or in favor of a
     trustee for the benefit of the Collateral Agent and the holders of the
     Non-Sharing Obligations), covering the Existing Mortgaged Facilities and
     securing the Non-Sharing Obligations.

          "NON-SHARING OBLIGATIONS" means, collectively, (i) the obligations of
     the Grantors to each Solutia Lender (and, in respect of any Hedging
     Obligations, any affiliate of a Solutia Lender that shall have entered into
     the respective hedging agreement giving rise to such Hedging Obligations),
     each Astaris Lender, each Co-gen Purchaser, each Term Loan Facility Lender
     and each Administrative Agent and their respective successors and assigns
     in respect of the Solutia Credit Agreement Obligations, the Make-Whole
     Obligations, the Synthetic Lease Obligations, the Term Loan Facility
     Obligations, the Designated Letter of Credit Obligations and the Hedging
     Obligations and (ii) any Debt incurred by the Company under a Term Loan
     Facility.

          "NON-SHARING SECURITY AND GUARANTEE AGREEMENT" means the Restated
     Security and Guarantee Agreement dated as of July [___], 2002 between the
     Company, the Subsidiary Guarantors and the Collateral Agent, as the same
     shall be modified and supplemented and in effect from time to time.

          "PENSACOLA FACILITY" means the manufacturing facility of the Company
     located in or near Pensacola, Florida.

          "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
     United States of America, or of any agency thereof, or obligations
     guaranteed as to principal and interest by the United States of America, or
     of any agency thereof, in either case maturing not more than 90 days from
     the date of acquisition thereof; (b) certificates of deposit or time
     deposits issued by any bank or trust company organized under the laws of
     the United States of America or any state thereof and having capital,
     surplus and undivided profits of at least $500,000,000, maturing not more
     than 90 days from the date of acquisition thereof; (c) fully collateralized
     repurchase agreements with a term of not more than 90 days for securities
     described in clause (a) of this definition and entered into with a
     financial institution satisfying the criteria described in clause (b) of
     this definition; (d) commercial paper rated A-1 or better or P-1 by
     Standard & Poor's Ratings Services, a division of McGraw-Hill Companies,
     Inc., or Moody's Investors Services, Inc., respectively, maturing not more
     than 90 days from the date of acquisition thereof; in each case so long as
     the same (x) provide for the payment of principal and interest (and not
     principal alone or interest alone) and (y) are not subject to any
     contingency regarding the payment of principal or interest; and (e) mutual
     funds which invest in securities issued or guaranteed by the United States
     of America or an agency or instrumentality thereof representing a full
     faith and credit obligation of the United States of America and, with

                        SHARING INTERCREDITOR AGREEMENT



                                      - 8 -

     respect to each of the foregoing, that is maintained in book-entry form on
     the records of a Federal Reserve Bank.

          "PERSON" means an individual, partnership, corporation (including a
     business trust), joint stock company, trust, unincorporated association,
     joint venture, limited liability company or other entity, or a government
     or any political subdivision or agency thereof.

          "PRINCIPAL PROPERTY" has the meaning assigned to such term in the
     Existing Notes Indentures, in each case as in effect on the date hereof and
     without giving effect to any modifications or supplements after the date
     hereof.

          "RELEVANT SHARING OBLIGATIONS" means at any time (a) in the case of
     any Credit Agreement Secured Party, the aggregate amount of Credit
     Agreement Obligations held by such Credit Agreement Secured Party at such
     time that are due and payable (including for these purposes amounts
     required to be delivered as cover for letters of credit) and (b) in the
     case of any holder of Senior Notes, the sum of (x) the aggregate principal
     amount of such Senior Note outstanding at such time PLUS (y) accrued and
     unpaid interest on such Senior Note outstanding at such time PLUS (z) any
     other amounts owing on such Senior Notes at such time. For purposes hereof,
     prior to the date upon which the Collateral Trustee shall have been
     notified of a Triggering Event, Hedging Obligations shall be excluded from
     the determination of Relevant Sharing Obligations.

          "REQUISITE SHARING SECURED PARTIES" means, at any time, Solutia
     Lenders, Astaris Lenders, Co-gen Purchasers, Term Loan Facility Lenders and
     holders of the Senior Notes holding at such time a majority in principal
     amount of the sum of (a) the Solutia Revolving Credit Exposures,
     outstanding Solutia Term Advances and unused Solutia Commitments (each as
     defined in the Solutia Credit Agreement), (b) the Make-Whole Obligations
     (which, for purposes hereof, shall be deemed to be equal to 50% of the
     Astaris Commitments), (c) the Co-gen Instruments, (d) the Term Loan
     Facility Obligations and (e) the Senior Notes of all Series then
     Outstanding (as the term "Outstanding" is defined in the Senior Notes
     Indentures). For purposes hereof, the Collateral Trustee shall be entitled
     to conclusively rely and act upon a certification from the Solutia
     Administrative Agent as to the Solutia Revolving Credit Exposures,
     outstanding Solutia Term Advances and unused Solutia Commitments, upon a
     certification from the Astaris Administrative Agent as to the Make-Whole
     Obligations, upon a certification from the Co-gen Agent as to the Co-gen
     Instruments, upon a certificate from the Company or the relevant agent
     under the Term Loan Facility as to the Term Loan Facility Obligations and
     upon a certification from the Indenture Trustees as to the aggregate amount
     of Senior Notes of all Series Outstanding at any time.

          Notwithstanding the foregoing, to authorize any release pursuant to
     Section 7.02(b), or any amendment pursuant to Section 8.02(ii), "Requisite
     Sharing Secured Parties" means (i) the Majority Lenders under the Solutia
     Credit Agreement, (ii) the Majority Lenders under the Astaris Credit
     Agreement, (iii) the Majority Purchasers under the Co-gen Participation
     Agreement, (iv) the holders of a majority in principal amount of the Term
     Loan Facility Obligations and (v) the holders of not less than a majority
     in principal amount of each Series (voting separately) of Senior Notes

                        SHARING INTERCREDITOR AGREEMENT



                                      - 9 -

     then Outstanding. For purposes hereof, the Collateral Trustee shall be
     entitled to conclusively rely upon a certification from the Solutia
     Administrative Agent that such Majority Lenders under the Solutia Credit
     Agreement have authorized such release or amendment, upon a certification
     from the Astaris Administrative Agent that such Majority Lenders under the
     Astaris Credit Agreement have authorized such release or amendment, upon a
     certification from the Co-gen Agent that such Majority Purchasers have
     authorized such release or amendment, upon a certification from the Company
     or the relevant agent under the Term Loan Facility that holders of a
     majority of the Term Loan Facility Obligations have authorized such release
     or amendment and upon a certification from the Indenture Trustees that such
     majority in principal amount of each Series of Senior Notes have authorized
     such release or amendment.

          "RESPONSIBLE OFFICER" means any officer within the corporate trust
     department of the Collateral Trustee, including any vice president,
     assistant vice president, assistant secretary, assistant treasurer, trust
     officer or any other officer of the Collateral Trustee who customarily
     performs functions similar to those performed by the Persons who at the
     time shall be such officers, respectively, or to whom any corporate trust
     matter is referred because of such Person's knowledge of and familiarity
     with the particular subject and who shall have direct responsibility for
     the administration of this Agreement.

          "RESTRICTED SUBSIDIARY" has the meaning assigned to such term in the
     Existing Notes Indentures, in each case as in effect on the date hereof and
     without giving effect to any modifications or supplements after the date
     hereof.

          "SECURITY DOCUMENTS" means, collectively, the Sharing Security
     Documents and the Non-Sharing Security Documents under and as defined in
     the Non-Sharing Intercreditor Agreement.

          "SENIOR NOTES" means the notes and debentures issued pursuant to any
     Existing Notes Indenture or New Notes Indenture.

          "SENIOR NOTES DOCUMENTS" means, collectively, the Existing Notes
     Indenture, each New Notes Indenture and the Senior Notes issued pursuant to
     any Existing Notes Indenture or New Notes Indenture.

          "SENIOR NOTES OBLIGATIONS" means the obligations of the Company to pay
     the principal of, premium, if any, interest on and any other amount owing
     on, the notes and debentures issued under the Existing Notes Indentures and
     any New Notes Indenture.

          "SERIES" means, with respect to any Senior Notes, all of the Senior
     Notes having the same interest rate, maturity and designation.

          "SHARED COLLATERAL" means the property from time to time subject to
     the Liens of the Sharing Security Documents.

          "SHARED PROPERTY" has the meaning assigned to such term in the
     preamble to this Agreement.

                        SHARING INTERCREDITOR AGREEMENT



                                     - 10 -

          "SHARING MORTGAGES" means, collectively, one or more instruments of
     Mortgage, Deed of Trust, Assignment of Rents, Security Agreement and
     Fixture Filing executed by the Company or CPFilms in favor of the
     Collateral Trustee for the benefit of the holders of the Sharing
     Obligations (or in favor of a trustee for the benefit of the Collateral
     Trustee and the holders of the Sharing Obligations), covering the Mortgaged
     Facilities and securing the Sharing Obligations.

          "SHARING OBLIGATIONS" means, collectively, (i) the Non-Sharing
     Obligations and (ii) the Senior Notes Obligations.

          "SHARING PERCENTAGE" means at any time (a) in the case of any Credit
     Agreement Secured Party, the aggregate amount of Credit Agreement
     Obligations held by such Credit Agreement Secured Party at such time that
     are due and payable (including for these purposes amounts required to be
     delivered as cover for letters of credit) expressed as a percentage of the
     sum (herein, the "RELEVANT SUM") of (w) the total amount of Credit
     Agreement Obligations that are then due and payable PLUS (x) the sum of the
     aggregate principal amount of the Senior Notes outstanding at such time
     PLUS (y) accrued and unpaid interest on such Senior Notes PLUS (z) any
     other amounts owing on such Senior Notes and (b) in the case of any holder
     of Senior Notes, the sum of (x) the aggregate principal amount of the
     Senior Notes held by such holder PLUS (y) accrued and unpaid interest on
     such Senior Notes PLUS (z) any other amounts owing on such Senior Notes
     expressed as a percentage of the Relevant Sum. For purposes hereof, (i)
     prior to the date upon which the Collateral Trustee shall have been
     notified of a Triggering Event, Hedging Obligations shall be excluded from
     the determination of Sharing Percentages and (ii) for purposes of
     calculations hereunder, all amounts denominated in Euros (as defined in the
     Solutia Credit Agreement) shall be converted into the Dollar Equivalent (as
     therein defined) thereof as of the applicable date of calculation.

          "SHARING SECURED PARTIES" means, collectively, the Collateral Agent,
     the Collateral Trustee and the other holders from time to time of the
     Sharing Obligations.

          "SHARING SECURITY AGREEMENT" means the Sharing Security Agreement
     dated as of July [___], 2002 between the Company, CPFilms and the
     Collateral Trustee, as the same shall be modified and supplemented and in
     effect from time to time.

          "SHARING SECURITY DOCUMENTS" means, collectively, the Sharing Security
     Agreement, each Sharing Mortgage, and any other pledge agreements, security
     agreements, assignment agreements, mortgages, deeds of trust or other
     instruments providing for collateral security on Shared Property from time
     to time executed by any Grantor in favor of the Collateral Trustee.

          "SOLUTIA ADMINISTRATIVE AGENT" has the meaning assigned to such term
     in the preamble to this Agreement.

          "SOLUTIA COMMITMENTS" means the "Commitments" under and as defined in
     the Solutia Credit Agreement .

                        SHARING INTERCREDITOR AGREEMENT



                                     - 11 -

          "SOLUTIA CREDIT AGREEMENT OBLIGATIONS" means the principal and
     interest on the Advances made by the Solutia Lenders to the Borrowers under
     and as defined in the Solutia Credit Agreement, all obligations of the
     Company in respect of Letters of Credit issued thereunder and all other
     amounts from time to time owing to the Solutia Lenders or the Solutia
     Administrative Agent under the Solutia Credit Agreement.

          "SOLUTIA REVOLVING CREDIT EXPOSURES" means the "Revolving Credit
     Exposures" under and as defined in the Solutia Credit Agreement.

          "SOLUTIA TERM ADVANCES" means the "Term Advances" under and as defined
     in the Solutia Credit Agreement.

          "SUBSIDIARY" has the meaning assigned to such term in the Existing
     Notes Indenture, in each case as in effect on the date hereof and without
     giving effect to any modifications or supplements after the date hereof.

          "SUBSIDIARY GUARANTORS" has the meaning assigned to such term in the
     Solutia Credit Agreement.

          "SYNTHETIC LEASE OBLIGATIONS" means all obligations of the Company
     under the Co-gen Guaranty Agreement, the Co-gen Lease and the other
     Operative Documents (as defined in the Co-gen Participation Agreement);
     PROVIDED that if such obligations exceed $33,000,000, then only the portion
     of such obligations that do not exceed $33,000,000, together with interest
     thereon at the rate specified in the Co-gen Participation Agreement, shall
     be deemed to be "Synthetic Lease Obligations".

          "TERM LOAN FACILITY" means any term loan facility satisfying the
     conditions set forth in Section 6.02(f)(x) of the Solutia Credit Agreement
     and designated by the Company at the time of such incurrence as a
     "Non-Sharing Obligation" hereunder (with a copy of such designation being
     delivered to the Collateral Trustee).

          "TERM LOAN FACILITY LENDERS" means the lenders from time to time
     holding any Term Loan Facility Obligations.

          "TERM LOAN FACILITY OBLIGATIONS" means any Debt incurred by the
     Company under a Term Loan Facility.

          "TRIGGERING EVENT" means the occurrence of any one or more of the
     following: (i) the failure to pay in full the principal of any Sharing
     Obligation upon final maturity thereof, (ii) the occurrence of any "Event
     of Default" under and as defined in any Senior Notes Document, (iii) the
     occurrence of a Bankruptcy Event with respect to any Grantor, (iv) the
     acceleration of the maturity of any Sharing Obligations (other than solely
     the Make-Whole Obligations or the Hedging Obligations) upon the occurrence
     of an "Event of Default" under and as defined in the documentation
     governing such Sharing Obligation or (v) the issuance of any direction by
     the Collateral Agent to the Collateral Trustee, following the occurrence
     and during the continuance of any Event of Default, to

                        SHARING INTERCREDITOR AGREEMENT



                                     - 12 -

     commence exercise of any of the Collateral Trustee's rights and remedies
     hereunder or under any of the Sharing Security Documents.

          "TRUST ESTATE" means the right, title and interest of the Collateral
     Trustee in, to and under the Sharing Security Documents.

          "2009 NOTES INDENTURE" means the Indenture dated as of July 9, 2002
     between SOI Funding Corp., a Delaware corporation, and HSBC Bank USA, a New
     York banking corporation, as trustee, providing for the issuance by SOI
     Funding Corp. of its 11.25% Senior Secured Notes due 2009, as modified
     pursuant to a Supplemental Indenture providing for the assumption by the
     Company of all of the obligations of SOI Funding Corp. under such Indenture
     and in respect of such Senior Secured Notes.

          "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
     effect from time to time in the State of New York.

          (b) TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (i) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (iii) the words "herein", "hereof" and "hereunder", and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (iv) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (v)
the words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

          Section 2. REPRESENTATIONS AND WARRANTIES BY GRANTORS. Each Grantor
represents and warrants to the Sharing Secured Parties that:

          2.01. INCORPORATION; GOOD STANDING. Such Grantor has been duly
organized, is validly existing and in good standing as a corporation or other
applicable entity under the laws of the jurisdiction of its organization, is
duly qualified to transact business and is in good standing in each state where
any Shared Collateral is located except where failure to be so qualified would
not have a Material Adverse Effect (as defined in the Solutia Credit Agreement).

          2.02. CORPORATE AUTHORITY; NO BREACH. The execution, delivery and
performance by such Grantor of this Agreement and the Sharing Security Documents
to which it is a party, and the other transactions contemplated hereby and
thereby, are within such Grantor's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene (i) such

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                                     - 13 -

Grantor's charter or bylaws or (ii) law or any contractual restriction binding
on or affecting such Grantor.

          2.03. NO CONSENTS OR APPROVALS. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body or any other third party is required for the due execution,
delivery and performance by such Grantor of this Agreement or the Sharing
Security Documents to which it is a party, other than those authorizations,
approvals, notices, filings and actions that have been obtained, filed or taken
on or before the date hereof by such Grantor or the Company. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for the
transactions contemplated hereby or thereby, except for (i) filings and
recordings in respect of the Security Documents and (ii) the authorizations,
approvals, actions, notices and filings (x) the failure to obtain would not have
a Material Adverse Effect (as defined in the Solutia Credit Agreement) or (y)
which have been duly obtained, taken, given or made and are in full force and
effect.

          2.04. ENFORCEABLE OBLIGATIONS, ETC. This Agreement has been and each
of the Sharing Security Documents to which it is a party when delivered
hereunder will have been, duly executed and delivered by such Grantor. This
Agreement is, and each of the Sharing Security Documents to which it is a party
when delivered hereunder will be, the legal, valid and binding obligation of
such Grantor enforceable against such Grantor in accordance with their
respective terms.

          Section 3. DECLARATION AND ACCEPTANCE OF TRUST; REMEDIES.

          3.01 DECLARATION AND ACCEPTANCE OF TRUST. The Collateral Trustee
hereby declares, and each of the Grantors agrees, that the Collateral Trustee
holds the Trust Estate as trustee in trust under this Agreement for the equal
and ratable benefit of the Sharing Secured Parties as provided herein. By
acceptance of the benefits of this Agreement and the Sharing Security Documents,
each Sharing Secured Party (whether or not a signatory hereto) (i) consents to
the appointment of the Collateral Trustee as trustee hereunder, (ii) confirms
that the Collateral Trustee shall have the authority to act as the exclusive
agent of such Sharing Secured Party for enforcement of any remedies under or
with respect to the Sharing Security Documents and the giving or withholding of
any consent or approval under the Shared Collateral or any Grantor's obligations
with respect thereto and (iii) agrees that, except as expressly provided in this
Agreement, it shall not take any action to enforce any of such remedies or give
any such consents or approvals.

          3.02 DETERMINATIONS RELATING TO SHARED COLLATERAL. In the event (i)
the Collateral Trustee shall at any time receive any written request from any
Grantor under a Sharing Security Document for consent or approval with respect
to any matter or thing relating to any Shared Collateral or such Grantor's
obligations with respect thereto or (ii) there shall be due to or from the
Collateral Trustee under the provisions of any Sharing Security Document any
performance or the delivery of any instrument or (iii) a Responsible Officer of
the Collateral Trustee shall receive notice of any nonperformance by any Grantor
of any covenant or any breach of any representation or warranty set forth in any
Sharing Security Document, then, in each such event, the Collateral Trustee
shall advise each Administrative Agent, the Co-gen Agent, the Collateral

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                                     - 14 -

Agent and each Indenture Trustee of the matter or thing as to which consent has
been requested or the performance or instrument or other document required to be
delivered or the nonperformance or breach of which the Collateral Trustee has
received notice. Subject to the provisions of Section 7.02(b) and 8.02(ii), the
Collateral Agent shall at all times have the exclusive authority to direct the
Collateral Trustee's response to any of the events or circumstances contemplated
in clauses (i), (ii) or (iii) above.

          3.03 ACKNOWLEDGEMENT OF LIEN PRIORITY. The Grantors and the Sharing
Secured Parties (by acceptance of this Agreement) each agrees that the Lien of
the Non-Sharing Mortgages on each Existing Mortgaged Facility is senior in right
of security to the Lien of the Sharing Mortgages on each such Existing Mortgaged
Facility to the extent of the "Senior Lien Limit" under and as defined in the
Non-Sharing Mortgages covering the Existing Mortgaged Facilities. The Collateral
Trustee agrees at any time and from time to time, prior to the time that a
Responsible Officer of the Collateral Trustee shall have actual knowledge of the
occurrence of a Triggering Event, to execute and deliver such supplements to the
Sharing Mortgages covering the Existing Mortgaged Facilities, as the Collateral
Agent shall request in order to acknowledge an increase in the "Senior Lien
Limit" under and as defined in the Non-Sharing Mortgages covering the Existing
Mortgaged Facilities.

          3.04 REMEDIES.

          (a) NOTICE OF TRIGGERING EVENT. Upon becoming aware of the occurrence
of any Triggering Event, the Solutia Administrative Agent, the Astaris
Administrative Agent, the Co-gen Agent, the Collateral Agent or any Indenture
Trustee, as applicable, shall promptly give written notice thereof to the
Collateral Trustee, and the Collateral Trustee, upon receipt of such notice,
shall promptly notify the Solutia Administrative Agent, the Astaris
Administrative Agent, the Co-gen Agent, the Collateral Agent, the Indenture
Trustees and the Grantors in writing that a Triggering Event has occurred.

          (b) DIRECTIONS TO COLLATERAL TRUSTEE. The Collateral Agent shall at
all times (whether before or after the occurrence of a Triggering Event) have
the right and authority to direct the time, method and place of conducting any
proceeding for the exercise of any right or remedy available to the Collateral
Trustee with respect to the Shared Collateral, or of exercising any trust or
power conferred on the Collateral Trustee, or for the taking of any other action
authorized by the instruments comprising the Trust Estate (including the making
of any determinations to be made by the Collateral Trustee thereunder); PROVIDED
that (i) following the occurrence of a Triggering Event, the Requisite Sharing
Secured Parties shall have the right at any time to assume such right and
authority of the Collateral Agent by notice to the Administrative Agents, the
Co-gen Agent, the Indenture Trustees, the Collateral Agent and the Collateral
Trustee and, thereafter, shall have the exclusive right and authority to direct
the Collateral Trustee as to such matters and (ii) nothing in this Section 3.04
shall impair the right of the Collateral Trustee in its discretion to take any
action deemed proper by the Collateral Trustee and which is not inconsistent
with such direction by the Collateral Agent or Requisite Sharing Secured
Parties, as applicable.

          3.05 RIGHT TO MAKE ADVANCES. In the event an advance of funds shall at
any time be required in the reasonable judgment of the Collateral Agent, for the
preservation or

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                                     - 15 -

maintenance of any Shared Collateral, any Credit Agreement Secured Party, with
the consent of the Collateral Agent (or, if the Requisite Sharing Secured
Parties shall have assumed the right and authority of the Collateral Agent as
contemplated by Section 3.04(b), with the consent of the Requisite Sharing
Secured Parties), shall be entitled to make such advance on behalf of, or in
lieu of, the Collateral Trustee after reasonable notice to the Company of its
intention to do so but without notice to any other Sharing Secured Party. Each
such advance shall constitute a Collateral Trustee's Fee and shall be repaid as
if such advance were a Collateral Trustee's Fee, with interest at the applicable
Default Rate, by the Company upon demand by the Collateral Trustee, and in any
event, whether or not such demand shall have been made, out of the proceeds of
any Shared Collateral distributed pursuant to clause FIRST of Section 4.01. In
the event any Sharing Secured Party shall receive any funds which, under this
Section 3.05, belong to the Collateral Trustee or any other Sharing Secured
Party, such Sharing Secured Party shall remit such funds promptly to the
Collateral Trustee for distribution to the Collateral Trustee or such other
Sharing Secured Party, as the case may be, and prior to such remittance shall
hold such funds in trust for the Collateral Trustee or such other Sharing
Secured Party, as the case may be.

          3.06 NATURE OF SHARING SECURED PARTIES' RIGHTS. All of the Sharing
Secured Parties shall be bound by any instruction or direction given by the
Collateral Agent or the Requisite Sharing Secured Parties, as applicable,
pursuant to this Section 3.

          Section 4. APPLICATION OF CERTAIN AMOUNTS.

          4.01 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided, including Section 3.03 hereof, the proceeds of any collection, sale or
other realization of all or any part of the Shared Collateral pursuant to any of
the Sharing Security Documents, and any other cash at the time held by the
Collateral Trustee under this Agreement or any of the Sharing Security
Documents, shall be applied by the Collateral Trustee as soon as practicable
after receipt (or as and when required by the relevant Sharing Security
Document) as follows:

          FIRST, to the Collateral Trustee in an amount equal to the Collateral
     Trustee's Fees which are unpaid as of the applicable Distribution Date PLUS
     the amount of Collateral Trustee's Fees advanced or paid by any Person
     (other than the Company) which has theretofore advanced or paid any such
     Collateral Trustee's Fees and any amount referred to in Section 3.05 paid
     by any Person (with interest thereon at the applicable Default Rate) which
     amount the Collateral Trustee shall pay to such Person (and to the extent
     such amount refers to amounts advanced pursuant to Section 3.05, a like
     amount of such advance shall be discharged);

          SECOND, after and giving effect to the payment in full of the Sharing
     Obligations referred to in clause FIRST above, to the Sharing Secured
     Parties equally and ratably, each in proportion to their respective Sharing
     Percentages of the Relevant Sharing Obligations then held by them, until
     all the Sharing Obligations have been paid in full (or monies set aside for
     such payment in full as provided in the next paragraph); and

          THIRD, after payment in full of all Sharing Obligations (or the set
     aside of monies for such payment in full as provided in the next paragraph)
     and the termination of all of

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                                     - 16 -

     the commitments and letters of credit under the Credit Agreements, to the
     applicable Grantor or its successors or assigns, as its interests may
     appear.

          In the event that at the time of any application of monies pursuant to
clause SECOND above any Senior Note Obligations held by any holder of Senior
Notes shall not have been declared (or become) due and payable, then on the date
of such application, the Collateral Trustee shall set aside the monies that
would otherwise have been paid to such holder in respect of such Senior Note
Obligations into a segregated collateral account for the exclusive right and
benefit of such holder, and shall notify the respective Indenture Trustee for
such Senior Note Obligations of the amount so deposited into such segregated
collateral account; PROVIDED that solely with respect to Senior Notes
Obligations under the 2009 Notes Indenture and solely with respect to the
proceeds of a disposition constituting an Asset Sale (as defined in the 2009
Notes Indenture), if no Triggering Event or Event of Default (as defined in the
2009 Notes Indenture) has occurred and is continuing, the monies otherwise
allocable to the 2009 Notes pursuant to the foregoing shall be paid to the
Company for use in accordance with the third and fourth paragraphs of Section
4.12(a) of the 2009 Notes Indenture and otherwise subject to the terms and
conditions set forth therein. The balance from time to time held in any such
segregated collateral account shall be invested in such Permitted Investments as
the Collateral Trustee shall from time to time in its discretion determine and
shall be available for application to the Senior Note Obligations held by such
holder upon request of such holder (or an Indenture Trustee on its behalf) until
such time as all such Senior Note Obligations have been paid in full, PROVIDED
that if (a) any such Senior Note Obligations shall have been declared (or
become) due and payable and (b) no such request shall have been received by the
Collateral Trustee for application to such Senior Note Obligations within the
Applicable Period after such Senior Note Obligations have been declared (or
become) due and payable, then the portion of such monies that would otherwise
have been applied to such Senior Note Obligations shall be applied by the
Collateral Trustee in the manner specified in clause SECOND or, if applicable,
clause THIRD above.

          For purposes hereof, "APPLICABLE PERIOD" means (a) two years with
respect to the 6.25% Euro Notes due 2005 issued by Solutia Europe S.A./N.V., (b)
three years with respect to the 6.50% notes due 2002, 7.375% debentures due 2027
and 6.72% debentures due 2037, in each case issued by the Company and (c) with
respect to Senior Note Obligations under any New Notes Indenture, such period as
is prescribed in such New Notes Indenture for the discharge from trust of
unclaimed monies deposited with the applicable trustee or paying agent.

          The Company shall deliver to the applicable Indenture Trustee, within
5 days after the applicable Senior Note Obligations have been declared (or
become) due and payable, notice that monies referred to in the second paragraph
of this Section 4.01 have been set aside into a segregated collateral account
for the exclusive right and benefit of the holders of such Senior Notes
Obligations.

          4.02 RELIANCE BY COLLATERAL TRUSTEE; PAYMENTS. The Collateral Trustee
shall be entitled to conclusively rely upon a certificate from each
Administrative Agent and the Co-gen Agent as to the aggregate amount of Credit
Agreement Sharing Obligations that on any Distribution Date are held by any
Credit Agreement Secured Party and as to the amount thereof that are due and
payable, and shall remit the amount of any cash to be applied pursuant to clause
SECOND of Section 4.01 to the Credit Agreement Sharing Obligations that are then
due and

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                                     - 17 -

payable directly to such Administrative Agent or the Co-gen Agent, as applicable
(it being understood that, for purposes hereof, amounts to be applied to
Designated Letter of Credit Obligations shall be remitted directly to the
Collateral Agent to be held as cover for the Designated Letter of Credit
Obligations as provided in Section 5.04 of the Non-Sharing Security and
Guarantee Agreement). Similarly, the Collateral Trustee shall be entitled to
conclusively rely upon a certificate from the Indenture Trustees as to the
aggregate amount of Senior Note Obligations that on any Distribution Date are
held by any holder of Senior Notes and as to the amount thereof that are due and
payable, and shall, except to the extent provided in the second paragraph of
Section 4.01, remit the amount of any cash to be applied pursuant to clause
SECOND of Section 4.01 to the Senior Note Obligations that are then due and
payable directly to the respective Indenture Trustees.

          4.03 PAYMENT PROVISIONS. For the purposes of applying the provisions
of Section 4.01, all interest to be paid on any of the Sharing Obligations
pursuant to the terms of any Debt Instrument shall, as among the Sharing Secured
Parties and irrespective of whether such interest is or would be recognized or
allowed in any bankruptcy or similar proceeding, be treated as a Sharing
Obligation for purposes hereof.

          4.04 CERTAIN PROCEEDS OF SHARED COLLATERAL. Anything herein or in any
of the other Sharing Security Documents to the contrary notwithstanding, the
Collateral Trustee shall promptly remit to the Company any amounts standing to
the credit of the Shared Collateral Account under and as defined in the Sharing
Security Agreement if, prior to the time that a Responsible Officer of the
Collateral Trustee shall have actual knowledge of the occurrence of a Triggering
Event, the Collateral Trustee shall be instructed by the Collateral Agent to
remit such amounts to the Company.

          Section 5. AGREEMENTS WITH COLLATERAL TRUSTEE.

          5.01 DELIVERY OF DEBT INSTRUMENTS. On or before the date hereof, the
Company shall have delivered to the Collateral Trustee a true and complete copy
of each of the Debt Instruments as in effect on the date hereof. Promptly upon
the execution thereof, the Company shall deliver to the Collateral Trustee a
true and complete copy of any and all amendments, modifications or supplements
to any Debt Instrument and of any Hedging Agreement or New Notes Indenture
hereafter entered into constituting a Debt Instrument.

          5.02 INFORMATION AS TO HOLDERS. Each Administrative Agent, the Co-gen
Agent and the applicable Indenture Trustee shall deliver to the Collateral
Trustee within 30 days after request by the Collateral Trustee, a list setting
forth (as of the date of such request), (a) in the case of the Administrative
Agents and the Co-gen Agent, for each Debt Instrument pursuant to which any
Credit Agreement Sharing Obligations are outstanding and (b) in the case of the
applicable Indenture Trustee, for the Senior Notes, (i) the aggregate principal
amount then outstanding thereunder, (ii) the interest rate or rates then in
effect thereunder, (iii) the amount thereof then due and payable and (iv) the
names of the holders thereof and the unpaid principal amount thereof then due
and payable to each such holder. In addition, each Administrative Agent, the
Co-gen Agent and the applicable Indenture Trustee shall furnish to the
Collateral Trustee within 30 days of a request therefor a list (as of the date
of such request) setting forth the name and address of each party to whom
notices must be sent under (x) in the case of the

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                                     - 18 -

Administrative Agents and the Co-gen Agent, the Debt Instruments pursuant to
which any Credit Agreement Sharing Obligations are outstanding and (y) in the
case of the applicable Indenture Trustee, the Senior Notes Documents, and the
Company agrees to furnish promptly to the Collateral Trustee any changes or
additions to such list.

          5.03 EXPENSES; INDEMNITY; DAMAGE WAIVER.

          (a) COSTS AND EXPENSES. The Grantors jointly and severally agree to
pay (i) to the Collateral Trustee, from time to time upon demand, compensation
(which shall not be limited by any provision of law in regard to compensation of
a trustee of an express trust) for its services hereunder and for administering
the Trust Estate, as heretofore or from time to time agreed upon in writing
between the Collateral Trustee and the Company, (ii) all reasonable
out-of-pocket expenses incurred by the Collateral Trustee and its affiliates,
including the reasonable fees, charges and disbursements of counsel for the
Collateral Trustee, in connection with the preparation and administration of
this Agreement or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (iii) all reasonable out-of-pocket expenses
incurred or required to be advanced by the Collateral Trustee in connection with
the administration of the Trust Estate or the preservation, protection or
defense of the Collateral Trustee's rights under this Agreement and in and to
the Shared Collateral and the Trust Estate, (iv) all out-of-pocket expenses
incurred by the Collateral Trustee, including the fees, charges and
disbursements of any counsel for the Collateral Trustee, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Section 5.03, including in connection with any
workout, restructuring or negotiations in respect thereof and (v) all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any other document referred to therein.

          (b) INDEMNIFICATION BY THE GRANTORS. The Grantors jointly and
severally agree to indemnify and hold harmless the Collateral Trustee and its
directors, officers, employees, agents and advisors from and against any and all
claims, losses, liabilities, obligations, damages and expenses (including
reasonable fees and expenses of counsel) that may be incurred by or asserted or
awarded against the Collateral Trustee or any such Person (hereinafter the
"INDEMNIFICATION AMOUNT") arising out of, related to or in connection with (i)
this Agreement or any other Security Document (including the enforcement of any
Security Document) or (ii) any refund or adjustment of any amount paid or
payable to the Collateral Trustee under or in respect of any Security Document
or any Shared Collateral, or any interest thereon, which may be ordered or
otherwise required by any Person, except to the extent such claims, losses,
liabilities, damages and expenses are found by a court of competent jurisdiction
to have resulted from such Person's gross negligence or willful misconduct. If
the Grantors fail to pay on demand the Indemnification Amount, interest will
accrue thereon at a rate per annum equal to that specified in Section 2.07(b) of
the Solutia Credit Agreement from the scheduled date for payment thereof until
the actual date of payment and such interest shall be added to the
Indemnification Amount.

          (c) WAIVER OF CONSEQUENTIAL DAMAGES, ETC. To the extent permitted by
applicable law, no Grantor shall assert, and each Grantor hereby waives, any
claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as

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                                     - 19 -

opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement or any agreement or instrument contemplated hereby.

          (d) PAYMENTS. All amounts due under this Section 5.03 shall be payable
promptly after written demand therefor.

          5.04 FURTHER ASSURANCES. At any time and from time to time, upon the
written request of the Collateral Agent or the Collateral Trustee, and at the
expense of the Grantors, each Grantor shall promptly execute and deliver any and
all such further instruments and documents and take such further action as is
necessary or desirable or as the Collateral Trustee reasonably deems necessary
or desirable in obtaining the full benefits of this Agreement.

          Section 6. THE COLLATERAL TRUSTEE.

          6.01 CERTAIN DUTIES. The Collateral Trustee's duties in respect of the
Trust Estate shall include the taking of action with respect to applications of
the Grantors or others for consents, waivers, releases or other matters relating
to the Trust Estate or the Shared Collateral as is explicitly required of the
Collateral Trustee pursuant to the terms hereunder and the prosecution following
any Triggering Event of any action or proceeding or the taking of any
nonjudicial remedial action as shall be determined to be required pursuant to
the provisions of Sections 3.02 and 3.04. The Collateral Trustee's sole duty
with respect to the custody, safekeeping and physical preservation of any Shared
Collateral in its possession, under the Uniform Commercial Code or otherwise,
shall be to deal with such Shared Collateral in the same manner as it
customarily deals with similar collateral of other parties held by it.

          6.02 EXCULPATORY PROVISIONS.

          (a) NO REPRESENTATIONS. The Collateral Trustee shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties herein contained, all of which are
made solely by the Grantors. The Collateral Trustee makes no representations as
to the value or condition of the Trust Estate or any part thereof, or as to the
title of the Grantors thereto or as to the security afforded by the Sharing
Security Documents or this Agreement or as to the validity, execution (except
its own execution thereof), enforceability, legality or sufficiency of the
Sharing Security Documents or this Agreement or of the Sharing Obligations, and
the Collateral Trustee shall incur no liability or responsibility with respect
to any such matters. The Collateral Trustee shall not be responsible for
insuring the Trust Estate or for the payment of taxes, charges, assessments or
Liens upon the Trust Estate or otherwise as to the maintenance of the Trust
Estate, including as to the preparation or filing of any Uniform Commercial Code
financing statements.

          (b) LIMITATIONS UPON DUTIES. The Collateral Trustee shall not be
required to ascertain or inquire as to the performance by any Grantor or any
other Person of any of the covenants or agreements contained herein, in the
Sharing Security Documents or in any Debt Instrument or any other agreement or
instrument referred to therein. Whenever it is necessary for the Collateral
Trustee to ascertain the amount of Sharing Obligations then held by a Sharing
Secured Party, the Collateral Trustee may conclusively rely on a certificate of
the Solutia Administrative Agent (in the case of the Solutia Credit Agreement
Obligations and the

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                                     - 20 -

Designated Letter of Credit Obligations), the Astaris Administrative Agent (in
the case of the Make-Whole Obligations), the Co-gen Agent (in the case of the
Synthetic Lease Obligations), the Company or the relevant agent under the Term
Loan Facility (in the case of the Term Loan Facility Obligations) and the
applicable Indenture Trustee (in the case of the Senior Notes Obligations) as to
such amount.

          (c) LIMITATIONS UPON LIABILITY. The Collateral Trustee shall not be
personally liable for any action taken or omitted to be taken by it in
accordance with this Agreement, the Sharing Security Documents or any Debt
Instrument, except for such actions or omissions that are determined by a court
of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of the Collateral Trustee. The
Collateral Trustee and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Company and its
Subsidiaries as though the Collateral Trustee were not the collateral trustee
hereunder.

          6.03 DELEGATION OF DUTIES. The Collateral Trustee may execute any of
the trusts or powers hereof and perform any duty hereunder either directly or by
or through agents or attorneys-in-fact which it shall select with due care. The
Collateral Trustee shall not be responsible for the negligence or willful
misconduct of any agents or attorneys-in-fact selected by it with due care.

          6.04 RELIANCE BY COLLATERAL TRUSTEE.

          (a) RELIANCE UPON CERTIFICATES OF COMPANY. Whenever in the
administration of the trusts of this Agreement the Collateral Trustee shall deem
it necessary or advisable that a matter be proved or established in connection
with the taking of any action hereunder by the Collateral Trustee, such matter
(unless other evidence in respect thereof be herein or in the Sharing Security
Documents specifically prescribed) may be deemed to be conclusively provided or
established by a certificate of an officer of the Company delivered to the
Collateral Trustee, and such officers' certificate shall be full warranty to
Collateral Trustee for any action taken, suffered or omitted in reliance
thereon.

          (b) CONSULTATION WITH COUNSEL. The Collateral Trustee may consult with
counsel of its own selection, and any opinion or advice of such counsel (which
may be in-house counsel for the Collateral Trustee) shall be full and complete
authorization and protection in respect of any action taken or suffered by it
hereunder in accordance therewith. The Collateral Trustee shall have the right
at any time to seek instructions concerning the administration of the Trust
Estate from any court of competent jurisdiction.

          (c) RELIANCE UPON RESOLUTIONS, ETC. The Collateral Trustee may
conclusively rely, and shall be fully protected in acting, upon any resolution,
statement, certificate, instrument, opinion, report, notice, request, consent,
order, bond or other paper or document (whether in its original or facsimile
form) which it has no reason to believe to be other than genuine and to have
been signed or presented by the proper party or parties or, in the case of
telecopies and telexes, to have been sent by the proper party or parties. The
Collateral Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any

                        SHARING INTERCREDITOR AGREEMENT



                                     - 21 -

certificates or opinions furnished to the Collateral Trustee and conforming to
the requirements of this Agreement or the Sharing Security Documents.

          (d) CONFLICT OR DOUBT IN ACTIONS TO BE TAKEN. In the event any
disagreement between the Credit Agreement Secured Parties and the holders of the
Senior Notes shall result in a proceeding in a court of competent jurisdiction
being instituted with respect to the proper action to be taken by the Collateral
Trustee hereunder, and an order shall be issued enjoining the Collateral Trustee
from taking any action hereunder or under any Sharing Security Document, the
Collateral Trustee shall be entitled to refrain from taking action hereunder and
to retain the Trust Estate until the Collateral Trustee shall have received a
replacement or supplemental order of such court with respect to the action to be
taken. Any such replacement or supplemental order of a court shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to the Collateral Trustee to the effect that said opinion is final and
nonappealable.

          In addition, in the event that the Collateral Trustee in good faith is
in doubt as to what action it should take hereunder, the Collateral Trustee
shall be entitled to refrain from taking action hereunder and to retain the
Trust Estate until the Collateral Trustee shall have received a direction from
the Administrative Agent with respect to the action to be taken (or, if the
Requisite Sharing Secured Parties shall have assumed the right and authority of
the Collateral Agent as contemplated by Section 3.04(b), a direction of the
Requisite Sharing Secured Parties).

          6.05 LIMITATIONS ON DUTIES OF COLLATERAL TRUSTEE. The Collateral
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in accordance with the direction of the Collateral Agent or, to the
extent provided in Sections 3.04(b), 7.02(b) and 8.02(ii), the Requisite Sharing
Secured Parties. Except as herein otherwise expressly provided, the Collateral
Trustee shall not be under any obligation to take any action which is
discretionary with the Collateral Trustee under the provisions hereof except
upon the written request of the Collateral Agent or, to the extent provided in
Sections 3.04(b), 7.02(b) and 8.02(ii), the Requisite Sharing Secured Parties.
Upon reasonable prior notice, the Collateral Trustee shall make available for
inspection and copying during normal business hours by any Sharing Secured Party
each certificate or other paper furnished to the Collateral Trustee by any
Grantor, either Administrative Agent, the Co-gen Agent, the Collateral Agent or
any Indenture Trustee under or in respect of this Agreement, the Sharing
Security Documents or any portion of the Trust Estate.

          6.06 MONEYS TO BE HELD IN TRUST. All moneys received by the Collateral
Trustee under or pursuant to any provision of this Agreement shall be held in
trust for the purposes for which they were paid or are held.

          6.07 RESIGNATION AND REPLACEMENT OF COLLATERAL TRUSTEE.

          (a) RESIGNATION. The Collateral Trustee may at any time, by giving 30
days' prior written notice to the Company, the Administrative Agents, the Co-gen
Agent, the Collateral Agent and the Indenture Trustees, resign and be discharged
of the responsibilities hereby created, such resignation to become effective
upon the earlier of (i) 30 days from the date of such notice and (ii) the
appointment of a successor collateral trustee or collateral trustees, proposed
by the Company, reasonably acceptable to the Indenture Trustees and the
Collateral Agent, by the Collateral Agent (determined after consultation with
the Company) and, with respect to any

                        SHARING INTERCREDITOR AGREEMENT



                                     - 22 -

Indenture Trustee, if no objection has been received from such Indenture Trustee
within 10 days of such proposal, such Indenture Trustee shall have been deemed
to have approved such collateral trustee or collateral trustees. If no successor
collateral trustee or collateral trustees shall be appointed and approved within
30 days from the date of the giving of the aforesaid notice of resignation, the
Collateral Trustee (notwithstanding the termination of all of its other duties
and obligations hereunder by reason of such resignation), the Collateral Agent
or the Company may at the expense of the Company, apply to any court of
competent jurisdiction to appoint a successor collateral trustee or collateral
trustees (which may be an individual or individuals) to act until such time, if
any, as a successor collateral trustee or collateral trustees shall have been
appointed as above provided. Any successor collateral trustee or collateral
trustees so appointed by such court shall immediately and without further act be
superseded by any successor collateral trustee or collateral trustees approved
by the Collateral Agent as above provided. In connection with the foregoing, the
Company hereby agrees with the Sharing Secured Parties to pay the fees, costs
and expenses of any successor collateral trustee, and to provide indemnification
to any successor collateral trustee, to the same extent as it provides the same
to the predecessor collateral trustee.

          (b) APPOINTMENT OF SUCCESSOR COLLATERAL TRUSTEE. If at any time the
Collateral Trustee shall resign or otherwise become incapable of acting, or if
at any time a vacancy shall occur in the office of Collateral Trustee for any
other cause, a successor collateral trustee or collateral trustees, reasonably
acceptable to the Indenture Trustees and the Collateral Agent (determined after
consultation with the Company) and, with respect to any Indenture Trustee, if no
objection has been received from such Indenture Trustee within 10 days of such
proposal, such Indenture Trustee shall have been deemed to have approved such
collateral trustee or collateral trustees, may be appointed by the
Administrative Agents, the Co-gen Agent and the Collateral Agent, and the
powers, duties, authority and title of the predecessor collateral trustee or
collateral trustees terminated and canceled without procuring the resignation of
such predecessor collateral trustee or collateral trustees, and without any
other formality (except as may be required by applicable law) other than
appointment and designation of a successor collateral trustee or collateral
trustees in writing, duly acknowledged, delivered to the predecessor collateral
trustee or collateral trustees, and filed for record in each public office, if
any, in which this Agreement is required to be filed.

          (c) RIGHTS OF SUCCESSOR COLLATERAL TRUSTEE. The appointment and
designation referred to in Section 6.07(b) shall, after any required filing, be
full evidence of the right and authority to make the same and of all the facts
therein recited, and this Agreement shall vest in such successor collateral
trustee or collateral trustees, without any further act, deed or conveyance, all
of the estate and title of its predecessor or their predecessors, and upon such
filing for record the successor collateral trustee or collateral trustees shall
become fully vested with all the estates, properties, rights, powers, trusts,
duties, authority and title of its predecessor or their predecessors; but such
predecessor or predecessors shall, nevertheless, on the written request of
either Administrative Agent, the Co-gen Agent, the Collateral Agent or any
successor collateral trustee or collateral trustees, execute and deliver an
instrument transferring to such successor or successors all the estates,
properties, rights, powers, trusts, duties, authority and title of such
predecessor or predecessors hereunder and shall deliver all securities and
moneys held by it or them to such successor collateral trustee or collateral
trustees.

                        SHARING INTERCREDITOR AGREEMENT



                                     - 23 -

          (d) FILINGS AT EXPENSE OF COMPANY. Any required filing for record of
the instrument appointing a successor collateral trustees as hereinabove
provided shall be at the expense of and done by the Company.

          6.08 QUALIFICATIONS OF SUCCESSORS TO COLLATERAL TRUSTEE. Except as
permitted by Section 6.07, any successor to the Collateral Trustee appointed
pursuant to Section 6.07 shall be a bank or trust company in good standing and
having power so to act, incorporated under the laws of the United States of
America or any State thereof or the District of Columbia, and having its
principal corporate trust office within the forty-eight contiguous States, and
shall also have capital, surplus and undivided profits of not less than
$100,000,000.

          6.09 MERGER OF COLLATERAL TRUSTEE. Any Person into which the
Collateral Trustee may be merged, or with which it may be consolidated, or any
Person resulting from any merger or consolidation to which the Collateral
Trustee shall be a party, or any Person acquiring all or substantially all of
the corporate trust business of the Collateral Trustee, shall be the Collateral
Trustee under this Agreement without the execution or filing of any paper or any
further act on the part of the parties hereto.

          6.10 APPOINTMENT OF ADDITIONAL AND SEPARATE COLLATERAL TRUSTEE.
Whenever (i) the Collateral Trustee or the Collateral Agent shall deem it
necessary or prudent in order to conform to any law of any jurisdiction in which
all or any part of the Shared Collateral shall be situated or to make any claim
or bring any suit with respect to or in connection with the Shared Collateral,
or (ii) the Collateral Trustee shall be advised by counsel that it is so
necessary or prudent in the interest of the Sharing Secured Parties, then in any
such case, the Collateral Trustee shall execute and deliver from time to time
all instruments and agreements necessary or proper to constitute another bank or
trust company or one or more Persons approved by the Collateral Trustee either
to act as additional trustee or trustees of all or any part of the Trust Estate,
jointly with the Collateral Trustee, or to act as separate trustee or trustees
of all or any part of the Trust Estate, in any such case with such powers as may
be provided in such instruments or agreements, and to vest in such bank, trust
company or Person as such additional trustee or separate trustee, as the case
may be, any property, title, right or power of the Collateral Trustee deemed
necessary or advisable by the Collateral Trustee. Each of the Grantors hereby
consents to all actions taken by the Collateral Trustee under the foregoing
provisions of this Section 6.10.

          Section 7. RELEASE OF COLLATERAL; EXPIRATION OF HEDGING RIGHTS;
DESIGNATIONS OF NEW NOTES INDENTURES.

          7.01 RELEASE OF TRUST ESTATE; EXPIRATION OF CERTAIN RIGHTS.
Notwithstanding any contrary provision herein, the Trust Estate shall be
assigned and released to (i) the Collateral Agent for the benefit of the Credit
Agreement Secured Parties and the other holders of Credit Agreement Obligations
(and such release confirmed in a written instrument in form satisfactory to the
Collateral Agent) on the earlier of the date (a) on which all the Senior Notes
Obligations shall have been paid in full to the holders thereof or (b) that is
ten days after the provisions of the Senior Notes Documents that require equal
and ratable security shall be held to be invalid, void or unenforceable by the
final judgment of a court of competent jurisdiction, no longer subject to appeal
or review, or (ii) the applicable Grantor on the date on which all the Credit
Agreement

                        SHARING INTERCREDITOR AGREEMENT



                                     - 24 -

Obligations have been paid in full, all Designated Letters of Credit and Letters
of Credit issued under the Solutia Credit Agreement expired or terminated and
the Solutia Commitments have been terminated, the Solutia Administrative Agent
has given written notice thereof to the Collateral Trustee and all the
Collateral Trustee's Fees have been paid in full.

          7.02 RELEASES OF SHARED COLLATERAL.

          (a) PRIOR TO TRIGGERING EVENT. At any time during which, to the actual
knowledge of any Responsible Officer of the Collateral Trustee, no Triggering
Event has occurred and is continuing, the Lien of the Sharing Security Documents
may, at any time, be released in whole or in part by the Collateral Trustee
pursuant to written directions signed by the Collateral Agent, PROVIDED that no
such release shall be effected in such a manner so that fewer than all, but not
all, of the Sharing Secured Parties continue to be entitled to the benefits of
such Lien (or become entitled to the benefits of a substitute Lien) without each
of the Sharing Secured Parties hereunder being equally and ratably secured on
the respective property subject to such Lien (to the extent such property is
Shared Property). No such release shall require any consent or approval by any
other Sharing Secured Party.

          (b) AFTER TRIGGERING EVENT. At any time during which, to the actual
knowledge of any Responsible Officer of the Collateral Trustee, a Triggering
Event has occurred and is continuing, the Lien of the Sharing Security Documents
may, at any time, be released in whole or in part by the Collateral Trustee only
pursuant to written directions signed by the Requisite Sharing Secured Parties
PROVIDED that no such release shall be effected in such a manner so that fewer
than all, but not all, of the Sharing Secured Parties continue to be entitled to
the benefits of such Lien (or become entitled to the benefits of a substitute
Lien) without each of the Sharing Secured Parties hereunder being equally and
ratably secured on the respective property subject to such Lien (to the extent
such property is Shared Property).

          7.03 NEW NOTES INDENTURES. In the event that after the date hereof the
Company issues any senior debt securities in connection with any Capital Markets
Transaction (as defined in the Solutia Credit Agreement) permitted under the
Solutia Credit Agreement then, the Company may at its option designate the
indenture or other agreements pursuant to which such securities are issued as a
"New Notes Indenture" for purposes hereof by furnishing to the Collateral
Trustee (with a copy thereof to the Administrative Agents, the Co-gen Agent and
the Collateral Agent) a letter (a "NEW NOTES INDENTURE DESIGNATION LETTER"), in
such form as shall be acceptable to the Collateral Agent and the Collateral
Trustee, duly completed and executed by the Company. Upon any such designation
of a New Notes Indenture, such New Notes Indenture shall be entitled to the
benefits of the Sharing Obligations subject to the terms and conditions of, and
to the extent provided in, this Agreement.

          Section 8. MISCELLANEOUS.

          8.01 EQUAL AND RATABLE SECURITY. This Agreement is intended to comply
with the provisions of the Senior Notes Documents to secure the unpaid principal
of, premium, if any, and accrued interest on the Senior Notes equally and
ratably with the Credit Agreement Obligations in respect of the Shared Property.
To the extent that the rights and benefits herein or in any of the Sharing
Security Agreement conferred on the holders of the Senior Notes or the Indenture

                        SHARING INTERCREDITOR AGREEMENT



                                     - 25 -

Trustees shall be held by a final judgment of a court of competent jurisdiction,
no longer subject to appeal or review, to exceed the rights and benefits
required so to be conferred by such provisions, such rights and benefits shall
be limited so as to provide to such holders and the Indenture Trustees only
those rights and benefits that are required by such provisions. Any and all
rights not herein expressly given to the Indenture Trustees are expressly
reserved to the Collateral Agent and the other Credit Agreement Secured Parties,
it being understood that in the absence of a requirement to provide equal and
ratable security set forth in the Senior Notes Documents, this Agreement would
not have been accepted by the Administrative Agents, the Co-gen Agent, the
Collateral Agent, the Solutia Lenders, the Astaris Lenders or the Co-gen
Purchasers.

          8.02 AMENDMENTS, SUPPLEMENTS AND WAIVERS. This Agreement and any other
Sharing Security Document may be amended at any time by an instrument in writing
between the parties hereto; PROVIDED that (i) at any time during which, to the
actual knowledge of any Responsible Officer of the Collateral Trustee, no
Triggering Event has occurred and is continuing, (x) it shall not be necessary
for the Indenture Trustees to join in any such instrument except to the extent
that the same would adversely affect the rights of the holders of the Senior
Notes to equally and ratably share in the security provided for herein and in
the Sharing Security Documents and (y) the Collateral Trustee will upon the
instruction of the Collateral Agent execute such instrument (except that the
Collateral Trustee shall not be obligated to execute any such instrument to the
extent it would affect the Collateral Trustee's own rights, duties or immunities
under this Agreement or the Sharing Security Documents) and (ii) at any time
during which, to the actual knowledge of any Responsible Officer of the
Collateral Trustee, a Triggering Event has occurred and is continuing, the
Collateral Trustee will execute such instrument only upon the instruction of the
Requisite Sharing Secured Parties (except that the Collateral Trustee shall not
be obligated to execute any such instrument to the extent it would affect the
Collateral Trustee's own rights, duties or immunities under this Agreement or
the Sharing Security Documents). To determine that, under the foregoing clause
(i)(x), it is not necessary for the Indenture Trustees to join in such
amendment, the Collateral Trustee shall be provided with (and shall be entitled
to rely upon) an opinion of counsel to the effect that such amendment would not
adversely affect the rights of the holders of the Senior Notes to equally and
ratably share in the security provided for herein and in the Sharing Security
Documents.

          8.03 NOTICES. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

          (i)   if to any Grantor, care of Solutia Inc., 575 Maryville Centre
     Drive, St. Louis, Missouri 63141, Attention: Vice President and Treasurer,
     telephone number (314) 674-8250, telecopier number (314) 674-6755, with a
     copy in care of Solutia Inc., 575 Maryville Centre Drive, St. Louis,
     Missouri 63141, Attention: General Counsel, telephone number (314)
     674-3586, telecopier number (314) 674-2721;

          (ii)  if to the Solutia Administrative Agent, at its address at
     Citibank, N.A., Two Penns Way, Suite 200, New Castle, DE 19720, Attention:
     Timothy Smith (or his successor), telephone number (302) 894-6059,
     telecopier number (302) 894-6120;

                        SHARING INTERCREDITOR AGREEMENT



                                     - 26 -

          (iii) if to the Astaris Administrative Agent, at its address at Bank
     of America, N.A., 101 North Tryon Street, Charlotte, North Carolina 28255,
     Attention: Ms. Kelly Weaver and Ms. Angela Berry, telephone number (704)
     388-6483, telecopier number (704) 409-0014;

          (iv)  if to the Co-gen Agent, at its address at Citibank, N.A., Bank
     Loan Syndications, Two Penns Way, Suite 200, New Castle, Delaware 19720,
     Attention: Brian Maxwell, telephone number (302) 894-6023, telecopier
     number (302) 894-6059;

          (v)   if the Collateral Agent, at its address at Citibank, N.A., 388
     Greenwich Street, New York, New York 10013, Attention: Jim Simpson,
     telephone number (212) 816-8208, telecopier number (212) 816-8051;

          (vi)  if to the Collateral Trustee, at its address at HSBC Bank USA,
     425 Fifth Avenue, New York, New York 10018 (if by mail) or 10 East 40th
     Street, 14th Floor, New York, New York 10016 (if delivered), Attention:
     Issuer Services, telephone number (212) 525-1351, telecopier number (212)
     525-1300; and

          (vii) if to any Indenture Trustee, at the address for notices provided
     in the respective Existing Notes Indenture or New Notes Indenture under
     which such Indenture Trustee serves as indenture trustee or fiscal agent;

or, in the case of any party, at such other address as shall be designated by it
in a written notice to each of the other parties. All such notices and other
communications given in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt.

          8.04 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

          8.05 SEVERABILITY. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

          8.06 DEALINGS WITH THE GRANTORS. Upon any application or demand by any
Grantor to the Collateral Trustee to take or permit any action under any of the
provisions of this Agreement or under any Sharing Security Document, such
Grantor shall furnish to the Collateral Trustee (with a copy thereof to the
Collateral Agent) a certificate of an appropriate officer and an opinion of
counsel stating that all conditions precedent, if any, provided for in this
Agreement and Sharing Security Document relating to the proposed action have
been complied with, except that in the case of any such application or demand as
to which the furnishing of such documents is specifically required by any
provision of this Agreement or the Sharing Security Documents relating to such
particular application or demand, no additional certificate or opinion need be
furnished.

                        SHARING INTERCREDITOR AGREEMENT



                                     - 27 -

          8.07 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each Grantor,
the Collateral Trustee, each Sharing Secured Party and each holder of any of the
Sharing Obligations (PROVIDED that no Grantor shall assign or transfer its
rights or obligations hereunder without the prior written consent of the
Collateral Trustee and the Collateral Agent)

          8.08 GOVERNING LAW; JURISDICTION; ETC.

          (a) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.

          (b) JURISDICTION. Each of the Grantors hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
Sharing Security Document, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the Grantors hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement or any Sharing Security Document shall affect any
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any Sharing Security Document in the courts of any
jurisdiction.

          (c) WAIVER OF VENUE. Each Grantor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any Sharing Security Document in any court referred to in paragraph (b) of this
Section 8.08. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

          (d) SERVICE OF PROCESS. Each party to this Agreement irrevocably
consents to service of process in the manner provided for notices in Section
8.03. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.

          8.09 COUNTERPARTS. This Agreement may be executed in counterparts (and
by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page to this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.

          8.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR

                        SHARING INTERCREDITOR AGREEMENT



                                     - 28 -

INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SHARING SECURITY
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.10.

          8.11 NO WAIVER. No failure on the part of the any Sharing Secured
Party to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by any Sharing Secured Party
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies herein
are cumulative and are not exclusive of any remedies provided by law.

          8.12 SURVIVAL. The provisions of Section 5.03 and Section 6 shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the resignation or removal of the
Collateral Trustee, the repayment of the Sharing Obligations, the termination or
expiration of all Designated Letters of Credit and Letters of Credit issued
under the Solutia Credit Agreement, and the termination of the Solutia
Commitments.

          8.13 ADDITIONAL SUBSIDIARY GUARANTORS. As contemplated in Section
6.01(l) of the Solutia Credit Agreement, certain new domestic Restricted
Subsidiaries of the Company formed or acquired by the Company after the date
hereof, are required to become a "Subsidiary Guarantor" under this Agreement, by
executing and delivering to the Collateral Agent and the Collateral Trustee a
Guarantee Assumption Agreement in the form of Exhibit J to the Solutia Credit
Agreement. In addition, as contemplated by Section 4.19 of the 2009 Notes
Indenture, any such newly-formed or acquired domestic Restricted Subsidiary is
required to become a Guarantor under the 2009 Notes Indenture pursuant to a
supplement to the 2009 Notes Indenture. Accordingly, upon the execution and
delivery of any such Guarantee Assumption Agreement or supplement by any such
Subsidiary, such new Subsidiary shall automatically and immediately, and without
any further action on the part of any Person, become a "Subsidiary Guarantor"
and a "Grantor" for all purposes of this Agreement. In addition, upon execution
and delivery of any such Guarantee Assumption Agreement, the new Subsidiary
Guarantor makes the representations and warranties set forth in Section 2.

                        SHARING INTERCREDITOR AGREEMENT



                                     - 29 -

          IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.


                                       SOLUTIA INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: Vice President and Treasurer


                                       CPFILMS INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: Attorney-in-Fact


                                 ADMINISTRATIVE AGENTS

                                       CITIBANK, N.A., as Administrative Agent


                                       By: /s/ James N. Simpson
                                          -------------------------------------
                                          Name: James N. Simpson
                                          Title: Vice President


                                       BANK OF AMERICA, N.A., as Administrative
                                          Agent


                                       By: /s/ Donald J. Chin
                                          -------------------------------------
                                          Name: Donald J. Chin
                                          Title: Managing Director


                        SHARING INTERCREDITOR AGREEMENT



                                     - 30 -

                                 CO-GEN AGENT

                                       CITIBANK, N.A., as Agent for the Co-gen
                                          Purchasers


                                       By: /s/ James N. Simpson
                                          -------------------------------------
                                          Name: James N. Simpson
                                          Title: Vice President


                                 COLLATERAL AGENT

                                       CITIBANK, N.A., as Collateral Agent


                                       By: /s/ James N. Simpson
                                          -------------------------------------
                                          Name: James N. Simpson
                                          Title: Vice President


                                 COLLATERAL TRUSTEE

                                       HSBC BANK USA, as Collateral Trustee


                                       By: /s/ Harriet Drandoff
                                          -------------------------------------
                                          Name: Harriet Drandoff
                                          Title: Vice President


                        SHARING INTERCREDITOR AGREEMENT



                                     - 31 -

                                                                      Appendix A

                          DESIGNATED LETTERS OF CREDIT

SOLUTIA INC. & CONSOLIDATED SUBSIDIARIES
STANDBY LETTERS OF CREDIT



BANK                   ISSUED ON BEHALF OF           AMOUNT      L/C NUMBER       EXPIRES
- -------------------------------------------------------------------------------------------
                                                                      
Citibank               Solutia Inc.             $ 8,000,000  NY-00928-30030824    30-Apr-03
Citibank               Solutia Inc.             $     3,875  NY-00928-30027436    11-Feb-03
Citibank               Solutia Inc.             $     6,620  NY-00928-30028536    30-Sep-02
Citibank               Solutia Inc.             $     7,824  NY-00928-30025958    30-Sep-04
- -------------------------------------------------------------------------------------------
SUB-TOTAL CITIBANK                              $ 8,018,319
- -------------------------------------------------------------------------------------------

Chase Manhattan Bank   Solutia Inc.             $   750,000       P-392986        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $   480,000       P-392987        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $ 2,000,000       P-393627        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $ 6,000,000       P-393629        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $   227,105       P-395392        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $   750,000       P-349116        31-Dec-02
Chase Manhattan Bank   Solutia Inc.             $ 2,938,000       P-200112        30-Apr-03
Chase Manhattan Bank   Solutia Inc.             $ 2,107,000       P-200113        30-Apr-03
Chase Manhattan Bank   Solutia Inc.             $   768,000       P-200114        30-Apr-03
Chase Manhattan Bank   Solutia Inc.             $   852,000       P-200233        30-Apr-03
Chase Manhattan Bank   Solutia Inc.             $ 7,953,791       P-204020        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $ 3,177,062       P-204012        31-Aug-02
Chase Manhattan Bank   Solutia Inc.             $   121,583       P-205878        15-Oct-02
- -------------------------------------------------------------------------------------------
SUB-TOTAL CHASE                                 $28,124,541
- -------------------------------------------------------------------------------------------

HSBC                   Solutia Inc.             $ 6,382,000     SDCMTN541972      30-Apr-03
HSBC                   Solutia UK Limited       $    24,517    102/13339798a      28-Feb-07
HSBC                   Solutia UK Limited       $   630,659     102/146377b       01-Jun-08
HSBC                   Solutia UK Limited       $   313,060       8852279           open
- -------------------------------------------------------------------------------------------
SUB-TOTAL HSBC                                  $ 7,350,236
- -------------------------------------------------------------------------------------------

Sumitomo Mitsui        Solutia Inc.             $   158,819     B/CGO-500852      06-Nov-02
Sumitomo Mitsui        Solutia Inc.             $ 5,000,000   LG/MIS/NY-431752    14-Aug-02
- -------------------------------------------------------------------------------------------
SUB-TOTAL SUMITOMO                              $ 5,158,819
- -------------------------------------------------------------------------------------------

KBC                    Solutia Europe S.A/N.V.  $   594,873      3019720143       01-Mar-08
KBC                    Solutia Europe S.A/N.V.  $   199,738      3019720648         open
KBC                    Solutia Europe S.A/N.V.  $    74,905      3019723274         open
KBC                    Solutia Europe S.A/N.V.  $   117,851       500322874         open
KBC                    Solutia Europe S.A/N.V.  $    21,870      3190826729         open
KBC                    Solutia Europe S.A/N.V.  $   249,688      3196014411         open
KBC                    Solutia Europe S.A/N.V.  $    27,167      3196625309         open
KBC                    Solutia Europe S.A/N.V.  $     4,200      3267502296       25-Sep-02
KBC                    Solutia Europe S.A/N.V.  $    38,562      3267521801       01-Nov-02


BANK                   BENEFICIARY                                   PURPOSE
- -----------------------------------------------------------------------------------------------------------
                                                               
Citibank               Kemper Indemnity Insurance Company            Pollution Insurance
Citibank               Gas Authority of India (GAIL)                 Fin. Assurance
Citibank               Gas Authority of India (GAIL)                 Fin. Assurance
Citibank               Gas Authority of India (GAIL)                 Fin. Assurance
- -----------------------------------------------------------------------------------------------------------
SUB-TOTAL CITIBANK
- -----------------------------------------------------------------------------------------------------------

Chase Manhattan Bank   Texas Department of Health                    Fin. Assur. - Choc Bayou
Chase Manhattan Bank   Massachusetts Dept. of Environmental Protect. Fin. Assur. - Indian Orchard
Chase Manhattan Bank   New Jersey Dept. of Environmental Protection  Fin. Assur. - Delaware River
Chase Manhattan Bank   Florida Dept. of Environmental Regulation     Fin. Assur. - Pensacola
Chase Manhattan Bank   Florida Dept. of Environmental Regulation     Fin. Assur. - Pensacola
Chase Manhattan Bank   Texas Natural Res. Conservation Commission    Fin. Assur. - Choc Bayou
Chase Manhattan Bank   New Jersey Dept. of Environmental Protection  Fin. Assur. - Delaware River
Chase Manhattan Bank   Georgia Dept. of Natural Resources            Fin. Assur. - Augusta
Chase Manhattan Bank   Alabama Dept. of Environmental Management     Fin. Assur. - Anniston
Chase Manhattan Bank   Illinois Environmental Protection Agency      Fin. Assur.- Krummrich
Chase Manhattan Bank   CIGNA Insurance Company                       Liability - General/Product/Automobile
Chase Manhattan Bank   Pacific Employers Insurance Co. (CIGNA)       Workers Comp - All but MO, WV, MA
Chase Manhattan Bank   Shaffer Landfill Remedial Action              Fin. Assur. - Environmental Cleanup
- -----------------------------------------------------------------------------------------------------------
SUB-TOTAL CHASE
- -----------------------------------------------------------------------------------------------------------

HSBC                   Florida Dept. of Environmental Protection     Financial Assurance - Pensacola
HSBC                   Environment Agency for GBP15,550              Fin. Assurance
HSBC                   HM Customs for GBP400,000                     Fin. Assur. - Duties
HSBC                   HM Customs for GBP200,000                     Fin. Assur. - Duties
- -----------------------------------------------------------------------------------------------------------
SUB-TOTAL HSBC
- -----------------------------------------------------------------------------------------------------------

Sumitomo Mitsui        Tennessee Dept. of Environment and Conserv.   Fin. Assur. - Columbia, TN Plant
Sumitomo Mitsui        Ferro Corporation                             Pursuant to Asset Purchase Agreement
- -----------------------------------------------------------------------------------------------------------
SUB-TOTAL SUMITOMO
- -----------------------------------------------------------------------------------------------------------

KBC                    OVAM for BEF23,837,000                        Fin. Assur. - Ghent
KBC                    Douane Gent for BEF8,000,000                  Fin. Assur. - Duties
KBC                    Douane Gent for BEF3,000,000                  Fin. Assur. - Duties
KBC                    Douane Gent for EUR117,000                    Fin. Assur. - Duties
KBC                    Betz Dearborn                                 Fin. Assurance
KBC                    TVA Luxembourg for BEF10,000,000              Fin. Assur. - VAT
KBC                    Emirate BL Oil & Gas                          Fin. Assurance
KBC                    Misr Pour La Rayonne                          Fin. Assurance
KBC                    Lungi Zimmer for DEM74,880                    Fin. Assurance


                         SHARING INTERCREDITOR AGREEMENT



                                     - 32 -

                                                                      
KBC                    Solutia Europe S.A/N.V.  $    74,402      3267592630       10-Sep-02
KBC                    Solutia Europe S.A/N.V.  $     2,242      3267575957       15-Sep-02
KBC                    Solutia Europe S.A/N.V.  $     1,873      3196573371       31-Mar-04
KBC                    Solutia Europe S.A/N.V.  $     2,996      3196573977       31-Oct-06
KBC                    Solutia Europe S.A/N.V.  $     1,311      3196574078       28-Apr-04
KBC                    Solutia Europe S.A/N.V.  $     2,097      3196574381       14-Apr-04
KBC                    Solutia Europe S.A/N.V.  $     1,873      3196719982       30-Sep-07
KBC                    Solutia Europe S.A/N.V.  $     7,491       500068957       31-May-10
KBC                    Solutia Europe S.A/N.V.  $     4,344       500095532       14-Dec-10
KBC                    Solutia Europe S.A/N.V.  $     2,696       500166260       30-Sep-10
KBC                    Solutia Europe S.A/N.V.  $     5,506       500305494       01-Apr-11
- -------------------------------------------------------------------------------------------
SUB-TOTAL KBC                                   $ 1,435,685
- -------------------------------------------------------------------------------------------

GRAND TOTAL                                     $50,087,599
- -------------------------------------------------------------------------------------------



                                                                
KBC                     Kirishinefteorgsintez                         Fin. Assurance
KBC                     Messrs Misr Polyester Co.                     Fin. Assurance
KBC                     J. Lousse / Annbritt Aspholi for BEF75,000    Fin. Assurance
KBC                     Van Huyck / Kabir for BEF120,000              Fin. Assurance
KBC                     Biernaux / Soto for BEF52,500                 Fin. Assurance
KBC                     De Poorter / Russel - Jones for BEF84,000     Fin. Assurance
KBC                     De Coninck / Reuter for BEF75,000             Fin. Assurance
KBC                     MR. & MME Jensen-Ponce for BEF300,000         Fin. Assurance
KBC                     TIESA for BEF174,000                          Fin. Assurance
KBC                     Geenen-Hartwig for BEF108,000                 Fin. Assurance
KBC                     Grass-Chardon / Daniels for EUR5,466          Fin. Assurance
- ------------------------------------------------------------------------------------
SUB-TOTAL KBC
- ------------------------------------------------------------------------------------

GRAND TOTAL
- ------------------------------------------------------------------------------------


                         SHARING INTERCREDITOR AGREEMENT

EX-4.11

                                                                    Exhibit 4.11

                           SHARING SECURITY AGREEMENT

          SHARING SECURITY AGREEMENT dated as of July 25, 2002, between SOLUTIA
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "COMPANY"); CPFILMS INC. ("CPFILMS" and, individually, a
"SUBSIDIARY GUARANTOR"); each of the subsidiaries of the Company that become
"Subsidiary Guarantors" hereunder pursuant to Section 6.10 after the date hereof
(individually a "SUBSIDIARY GUARANTOR" and, collectively, with CPFilms, the
"SUBSIDIARY GUARANTORS" and, together with the Company, the "GRANTORS"); and
HSBC Bank USA, a banking corporation and trust company duly organized and
validly existing under the laws of the State of New York, as collateral trustee
(in such capacity, together with its successors in such capacity, the
"COLLATERAL TRUSTEE") for the Sharing Secured Parties (as defined in the Sharing
Intercreditor Agreement referred to below).

          The Company, certain lenders (the "SOLUTIA LENDERS") and Citibank,
N.A., as administrative agent (in such capacity, together with its successors
and assigns, the "SOLUTIA ADMINISTRATIVE AGENT") are parties to a Second Amended
and Restated Credit Agreement dated as of July 25, 2002 (as modified and
supplemented and in effect from time to time, the "SOLUTIA CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by means of loans and letters of credit) to be made by said lenders to the
Company and the other borrowers referred to therein in an aggregate principal or
face amount not exceeding $600,000,000. In addition, the Company may from time
to time be obligated to various of the Solutia Lenders (or their affiliates) in
respect of one or more Hedging Agreements permitted under Section 6.02(g)(v) of
the Solutia Credit Agreement.

          Astaris LLC, a limited liability company organized under the laws of
Delaware ("ASTARIS"), certain lenders (the "ASTARIS LENDERS") and Bank of
America, N.A., as administrative agent (in such capacity, together with its
successors in such capacity, the "ASTARIS ADMINISTRATIVE AGENT"), are parties to
a Credit Agreement dated as of September 14, 2000 (as modified and supplemented
and in effect from time to time, the "ASTARIS CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for loans to be made by said
lenders to Astaris in an aggregate principal amount not exceeding $275,000,000.
The obligations of Astaris under the Astaris Credit Agreement have been
partially guaranteed by the Company pursuant to a Guaranty Agreement dated as of
September 14, 2000 (as modified and supplemented and in effect from time to
time, the "ASTARIS GUARANTY AGREEMENT") by the Company in favor of Astaris LLC
and in favor of the Astaris Lenders and the Astaris Administrative Agent.

          The Company, State Street Bank and Trust Company, as trustee (in such
capacity, together with its successors in such capacity, the "CO-GEN TRUSTEE"),
certain financial institutions named as purchasers therein (collectively, the
"CO-GEN PURCHASERS") and Citibank, N.A., as agent for the Co-gen Purchasers (in
such capacity, together with its successors in such capacity, the "CO-GEN
AGENT"), are parties to an Amended and Restated Participation Agreement dated as
of April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN PARTICIPATION AGREEMENT"), providing, subject to the terms and
conditions thereof, for loans and investments to be made by the Co-gen
Purchasers to the Co-gen Trustee in an aggregate principal amount not exceeding
$33,000,000. The obligations of the Co-gen Trustee under the Co-gen
Participation Agreement have been guaranteed by the Company pursuant to an
Amended



and Restated Instrument Guaranty dated as of April 24, 1998 (as modified and
supplemented and in effect from time to time, the "CO-GEN GUARANTY AGREEMENT")
by the Company in favor of the Co-gen Trustee and the Co-gen Purchasers. In
addition, the Co-gen Trustee, as lessor, and the Company, as lessee, are party
to an Amended and Restated Lease dated as of April 24, 1998 (as modified and
supplemented and in effect from time to time, the "CO-GEN LEASE") pursuant to
which the Company agrees to make certain rent payments to the Co-gen Trustee in
consideration of the lease of the co-generation facility referred to therein,
which rent payments service the loans and investments made by the Co-gen
Purchasers.

          In addition, certain of the Solutia Lenders may have issued letters of
credit for the account of the Company or a Subsidiary, or may in the future
issue letters of credit for the account of the Company, which are or will be
identified in this Agreement as "Designated Letters of Credit" (as defined in
the Sharing Intercreditor Agreement referred to below). It is contemplated that,
in connection herewith, such Solutia Lenders will execute and deliver a Letter
of Credit Override Agreement providing for certain common terms to be applicable
to such letters of credit.

          The Company is also party to (a) an Indenture dated as of October 1,
1997 (the "1997 NOTES INDENTURE") between the Company and JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank), as trustee, pursuant to which the
Company has issued its 6.50% Notes due 2002, 7.375% Debentures due 2027 and
6.72% Debentures due 2037 in an aggregate outstanding principal amount of
$600,000,000 as of the date hereof and (b) a Fiscal Agency Agreement dated as of
February 11, 2000 (the "EURO NOTES AGREEMENT") between Solutia Europe S.A./N.V.,
the Company and Kreidietbank S.A. Luxembourgeoise, as Fiscal Agent, pursuant to
which Solutia Europe S.A./N.V. has issued its 6.25% Notes due 2005, guaranteed
by the Company in an aggregate principal amount of EURO200,000,000 as of the
date hereof.

          Pursuant to the provisions of the 1997 Notes Indentures and the Euro
Notes Agreement, the Company in certain circumstances may not, and may not
permit any of its Restricted Subsidiaries (as defined therein) to, secure Debt
(as defined in the 1997 Notes Indenture and Euro Notes Agreement) with a lien on
any Principal Property (as defined below) or any shares of stock or indebtedness
of the Company or any such Restricted Subsidiary without equally and ratably
securing the notes, debentures and other instruments issued under the 1997 Notes
Indenture and the Euro Notes Agreement.

          Accordingly, to induce the Solutia Lenders to enter into the Solutia
Credit Agreement as described above and to continue to extend credit under the
Solutia Credit Agreement, to induce the Astaris Lenders to enter into an
Amendment No. 3 to the Astaris Credit Agreement and to continue to extend credit
under the Astaris Credit Agreement, to induce the Co-gen Purchasers to continue
to extend credit and make investments under the Co-gen Participation Agreement
and to induce the Solutia Lenders to extend credit in respect of Designated
Letters of Credit and hedging agreements, the parties hereto hereby agree as
follows:

          Section 1. DEFINITIONS.

          (a) DEFINED TERMS. Terms defined in the Sharing Intercreditor
Agreement are used herein as defined therein. The term "INVESTMENT PROPERTY"
shall have the meaning assigned



to such term in Article 9 of the Uniform Commercial Code. The term "FINANCIAL
ASSETS" shall have the meaning assigned to such term in Article 8 of the Uniform
Commercial Code. In addition, as used herein, the following terms shall have the
following respective meanings:

          "DOMESTIC SUBSIDIARY" means any Subsidiary of the Company organized
     under the laws of any jurisdiction within the United States of America.

          "FINANCIAL OFFICER" means the chief financial officer, principal
     accounting officer, treasurer or controller of the Company.

          "ISSUERS" means, collectively, (a) the respective corporations,
     partnerships or other entities identified under the names of the Grantors
     on Annex 3 under the caption "Issuer" and (b) any other entity that shall
     at any time be a Restricted Subsidiary of either of the Grantors.

          "PLEDGED DEBT" means any Debt (as defined in the Existing Notes
     Indentures) of any Restricted Subsidiary held by any Grantor.

          "PLEDGED STOCK" has the meaning assigned to such term in Section 3(b).

          "SHARED COLLATERAL" has the meaning assigned to such term in
     Section 3.

          "SHARING INTERCREDITOR AGREEMENT" means the Intercreditor and
     Collateral Trust Agreement dated as of July [___], between the Company,
     CPFilms, the Solutia Administrative Agent, the Astaris Administrative
     Agent, the Co-gen Agent, the Collateral Agent and the Collateral Trustee.

          "STOCK COLLATERAL" has the meaning assigned to such term in
     Section 3(b)(ii).

          (b) TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.



          Section 2. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants to the Collateral Trustee, the Collateral Agent, the Administrative
Agents, the Co-gen Agent, the Solutia Lenders, the Astaris Lenders, the Co-gen
Purchasers, the Term Loan Facility Lenders and the holders of the Senior Notes
of each Series that:

          (a) TITLE AND PRIORITY. Such Grantor is the sole beneficial owner of
     the Shared Collateral in which it purports to grant a security interest
     pursuant to Section 3 and no Lien exists or will exist upon such Shared
     Collateral at any time, except for Liens permitted under Section 6.02(a) of
     the Solutia Credit Agreement and except for such security interest in favor
     of the Collateral Agent for the benefit of the Sharing Secured Parties
     created pursuant hereto. The security interest created pursuant hereto
     constitutes a valid and perfected security interest in the Shared
     Collateral in which such Grantor purports to grant a security interest
     pursuant to Section 3, subject to no equal or prior Lien except as
     expressly permitted by Section 6.02(a) of the Solutia Credit Agreement.

          (b) NAMES, ETC. The full and correct legal name, type of organization,
     jurisdiction of organization, organizational ID number (if applicable) and
     mailing address of each Grantor as of the date hereof are correctly set
     forth in Annex 1. Annex 1 correctly specifies the place of business of each
     Grantor or, if such Grantor has more than one place of business, the
     location of the chief executive office of such Grantor.

          (c) CHANGES IN CIRCUMSTANCES. Such Grantor has not (i) within the
     period of four months prior to the date hereof, changed its "location" (as
     defined in Section 9-307 of the Uniform Commercial Code), (ii) except as
     specified in Annex 1, heretofore changed its name, or (iii) except as
     specified in Annex 2, heretofore become a "new debtor" (as defined in
     Section 9-102(a)(56) of the Uniform Commercial Code) with respect to a
     currently effective security agreement previously entered into by any other
     Person.

          (d) PLEDGED STOCK. The Pledged Stock, if any, identified under the
     name of such Grantor in Annex 3 is, and all other Pledged Stock in which
     such Grantor shall hereafter grant a security interest pursuant to Section
     3 will be, duly authorized, validly issued, fully paid and non-assessable
     and none of such Pledged Stock is or will be subject to any contractual
     restriction, or any restriction under the charter, by-laws, or other
     organizational document of the respective Issuer of such Pledged Stock,
     upon the transfer of such Pledged Stock (except for any restriction
     contained herein or under such organizational documents).

          (e) OWNERSHIP OF PLEDGE STOCK. The Pledged Stock, if any, identified
     under the name of such Grantor in Annex 3 constitutes all of the issued and
     outstanding shares of capital stock of whatever class of such Issuer
     beneficially owned by such Grantor on the date hereof (whether or not
     registered in the name of such Grantor) and Annex 3 correctly identifies,
     as at the date hereof, the respective Issuers of such Pledged Stock and the
     respective class and par value of the shares constituting such Pledged
     Stock and the respective number of shares (and registered owners thereof)
     represented by each such certificate.



          Section 3. SHARED COLLATERAL. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Sharing Obligations, each Grantor hereby pledges and grants to
the Collateral Trustee, for the benefit of the Sharing Secured Parties as
hereinafter provided, a security interest in and to all of such Grantor's right,
title and interest in, to and under the following property, whether now owned by
such Grantor or hereafter acquired and whether now existing or hereafter coming
into existence (all being collectively referred to herein as the "SHARED
COLLATERAL"):

          (a) the Pledged Debt;

          (b) the shares of voting stock of the Issuers identified in Annex 3
     under the name of such Grantor and all other shares of capital stock of
     whatever class of the Issuers together with all rights, privileges,
     authority and power of such Issuer with respect to such shares, in each
     case together with the certificates, instruments and agreements, if any,
     evidencing the same (collectively, the "PLEDGED STOCK"), together with:

               (i)  all shares, securities, moneys or property representing a
          dividend on any of the Pledged Stock, or representing a distribution
          or return of capital upon or in respect of the Pledged Stock, or
          resulting from a split-up, revision, reclassification or other like
          change of the Pledged Stock or otherwise received in exchange
          therefor, and any subscription warrants, rights, agreements or options
          issued to the holders of, or otherwise in respect of, the Pledged
          Stock; and

               (ii) without affecting the obligations of such Grantor under any
          provision prohibiting such action hereunder or under the Solutia
          Credit Agreement, in the event of any consolidation or merger in which
          an Issuer is not the surviving corporation, all shares of each class
          of the capital stock of the successor corporation (unless such
          successor corporation is such Grantor itself) formed by or resulting
          from such consolidation or merger (the Pledged Stock, together with
          all other certificates, shares, securities, properties or moneys as
          may from time to time be pledged hereunder pursuant to this clause
          (ii) and clause (i) above being herein collectively called the "STOCK
          COLLATERAL");

          (c) the Shared Collateral Account (as defined below) and the balance
     from time to time therein; and

          (d) all proceeds, profits, income, benefits, substitutions and
     replacements of and to any of the Shared Collateral and, to the extent
     related to any Shared Collateral, all books, correspondence, credit files,
     records, invoices and other papers, including all tapes, cards, computer
     runs and other papers and documents in the possession or under the control
     of such Grantor or any computer bureau or service company from time to time
     acting for such Grantor.



          Section 4. CASH PROCEEDS OF SHARED COLLATERAL.

          4.01 SHARED COLLATERAL ACCOUNT. The Collateral Trustee will cause to
be established at a banking institution to be selected by the Collateral Trustee
one or more cash collateral accounts (collectively, the "SHARED COLLATERAL
ACCOUNT"), which


          (i)  to the extent of all Investment Property or Financial Assets
     (other than cash) shall be a "securities account" (as defined in Section
     8-501 of the Uniform Commercial Code) in respect of which the Collateral
     Trustee shall be the "entitlement holder" (as defined in Section
     8-102(a)(7) of the Uniform Commercial Code) and

          (ii) to the extent of any cash, shall be a deposit account in respect
     of which the Collateral Trustee is the customer (as contemplated by
     9-104(a)(3) of the Uniform Commercial Code),

into which there shall be deposited from time to time the cash proceeds of any
of the Shared Collateral (including dividends, distributions, interest, profits
and income thereon) required to be delivered to the Collateral Trustee pursuant
hereto and into which the Grantors may from time to time deposit any additional
amounts that any of them wishes to pledge to the Collateral Trustee for the
benefit of the Sharing Secured Parties as additional collateral security
hereunder. The balance from time to time in the Shared Collateral Account shall
constitute part of the Shared Collateral hereunder and shall remain in the
Shared Collateral Account until applied as hereinafter provided. The Collateral
Trustee may (and, if instructed by the Collateral Agent (or, if the Requisite
Sharing Secured Parties shall have assumed the right and authority of the
Collateral Agent as contemplated by Section 3.04(b) of the Sharing Intercreditor
Agreement, by the Requisite Sharing Secured Parties), shall) in its (or their)
discretion apply or cause to be applied (subject to collection) the balance from
time to time standing to the credit of the Shared Collateral Account to the
payment of Sharing Obligations in the manner specified in Section 5.09 to the
extent necessary to result in the payment of the Sharing Obligations then due
and payable. In addition, the Company may at any time request that the balance
from time to time standing to the credit of the Shared Collateral Account be
applied to the payment of Sharing Obligations in the manner specified in Section
5.09 to the extent necessary to result in the payment of the Sharing Obligations
then due and payable. The balance from time to time in the Shared Collateral
Account shall be subject to withdrawal only as provided herein.

          4.02 PROCEEDS OF PLEDGED DEBT. If requested by the Collateral Trustee
(acting at the request or with the consent of the Collateral Agent or the
Requisite Secured Parties as provided in Section 3.04(b) of the Sharing
Intercreditor Agreement) at any time after the occurrence and during the
continuance of an Event of Default, each Grantor shall instruct all Restricted
Subsidiaries obligated in respect of all Pledged Debt to make all payments in
respect of the Pledged Debt directly to the Collateral Trustee. All payments
made to the Collateral Trustee, as provided in the preceding sentence, shall be
immediately deposited by the Collateral Trustee in the Shared Collateral
Account. In addition to the foregoing, each Grantor agrees that, at any time
after the occurrence and during the continuance of an Event of Default, if the
proceeds of any Shared Collateral hereunder (including the payments made in
respect of Pledged Debt) shall be received by it, such Grantor shall, upon the
request of the Collateral Trustee, as



promptly as possible deposit such proceeds into the Shared Collateral Account.
Until so deposited, all such proceeds shall be held in trust by such Grantor for
and as the property of the Collateral Trustee and shall not be commingled with
any other funds or property of such Grantor.

          4.03 INVESTMENT OF BALANCE IN SHARED COLLATERAL ACCOUNT. The cash
balance standing to the credit of the Shared Collateral Account shall be
invested from time to time in such Permitted Investments as the Collateral Agent
shall determine, which Permitted Investments shall be held in the name and be
under the control of the Collateral Trustee (and, if the Shared Collateral
Account is a securities account, credited to the Shared Collateral Account),
PROVIDED that at any time after the occurrence and during the continuance of an
Event of Default, the Collateral Trustee may (and, if instructed by the
Collateral Agent (or, if the Requisite Sharing Secured Parties shall have
assumed the right and authority of the Collateral Agent as contemplated by
Section 3.04(b) of the Sharing Intercreditor Agreement, by the Requisite Sharing
Secured Parties), shall) in its (or their) discretion at any time and from time
to time elect to liquidate any such Permitted Investments and to apply or cause
to be applied the proceeds thereof in the manner specified in Section 5.09 to
the extent necessary to result in the payment of the Sharing Obligations then
due and payable.

          Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 3, the Grantors hereby
jointly and severally agree with the Sharing Secured Parties as follows:

          5.01 DELIVERY AND OTHER PERFECTION. Each Grantor shall:

          (a) if any of the shares, securities, moneys or property required to
     be pledged by such Grantor under clauses (b)(i) or (b)(ii) of Section 3 are
     received by such Grantor, forthwith either (x) transfer and deliver to the
     Collateral Trustee such shares or securities so received by such Grantor
     (together with the certificates for any such shares and securities duly
     endorsed in blank or accompanied by undated stock powers duly executed in
     blank), all of which thereafter shall be held by the Collateral Trustee,
     pursuant to the terms of this Agreement, as part of the Shared Collateral
     or (y) take such other action as the Collateral Agent or the Collateral
     Trustee shall deem reasonably necessary or appropriate to duly record the
     Lien created hereunder in such shares, securities, moneys or property in
     said clauses (b)(i) and (b)(ii);

          (b) deliver and pledge to the Collateral Trustee any and all
     promissory notes or other instruments evidencing any of the Pledged Debt,
     endorsed and/or accompanied by such instruments of assignment and transfer
     in such form and substance as the Collateral Trustee may request;

          (c) give, execute, deliver, file, register and record, authorize or
     obtain all such financing statements, notices, instruments, documents,
     agreements or other papers, and take such other action, as may be necessary
     or desirable (in the reasonable judgment of the Collateral Agent) to
     create, preserve, publish notice of, perfect, validate or preserve the
     priority of the security interest granted pursuant hereto or to enable the
     Collateral Trustee to exercise and enforce its rights hereunder with
     respect to such pledge and security interest, including causing any or all
     of the Stock Collateral to be transferred of



     record into the name of the Collateral Trustee or its nominee (and the
     Collateral Trustee agrees that if any Stock Collateral is transferred into
     its name or the name of its nominee, the Collateral Trustee will thereafter
     promptly give to the respective Grantor copies of any notices and
     communications received by it with respect to the Stock Collateral pledged
     by such Grantor hereunder);

          (d) keep accurate books and records relating to the Shared Collateral,
     and stamp or otherwise mark such books and records in such manner as the
     Collateral Agent or the Collateral Trustee may reasonably require in order
     to reflect the security interests granted by this Agreement; and

          (e) permit representatives of the Collateral Agent or the Collateral
     Trustee, upon reasonable notice, at any time during normal business hours
     to inspect and make abstracts from its books and records pertaining to the
     Shared Collateral and, during the continuance of an Event of Default,
     permit representatives of the Collateral Trustee to be present at such
     Grantor's place of business to receive copies of all communications and
     remittances relating to the Shared Collateral, and forward copies of any
     notices or communications received by such Grantor with respect to the
     Shared Collateral, all in such manner as the Collateral Agent or Collateral
     Trustee may reasonably require.

          5.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise
permitted in Section 6.02(a) of the Solutia Credit Agreement, without the prior
written consent of the Collateral Trustee (granted with the authorization of the
Collateral Agent), no Grantor shall file or suffer to be on file, or authorize
or permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Shared Collateral in which the
Collateral Trustee is not named as the sole secured party for the benefit of the
Sharing Secured Parties.

          5.03 PRESERVATION OF RIGHTS. The Collateral Trustee shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Shared Collateral.

          5.04 SPECIAL PROVISIONS RELATING TO STOCK COLLATERAL.

          (1) PERCENTAGE PLEDGED. The Grantors will cause the Stock Collateral
to constitute at all times 100% of the total number of shares of each class of
capital stock of each Issuer then issued and outstanding.

          (2) VOTING AND OTHER RIGHTS. So long as no Event of Default shall have
occurred and be continuing, the Grantors shall have the right to exercise all
voting, consensual and other powers of ownership pertaining to the Stock
Collateral for all purposes not inconsistent with the terms of this Agreement,
the Sharing Intercreditor Agreement, the Solutia Credit Agreement or any other
instrument or agreement referred to herein or therein, PROVIDED that the
Grantors jointly and severally agree that they will not vote the Stock
Collateral in any manner that results in a violation of the terms of this
Agreement, the Sharing Intercreditor Agreement, the Solutia Credit Agreement or
any such other instrument or agreement; and the Collateral Trustee shall execute
and deliver to the Grantors or cause to be executed and delivered to the
Grantors all such proxies,



powers of attorney, dividend and other orders, and all such instruments, without
recourse, as the Grantors may reasonably request for the purpose of enabling the
Grantors to exercise the rights and powers that they are entitled to exercise
pursuant to this Section 5.04(2).

          (3) DIVIDENDS, ETC. Unless and until an Event of Default has occurred
and is continuing, the Grantors shall be entitled to receive and retain any
dividends on the Stock Collateral paid in cash out of earned surplus.

          (4) RIGHTS FOLLOWING DEFAULT. If any Event of Default shall have
occurred, then so long as such Event of Default shall continue, and whether or
not the Collateral Trustee or any Sharing Secured Party exercises any available
right to declare any Sharing Obligation due and payable or seeks or pursues any
other relief or remedy available to it under applicable law or under or in
respect of this Agreement, the Sharing Intercreditor Agreement, the Solutia
Credit Agreement, the Astaris Guaranty Agreement, the Co-gen Participation
Agreement, the Co-gen Guaranty Agreement, the Co-gen Lease, the Designated
Letters of Credit, the Senior Notes Documents or any other agreement relating to
such Sharing Obligation, all dividends and other distributions on the Stock
Collateral shall be paid directly to the Collateral Trustee and retained by it
in the Shared Collateral Account as part of the Stock Collateral, subject to the
terms of this Agreement, and, if the Collateral Trustee shall so request in
writing, the Grantors jointly and severally agree to execute and deliver to the
Collateral Trustee appropriate additional dividend, distribution and other
orders and documents to that end, PROVIDED that if such Event of Default is
cured, any such dividend or distribution theretofore paid to the Collateral
Trustee shall, upon the request of the Grantors (except to the extent
theretofore applied to the Sharing Obligations), be returned by the Collateral
Trustee to the Grantors.

          5.05 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing:

          (a) each Grantor shall, at the request of the Collateral Trustee,
     assemble the Shared Collateral owned by it at such place or places,
     reasonably convenient to both the Collateral Trustee and such Grantor,
     designated in the Collateral Trustee's request;

          (b) the Collateral Trustee may (acting at the request or with the
     consent of the Collateral Agent or the Requisite Secured Parties as
     provided in Section 3.04(b) of the Sharing Intercreditor Agreement) make
     any reasonable compromise or settlement deemed desirable with respect to
     any of the Shared Collateral and may extend the time of payment, arrange
     for payment in installments, or otherwise modify the terms of, any of the
     Shared Collateral;

          (c) the Collateral Trustee shall have all of the rights and remedies
     with respect to the Shared Collateral of a secured party under the Uniform
     Commercial Code (whether or not the Uniform Commercial Code is in effect in
     the jurisdiction where the rights and remedies are asserted) and such
     additional rights and remedies to which a secured party is entitled under
     the laws in effect in any jurisdiction where any rights and remedies
     hereunder may be asserted, including the right, to the fullest extent
     permitted by applicable law, to exercise all voting, consensual and other
     powers of ownership



     pertaining to the Shared Collateral as if the Collateral Trustee were the
     sole and absolute owner thereof (and each Grantor agrees to take all such
     action as may be appropriate to give effect to such right);

          (d) the Collateral Trustee in its discretion may, in its name or in
     the name of any Grantor or otherwise, demand, sue for, collect or receive
     any money or property at any time payable or receivable on account of or in
     exchange for any of the Shared Collateral, but shall be under no obligation
     to do so; and

          (e) the Collateral Trustee may (acting at the request or with the
     consent of the Collateral Agent or the Requisite Secured Parties as
     provided in Section 3.04(b) of the Sharing Intercreditor Agreement), upon
     ten Business Days' prior written notice to the Grantors of the time and
     place, with respect to the Shared Collateral or any part thereof which
     shall then be or shall thereafter come into the possession, custody or
     control of the Collateral Trustee, the Sharing Secured Parties or any of
     their respective agents, sell, lease, assign or otherwise dispose of all or
     any part of such Shared Collateral, at such place or places as the
     Collateral Trustee deems best, and for cash or for credit or for future
     delivery (without thereby assuming any credit risk), at public or private
     sale, without demand of performance or notice of intention to effect any
     such disposition or of the time or place thereof (except such notice as is
     required above or by applicable statute and cannot be waived), and the
     Collateral Trustee or any Sharing Secured Party or anyone else may be the
     purchaser, lessee, assignee or recipient of any or all of the Shared
     Collateral so disposed of at any public sale (or, to the extent permitted
     by law, at any private sale) and thereafter to the fullest extent permitted
     by law hold the same absolutely, free from any claim or right of whatsoever
     kind, including any right or equity of redemption (statutory or otherwise),
     of the Grantors, any such demand, notice and right or equity being hereby
     expressly waived and released, to the fullest extent permitted by law. The
     Collateral Trustee may, without notice or publication, adjourn any public
     or private sale or cause the same to be adjourned from time to time by
     announcement at the time and place fixed for the sale, and such sale may be
     made at any time or place to which the sale may be so adjourned.

The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09.

          The Grantors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral Trustee (acting at the request or with the
consent of the Collateral Agent or the Requisite Secured Parties as provided in
Section 3.04(b) of the Sharing Intercreditor Agreement) may be compelled, with
respect to any sale of all or any part of the Shared Collateral, to limit
purchasers to those who will agree, among other things, to acquire the Shared
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Grantors acknowledge that any such private
sales may be at prices and on terms less favorable to the Collateral Trustee
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Collateral Trustee shall have no obligation to



engage in public sales and no obligation to delay the sale of any Shared
Collateral for the period of time necessary to permit the respective Issuer or
issuer thereof to register it for public sale.

          5.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Shared Collateral pursuant to Section 5.05 are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Sharing Obligations, the Grantors shall remain liable for any
deficiency to the extent obligated under the respective Debt Instruments to
which the Grantors are party.

          5.07 LOCATIONS; NAMES. Without at least 30 days' prior written notice
to the Collateral Agent and the Collateral Trustee, no Grantor shall change its
"location" (as defined in Section 9-307 of the Uniform Commercial Code) or
change its name from the name shown as its current legal name on Annex 1.

          5.08 PRIVATE SALE. The Collateral Trustee and the Sharing Secured
Parties shall incur no liability as a result of the sale of the Shared
Collateral, or any part thereof, at any private sale pursuant to Section 5.05
conducted in a commercially reasonable manner. Each Grantor hereby waives any
claims against the Collateral Trustee or any Sharing Secured Party arising by
reason of the fact that the price at which the Shared Collateral may have been
sold at such a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the Sharing
Obligations, even if the Collateral Trustee accepts the first offer received and
does not offer the Shared Collateral to more than one offeree.

          5.09 APPLICATION OF PROCEEDS OF SHARED COLLATERAL. The proceeds of any
collection, sale or other realization of all or any part of the Shared
Collateral pursuant hereto, and any other cash at the time held by the
Collateral Trustee under Section 4 or this Section 5, shall be applied by the
Collateral Trustee in the manner set forth in Section 4.01 of the Sharing
Intercreditor Agreement; PROVIDED that if the Sharing Intercreditor Agreement
shall not be in effect, such proceeds and cash shall be applied in the manner
set forth in Section 5.02 of the Non-Sharing Intercreditor Agreement.

          5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Collateral Trustee while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Collateral Trustee is hereby appointed the
attorney-in-fact of each Grantor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments which the
Collateral Trustee (acting at the request or with the consent of the Collateral
Agent or the Requisite Secured Parties as provided in Section 3.04(b) of the
Sharing Intercreditor Agreement) may reasonably deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, so long as the Collateral Trustee shall be entitled under this
Section 5 to make collections in respect of the Shared Collateral, the
Collateral Trustee shall have the right and power to receive, endorse and
collect all checks made payable to the order of any Grantor representing any
dividend, payment or other distribution in respect of the Shared Collateral or
any part thereof and to give full discharge for the same.



          5.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Grantor shall (i) file such financing
statements and other documents in such offices as the Collateral Trustee may
request to perfect the security interests granted by Section 3 of this Agreement
and (ii) deliver to the Collateral Trustee all certificates evidencing any of
the Pledged Stock, accompanied by undated stock powers duly executed in blank,
and, to the extent required under Section 5.01(b), all promissory notes and
other instruments evidencing any Pledged Debt identified in Annex 4. Without
limiting the foregoing, each Grantor consents that Uniform Commercial Code
financing statements may be filed describing the Shared Collateral as set forth
in Section 3.

          5.12 TERMINATION. This Agreement and the security interests granted
hereby shall cease to be effective

          (a) with respect to the Senior Notes Obligations on the earlier of the
     date (i) on which all the Senior Notes Obligations shall have been paid in
     full to the holders thereof and (ii) that is ten days after the provisions
     of the Senior Notes Documents that require equal and ratable security shall
     be held to be invalid, void or unenforceable by the final judgment of a
     court of competent jurisdiction, no longer subject to appeal or review and

          (b) when all of the Non-Sharing Obligations have been paid in full,
     all Designated Letters of Credit and Letters of Credit issued under the
     Solutia Credit Agreement have expired or terminated and the Solutia
     Commitments have been terminated and the Solutia Administrative Agent, the
     Astaris Administrative Agent and the Co-gen Agent have each given written
     notification thereof to the Collateral Trustee, or when the Collateral
     Agent shall have authorized the release of the Liens created hereunder and
     the termination of this Agreement pursuant to Section 7 of the Sharing
     Intercreditor Agreement,

whereupon, in the case of the foregoing clause (b), the Collateral Trustee shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Shared Collateral and money received in respect thereof, to or on the order of
the respective Grantor. The Collateral Trustee shall, at the expense of the
Company, also execute and deliver to the respective Grantor upon such
termination such Uniform Commercial Code termination statements and such other
documentation as shall be reasonably requested by the respective Grantor to
effect the termination and release of the Liens on the Shared Collateral

          Notwithstanding the foregoing (other than paragraph (a) of this
Section 5.12), any release of such Grantor or any Shared Collateral after the
occurrence and during the continuance of a Triggering Event (as defined in the
Sharing Intercreditor Agreement) shall be subject to the prior approval of the
Requisite Sharing Secured Parties.

          5.13 FURTHER ASSURANCES. Each Grantor agrees that, from time to time
upon the written request of the Collateral Trustee, such Grantor will execute
and deliver such further documents and do such other acts and things as the
Collateral Trustee may reasonably request in order fully to effect the purposes
of this Agreement.



          Section 6. MISCELLANEOUS.

          6.01 NOTICES. All notices and other communications provided for herein
(a) to the Grantors, the Collateral Agent, the Solutia Administrative Agent, the
Astaris Administrative Agent, the Co-gen Agent, any Indenture Trustee or the
Collateral Trustee shall be in writing and shall be delivered to the intended
recipient as specified in Section 8.03 of the Sharing Intercreditor Agreement
and shall be deemed to have been given at the times specified in said Section
8.03, (b) to the Credit Agreement Secured Parties, shall be delivered to the
Collateral Agent, the Solutia Administrative Agent, the Astaris Administrative
Agent and the Co-gen Agent as provided above and (c) to the holders from time to
time of the Senior Notes, shall be delivered to the Indenture Trustees as
provided above.

          6.02 NO WAIVER. No failure on the part of any Sharing Secured Party to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by any Sharing Secured Party of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are cumulative
and are not exclusive of any remedies provided by law.

          6.03 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Grantor and the Collateral Trustee in accordance with the provisions of Section
8.02 of the Sharing Intercreditor Agreement. Any such amendment or waiver shall
be binding upon the Sharing Secured Parties, each holder of any of the Sharing
Obligations and each Grantor.

          6.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each Grantor,
the Sharing Secured Parties and each holder of any of the Sharing Obligations
(PROVIDED that no Grantor shall assign or transfer its rights or obligations
hereunder without the prior written consent of the Collateral Trustee)

          6.05 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

          6.06 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.

          6.07 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

          6.08 AGENTS AND ATTORNEYS-IN-FACT. The Collateral Trustee may employ
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the gross negligence or willful misconduct of any such agents or
attorneys-in-fact selected by it in good faith.



          6.09 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.

          6.10 ADDITIONAL SUBSIDIARY GUARANTORS. As contemplated by Section
6.01(l) of the Solutia Credit Agreement, new domestic Restricted Subsidiaries of
the Company formed or acquired by the Company after the date hereof, are
required to become a "Subsidiary Guarantor" under this Agreement, by executing
and delivering to the Collateral Agent and the Collateral Trustee a Guarantee
Assumption Agreement in the form of Exhibit J to the Solutia Credit Agreement.
In addition, as contemplated by Section 4.19 of the 2009 Notes Indenture, any
such newly-formed or acquired domestic Restricted Subsidiary is required to
become a Guarantor under the 2009 Notes Indenture pursuant to a supplement to
the 2009 Notes Indenture. Accordingly, upon the execution and delivery of any
such Guarantee Assumption Agreement by any such Subsidiary, such new Subsidiary
shall automatically and immediately, and without any further action on the part
of any Person, become a "Subsidiary Guarantor" and a "Grantor" for all purposes
of this Agreement, and Annexes 1, 2, 3 and 4 hereto shall be deemed to be
supplemented in the manner specified in such Guarantee Assumption Agreement. In
addition, upon execution and delivery of any such Guarantee Assumption
Agreement, the new Subsidiary Guarantor makes the representations and warranties
set forth in Section 2 of the Sharing Intercreditor Agreement.

          6.11 INCORPORATION BY REFERENCE. In acting hereunder, the Collateral
Trustee is entitled to all rights, privileges, protections, immunities and
indemnities provided to it under the Sharing Intercreditor Agreement.
Notwithstanding the foregoing, the Collateral Trustee shall not be obligated to
take any action hereunder without obtaining the request or direction of the
Collateral Agent or the Requisite Secured Parties as provided in Section 3.04(b)
of the Sharing Intercreditor Agreement.



          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.

                                       SOLUTIA INC.


                                       By: /s/ Kevin Wilson
                                          -----------------------------------
                                          Name: Kevin Wilson
                                          Title: Vice President and Treasurer


                                       CPFILMS INC.


                                       By: /s/ Kevin Wilson
                                          -----------------------------------
                                          Name: Kevin Wilson
                                          Title: Attorney-in-Fact


                                       HSBC BANK USA, as Collateral Trustee


                                       By: /s/ Harriet Drandoff
                                          -----------------------------------
                                          Title: Harriet Drandoff
                                          Name: Vice President

EX-4.12

                                                                    EXHIBIT 4.12

                         JUNIOR INTERCREDITOR AGREEMENT

          JUNIOR INTERCREDITOR AGREEMENT dated as of July 25, 2002 between
SOLUTIA INC., a Delaware corporation (the "COMPANY"); each of the subsidiaries
of the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (individually, a "SUBSIDIARY GUARANTOR" and,
collectively, the "SUBSIDIARY GUARANTORS" and, together with the Company, the
"SECURING PARTIES"); CITIBANK, N.A., as Collateral Agent for the Senior Secured
Parties referred to below (in such capacity, the "COLLATERAL AGENT"); and HSBC
BANK USA, a banking corporation duly organized and validly existing under the
laws of the State of New York, as trustee under the 2009 Notes Indenture
referred to below (in such capacity, together with its successors in such
capacity, the "TRUSTEE").

          The Company, certain lenders (the "SOLUTIA LENDERS") and Citibank,
N.A., as administrative agent (in such capacity, together with its successors
and assigns, the "SOLUTIA ADMINISTRATIVE AGENT") are parties to a Second Amended
and Restated Credit Agreement dated as of July 25, 2002 (as modified and
supplemented and in effect from time to time, the "SOLUTIA CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by means of loans and letters of credit) to be made by said lenders to the
Company and the other borrowers referred to therein in an aggregate principal or
face amount not exceeding $600,000,000. In addition, the Company may from time
to time be obligated to various of the Solutia Lenders (or their affiliates) in
respect of one or more hedging agreements permitted under Section 6.02(g)(v) of
the Solutia Credit Agreement.

          Astaris LLC, a limited liability company organized under the laws of
Delaware ("ASTARIS"), certain lenders (the "ASTARIS LENDERS") and Bank of
America, N.A., as administrative agent (in such capacity, together with its
successors in such capacity, the "ASTARIS ADMINISTRATIVE AGENT") are parties to
a Credit Agreement dated as of September 14, 2000 (as modified and supplemented
and in effect from time to time, the "ASTARIS CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for loans to be made by said
lenders to Astaris in an aggregate principal amount not exceeding $275,000,000.
The obligations of Astaris under the Astaris Credit Agreement have been
partially guaranteed by the Company pursuant to a Guaranty Agreement dated as of
September 14, 2000 (as modified and supplemented and in effect from time to
time, the "ASTARIS GUARANTY AGREEMENT") by the Company in favor of Astaris LLC
and in favor of the Astaris Lenders and the Astaris Administrative Agent.

          The Company, State Street Bank and Trust Company, as trustee (in such
capacity, together with its successors in such capacity, the "CO-GEN TRUSTEE"),
certain financial institutions named as purchasers therein (collectively, the
"CO-GEN PURCHASERS") and Citibank, N.A., as agent for the Co-gen Purchasers (in
such capacity, together with its successors in such capacity, the "CO-GEN
AGENT"), are parties to an Amended and Restated Participation Agreement dated as
of April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN PARTICIPATION AGREEMENT"), providing, subject to the terms and
conditions thereof, for loans and investments to be made by the Co-gen
Purchasers to the Co-gen Trustee in an aggregate principal amount not exceeding
$33,000,000. The obligations of the Co-gen Trustee under the Co-gen
Participation Agreement have been guaranteed by the Company pursuant to an
Amended and Restated Instrument Guaranty dated as of April 24, 1998 (as modified
and supplemented and in effect from time to time, the "CO-GEN GUARANTY
AGREEMENT") by the Company in favor of the

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 2 -

Co-gen Trustee and the Co-gen Purchasers. In addition, the Co-gen Trustee, as
lessor, and the Company, as lessee, are party to an Amended and Restated Lease
dated as of April 24, 1998 (as modified and supplemented and in effect from time
to time, the "CO-GEN LEASE") pursuant to which the Company agrees to make
certain rent payments to the Co-gen Trustee in consideration of the lease of the
co-generation facility referred to therein, which rent payments service the
loans and investments made by the Co-gen Purchasers.

          In addition, certain of the Solutia Lenders may have issued letters of
credit for the account of the Company or a Subsidiary, or may in the future
issue letters of credit for the account of the Company, which are or will be
identified in the below-referenced Senior Non-Sharing Intercreditor Agreement as
"Designated Letters of Credit" (as hereinafter defined). It is contemplated
that, in connection herewith, such Solutia Lenders will execute and deliver a
Letter of Credit Override Agreement providing for certain common terms to be
applicable to such letters of credit.

          The Company is also party to an Indenture dated as of July 9, 2002
(the "2009 NOTES INDENTURE") between the Company, SOI Funding Corp. and HSBC
Bank USA, as trustee, pursuant to which SOI Funding Corp. has issued its 11.25%
Senior Secured Notes due 2009 (the "2009 NOTES"), in an aggregate principal
amount of $223,000,000 as of July 9, 2002, and which 2009 Notes have been
assumed by the Company pursuant to a Supplemental Indenture thereto, and
guaranteed by the Subsidiary Guarantors as provided in Section 10.01 thereof.

          Pursuant to the Senior Non-Sharing Security Documents (as defined
below), the Securing Parties have granted to the Collateral Agent liens on
certain of the property of the Securing Parties as collateral security for the
obligations of the Securing Parties under the Solutia Credit Agreement, the
Astaris Credit Agreement, the Co-gen Guaranty Agreement, Hedging Obligations (as
defined below) and the Designated Letters of Credit.

          In connection with the foregoing, the parties hereto wish to provide
for the subordination of the liens granted pursuant to the Junior Security
Documents (as defined below) in favor of the Trustee to the liens granted to the
Collateral Agent pursuant to the Senior Non-Sharing Security Documents.
Accordingly, the parties hereto hereby agree as follows:

          Section 1. DEFINITIONS, ETC.

          (a) DEFINED TERMS. As used in this Agreement, the following terms have
the meanings specified below:

          "ADVANCE" has the meaning assigned to such term in Section 1.01 of the
     Solutia Credit Agreement.

          "COLLATERAL" means, collectively, the assets of the Securing Parties
     subject to the Liens of the Junior Security Documents.

          "DESIGNATED LETTER OF CREDIT" has the meaning ascribed thereto in the
     Senior Non-Sharing Intercreditor Agreement.

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 3 -

          "DESIGNATED LETTER OF CREDIT OBLIGATIONS" means all obligations of the
     Company in respect of Designated Letters of Credit.

          "DOMESTIC SUBSIDIARY" means any Subsidiary of the Company organized
     under the laws of a State of the United States of America.

          "EXISTING NOTE INDENTURES" means, collectively, the indenture and/or
     the fiscal agency agreement, as applicable, pursuant to which the following
     notes or debentures of the Company or Solutia Europe, as applicable, have
     been issued: 6.50% notes due 2002, 7.375% debentures due 2027, 6.72%
     debentures due 2037 and 6.25% euro notes due 2005, as in effect on the date
     hereof and without giving effect to any modifications or supplements after
     the date hereof.

          "GAAP" means the generally accepted accounting principles in the
     United States of America.

          "HEDGING OBLIGATIONS" means all obligations of the Company in respect
     of any interest rate protection agreement, foreign currency exchange
     agreement, commodity price protection agreement or other interest or
     currency exchange rate or commodity price hedging arrangement entered into
     with any Lender (or any affiliate thereof).

          For purposes hereof, it is understood that any Hedging Obligations to
     a Person arising under an agreement entered into at the time such Person
     (or an affiliate thereof) is a "Lender" party to the Solutia Credit
     Agreement shall nevertheless continue to constitute Hedging Obligations for
     purposes hereof, notwithstanding that such Person (or its affiliate) may
     have assigned all of its Advances and other interests in the Solutia Credit
     Agreement and, at the time a claim is to be made in respect of such Hedging
     Obligations, such Person (or its affiliate) is no longer a "Lender" party
     to the Solutia Credit Agreement.

          "JUNIOR SECURED OBLIGATIONS" has the meaning ascribed thereto in the
     Junior Security Agreement.

          "JUNIOR SECURITY AGREEMENT" means the Junior Security Agreement dated
     as of July [___], 2002 between the Securing Parties, the Collateral Agent
     and the Trustee, as the same shall be modified and supplemented and in
     effect from time to time.

          "JUNIOR SECURITY DOCUMENTS" means (a) this Agreement, (b) the Junior
     Security Agreement, and (c) each other security agreement, pledge
     agreement, mortgage, deed of trust, assignment agreement and other
     instrument (including any Uniform Commercial Code financing statements)
     executed pursuant to Section 3 or Section 5 of the Junior Security
     Agreement.

          "LIEN" means any lien, security interest or other charge or
     encumbrance of any kind, or any other type of preferential arrangement,
     including the lien or retained security title of a conditional vendor and
     any mortgage, easement, right of way or other encumbrance on title to real
     property.

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 4 -

          "MAJORITY SOLUTIA LENDERS" means the Majority Lenders under and as
     defined in the Solutia Credit Agreement.

          "MAKE-WHOLE OBLIGATIONS" means all obligations of the Company under
     the Astaris Guaranty Agreement as in effect on the date hereof and without
     giving effect to any amendments or supplements made to the Astaris Guaranty
     Agreement after the date hereof.

          "NON-SHARING OBLIGATIONS" means, collectively, the obligations of the
     Securing Parties to each Solutia Lender (and, in respect of any Hedging
     Obligations, any affiliate of a Solutia Lender that shall have entered into
     the respective hedging agreement giving rise to such Hedging Obligations),
     each Astaris Lender, each Co-gen Purchaser and each Administrative Agent
     and their respective successors and assigns in respect of the Solutia
     Credit Agreement Obligations, the Make-Whole Obligations, the Synthetic
     Lease Obligations, the Designated Letter of Credit Obligations and the
     Hedging Obligations.

          "PERSON" means any individual, corporation (including a business
     trust), company, voluntary association, partnership, limited liability
     company, joint venture, trust, unincorporated organization or governmental
     authority or other entity of whatever nature.

          "SENIOR NON-SHARING INTERCREDITOR AGREEMENT" means the Restated
     Intercreditor and Collateral Agency Agreement dated as of July [___], 2002
     between the Company, the Subsidiary Guarantors, the Solutia Administrative
     Agent, the Astaris Administrative Agent, the Co-gen Agent and the
     Collateral Agent, as the same shall be modified and supplemented and in
     effect from time to time.

          "SENIOR NON-SHARING SECURITY AND GUARANTEE AGREEMENT" means the
     Restated Security and Guarantee Agreement dated as of July [___], 2002
     between the Securing Parties and the Collateral Agent, as the same shall be
     modified and supplemented and in effect from time to time.

          "SENIOR NON-SHARING SECURITY DOCUMENTS" means, collectively, (a) the
     Senior Non-Sharing Security and Guarantee Agreement and (b) any other
     pledge agreements, security agreements, assignment agreements, mortgages,
     deeds of trust or other instruments providing for collateral security from
     time to time executed pursuant to Section 4 or Section 6 of the Senior
     Non-Sharing Security and Guarantee Agreement.

          "SENIOR SECURED OBLIGATIONS" means, collectively, (a) in the case of
     the Company, the Non-Sharing Obligations, (b) in the case of the Subsidiary
     Guarantors, the obligations of the Subsidiary Guarantors in respect of the
     Guaranteed Obligations (as defined in the Senior Non-Sharing Security and
     Guarantee Agreement pursuant to Section 2.01 of the Senior Non-Sharing
     Security and Guarantee Agreement and (c) in the case of all Securing
     Parties, all present and future obligations of the Securing Parties to the
     Senior Secured Parties, or any of them, under the Senior Non-Sharing
     Security Documents.

          "SENIOR PAYMENT DATE" means the date on which all the Non-Sharing
     Obligations have been paid in full, all Designated Letters of Credit, and
     Letters of Credit issued under

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 5 -

     the Solutia Credit Agreement, have expired or terminated and the
     "Commitments" under and as defined in the Solutia Credit Agreement have
     been terminated.

          "SENIOR SECURED PARTIES" means, collectively, the Collateral Agent,
     the Solutia Lenders, the Astaris Lenders, the Co-gen Purchasers, the
     Administrative Agents and the Co-gen Agent (and, in respect of any Hedging
     Obligations, any affiliate of a Solutia Lender that shall have entered into
     the respective hedging agreement giving rise to such Hedging Obligations).

          "SOLUTIA CREDIT AGREEMENT OBLIGATIONS" means the principal and
     interest on the Advances (as defined in the Solutia Credit Agreement) made
     by the Solutia Lenders to the Borrowers under and as defined in the Solutia
     Credit Agreement, all obligations of the Company in respect of Letters of
     Credit issued thereunder and all other amounts from time to time owing to
     the Solutia Lenders or the Solutia Administrative Agent under the Solutia
     Credit Agreement.

          "SUBSIDIARY" has the meaning assigned to such term in the Existing
     Note Indentures, in each case as in effect on the date hereof and without
     giving effect to any modifications or supplements after the date hereof.

          "SYNTHETIC LEASE OBLIGATIONS" means all obligations of the Company
     under the Co-gen Guaranty Agreement, the Co-gen Lease and the other
     Operative Documents (as defined in the Co-gen Participation Agreement);
     PROVIDED that if such obligations exceed $33,000,000, then only the portion
     of such obligations that do not exceed $33,000,000, together with interest
     thereon at the rate specified in the Co-gen Participation Agreement, shall
     be deemed to be "Synthetic Lease Obligations".

          "2009 NOTEHOLDERS" means each Person from time to time holding any of
     the 2009 Notes under the 2009 Notes Indenture.

          (b) TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (i) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (iii) the words "herein", "hereof" and "hereunder", and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (iv) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (v)
the words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 6 -

          Section 2. PRIORITY OF LIENS. It is the intent of the parties that the
Liens created pursuant to the Junior Security Documents in favor of the Trustee
shall be junior and subject in all respects to the Liens created pursuant to the
Senior Non-Sharing Security Documents. Accordingly, anything herein or in any of
the other Junior Security Documents, the 2009 Notes Indenture or any other
agreement or instrument between any of the Securing Parties and any of the 2009
Noteholders to the contrary notwithstanding, the Trustee, on behalf of itself
and each of the 2009 Noteholders, hereby agrees for the benefit of the
Collateral Agent and the Senior Secured Parties that, notwithstanding the time
of filing or recording of the Liens created by the Junior Security Documents, to
the extent securing such Lien in favor of any of the Senior Secured Parties is
valid and enforceable, the Liens created pursuant to the Junior Security
Documents shall be subordinate to the Liens created pursuant to the Senior
Non-Sharing Security Documents in any "Collateral" under and as defined in the
Senior Non-Sharing Security Documents.

          The Collateral Agent and the Senior Secured Parties may release their
Liens against all or any portion of the Collateral at any time but are not
entitled to release or affect the Liens of the Trustee which shall thereafter
continue to be valid and enforceable (as first priority Liens) in and to such
released Collateral unless the conditions in Section 3 hereof are met, at which
time the Liens of the Trustee shall be released. If (i) the Collateral Agent and
the Senior Secured Parties have released all or a portion of their Liens, (ii)
the conditions for an automatic release of the Liens of the Junior Secured
Parties (as defined in the Junior Security Agreement) securing the Junior
Secured Obligations against the Senior Collateral set forth in Section 3 shall
not have been satisfied and (iii) at any later time such Liens in favor of the
Collateral Agent and the Senior Secured Parties are reinstated or re-granted,
the Collateral Agent shall, subject to the applicable provisions of the 2009
Notes Indenture and the Junior Security Documents, be entitled to (and at the
request of the Company, shall) subordinate the Liens of the Trustee and the 2009
Noteholders under the Junior Security Documents to such reinstated Liens in
favor of the Collateral Agent and the Senior Secured Parties, such subordination
to be on the same terms and subject to the same conditions as provided in the
first paragraph of this Section 2.

          The Trustee, on behalf of itself and each 2009 Noteholder, hereby
waives any requirement on the part of the Collateral Agent or the Senior Secured
Parties in respect of marshalling of assets upon any exercise of remedies by the
Collateral Agent or the Senior Secured Parties and any requirement that the
Collateral Agent or any Senior Secured Party exercise remedies with respect to
collateral security for the Senior Secured Obligations in any particular order
or any particular manner.

          Section 3. RELEASE OF LIENS AND GUARANTEES. The Liens of the Junior
Secured Parties securing the Junior Secured Obligations against the Senior
Collateral will be released automatically (and without any action or consent by
the Trustee or the 2009 Noteholders) at such time, if (1) the Lien of the
Collateral Agent against the Senior Collateral has been released and (2) all the
Solutia Credit Agreement Obligations are unsecured and the revolving facility
thereunder (x) is in a minimum amount of $50,000,000 and (y) has a tenor of no
less than 364 days. In addition, the Liens of the Junior Secured Parties
securing the Junior Secured Obligations against any particular item of Senior
Collateral will be released automatically (and without any action or consent by
the Trustee or the 2009 Noteholders) at such time as such item is sold or
otherwise disposed of and the proceeds thereof applied to the Senior Secured

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 7 -

Obligations to the extent required by the Solutia Credit Agreement or,
alternatively, paid over to the Trustee for application to the Junior Secured
Obligations. In either such event, the Trustee shall execute and deliver such
documents, and do such other acts and things, as may be reasonably requested by
the Company to confirm such release.

          Section 4. LIMITATION ON RIGHTS AND REMEDIES. Notwithstanding anything
to the contrary herein, in the other Junior Security Documents or in the 2009
Notes Indenture, the Trustee shall not be entitled to exercise (whether upon its
own initiative or at the direction of any one or more of the 2009 Noteholders)
any rights or remedies in respect of the Liens under the Junior Security
Documents, or to enforce any of the Junior Security Documents, until the Senior
Payment Date; PROVIDED that nothing herein shall prevent the 2009 Noteholders or
the Trustee from declaring an "Event of Default" under the 2009 Notes Indenture,
accelerating the Junior Secured Obligations, bringing suit thereon, filing
proofs of claims or otherwise exercising rights or remedies under the 2009 Notes
Indenture or the Junior Security Documents other than exercising rights or
remedies in respect of their Liens under the Junior Security Documents.

          Section 5. NOTICE OF SENIOR PAYMENT DATE. The Collateral Agent shall
promptly notify the Trustee of the occurrence of the Senior Payment Date.

          Section 6. MISCELLANEOUS

          6.01. NOTICES, ETC. All notices and other communications provided for
hereunder shall be in writing, telecopied or delivered:

          (a) if to any of the Securing Parties, care of Solutia Inc., 575
     Maryville Centre Drive, St. Louis, Missouri 63141, Attention: Vice
     President and Treasurer, telephone number (314) 674-8250, telecopier number
     (314) 674-6755, with a copy in care of Solutia Inc., 575 Maryville Centre
     Drive, St. Louis, Missouri 63141, Attention: General Counsel, telephone
     number (314) 674-3586, telecopier number (314) 674-2721;

          (b) if to the Collateral Agent, at its address at Citibank, N.A., 388
     Greenwich Street, New York, New York 10013, Attention: Jim Simpson,
     telephone number (212) 816-8208, telecopier number (212) 816-8051; and

          (c) if to the Trustee, at its address at HSBC Bank USA, 452 Fifth
     Avenue, New York, New York 10018 (if mailed) or 10 East 40th Street, 14th
     Floor, New York, New York 10016 (if delivered), Attention: Issuer Services,
     telephone number (212) 525-1351, telecopier number (212) 525-1300.

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when delivered or telecopied, be effective when delivered or transmitted
by telecopier, respectively.

          6.02. WAIVERS. No failure on the part of the Collateral Agent to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 8 -

any other right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.

          6.03. AMENDMENTS, ETC. Except as otherwise herein expressly provided,
the terms of this Agreement and the other Junior Security Documents may be
waived, altered or amended only by an instrument in writing duly executed by
each Securing Party, the Collateral Agent (prior to the Senior Payment Date
only) and the Trustee, with the consent (if and to the extent required by the
2009 Indenture) of the Required 2009 Noteholders, PROVIDED that (i) no such
amendment shall adversely affect the relative rights of any Senior Secured Party
or 2009 Noteholder as against any other Senior Secured Party or 2009 Noteholder
without the prior written consent of such first Senior Secured Party or 2009
Noteholder and (ii) any amendment or waiver (other than an amendment or a waiver
releasing any Collateral) of any provision of the Senior Non-Sharing Security
and Guarantee Agreement or any other Senior Non-Sharing Security Document not
inconsistent with clause (i) above shall, at the written election of the Company
delivered to the Collateral Agent and the Trustee (and without the action by any
other party), be deemed to be an amendment or a waiver of the corresponding
provision, if any, of the Junior Security Agreement or other Junior Security
Document with the same effect as if such amendment or waiver of such provision
had been agreed to in writing in compliance with this Section 6.03. Any such
amendment or waiver shall be binding upon the Collateral Agent, the Trustee each
Senior Secured Party, each 2009 Noteholder and each Securing Party.

          6.04. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.

          6.05. JURISDICTION. Each party hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
Junior Security Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each party hereto hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Junior Security Document shall affect any
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any other Junior Security Document in the courts
of any jurisdiction.

          6.06. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each of the
parties hereto (PROVIDED that no Securing Party shall assign or transfer its
rights or obligations hereunder without the prior written consent of the
Collateral Agent and the Trustee).

          6.07. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

                         JUNIOR INTERCREDITOR AGREEMENT



                                      - 9 -

          6.08. SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.

          6.09. CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

          6.10. ADDITIONAL SUBSIDIARY GUARANTORS. Pursuant to Section 4.19 of
the 2009 Notes Indenture, any Subsidiary of the Company that becomes a
Subsidiary Guarantor thereunder after the date hereof, shall become a
"Subsidiary Guarantor" under this Agreement, and shall grant liens on all
property owned by it that constitutes Collateral under the Junior Security
Documents, by executing and delivering to the Collateral Agent and the Trustee a
Guarantee Assumption Agreement in the form of Exhibit A hereto. Accordingly,
upon the execution and delivery of any such Guarantee Assumption Agreement by
any such Subsidiary, such new Subsidiary shall automatically and immediately,
and without any further action on the part of any Person, become a "Subsidiary
Guarantor" and a "Securing Party" for all purposes of this Agreement.


                         JUNIOR INTERCREDITOR AGREEMENT



                                     - 10 -

          IN WITNESS WHEREOF, the parties hereto have caused this Junior
Intercreditor Agreement to be duly executed as of the day and year first above
written.

                                       SOLUTIA INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: Vice President and Treasurer


                                SUBSIDIARY GUARANTORS

                                       CPFILMS INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: Attorney-in-Fact


                                       MONCHEM, INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: President


                                       MONCHEM INTERNATIONAL, INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: President


                         JUNIOR INTERCREDITOR AGREEMENT



                                     - 11 -

                                       SOLUTIA SYSTEMS, INC.


                                       By: /s/ Kevin Wilson
                                          -------------------------------------
                                          Name: Kevin Wilson
                                          Title: President


                                COLLATERAL AGENT

                                       CITIBANK, N.A., as Collateral Agent


                                       By: /s/ James N. Simpson
                                          -------------------------------------
                                          Name: James N. Simpson
                                          Title: Vice President


                                TRUSTEE

                                       HSBC BANK USA, as Trustee


                                       By: /s/ Harriet Drandoff
                                          -------------------------------------
                                          Name: Harriet Drandoff
                                          Title: Vice President


                         JUNIOR INTERCREDITOR AGREEMENT



                                                                       EXHIBIT A

                    [Form of Guarantee Assumption Agreement]

                         GUARANTEE ASSUMPTION AGREEMENT

          GUARANTEE ASSUMPTION AGREEMENT dated as of ________ __, ____ by [NAME
OF ADDITIONAL SUBSIDIARY GUARANTOR], a ________ corporation (the "ADDITIONAL
SUBSIDIARY GUARANTOR"), in favor of HSBC Bank USA, as trustee under the 2009
Notes Indenture under and as defined in the Junior Intercreditor Agreement
referred to below (in such capacity, together with its successors in such
capacity, the "TRUSTEE").

          Solutia Inc., a Delaware corporation (the "COMPANY"), the Subsidiary
Guarantors referred to therein (collectively, together with the Company, the
"SECURING PARTIES"), Citibank, N.A., as collateral agent, and the Trustee are
parties to a Junior Intercreditor Agreement dated as of July [___], 2002 (the
"JUNIOR INTERCREDITOR AGREEMENT"). In addition, one or more of the Securing
Parties have executed and delivered in favor of the Trustee one or more "Junior
Security Documents" under and as defined in the Junior Intercreditor Agreement,
including a Junior Security Agreement dated as of July [___] (the "JUNIOR
SECURITY AGREEMENT") between the Securing Parties, said collateral agent and the
Trustee, pursuant to which the Securing Parties have granted collateral
security, in respect of the Junior Secured Obligations as defined the Junior
Secured Obligations. Terms defined in the Junior Intercreditor Agreement and
used herein are used herein as defined therein.

          Pursuant to Section 4.19 of the 2009 Notes Indenture, the Additional
Subsidiary Guarantor has guaranteed the obligations of the Company under and in
respect of the 2009 Notes Indenture and the 2009 Notes issued thereunder. As
contemplated by Section 6.10 of the Junior Intercreditor Agreement and Section
6.12 of the Junior Security Agreement, the Additional Subsidiary Guarantor
hereby agrees to become a "Subsidiary Guarantor" and a "Securing Party", under
and for all purposes of the Junior Security Documents, and each of the Annexes
to the Junior Security Agreement shall be deemed to be supplemented in the
manner specified in Appendix A hereto.

          In addition, the Additional Subsidiary Guarantor hereby makes the
representations and warranties set forth in Section 2 of the Junior Security
Agreement with respect to itself and the Collateral in which it grants a
security interest thereunder.


                         GUARANTEE ASSUMPTION AGREEMENT



                                      - 2 -

          IN WITNESS WHEREOF, the Additional Subsidiary Guarantor has caused
this Guarantee Assumption Agreement to be duly executed and delivered as of the
day and year first above written.


                                       [NAME OF ADDITIONAL SUBSIDIARY
                                         GUARANTOR]


                                       By:
                                          ------------------------------------
                                          Name:
                                          Title:

Accepted and agreed:

CITIBANK, N.A., as Collateral Agent


By:
   --------------------------------
   Name:
   Title:


HSBC BANK USA, as Trustee


By:
   --------------------------------
   Name:
   Title:

                         GUARANTEE ASSUMPTION AGREEMENT



                                      - 3 -

                                                                      Appendix A

               SUPPLEMENTS TO ANNEXES TO JUNIOR SECURITY AGREEMENT


SUPPLEMENT TO ANNEX 1:

              [to be completed]

SUPPLEMENT TO ANNEX 2:

              [to be completed]

SUPPLEMENT TO ANNEX 3:

              [to be completed]

SUPPLEMENT TO ANNEX 4:

              [to be completed]

SUPPLEMENT TO ANNEX 5:

              [to be completed]

SUPPLEMENT TO ANNEX 6:

              [to be completed]

SUPPLEMENT TO ANNEX 7:

              [to be completed]

SUPPLEMENT TO ANNEX 8:

              [to be completed]


                            JUNIOR SECURITY AGREEMENT

EX-4.13

                                                                    EXHIBIT 4.13

                            JUNIOR SECURITY AGREEMENT

          JUNIOR SECURITY AGREEMENT dated as of July 25, 2002, between SOLUTIA
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware (the "COMPANY"); each of the Subsidiaries of the Company
identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages
hereto or that become "Subsidiary Guarantors" hereunder pursuant to Section 6.12
after the date hereof (individually, a "SUBSIDIARY GUARANTOR" and, collectively,
the "SUBSIDIARY GUARANTORS" and, together with the Company, individually a
"SECURING PARTY" and, collectively, the "SECURING PARTIES"); Citibank, N.A., as
collateral agent under the Non-Sharing Intercreditor Agreement referred to below
(in such capacity, the "COLLATERAL AGENT"); and HSBC Bank USA, a banking
corporation duly organized and validly existing under the laws of the State of
New York, as trustee under the 2009 Notes Indenture referred to below (in such
capacity, together with its successors in such capacity, the "TRUSTEE").

          The Company, certain lenders (the "SOLUTIA LENDERS") and Citibank,
N.A., as administrative agent (in such capacity, together with its successors in
such capacity, the "SOLUTIA ADMINISTRATIVE AGENT") are parties to a Second
Amended and Restated Credit Agreement dated as of July 25, 2002 (as modified and
supplemented and in effect from time to time, the "SOLUTIA CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by means of loans and letters of credit) to be made by said lenders to the
Company and the other borrowers referred to therein in an aggregate principal or
face amount not exceeding $600,000,000. In addition, the Company may from time
to time be obligated to various of the Solutia Lenders (or their affiliates) in
respect of one or more hedging agreements permitted under Section 6.02(g)(v) of
the Solutia Credit Agreement.

          Astaris LLC, a limited liability company organized under the laws of
Delaware ("ASTARIS"), certain lenders (the "ASTARIS LENDERS") and Bank of
America, N.A., as administrative agent (in such capacity, together with its
successors in such capacity, the "ASTARIS ADMINISTRATIVE AGENT") are parties to
a Credit Agreement dated as of September 14, 2000 (as modified and supplemented
and in effect from time to time, the "ASTARIS CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for loans to be made by said
lenders to Astaris in an aggregate principal amount not exceeding $275,000,000.
The obligations of Astaris under the Astaris Credit Agreement have been
partially guaranteed by the Company pursuant to a Guaranty Agreement dated as of
September 14, 2000 (as modified and supplemented and in effect from time to
time, the "ASTARIS GUARANTY AGREEMENT") by the Company in favor of Astaris LLC
and in favor of the Astaris Lenders and the Astaris Administrative Agent.

          The Company, State Street Bank and Trust Company, as trustee (in such
capacity, together with its successors in such capacity, the "CO-GEN TRUSTEE"),
certain financial institutions named as purchasers therein (collectively, the
"CO-GEN PURCHASERS") and Citibank, N.A., as agent for the Co-gen Purchasers (in
such capacity, together with its successors in such capacity, the "CO-GEN
AGENT"), are parties to an Amended and Restated Participation Agreement dated as
of April 24, 1998 (as modified and supplemented and in effect from time to time,
the "CO-GEN PARTICIPATION AGREEMENT"), providing, subject to the terms and
conditions thereof, for loans and investments to be made by the Co-gen
Purchasers to the Co-gen Trustee in an aggregate principal amount not exceeding
$33,000,000. The obligations of the Co-gen Trustee under the

                            JUNIOR SECURITY AGREEMENT



Co-gen Participation Agreement have been guaranteed by the Company pursuant to
an Amended and Restated Instrument Guaranty dated as of April 24, 1998 (as
modified and supplemented and in effect from time to time, the "CO-GEN GUARANTY
AGREEMENT") by the Company in favor of the Co-gen Trustee and the Co-gen
Purchasers. In addition, the Co-gen Trustee, as lessor, and the Company, as
lessee, are party to an Amended and Restated Lease dated as of April 24, 1998
(as modified and supplemented and in effect from time to time, the "CO-GEN
LEASE") pursuant to which the Company agrees to make certain rent payments to
the Co-gen Trustee in consideration of the lease of the co-generation facility
referred to therein, which rent payments service the loans and investments made
by the Co-gen Purchasers.

          In addition, certain of the Solutia Lenders may have issued letters of
credit for the account of the Company or a Subsidiary, or may in the future
issue letters of credit for the account of the Company, which are or will be
identified in the below-referenced Non-Sharing Intercreditor Agreement as
"Designated Letters of Credit" (collectively, the "DESIGNATED LETTERS OF
CREDIT"). It is contemplated that, in connection herewith, such Solutia Lenders
will execute and deliver a Letter of Credit Override Agreement providing for
certain common terms to be applicable to such letters of credit.

          The Company is also party to an Indenture dated as of July 9, 2002
(the "2009 NOTES INDENTURE") between the Company, SOI Funding Corp. and the
Trustee, pursuant to which SOI Funding Corp. has issued its 11.25% Senior
Secured Notes due 2009 (the "2009 NOTES"), in an aggregate principal amount of
$223,000,000 as of July 9, 2002, and which 2009 Notes have been assumed by the
Company pursuant to a Supplemental Indenture thereto, and guaranteed by the
Subsidiary Guarantors as provided in Section 10.01 thereof.

          Pursuant to the Senior Non-Sharing Security and Guarantee Agreement
(as defined below), the Securing Parties have granted to the Collateral Agent
liens on certain of the property of the Securing Parties (the "SENIOR
COLLATERAL") as collateral security for the obligations of the Securing Parties
under the Solutia Credit Agreement, the Astaris Credit Agreement, the Co-gen
Guaranty Agreement, Hedging Obligations (as defined in the Junior Intercreditor
Agreement referred to below) and the Designated Letters of Credit.

          In connection with the foregoing, the parties hereto wish to provide
for the grant by the Securing Parties to the Trustee of a lien on the Senior
Collateral, which liens the Trustee has agreed, on behalf of itself and each
holder of the 2009 Notes, pursuant to a Junior Intercreditor Agreement dated as
of the date hereof between the Securing Parties, the Collateral Agent and the
Trustee, shall be junior to the liens on the Senior Collateral granted to the
Collateral Agent pursuant to the Senior Non-Sharing Guarantee and Security
Agreement.

          Accordingly, the parties hereto hereby agree as follows:

          Section 1. DEFINITIONS. Terms defined in the Junior Intercreditor
Agreement are used herein as defined therein.

          (a) The terms "ACCOUNTS", "INVENTORY" and "INVESTMENT PROPERTY" have
the respective meanings ascribed thereto in Article 9 of the Uniform Commercial
Code. The term



"FINANCIAL ASSETS" shall have the meaning ascribed thereto in Article 8 of the
Uniform Commercial Code.

          (b) In addition, as used herein:

          "APPLICABLE SECURED PARTY" means, (a) prior to the Senior Payment
     Date, the Collateral Agent and (b) on and after the Senior Payment Date,
     the Trustee.

          "COLLATERAL" has the meaning assigned to such term in Section 3.

          "COLLATERAL ACCOUNT" means, collectively, the Senior Collateral
     Account and the Junior Collateral Account.

          "COPYRIGHT COLLATERAL" means all material Copyrights, whether now
     owned or hereafter acquired by any Securing Party, including each Copyright
     identified in Annex 4.

          "COPYRIGHTS" means all copyrights, copyright registrations and
     applications for copyright registrations, including all renewals and
     extensions thereof, the right to recover for all past, present and future
     infringements thereof, and all other rights of any kind whatsoever accruing
     thereunder or pertaining thereto.

          "DOCUMENT" has the meaning assigned to such term in Section 3(g).

          "EUROPE" means the countries of Austria, Benelux, Denmark, Finland,
     France, Germany, Greece, Ireland, Italy, Norway, Portugal, Spain, Sweden,
     Switzerland and the United Kingdom.

          "EVENT OF DEFAULT" has the meaning assigned to such term in the 2009
     Notes Indenture.

          "INSTRUMENTS" has the meaning assigned to such term in Section 3(d).

          "INTELLECTUAL PROPERTY" means collectively, all Copyright Collateral,
     all Patent Collateral and all Trademark Collateral, together with (a) to
     the extent used in connection with production at the Mortgaged Facilities,
     all inventions, processes, software, production methods, proprietary
     information, know-how and trade secrets with respect to any of the
     foregoing; (b) all licenses or user or other agreements granted to any
     Securing Party with respect to any of the foregoing, including software
     licenses, in each case whether now or hereafter owned or used including the
     licenses or other agreements with respect to the Copyright Collateral, the
     Patent Collateral or the Trademark Collateral, listed in Annex 7 and (c) to
     the extent used in connection with production at the Mortgaged Facilities,
     all information, data, plans, blueprints, specifications, designs,
     drawings, recorded knowledge, surveys, engineering reports, test reports,
     manuals, materials standards, processing standards, performance standards,
     catalogs, computer and automatic machinery software and programs with
     respect to any of the foregoing.



          "ISSUERS" means, collectively, (a) the respective corporations,
     partnerships or other entities identified under the names of the Securing
     Parties on Annex 3 under the caption "Issuer" and (b) any other entity that
     shall at any time be a Subsidiary Guarantor that is not a Restricted
     Subsidiary.

          "JUNIOR COLLATERAL ACCOUNT" has the meaning assigned to such term in
     Section 4.01.

          "JUNIOR SECURED OBLIGATIONS" means, collectively, (a) in the case of
     the Company, the obligations of the Company to the Trustee and the 2009
     Noteholders in respect of the 2009 Notes, (b) in the case of the Subsidiary
     Guarantors, the obligations of the Subsidiary Guarantors in respect of the
     2009 Notes pursuant to the guarantee thereof set forth in Section 10.01 of
     the 2009 Notes Indenture (or a supplement thereto executed and delivered
     pursuant to Section 4.19 thereof) and (c) in the case of all Securing
     Parties, all present and future obligations of the Securing Parties to the
     Junior Secured Parties, or any of them, hereunder.

          "JUNIOR SECURED PARTIES" means, collectively, the Trustee and the 2009
     Noteholders in respect of the 2009 Notes.

          "MORTGAGED FACILITIES" means the manufacturing facilities of the
     Company located in or near Decatur, Alabama, Pensacola, Florida, Indian
     Orchard, Massachusetts, Trenton, Michigan, Greenwood, South Carolina and
     Alvin, Texas and the production facility of CPFilms Inc. located in or near
     Martinsville, Virginia.

          "PATENT COLLATERAL" means all material Patents used in connection with
     production at the Mortgaged Facilities, whether now owned or hereafter
     acquired by any Securing Party, including each Patent identified in
     Annex 5.

          "PATENTS" means to the extent used, registered or applied for in the
     United States of America or Europe all patents, including the inventions
     and improvements described and claimed therein together with the reissues,
     divisions, continuations, renewals, extensions and continuations-in-part
     thereof, all income, royalties, damages and payments now or hereafter due
     and/or payable under and with respect thereto, including damages and
     payments for past or future infringements thereof, the right to sue for
     past, present and future infringements thereof.

          "PLEDGED DEBT" means any Debt (as defined in the Solutia Credit
     Agreement) of any Domestic Subsidiary (other than a Restricted Subsidiary)
     held by any Securing Party.

          "PLEDGED STOCK" has the meaning assigned to such term in Section 3(a).

          "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
     United States of America, or of any agency thereof, or obligations
     guaranteed as to principal and interest by the United States of America, or
     of any agency thereof, in either case maturing not more than 90 days from
     the date of acquisition thereof; (b) certificates of deposit or time
     deposits issued by any bank or trust company organized under the laws of
     the United States of America or any state thereof and having capital,
     surplus and undivided profits of



     at least $500,000,000, maturing not more than 90 days from the date of
     acquisition thereof; (c) fully collateralized repurchase agreements with a
     term of not more than 90 days for securities described in clause (a) of
     this definition and entered into with a financial institution satisfying
     the criteria described in clause (b) of this definition; and (d) commercial
     paper rated A-1 or better or P-1 by Standard & Poor's Ratings Services, a
     division of McGraw-Hill Companies, Inc., or Moody's Investors Services,
     Inc., respectively, maturing not more than 90 days from the date of
     acquisition thereof; in each case so long as the same (x) provide for the
     payment of principal and interest (and not principal alone or interest
     alone) and (y) are not subject to any contingency regarding the payment of
     principal or interest.

          "RESTRICTED ISSUERS" means, collectively, Monchem International, Inc.,
     a corporation duly organized and validly existing under the laws of the
     State of Delaware, Solutia Europe and Solutia UK Holdings Ltd., a
     corporation organized under the laws of England and Wales.

          "RESTRICTED SUBSIDIARY" has the meaning assigned to such term in the
     Existing Note Indentures as in effect on the date hereof and without giving
     effect to any modifications or supplements after the date hereof.

          "SENIOR COLLATERAL ACCOUNT" means the Collateral Account established
     pursuant to Section 4.01 of the Senior Non-Sharing Security and Guarantee
     Agreement.

          "SOLUTIA EUROPE" means Solutia Europe S.A./N.V., a corporation
     organized under the laws of Belgium.

          "STOCK COLLATERAL" has the meaning assigned to such term in Section
     3(a)(ii).

          "TRADEMARK COLLATERAL" means all material Trademarks, whether now
     owned or hereafter acquired by any Securing Party, including each Trademark
     identified in Annex 6. Notwithstanding the foregoing, the Trademark
     Collateral does not and shall not include any Trademark that would be
     rendered invalid, abandoned, void or unenforceable by reason of its being
     included as part of the Trademark Collateral.

          "TRADEMARKS" means, to the extent used, registered or applied for in
     the United States of America or Europe, all trade names, trademarks and
     service marks, logos, trademark and service mark registrations, and
     applications for trademark and service mark registrations, including all
     renewals of trademark and service mark registrations, all rights
     corresponding thereto throughout the United States of America and Europe,
     the right to recover for all past, present and future infringements
     thereof, all other rights of any kind whatsoever accruing thereunder or
     pertaining thereto, together, in each case, with the product lines and
     goodwill of the business connected with the use of, and symbolized by, each
     such trade name, trademark and service mark.

          "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
     effect from time to time in the State of New York.



          Section 2. REPRESENTATIONS AND WARRANTIES. Each Securing Party
represents and warrants to the Junior Secured Parties that:

          (a) TITLE AND PRIORITY. Such Securing Party is the sole beneficial
     owner of the Collateral in which it purports to grant a security interest
     pursuant to Section 3 and no Lien exists or will exist upon such Collateral
     at any time, except for Liens permitted under Section 4.11 of the 2009
     Notes Indenture and except for (x) the security interest in favor of the
     Collateral Agent for the benefit of the Senior Secured Parties created
     pursuant to the Senior Non-Sharing Security and Guarantee Agreement and (y)
     the security interest in favor of the Trustee for the benefit of the Junior
     Secured Parties created pursuant hereto. The security interest created
     pursuant hereto constitutes a valid and perfected security interest in the
     Collateral in which such Securing Party purports to grant a security
     interest pursuant to Section 3, subject to the senior Lien created pursuant
     to the Senior Non-Sharing Security and Guarantee Agreement, but subject to
     no other equal or prior Lien except as expressly permitted by said Section
     4.11 of the 2009 Notes Indenture.

          (b) NAMES, ETC. The full and correct legal name, type of organization,
     jurisdiction of organization, organizational ID number (if applicable) and
     mailing address of each Securing Party as of the date hereof are correctly
     set forth in Annex 1. Annex 1 correctly specifies (x) the place of business
     of each Securing Party or, if such Securing Party has more than one place
     of business, the location of the chief executive office of such Securing
     Party, and (y) each location of the Securing Parties where in excess of
     $5,000,000 of Inventory as of March 31, 2002 of the Securing Parties is
     located.

          (c) CHANGES IN CIRCUMSTANCES. Such Securing Party has not (i) within
     the period of four months prior to the date hereof, changed its "location"
     (as defined in Section 9-307 of the Uniform Commercial Code), (ii) except
     as specified in Annex 1, heretofore changed its name, or (iii) except as
     specified in Annex 2, heretofore become a "new debtor" (as defined in
     Section 9-102(a)(56) of the Uniform Commercial Code) with respect to a
     currently effective security agreement previously entered into by any other
     Person.

          (d) PLEDGED STOCK. The Pledged Stock, if any, identified under the
     name of such Securing Party in Annex 3 is, and all other Pledged Stock in
     which such Securing Party shall hereafter grant a security interest
     pursuant to Section 3 will be, duly authorized, validly issued, fully paid
     and non-assessable and none of such Pledged Stock is or will be subject to
     any contractual restriction, or any restriction under the charter, by-laws
     or other organizational document of the respective Issuer of such Pledged
     Stock, upon the transfer of such Pledged Stock (except for any restriction
     contained herein or under such organizational documents).

          (e) OWNERSHIP OF PLEDGED STOCK. The Pledged Stock, if any, identified
     under the name of such Securing Party in Annex 3 constitutes (i) in the
     case of each Issuer other than a Restricted Issuer, 100% of all the issued
     and outstanding shares of capital stock of whatever class of such Issuer
     beneficially owned by such Securing Party on the date hereof (whether or
     not registered in the name of such Securing Party) and (ii) in the case



     of each Restricted Issuer, 65% of the issued and outstanding shares of
     voting stock of such Restricted Issuer (it being understood that, in the
     case of Solutia Europe, shares of treasury stock or stock of Solutia Europe
     held by Solutia Europe shall not be deemed to be outstanding) and 100% of
     all other issued and outstanding shares of capital stock of whatever class
     of such Restricted Issuer beneficially owned by such Securing Party on the
     date hereof (whether or not registered in the name of such Securing Party);
     Annex 3 correctly identifies, as at the date hereof, the respective Issuers
     of such Pledged Stock and the respective class and par value of the shares
     constituting such Pledged Stock and the respective number of shares (and
     registered owners thereof) represented by each such certificate.

          (f) FAIR LABOR STANDARDS ACT. Any goods now or hereafter produced by
     such Securing Party or any of its Subsidiaries in the United States of
     America included in the Collateral have been and will be produced in
     compliance with the requirements of the Fair Labor Standards Act, as
     amended.

          (g) INTELLECTUAL PROPERTY. Annexes 4, 5, and 6, respectively, set
     forth under the name of such Securing Party a complete and correct list of
     all material Copyrights, material Patents and material Trademarks (in each
     case to the extent encompassed within the definition of "Intellectual
     Property" in Section 1(b) hereof) owned by such Securing Party on the date
     hereof, and all registrations listed in Annexes 4, 5, and 6, are properly
     issued and in full force and effect. Annex 7 sets forth under the name of
     such Securing Party all licenses and other user agreements pursuant to
     which such Securing Party has been granted the right to use any Copyrights,
     Patents or Trademarks owned by others and material to the business of such
     Securing Party (and, in the case of Patents, used in connection with
     production at the Mortgaged Facilities).

          To such Securing Party's knowledge, (i) except as set forth in Annex
     4, 5 or 6, there is no violation by others of any right of such Securing
     Party with respect to any material Copyright, Patent or Trademark listed in
     Annexes 4, 5, and 6, respectively, under the name of such Securing Party
     and (ii) such Securing Party is not infringing in any material respect upon
     any copyright, patent or trademark of any other Person by virtue of the
     conduct of its business or, in the case of any such patent, use in
     connection with production at any of such Securing Party's facilities, as
     applicable; and no proceedings have been instituted or are pending against
     such Securing Party or, to such Securing Party's knowledge, threatened, and
     no claim against such Securing Party has been received by such Securing
     Party, alleging any such violation, except as may be set forth in Annex 7.

          As of the date hereof, such Securing Party does not own any Trademarks
     registered in the United States of America to which the last sentence of
     the definition of Trademark Collateral applies.

          Section 3. COLLATERAL. Subject to the Lien of the Senior Non-Sharing
Security and Guarantee Agreement, as collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Junior Secured Obligations, each Securing Party hereby pledges and grants to
the Trustee, for the benefit of the Junior Secured Parties as



hereinafter provided, a security interest in all of such Securing Party's right,
title and interest in the following property, whether now owned by such Securing
Party or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "COLLATERAL"):

          (a) the shares of voting stock of the Issuers identified in Annex 3
     under the name of such Securing Party and all other shares of capital stock
     of whatever class of the Issuers together with all rights, privileges,
     authority and power of such Issuer with respect to such shares, in each
     case together with the certificates, instruments and agreements, if any,
     evidencing the same (collectively, the "PLEDGED STOCK"), together with:

               (i)  all shares, securities, moneys or property representing a
          dividend on any of the Pledged Stock, or representing a distribution
          or return of capital upon or in respect of the Pledged Stock, or
          resulting from a split-up, revision, reclassification or other like
          change of the Pledged Stock or otherwise received in exchange
          therefor, and any subscription warrants, rights, agreements or options
          issued to the holders of, or otherwise in respect of, the Pledged
          Stock; and

               (ii) without affecting the obligations of such Securing Party
          under any provision prohibiting such action hereunder or under the
          Solutia Credit Agreement, in the event of any consolidation or merger
          in which an Issuer is not the surviving corporation, all shares of
          each class of the capital stock of the successor corporation (unless
          such successor corporation is such Securing Party itself) formed by or
          resulting from such consolidation or merger (the Pledged Stock,
          together with all other certificates, shares, securities, properties
          or moneys as may from time to time be pledged hereunder pursuant to
          this clause (ii) and clause (i) above being herein collectively called
          the "STOCK COLLATERAL");

     PROVIDED that, notwithstanding the foregoing, the Stock Collateral of any
     Restricted Issuer shall be limited to 65% of the issued and outstanding
     shares of voting stock of such Restricted Issuer (it being understood that,
     in the case of Solutia Europe, shares of treasury stock or stock of Solutia
     Europe held by Solutia Europe shall not be deemed to be outstanding) and
     100% of all other issued and outstanding shares of capital stock of
     whatever class of such Issuer;

          (b) the Pledged Debt;

          (c) all Accounts and all Intellectual Property;

          (d) all instruments, chattel paper (whether tangible or electronic) or
     letters of credit (each as defined in the Uniform Commercial Code) of such
     Securing Party evidencing, representing, arising from or existing in
     respect of, relating to, securing or otherwise supporting the payment of,
     any of the Accounts, including (but not limited to) promissory notes,
     drafts, bills of exchange and trade acceptances (herein collectively called
     "INSTRUMENTS");

          (e) all Inventory;



          (f) each contract and other agreement of such Securing Party relating
     to the sale or other disposition of Inventory;

          (g) all documents of title (as defined in the Uniform Commercial Code)
     or other receipts of such Securing Party covering, evidencing or
     representing Inventory (herein collectively called "DOCUMENTS");

          (h) all rights, claims and benefits of such Securing Party against any
     Person arising out of, relating to or in connection with Inventory
     purchased by such Securing Party, including any such rights, claims or
     benefits against any Person storing or transporting such Inventory;

          (i) all Investment Property and Financial Assets contained in the
     Collateral Account;

          (j) the balance from time to time in the Collateral Account; and

          (k) all proceeds, products, offspring, accessions, rents, profits,
     income, benefits, substitutions and replacements of and to any of the
     Collateral and, to the extent related to any Collateral, all books,
     correspondence, credit files, records, invoices and other papers, including
     without limitation all tapes, cards, computer runs and other papers and
     documents in the possession or under the control of such Securing Party or
     any computer bureau or service company from time to time acting for such
     Securing Party;

PROVIDED that (i) Debt (as defined in the Existing Note Indentures), or shares
of stock, of any Restricted Subsidiary owned or held by the Company or any other
Restricted Subsidiary shall not be included as part of the Collateral under this
Agreement and (ii) licenses and other user agreements pursuant to which any
Securing Party has been granted the right to use any Copyrights, Patents or
Trademarks owned by others shall be included in the Collateral only to the
extent permitted under the applicable instruments pursuant to which such
licenses and user agreements are created or granted.

          The Securing Parties hereto contemplate that the pledge of shares of
capital stock of Solutia Europe and Solutia UK Holdings Ltd. provided above may
be supplemented by one or more separate pledge agreements, executed and
delivered by the relevant Securing Parties in favor of the Trustee (each junior
to the corresponding pledge in favor of the Collateral Agent executed and
delivered pursuant to the Senior Non-Sharing Security and Guarantee Agreement),
which pledge agreements will provide for the pledge of shares in accordance with
the requirements of the law of Belgium or of England and Wales, as applicable;
upon the execution and delivery of any such pledge agreement, the provisions of
such pledge agreement shall supersede in their entirety the provisions of this
Agreement with respect to the shares of capital stock of Solutia Europe or
Solutia UK Holdings Ltd. pledged by such Securing Party hereunder.

          Section 4. CASH PROCEEDS OF COLLATERAL.

          4.01 JUNIOR COLLATERAL ACCOUNT. The Trustee will cause to be
established at a banking institution to be selected by the Trustee one or more
cash collateral accounts (collectively, the "JUNIOR COLLATERAL ACCOUNT"), which



          (i)  to the extent of all Investment Property or Financial Assets
     (other than cash) shall be a "securities account" (as defined in Section
     8-501 of the Uniform Commercial Code) in respect of which the Trustee shall
     be the "entitlement holder" (as defined in Section 8-102(a)(7) of the
     Uniform Commercial Code) and

          (ii) to the extent of any cash, shall be a deposit account in respect
     of which the Trustee is the customer (as contemplated by Section
     9-104(a)(3) of the Uniform Commercial Code) and

into which, at any time after the Senior Payment Date, there shall be deposited
from time to time the cash proceeds of any of the Collateral (including proceeds
of insurance thereon) that the Trustee requests pursuant to Section 4.02 be
delivered hereunder and into which a Securing Party may from time to time
deposit any additional amounts that any of them wishes to pledge to the Trustee
for the benefit of the Junior Secured Parties as additional collateral security
hereunder. The balance from time to time in the Junior Collateral Account shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Junior Secured Obligations until applied as hereinafter provided. If at any
time following request by the Trustee pursuant to Section 4.02 no Event of
Default shall be continuing, the Trustee shall remit the collected balance
standing to the credit of the Junior Collateral Account to or upon the order of
the respective Securing Party as such Securing Party through the Company shall
from time to time instruct, PROVIDED that at any time during the continuance of
an Event of Default, the Trustee may in its discretion apply or cause to be
applied (subject to collection) the balance from time to time standing to the
credit of the Junior Collateral Account to the payment of any Junior Secured
Obligation then due and payable in the manner specified in Section 5.09. In
addition, the Company may at any time request that the balance from time to time
standing to the credit of the Junior Collateral Account be applied to the
payment of any Junior Secured Obligations then due and payable in the manner
specified in Section 5.09. The balance from time to time in the Junior
Collateral Account shall be subject to withdrawal only as provided herein.

          4.02 PROCEEDS OF ACCOUNTS AND PLEDGED DEBT. If requested by the
Trustee at any time after the Senior Payment Date and after the occurrence and
during the continuance of an Event of Default, each Securing Party shall
instruct (i) all account debtors and other Persons obligated in respect of all
Accounts of such Securing Party to make all payments in respect of the Accounts
of such Securing Party either (a) directly to the Trustee (by instructing that
such payments be remitted to a post office box which shall be in the name and
under the control of the Trustee) or (b) to one or more other banks in the
United States of America (by instructing that such payments be remitted to a
post office box which shall be in the name and under the control of the Trustee)
under arrangements, in form and substance reasonably satisfactory to the
Trustee, pursuant to which such Securing Party shall have irrevocably instructed
such other bank (and such other bank shall have agreed) to remit all proceeds of
such payments directly to the Trustee for deposit into the Junior Collateral
Account and (ii) all Domestic Subsidiaries obligated in respect of all Pledged
Debt to make all payments in respect of the Pledged Debt directly to the
Trustee. All payments made to the Trustee, as provided in the preceding
sentence, shall be immediately deposited by the Trustee in the Junior Collateral
Account. In addition to the foregoing, each Securing Party agrees that, at any
time after the Senior Payment Date and after the occurrence and during the
continuance of an Event of Default, if the proceeds of any Collateral hereunder
(including the payments made in respect of Accounts and Pledged Debt)



shall be received by it, such Securing Party shall, upon the request of the
Trustee, as promptly as possible deposit such proceeds into the Junior
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by such Securing Party for and as the property of the Trustee and shall not be
commingled with any other funds or property of such Securing Party.

          4.03 INVESTMENT OF BALANCE IN JUNIOR COLLATERAL ACCOUNT. The cash
balance standing to the credit of the Junior Collateral Account shall be
invested from time to time in such Permitted Investments as the respective
Securing Party through the Company (or, after the occurrence and during the
continuance of a Default, the Trustee) shall determine, which Permitted
Investments shall be held in the name and be under the control of the Trustee
(and, if the Junior Collateral Account is a securities account, credited to the
Trustee), PROVIDED that at any time after the occurrence and during the
continuance of an Event of Default on or after the Senior Payment Date, the
Trustee may in its discretion at any time and from time to time elect to
liquidate any such Permitted Investments and to apply or cause to be applied the
proceeds thereof to the payment of the Junior Secured Obligations then due and
payable in the manner specified in Section 5.09.

          4.04 SENIOR COLLATERAL ACCOUNT. Prior to the Senior Payment Date, the
Collateral Agent agrees that the balance from time to time standing to the
credit of the Senior Collateral Account shall be held by the Collateral Agent
for the benefit, on a junior lien basis, of the Trustee and the 2009
Noteholders, PROVIDED that (i) prior to the Senior Payment Date, the Trustee
shall not have any right to give any instructions or consents with respect to
actions of the Collateral Agent relating to the Senior Collateral Account and
(ii) at any time after the Senior Payment Date, the Collateral Agent may in its
discretion (and shall, if requested by the Trustee) remit the balance then
standing to the credit of the Senior Collateral Account to the Trustee for
deposit into the Junior Collateral Account.

          Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 3, the Securing Parties
hereby jointly and severally agree with each Junior Secured Party as follows:

          5.01 DELIVERY AND OTHER PERFECTION. Each Securing Party shall:

          (a) if any of the shares, securities, moneys or property required to
     be pledged by such Securing Party under clauses (a)(i) or (a)(ii) of
     Section 3 are received by such Securing Party forthwith, either (x)
     transfer and deliver to the Applicable Secured Party such shares or
     securities so received by such Securing Party (together with the
     certificates for any such shares and securities duly endorsed in blank or
     accompanied by undated stock powers duly executed in blank), all of which
     thereafter shall be held by the Applicable Secured Party, pursuant to the
     terms of the Senior Non-Sharing Security and Guarantee Agreement or this
     Agreement (as applicable), as part of the Senior Collateral (at any time
     prior to the Senior Payment Date) or the Collateral (at any time after the
     Senior Payment Date) or (y) take such other action as the Collateral Agent
     pursuant to the Senior Non-Sharing Security and Guarantee Agreement (at all
     times prior to the Senior Payment Date) or the Trustee (at any time on or
     after the Senior Payment Date) shall deem reasonably necessary or
     appropriate to duly record the Lien created hereunder in such shares,
     securities, moneys or property in said clauses (a)(i) and (a)(ii);



          (b) deliver and pledge to the Applicable Secured Party any and all
     Instruments constituting part of the Collateral in which such Securing
     Party purports to grant a security interest hereunder, endorsed and/or
     accompanied by such instruments of assignment and transfer in such form and
     substance as the Collateral Agent pursuant to the Senior Non-Sharing
     Security and Guarantee Agreement (at all times prior to the Senior Payment
     Date) or the Trustee (at any time on or after the Senior Payment Date) may
     request; PROVIDED, that so long as no Event of Default shall have occurred
     and be continuing, such Securing Party may retain for collection in the
     ordinary course any Instruments received by such Securing Party in the
     ordinary course of its business and the Applicable Secured Party shall,
     promptly upon request of such Securing Party through the Company, make
     appropriate arrangements for making any Instrument pledged by such Securing
     Party available to such Securing Party for purposes of presentation,
     collection or renewal (any such arrangement to be effected, to the extent
     deemed appropriate by the Collateral Agent pursuant to the Senior
     Non-Sharing Security and Guarantee Agreement (at all times prior to the
     Senior Payment Date) or the Trustee (at any time on or after the Senior
     Payment Date), against trust receipt or like document);

          (c) deliver and pledge to the Applicable Secured Party any and all
     promissory notes or other instruments evidencing any of the Pledged Debt,
     endorsed and/or accompanied by such instruments of assignment and transfer
     in such form and substance as the Collateral Agent pursuant to the Senior
     Non-Sharing Security and Guarantee Agreement (at all times prior to the
     Senior Payment Date) or the Trustee (at any time on or after the Senior
     Payment Date) may request;

          (d) give, execute, deliver, file, register and record, authorize or
     obtain all such financing statements, notices, instruments, documents,
     agreements or other papers, and take such other action, as may be necessary
     or desirable (in the reasonable judgment of the Collateral Agent pursuant
     to the Senior Non-Sharing Security and Guarantee Agreement (at all times
     prior to the Senior Payment Date) or the Trustee (at any time on or after
     the Senior Payment Date)) to create, preserve, publish notice of, perfect,
     validate or preserve the priority of the security interest granted pursuant
     hereto or to enable the Applicable Secured Party to exercise and enforce
     its rights hereunder with respect to such pledge and security interest,
     including causing any or all of the Stock Collateral to be transferred of
     record into the name of the Applicable Secured Party or its nominee (and
     the Trustee agrees that if any Stock Collateral is transferred into its
     name or the name of its nominee, the Trustee will thereafter promptly give
     to the respective Securing Party copies of any notices and communications
     received by it with respect to the Stock Collateral pledged by such
     Securing Party hereunder), PROVIDED that notices to account debtors in
     respect of any Accounts or Instruments shall be subject to the provisions
     of clause (h) below;

          (e) keep accurate books and records relating to the Collateral, and
     stamp or otherwise mark such books and records in such manner as the
     Collateral Agent pursuant to the Senior Non-Sharing Security and Guarantee
     Agreement (at all times prior to the Senior Payment Date) or the Trustee
     (at any time on or after the Senior Payment Date) may reasonably require in
     order to reflect the security interests granted by this Agreement;



          (f) permit representatives of the Collateral Agent pursuant to the
     Senior Non-Sharing Security and Guarantee Agreement (at all times prior to
     the Senior Payment Date) and the Trustee (at any time on or after the
     Senior Payment Date), upon reasonable notice, at any time during normal
     business hours to inspect and make abstracts from its books and records
     pertaining to the Collateral, and, during the continuance of an Event of
     Default, permit representatives of the Collateral Agent pursuant to the
     Senior Non-Sharing Security and Guarantee Agreement (at all times prior to
     the Senior Payment Date) and the Trustee (at any time on or after the
     Senior Payment Date) to be present at such Securing Party's place of
     business to receive copies of all communications and remittances relating
     to the Collateral, and forward copies of any notices or communications
     received by such Securing Party with respect to the Collateral, all in such
     manner as the Collateral Agent pursuant to the Senior Non-Sharing Security
     and Guarantee Agreement (at all times prior to the Senior Payment Date) and
     the Trustee (at any time on or after the Senior Payment Date) may
     reasonably require;

          (g) execute and deliver and, subject to the execution thereof by the
     Trustee, cause to be filed, such continuation statements, and do such other
     acts and things, as may be necessary to maintain the perfection of the
     security interest granted pursuant hereto; and

          (h) without limiting the provisions of Section 4.02 hereof, upon the
     occurrence and during the continuance of any Default, upon request of the
     Collateral Agent pursuant to the Senior Non-Sharing Security and Guarantee
     Agreement (at all times prior to the Senior Payment Date) or the Trustee
     (at any time on or after the Senior Payment Date), promptly notify (and
     such Securing Party hereby authorizes the Trustee so to notify) each
     account debtor in respect of any Accounts or Instruments that such
     Collateral has been assigned to the Trustee hereunder, and that any
     payments due or to become due in respect of such Collateral are to be made
     directly to the Trustee.

          5.02 SENIOR COLLATERAL. Prior to the Senior Payment Date, the
Collateral Agent agrees that all items of Senior Collateral (or instruments or
certificates evidencing the same) it holds in its possession pursuant to Section
6.01 of the Non-Sharing Security and Guarantee Agreement shall be held by the
Collateral Agent for the benefit, on a junior lien basis, of the Trustee and the
2009 Noteholders, PROVIDED that (i) prior to the Senior Payment Date, the
Trustee shall not have any right to give any instructions or consents with
respect to actions of the Collateral Agent relating to such Senior Collateral
(or instruments or certificates evidencing the same) and (ii) at any time after
the Senior Payment Date, the Collateral Agent may in its discretion (and shall,
if requested by the Trustee) remit all items of Senior Collateral to the
Trustee.

          5.03 PRESERVATION OF RIGHTS. The Trustee shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.



          5.04 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.

          (a) STOCK COLLATERAL.

          (1) PERCENTAGE PLEDGED. The Securing Parties will cause the Stock
     Collateral to constitute at all times (i) in the case of the Issuers other
     than Restricted Issuers, 100% of all the total number of shares of capital
     stock of each such Issuer then issued and outstanding and (ii) in the case
     of the Restricted Issuers, 65% of the total number of shares of the voting
     stock of the Restricted Issuers (it being understood that, in the case of
     Solutia Europe, shares of treasury stock or stock of Solutia Europe held by
     Solutia Europe shall not be deemed to be outstanding) and 100% of the total
     number of shares of all other classes of capital stock of each Restricted
     Issuer then issued and outstanding.

          (2) VOTING AND OTHER RIGHTS. So long as no Event of Default shall have
     occurred and be continuing, the Securing Parties shall have the right to
     exercise all voting, consensual and other powers of ownership pertaining to
     the Stock Collateral for all purposes not inconsistent with the terms of
     this Agreement, the Solutia Credit Agreement or any other instrument or
     agreement referred to herein or therein, PROVIDED that the Securing Parties
     jointly and severally agree that they will not vote the Stock Collateral in
     any manner that results in a violation of the terms of this Agreement, the
     Solutia Credit Agreement or any such other instrument or agreement; and the
     Collateral Agent shall execute and deliver to the Securing Parties or cause
     to be executed and delivered to the Securing Parties all such proxies,
     powers of attorney, dividend and other orders, and all such instruments,
     without recourse, as the Securing Parties may reasonably request for the
     purpose of enabling the Securing Parties to exercise the rights and powers
     that they are entitled to exercise pursuant to this Section 5.04(a)(2).

          (3) DIVIDENDS. Unless and until an Event of Default has occurred and
     is continuing, the Securing Parties shall be entitled to receive and retain
     any dividends on the Stock Collateral paid in cash out of earned surplus.

          (4) RIGHTS FOLLOWING DEFAULT. If any Event of Default shall have
     occurred, then so long as such Event of Default shall continue, and whether
     or not the Trustee or any other Junior Secured Party exercises any
     available right to declare any Junior Secured Obligation due and payable or
     seeks or pursues any other relief or remedy available to it under
     applicable law or under or in respect of this Agreement or the 2009 Notes
     Indenture, all dividends and other distributions on the Stock Collateral
     shall be paid directly to the Applicable Secured Party and retained by it
     in the Collateral Account as part of the Stock Collateral, subject to the
     terms of this Agreement, and, if the Collateral Agent pursuant to the
     Senior Non-Sharing Security and Guarantee Agreement (at all times prior to
     the Senior Payment Date) or the Trustee (at any time on or after the Senior
     Payment Date) shall so request in writing, the Securing Parties jointly and
     severally agree to execute and deliver to the Applicable Secured Party
     appropriate additional dividend, distribution and other orders and
     documents to that end, PROVIDED that if such Event of Default is cured, any
     such dividend or distribution theretofore paid to the Trustee shall, upon
     request of the Securing Parties (except to the extent theretofore applied
     to the Junior Secured Obligations), be returned by the Trustee to the
     Securing Parties.



          (b) INTELLECTUAL PROPERTY.

          (1) For the purpose of enabling the Trustee to exercise rights and
     remedies under Section 5.05 at such time as the Trustee shall be lawfully
     entitled to exercise such rights and remedies, and for no other purpose,
     each Securing Party hereby grants to the Trustee, to the extent assignable,
     an irrevocable, non-exclusive right (exercisable without payment of royalty
     or other compensation to such Securing Party) to use, assign, license or
     sublicense any of the Intellectual Property now owned or hereafter acquired
     by such Securing Party, wherever the same may be located, including in such
     right reasonable access to all media in which any of the Intellectual
     Property may be recorded or stored and to all computer programs used for
     the compilation or printout thereof.

          (2) Notwithstanding anything contained herein to the contrary, the
     Securing Parties will be permitted to exploit, use, enjoy, protect,
     license, sublicense, assign, sell, dispose of or take other actions with
     respect to the Intellectual Property in the ordinary course of the business
     of the Securing Parties. In furtherance of the foregoing, unless an Event
     of Default shall have occurred and be continuing the Trustee shall from
     time to time, upon the request of the respective Securing Party, execute
     and deliver any instruments, certificates or other documents, in the form
     so requested, that such Securing Party through the Company shall have
     certified are appropriate (in its judgment) to allow it to take any action
     permitted above (including relinquishment of the right provided pursuant to
     clause (1) immediately above as to any specific Intellectual Property).
     Further, upon the payment in full of all of the Junior Secured Obligations
     or earlier expiration of this Agreement or release of the Collateral, the
     Trustee shall grant back to the Securing Parties the right granted pursuant
     to clause (1) immediately above. The exercise of rights and remedies under
     Section 5.05 by the Trustee shall not terminate the rights of the holders
     of any licenses or sublicenses theretofore granted by the Securing Parties
     in accordance with the first sentence of this clause (2).

          (3) At all times prior to the Senior Payment Date, the Securing
     Parties shall furnish to the Trustee copies of any statements and schedules
     delivered pursuant to Section 6.04(b)(3) of the Senior Non-Sharing Security
     and Guarantee Agreement to the Collateral Agent, and, upon any modification
     of the Senior Non-Sharing Security and Guarantee Agreement to supplement
     any of Annexes 4, 5 or 6 of the Senior Non-Sharing Security and Guarantee
     Agreement, will similarly supplement Annexes 4, 5 and 6 hereto. At all
     times on and after the Senior Payment Date, the Securing Parties will
     furnish to the Trustee from time to time (but, unless a Default (as defined
     in the 2009 Notes Indenture) shall have occurred and be continuing, no more
     frequently than semi-annually) statements and schedules further identifying
     and describing the Copyright Collateral, the Patent Collateral and the
     Trademark Collateral, respectively, and such other reports in connection
     with the Copyright Collateral, the Patent Collateral and the Trademark
     Collateral as the Trustee may reasonably request, all in reasonable detail;
     and promptly upon request of the Trustee, following receipt by the Trustee
     of any statements, schedules or reports pursuant to this clause (3), modify
     this Agreement by amending Annexes 4, 5 and/or 6, as the case may be, to
     include any Copyright, Patent or Trademark that becomes part of the
     Collateral under this Agreement.



          5.05 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing, but subject in each case to
the applicable provisions of the Junior Intercreditor Agreement:

          (a) each Securing Party shall, at the request of the Trustee, assemble
     the Collateral owned by it at such place or places, reasonably convenient
     to both the Trustee and such Securing Party, designated in the Trustee's
     request;

          (b) the Trustee may make any reasonable compromise or settlement
     deemed desirable with respect to any of the Collateral and may extend the
     time of payment, arrange for payment in installments, or otherwise modify
     the terms of, any of the Collateral;

          (c) the Trustee shall have all of the rights and remedies with respect
     to the Collateral of a secured party under the Uniform Commercial Code
     (whether or not the Uniform Commercial Code is in effect in the
     jurisdiction where the rights and remedies are asserted) and such
     additional rights and remedies to which a secured party is entitled under
     the laws in effect in any jurisdiction where any rights and remedies
     hereunder may be asserted, including the right, to the fullest extent
     permitted by applicable law, to exercise all voting, consensual and other
     powers of ownership pertaining to the Collateral as if the Trustee were the
     sole and absolute owner thereof (and each Securing Party agrees to take all
     such action as may be appropriate to give effect to such right);

          (d) the Trustee in its discretion may, in its name or in the name of
     any Securing Party or otherwise, demand, sue for, collect or receive any
     money or property at any time payable or receivable on account of or in
     exchange for any of the Collateral, but shall be under no obligation to do
     so; and

          (e) the Trustee may, upon ten Business Days' prior written notice to
     the Securing Parties of the time and place, with respect to the Collateral
     or any part thereof which shall then be or shall thereafter come into the
     possession, custody or control of the Trustee, the other Junior Secured
     Parties or any of their respective agents, sell, lease, assign or otherwise
     dispose of all or any part of such Collateral, at such place or places as
     the Trustee deems best, and for cash or for credit or for future delivery
     (without thereby assuming any credit risk), at public or private sale,
     without demand of performance or notice of intention to effect any such
     disposition or of the time or place thereof (except such notice as is
     required above or by applicable statute and cannot be waived), and the
     Trustee or any other Junior Secured Party or anyone else may be the
     purchaser, lessee, assignee or recipient of any or all of the Collateral so
     disposed of at any public sale (or, to the extent permitted by law, at any
     private sale) and thereafter, to the fullest extent permitted by law, hold
     the same absolutely, free from any claim or right of whatsoever kind,
     including any right or equity of redemption (statutory or otherwise), of
     the Securing Parties, any such demand, notice and right or equity being
     hereby expressly waived and released, to the fullest extent permitted by
     law. In the event of any sale, assignment, or other disposition of any of
     the Trademark Collateral, the goodwill connected with and symbolized by the
     Trademark Collateral subject to such disposition shall be included, and the
     Securing Parties shall supply to the Trustee or its designee, for inclusion
     in such sale,



     assignment or other disposition, all Intellectual Property relating to such
     Trademark Collateral. The Trustee may, without notice or publication,
     adjourn any public or private sale or cause the same to be adjourned from
     time to time by announcement at the time and place fixed for the sale, and
     such sale may be made at any time or place to which the sale may be so
     adjourned.

The proceeds of each collection, sale or other disposition under this
Section 5.05 shall be applied in accordance with Section 5.09.

          The Securing Parties recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Trustee may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Securing Parties acknowledge that any such private sales may be at prices and on
terms less favorable to the Trustee than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agree that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Trustee shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the Company or issuer thereof to register it
for public sale.

          5.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 are insufficient
to cover the costs and expenses of such realization and the payment in full of
the Junior Secured Obligations, the Securing Parties shall remain liable for any
deficiency.

          5.07 LOCATIONS; NAMES. Without at least 30 days' prior written notice
to the Trustee, no Securing Party shall change its "location" (as defined in
Section 9-307 of the Uniform Commercial Code) or change its name from the name
shown as its current legal name on Annex 1.

          5.08 PRIVATE SALE. The Trustee and the Junior Secured Parties shall
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 conducted in a
commercially reasonable manner. Each Securing Party hereby waives any claims
against the Trustee or any other Junior Secured Party arising by reason of the
fact that the price at which the Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale or
was less than the aggregate amount of the Junior Secured Obligations, even if
the Trustee accepts the first offer received and does not offer the Collateral
to more than one offeree.

          5.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Trustee under this Section 5, shall be applied by the Trustee:

          FIRST, to the payment of the costs and expenses of such collection,
     sale or other realization, including reasonable out-of-pocket costs and
     expenses of the Trustee and the



     fees and expenses of its agents and counsel, and all expenses incurred and
     advances made by the Trustee in connection therewith;

          SECOND, to the payment in full of the Junior Secured Obligations in
     such manner of application as required under the 2009 Notes Indenture; and

          FINALLY, to the payment to the respective Securing Parties, or their
     respective successors or assigns, or as a court of competent jurisdiction
     may direct, of any surplus then remaining.

          5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Trustee while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Trustee is hereby appointed, subject to the rights of the Collateral
Agent under the Senior Non-Sharing Security and Guarantee Agreement, the
attorney-in-fact of each Securing Party for the purpose of carrying out the
provisions of this Section 5 and taking any action and executing any instruments
which the Trustee may reasonably deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, so
long as the Trustee shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Trustee shall have the right and power to
receive, endorse and collect all checks made payable to the order of any
Securing Party representing any dividend, payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same.

          5.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Securing Party shall (i) file such financing
statements and other documents in such offices as the Trustee may reasonably
request to perfect the security interests granted by Section 3 of this
Agreement, (ii) deliver to the Applicable Secured Party all certificates
evidencing any of the Pledged Stock, accompanied by undated stock powers duly
executed in blank, and, to the extent required by Section 3(b), all promissory
notes and other instruments evidencing any Pledged Debt identified in Annex 8
and (iii) execute and deliver such short form assignments or security agreements
relating to Collateral consisting of the Intellectual Property as the Collateral
Agent pursuant to the Senior Non-Sharing Security and Guarantee Agreement (at
all times prior to the Senior Payment Date) or the Trustee (at any time on or
after the Senior Payment Date) may reasonably request. Without limiting the
foregoing, each Securing Party consents that Uniform Commercial Code financing
statements may be filed describing the Collateral as set forth in Section 3.

          5.12 TERMINATION. When all Junior Secured Obligations shall have been
paid in full, this Agreement shall terminate, and the Trustee shall forthwith
cause to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the respective Securing
Party. The Trustee shall, at the expense of the Company, also execute and
deliver to the respective Securing Party upon such termination such Uniform
Commercial Code termination statements and such other documentation as shall be
reasonably requested by the respective Securing Party to effect the termination
and release of the Liens on the Collateral.



          5.13 FURTHER ASSURANCES. Each Securing Party agrees that, from time to
time upon the written request of the Trustee, such Securing Party will execute
and deliver such further documents and do such other acts and things as the
Collateral Agent may reasonably request in order fully to effect the purposes of
this Agreement.

          Section 6. MISCELLANEOUS.

          6.01 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the respective parties hereto
pursuant to Section 6.01 of the Junior Intercreditor Agreement. All such
communications shall be deemed to have been given at the times specified in said
Section 6.01.

          6.02 NO WAIVER. No failure on the part of the Trustee or any other
Junior Secured Party to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Trustee or any
other Junior Secured Party of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

          6.03 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Securing Party and the Trustee in accordance with the provisions of Section 6.03
of the Junior Intercreditor Agreement (or as otherwise provided in said Section
6.03), PROVIDED that no such amendment shall alter or impose any obligations
upon, or affect any of the rights of, the Collateral Agent hereunder without the
consent of the Collateral Agent. Any such amendment or waiver shall be binding
upon the Trustee, the Collateral Agent, each other Junior Secured Party and each
Securing Party.

          6.04 EXPENSES. The Securing Parties jointly and severally agree to
reimburse each of the Trustee and the 2009 Noteholders for all reasonable costs
and expenses of the Trustee and the other Junior Secured Parties (including the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including all manner of participation in or other involvement with (w)
performance by the Trustee of any obligations of the Securing Parties in respect
of the Collateral that the Securing Parties have failed or refused to perform,
(x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral and defending or asserting rights and claims of
the Trustee in respect thereof, by litigation or otherwise, including expenses
of insurance, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 6.04, and all such costs and expenses shall be
Junior Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 3.

          6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each Securing
Party, the Collateral Agent,



the Trustee, each Junior Secured Party and each holder of any of the Junior
Secured Obligations (PROVIDED that no Securing Party shall assign or transfer
its rights or obligations hereunder without the prior written consent of the
Trustee).

          6.06 NO DUTY ON THE PART OF THE COLLATERAL AGENT. Anything herein to
the contrary notwithstanding, the Collateral Agent shall not have any duty to
the Trustee or any other Junior Secured Party hereunder, other than (i) to hold
the balance from time to time standing to the credit of the Senior Collateral
Account as provided in Section 4.04 and (ii) to hold as bailee the shares,
securities, moneys, property, instruments, promissory notes and other items of
possessory Collateral on behalf of the Trustee and the other Junior Secured
Parties as provided in Section 5.02. Nothing herein shall be deemed to require
that the Collateral Agent first obtain the consent of the Trustee or any other
Junior Secured Party to release or terminate any Lien covering the Senior
Collateral.

          6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

          6.08 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.

          6.09 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

          6.10 AGENTS AND ATTORNEYS-IN-FACT. The Trustee may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or willful misconduct of any such agents or attorneys-in-fact
selected by it with due care.

          6.11 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.

          6.12 ADDITIONAL SUBSIDIARY GUARANTORS. New Domestic Subsidiaries of
the Company formed or acquired by the Company after the date hereof and any
Domestic Subsidiary that ceases to be an "Immaterial Subsidiary" (as defined in
the Solutia Credit Agreement) which become a Subsidiary Guarantor under the 2009
Notes Indenture and grant Liens on any "Collateral" under and as defined in the
Senior Non-Sharing Security Documents, shall become a "Subsidiary Guarantor"
under this Agreement, by executing and delivering to the Collateral Agent and
the Trustee a Guarantee Assumption Agreement in the form of Exhibit A to the
Junior Intercreditor Agreement. Accordingly, upon the execution and delivery of
any such Guarantee Assumption Agreement by any such Subsidiary, such new
Subsidiary shall automatically and immediately, and without any further action
on the part of any Person, become a "Subsidiary Guarantor" and an "Securing
Party" for all purposes of this Agreement.



          IN WITNESS WHEREOF, the parties hereto have caused this Junior
Security Agreement to be duly executed and delivered as of the day and year
first above written.

                                       SOLUTIA INC.


                                       By: /s/ Kevin Wilson
                                          ------------------------------------
                                          Name: Kevin Wilson
                                          Title: Vice President and Treasurer


                                  SUBSIDIARY GUARANTORS

                                       CPFILMS INC.


                                       By: /s/ Kevin Wilson
                                          ------------------------------------
                                          Name: Kevin Wilson
                                          Title: Attorney-in-Fact


                                       MONCHEM, INC.


                                       By: /s/ Kevin Wilson
                                          ------------------------------------
                                          Name: Kevin Wilson
                                          Title: President


                                       MONCHEM INTERNATIONAL, INC.


                                       By: /s/ Kevin Wilson
                                          ------------------------------------
                                          Name: Kevin Wilson
                                          Title: President



                                       SOLUTIA SYSTEMS, INC.


                                       By: /s/ Kevin Wilson
                                          ------------------------------------
                                          Name: Kevin Wilson
                                          Title: President


                                  COLLATERAL AGENT

                                       CITIBANK, N.A., as Collateral Agent


                                       By: /s/ James N. Simpson
                                          ------------------------------------
                                          Name: James N. Simpson
                                          Title: Vice President

                                  TRUSTEE

                                       HSBC BANK USA, as Trustee


                                       By: /s/ Harriet Drandoff
                                          ------------------------------------
                                          Name: Harriet Drandoff
                                          Title: Vice President



                                                                         ANNEX 1

                                 FILING DETAILS



                    TYPE OF
                  ORGANIZATION                   ORGANIZATIONAL                  PLACE OF BUSINESS OR                   FORMER
 CURRENT LEGAL    (CORPORATION,    JURISDICTION       ID                          LOCATION OF CHIEF      LOCATION        LEGAL
NAME (NO TRADE  LIMITED LIABILITY       OF          NUMBER       CURRENT MAILING      EXECUTIVE             OF          NAME(s)
     NAMES)      COMPANY, ETC.)    ORGANIZATION (IF APPLICABLE)     ADDRESS           OFFICER              GOODS        (IF ANY)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                               
  Solutia Inc.    Corporation        Delaware       2735025       575 Maryville      575 Maryville      Alvin, TX   Queeny Chemical
                                                                  Centre Drive       Centre Drive      Cantonment,      Company
                                                                  St. Louis, MO      St. Louis, MO          FL
                                                                      63141              63141         Decatur, AL
                                                                                                        Foley, AL
                                                                                                        Greenwood,
                                                                                                            SC
                                                                                                       Springfield,
                                                                                                            MA
                                                                                                        St. Louis,
                                                                                                            MO
                                                                                                       Trenton, MI
- -----------------------------------------------------------------------------------------------------------------------------------
    Solutia       Corporation        Delaware       2976482       575 Maryville      575 Maryville         Not            None
 Systems, Inc.                                                     Centre Drive       Centre Drive      applicable
                                                                  St. Louis, MO      St. Louis, MO
                                                                      63141              63141
- -----------------------------------------------------------------------------------------------------------------------------------
    Monchem       Corporation        Delaware       2735035      The Corporation     575 Maryville         Not            None
 International,                                                   Trust Company       Centre Drive      applicable
      Inc.                                                         1209 Orange       St. Louis, MO
                                                                      Street             63141
                                                                  Wilmington, DE
                                                                      19801
- -----------------------------------------------------------------------------------------------------------------------------------
 Monchem, Inc.    Corporation        Delaware       2735322      The Corporation     575 Maryville         Not            None
                                                                  Trust Company       Centre Drive      applicable
                                                                   1209 Orange       St. Louis, MO
                                                                      Street             63141
                                                                  Wilmington, DE
                                                                      19801
- -----------------------------------------------------------------------------------------------------------------------------------
 CPFilms Inc.     Corporation        Delaware       0312016       4210 The Great     4210 The Great    Fieldale, VA    Courtaulds
                                                                       Road               Road                        Performance
                                                                   Fieldale, VA       Fieldale, VA                    Films, Inc.
                                                                      24089              24089                           Martin
                                                                                                                    Processing, Inc.
                                                                                                                    Hat Corporation
                                                                                                                     of America
- -----------------------------------------------------------------------------------------------------------------------------------


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 2

                               "NEW DEBTOR" EVENTS

                                      None.


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 3

                                  PLEDGED STOCK

                                  Solutia Inc.


                                                                        NUMBER OF SHARES
       ISSUER             CERTIFICATE NO(S).     REGISTERED OWNER            PLEDGED
- ------------------------------------------------------------------------------------------
                                                            
Monchem
 International, Inc.             3                 Solutia Inc.      6.5 shares of common
                                                                     stock with par value
                                                                     $1.00 each
- ------------------------------------------------------------------------------------------
Solutia Systems, Inc.            2                 Solutia Inc.      100 shares of common
                                                                     stock with par value
                                                                     $0.01 each

- ------------------------------------------------------------------------------------------


                           Monchem International, Inc.



                                                                                NUMBER OF SHARES
         ISSUER            CERTIFICATE NO(S).       REGISTERED OWNER                PLEDGED
- ----------------------------------------------------------------------------------------------------
                                                                     
Monchem, Inc.                       3           Monchem International, Inc.   10 shares of common
                                                                              stock with par value
                                                                              $1.00 each
- ----------------------------------------------------------------------------------------------------
Solutia UK Holdings Ltd.            2           Monchem International, Inc.   4,602,926 ordinary
                                                                              shares of L0.01 each
- ----------------------------------------------------------------------------------------------------
Solutia Europe S.A./N.V.  No certificates, but  Monchem International, Inc.   11,870 registered
                          shares are numbered                                 shares without nominal
                          488,321 through                                     value
                          500,190

- ----------------------------------------------------------------------------------------------------


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 4

                 LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
                    APPLICATIONS FOR COPYRIGHT REGISTRATIONS

                                    [To Come]


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 5

                     LIST OF PATENTS AND PATENT APPLICATIONS

                                    [To Come]


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 6

                LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
                  TRADEMARK AND SERVICE MARK REGISTRATIONS AND
            APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS

                                    [To Come]


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 7

                LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS

                                    [To Come]


                            JUNIOR SECURITY AGREEMENT



                                                                         ANNEX 8

                                  PLEDGED DEBT

                       [See Definition of "Pledged Debt"]


                            JUNIOR SECURITY AGREEMENT



                                      - 2 -


                SUBORDINATED INDEBTEDNESS SUBORDINATION AGREEMENT



                                      - 3 -


                SUBORDINATED INDEBTEDNESS SUBORDINATION AGREEMENT

EX-5.1

                                                                     Exhibit 5.1

                                WINSTON & STRAWN
                              35 West Wacker Drive
                             Chicago, Illinois 60601


                               September 17, 2001

Solutia Inc.
CPFilms Inc.
Monchem, Inc.
Monchem International, Inc.
Solutia Systems, Inc.
575 Maryville Center Drive
P.O. Box 66760
St. Louis, Missouri 63166-6760

          RE:   REGISTRATION STATEMENT ON FORM S-4
                OF SOLUTIA INC. AND THE
                SUBSIDIARY GUARANTORS (AS DEFINED BELOW)

Ladies and Gentlemen:

     We have acted as special counsel to Solutia Inc., a Delaware corporation
(the "Company"), and certain of its subsidiaries (the "Subsidiary Guarantors")
in connection with the preparation of the Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange Commission
(the "Commission") on behalf of the Company and the Subsidiary Guarantors,
relating to the Company's offer to exchange $150 million aggregate principal
amount of the Company's 11.25% Senior Secured Notes due 2009 (the "New Notes")
and the Guarantees (as hereinafter defined) thereof by the Subsidiary
Guarantors, which are to be offered in exchange for an equivalent principal
amount of the Company's currently outstanding 11.25% Senior Secured Notes due
2009 (the "Old Notes"), all as more fully described in the Registration
Statement. The New Notes will be issued under the Company's Indenture, dated as
of July 9, 2002 (the "Original Indenture"), between SOI Funding Corp. and HSBC
Bank USA, as trustee (the "Trustee"), as amended and supplemented by the First
Supplemental Indenture dated as of July 25, 2002 (the "Supplemental Indenture"
and, together with the Original Indenture, the "Indenture"), among the Company,
the Trustee and the Subsidiary Guarantors. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the
prospectus (the "Prospectus") contained in the Registration Statement.

     This opinion letter is delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Securities Act").

     In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement, in the form filed with the Commission and as
amended through the date hereof; (ii) the Certificate



Solutia Inc.
CPFilms Inc.
Monchem, Inc.
Monchem International, Inc.
Solutia Systems, Inc.
September 17, 2002
Page 2

of Incorporation of the Company and each of the Subsidiary Guarantors, as
currently in effect; (iii) the By-laws of the Company and each of the Subsidiary
Guarantors, as currently in effect; (iv) the Indenture; (v) the form of the New
Notes; and (vi) resolutions of the Boards of Directors of the Company and each
of the Subsidiary Guarantors, relating to, among other things, the issuance and
exchange of the New Notes for the Old Notes, the issuance of the Guarantees and
the filing of the Registration Statement. We also have examined such other
documents as we have deemed necessary or appropriate as a basis for the opinions
set forth below.

     In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents. As to certain facts
material to this opinion, we have relied without independent verification upon
oral or written statements and representations of officers and other
representatives of the Company and others.

     Based upon and subject to the foregoing, we are of the opinion that:

     1.   The issuance and exchange of the New Notes for the Old Notes and the
issuance of the Guarantees have been duly authorized by requisite corporate
action on the part of the Company and each Subsidiary Guarantor, respectively.

     2.   When (i) the Registration Statement, as finally amended (including all
necessary post-effective amendments), shall have become effective under the
Securities Act, (ii) the New Notes are duly executed and authenticated in
accordance with the provisions of the Indenture, and (iii) the New Notes shall
have been issued and delivered in exchange for the Old Notes pursuant to the
terms set forth in the Prospectus, the New Notes and the Guarantees will be
valid and binding obligations of the Company and the Subsidiary Guarantors,
respectively, entitled to the benefits of the Indenture and enforceable against
the Company and the Subsidiary Guarantors, respectively, in accordance with
their terms, except to the extent that the enforceability thereof may be limited
by (x) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (y) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) when (i) the
Registration Statement, as finally amended (including all necessary
post-effective amendments), shall have become effective under the Securities
Act; (ii) the New Notes are duly executed and authenticated in accordance with
the provisions of the Indenture; and (iii) the New Notes shall have been issued
and delivered in exchange for the Old Notes pursuant to the terms set forth in
the Prospectus.

     The foregoing opinions are limited to the laws of the United States, the
State of New York and the General Corporation Law of the State of Delaware. We
express no opinion as to



Solutia Inc.
CPFilms Inc.
Monchem, Inc.
Monchem International, Inc.
Solutia Systems, Inc.
September 17, 2002
Page 3

the application of the securities or blue sky laws of the various states to the
issuance or exchange of the New Notes.

     We hereby consent to the reference to our firm under the headings "Legal
Matters" in the Prospectus and to the filing of this opinion with the Commission
as an exhibit to the Registration Statement. In giving such consent, we do not
concede that we are experts within the meaning of the Securities Act or the
rules and regulations thereunder or that this consent is required by Section 7
of the Securities Act.

                                            Very truly yours,

                                            /s/ Winston & Strawn

EX-23.1

                                                                    Exhibit 23.1


                          INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Solutia Inc. on Form
S-4 of our report dated March 4, 2002 (June 4, 2002 as to Note 19 and June
17, 2002 as to Note 20), appearing in the Prospectus, which is part of this
Registration Statement (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to a change in accounting
principle), and our report dated March 4, 2002 relating to the financial
statement schedule included in the Annual Report on Form 10-K for the year
ended December 31, 2001 incorporated by reference in this Registration
Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

                                       /s/ Deloitte & Touche LLP


Saint Louis, Missouri
September 17, 2002

EX-24.1

                                                                Exhibit 24.1


                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That each person whose signature appears below, as a Director or Officer of
Solutia Inc. (the "Company"), a Delaware corporation with its general offices in
the County of St. Louis, Missouri, does hereby make, constitute and appoint Karl
R. Barnickol, Mary B. Cody and Karen L. Knopf, or any of them acting alone, to
be his or her true lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, in his or her name, place and stead, in any and
all capacities to sign: (a) a Registration Statement on Form S-4 and/or a
Registration Statement on Form S-3, and any and all amendments thereto, to be
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), covering the registration of
$223,000,000 aggregate principal amount of 11.25% Senior Secured Notes due 2009
(the "Notes") to be issued by the Company and Guarantees of the Notes to be
issued by certain wholly-owned subsidiaries of the Company, and (b) a
Registration Statement on Form S-3, to be filed with the Commission under the
Act, covering the registration of warrants issued by the Company (the
"Warrants") to purchase 5,533,522 shares of common stock, par value $0.01 per
share ("Common Stock"), of the Company and the registration of Common Stock to
be issued by the Company upon the exercise of the Warrants, giving and granting
unto said attorneys full power and authority to do and perform such actions as
fully as they might have done or could do if personally present and executing
any of said documents.

Dated and effective as of the 6th day of September, 2002.


/s/ John C. Hunter III                 /s/ Robert A. Clausen
- ------------------------------         ---------------------------------
John C. Hunter III, Chairman,          Robert A. Clausen, Senior Vice President
President, Chief Executive Officer     and Chief Financial Officer
and Director (Principal Executive      (Principal Financial Officer)
Officer


/s/ J. M. Sullivan                     /s/ Paul Donovan
- ------------------------------         ---------------------------------
James M. Sullivan, Vice President      Paul Donovan, Director
and Controller (Principal
Accounting Officer)


/s/ Paul H. Hatfield                   /s/ Robert H. Jenkins
- ------------------------------         ---------------------------------
Paul H. Hatfield, Director             Robert H. Jenkins, Director


/s/ Frank A. Metz, Jr.                 /s/ J. Patrick Mulcahy
- ------------------------------         ---------------------------------
Frank A. Metz, Jr., Director           J. Patrick Mulcahy, Director


/s/ Sally G. Narodick                  /s/ William D. Ruckelshaus
- ------------------------------         ---------------------------------
Sally G. Narodick, Director            William D. Ruckelshaus, Director


/s/ John B. Slaughter
- ------------------------------
John B. Slaughter, Director

EX-24.2

                                                                    Exhibit 24.2

                                POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS:

That each person whose signature appears below, as a Director or Officer of
CPFILMS INC. (the "Company"), a Delaware corporation with its general offices in
the County of Henry, Virginia, does hereby make, constitute and appoint Karl R.
Barnickol, Mary B. Cody and Karen L. Knopf, or any of them acting alone, to be
his or her true lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, in his or her name, place and stead, in any and
all capacities, to sign any and all registration statements and any and all
amendments thereto to be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, covering the registration of
$223,000,000 aggregate principal amount of 11.25% Senior Secured Notes due 2009
(the "Notes") to be issued by Solutia Inc. and Guarantees of the Notes to be
issued by the Company and other wholly-owned subsidiaries of Solutia Inc.,
giving and granting unto said attorneys full power and authority to do and
perform such actions as fully as they might have done or could do if personally
present and executing any of said documents.

Dated and effective as of the 6th day of September, 2002.


/s/ Ken Vickers                                  /s/ G. Bruce Greer, Jr.
- ----------------------------                     -----------------------------
Ken Vickers                                      G. Bruce Greer, Jr.
President and Director                           Director
(Principal Executive Officer)

/s/ Philip Solomon                               /s/ Victoria M. Holt
- ----------------------------                     -----------------------------
Philip Solomon                                   Victoria M. Holt
Vice President, Treasurer,                       Director
Assistant Secretary and
Director (Principal Accounting
And Financial Officer)
                                                 /s/ J. F. Quinn
                                                 -----------------------------
                                                 J. F. Quinn
                                                 Director

EX-24.3

                                                                    Exhibit 24.3

                                POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS:

That each person whose signature appears below, as a Director or Officer of
MONCHEM, INC. (the "Company"), a Delaware corporation with offices in the County
of St.. Louis, Missouri, does hereby make, constitute and appoint Karl R.
Barnickol, Mary B. Cody and Karen L. Knopf, or any of them acting alone, to be
his true lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his name, place and stead, in any and all capacities, to sign
any and all registration statements and any and all amendments thereto to be
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, covering the registration of $223,000,000 aggregate principal
amount of 11.25% Senior Secured Notes due 2009 (the "Notes") to be issued by
Solutia Inc. and Guarantees of the Notes to be issued by the Company and other
wholly-owned subsidiaries of Solutia Inc., giving and granting unto said
attorneys full power and authority to do and perform such actions as fully as
they might have done or could do if personally present and executing any of said
documents.

Dated and effective as of the 6th day of September, 2002.


                                          /s/ Kevin Wilson
                                          --------------------------------------
                                          C. Kevin Wilson
                                          President and Director
                                          (Principal Executive Officer)


                                          /s/ J. F. Quinn
                                          --------------------------------------
                                          J. F. Quinn
                                          Vice President, Treasurer and Director
                                          (Principal Financial and
                                          Accounting Officer)


                                          /s/ James M. Sullivan
                                          --------------------------------------
                                          James M. Sullivan
                                          Director

EX-24.4

                                                                    Exhibit 24.4

                                POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS:

That each person whose signature appears below, as a Director or Officer of
MONCHEM INTERNATIONAL, INC. (the "Company"), a Delaware corporation with offices
in the County of St.. Louis, Missouri, does hereby make, constitute and appoint
Karl R. Barnickol, Mary B. Cody and Karen L. Knopf, or any of them acting alone,
to be his true lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, in his name, place and stead, in any and all
capacities, to sign any and all registration statements and any and all
amendments thereto to be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, covering the registration of
$223,000,000 aggregate principal amount of 11.25% Senior Secured Notes due 2009
(the "Notes") to be issued by Solutia Inc. and Guarantees of the Notes to be
issued by the Company and other wholly-owned subsidiaries of Solutia Inc.,
giving and granting unto said attorneys full power and authority to do and
perform such actions as fully as they might have done or could do if personally
present and executing any of said documents.

Dated and effective as of the 6th day of September, 2002.


                                          /s/ Kevin Wilson
                                          --------------------------------------
                                          C. Kevin Wilson
                                          President and Director
                                          (Principal Executive Officer)


                                          /s/ James M. Sullivan
                                          --------------------------------------
                                          James M. Sullivan
                                          Vice President, Treasurer and Director
                                          (Principal Financial and
                                          Accounting Officer)


                                          /s/ J. F. Quinn
                                          --------------------------------------
                                          J. F. Quinn
                                          Director

EX-24.5

                                                                    Exhibit 24.5

                                POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS:

That each person whose signature appears below, as a Director or Officer of
SOLUTIA SYSTEMS, INC. (the "Company"), a Delaware corporation with its general
offices in the County of St.. Louis, Missouri, does hereby make, constitute and
appoint Karl R. Barnickol, Mary B. Cody and Karen L. Knopf, or any of them
acting alone, to be his true lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, in his name, place and stead, in any and all
capacities, to sign any and all registration statements and any and all
amendments thereto to be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, covering the registration of
$223,000,000 aggregate principal amount of 11.25% Senior Secured Notes due 2009
(the "Notes") to be issued by Solutia Inc. and Guarantees of the Notes to be
issued by the Company and other wholly-owned subsidiaries of Solutia Inc.,
giving and granting unto said attorneys full power and authority to do and
perform such actions as fully as they might have done or could do if personally
present and executing any of said documents.

Dated and effective as of the 6th day of September, 2002.

                                                 /s/ Kevin Wilson
                                                 -----------------------------
                                                 C. Kevin Wilson
                                                 President and Director
                                                 (Principal Executive Officer)

                                                 /s/ J. F. Quinn
                                                 -----------------------------
                                                 J. F. Quinn
                                                 Treasurer and Director
                                                 (Principal Financial and
                                                 Accounting Officer)

                                                 /s/ Frank Riddick, Jr.
                                                 -----------------------------
                                                 Frank Riddick, Jr.
                                                 Director

EX-25.1

                                                                    EXHIBIT 25.1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

- --------------------------------------------------------------------------------

                                    FORM T-1
                    STATEMENT OF ELIGIBILITY UNDER THE TRUST
                     INDENTURE ACT OF 1939 OF A CORPORATION
                          DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                                SECTION 305(b)(2)

                                  HSBC BANK USA
               (Exact name of trustee as specified in its charter)

      New York                                          13-2774727
      (Jurisdiction of incorporation                    (I.R.S. Employer
      or organization if not a U.S.                     Identification No.)
      national bank)

      452 Fifth Avenue, New York, NY                    10018-2706
      (212) 525-5600                                    (Zip Code)
      (Address of principal executive offices)

                             Warren L. Tischler, SVP
                                  HSBC Bank USA
                                452 Fifth Avenue
                          New York, New York 10018-2706
                               Tel: (212) 525-1311
            (Name, address and telephone number of agent for service)

                                  SOLUTIA INC.*
               (Exact name of obligor as specified in its charter)

      Delaware                                          43-1781797
      (State or other jurisdiction                      (I.R.S. Employer
      of incorporation or organization)                 Identification No.)

      575 Maryville Centre Drive                        63166
      P.O. Box 66760
      St. Lousi, MO
      (314) 674-1000                                    (Zip Code)
      (Address of principal executive offices)

                       11.25 Senior Secured Notes due 2009
                   Guarantees of 11.25% Senior Notes due 2009
                         (Title of Indenture Securities)




                        *TABLE OF ADDITIONAL REGISTRANTS




                                         State or Other
                                         Jurisdiction of        I.R.S. Employer
                                         Incorporation or       Identification
Name, Address and Telephone Number         Organization              Number
- ----------------------------------         ------------              ------
                                                              
CPFilms Inc.                               Delaware                  06-0385340
Monchem, Inc.                              Delaware                  43-1788418
Monchem International, Inc.                Delaware                  43-1788416
Solutia Systems, Inc.                      Delaware                  43-1834280






                                     General
Item 1. General Information.
        --------------------

              Furnish the following information as to the trustee:

         (a)  Name and address of each examining or supervisory
         authority to which it is subject.

              State of New York Banking Department.

              Federal Deposit Insurance Corporation, Washington, D.C.

             Board of Governors of the Federal Reserve System,
             Washington, D.C.

         (b) Whether it is authorized to exercise corporate trust powers.

                     Yes.

Item 2. Affiliations with Obligor.
        --------------------------

            If the obligor is an affiliate of the trustee, describe
            each such affiliation.

                     None





Item 16. List of Exhibits
         ----------------



Exhibit
- -------

                   
T1A(i)                (1)    Copy of the Organization Certificate of HSBC Bank USA.

T1A(ii)               (1)    Certificate of the State of New York Banking Department dated
                             December 31, 1993 as to the authority of HSBC Bank USA to commence
                             business as amended effective on March 29, 1999.

T1A(iii)                     Not applicable.

T1A(iv)               (3)    Copy of the existing By-Laws of HSBC Bank USA as amended on April
                             11, 2002.

T1A(v)                       Not applicable.

T1A(vi)               (2)    Consent of HSBC Bank USA required by Section 321(b) of the Trust
                             Indenture Act of 1939.

T1A(vii)                     Copy of the latest report of condition of the trustee (June 30,
                             2002), published pursuant to law or the requirement of its
                             supervisory or examining authority.

T1A(viii)                    Not applicable.

T1A(ix)                      Not applicable.



     (1)  Exhibits previously filed with the Securities and Exchange Commission
          with Registration No. 022-22429 and incorporated herein by reference
          thereto.

     (2)  Exhibit previously filed with the Securities and Exchange Commission
          with Registration No. 33-53693 and incorporated herein by reference
          thereto.

     (3)  Exhibit previously filed with the Securities and Exchange Commission
          with Registration No. 333-88532 and incorporated herein by reference
          thereto.








                                    SIGNATURE


Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HSBC Bank USA, a banking corporation and trust company organized under the laws
of the State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York and State of New York on the 22nd day of August, 2002.



                                       HSBC BANK USA


                                       By:  /s/Harriet Drandoff
                                            ------------------------
                                            Harriet Drandoff
                                              Vice President



                                                               EXHIBIT T1A (VII)

                                Board of Governors of the Federal Reserve System
                                OMB Number: 7100-0036
                                Federal Deposit Insurance Corporation
                                OMB Number: 3064-0052
                                Office of the Comptroller of the Currency
                                OMB Number: 1557-0081
- --------------------------------------------------------------------------------
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL        Expires March 31, 2004

                                                         Please refer to page i,
                                                         Table of Contents, for
                                                         the required disclosure
                                                         of estimated burden.  1
- --------------------------------------------------------------------------------

CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
                                                  (19980930)
                                                  ----------
                                                  (RCRI 9999)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 2002

                                                                    
This report is required  by law; 12 U.S.C. section 324 (State           This report form is to be filed by banks with  branches and
member banks); 12 U.S.C. section 1817 (State nonmember banks);          consolidated subsidiaries in U.S. territories and
and 12 U.S.C. section 161 (National banks).                             possessions, Edge or Agreement subsidiaries, foreign
                                                                        branches, consolidated foreign subsidiaries, or
                                                                        International Banking Facilities.

NOTE: The Reports of Condition and Income must be signed by an          The Reports of Condition and Income are to be prepared in
authorized officer and the Report of Condition must be attested         accordance with Federal regulatory authority instructions.
to by not less than two directors (trustees) for State nonmember
banks and three directors for State member and National Banks.          We, the undersigned directors (trustees), attest to the
                                                                        correctness of  this Report of Condition (including the
I,  Gerald A. Ronning, Executive VP & Controller                        supporting schedules) and declare that it has been examined
   -----------------------------------------------------                by us and to the best of our knowledge and belief has been
    Name and Title of Officer Authorized to Sign Report                 prepared in conformance with the instructions issued by the
                                                                        appropriate Federal regulatory authority and is true and
Of the named bank do hereby declare that these Reports of               correct.
Condition and Income (including the supporting schedules) have
been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and are true to the
best of my knowledge and believe.                                       /s/ Youssef Nasr
                                                                        -----------------------------------------------------------
                                                                        Director (Trustee)
/s/ Gerald A. Ronning
- -----------------------------------------------------------------       /s/ Bernard J. Kennedy
Signature of Officer Authorized to Sign Report                          -----------------------------------------------------------
                                                                        Director (Trustee)
             8/15/02
- -----------------------------------------------------------------       /s/ Sal H. Alfieri
Date of Signature                                                       -----------------------------------------------------------
                                                                        Director (Trustee)

- -----------------------------------------------------------------------------------------------------------------------------------

SUBMISSION OF REPORTS

Each Bank must prepare its Reports of Condition and Income              For electronic filing assistance, contact EDS Call report
either:                                                                 Services,  2150 N. Prospect Ave., Milwaukee, WI 53202,
                                                                        telephone (800) 255-1571.
(a)  in electronic form and then file the computer data file
     directly with the banking agencies' collection agent,              To fulfill the signature and attestation requirement for the
     Electronic Data System Corporation (EDS), by modem                 Reports of Condition and Income for this report date, attach
     or  computer diskette; or                                          this signature page to the hard-copy f the completed report
                                                                        that the bank places in its files.
b)   in hard-copy (paper) form and arrange for another party
     to convert the paper report to automated for. That party
     (if other than EDS) must transmit the bank's computer
     data file to EDS.

- -----------------------------------------------------------------------------------------------------------------------------------

FDIC Certificate Number   / 0 / / 0 / / 5 / / 8 / / 9 /
                          ----------------------------
                             (RCRI 9030)
http://WWW.BANKING.US.HSBC.COM                                          HSBC Bank USA
- --------------------------------------------------------------          -----------------------------------------------------------
Primary Internet Web Address of Bank (Home Page), if any                Legal Title of Bank (TEXT 9010)
(TEXT 4087)
(Example:  www.examplebank.com)                                         Buffalo
                                                                        -----------------------------------------------------------
                                                                        City (TEXT 9130)

                                                                       N.Y.                                         14203
                                                                       ------------------------------------------------------------
                                                                       State Abbrev. (TEXT 9200)              ZIP Code (TEXT 9220)







     Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency


                               REPORT OF CONDITION

Consolidated domestic subsidiaries
HSBC Bank USA                             of  Buffalo
- -----------------------------------------------------
  Name of Bank                               City

in the state of New York, at the close of business June 30, 2002


ASSETS


                                                                                                                Thousands of dollars
Cash and balances due from depository institutions:                                                             --------------------

                                                                                                         
 a. Non-interest-bearing balances currency and coin                                                                 $      1,816,157
- -----------------------------------------------------------------------------------------------------------------
 b. Interest-bearing balances                                                                                              1,658,723
- -----------------------------------------------------------------------------------------------------------------
   Held-to-maturity securities                                                                                             3,669,450
- -----------------------------------------------------------------------------------------------------------------
   Available-for-sale securities                                                                                          12,554,394
- -----------------------------------------------------------------------------------------------------------------
   Federal funds sold and securities purchased under agreements to resell:
- -----------------------------------------------------------------------------------------------------------------
a. Federal funds sold in domestic offices                                                                                          0
b. Securities purchased under agreements to resell                                                                         5,979,340
                                                                                                                 -------------------
Loans and lease financing receivables:

   Loans and leases held for sale                                                                                   $      2,553,658
- ------------------------------------------------------------------------------------------------------------------------------------
   Loans and leases net of unearned income                                                      $     39,015,047
- -----------------------------------------------------------------------------------------------------------------
   LESS: Allowance for loan and lease losses                                                             538,987
- ------------------------------------------------------------------------------------------------------------------------------------
   Loans and lease, net of unearned income, allowance, and reserve                                                  $     38,476,060
- -----------------------------------------------------------------------------------------------------------------
   Trading assets                                                                                                         11,359,431
- -----------------------------------------------------------------------------------------------------------------
   Premises and fixed assets                                                                                                 737,811
- -----------------------------------------------------------------------------------------------------------------
Other real estate owned                                                                                                       11,103
- -----------------------------------------------------------------------------------------------------------------
Investments in unconsolidated subsidiaries                                                                                   246,227
- -----------------------------------------------------------------------------------------------------------------
Customers' liability to this bank on acceptances outstanding                                                                  93,300
- -----------------------------------------------------------------------------------------------------------------
Intangible assets: Goodwill                                                                                                2,162,325
- -----------------------------------------------------------------------------------------------------------------
Intangible assets: Other intangible assets                                                                                   479,872
- -----------------------------------------------------------------------------------------------------------------
Other assets                                                                                                               2,384,822
- -----------------------------------------------------------------------------------------------------------------
Total assets                                                                                                              84,182,673
- ------------------------------------------------------------------------------------------------------------------------------------

LIABILITIES

Deposits:

   In domestic offices                                                                                                    38,513,703
- ------------------------------------------------------------------------------------------------------------------------------------
   Non-interest-bearing                                                                                5,001,941
- -------------------------------------------------------------------------------------------------
   Interest-bearing                                                                                   33,511,762
- ------------------------------------------------------------------------------------------------------------------------------------
In foreign offices                                                                                                        17,807,757
- -------------------------------------------------------------------------------------------------





- ----------------------------------------------------------------------------------------------------------------
   Non-interest-bearing                                                                                  426,703
- ------------------------------------------------------------------------------------------------
   Interest-bearing                                                                                   17,381,054
- ----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase:
- -----------------------------------------------------------------------------------------------------------------
 a. Federal funds purchased in domestic offices                                                                            1,176,485
- -----------------------------------------------------------------------------------------------------------------
 b. Securities sold under agreements to repurchase                                                                           704,247
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Trading Liabilities                                                                                                        6,301,519
- -----------------------------------------------------------------------------------------------------------------
Other borrowed money                                                                                                       8,535,736
- -----------------------------------------------------------------------------------------------------------------
Bank's liability on acceptances                                                                                               93,300
- -----------------------------------------------------------------------------------------------------------------
Subordinated notes and debentures                                                                                          1,548,908
- -----------------------------------------------------------------------------------------------------------------
Other liabilities                                                                                                          2,440,222
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                                                         77,121,877
- ------------------------------------------------------------------------------------------------------------------------------------
Minority Interests in consolidated Subsidiaries                                                                                  172
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY CAPITAL

- ------------------------------------------------------------------------------------------------------------------------------------
Perpetual preferred stock and related surplus                                                                                      -
- -----------------------------------------------------------------------------------------------------------------
Common Stock                                                                                                                 205,000
- -----------------------------------------------------------------------------------------------------------------
Surplus                                                                                                                    6,440,465
- -----------------------------------------------------------------------------------------------------------------
Retained earnings                                                                                                            316,467
- -----------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income                                                                                        98,692
- -----------------------------------------------------------------------------------------------------------------
Other equity capital components                                                                                                    -
- -----------------------------------------------------------------------------------------------------------------
Total equity capital                                                                                                       7,060,624
- -----------------------------------------------------------------------------------------------------------------
Total liabilities, minority interests and equity capital                                                                  84,182,673
- ------------------------------------------------------------------------------------------------------------------------------------

EX-99.1

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Exhibit 99.1

SOLUTIA INC.

LETTER OF TRANSMITTAL

Offer to exchange its
11.25% Senior Secured Notes due 2009,
which have been registered under the Securities Act of 1933,
for any and all of its
outstanding 11.25% Senior Secured Notes due 2009

Pursuant to the Prospectus, dated                        , 2002

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON                            , 2002, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

The Exchange Agent for the Exchange Offer is:

HSBC BANK USA

By Mail, Hand or Overnight Delivery:

HSBC Bank USA
Lower Level
One Hudson Place
Brooklyn, New York 11243
Attention: Issuer Services

By Facsimile (For Eligible Institutions Only):

Confirm by Telephone:

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

        The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated                        , 2002 (the "Prospectus"), of Solutia Inc., a Delaware corporation (the "Issuer"), and this Letter of Transmittal (the "Letter"), which together constitute the Issuer's offer (the "Exchange Offer") to exchange up to $223,000,000 in aggregate principal amount of its 11.25% Senior Secured Notes due 2009 (the "New Notes"), for a like principal amount of its outstanding 11.25% Senior Secured Notes due 2009 (the "Outstanding Notes") that were issued and sold in reliance upon an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act").

        For each Outstanding Note accepted for exchange, the holder of such Outstanding Note will receive a New Note having a principal amount equal to that of the surrendered Outstanding Note.

        This Letter is to be completed by a holder of Outstanding Notes either if certificates are to be forwarded herewith or if a tender of certificates for Outstanding Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer—Procedures for Tendering Outstanding Notes" section of the Prospectus and an Agent's Message (as defined herein) is not delivered. Holders of Outstanding Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or before the Expiration Date, must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer—Procedures for Tendering Outstanding Notes" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.

        The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer.

PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL,
INCLUDING THE INSTRUCTIONS TO THIS LETTER,
CAREFULLY BEFORE CHECKING ANY BOX BELOW

        List below the Outstanding Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Outstanding Notes should be listed on a separate signed schedule affixed hereto.

DESCRIPTION OF OUTSTANDING NOTES TENDERED
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank, exactly as name(s) appear(s) on Certificate(s))		Description of Outstanding Notes Tendered	Certificate Number(s)*	Aggregate Principal Amount of Certificate(s)	Aggregate Principal Amount of Outstanding Notes Tendered**
				Total Outstanding Notes
*	DOES NOT need to be completed by holders tendering Outstanding Notes by book-entry transfer.
**	Unless otherwise indicated, it will be assumed that all Outstanding Notes evidenced by each certificate delivered to the Exchange Agent are being tendered hereby. See Instruction 4.

THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.

o

CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

        Name of Tendering Institution(s)

        Account Number

        Transaction Code Number

        By crediting Outstanding Notes to the Exchange Agent's Account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting an Agent's Message to the Exchange Agent in which the holder of Outstanding Notes acknowledges and agrees to be bound by the terms of this Letter, the participant in ATOP confirms on behalf of itself and the beneficial owners of such Outstanding Notes all provisions of this Letter applicable to it and such beneficial owners as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent.

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CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

        Name of Registered Holder

        Window Ticket Number (if any)

        Date of Execution of Notice of Guaranteed Delivery

        Name of Eligible Institution that guaranteed delivery

        IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:

        Account Number

        Transaction Code Number

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CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

        Name:

        Address:

        If the undersigned is not a broker-dealer, the undersigned represents that it is not participating in, and does not intend to participate in, a distribution of the Registered Notes. If the undersigned is a broker-dealer that will receive Registered Notes for its own account in exchange for Outstanding Notes, it represents that the Outstanding Notes to be exchanged for Registered Notes were acquired by it as a result of market-making or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Registered Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

Ladies and Gentlemen:

        Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount of Outstanding Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Outstanding Notes as are being tendered hereby, and irrevocably constitutes and appoints the Exchange Agent as agent and attorney-in-fact to cause the Outstanding Notes to be assigned, transferred and exchanged.

        The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Outstanding Notes tendered hereby and to acquire Registered Notes issuable upon the exchange of such tendered Outstanding Notes, and that the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer. The undersigned hereby further represents that (1) any New Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder; (2) it is not an "affiliate" of the Issuer as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"); (3) it is not participating in, and does not intend to participate in, and has no arrangement or understanding with any Person to participate in, a distribution of the Outstanding Notes or the New Notes; and (4) if such holder is a broker or dealer registered under the Exchange Act, it will receive the New Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities. Each broker-dealer referred to in clause (4) of the preceding sentence must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The undersigned also warrants that acceptance of any tendered Outstanding Notes by the Issuer and the issuance of New Notes in exchange therefor shall constitute performance in full by the Issuer of certain of its obligations under the Registration Rights Agreement.

        The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued in exchange for the Outstanding Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than (1) any such holder that is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act and (2) any broker-dealer that purchases Outstanding Notes from the Issuer to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such New Notes and are not participating in, and do not intend to participate in, the distribution of the New Notes. However, the Issuer does not intend to request the SEC to consider, and the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. The undersigned acknowledges that any holder that is an affiliate of the Issuer, or is participating in or intends to participate in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, (1) could not rely on the applicable interpretations of the staff of the SEC and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaging in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Outstanding Notes, it represents that the Outstanding Notes to be exchanged for the New Notes were acquired by it as a result of market-making or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        The undersigned, if a California resident, hereby further represents and warrants that the undersigned (or the beneficial owner of the Outstanding Notes tendered hereby, if not the undersigned) (1) is a bank, savings and loan association, trust company, insurance company, investment company registered under the Investment Company Act of 1940, pension or profit-sharing trust (other than a pension or profit-sharing trust of the Issuer, a self-employed individual retirement plan or individual retirement account), or a corporation which has a net worth on a consolidated basis according to its most recent audited financial statement of not less than $14,000,000, and (2) is acquiring the New Notes for its own account for investment purposes (or for the account of the beneficial owner of such New Notes for investment purposes).

        The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Outstanding Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer—Withdrawal Rights" section of the Prospectus.

        Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Outstanding Notes for any Outstanding Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Outstanding Notes, please credit the account indicated above maintained at the Book Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Outstanding Notes for any Outstanding Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Outstanding Notes Tendered."

SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)

        To be completed ONLY if certificates for Outstanding Notes not exchanged and/or New Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Outstanding Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above.*

Issue New Debentures and/or Existing Debentures to:

Name(s)

(Please Type or Print)

Address

(Include Zip Code)

(Taxpayer Identification or Social Security Number)

(Complete Substitute Form W-9)

*	Credit unexchanged Outstanding Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below.
(Book-Entry Transfer Facility Account Number, if applicable)

SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)

        To be completed ONLY if certificates for Outstanding Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Outstanding Notes Tendered" on this Letter above.

Mail New Notes and/or Outstanding Notes to:

Name(s)

(Please Type or Print)

Address

(Include Zip Code)

PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.

PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)

Signature(s) of Owner

Area Code and Telephone Number:

Date:

              If a holder is tendering any Outstanding Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Outstanding Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.

Name(s):

(Please Type or Print)

Capacity:

Address:

(Including Zip Code)

SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)

Signature(s) Guaranteed by
an Eligible Institution:

(Authorized Signature)

Title:

Name and Firm:

Date:

IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU HEREOF (TOGETHER WITH THE CERTIFICATES FOR OUTSTANDING NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

SOLUTIA INC.
INSTRUCTIONS
Forming part of the Terms and Conditions of the
offer to exchange its 11.25% Senior Secured Notes due 2009,
which have been registered under the Securities Act,
for any and all of its
outstanding 11.25% Senior Secured Notes due 2009

1.    Delivery of this Letter and Outstanding Notes; Guaranteed Delivery Procedures.    This Letter is to be completed by Outstanding Note holders either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer—Procedures for Tendering Outstanding Notes" section of the Prospectus and an Agent's Message is not delivered. Certificates for all physically tendered Outstanding Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or before the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Outstanding Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. The term "Agent's Message" means a message, transmitted by The Depository Trust Company (the "Book-Entry Transfer Facility") and received by the Exchange Agent and forming a part of the Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from a participant tendering Outstanding Notes that are subject to the Book-Entry Confirmation and that such participant has received and agrees to be bound by this Letter and that the Issuer may enforce this Letter against such participant.

        Outstanding Note holders whose certificates for Outstanding Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or before the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Outstanding Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer—Procedures for Tendering Outstanding Notes" section of the Prospectus. Pursuant to such procedures, (1) such tender must be made through an Eligible Institution, (2) before the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter (or a facsimile thereof or an Agent's Message in lieu hereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Outstanding Notes and the amount of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Outstanding Notes, or a Book-Entry Confirmation, and any other documents required by the Letter will be deposited by the Eligible Institution with the Exchange Agent, and (3) the certificates for all physically tendered Outstanding Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery.

The method of delivery of this Letter, the Outstanding Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Outstanding Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent before 5:00 p.m., New York City time, on the Expiration Date.

        See "The Exchange Offer" section of the Prospectus.

2.    Partial Tenders (Not Applicable to Outstanding Note holders Who Tender by Book-Entry Transfer).    If less than all of the Outstanding Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Outstanding Notes to be tendered in the box above entitled "Description of Outstanding Notes Tendered—Principal Amount Tendered." A reissued certificate representing the balance of untendered Outstanding Notes will be

sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. All of the Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.

3.    Signatures on this Letter; Bond Powers and Endorsements; Guarantee of Signatures.    If this Letter is signed by the registered holder of the Outstanding Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever.

        If any tendered Outstanding Notes are owned of record by two or more joint owners, all of such owners must sign this Letter.

        If any tendered Outstanding Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates.

        When this Letter is signed by the registered holder or holders of the Outstanding Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Outstanding Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution.

        If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution.

        If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted.

        Endorsements on certificates for Outstanding Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a clearing agency, insured credit union, a savings association or a commercial bank or trust company having an office or correspondent in the United States (each an "Eligible Institution").

        Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Outstanding Notes are tendered: (1) by a registered holder of Outstanding Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Outstanding Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (2) for the account of an Eligible Institution.

4.    Special Issuance and Delivery Instructions.    Tendering holders of Outstanding Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Outstanding Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Outstanding Notes by book-entry transfer may request that Outstanding Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such Outstanding Note holder may designate hereon. If no such instructions are given, such Outstanding Notes not exchanged will be returned to the name or address of the person signing this Letter.

5.    Tax Identification Number.    Federal income tax law generally requires that a tendering holder who is a U.S. person (or a U.S. resident alien) whose Outstanding Notes are accepted for exchange must provide the Issuer (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Issuer is not provided with the current TIN or an adequate basis for

an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding (currently at a rate of 30%) or all reportable payments made after the exchange. More serious penalties may be imposed for providing false information which, if willfully done, may result in fines and/or imprisonment. If withholding results in an overpayment of taxes, a refund may be obtained if timely filed.

        To prevent backup withholding, each tendering holder of Outstanding Notes who is a U.S. person (or U.S. resident alien) must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that (1) the TIN provided is correct (or that such holder is awaiting a TIN), (2) that (A) the holder is exempt from backup withholding, or (B) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (C) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding, and (3) the holder is a U.S. person or U.S. resident alien. If such holder does not have a TIN, such holder should check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If such holder does not provide its TIN to the Issuer within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Issuer.

        Exempt holders of Outstanding Notes (including, among others, corporations and certain tax exempt organizations) are not subject to these backup withholding and reporting requirements. If the tendering holder of Outstanding Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Issuer an appropriate completed Form W-8. These forms may be obtained from the Exchange Agent.

6.Transfer Taxes.    The Issuer will pay all stamp or transfer taxes, if any, applicable to the transfer of Outstanding Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Outstanding Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Outstanding Notes tendered hereby, or if tendered Outstanding Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Outstanding Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder.

        Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Outstanding Notes specified in this Letter.

7.Waiver of Conditions.    The Issuer reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus.

8.No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Outstanding Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Outstanding Notes for exchange.

        Neither the Issuer, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Outstanding Notes nor shall any of them incur any liability for failure to give any such notice.

9.Mutilated, Lost, Stolen or Destroyed Outstanding Notes.    Any holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions.

10.Requests for Assistance or Additional Copies.    Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent, at the address and telephone number indicated above.

11.Incorporation of Letter of Transmittal.    This Letter shall be deemed to be incorporated in and acknowledged and accepted by any tender through the Book-Entry Transfer Facility's ATOP procedures by any participant on behalf of itself and the beneficial owners of any Outstanding Notes so tendered.

TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)

PAYER: HSBC BANK USA

SUBSTITUTE FORM W-9	Part 1—Taxpayer Identification Number—for all accounts, enter taxpayer identification	TIN	(Social Security Number or Employer Identification Number)
Department of the Treasury Internal Revenue Service	Part 2—FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" HERE (SEE INSTRUCTIONS)
Payer's Request for Taxpayer Identification Number ("TIN") and Certification	Part 3—Certification—UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person or U.S. resident alien.
	CERTIFICATION INSTRUCTIONS—You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.
	SIGNATURE	DATE

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING (CURRENTLY AT A RATE OF 30%) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER AND A $50 PENALTY TO THE IRS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

        I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and that I mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office (or I intend to mail or deliver an application in the near future). I understand that, notwithstanding the information I provided in Part 3 of the Substitute Form W-9 above (and the fact that I have completed this Certificate of Awaiting Taxpayer Identification Number), if I do not provide a taxpayer identification number to the Depositary within sixty (60) days, the Depositary is required to withhold at a current rate of 30% on all cash payments made to me thereafter until I provide a number.

Signature Date

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Exhibit 99.2

SOLUTIA INC.

NOTICE OF GUARANTEED DELIVERY

Offer to exchange its
11.25% Senior Secured Notes due 2009,
which have been registered under the Securities Act of 1933,
for any and all of its
outstanding 11.25% Senior Secured Notes due 2009

Pursuant to the Prospectus dated                        , 2002

        This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Solutia Inc., a Delaware corporation (the "Issuer"), made pursuant to the Prospectus dated                        , 2002 (the "Prospectus"), if certificates for the outstanding 11.25% Senior Secured Notes due 2009 of the Issuer (the "Outstanding Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Issuer before 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by telegram, telex, facsimile transmission, mail or hand delivery to HSBC Bank USA (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Outstanding Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent before 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus.

The Exchange Agent for the Exchange Offer is:

HSBC BANK USA

By Mail, Hand or Overnight Delivery:

HSBC Bank USA
Lower Level
One Hudson Place
Brooklyn, New York 11243

Attention: Issuer Services

By Facsimile Transmission (For Eligible Institutions Only):

Confirm by Telephone:

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

Ladies and Gentlemen:

        The undersigned hereby tenders to the Issuer, upon the terms and conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the principal amount of Outstanding Notes set forth below pursuant to the guaranteed delivery procedures described in the Prospectus and the Letter of Transmittal.

        The undersigned understands and acknowledges that the Exchange Offer will expire at 5:00 p.m., New York City time, on                        , 2002, unless extended by the Issuer. With respect to the Exchange Offer, "Expiration Date" means such time and date, or if the Exchange Offer is extended, the latest time and date to which the Exchange Offer is so extended by the Issuer.

        All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned.

SIGNATURES
Signature of Owner
Signature of Owner (if more than one)
Dated:	, 2002
Name(s):
(Please Print)
Address:
(Include Zip Code)

Area Code and
Telephone No.:

Capacity (full title), if signing in a representative capacity:

Taxpayer Identification or Social Security No.:

Principal amount of Outstanding Notes

Exchanged: $

Certificate Nos. of Outstanding Notes (if available)

Total $

IF OUTSTANDING NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO.:

Account No.

2

GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)

        The undersigned, a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or a clearing agency, insured credit union, a savings association or a commercial bank or trust company having an office or correspondent in the United States, hereby guarantees that the certificates representing the principal amount of Outstanding Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Outstanding Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer—Procedures for Tendering Outstanding Notes" section of the Prospectus, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the date of execution hereof.

Name of Firm:

Address:

Area Code and Telephone No.:

Authorized Signature

Name:	(Please Print)
Title:
Date:		, 2002

NOTE: DO NOT SEND OUTSTANDING NOTE CERTIFICATES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD BE SENT
WITH THE LETTER OF TRANSMITTAL.

3

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Exhibit 99.2

EX-99.3

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Exhibit 99.3

SOLUTIA INC.

Instruction to Registered Holder and/or Depository
Trust Company Participant from Beneficial Owner

Offer to exchange its
11.25% Senior Secured Notes due 2009,
which have been registered under the Securities Act of 1933,
for any and all of its
outstanding 11.25% Senior Secured Notes due 2009

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON                              , 2002, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

To Registered Holder and/or Depository Trust Company Participant:

        The undersigned hereby acknowledges receipt of the Prospectus dated                       , 2002 (as the same may be amended or supplemented from time to time, the "Prospectus") of Solutia Inc., a Delaware corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer") to exchange up to $223,000,000 in aggregate principal amount of its 11.25% Senior Secured Notes due 2009 (the "New Notes") for up to $223,000,000 in aggregate principal amount of its outstanding 11.25% Senior Secured Notes due 2009 (the "Outstanding Notes") that were issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus.

        This will instruct you, the registered holder and/or Depository Trust Company Participant, as to the action to be taken by you relating to the Exchange Offer with respect to the Outstanding Notes held by you for the account of the undersigned.

        The aggregate face amount of the Outstanding Notes held by you for the account of the undersigned is (FILL IN AMOUNT):

        $                                of the 11.25% Senior Secured Notes due 2009.

        With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX):

o

To TENDER the following Outstanding Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF OUTSTANDING NOTES TO BE TENDERED (IF LESS THAN ALL)):
$



o

NOT to TENDER any Outstanding Notes held by you for the account of the undersigned.

        If the undersigned instructs you to tender the Outstanding Notes hereby for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that (1) the undersigned is not an "affiliate" of the Company, (2) any New Notes to be received by the undersigned are being acquired in the ordinary course of its business, (3) the undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of New Notes to be received in the Exchange Offer, and (4) if the undersigned is not a broker-dealer, the undersigned is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. The Company may require the undersigned, as a condition of the undersigned's eligibility to participate in the Exchange Offer, to furnish to the Company (or an agent thereof) in writing information as to the number of "Beneficial Owners" within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934 on behalf of whom the undersigned holds the Outstanding Notes to be exchange in the Exchange Offer. By tendering Outstanding Notes pursuant to the Exchange Offer, a holder of Outstanding Notes which is a broker-dealer represents and agrees, consistent with certain interpretive letters issued by the staff of the Division of Corporation Finance of the Securities and Exchange Commission to third parties, that such Outstanding Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities, and it will deliver a Prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of such New Notes (provided that, by so acknowledging and by delivering a Prospectus, such broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act).

SIGN HERE

Name of beneficial owner(s)

Signature

Names(s) (please print)

(Address)

(Telephone Number)

(Taxpayer Identification or Social Security Number)

Date

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Exhibit 99.3