body_10q.htm

	Three Months Ended March 31,
	2010			2009

Net Loss	$	(57	)	$	(159	)
Other Comprehensive Income (Loss):
Currency translation adjustments		(35	)		(37	)
Unrealized gain on derivative instruments		--			4
Amortization of net actuarial loss		1			2
Pension settlement charge		1			--
Comprehensive Loss		(90	)		(190	)
Comprehensive Income attributable to noncontrolling interest		1			--
Comprehensive Loss attributable to Solutia	$	(91	)	$	(190	)

See accompanying Notes to the Consolidated Financial Statements

- 1 -

SOLUTIA INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Dollars in millions, except per share amounts)

(Unaudited)

	March 31, 2010			December 31, 2009

ASSETS
Current Assets:
Cash and cash equivalents	$	458		$	243
Trade receivables, net of allowances of $3 in 2010 and $2 in 2009		283			268
Miscellaneous receivables		75			82
Inventories		271			257
Prepaid expenses and other assets		21			37
Assets of discontinued operations		10			10
Total Current Assets		1,118			897
Net Property, Plant and Equipment		883			919
Goodwill		511			511
Identified Intangible Assets, net		783			803
Other Assets		91			136
Total Assets	$	3,386		$	3,266

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	167		$	169
Accrued liabilities		221			206
Short-term debt, including current portion of long-term debt		24			28
Liabilities of discontinued operations		46			50
Total Current Liabilities		458			453
Long-Term Debt		1,536			1,264
Postretirement Liabilities		353			411
Environmental Remediation Liabilities		255			260
Deferred Tax Liabilities		169			179
Other Liabilities		102			99

Commitments and Contingencies (Note 8)

Shareholders’ Equity:
Common stock at $0.01 par value; (500,000,000 shares authorized, 121,869,293 shares issued in both 2010 and 2009)		1			1
Additional contributed capital		1,616			1,612
Treasury shares, at cost (515,894 in 2010 and 430,203 in 2009)		(3	)		(2	)
Accumulated other comprehensive loss		(270	)		(237	)
Accumulated deficit		(839	)		(781	)
Total Shareholders’ Equity attributable to Solutia		505			593
Equity attributable to noncontrolling interest		8			7
Total Shareholders’ Equity		513			600
Total Liabilities and Shareholders’ Equity	$	3,386		$	3,266

See accompanying Notes to the Consolidated Financial Statements.

- 2 -

SOLUTIA INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

(Unaudited)

	Three Months Ended March 31,
	2010			2009
INCREASE IN CASH AND CASH EQUIVALENTS OPERATING ACTIVITIES:
Net loss	$	(57	)	$	(159	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Loss from discontinued operations, net of tax		--			155
Depreciation and amortization		27			25
Pension obligation related expense less than contributions		(52	)		(5	)
Other postretirement benefit obligation related expense less than contributions		--			(2	)
Amortization of deferred debt issuance costs and debt discount		4			5
Deferred income taxes		(11	)		(14	)
Other charges (gains):
Non-cash loss on deferred debt issuance cost write-off		80			--
Other charges (gains), including restructuring expenses		20			(1	)
Changes in assets and liabilities:
Income taxes payable		5			(9	)
Trade receivables		(15	)		33
Inventories		(14	)		31
Accounts payable		(7	)		(42	)
Environmental remediation liabilities		(5	)		(5	)
Restricted cash for environmental remediation and other legacy payments		--			5
Other assets and liabilities		25			13
Cash Provided by Operations – Continuing Operations		--			30
Cash Provided by (Used in) Operations – Discontinued Operations		(4	)		40
Cash Provided by (Used in) Operations		(4	)		70

INVESTING ACTIVITIES:
Property, plant and equipment purchases		(5	)		(15	)
Acquisition and investment payments		(1	)		(1	)
Investment proceeds and property disposals		--			1
Cash Used in Investing Activities – Continuing Operations		(6	)		(15	)
Cash Used in Investing Activities – Discontinued Operations		--			(5	)
Cash Used in Investing Activities		(6	)		(20	)

FINANCING ACTIVITIES:
Net change in lines of credit		--			2
Proceeds from long-term debt obligations		1,144			--
Net change in long-term revolving credit facilities		--			(43	)
Payment of long-term debt obligations		(876	)		(3	)
Debt issuance costs		(25	)		--
Purchase of treasury shares		(1	)		(1	)
Other, net		(9	)		(2	)
Cash Provided by (Used in) Financing Activities		233			(47	)

Effect of Exchange Rate Changes on Cash		(8	)		--

INCREASE IN CASH AND CASH EQUIVALENTS		215			3
CASH AND CASH EQUIVALENTS:
Beginning of period		243			32
End of period	$	458		$	35

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest	$	16		$	19
Cash payments for income taxes, net of refunds	$	7		$	2

Non-Cash Investing Activities:
Capital expenditures included in accounts payable	$	3		$	6

Non-Cash Financing Activities:
Deferred debt issuance costs included in other liabilities	$	2		$	--

See accompanying Notes to the Consolidated Financial Statements.

- 3 -

SOLUTIA INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Dollars in millions)

	Equity attributable to Solutia
	Common Stock		Additional Contributed Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Accumulated Deficit			Equity Attributable to Noncontrolling Interest			Total Shareholders’ Equity
Beginning Balance – January 1, 2009	$	1	$	1,474	$	--		$	(286	)	$	(668	)	$	8		$	529
Comprehensive income:
Net loss		--		--		--			--			(159	)		--			(159	)
Accumulated currency adjustments		--		--		--			(37	)		--			--			(37	)
Unrealized gain on derivative instruments		--		--		--			4			--			--			4
Amortization of net actuarial loss		--		--		--			2			--			--			2
Dividends attributable to noncontrolling interest		--		--		--			--			--			(2	)		(2	)
Treasury stock purchases		--		--		(1	)		--			--			--			(1	)
Share-based compensation expense		--		6		--			--			--			--			6
Ending Balance – March 31, 2009	$	1	$	1,480	$	(1	)	$	(317	)	$	(827	)	$	6		$	342


Beginning Balance – January 1, 2010	$	1	$	1,612	$	(2	)	$	(237	)	$	(781	)	$	7		$	600
Comprehensive income:
Net loss		--		--		--			--			(58	)		1			(57	)
Accumulated currency adjustments		--		--		--			(35	)		--			--			(35	)
Amortization of net actuarial loss		--		--		--			1			--			--			1
Pension settlement charge		--		--		--			1			--			--			1
Treasury stock purchases		--		--		(1	)		--			--			--			(1	)
Share-based compensation expense		--		4		--			--			--			--			4
Ending Balance – March 31, 2010	$	1	$	1,616	$	(3	)	$	(270	)	$	(839	)	$	8		$	513

See accompanying Notes to the Consolidated Financial Statements.

- 4 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

1. Basis of Presentation and Accounting Policies

Basis of Presentation

Unless the context requires otherwise, the terms “Solutia”, “Company”, “we”, and “our” in this report refer to Solutia Inc. and its subsidiaries. The accompanying consolidated financial statements have not been audited but have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, this Report on Form 10-Q should be read in conjunction with Solutia’s Report on Form 10 - -K for the fiscal year ended December 31, 2009. In the opinion of management, these unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. Financial information for the first quarter of fiscal year 2010 should not be annualized because of the seasonality of our business.

Accounting Policies

Inventory Valuation

Inventories are stated at cost or market, whichever is less, with cost being determined using standards, which approximate actual cost. Variances, exclusive of unusual volume and operating performance, are capitalized into inventory when material. Standard cost includes direct labor and raw materials, and manufacturing overhead based on normal capacity. Effective January 1, 2010, the cost of all consolidated inventories is determined using the FIFO method. For further detail, see Note 5 – Detail of Certain Balance Sheet Accounts.

Recently Issued and Adopted Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 amends Accounting Standards Codification (“ASC”) 820 Fair Value Measurements and Disclosures to require new disclosures related to transfers into and out of Levels 1 and 2 of the fair value hierarchy and additional disclosure requirements related to Level 3 measurements. The guidance also clarifies existing fair value measurement disclosures about the level of disaggregation and about inputs and valuation t echniques used to measure fair value. The additional disclosure requirements are effective for the first reporting period beginning after December 15, 2009, except for the additional disclosure requirements related to Level 3 measurements which are effective for fiscal years beginning after December 15, 2010. Therefore, the additional disclosure requirements for 2010 have been taken into consideration in Note 10 – Fair Value of Financial Instruments. The additional disclosure requirements effective for periods beginning after December 15, 2010 are not expected to have any financial impact on our consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09 Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09 amends ASC 855 Subsequent Events to no longer require public filers to disclose the date through which subsequent events have been evaluated.

2. Acquisitions and Divestitures

Acquisitions

On February 28, 2010, Solutia entered into an agreement to purchase Etimex Solar GmbH (“Etimex Solar”) for €240 million or $324 if a March 31, 2010 conversion rate of 1.35 were utilized, subject to a working capital adjustment (“Etimex Acquisition”). Etimex Solar is a leading supplier of ethylene vinyl acetate (“EVA”) encapsulants to the photovoltaic market which enables us to expand our product portfolio to supply each of the dominant photovoltaic encapsulant technologies. We expect the acquisition to close during the second quarter of 2010.

- 5 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Divestitures

On June 1, 2009, we sold substantially all the assets and certain liabilities, including environmental remediation and pension liabilities of active employees, of our Integrated Nylon business to S.K. Capital Partners II, L.P. (“Buyer”), a New York-based private equity firm. In the three months ended March 31, 2009, we wrote the carrying value of our fixed assets down from $48 to their fair value of zero, resulting in a $31 loss, net of tax, which was recorded in loss from discontinued operations. The fair value of these long-lived assets was developed using the sales agreement, which is a Level 2 fair value measurement under the fair value hierarchy.

A summary of the net sales and loss from discontinued operations is as follows:

	Three Months Ended March 31,
	2010		2009
Integrated Nylon:
Operating results:
Net sales	$	--	$	208
Loss before income taxes	$	--	$	(174	)
Income tax benefit		--		(17	)
Loss from discontinued operations, net of tax	$	--	$	(157	)

The carrying amounts of all assets and liabilities associated with our Integrated Nylon business have been classified as current in the Consolidated Statement of Financial Position and consist of the following:

	March 31, 2010		December 31, 2009

Assets:
Miscellaneous receivables	$	10	$	10
Assets of discontinued operations	$	10	$	10

Liabilities:
Accounts payable	$	29	$	29
Accrued liabilities		17		21
Liabilities of discontinued operations	$	46	$	50

The operating results of our Integrated Nylon business reflect adjustments to our interest expense associated with debt which would be repaid using anticipated sales proceeds which were not previously allocated to the results of this business. Conversely, certain corporate expenses are excluded from the operating results which had previously been allocated to Integrated Nylon.

Prior to the sale of our Integrated Nylon business, Lyondell Chemical Company (“Lyondell”), a guest at the Integrated Nylon Alvin, Texas plant under various operating agreements which expire in December 2010, declared bankruptcy and provided to us notice of its intention to exit the facility and terminate its operating agreements early without consideration for the contractually agreed to early exit penalties. In response, we have withheld payment on certain trade payables to subsidiaries of Lyondell asserting these liabilities partially offset damages associated with the rejection of these contracts. In conjunction with the sale of the Integrated Nylon business, we have agreed to reimburse the Buyer for indirect residual costs incurred by them resulting from Lyondell’s early exit.

On April 20, 2010, we entered into a settlement agreement that resolved all outstanding matters with Lyondell in exchange for payment by us of $17 (“Lyondell Settlement”). Separately, we have entered into an agreement with the Buyer whereby our liability for indirect residual costs at the plant is settled in exchange for a payment by us of $4. The Lyondell Settlement was approved by the bankruptcy court on April 23, 2010, but remains contingent upon Lyondell emerging from bankruptcy protection. Because the proceedings of bankruptcy court are inherently uncertain, any gain that might result from the settlements for amounts less than current ly accrued will only be recognized upon the resolution of this contingency.

On January 31, 2003, we sold the resins, additives and adhesives business to UCB S.A. During the three months ended March 31, 2009, changes related to tax audits from 2000 through 2004 for our 100% owned subsidiary, Solutia Deutschland GmbH, resulted in a reduction in previously unrecognized tax benefits of $2. Accordingly, an income tax benefit equal to this amount was recognized in loss from discontinued operations.

- 6 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

3. Share-Based Compensation

Stock Options

We granted options to purchase a total of 10,000 shares of common stock to eligible employees under our 2007 Management Long-Term Incentive Plan (“2007 Management Plan”) during the three months ended March 31, 2010. We did not grant any options under our 2007 Non-Employee Director Stock Compensation Plan (“2007 Director Plan”) during the three months ended March 31, 2010. The options granted (i) have an exercise price of not less than 100 percent of the fair market value of the common stock on the grant date, (ii) become exercisable in three equal installments on the first, second, and third anniversary of the grant date, subject to the employee’s continued employment and (iii) expire on the tenth anniversary of the grant date. We did not grant any options to purchase shares of common stock under the 2007 Management Plan or 2007 Director Plan during the three months ended March 31, 2009.

The fair value of stock options is determined at the grant date using a Black-Scholes model, which requires us to make several assumptions including risk-free interest rate, expected dividends and volatility. The risk-free rate is based on the U.S. Treasury yield curve in effect for the expected term of the options at the time of grant. The dividend yield on our common stock is assumed to be zero since we do not pay dividends and have no current plans to do so. Our historical volatility data and employee stock option exercise patterns were not considered in determining the volatility data and expected life assumptions. The volatility assumptions were based on (i) historical volatilities of the stock of comparable chemical companies whose shares are traded using daily stock price returns equi valent to the expected term of the options and (ii) implied volatility. The expected life of an option was determined based on a simplified assumption that the option will be exercised evenly from the time it becomes exercisable to expiration.

The weighted-average fair value of options granted during the three months ended March 31, 2010 was determined based on the following weighted-average assumptions:

	March 31, 2010

Expected volatility		35.13	%
Expected term (in years)		6
Risk-free rate		2.44	%
Weighted-average grant date fair value	$	4.98

A summary of stock option information as of March 31, 2010 is as follows:

	Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value (a)

Vested or Expected to Vest at March 31, 2010		1,863,741	$	17.22		7.9	$	--
Exercisable at March 31, 2010		1,240,857	$	17.30		7.9	$	--

(a)

Intrinsic value for stock options is calculated based on the difference between the exercise price of the underlying awards and the quoted market price of our common stock as of the reporting date. If the exercise price of the underlying awards is higher than the quoted market price of our common stock as of the reporting date, the intrinsic value of the award is $0.

During the three months ended March 31, 2010, we recognized $1 of compensation expense related to our stock options. For the three months ended March 31, 2009, we recognized $2 of compensation expense related to our stock options, of which less than $1 was allocated to discontinued operations. Pre-tax unrecognized compensation expense for stock options, net of estimated forfeitures, was $3 as of March 31, 2010 which will be recognized as expense over a remaining weighted-average period of 1 year.

- 7 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Restricted Stock Awards

We did not grant any restricted stock awards under the 2007 Management Plan or the 2007 Director Plan during either the three months ended March 31, 2010 or 2009.

During the three months ended March 31, 2010, we recognized $3 of compensation expense related to our restricted stock awards. During the three months ended March 31, 2009, we recognized $4 of compensation expense related to our restricted stock awards, of which less than $1 was allocated to discontinued operations. Pre-tax unrecognized compensation expense for restricted stock awards, net of estimated forfeitures, was $17 as of March 31, 2010 which will be recognized as expense over a remaining weighted-average period of 1.5 years.

4. Goodwill and Other Intangible Assets

Goodwill

Goodwill by reportable segment as of March 31, 2010 and December 31, 2009 is as follows:

	Balance
Advanced Interlayers	$	205
Performance Films		159
Technical Specialties		147
Total	$	511

Identified Intangible Assets

Intangible assets are summarized in aggregate as follows:

	March 31, 2010								December 31, 2009
	Estimated Useful Life in Years	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Estimated Useful Life in Years	Gross Carrying Value		Accumulated Amortization			Net Carrying Value

Amortizable intangible assets:
Customer relationships	23 to 27	$	486	$	(38	)	$	448	23 to 27	$	491	$	(34	)	$	457
Technology	5 to 26		197		(21	)		176	5 to 26		202		(19	)		183
Trade names	25		13		(1	)		12	25		13		(1	)		12
Patents	13		5		(1	)		4	13		5		(1	)		4
Non amortizable intangible assets:
Trademarks			143		--			143			147		--			147
Total Identified Intangible Assets		$	844	$	(61	)	$	783		$	858	$	(55	)	$	803

During both the three months ended March 31, 2010 and 2009, we recognized $7 of amortization expense of intangible assets. Amortization expense is allocated to cost of goods sold and selling, general and administrative expenses in the Consolidated Statement of Operations as follows:

	Three Months Ended March 31,
	2010		2009

Cost of goods sold	$	2	$	2
Selling, general and administrative expenses	$	5	$	5

We expect amortization expense for intangible assets to total approximately $30 for each of the years ending December 31, 2010 through 2014.

- 8 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

5. Detail of Certain Balance Sheet Accounts

Components of inventories were as follows:

Inventories	March 31, 2010		December 31, 2009

Finished goods	$	150	$	138
Goods in process		46		47
Raw materials and supplies		75		71
Inventories, at FIFO cost	$	271		256
Excess of LIFO over FIFO cost				1
Total Inventories			$	257

On January 1, 2010 we changed our method of accounting for inventories in the United States, excluding supplies, from determining cost using the LIFO method to determining cost using the FIFO method. All of our other operations will continue to be valued at cost, determined by the FIFO method. We believe this change is preferable as the FIFO method better reflects the current value of inventories on the Consolidated Statement of Financial Position. Furthermore, the application of the FIFO method provides a uniform costing method across our global operations. Prior financial statements have not been retroactively adjusted due to immaterialit y. The cumulative effect of the change in accounting principle of $1 was recorded as an increase to cost of goods sold as of January 1, 2010.

Components of property, plant, and equipment were as follows:

Property, Plant and Equipment	March 31, 2010			December 31, 2009

Land	$	33		$	33
Leasehold improvements		10			10
Buildings		204			211
Machinery and equipment		747			758
Construction in progress		33			35
Total property, plant and equipment		1,027			1,047
Less accumulated depreciation		(144	)		(128	)
Total Property, Plant, and Equipment, Net	$	883		$	919

Components of accrued liabilities were as follows:

Accrued Liabilities	March 31, 2010		December 31, 2009

Wages and benefits	$	37	$	24
Foreign currency and interest rate hedge agreements		10		7
Restructuring reserves		10		13
Environmental remediation liabilities		31		31
Accrued income taxes payable		21		19
Accrued selling expenses		14		20
Accrued interest		20		8
Other		78		84
Total Accrued Liabilities	$	221	$	206

6. Income Taxes

Income Tax Expense

We recorded net income tax expense of $9 for the three months ended March 31, 2010 and a net income tax benefit of $7 for the three months ended March 31, 2009. Our income tax expense or benefit is affected by changes in unrecognized tax benefits and the mix of income and losses in the tax jurisdictions in which we operate. Included in the net income tax benefit for the three months ended March 31, 2009 is a previously unrecognized tax benefit of $10 recognized in this period due to developments in case law changing the technical merits of a tax position. For both of the pe riods presented, we recorded income tax expense on ex-U.S. earnings but a full valuation allowance against the tax benefit on losses experienced in the U.S.

- 9 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Unrecognized Tax Benefits

The total amount of unrecognized tax benefits, inclusive of interest and penalties, at March 31, 2010 and December 31, 2009 was $149 and $155, respectively. Included in the balance at March 31, 2010 and December 31, 2009 were $52 and $54, respectively, of unrecognized tax benefits that, if recognized, would affect the effective tax rate. The decrease in the amounts is mainly the result of the closure of tax audits, statute of limitation expirations, and the effect of currency exchan ge rate fluctuations, offset by tax positions with respect to events in the current year.

We file income tax returns in the U.S. and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2002. It is reasonably possible that within the next 12 months as a result of the resolution of federal, state and foreign examinations and appeals, and the expiration of various statutes of limitation that the unrecognized tax benefits that would affect the effective tax rate will decrease by a range of $0 to $12.

7. Restructuring Reserves

In an effort to maintain competitiveness across our businesses and the geographic areas in which we operate and to enhance the efficiency and cost effectiveness of our support operations, we periodically initiate certain restructuring activities which result in charges for costs associated with exit or disposal activities, severance and/or impairment of long-lived assets. A summary of these activities for the periods presented are as follows:

Cologne Facility Closure

In the fourth quarter 2009, we announced the sale of our customer list and technology related to select products in our PERKACIT® ultra accelerators product line within our Technical Specialties reportable segment (“Thiurams Sale”). As part of the Thiurams Sale, we entered into an agreement with the buyer to produce the select products through March 31, 2010 (“Tolling Agreement”) for $4. At the end of the Tolling Agreement, we ceased manufacturing at the Akzo Nobel facility in Cologne, Germany (“Cologne Facility”) where we operated as a guest with expectation of a complete exit of this facility by the third quarter of 2010. A summary of the charges associated with this project during the three months ended March 31 , 2010 and cumulative charges through March 31, 2010 are as follows:

	Future Contractual Payments		Employment Reductions		Total
Three Months Ended and Cumulative through March 31, 2010:
Cost of goods sold	$	1	$	1	$	2
Selling, general and administrative expenses		--		1		1
Total	$	1	$	2	$	3

To complete the closure process, based on current information, we expect to incur charges of approximately $5 as an increase to cost of goods sold, categorized as follows: (i) $2 for employment reductions and (ii) $3 for other costs including demolition. There can be no assurance as to what the ultimate charges will be.

- 10 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

General Corporate

In the fourth quarter of 2008, we initiated a general corporate restructuring targeted to increase the efficiency and cost effectiveness of our support operations. Throughout 2009, this project expanded in scope to include a reduction in operational personnel in order to more appropriately match our organization with current production levels. A summary of the employee reduction charges associated with this project during the three months ended March 31, 2010 and cumulative charges through March 31, 2010 are as follows:

	Advanced Interlayers		Performance Films		Technical Specialties		Unallocated and Other		Total
Three Months Ended March 31, 2010:
Cost of goods sold	$	--	$	1	$	--	$	--	$	1
Selling, general and administrative expenses		--		--		1		--		1
Total	$	--	$	1	$	1	$	--	$	2

Cumulative through March 31, 2010:
Cost of goods sold	$	3	$	2	$	1	$	1	$	7
Selling, general and administrative expenses		12		3		3		13		31
Research, development and other operating expenses, net		1		--		--		--		1
Total	$	16	$	5	$	4	$	14	$	39

In addition to the cumulative employee reduction charges recorded in selling, general and administrative expenses, we incurred $1 of charges for future contractual payments related to the relocation of certain regional support operations from Singapore to Shanghai, China. We expect to incur an additional $1 in charges to be shared by all our segments to cover the cost of impacted headcount reductions.

Ruabon Facility Closure

Due to overcapacity within the industry, a disadvantaged cost position and increasing pressure from Far Eastern producers, we ceased the manufacturing of certain rubber chemicals at our facility in Ruabon, United Kingdom (“Ruabon Facility”) in the third and fourth quarters of 2008 with an expected final closure of the plant in 2014. A summary of the charges associated with this project within our Technical Specialties reportable segment during the three months ended March 31, 2010 and cumulative charges and changes in estimates through March 31, 2010 as recorded in cost of goods sold are as follows:

	Future Contractual Payments			Employment Reductions		Other Restructuring Costs		Total
Three Months Ended March 31, 2010:
Charges taken	$	--		$	--	$	1	$	1

Cumulative through March 31, 2010:
Charges taken	$	10		$	9	$	5	$	24
Changes in estimates (a)		(5	)		--		--		(5	)
Total	$	5		$	9	$	5	$	19

(a)

We reduced the future contractual payment reserve by $5 due to a renegotiation of the lease and operating agreement with our third party operator. The new lease and operating agreement, which is effective from September 1, 2009 through December 31, 2013, reduced the services to be provided and increased certain fees allowing the contract to provide an economic benefit.

To complete the closure process, based on current information, we expect to incur an additional $4 in charges as an increase to cost of goods sold for other restructuring costs including demolition.

Restructuring Summary

A summary of all restructuring activity during the three months ended March 31, 2010 is as follows:

- 11 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

	Future Contractual Payments			Employment Reductions			Other Restructuring Costs			Total

Balance at December 31, 2009	$	2		$	15		$	--		$	17
Charges taken		1			4			1			6
Amounts utilized		(1	)		(7	)		(1	)		(9	)
Currency fluctuations		--			(1	)		--			(1	)
Balance at March 31, 2010	$	2		$	11		$	--		$	13

We expect $10 of restructuring liabilities as of March 31, 2010 to be utilized within the next twelve months.

8. Commitments and Contingencies

Litigation

We are a party to legal proceedings, which have arisen in the ordinary course of business and involve claims for monetary damages. As of March 31, 2010 and December 31, 2009, we accrued approximately $2 for legal costs to defend ourselves in legal matters.

Except for the potential effect of an unfavorable outcome with respect to our Legacy Tort Claims Litigation, it is our opinion that the aggregate of all claims and lawsuits will not have a material adverse impact on our consolidated financial statements.

Legacy Tort Claims Litigation

Pursuant to the Amended and Restated Settlement Agreement effective February 28, 2008, entered into by Solutia and Monsanto Company (“Monsanto”) in connection with our emergence from Chapter 11 (the “Monsanto Settlement Agreement”), Monsanto is responsible to defend and indemnify Solutia for any Legacy Tort Claims as that term is defined in the agreement, while Solutia retains responsibility for tort claims arising out of exposure occurring after our spinoff from Pharmacia Corporation (“Pharmacia”) (the former Monsanto Company which is now a 100% owned subsidiary of Pfizer, Inc.), which occurred on September 1, 1997 (the “Solutia Spinoff”). Solutia or its 100% owned subsidiary, Flexsys, have been name d as defendants in the following actions, and have submitted the matters to Monsanto as Legacy Tort Claims. However, to the extent these matters relate to post Solutia Spinoff exposure or such matters are not within the meaning of “Legacy Tort Claims” within the Monsanto Settlement Agreement, we would potentially be liable. All claims in the Flexsys tort litigation matters described below concern alleged conduct occurring while Flexsys was a joint venture of Solutia and Akzo Nobel, and any potential damages in these cases would be evenly apportioned between Solutia and Akzo Nobel. In addition to the below actions, Monsanto has sought indemnity from us for certain tort and workers’ compensation claims in which Monsanto has been named a defendant. We have rejected such demand pursuant to the Monsanto Settlement Agreement. There are no pending legal actions regarding these alleged indemnification rights.

Putnam County, West Virginia Litigation: In December 2004, a purported class action lawsuit was filed in the Circuit Court of Putnam County, West Virginia against Flexsys, Pharmacia, Monsanto and Akzo Nobel (Solutia is not a named defendant) alleging exposure to dioxin from Flexsys’ Nitro, West Virginia facility, which is now closed. The relevant production activities at the facility occurred during Pharmacia’s ownership and operation of the facility and well prior to the creation of the Flexsys joint venture between Pharmacia (whose interest was subsequently transferred to us in the Solutia Spinoff) and Akzo Nobel. The plaintiffs are seeking damages for loss of pr operty value, medical monitoring and other equitable relief.

Beginning in February 2008, Flexsys, Monsanto, Pharmacia, Akzo Nobel and another third party were named as defendants in approximately seventy-five individual lawsuits, and Solutia was named in two individual lawsuits, filed in various state court jurisdictions by residents or former residents of Putnam County, West Virginia. The largely identical complaints allege that the residents were exposed to potentially harmful levels of dioxin particles from the Nitro facility. Plaintiffs did not specify the amount of their alleged damages in their complaints. In 2009, over fifty additional nearly identical complaints were filed by individual plaintiffs in the Putnam County area, which named Solutia and Flexsys as defendants.

- 12 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Escambia County, Florida Litigation: In June 2008, a group of approximately fifty property owners and business owners in the Pensacola, Florida area filed a lawsuit in the Circuit Court for Escambia County, Florida against Monsanto, Pharmacia, Solutia, and the plant manager at Solutia's former Pensacola plant, which was included in the sale of our Integrated Nylon business. The lawsuit, entitled John Allen, et al. v. Monsanto Company, et al., alleges that the defendants are responsible for elevated levels of PCBs in the Escambia River and Escambia Bay due to past and allegedly continuing releases of PCBs from the Pensacola plant. The plaintiffs seek: (1) damages asso ciated with alleged decreased property values caused by the alleged contamination, and (2) remediation of the alleged contamination in the waterways. Plaintiffs did not specify the amount of their alleged damages in their complaint. Plaintiffs have subsequently amended their complaint to add additional plaintiffs to the litigation, such that 111 property and business owners are now named as plaintiffs.

St. Clair and Madison Counties, Illinois Litigation: In February 2009, a purported class action lawsuit was filed in the Circuit Court of St. Clair County, Illinois against Solutia, Pharmacia, Monsanto and two other unrelated defendants alleging the contamination of their property from PCBs, dioxins, furans, and other alleged hazardous substances emanating from the defendants’ facilities in Sauget, Illinois (including our W.G. Krummrich site in Sauget, Illinois). The proposed class action is comprised of residents who live within a two-mile radius of the Sauget facilities. The plaintiffs are seeking damages for medical monitoring and the costs associated with remediation and removal of alleged contaminants from their prop erty.

In addition to the purported class action lawsuit, twenty additional individual lawsuits have been filed since February 2009 against the same defendants (including Solutia) comprised of claims from over one thousand individual residents of Illinois who claim they suffered illnesses and/or injuries as well as property damages as a result of the same PCB’s, dioxins, furans, and other alleged hazardous substances allegedly emanating from the defendants’ facilities in Sauget. Moreover, two additional individual lawsuits comprised of claims from eight plaintiffs have been filed in Madison County, Illinois, alleging the plaintiffs suffered illnesses resulting from exposure to benzene, PCBs, dioxins, furans and other hazardous substances.

Upon assessment of the terms of the Monsanto Settlement Agreement and other defenses available to us, we believe the probability of an unfavorable outcome to us on the Putnam County, West Virginia, Escambia County, Florida, and St. Clair and Madison Counties, Illinois litigation against us is remote and, accordingly, we have not recorded a loss contingency. Nonetheless, if it were subsequently determined these matters are not within the meaning of “Legacy Tort Claims,” as defined in the Monsanto Settlement Agreement, or other defenses to us were unsuccessful, it is reasonably possible we would be liable for an amount which cannot be estimated but which could have a material adverse effect on our consolidated financial statements.

Solutia Inc. Employees’ Pension Plan Litigation

Starting in October 2005, separate purported class action lawsuits were filed by current or former participants in our U.S. pension plan (“U.S. Plan”), which were ultimately consolidated in September 2006 into a single case. The Consolidated Class Action Complaint alleged three separate causes of action against the U.S. Plan: (1) the U.S. Plan violates ERISA by terminating interest credits on prior plan accounts at the age of 55; (2) the U.S. Plan is improperly backloaded in violation of ERISA; and (3) the U.S. Plan is discriminatory on the basis of age. In September 2007, the court dismissed the plaintiffs’ second and third claims, and by consent of the parties, certified a class action against the U.S. Plan only with respect to plaintiffs’ claim that the U.S. Plan violates ERISA by allegedly terminating interest credits on prior plan accounts at the age of 55. On June 11, 2009, the United States District Court for the Southern District of Illinois entered a summary judgment in favor of the U.S. Plan on the sole remaining claim against the U.S. Plan. The district court entered its final appealable judgment in the case on September 29, 2009, and plaintiffs have appealed the decision to the Seventh Circuit Court of Appeals.

Medicare Reimbursement Litigation

In December 2009, the Department of Justice (“DOJ”), on behalf of the United States government, filed suit in the United States District Court, Northern District of Alabama (in a case captioned United States of America v. Stricker, et al.), against Solutia, Monsanto, Pharmacia, and the attorneys and law firms who represented the plaintiffs in Abernathy v. Solutia Inc., et al. (“Abernathy”) lawsuit arising out of PCB contamination in Anniston, Alabama. The DOJ alleges the defendants failed to reimburse Medicare for medical expenses paid to Abernathy settlement recipients who were Medicare beneficiaries. Specifically, the DOJ claims that approximately 907 claimants who received payments for medical treatment under the Abernathy settlement were Medicare beneficiaries who received “conditional” payments from Medicare for the same treatment. The DOJ alleges that the conditional payments were subject to reimbursement if a primary payer had responsibility to cover the treatment at issue, but no reimbursement was made to the government by any of the Abernathy participants. The DOJ is seeking recovery of these allegedly unpaid reimbursements from the defendants who paid into the Abernathy settlement fund, as well as the plaintiffs’ counsel who represented the Medicare recipients and were responsible for the distribution of the settlement funds. The DOJ d id not specify the amount of damages – either generally from the defendants or specifically from Solutia – which the government seeks in this case.

- 13 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Solutia denies the allegations, and asserts that liability for such reimbursements should be the responsibility of the plaintiffs’ counsel who were actually responsible for the distribution of the settlement funds to the plaintiffs. In February 2010, defendants filed motions, which are currently pending, to dismiss the suit.

Environmental Liabilities

In the ordinary course of business, we are subject to numerous environmental laws and regulations covering compliance matters or imposing liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances. We have incurred, and we may in the future incur, liabilities to investigate and clean up waste or contamination at our current facilities, properties adjacent to our current facilities or facilities operated by third parties at where we may have disposed of waste or other materials. Under some circumstances, the scope of our liability may extend to damages to natural resources for which we have accrued $2, exclusive of the balances noted below. In almost all cases, our potential liability arising from historical contamination is based on operations and other events occurring at our facilities or as a result of their operation prior to the Solutia Spinoff.

Further, under terms of the Monsanto Settlement Agreement, we have agreed to share responsibility with Monsanto for the environmental remediation at certain locations outside our plant boundaries in Anniston, Alabama, and Sauget, Illinois which were also incurred prior to the Solutia Spinoff (the “Shared Sites”). Under this cost-sharing arrangement, we are responsible for the funding of environmental liabilities at the Shared Sites from February 28, 2008 (the “Effective Date”) up to a total of $325. Thereafter, if needed, we and Monsanto will share responsibility equally. From the Effective Date through March 31, 2010, we have made cash payments of $16 toward remediation of Shared Sites after exhau stion of the special purpose entity funds and have accrued an additional $171 to be paid over the life of the Shared Sites remediation activity.

Reserves for environmental remediation that we believe to be probable and estimable are recorded appropriately as current and long-term liabilities in the Consolidated Statement of Financial Position. These reserves include liabilities expected to be paid out within fifteen years. The amounts charged to pre-tax earnings for environmental remediation and related charges are included in cost of goods sold and are summarized below:

	Total
Balance at December 31, 2009	$	291
Net charges taken		3
Amounts utilized		(7	)
Currency fluctuations		(1	)
Balance at March 31, 2010	$	286

	March 31, 2010		December 31, 2009
Environmental Remediation Liabilities, current	$	31	$	31
Environmental Remediation Liabilities, long-term		255		260
Total	$	286	$	291

- 14 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

In addition to accrued environmental liabilities, there are costs which have not met the definition of probable, and accordingly, are not recorded in the Consolidated Statement of Financial Position. These loss contingencies are monitored regularly for a change in fact or circumstance that would require an accrual adjustment. These matters involve significant unresolved issues, including the interpretation of applicable laws and regulations, the outcome of negotiations with regulatory authorities and alternative methods of remediation. Because of these uncertainties, the potential liability for existing environmental remediation may range up to two times the amount recorded.

Except as noted below, we believe that these matters, when ultimately resolved, which may be over an extended period of time, will not have a material adverse effect on our Consolidated Statement of Financial Position, but could have a material adverse effect on our Consolidated Statement of Operations in any given period. Our significant sites are described in more detail below:

Anniston, Alabama: On Aug. 4, 2003, the U.S. District Court for the Northern District of Alabama approved a Revised Partial Consent Decree, pursuant to which Pharmacia and Solutia are obligated to perform, among other things, residential cleanup work and a remedial investigation/feasibility study (“RI/FS”) as a result of PCB contamination from our Anniston plant, which occurred prior to the Solutia Spinoff. The residential cleanup is proceeding and should be completed within the next year, along with the implementation of an institutional control program to address future changes to residential properties. Some level of remediation of non-residential properties and creek floodplains and/or sediment will be required in the future and we have accrued for this liability based upon our understanding of the level and extent of contamination in these areas, the remedial effort likely to be required by various governmental organizations and estimated costs associated with similar remediation projects. We may recover some of our investigation and remediation costs from parties, against whom we filed a cost recovery action in July 2003 but because the eventual outcome of these proceedings is uncertain, our environmental liability at March 31, 2010 does not incorporate this potential reimbursement. State and Federal Natural Resource Damage Trustees have asserted a claim for potential natural resource damage but have yet to undertake an assessment as to the nature and extent of such damages. As of March 31, 2010, we have accrued $114 for all environmental remediation projects in the Anniston, Alabama area which represents our best estimate of the final cost liability. Timing of the reme diation will not be established until we complete the RI/FS, a Record of Decision is issued by the United States Environmental Protection Agency (“USEPA”), and a consent decree is negotiated and entered by the court to cover the selected remediation for each of the operable units of this site, which will take several years.

Sauget, Illinois: A number of industries, including our W.G. Krummrich Plant, have operated and disposed of wastes in Sauget, Illinois. Areas of contamination from these industrial operations, which for our W.G. Krummrich Plant occurred prior to the Solutia Spinoff, have been classified as part of either the Sauget Area 1 Sites or the Sauget Area 2 Sites. We conducted a RI/FS for the Sauget Area 1 Sites under an Administrative Order on Consent issued on January 21, 1999. Although an e xtensive removal action for one of the Sauget Area 1 Sites was conducted under a Unilateral Administrative Order issued on May 31, 2000, the cost and timing of any additional required remedial actions will be established only after a Record of Decision is issued by the USEPA and a consent decree is negotiated and entered by the court to cover the selected remediation, which is expected within the next two years. We have an agreement with two other potentially responsible parties (“PRPs”) to enter into an allocation proceeding upon issuance of the Record of Decision to resolve our respective shares of the liability for the Sauget Area 1 Sites. We, in coordination with 19 other PRPs, were also required to conduct a RI/FS for the Sauget Area 2 Sites under an Administrative Order on Consent issued effective November 24, 2000. We submitted the revised RI/FS report with other PRPs based on interim allocations and have agreed, upon issuance of the Record of Decision, to participate in an allocation proceeding to fully resolve each PRPs’ share of the liability for the investigation and remediation costs. An interim groundwater remedy has been installed pursuant to a Unilateral Administrative Order issued on October 3, 2002. We anticipate that the USEPA will issue a Record of Decision sometime in 2011. Our ultimate exposure at these sites will depend on the final remedial actions to be taken and on the level of contribution from other PRPs. In addition, several PRPs, including Solutia and Pharmacia, received in June 2009 from the U.S. Department of Interior, on behalf of various federal and state natural resource trustees, a notice of intent to perform and an invitation to cooperate in a natural resource damage assessment from the Sauget Industrial Corridor. Our best estimate of the ultimate cost of all remedial measures that will be required at the Sauget, Illinois area sites is $69 which we have accrued as of Marc h 31, 2010.

- 15 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

W. G. Krummrich Site: We entered into a Consent Order under the U.S. Resource Conservation and Recovery Act of 1976, as amended, effective May 3, 2000, to investigate and remediate soil and groundwater contamination from our manufacturing operations at the W.G. Krummrich Plant, which occurred prior to the Solutia Spinoff. We conducted an extensive corrective measures study and a Final Decision was issued by the USEPA in February 2008 setting out the required corrective measures to be completed. Due to the complexity of the contamination issues at this site, certain of the corrective measures will be performed in phases with the final remediation approach and timing for some of the corrective measures being determined only after investigation and pilot testing phases are completed. Our best estimate of the ultimate cost of all corrective measures that will be required at the W.G. Krummrich Site is $27 which we have accrued as of March 31, 2010.

We also have accruals for remedial obligations at several of our current or former manufacturing sites which we have owned or operated since the Solutia Spinoff. Our best estimate of the ultimate cost of all corrective measures that will be required at these sites is $76 which we have accrued as of March 31, 2010.

Environmental Agency Enforcement Actions

On March 3, 2009, the USEPA issued a Notice of Violation (“NOV”), Administrative Order (“AO”) and Reporting Requirement (“RR”) to Solutia concerning alleged violations of the Clean Air Act arising out of an inspection conducted at our manufacturing facility in Springfield, Massachusetts. The NOV describes the USEPA’s findings alleging violations of the plant’s Title V and state operating permits related to emissions of volatile organic compounds. The AO orders Solutia to comply with its Title V permit and the National Emission Standards for Hazardous A ir Pollutants, Subpart OOO (Amino/Phenolic Resins), Subpart UU (Equipment Leaks), and General Provisions. The RR requires Solutia to submit additional information regarding certain storage vessels and associated equipment. On March 23, 2009, Solutia met with the USEPA to confer on this NOV, AO, and RR. Submittals of the requested information under the RR were made as required. The USEPA informed Solutia at the meeting that it had not yet made any decisions as to whether it will take enforcement action or what type of action it will take with respect to this matter and we have entered into a tolling agreement with the United States that provides the USEPA time to evaluate its case. The amount of a potential loss, if any, is not currently estimable.

9. Derivatives and Risk Management

Our business operations give rise to market risk exposures that result from changes in foreign currency exchange rates, interest rates and certain commodity prices. To manage the volatility relating to these exposures, we periodically enter into various derivative transactions that enable us to alleviate the adverse effects of financial market risk. 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. Our approved policies and procedures do not permit the purchase or holding of any derivative financial instruments for trading purposes. Management of counterparty credit risk is through diversification and credit rating reviews of the firms with whom we transact.< /font>

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 are exposed to this risk both on an intercompany and a third-party basis. We use foreign currency derivative instruments to manage the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business and to protect against exposure related to intercompany financing transactions. These risks are hedged primarily through the use of forward exchange contracts and purchased options with maturities of less than 18 months.

We have chosen not to designate these instruments as hedges to allow the changes in the fair value of these instruments to largely offset the re-measurement of the underlying assets and liabilities in the Consolidated Statement of Operations. We had currency forward contracts to purchase and sell $120 of currencies as of March 31, 2010 comprised principally of the Euro, British Pound-Sterling, U.S. Dollar, Japanese Yen and Malaysian Ringgit.

- 16 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Interest Rate Risk

Interest rate risk is primarily related to changes in interest expense from floating rate debt. To limit our exposure to this risk, in 2008 we entered into interest rate swap agreements related to our $1.2 billion senior secured term loan facility (“2014 Term Loan”). The interest rate swap agreements have declining total notional amounts of $800 to $150 which are effective from April 2010 through February 2014. The terms of the interest rate swap agreements require us to pay interest utilizing fixed interest rates ranging from 4.65 percent to 4.85 percent and receive interest utilizing 1-Month LIBOR, with a floor of 3.50 percent. Through February 2009, we designated the interest rate swap agreements as cash fl ow hedges. Because of significant declines in interest rates and the significant difference between the prime and LIBOR rates, we could no longer assert we would always choose the 1-Month LIBOR on our 2014 Term Loan. Subsequent effectiveness testing on a historical and prospective basis comparing our interest rate swap agreements to the available interest rate options on our 2014 Term Loan concluded the relationships were not highly effective. Therefore, we discontinued hedge accounting in February 2009 and all prospective mark-to-market gains or losses are recognized in interest expense on the Consolidated Statement of Operations.

Commodity Price Risk

Certain raw materials and energy resources we use are subject to price volatility caused by weather, crude oil prices, supply conditions, political and economic variables and other unpredictable factors. At the current time, we are not using derivative instruments because the volatility of these costs has been within an acceptable range. We will deploy appropriate derivative instruments if we project or experience volatility related to the price fluctuations that are deemed unacceptable.

At March 31, 2010 and December 31, 2009, we did not have any derivatives designated as hedging instruments. Our derivatives not designated as hedging instruments, recorded at their respective fair values at March 31, 2010 and December 31, 2009 are summarized as follows:

	March 31, 2010
	Asset Derivatives			Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value		Consolidated Statement of Financial Position Presentation	Fair Value
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables	$	--	Accrued Liabilities	$	9
	Other Assets		--	Other Liabilities		17
Total Interest rate contracts			--			26
Foreign exchange contracts	Miscellaneous Receivables		3	Accrued Liabilities		1
Total		$	3		$	27

	December 31, 2009
	Asset Derivatives			Liability Derivatives
	Consolidated Statement of Financial Position Presentation	Fair Value		Consolidated Statement of Financial Position Presentation	Fair Value
Derivative not designated as hedging instruments:
Interest rate contracts	Miscellaneous Receivables	$	--	Accrued Liabilities	$	6
	Other Assets		--	Other Liabilities		14
Total Interest rate contracts			--			20
Foreign exchange contracts	Miscellaneous Receivables		2	Accrued Liabilities		1
Total		$	2		$	21

- 17 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

During the twelve months following March 31, 2010, we expect a reclassification of $8 into earnings of the $21 accumulated losses on the interest rate swaps. For the three months ended March 31, 2009, we recognized a gain of $4 in Other Comprehensive Income for the period in which our interest rate contracts were designated as cash flow hedging instruments.

A summary of the effect of our derivative instruments on the Consolidated Statement of Operations is as follows:

		Amount of Gain (Loss) Recognized in Consolidated Statement of Operations
		Three Months Ended March 31,
Derivatives not designated as hedging instruments:	Presentation of Gain (Loss) Recognized in Consolidated Statement of Operations	2010			2009
Interest rate contracts	Interest expense	$	(6	)	$	(5	)
Foreign exchange contracts	Other income (loss), net		2			2
Commodity contracts	Loss from Discontinued Operations, net of tax		--			(1	)
Total		$	(4	)	$	(4	)

10. Fair Value of Financial Instruments

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

			Fair Value Measurements at March 31, 2010
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Derivatives – Foreign Exchange (a)	$	3	$	--	$	3	$	--
Total	$	3	$	--	$	3	$	--

Liabilities:
Derivatives – Foreign Exchange (a)	$	1	$	--	$	1	$	--
Derivatives – Interest Rates (b)		26		--		26		--
Total	$	27	$	--	$	27	$	--

			Fair Value Measurements at December 31, 2009
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Derivatives – Foreign Exchange (a)	$	2	$	--	$	2	$	--
Total	$	2	$	--	$	2	$	--

Liabilities:
Derivatives – Foreign Exchange (a)	$	1	$	--	$	1	$	--
Derivatives – Interest Rates (b)		20		--		20		--
Total	$	21	$	--	$	21	$	--

(a)	Includes foreign currency forward and options contracts which are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.
(b)	Includes interest rate swaps which are valued using counterparty quotes, which use discounted cash flows and the then-applicable forward interest rates.

- 18 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

The recorded amounts of cash, trade receivables, accounts payable and short-term debt approximate their fair values at both March 31, 2010 and December 31, 2009, due to the short maturity of these instruments. The estimated fair value of our long-term debt at March 31, 2010 is $1,582 compared to the recorded amount of $1,544 (including current portion of long-term debt). The estimated fair value of our long-term debt at December 31, 2009 was $1,309 compared to the recorded amount of $1,276 (including current portion of long-term debt). The fair values are estimated by various banks based upon trading levels on the date of measurement.

11. Pension Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost

For the three months ended March 31, 2010 and 2009, our principal pension and healthcare and other benefit costs for continuing operations were as follows:

	Pension Benefits						Healthcare and Other Benefits
	Three Months Ended March 31,						Three Months Ended March 31,
	2010			2009			2010			2009
Service costs for benefits earned	$	1		$	1		$	1		$	1
Interest costs on benefit obligation		12			15			2			4
Assumed return on plan assets		(13	)		(14	)		(1	)		(1	)
Amortization of actuarial net loss (gain)		2			--			(1	)		(2	)
Settlement Charges		1			--			--			--
Total	$	3		$	2		$	1		$	2

Settlements

For the three months ended March 31, 2010 we recorded a settlement charge of $1 resulting from the significant amount of lump sum distributions in Belgium associated with a reduction of personnel prior to March 31, 2010. This reduction was driven by restructuring activities as more fully discussed in Note 7 – Restructuring Reserves.

Employer Contributions

According to current IRS funding rules, we are required to contribute $37 to our U.S. pension plans, collectively, in 2010. In the three months ended March 31, 2010, we satisfied this requirement via a $50 contribution which included a $13 voluntary contribution. We also expect to be required to fund approximately $12 in pension contributions to our foreign pension plans in 2010, of which, $2 has been contributed in the three months ended March 31, 2010.

12. Debt Obligations

In the first quarter of 2010, we issued $300 of senior unsecured notes, due 2020 (“2020 Notes”) which resulted in net proceeds to us of $292, after deducting underwriting discount and fees. In addition, we extinguished our existing 2014 Term Loan and $350 senior secured asset-based revolving credit facility (“2013 Revolver”), replacing them with a $1,150 senior secured credit facility (“Credit Facility”). The Credit Facility consists of an $850 term loan maturing in 2017 (“2017 Term Loan”) and a $300 revolving credit facility maturing in 2015 (“2015 Revolver”). As a result of the early extinguis hment of our 2014 Term Loan and 2013 Revolver, we incurred an $80 non-cash charge related to the write-off of deferred debt issuance costs on our 2014 Term Loan and 2013 Revolver and a $9 prepayment penalty for the early extinguishment of the 2014 Term Loan. These amounts were recorded in loss on debt extinguishment for the three months ended March 31, 2010.

We had short-term borrowings of $16 at March 31, 2010 and December 31, 2009, comprised of other lines of credit.

Our long-term debt consisted of the following as of March 31, 2010 and December 31, 2009:

- 19 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

	March 31, 2010			December 31, 2009

2017 Term Loan	$	850		$	--
2014 Term Loan		--			876
2017 Notes		400			400
2020 Notes		300			--
Total principal amount		1,550			1,276
Less: Unamortized debt discount		(6	)		--
Less: Current portion of long-term debt		(8	)		(12	)
Total	$	1,536		$	1,264

The weighted average interest rate on our total debt outstanding was 6.1 percent and 7.7 percent at March 31, 2010 and December 31, 2009, respectively. Our weighted average interest rate on short-term debt outstanding was 1.8 percent and 2.1 percent at March 31, 2010 and December 31, 2009, respectively.

The $400 notes due in 2017 (“2017 Notes”) were issued at par bearing interest at 8.75 percent and require semi-annual interest payments. The 2020 Notes were issued at 99.5 percent of par bearing interest at 7.875 percent and require semi-annual interest payments. Our current subsidiaries CPFilms Inc., Flexsys America L.P., Flexsys America Co., Monchem International, Inc., Solutia Business Enterprises Inc., Solutia Inter-America, Inc., Solutia Overseas, Inc., S E Investment LLC and future subsidiaries as defined by the 2017 Notes and 2020 Notes (“The Notes”), subject to certain exceptions are guarantors (“Note Guarantors”) of The Notes as of March 31, 2010. The Notes and the related guarantee s are secured by liens on substantially all of our and the Note Guarantors’ present and future assets.

The 2017 Term loan was issued at 99.5 percent of the principal amount bearing interest at LIBOR plus 3.25 percent with a 1.50 percent LIBOR floor. We are required to pay 1 percent of the principal of the 2017 Term Loan annually via quarterly payments. The 2015 Revolver bears interest at our option, at LIBOR plus 3.50 percent with no LIBOR floor or at the prime rate plus 2.50 percent. LIBOR based interest for the 2017 Term Loan and 2015 Revolver is payable on the last day of each relevant interest period (defined as one, two, three or six months or other periods available to all lenders under each facility) and, in the case of any interest period longer than three months, on each successive date three months after the first day of such int erest period. Prime based interest for the 2015 Revolver is payable quarterly in arrears. CPFilms Inc., Flexsys America L.P., Flexsys America Co., Monchem International, Inc., Solutia Business Enterprises Inc., Solutia Inter-America, Inc., Solutia Overseas, Inc. and future subsidiaries, as defined by the Credit Facility, subject to certain exceptions (the “Credit Facility Guarantors”), are guarantors of our obligations under the Credit Facility. The Credit Facility and the related guarantees are secured by liens on substantially all of our and the Credit Facility Guarantors’ present and future assets.

The Credit Facility and The Notes include a number of customary covenants and events of default, including the maintenance of certain financial covenants that restrict our ability to, among other things, incur additional debt; make certain investments; pay dividends, repurchase stock, sell certain assets or merge with or into other companies; enter into new lines of business; and prepay, redeem or exchange our debt. The Credit Facility also includes the maintenance of the following financial covenants: (i) total leverage ratio and (ii) fixed charge coverage ratio as defined by the Credit Facility. We were in compliance with all applicable covenants as of March 31, 2010.

13. Segment Data

We are a global manufacturer and marketer of a variety of high-performance chemical-based materials, which are used in a broad range of consumer and industrial applications. Our operations are managed and reported in three reportable segments, consisting of Advanced Interlayers (formerly Saflex), Performance Films (formerly CPFilms) and Technical Specialties. The reportable segment name changes in the first quarter of 2010 did not affect the organizational structure, financial results or the composition of the products within each reportable segment.

- 20 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

The Advanced Interlayers reportable segment is a global manufacturer of interlayers for laminated glass. The Performance Films reportable segment is a manufacturer of performance films for after-market applications which add functionality to glass. The Technical Specialties reportable segment is a global manufacturer of specialties such as chemicals for the rubber, solar energy, process manufacturing and aviation industries. The major products by reportable segment are as follows:

Reportable Segment		Products
Advanced Interlayers		· SAFLEX® plastic interlayer · Specialty intermediate Polyvinyl Butyral resin and plasticizer
Performance Films		· LLUMAR®, VISTA®, GILA® and FORMULA ONE PERFORMANCE AUTOMOTIVE FILMS® professional and retail window films · Other enhanced polymer films for industrial customers
Technical Specialties		· CRYSTEX® insoluble sulphur · SANTOFLEX® antidegradants · SANTOCURE® and PERKACIT® primary and ultra accelerators · THERMINOL® heat transfer fluids · SKYDROL® aviation hydraulic fluids · SKYKLEEN® brand of aviation solvents

The performance of our operating segments is evaluated based on segment profit, defined as earnings before interest expense, loss on debt extinguishment, income taxes, depreciation and amortization less net income attributable to noncontrolling interests (“EBITDA”). Segment profit includes selling, general and administrative, research, development and other operating expenses, gains and losses from asset dispositions and restructuring charges, net income attributable to noncontrolling interests and other income and expense items that can be directly attributable to the segment. Certain operations, expenses and other items that are managed outside the reportable segments are reported as Unallocated and Other. Unallocated and Other is comprised of corporate expenses, adjustments to our LIFO valuation reserve, adjustments to our environmental remediation liabilities, equity earnings from affiliates, other income and expense items including currency gains/losses, gains and losses from asset dispositions and restructuring charges that are not directly attributable to the reportable segments in addition to operating segments that do not meet the quantitative threshold for determining reportable segments. There were no inter-segment sales in the periods presented below.

Segment data for the three months ended March 31, 2010 and 2009 are as follows:

	Three Months Ended March 31, 2010					Three Months Ended March 31, 2009
	Net Sales		Profit (Loss)			Net Sales		Profit (Loss)

Reportable Segments:
Advanced Interlayers	$	186	$	48		$	133	$	19
Performance Films		52		9			34		1
Technical Specialties		224		74			167		56
Reportable Segment Totals		462		131			334		76
Unallocated and Other		4		(26	)		5		(25	)
Total		466		105			339		51

Reconciliation to Consolidated Totals:
Depreciation and amortization				(27	)				(25	)
Interest expense				(38	)				(37	)
Loss on debt extinguishment				(89	)				--
Net income attributable to noncontrolling interest				1					--
Consolidated Totals:
Net Sales	$	466				$	339
Loss from Continuing Operations Before Income Taxes			$	(48	)			$	(11	)

- 21 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

14. Earnings (Loss) Per Share

The following table presents the net income (loss) used in the basic and diluted earnings (loss) per share and reconciles weighted-average number of shares used in the basic earnings (loss) per share calculation to the weighted-average number of shares used to compute diluted earnings (loss) per share.

(Shares in millions)	Three Months Ended March 31,
	2010			2009

Consolidated Statement of Operations:
Loss from continuing operations	$	(57	)	$	(4	)
Less: Net Income attributable to noncontrolling interest		1			--
Loss from continuing operations attributable to Solutia		(58	)		(4	)
Loss from discontinued operations, net of tax		--			(155	)
Net Loss attributable to Solutia	$	(58	)	$	(159	)

Weighted-average number of shares outstanding used for basic earnings (loss) per share		118.5			93.3
Non-vested restricted shares(a)		--			--
Stock options		--			--
Warrants		--			--
Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings (loss) per share		118.5			93.3

(a)	1.5 million and 0.1 million shares of non-vested restricted stock for the three months ended March 31, 2010 and 2009, respectively, would have been considered dilutive for purposes of the earnings per share calculation in the event that operations resulted in income.

During the three months ended March 31, 2010 and 2009, the following shares were not included in the computation of earnings (loss) per share since the result would have been anti-dilutive.

	Three Months Ended March 31,
(Shares in millions)	2010	2009
Non-vested restricted shares	0.3	0.8
Stock options	1.9	2.7
Warrants	4.5	4.5

15. Subsequent Events

On April 21, 2010, at our annual meeting of stockholders, our stockholders approved amendments to our 2007 Management Long-Term Incentive Plan (the “Restated Plan”). The amendments, among other things, increase the number of shares reserved for issuance under the Restated Plan by 3,640,000 shares, to a total amount of 10,840,000 shares. Subsequent to stockholder approval, on April 21, 2010, the Executive Compensation and Development Committee of the Board of Directors (“ECDC”) approved the following grants to eligible employees under the Restated Plan (i) options to purchase 970,827 shares of common stock, which vest ratably over a four year period based upon completion of a service condition; and (ii) 302,261 shares of time vested restricted stock awards and stock units that vest in full upon the completion of a four year service condition. Furthermore, the ECDC granted additional shares of performance stock awards and stock units (“Performance Shares”) which vest based upon the attainment of certain performance measures over a period measured from January 1, 2010 through December 31, 2012. Performance Shares targeted at 302,320 would fully vest on April 21, 2013 upon the achievement of 100 percent of performance goals. However, actual vesting of the Performance Shares could range from zero to 175 percent of the targeted number of shares depending upon actual performance. At this time, we cannot make an estimate of the financial impact o f these grants to be recognized over the vesting period.

On April 22, 2010, we announced the planned exit of our Primary Accelerators business and to cease manufacturing of these products at our facility in Antwerp, Belgium in the second half of 2010. The decision to exit this business is due to the existence of an over-supplied market with limited opportunity for increased demand, which prevents us from obtaining a sustainable competitive advantage. In connection with this closure, we expect to incur pre-tax charges ranging from $43 to $52, predominantly over the next two years.

- 22 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

16. Condensed Consolidating Financial Statements

In accordance with SEC regulation S-X Rule 3-10 “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered,” we are providing condensed consolidating financial statements as The Notes are fully and unconditionally guaranteed on a joint and several basis.

The following consolidating financial statements present, in separate columns, financial information for: Solutia on a parent only basis carrying its investment in subsidiaries under the equity method; Note Guarantors on a combined basis (“Guarantors”), carrying investments in subsidiaries which do not guarantee the debt (the “Non-Guarantors”) under the equity method; Non-Guarantors on a combined basis; eliminating entries; and consolidated totals as of March 31, 2010 and December 31, 2009 and for the three months ended March 31, 2010 and 2009. The eliminating entries 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.

Condensed Consolidating Statement of Operations

Three Months Ended March 31, 2010

	Parent-Only Solutia			Guarantors		Non- Guarantors			Eliminations			Consolidated Solutia

Net Sales	$	112		$	101	$	424		$	(171	)	$	466
Cost of goods sold		95			68		333			(176	)		320
Gross Profit		17			33		91			5			146

Selling, general, and administrative expenses		28			14		24			--			66
Research, development and other operating expenses, net		2			1		1			--			4

Operating Income (Loss)		(13	)		18		66			5			76

Equity earnings from affiliates		70			39		--			(109	)		--
Interest expense		(38	)		--		(34	)		34			(38	)
Other income, net		11			13		21			(42	)		3
Loss on debt extinguishment		( 88	)		--		(1	)		--			(89	)

Income (Loss) from Continuing Operations Before Income Tax Expense		(58	)		70		52			(112	)		(48	)
Income tax expense		--			--		11			(2	)		9
Income (Loss) from Continuing Operations		(58	)		70		41			(110	)		(57	)
Loss from discontinued operations, net of tax		--			--		--			--			--
Net Income (Loss)		(58	)		70		41			(110	)		(57	)
Net Income attributable to noncontrolling interest		--			--		1			--			1
Net Income (Loss) attributable to Solutia	$	(58	)	$	70	$	40		$	(110	)	$	(58	)

- 23 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Operations

Three Months Ended March 31, 2009

	Parent-Only Solutia			Guarantors			Non- Guarantors			Eliminations			Consolidated Solutia

Net Sales	$	82		$	77		$	293		$	(113	)	$	339
Cost of goods sold		71			50			249			(112	)		258
Gross Profit		11			27			44			(1	)		81

Selling, general, and administrative expenses		16			11			23			--			50
Research, development and other operating expenses, net		2			1			1			--			4

Operating Income (Loss)		(7	)		15			20			(1	)		27

Equity earnings (loss) from affiliates		29			(3	)		--			(26	)		--
Interest expense		(36	)		--			(42	)		41			(37	)
Other income, net		8			16			15			(40	)		(1	)

Income (Loss) from Continuing Operations Before Income Tax Benefit		(6	)		28			(7	)		(26	)		(11	)
Income tax benefit		--			--			(7	)		--			(7	)
Income (Loss) from Continuing Operations		(6	)		28			--			(26	)		(4	)
Loss from discontinued operations, net of tax		(153	)		--			(2	)		--			(155	)
Net Income (Loss)		(159	)		28			(2	)		(26	)		(159	)
Net Income attributable to noncontrolling interest		--			--			--			--			--
Net Income (Loss) attributable to Solutia	$	(159	)	$	28		$	(2	)	$	(26	)	$	(159	)

- 24 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Balance Sheet

March 31, 2010

	Parent-Only Solutia			Guarantors		Non- Guarantors		Eliminations			Consolidated Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	248		$	1	$	209	$	--		$	458
Trade receivables, net		35			55		193		--			283
Intercompany receivables		158			369		322		(849	)		--
Miscellaneous receivables		11			2		62		--			75
Inventories		73			45		187		(34	)		271
Prepaid expenses and other assets		3			3		8		7			21
Assets of discontinued operations		10			--		--		--			10
Total Current Assets		538			475		981		(876	)		1,118

Net Property, Plant and Equipment		178			141		564		--			883
Investments in Affiliates		2,103			475		92		(2,670	)		--
Goodwill		150			191		170		--			511
Identified Intangible Assets, net		193			318		272		--			783
Intercompany Advances		178			518		1,064		(1,760	)		--
Other Assets		53			4		34		--			91
Total Assets	$	3,393		$	2,122	$	3,177	$	(5,306	)	$	3,386

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	45		$	21	$	101	$	--		$	167
Intercompany payables		577			--		272		(849	)		--
Accrued liabilities		104			13		105		(1	)		221
Short-term debt, including current portion of long-term debt		8			--		16		--			24
Intercompany short-term debt		--			--		548		(548	)		--
Liabilities of discontinued operations		46			--		--		--			46
Total Current Liabilities		780			34		1,042		(1,398	)		458

Long-Term Debt		1,536			--		--		--			1,536
Intercompany Long-Term Debt		10			23		1,179		(1,212	)		--
Postretirement Liabilities		252			3		98		--			353
Environmental Remediation Liabilities		237			2		16		--			255
Deferred Tax Liabilities		21			10		138		--			169
Other Liabilities		52			6		44		--			102

Shareholders’ Equity:
Common stock		1			--		--		--			1
Additional contributed capital		1,616			2,044		652		(2,696	)		1,616
Treasury stock		(3	)		--		--		--			(3	)
Accumulated other comprehensive loss		(270	)		--		--		--			(270	)
Accumulated deficit		(839	)		--		--		--			(839	)
Total Shareholders’ Equity attributable to Solutia		505			2,044		652		(2,696	)		505
Equity attributable to noncontrolling interest		--			--		8		--			8
Total Shareholders’ Equity		505			2,044		660		(2,696	)		513
Total Liabilities and Shareholders’ Equity	$	3,393		$	2,122	$	3,177	$	(5,306	)	$	3,386

- 25 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Balance Sheet

December 31, 2009

	Parent-Only Solutia			Guarantors		Non- Guarantors		Eliminations			Consolidated Solutia
ASSETS
Current Assets:
Cash and cash equivalents	$	104		$	1	$	138	$	--		$	243
Trade receivables, net		27			44		197		--			268
Intercompany receivables		188			357		326		(871	)		--
Miscellaneous receivables		7			2		73		--			82
Inventories		65			39		184		(31	)		257
Prepaid expenses and other current assets		24			1		7		5			37
Assets of discontinued operations		10			--		--		--			10
Total Current Assets		425			444		925		(897	)		897

Net Property, Plant and Equipment		182			142		595		--			919
Investments in Affiliates		2,064			421		52		(2,537	)		--
Goodwill		150			191		170		--			511
Identified Intangible Assets, net		194			320		289		--			803
Intercompany Advances		153			552		1,259		(1,964	)		--
Other Assets		92			4		40		--			136
Total Assets	$	3,260		$	2,074	$	3,330	$	(5,398	)	$	3,266

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	48		$	13	$	108	$	--		$	169
Intercompany payables		578			18		275		(871	)		--
Accrued liabilities		85			9		121		(9	)		206
Short-term debt, including current portion of long-term debt		12			--		16		--			28
Intercompany short-term debt		--			--		778		(778	)		--
Liabilities of discontinued operations		50			--		--		--			50
Total Current Liabilities		773			40		1,298		(1,658	)		453

Long-Term Debt		1,264			--		--		--			1,264
Intercompany Long-Term Debt		19			23		1,144		(1,186	)		--
Postretirement Liabilities		304			3		104		--			411
Environmental Remediation Liabilities		242			1		17		--			260
Deferred Tax Liabilities		20			10		149		--			179
Other Liabilities		45			7		47		--			99

Shareholders’ Equity:
Common stock		1			--		--		--			1
Additional contributed capital		1,612			1,990		564		(2,554	)		1,612
Treasury stock		(2	)		--		--		--			(2	)
Accumulated other comprehensive loss		(237	)		--		--		--			(237	)
Accumulated deficit		(781	)		--		--		--			(781	)
Total Shareholders’ Equity attributable to Solutia		593			1,990		564		(2,554	)		593
Equity attributable to noncontrolling interest		--			--		7		--			7
Total Shareholders’ Equity		593			1,990		571		(2,554	)		600
Total Liabilities and Shareholders’ Equity	$	3,260		$	2,074	$	3,330	$	(5,398	)	$	3,266

- 26 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

Three Months ended March 31, 2010

	Parent-Only Solutia			Guarantors			Non- Guarantors			Eliminations		Consolidated Solutia

Cash Provided by (Used in) Operations	$	(72	)	$	30		$	38		$	--	$	(4	)

INVESTING ACTIVITIES:
Property, plant and equipment purchases		(2	)		(1	)		(2	)		--		(5	)
Acquisition and investment payments		--			(1	)		--			--		(1	)
Cash Used in Investing Activities		(2	)		(2	)		(2	)		--		(6	)

FINANCING ACTIVITIES:
Proceeds from long-term debt obligations		1,144			--			--			--		1,144
Payments of long-term debt obligations		(876	)		--			--			--		(876	)
Debt issuance costs		(25	)		--			--			--		(25	)
Purchase of treasury shares		(1	)		--			--			--		(1	)
Other, net		(9	)		--			--			--		(9	)
Changes in investments and advances from (to) affiliates		(15	)		(28	)		43			--		--
Cash Provided by (Used in) Financing Activities		218			(28	)		43			--		233

Effect of Exchange Rate Changes on Cash		--			--			(8	)		--		(8	)

Increase in Cash and Cash Equivalents		144			--			71			--		215

CASH AND CASH EQUIVALENTS:
Beginning of year		104			1			138			--		243
End of year	$	248		$	1		$	209		$	--	$	458

- 27 -

SOLUTIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in millions, except per share amounts or otherwise noted)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

Three Months Ended March 31, 2009

	Parent-Only Solutia			Guarantors			Non- Guarantors			Eliminations		Consolidated Solutia

Cash Provided by (Used in) Operations	$	(20	)	$	40		$	50		$	--	$	70

INVESTING ACTIVITIES:
Property, plant and equipment purchases		(10	)		(1	)		(9	)		--		(20	)
Acquisition and investment payments		--			(1	)		--			--		(1	)
Investment proceeds and property disposals		--			--			1			--		1
Cash Used in Investing Activities		(10	)		(2	)		(8	)		--		(20	)

FINANCING ACTIVITIES:
Net change in lines of credit		(2	)		--			4			--		2
Net change in long-term revolving credit facilities		(78	)		--			35			--		(43	)
Payment of long-term debt obligations		(3	)		--			--			--		(3	)
Purchase of treasury shares		(1	)		--			--			--		(1	)
Other, net		--			--			(2	)		--		(2	)
Changes in investments and advances from (to) affiliates		123			(39	)		(84	)		--		--
Cash Provided by (Used in) Financing Activities		39			(39	)		(47	)		--		(47	)

Increase (Decrease) in Cash and Cash Equivalents		9			(1	)		(5	)		--		3

CASH AND CASH EQUIVALENTS:
Beginning of period		--			1			31			--		32
End of period	$	9		$	--		$	26		$	--	$	35

- 28 -

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include all statements regarding expected future financial position, results of operations, profitability, cash flows and liquidity. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, our ability to comply with the terms of our financing agreements, our ability to reduce our overall leveraged position, general economic, business and market conditions; customer acceptance of new products; raw material and energy costs or shortages; limited access to capital resources; currency and interest rate fluctua tions; increased competitive and/or customer pressure; gain or loss of significant customers; compression of credit terms with suppliers; exposure to product liability and other litigation; changes in cost of environmental remediation obligations and other environmental liabilities; changes in accounting principles generally accepted in the U.S. (“U.S. GAAP”); ability to implement cost reduction initiatives in a timely manner; geopolitical instability; and changes in pension and other postretirement assumptions.

Overview

We are a leading global manufacturer and marketer of high-performance chemical-based materials that are used across automotive, construction, industrial and consumer applications. We report our operations in three segments: Advanced Interlayers (formerly Saflex), Performance Films (formerly CPFilms) and Technical Specialties. The reportable segment name changes in the first quarter of 2010 did not affect the organizational structure, financial results or the composition of the products within each reportable segment. Through our Advanced Interlayers segment, we produce Polyvinyl Butyral (“PVB”) sheet used in the manufacture of laminated glass for automotive, architectural and solar applications in addition to the manufacture of specialized technical films for use in a wide variety of industrial applications. Our Performance Films segment manufactures, markets and distributes custom-coated window films for aftermarket automotive and architectural applications. Technical Specialties is our specialty chemicals segment, which includes the manufacture and sale of chemicals for the rubber, solar energy, process manufacturing and aviation industries. The major products by reportable segment are as follows:

Reportable Segment		Products
Advanced Interlayers		· SAFLEX® plastic interlayer · Specialty intermediate Polyvinyl Butyral resin and plasticizer
Performance Films		· LLUMAR®, VISTA®, GILA® and FORMULA ONE PERFORMANCE AUTOMOTIVE FILMS® professional and retail window films · Other enhanced polymer films for industrial customers
Technical Specialties		· CRYSTEX® insoluble sulphur · SANTOFLEX® antidegradants · SANTOCURE® and PERKACIT® primary and ultra accelerators · THERMINOL® heat transfer fluids · SKYDROL® aviation hydraulic fluids · SKYKLEEN® brand of aviation solvents

See Note 13 to the accompanying consolidated financial statements for further information regarding our reportable segments.

Significant 2010 Events

On February 28, 2010 we entered into a definitive agreement to purchase Etimex Solar GmbH (“Etimex Solar”), a leading supplier of ethylene vinyl acetate (“EVA”) encapsulants to the photovoltaic market, for €240 million or $324 million if a March 31, 2010 conversion rate of 1.35 were utilized, subject to a working capital adjustment. Acquisition of Etimex Solar complements our existing PVB encapsulant product capabilities resulting in the world’s only single source for solar encapsulant solutions. Integration of Etimex Solar into our Advanced Interlayer segment’s existing processing expertise, global commercial capabi lities, and technology resources is expected to enable rapid expansion in the photovoltaic market. The purchase of Etimex Solar is expected to close during the second quarter 2010, contingent upon customary closing conditions, including receipt of governmental approvals.

- 29 -

On March 9, 2010 we completed the sale of $300 million of senior unsecured notes, due 2020 (“2020 Notes”) at a price of 99.5 percent of the aggregate principal amount bearing interest at 7.875 percent per annum.

On March 17, 2010 we successfully closed a new $1,150 million senior secured credit facility (“Credit Facility”), consisting of an $850 million term loan maturing in 2017 (“2017 Term Loan”) and a $300 million revolving credit facility maturing in 2015 (“2015 Revolver”). The 2017 Term Loan was issued at 99.5 percent of the principal amount. The 2015 Revolver will replace our existing asset backed revolver (“2013 Revolver”). Completion of this refinancing significantly extends the debt maturities of the term loan and the revolver, increases our operational an d strategic flexibility, and significantly lowers our interest costs.

Proceeds from the various debt discussed above were used to repay our then existing $876 million term loan (“2014 Term Loan”). The remaining funds will be used to partially fund the acquisition of Etimex Solar and for general corporate purposes.

Also in the first quarter 2010, we received favorable rulings involving competitor challenges to the validity of patents covering our proprietary PPD2 technology utilized in the manufacture of products sold under the SANTOFLEXÒ antidegradants brand name. Specifically, in March, the Korean Supreme Court dismissed the appeal of a lower court decision which found key claims of our Korean patent to be valid, defeating attempts by a Chinese competitor to invalidate those claims. This decision follows similar rulings in January by the Beijing No. 1 Intermediate People' s Court in China and the Federal Patent Court in Germany, dismissing attempts by the same competitor to invalidate our PPD patents in those countries. Also in March, the European Patent Office rejected an attempt by another competitor to invalidate our PPD patent in the European Union.

On April 22, 2010, we announced the planned exit of our Primary Accelerators business and to cease manufacturing of these products at our facility in Antwerp, Belgium in the second half of 2010. Our decision to exit this business is consistent with our strategy of focusing on businesses that are leaders in their respective markets with sustainable competitive advantage. This step further refines our product portfolio to remain the global leader in the manufacture and supply of high-quality rubber chemicals that have a competitive advantage in the market.

Summary Results of Operations: In the first quarter 2010, we reported sales of $466 million, a 37 percent increase as compared to $339 million reported in the first quarter 2009. The increase was driven by higher sales volumes and favorable currency exchange rate fluctuations, partially offset by lower selling prices. Our first quarter 2010 gross profit of $146 million, an 80 percent increase versus the same period in 2009, was driven by higher net sales, as described above, lower raw material and energy costs and lower restructuring charges partially offset by higher incentive costs. Our gross profit margin increased significantly to 31.3 percent in the first quarter of 2010 as compared to 23.9 percent for the same period in 2009 due to the higher sales volumes, partially offset by higher variable costs, on an effectively unchanged fixed manufacturing cost base. Selling, general and administrative expenses were $66 million in the first quarter 2010 as compared to $50 million in the same period in 2009. This increase is predominantly due to the higher incentive expenses along with the recognition of acquisition costs related to our purchase of Etimex Solar, partially offset by lower restructuring charges. As a percentage of sales, selling, general and administrative expenses were effectively unchanged at 15 percent.

Cash used in operations in the first quarter 2010 was $4 million as compared to cash provided of $70 million in the same period in 2009. The decrease is primarily attributable to a $50 million pension contribution and higher working capital requirements, partially offset by lower losses. Working capital requirements were higher in the first quarter 2010 as compared to the same period in 2009 on significantly higher sales along with the expectation of continued improvement in the macroeconomic environment thro ughout 2010. Conversely, the first quarter 2009 working capital requirements reflected the sharp decline in demand across the global construction, automotive and industrial markets experienced throughout the global economy along with an uncertainty on the timing of a recovery. Further, cash provided by operations in the first quarter 2009 includes $40 million in cash provided by discontinued operations which is predominantly attributable to the monetization of working capital balances of our Integrated Nylon business in preparation of this asset group’s sale.

Outlook

In the first quarter 2010, we experienced a continued improvement in sales volumes as compared to the fourth quarter 2009 across almost all our product offerings. We expect volumes to continue to grow in the second and third quarters in comparison to first quarter results. We expect a volume downturn in the fourth quarter due to the seasonality of our businesses. Coupled with this volume assumption, we are premising prices generally consistent with the levels experienced in the first quarter 2010.

We expect to close the previously announced Etimex Solar transaction during the second quarter, which will benefit our overall revenue growth rate in comparison to the prior year. With respect to our planned exit of our Primary Accelerators business, upon cessation of manufacturing these products, currently expected in the second half of 2010, we will retrospectively report the results of this business as discontinued operations. In aggregating these premises, our expectation for 2010 is an increase in net sales in the range of 10 percent – 15 percent versus 2009.

- 30 -

With respect to profitability, the adherence to cost reduction and cost avoidance programs positively impacted operating margins in the first quarter 2010, despite the return of costs associated with certain employee incentive plans, which were suspended in 2009. We expect this net benefit to continue throughout 2010, which will most significantly be realized via contribution margin as sales volumes escalate. Offsetting these benefits will be the costs associated with higher raw material costs for certain of our product lines, as we are premising increased raw material costs through the remainder of 2010 as o verall economic conditions improve. Although we expect to recover these raw material increases from our customers over time, pricing on many of our Advanced Interlayers customer contracts are negotiated on an annual basis. Overall, therefore, we expect operating margins from continuing operations for the remainder of 2010 to remain consistent or modestly lower as compared to the results delivered in the first quarter but, on a full year basis, modestly higher than 2009.

Our incremental earnings premised in 2010 versus 2009 will generate additional operating cash, which will be offset by higher spending for new product and growth related capital spending, higher tax payments due to the enhanced earnings profile, higher environmental remediation outflows due to the exhaustion of a restricted fund dedicated for this purpose, which will be partially offset by lower interest payments resulting from our successful term loan refinancing. In 2010, we are currently anticipating generating cash from operations less capital spending in the range of $150 million – $175 million from continuing operations.

Critical Accounting Policies and Estimates

There were no changes in the three months ended March 31, 2010 with respect to our critical accounting policies, as presented in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2009 Form 10-K filed on February 17, 2010.

Results of Operations—First Quarter 2010 Compared with First Quarter 2009

Consolidated Results

(dollars in millions)	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009			Increase (Decrease)			% Increase (Decrease)

Net Sales	$	466		$	339		$	127			37	%

Operating Income:
Reportable Segment Profit	$	131		$	76		$	55			72	%
Unallocated and Other		(26	)		(25	)		(1	)		(4	)%
Less: Depreciation and Amortization		(27	)		(25	)
Less: Other (Income) Loss and Net Income attributable to Noncontrolling interest included in Segment Profit and Unallocated and Other		(2	)		1

Operating Income	$	76		$	27		$	49			181	%
Net Gains (Charges) included in Operating Income	$	(11	)	$	1

The increase in net sales as compared to the first quarter 2009 resulted from increased sales volumes of $136 million or 40 percent and the effect of favorable exchange rate fluctuations of $8 million or 2 percent, partially offset by lower selling prices of $17 million or 5 percent. Higher sales volumes were realized by all of our reporting segments due to the strengthening demand across the global construction, automotive and industrial sectors led predominately by the Europe and Asia Pacific regions. The favorable currency impact was driven most notably by the increased strength of the Euro versus the U.S. dollar, in comparison to the same period in 2009, due to our strong market positions in Europe by the Advanced Interlayers an d Technical Specialties reporting segments. Lower selling prices were experienced predominately in the Advanced Interlayers and Technical Specialties reporting segments due to increased pricing pressure as a result of a lower demand profile from the economic slowdown.

The increase in operating income as compared to the first quarter 2009 resulted from higher net sales, as described above, and decreased raw material and energy costs of $13 million, predominately in our Technical Specialties reporting segment, partially offset by the return of certain employee incentives suspended during 2009 and increased charges as further described below in the Summary of Events Affecting Comparability section.

- 31 -

Advanced Interlayers

(dollars in millions)	Three Months Ended March 31, 2010		Three Months Ended March 31, 2009			Increase (Decrease)		% Increase (Decrease)

Net Sales	$	186	$	133		$	53		40	%

Segment Profit	$	48	$	19		$	29		153	%
Net Charges included in Segment Profit	$	--	$	(5	)

The increase in net sales in the first quarter 2010 was a result of higher sales volumes of $52 million or 39 percent and favorable currency exchange rate fluctuations of $5 million or 4 percent, partially offset by lower average selling prices of $4 million or 3 percent. Higher sales volumes were due to the strengthening demand primarily in the global automotive market led predominately by the Europe and Asia Pacific regions. The favorable currency impact was driven most notably by the increased strength of the Euro versus the U.S. dollar, in comparison to the same period in 2009, due to our strong market positions in Europe. The decrease in selling prices is in response to increased pricing pressure in the automotive and residential construction sectors resulting from low industry utilization.

The increase in segment profit in the first quarter 2010 resulted from higher net sales, as described above, on an effectively unchanged fixed manufacturing base and lower charges as compared to the same period in 2009 described in detail in the Summary of Events Affecting Comparability section, partially offset by the higher incentive expense.

Performance Films

(dollars in millions)	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009			Increase (Decrease)		% Increase (Decrease)

Net Sales	$	52		$	34		$	18		53	%

Segment Profit	$	9		$	1		$	8	N.M.
Charges included in Segment Profit	$	(1	)	$	(1	)

The increase in net sales as compared to the first quarter 2009 resulted primarily from higher sales volumes of $18 million or 53 percent. The increase in sales volumes were experienced across all global markets due to improved demand in the global automotive, residential housing, and commercial construction sectors, led predominately by the U.S. and Asia Pacific regions.

The increase in segment results in comparison to the first quarter 2009 resulted primarily from increased net sales, as described above, on an effectively unchanged fixed manufacturing cost base, partially offset by higher incentive expense.

Technical Specialties

(dollars in millions)	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009		Increase (Decrease)		% Increase (Decrease)

Net Sales	$	224		$	167	$	57		34	%

Segment Profit	$	74		$	56	$	18		32	%
Net Gains (Charges) included in Segment Profit	$	(5	)	$	10

The increase in net sales as compared to the first quarter 2009 resulted from higher sales volumes of $67 million or 40 percent and favorable currency exchange rate fluctuations of $3 million or 2 percent, partially offset by lower average selling prices of $13 million or 8 percent. The higher sales volumes were experienced by all products within Technical Specialties due to strengthening demand in the global automotive and industrial markets led predominately by the Europe and Asia Pacific regions. The favorable exchange rate fluctuations occurred primarily as a result of the strengthening Euro in relation to the U.S. dollar in comparison to the first quarter 2009. Lower average selling prices were experienced primarily within our SANTOCURE® primary accelerators and other rubber chemical products due to higher market capacities.

- 32 -

The increase in segment profit in comparison to the first quarter 2009 resulted primarily from higher net sales, as discussed above, improved utilization, and lower raw material and utility prices, partially offset by higher charges as compared to the same period in 2009 described in the Summary of Events Affecting Comparability section and higher incentive expense.

Unallocated and Other

(dollars in millions)	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009			Increase (Decrease)			% Increase (Decrease)

Components of Unallocated and Other
Other Operations Segment Profit (Loss)	$	1		$	(4	)
Corporate Expenses		(15	)		(13	)
Share-Based Compensation Expense		(4	)		(5	)
Other Unallocated Expense, net		(8	)		(3	)
Unallocated and Other results	$	(26	)	$	(25	)	$	(1	)		(4	)%
Net Charges included in Unallocated and Other	$	(5	)	$	(3	)

Unallocated and Other results decreased as compared to the first quarter 2009 due to higher net charges, increased environmental charges, a charge related to the release of our LIFO reserve and the return of certain employee incentives temporarily suspended during 2009, partially offset by higher gains on foreign currency and higher segment profit from other operations. Included in the results of Unallocated and Other in the first quarter 2010 are (i) $1 million of pension settlement charges and (ii) $4 million of charges related to the Etimex Solar acquisition, both of which are recorded in other unallocated expense, ne t. Included in the results of Unallocated and Other in the first quarter 2009 are (i) a charge of $7 million related to the general corporate restructuring with $5 million recorded in corporate expenses and $2 million recorded in other operations segment loss and (ii) a $4 million gain related to the reduction in the 2008 annual incentive plan recorded in corporate expenses.

After consideration of the aforementioned items in 2010 and 2009, other unallocated expense, net and corporate expenses remained comparable to the first quarter 2009 while other operations segment profit (loss) increased $3 million due to improved demand.

Interest Expense

(dollars in millions)	Three Months Ended March 31, 2010		Three Months Ended March 31, 2009		Increase (Decrease)		% Increase (Decrease)

Interest Expense	$	38	$	37	$	1	3	%

The increase in interest expense as compared to the first quarter 2009 resulted principally from a higher average balance outstanding and higher mark-to-market losses on our interest rate swap agreements offset largely by lower average interest rates. The higher outstanding balance was driven predominately by the issuance in the fourth quarter 2009 of $400 million of senior unsecured notes, due 2017 (“2017 Notes”) and the issuance in the first quarter 2010 of the 2020 Notes as partially offset by lower borrowings on our term loan and revolver. Our lower average interest rate in the first quarter 2010 was a result of the extinguishment of the 2014 Term Loan and replaced by the 2017 Term Loan, the 2017 Notes and the 2020 Notes, which collectively bear a lower effective interest rate. In February 2009, we discontinued hedge accounting on our interest rate swap agreements resulting in mark-to-market gains or losses on these agreements recognized as interest expense when interest rates fluctuate. In the first quarter 2010, we recognized $6 million of losses on these agreements as compared to $5 million of losses for the same period in 2009.

Loss on Debt Extinguishment

(dollars in millions)	Three Months Ended March 31, 2010		Three Months Ended March 31, 2009		Increase (Decrease)		% Increase (Decrease)

Loss on Debt Extinguishment	$	89	$	--	$	89	N.M.

The increase in the loss on debt extinguishment in first quarter 2010 is the result of the early extinguishment of our 2014 Term Loan and 2013 Revolver. As a result of the early retirement of these facilities, we incurred a $9 million prepayment penalty and an $80 million non-cash charge related to the write-off of deferred debt issuance costs related to the facilities.

Income Tax Expense

(dollars in millions)	Three Months Ended March 31, 2010		Three Months Ended March 31, 2009			Increase (Decrease)		% Increase (Decrease)

Income Tax Expense (Benefit)	$	9	$	(7	)	$	16	N.M.

Our income tax expense increase in the first quarter 2010 as compared to the same period in 2009 resulted from higher income in ex-U.S. operations combined with lower previously unrecognized tax benefits. Our U.S. operations experienced pre-tax losses in both the first quarters 2010 and 2009 but no income tax benefit was recognized as a full valuation allowance has been provided against the U.S. deferred tax assets. In the first quarter 2009, we recognized a previously unrecognized tax benefit of $10 million due to developments in case law changing the technical merits of a tax position.

- 33 -

Discontinued Operations

(dollars in millions)	Three Months Ended March 31, 2010		Three Months Ended March 31, 2009			Increase (Decrease)		% Increase (Decrease)

Integrated Nylon business	$	--	$	(157	)
Other		--		2
Loss from Discontinued Operations, net of tax	$	--	$	(155	)	$	155		100	%

Income from discontinued operations consisted of the results of our Integrated Nylon and other previously divested businesses. The decrease is a result of the sale of our Integrated Nylon business in the second quarter of 2009.

Summary of Events Affecting Comparability

Charges and gains recorded in the three months ended March 31, 2010 and 2009 and other events affecting comparability have been summarized and described in the table and accompanying footnotes below (dollars in millions):

2010 Events

Increase/(Decrease)	Advanced Interlayers		Performance Films			Technical Specialties			Unallocated /Other			Consolidated

Impact on:
Cost of goods sold	$	--	$	1		$	--		$	--		$	1		(a)
		--		--			1			--			1		(b)
		--		--			2			--			2		(c)
Selling, general and administrative expenses		--		--			1			1			2		(a)
		--		--			1			--			1		(c)
		--		--			--			4			4		(d)
Operating Income Impact		--		(1	)		(5	)		(5	)		(11	)
Loss on debt extinguishment		--		--			--			(89	)		(89	)	(e)
Pre-tax Income Statement Impact	$	--	$	(1	)	$	(5	)	$	(94	)		(100	)
Income tax impact													2		(f)
After-tax Income Statement Impact												$	(98	)

(a)	Severance, pension settlement and retraining costs related to the general corporate restructuring ($3 million pre-tax and after-tax).
(b)	Restructuring costs related to the closure of our Ruabon facility ($1 million pre-tax and after-tax).
(c)	Restructuring costs related to the closure of our Cologne facility ($3 million pre-tax and $2 million after-tax).
(d)	Acquisition costs related to our agreement to purchase Etimex Solar ($4 million pre-tax and after-tax).
(e)	Charges related to the early extinguishment of our 2014 Term Loan and 2013 Revolver ($89 million pre-tax and $88 million after-tax).
(f)	Income tax expense has been provided on gains and charges at the tax rate in the jurisdiction in which they have been or will be realized.

- 34 -

2009 Events

Increase/(Decrease)	Advanced Interlayers			Performance Films			Technical Specialties			Unallocated /Other			Consolidated

Impact on:
Cost of goods sold	$	(2	)	$	--		$	(3	)	$	(1	)	$	(6	)	(a)
		1			1			--			1			3		(b)
		4			--			--			--			4		(c)
		--			--			1			--			1		(d)
Selling, general and administrative expenses		(4	)		--			(9	)		(3	)		(16	)	(a)
		6			--			1			6			13		(b)
Research, development and other operating expenses, net		(1	)		--			--			--			(1	)	(a)
		1			--			--			--			1		(b)
Operating Income Impact		(5	)		(1	)		10			(3	)		1

Pre-tax Income Statement Impact	$	(5	)	$	(1	)	$	10		$	(3	)		1
Income tax impact														--		(e)
After-tax Income Statement Impact													$	1

(a)	Gain related to the reduction in the 2008 annual incentive plan ($23 million pre-tax and $20 million after-tax).
(b)	Severance and retraining costs related to the general corporate restructuring ($17 million pre-tax and $14 million after-tax).
(c)	Charges related to the announced closure of the SAFLEX® plastic interlayer production line at our Trenton facility ($4 million pre-tax and after-tax).
(d)	Charges related to the announced closure of our Ruabon facility ($1 million pre-tax and after-tax).
(e)	Income tax expense has been provided on gains and charges at the tax rate in the jurisdiction in which they have been or will be realized.

Financial Condition and Liquidity

As of March 31, 2010, our total liquidity was $719 million which was comprised of $261 million in availability under our 2015 Revolver and $458 million in cash.

In the first quarter 2010, we refinanced our 2013 revolver, which previously was limited to the amount of the borrowing base, which was calculated as a percentage of allowable inventory and trade receivables, with a new $300 million revolving credit facility that does not depend upon our borrowing base. The impact of this refinancing was an increase in revolver availability of approximately $130 million. As of March 31, 2010, we had no draws against our 2015 Revolver but availability was reduced by letters of credit of $39 million. Also in the first quarter 2010, we completed the sale of the 2020 Notes, resulting in an increase to liquidity of $292 million. In the second quarter 2010, we expect to complete the acquisition of Etimex Solar at the agreed upon price of €240 million wh ich will be funded, in part, from the proceeds of the offering and the remainder from cash on hand.

For the remainder of 2010, our anticipated use of cash includes fulfillment of our interest, foreign pension, environmental, restructuring and tax obligations, in addition to certain capital expenditures for new products, expansion and productivity projects and for maintenance and safety requirements. To the extent required to fund certain seasonal demands of our operations, an additional use of cash may be needed to fund working capital although management has instituted significant monitoring procedures and, as a result, expects this use of cash to be closely managed. New sources of liquidity may include additional lines of credit, financing other assets, customer receivables and/or asset sales, all of which are allowable, with certain limitations, under our existing credit agreements.

In summary, we expect that our cash on hand, coupled with future cash flows from operations and other sources of liquidity, including our 2015 Revolver, will provide sufficient liquidity to allow us to meet our projected cash requirements.

Debt Covenants

Our Credit Facility includes a number of customary covenants and events of default, including the maintenance of certain financial covenants that restrict our ability to, among other things, incur additional debt; make certain investments; pay dividends, repurchase stock, sell certain assets or merge with or into other companies; and enter into new lines of business. The financial covenants for all measurement periods for the year ended December 31, 2010 are a Leverage Ratio and a Fixed Charge Ratio. Below is a summary of our actual performance under these financial covenants as of March 31, 2010 along with a summary of the contractually agreed to financial covenants for each of the three remaining me asurement periods in 2010.

- 35 -

	March 31, 2010		June 30, 2010	September 30, 2010	December 31, 2010
	Actual	Covenant	Covenant	Covenant	Covenant

Max Leverage Ratio	3.49	4.50	4.50	4.50	4.50
Min Fixed Charge Ratio	2.94	1.35	1.35	1.35	1.35

Cash Flows - Continuing Operations

Our cash flows from continuing operations attributable to operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized in the following table:

Cash Flow Summary – Continuing Operations (dollars in millions)	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009			Increase (Decrease)

Cash provided by operating activities	$	-		$	30		$	(30	)
Cash used in investing activities		(6	)		(15	)		9
Cash provided by (used in) financing activities		233			(47	)		280
Effect of exchange rate changes on cash		(8	)		--			(8	)
Net change in cash for period attributable to continuing operations	$	219		$	(32	)	$	251

Operating activities: Cash provided by operating activities was zero for the first three months of 2010, a $30 million decrease as compared to the same period in 2009. The decrease is primarily attr ibutable to higher payments on our postretirement obligations, higher working capital requirements, and the absence of reimbursements to us for environmental remediation payments as partially offset by reduced losses. In the first quarter 2010, we contributed $50 million to our U.S. pension plans, which satisfies our minimum funding requirement for 2010 and a portion of the 2011 minimum funding requirements, as compared to a contribution of $4 million in the first quarter 2009. Working capital requirements were higher in the first quarter 2010 as compared to the same period in 2009 on significantly higher sales along with the expectation of continued improvement in the macroeconomic environment throughout 2010. Conversely, the first quarter 2009 working capital requirements differed from our historical pattern of a seasonal increase, as it reflected the sharp decline in demand across the global construction, automotive and industrial sectors experienced throughout the global economy along with an uncertainty on the timing of a recovery. Finally, in the first quarter 2009, payments on our environmental remediation liabilities were reimbursed to us through a restricted cash fund established upon our emergence from bankruptcy. With the exhaustion of this fund in 2009, cash on hand was used to satisfy these requirements in the first quarter 2010.

Investing activities: Cash used in investing activities decreased $9 million for the first three months in 2010 compared to the same period in 2009 due to the status and timing of payments on certain growth re lated projects. In the fourth quarter 2008 and the first quarter 2009, the majority of growth related capital projects were closed out in reaction to the global economic slowdown which resulted in the payment of final cash payments on these projects in the first quarter 2009. Conversely, new growth capital projects were only initiated in the first quarter 2010, as a more stable economic environment evolved. Capital investment is expected to increase in subsequent quarters in 2010.

Financing activities: Cash provided by financing activities was $233 million for the first three months in 2010, compared with $47 million of cash used in financing activities in the same period of 2009. During the first quarter 2010 we completed the refinancing of our 2014 Term Loan and 2013 Revolver, along with the issuance of the 2020 Notes, which resulted in an extension of our debt maturities, greater strategic and operational flexibility, and net proceeds of $234 million, after deducting $34 million in debt issuance costs and prepayment penalty and a principal reduction in our term debt of $30 million. These net proceeds will be used to partially fund our acquisition of Etimex Solar, which is expected to close in the second quarter 2010. During the first quarter 2009, we repaid $43 million of borrowing on our 2013 Revolver and paid our quarterly installment of $3 million on our 2014 Term Loan.

Working Capital – Continuing Operations

Working capital used for continuing operations is summarized as follows:

- 36 -

Working Capital – Continuing Operations (dollars in millions)	March 31, 2010		December 31, 2009		Increase (Decrease)

Cash and cash equivalents	$	458	$	243
Trade receivables, net		283		268
Inventories		271		257
Other current assets		96		119
Total current assets	$	1,108	$	887

Accounts payable	$	167	$	169
Accrued liabilities		221		206
Short-term debt, including current maturities of long-term debt		24		28
Total current liabilities	$	412	$	403

Working Capital	$	696	$	484	$212

Our working capital used for continuing operations increased $212 million in the first quarter 2010 primarily due to the net increase in cash and cash equivalents, as previously discussed, partially offset by $8 million in devaluation of cash held by certain of our European subsidiaries in anticipation of the Etimex Solar acquisition. After consideration of this item, working capital requirements were effectively unchanged as seasonally driven higher working capital balances were substantially offset by the effects of a stronger U.S. dollar versus relevant currencies.

Beginning subsequent to our emergence from bankruptcy, from time to time we sell trade receivables without recourse to third parties. These trade receivables were removed from our Consolidated Statement of Financial Position and reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows at the time of sale to the third party. Uncollected trade receivables sold under these arrangements and removed from the Consolidated Statement of Financial Position were $10 million and $8 million at March 31, 2010 and December 31, 2009, respectively. The average monthly amounts of trade receivables sold were $11 million for the three months ended March 31, 2010.

Cash Flows - Discontinued Operations

Cash Flow Summary – Discontinued Operations (dollars in millions)	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009			Increase (Decrease)

Cash provided by (used in) operating activities	$	(4	)	$	40		$	(44	)
Cash used in investing activities		--			(5	)		5
Net change in cash for period attributable to discontinued operations	$	(4	)	$	35		$	(39	)

Cash used in operating activities for discontinued operations increased $44 million predominantly due to the payment of residual liabilities in the first quarter 2010, which were accrued upon the sale of our Integrated Nylon business, as compared to the significant monetization of the working capital balances of this same business in the same period of 2009 in preparation of this asset group’s imminent sale. Cash used in investing activities decreased $5 million in the first quarter 2010 due to the completion of the divestiture of this business in 2009.

Pension Funding

According to current IRS funding rules, we are required to contribute $37 million to our U.S. pension plans, collectively, in 2010. In the first quarter 2010, we satisfied this requirement via a $50 million contribution which included a $13 million voluntary contribution which will reduce our 2011 minimum funding requirement by a similar amount. We also expect to fund approximately $12 million in pension contributions to our foreign pension plans in 2010, of which $2 million was contributed in the first quarter 2010. Actual contributions to the plans for the full year may differ as a result of a variety of factors, including future changes in actuarial assumptions, legislative changes to pension funding laws, market conditions and whether we choose to make additional voluntary contributions or to contribute our common stock rather than cash to the plans.

Contingencies

See Note 8 to the accompanying consolidated financial statements for a summary of our contingencies as of March 31, 2010.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS

- 37 -

There have been no material changes in market risk exposures during the three months ended March 31, 2010 that affect the disclosures presented in the information appearing under “Derivative Financial Instruments” as presented in our 2009 Form 10-K.

Item 4. CONTROLS AND PROCEDURES

During the period covered by this Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective in timely accumulating and communicating to them material information relating to us and our consolidated subsidiaries that is requ ired to be included in our periodic SEC filings. The Chief Executive Officer and Chief Financial Officer also concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective to provide reasonable assurance that we record, process, summarize, and report the required disclosure information within the specified time periods. Further, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

- 38 -

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required by this item is incorporated herein by reference to Note 8 included in Part I, Item 1. Financial Statements (unaudited) – Notes to Consolidated Financial Statements. Also please refer to Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

- 39 -

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c ) Purchases of Equity Securities by the Issuer

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value (in millions) that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2010		256	$	13.75		0	$	0
February 1-28, 2010		0	$	0.00		0	$	0
March 1-31, 2010		67,933	$	14.13		0	$	0
Total		68,189	$	14.13		0	$	0

(1)	Shares surrendered to the Company by an employee to satisfy individual tax withholding obligations upon vesting of previously issued shares of restricted common stock.

(2)	Average price paid per share reflects the closing price of Solutia common stock on the business date the shares were surrendered by the employee stockholder to satisfy individual tax withholding obligations upon vesting of restricted common stock.

ITEM 5. OTHER INFORMATION

Exit of Primary Accelerators Business

On April 21, 2010, the Company made the decision to exit its Primary Accelerators business and to cease manufacturing of Primary Accelerators products at its facility in Antwerp, Belgium at a date to be determined during the second half of 2010. The Company’s decision is consistent with its strategy of focusing on businesses that are leaders in their global markets and that have sustainable competitive advantages.

We expect that the exit from the Primary Accelerators business will result in estimated pre-tax charges to income of approximately $43 to $52 million over the next two years, beginning in the second quarter of 2010. Upon cessation of manufacturing of these products, the Company will retrospectively report the results of this business, including exit related charges, as discontinued operations. Estimates of the total cost we expect to incur for each major type of cost associated with the exit are as follows: (i) severance and retraining costs for third party employees of approximately $25 to $30 million; (ii) future payments against contractual obligations including notice period and residual costs of approximately $8 to $ 10 million; (iii) clean-out and dismantling costs of the manufacturing unit of approximately $6 to $7 million; and (iv) direct severance and other costs of approximately $4 to $5 million.

For the year ended December 31, 2009, net sales and pre-tax losses for the Primary Accelerators business were $49 million and $13 million, respectively. In the second half of 2010, we expect to fund restructuring payments for this exit in the range of $13 million to $16 million, which will be partially offset by the monetization of working capital on this business ranging from $8 million to $10 million.

Amended and Restated 2007 Management Long-Term Incentive Plan

On April 21, 2010 our stockholders approved amendments to the Solutia Inc. 2007 Management Long-Term Incentive Plan (the “Restated Plan”) described in our definitive proxy statement dated March 12, 2010 for the 2010 Annual Meeting of Stockholders. Our Executive Compensation and Development Committee (the “ECDC”) of our Board of Directors adopted the Restated Plan on February 16, 2010, subject to approval by our stockholders on April 21, 2010.

The Restated Plan (i) increases the maximum number of shares of common stock available for new awards under the Restated Plan by 3,640,000 from the original reserved amount of 7,200,000 to a total of 10,840,000; (ii) explicitly prohibits re-pricing of any outstanding grants of stock options or stock appreciation rights without stockholder approval; (iii) requires a three-year minimum vesting requirement for non-performance based awards of options, stock appreciation rights, restricted stock and restricted stock units and one-year minimum vesting requirements for such awards that are performance based; (iv) prohibits the re-grant of shares used to pay the purchase price of an award or any applicable tax withholding for an award; (v) ties payment of any dividends or dividend equivalents on restricted stock and restricted stock units to the same vesting and forfeiture requirements as the underlying grant; and (vi) requires stockholder approval of material amendments to the Restated Plan.

On April 20, 2010 and subject to stockholder approval of the Restated Plan, the ECDC approved grants of stock options, restricted stock awards and performance shares under the Restated Plan to certain employees of the Company including executive officers and the full Board of Directors (with the exception of Mr. Quinn who did not participate) approved Mr. Quinn’s grants. Awards to the Named Executive Officers in the amounts listed below:

Named Executive Officer	Stock Options		Restricted Stock		Performance Shares
Jeffry N. Quinn		190,302		59,250		59,250
James M. Sullivan		70,949		22,090		22,090
James R. Voss		74,710		23,260		23,260
Robert T. DeBolt		33,315		10,372		10,372
Paul J. Berra, III		29,969		9,332		9,331

- 40 -

The stock options vest over a four year period at a rate of 25% per year on the anniversary date of the grant.

The restricted stock vest 100% on the four year anniversary of the date of the grant.

The performance shares vest on the third year anniversary of the date of the grant subject to the achievement of performance goals, described below, during the Performance Period. The Performance Period runs from January 1, 2010 up to and including December 31, 2012.

Total Shareholder Return: Fifty percent of the Performance Shares shall vest 100% at target if the total shareholder return (“TSR”) equals the 55th percentile of a group of companies listed below, for the Performance Period. A threshold level of 25% of the target shares shall vest if the TSR equals the 40th percentile. A maximum of 175% shall vest if TSR equals the 75th percentile or higher. Vested Performance Shares will be interpolated for the percentile achieved at the end of the Performance Period. The TSR shall include reinvested dividends over the Performance Period and shall be calculated using the average closing price of the Company’s common stock and the average closing price of the common stock of the companies in the group listed below within a ninety calendar day period, which would include all trading days within that ninety day calendar period, immediately preceding the beginning date of the Performance Period and the ending date of the Performance Period.

Relative Return on Capital: Fifty percent of the Performance Shares shall vest 100% at target if the three year average return on capital (“ROC”) equals the 55th percentile of the group of companies listed below for the Performance Period. A threshold level of 25% of the target shares shall vest if the three year average ROC equals the 40th percentile. A maximum of 175% shall vest if the three year average ROC equals the 75th percentile or higher. Vested Performance Shares will be interpolated for the percentile achieved at the end of the Performance Period. ROC is subject to a $1 billion cumulative EBITDA threshold before any payouts occur.

The group of companies (a subset of the S&P Chemical Index) means: Dow Chemical Company, E.I. du Pont de Nemours and Company, PPG Industries Inc., Ashland Inc., Ecolab Inc., Eastman Chemical Company, The Lubrizol Corporation, RPM International Inc., Cytec Industries Inc., Valspar Corporation, Rockwood Holdings, Inc., Cabot Corporation, FMC Corporation, PolyOne Corporation, Albemarle Corporation, International Flavors & Fragrances, Inc., Sigma-Aldrich Corporation, OM Group, Inc. Olin Corporation, NewMarket Corporation, Stepan Company, A. Schulman Inc., H.B. Fuller Company, Sensient Technologies Corporation, Minerals Technologies Inc., Zep Inc., Quaker Chemical Corporation, Calgon Carbon Corporation, Penford Corporation, Balchem Corporation, and Arch Chemicals Inc. The ECDC may adjust the group of companies if, during the Performance Period, a company in this group is acquired or ceases to be publicly traded.

Annual Incentive Plan

On April 21, 2010, our stockholders approved the Solutia Inc. Annual Incentive Plan (the “Annual Plan”) described in our proxy statement dated March 12, 2010 for the 2010 Annual Meeting of Stockholders. Our ECDC adopted the Annual Plan on January 29, 2010. The Annual Plan is described in our proxy statement dated March 12, 2010. The Annual Plan replaces Solutia’s prior annual incentive plan that was approved by the U.S. Bankruptcy Court for the Southern District of New York on November 29, 2007 as part of our Fifth Amended Joint Plan of Reorganization which became effective on February 28, 2008.

The Annual Plan provides an annual incentive-based bonus opportunity that applies to almost all of our employees, including executive officers. The Annual Plan is administered by the ECDC. The Annual Plan is based on a bonus pool concept. There are separate bonus pools, funded 100% on the results of the performance measures for the enterprise, for enterprise-level participants and 50% on the enterprise performance measures and 50% on the performance measures for the applicable business unit, for the business unit participants. Our Named Executive Officers participate in the enterprise-level pool.

- 41 -

For 2010 (the “2010 AIP”), the ECDC established financial and strategic performance measures for the enterprise pool and a weighting of each such measure as follows: revenue (25%); earnings per share (25%); working capital as a percentage of sales (25%); and safety and business development strategic measures (25%). The ECDC determines a threshold (0.50x), target (1.0x) and maximum (2.5x) funding level (1.5x maximum for the strategic measure) for each performance measure. If the threshold level of performance level is not met with respect to any particular performance measure, there is no funding of the bonus pool for that particular performance measure. The target level of funding or a 1.0x funding factor is the aggregate of all target bonuses for the participants in the 2010 AIP.

The target incentive is a percentage of annual base salary and varies by participant level in the organization. Our Named Executive Officers have the following target incentives: Mr. Quinn: 150%; Messrs. Voss and Sullivan: 100%; and Messrs. DeBolt and Berra: 75%. Actual performance against each of the established performance measures determines an overall funding factor (after applying the appropriate weighting to each measure) that is applied to each individual’s target (1.0x) incentive.

Each participant’s target bonus is multiplied by the relevant overall funding factor that was used to determine the size of the bonus pools from which the participant’s bonus is paid. For our Named Executive Officers, awards are based 75% on business performance and 25% on individual performance. The total award can range from 0% to a maximum of 150% of the adjusted target award. For our Named Executive Officers, their minimum, target and maximum bonus is set forth below:

	2010 AIP
Name	Minimum		Target		Maximum
Jeffry N. Quinn	$	687,750	$	1,375,500	$	4,126,500
James M. Sullivan	$	233,200	$	466,400	$	1,399,200
James R. Voss	$	270,000	$	540,000	$	1,620,000
Robert T. DeBolt	$	127,598	$	255,195	$	765,585
Paul J. Berra, III	$	120,000	$	240,000	$	720,000

Awards under the 2010 AIP will be paid within two and one-half months following the end of the 2010 calendar year.

2010 Annual Meeting of Stockholders

The Company held its annual meeting of stockholders on April 21, 2010. The stockholders considered five proposals, each of which is described in more detail in the Company’s definitive proxy statement dated March 12, 2010.

Proposal 1: To elect three directors of the Company, each for a three year term and until their successors have been elected and qualified.

NAME	FOR		WITHHELD		BROKER NON-VOTES
James P. Heffernan		97,324,674		1,453,361		12,381,379
W. Thomas Jagodinski		97,199,901		1,578,134		12,381,379
William C. Rusnack		97,595,547		1,182,488		12,381,379

Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP as the Company’s independent public accounting firm for fiscal year 2010

FOR				AGAINST				ABSTAIN
	108,649,209				2,484,330				25,875

- 42 -

Proposal 3: Approval of the Amended and Restated Solutia Inc. 2007 Management Long-Term Incentive Plan.

FOR				AGAINST				ABSTAIN				BROKER NON-VOTES
	93,026,165				5,709,945				41,925				12,381,379

Proposal 4: Approval of the Solutia Inc. Annual Incentive Plan

FOR				AGAINST				ABSTAIN				BROKER NON-VOTES
	94,547,604				4,184,381				46,050				12,381,379

Proposal 5: Approval of Adoption of a Section 382 Stockholder Rights Agreement

FOR				AGAINST				ABSTAIN				BROKER NON-VOTES
	72,927,113				25,806,921				44,001				12,381,379

- 43 -

ITEM 6. EXHIBITS

See the Exhibit Index at page 46 of this report.

- 44 -

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SOLUTIA INC.
	(Registrant)

	By:	/s/ TIMOTHY J. SPIHLMAN
		Timothy J. Spihlman
		(Vice President and Controller)
		(On behalf of the Registrant and as Principal Accounting Officer)

Dated: April 27, 2010

- 45 -

EXHIBIT INDEX

These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.

EXHIBIT NUMBER		DESCRIPTION
3.1		Second Amended and Restated Certificate of Incorporation of Solutia Inc. (incorporated by reference to Exhibit 3.1 to Solutia's Form 8-K filed on March 4, 2008)
3.2		Certificate of Designation, Preferences and Rights of Series A Preferred Stock. (incorporated by reference to Exhibit 3.1 to Solutia’s Current Report on Form 8-K filed on July 27, 2009)
3.3		Amended and Restated Bylaws of Solutia Inc. (incorporated by reference to Exhibit 3.2 to Solutia's Form 8-K filed on March 4, 2008)
4.1		382 Rights Agreement, dated as of July 27, 2009, between Solutia Inc. and American Stock Transfer & Trust Company, LLC, which included the Form of Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock as Exhibit A and the Summary of Rights as Exhibit C (incorporated by reference to Exhibit 3.1 to Solutia’s Current Report on Form 8-K filed on July 27, 2009)
4.2		Indenture dated October 15, 2009 by and between the Company, the subsidiary guarantors party thereto and the Trustee (incorporated by reference to Exhibit 4.1 to Solutia’s Current Report on Form 8-K filed October 16, 2009)
4.3		First Supplemental Indenture to the Indenture dated October 15, 2009, by and between Solutia, the subsidiary guarantors parties thereto and the Trustee (incorporated by reference to Exhibit 4.2 to Solutia’s Form 8-K filed on October 16, 2009)
4.4		Second Supplemental Indenture to the Indenture dated March 9, 2010, by and between the Company, the subsidiary guarantors party thereto and the Trustee (incorporated by reference to Exhibit 4.2 to Solutia’s Form 8-K filed on March 10, 2010)
10.1		Credit Agreement dated March 17, 2010, by and among Solutia Inc., the lender parties thereto, Deutsche Bank Trust Company Americas, as Administrative Agent, Collateral Agent, Swing Line Lender and Issuer, Citibank, N.A., HSBC Securities (USA) Inc. and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, Jefferies Finance LLC, as Documentation Agent and Deutsche Bank Securities Inc., Jefferies Finance LLC, HSBC Securities (USA) Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., as Joint Lead Arrangers and as Joint Bookrunners (incorporated by reference to Exhibit 10.1 to Solutia’s Form 8-K filed on March 23, 2010)
10.2		Guarantee Agreement, dated as of March 17, 2010, by and among certain subsidiaries of Solutia Inc. party hereto, as Guarantors, and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.1 to Solutia’s Form 8-K filed on March 23, 2010)
10.3		Security Agreement, dated as of March 17, 2010, by and among Solutia Inc., the subsidiaries party thereto, as Grantors, and Deutsche Bank Trust Company Americas, as Collateral Agent. (incorporated by reference to Exhibit 10.1 to Solutia’s Form 8-K filed on March 23, 2010)
10.4		Pledge Agreement, dated as of March 17, 2010, by and among Solutia Inc., the subsidiaries party thereto, as Pledgors, and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.1 to Solutia’s Form 8-K filed on March 23, 2010)
10.5		Share Purchase Agreement Between Etimex Holding GmbH, Etimex Primary Packaging GmbH, Solutia Inc. and Flexsys Verwaltungs- und Beteiligungsgesellschaft mbH dated as of February 28, 2010
10.6		Solutia Inc. Annual Incentive Plan
10.7		Solutia Inc. 2007 Management Long-Term Incentive Plan as Amended and Restated (incorporated by reference to Exhibit 99.1 to Solutia’s Registration Statement on Form S-8 filed April 23, 2010)
10.8		Form of Stock Option Award Agreement Pursuant to the Solutia Inc. 2007 Management Long-Term Incentive Plan as Amended and Restated
10.9		Form of Restricted Stock Award Agreement Pursuant to the Solutia Inc. 2007 Management Long-Term Incentive Plan as Amended and Restated
10.10		Form of Performance Stock Award Agreement Pursuant to the Solutia Inc. 2007 Management Long-Term Incentive Plan as Amended and Restated
10.11		Form of Restricted Stock Award Agreement Pursuant to the Solutia Inc. Non-Employee Director Stock Compensation Plan
10.12		Form of Restricted Stock Unit Agreement Pursuant to the Solutia Inc. Non-Employee Director Stock Compensation Plan
18.1		Letter from Deloitte & Touche LLP dated April 23, 2010
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Press Release dated April 22, 2010

- 46 -

EX-10.5 2 exhibit_10-5.htm EXHIBIT 10.5 SHARE PURCHASE AGMT - ETIMEX exhibit_10-5.htm

EXHIBIT 10.5

Share Purchase Agreement

between

Etimex Holding GmbH

Etimex Primary Packaging GmbH

Solutia Inc.

and

Flexsys Verwaltungs- und Beteiligungsgesellschaft mbH

dated 28 February 2010

regarding the sale and purchase of Etimex Solar GmbH

TABLE OF CONTENTS

		Page
PREAMBLE		1
Section 1.	Definitions	2
Section 2.	Sale and Purchase of the Sold Share	14
2.1	Agreement to Sell and Purchase	14
2.2	Share Transfer	14
2.3	Dividend and Profit Rights	14
Section 3.	Enterprise Agreements, Sale of EPP GmbH	14
3.1	Current Enterprise Agreements	14
3.2	Termination of Enterprise Agreements	14
3.3	Conversion of Profit Transfer Receivables into Loan Receivables, Sale and Assignment	15
3.4	Sale of EPP GmbH	17
Section 4.	Purchase Price, Payments, Guarantee	17
4.1	Purchase Price	17
4.2	Settlement of Inter-Group Debt	20
4.3	Payments at Closing	21
4.4	Settlement Payments after the Closing Date	22
4.5	Mode of Payment; Default; Set-off	22
4.6	Exchange Rate	23
Section 5.	Closing	23
5.1	Time and Place of Closing	23
5.2	Closing Conditions	24
5.3	Right to Rescind	25
5.4	Closing Actions	26
5.5	Post-Closing Actions	27
Section 6.	Effective Date Financial Statements	28
6.1	Preparation of Effective Date Financial Statements	28
6.2	Accounting Principles	28
6.3	Review of Effective Date Financial Statements and Effective Date Certificate	30
6.4	Dispute Resolution	30
6.5	Final Amounts	31
Section 7.	Seller’s and New Packaging’s Representations	32
7.1	Legal Organization of Seller, New Packaging and the Companies	32
7.2	Title in the Sold Share and US Subsidiary Shares	32
7.3	Sufficiency of Assets; Condition	33

7.4	Authorization; No Insolvency; Corporate Governance	33
7.5	Financial Statements; Liabilities	34
7.6	Title to Assets; Encumbrances	35
7.7	Compliance with Laws	35
7.8	Noncontravention	36
7.9	Intellectual Property Rights	36
7.10	Litigation	37
7.11	Material Contracts	38
7.12	Real Property	39
7.13	Product Warranty; Product Liability	39
7.14	Affiliate Transactions	40
7.15	Customers and Suppliers	40
7.16	Employee and Labor Matters	40
7.17	Taxes	43
7.18	Insurance Coverage	43
7.19	Conduct of Business	43
7.20	Environmental Matters	45
7.21	Broker’s Fees	45
7.22	No Other Representations and Warranties	46
Section 8.	Covenants	46
8.1	Conduct of Business Prior to Closing; Actions by the Companies	46
8.2	Release from Guarantees	48
8.3	Cooperation	48
8.4	Notice of Developments	49
8.5	Interim Financial Information	49
8.6	Reimbursement for Payments Related to Seller, EPP GmbH or the Companies after Closing	50
8.7	Covenant to Non-Compete	51
8.8	Use of Seller’s Names	51
8.9	Transition	52
8.10	Litigation Support	53
8.11	Exclusivity	53
Section 9.	Indemnification	54
9.1	Restitution/Payment of Damages	54
9.2	Notification of Damage Claims and Remedial Measures	56
9.3	Monetary Limitations on Liability	57
9.4	Statute of Limitation	59
9.5	No Additional Rights or Remedies	59
9.6	Indemnities for Non-Compliance	60
9.7	Excluded Liabilities	61
9.8	Collection; Guarantor’s Guarantees	62
9.9	Purchase Price Adjustment	63
9.10	Waiver	63

Section 10.	Taxes	64
10.1	Tax Indemnification	64
10.2	Tax Covenants of Purchaser	65
10.3	Tax Refunds	66
10.4	Indemnification Procedures	67
10.5	Cooperation on Tax Matters	68
10.6	VAT Group	68
10.7	Tax Limitation Period	69
Section 11.	Representations of and Indemnity from Purchaser and Purchaser Parent	69
11.1	Representations	69
11.2	Indemnity in Case of Breach of Representation	71
11.3	Purchaser Parent Guaranty	71
Section 12.	Merger Control Proceedings / Other Regulatory Requirements	71
Section 13.	Public Announcements, Non-Solicitation	73
13.1	Public Disclosure and Confidentiality	73
13.2	Non-Solicitation	74
Section 14.	Miscellaneous	74
14.1	Interest	74
14.2	Costs and Expenses	75
14.3	Notices	75
14.4	Entire Agreement; Amendments and Waivers	75
14.5	Assignments, Third Parties	76
14.6	Set-off and Retention	76
14.7	Further Assurances	76
14.8	Severability	77
14.9	Interpretation	77
Section 15.	Governing Law, Jurisdiction	77
15.1	Governing Law	77
15.2	Jurisdiction	77

This Share Purchase Agreement is entered into on this 28th day of February 2010, by and between

1.	Etimex Holding GmbH,

a German limited liability company located in 89165 Dietenheim, Martin-Adolff-Straße 44, registered with the commercial register of the local court of Ulm under register number HRB 720666,

(“Seller”),

2.	Etimex Primary Packaging GmbH,

a German limited liability company located in 89165 Dietenheim, Martin-Adolff-Straße 44, registered with the commercial register of the local court of Ulm under register number HRB 722023,

(“Guarantor” or “EPP GmbH” or “New Packaging”),

3.	Solutia Inc.,

a Delaware corporation located in 575 Maryville Centre Drive, P.O. Box 66760, St. Louis, Missouri 63166-6760 U.S.A.,

(“Purchaser Parent”),

and

4.	Flexsys Verwaltungs- und Beteiligungsgesellschaft mbH,

a German limited liability company located at Grosse Drakenburgerstrasse 93-97, Postfach 1440, D-31582 Nienburg/Weser, and registered with the commercial register of the local court of Walsrode under register number HRB 30 675,

(“Purchaser”).

PREAMBLE

(A)

WHEREAS, Seller is the owner of 100% of the issued share capital of Etimex Solar GmbH, registered in the commercial register of the local court of Ulm under register number HRB 4548 (“Target”). Target has a registered share capital of EUR 25,000 consisting of one share (Geschäftsanteil) in the nominal amount of EUR 25,000 (the “Sold Share”) owned by Seller;

(B)	WHEREAS, Target directly holds, as described in Schedule B, all shares in Etimex Solar USA Inc., a corporation organized and existing under the laws of the State of Delaware,

United States, with registered office at World Trade Center Delaware, 702 West Street, City of Wilmington, Delaware (the “US Subsidiary”, together with Target the “Companies” and each a “Company”);

(C)

WHEREAS, Target and US Subsidiary are engaged in the business of designing, developing, manufacturing and distributing specialty films and products for the encapsulation of solar cells, thin film solar coatings and other active semiconductor materials in photovoltaic solar modules and any other related applications (the “Solar Business”), which Solar Business does not include the packaging business as conducted by EPP GmbH or any other member of Seller’s Group or any predecessor thereof or any other business operation of EPP GmbH (the “Packaging Business”);

(D)

WHEREAS, as of the date of this Agreement, Target is the owner of all shares in EPP GmbH. The shares in EPP GmbH shall be sold and transferred by Target to Seller prior to the Closing Date by way of a separate sale and purchase agreement and will therefore not be owned by Target as of the Closing of the transactions contemplated by this Agreement;

(E)	WHEREAS, on 7 August 2008, Target has entered into a spin-off-agreement with EPP GmbH (Ausgliederungsvertrag; the “Spin-Off-Agreement”). Pursuant to the Spin-Off-Agreement, Target has divested its Packaging Business to EPP GmbH (the “Spin-Off”);

(F)	WHEREAS, Seller intends to sell to Purchaser the Sold Share, and Purchaser intends to purchase the Sold Share (the sale, purchase and transfer of the Sold Share hereinafter the “Transaction”).

NOW, THEREFORE, the Parties agree as follows:

SECTION 1. DEFINITIONS

Capitalized terms used in this Agreement shall have the meanings ascribed to them as follows:


“2009 Audited Financial Statements”	has the meaning as defined in Section 8.5(c).
“2009 Unaudited Financial Statements”	means the unaudited financial statements of the Companies for the fiscal year ending on 31 December 2009 which have been provided to Purchaser prior to signing of this Agreement.

“Accounting Firm”	has the meaning as defined in Section 6.4(a).
“Acquisition Proposal”	means any inquiry regarding, or proposal or offer to enter into, a transaction to acquire, by purchase, merger, license, transfer or otherwise, to acquire any capital stock of either of the Companies or any of their businesses or assets (other than sales of inventory and the like in the ordinary course) or any right to acquire any of the foregoing, made by any Person other than Purchaser, Purchaser Parent or any of their Affiliates or representatives.
“Affiliate”	means, with respect to any Person, any general or limited partnership, corporation, business trust, limited liability company, trust, association, civil law partnership or other unincorporated organization, or any other entity or individual, which is an affiliate (verbundenes Unternehmen) within the meaning of sections 15 et seqq. German Stock Corporation Act (Aktiengesetz) or a relative or an affiliated individual (nahestehende Person) within the meaning of section 15 German Tax Code (Abgabenordnung) of any such Person.
“Agreement”	means this Share Purchase Agreement.
“AktG”	means the German Stock Corporation Act (Aktiengesetz).
“Audited Financial Statements”	has the meaning as defined in Section 7.5(a).
“AWV”	means the German Foreign Trade Act Implementation Ordinance (Durchführungsverordnung zum Außenwirtschaftsgesetz).
“Benefit Plans”	has the meaning as defined in Section 7.16(m).
“BGB”	means the German Civil Code (Bürgerliches Gesetzbuch).
“Breach”	has the meaning as defined in Section 9.1(a).
“Business Day”	means any day on which the commercial banks in Frankfurt am Main, Germany, are open for regular business transactions.
“Cash”	has the meaning as defined in Section 4.1(b).

“Closing”	has the meaning as defined in Section 5.1.
“Closing Conditions”	means, collectively, the Joint Closing Conditions, Purchaser Closing Conditions and Seller Closing Condition.
“Closing Date”	has the meaning as defined in Section 5.1.
“Companies”	has the meaning as defined in paragraph (B) of the Preamble.
“Company”	has the meaning as defined in paragraph (B) of the Preamble.
“Company Intellectual Property Rights”	has the meaning as defined in Section 7.9(b).
“Confidentiality Agreement”	has the meaning as defined in Section 14.4(a).
“Contract”	means any agreement or contract (including any lease, guarantee, accepted customer order or accepted purchase order), whether written or oral and including any right or obligation under any of the foregoing.
“Current Properties”	means, collectively, the Owned Real Property and the Leased Real Property.
“Damages”	has the meaning as defined in Section 9.1(a).
“Data Room”	means the electronic data room hosted by Intralinks, managed by Jefferies International Ltd. under the code name “Crystal” and opened from 12 December 2009 to and including the status through 26 February 2010 as provided to Purchaser Parent. The Data Room documentation (including the written answers by Seller to certain inquiries from Purchaser or Purchaser Parent in the Data Room) disclosed is contained on one (1) CD-ROM, which for purpose of proof (Beweiszwecke) has been deposited with the acting notary.
“Disclosure Schedule”	has the meaning as defined in Section 7.
“Due Diligence”	means the due diligence by Purchaser and its advisors conducted in the Data Room and based on other information provided to it.
“Effective Date”	has the meaning as defined in Section 3.2(a).

“Effective Date Certificate”	has the meaning as defined in Section 6.1(a).
“Effective Date Financial Statements”	has the meaning as defined in Section 6.1(a).
“Environmental Laws”	means, whenever in effect, all European Community, federal, provincial, state, local and foreign statutes, regulations, subordinate legislation, codes of law, judgments, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations with Governmental Authorities and, where applicable, all common law, in each of the foregoing cases concerning public health and safety and workplace health and safety (in each case solely to the extent relating to exposure to hazardous materials, substances or wastes), or pollution or protection of the environment, including the European Union’s Regulation (EC) No. 1907/2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals.
“Environmental Permits”	means any license, approval, authorization, permission, registration, notification, waiver, order or exemption which is issued, granted or required under Environmental Laws.
“EPP Effective Date”	has the meaning as defined in Section 3.2(b).
“EPP FY Date”	has the meaning as defined in Section 3.2(b).
“EPP GmbH”	has the meaning as defined in the recitals of this Agreement.
“EPP Loan Payable”	has the meaning as defined in Section 3.3(e).
“EPP Loan Receivable”	has the meaning as defined in Section 3.3(e).
“EPP Loss Balancing Payable”	has the meaning as defined in Section 3.3(e).
“EPP Profit Transfer Agreement”	has the meaning as defined in Section 3.1(b).
“EPP Profit Transfer Payable”	has the meaning as defined in Section 3.3(e).
“EPP Share Transfer”	has the meaning as defined in Section 3.4.
“EPP Transfer”	has the meaning as defined in Section 3.3(e).

“ES Loan Receivable”	has the meaning as defined in Section 3.3(a).
“ES Loan Receivable Purchase Price”	has the meaning as defined in Section 3.3(c).
“ES Profit Transfer Agreement”	has the meaning as defined in Section 3.1(a).
“ES Profit Transfer Receivable”	has the meaning as defined in Section 3.3(a).
“Estimated ES Loan Receivable Purchase Price”	has the meaning as defined in Section 4.3(a)(iii).
“Estimated Inter-Group Net-Debt Amount”	has the meaning as defined in Section 4.3(a)(ii).
“Estimated Purchase Price”	has the meaning as defined in Section 4.3(a)(i).
“EURIBOR”	means the rate for deposits in Euro for a period of three months which appears on the appropriate page of the Reuters screen (or such other page as may replace such page on that service for the purpose of displaying Brussels interbank offered rate quotations of major banks as of 11.00 a.m. (Brussels time)) on the relevant due date to be reset accordingly at the beginning of each following 3-month period for which such EURIBOR is fixed.
“Euro Reference Rate”	has the meaning as defined in Section 4.6(a).
“Excluded Liabilities”	has the meaning as defined in Section 9.7(a).
“Financial Debt”	has the meaning as defined in Section 4.1(b).
“Financing”	has the meaning as defined in Section 11.1(f).
“German Capital Maintenance Rules”	has the meaning as defined in Section 9.3(g).
“Governmental Authority”	means any United States federal, state or local or non-United States governmental or regulatory authority, agency, commission, court, body or other governmental entity.
“Guarantor”	has the meaning as defined in the recitals of this Agreement.
“GWB”	means the German Act Against Restraints on Competition (Gesetz gegen Wettbewerbsbeschränkungen).

“HGB”	means the German Commercial Code (Handelsgesetzbuch).
“Increased Tax”	means any increase of any Tax assessed against any of the Companies, including any decrease of corporation tax credit (Körperschaftsteuerguthaben) within the meaning of section 37 of the German Corporate Income Tax Act (KStG) or similar tax credits under the tax laws of any other jurisdiction, however, excluding, for the avoidance of doubt, notional tax credits (such as increases of loss carry-forwards, timing differences or potential write-offs).
“Indemnifiable Tax”	means any Tax imposed (by a Tax assessment or otherwise) on the Companies by any Taxing Authority, including, for the avoidance of doubt, any Tax levied on any of the Companies as a secondary liability (Haftungsschuld) and excluding any notional tax losses (such as reductions of loss carry-forwards or potential write-offs).
“Indemnifying Party”	has the meaning as defined in Section 9.2(a).
“Intellectual Property Rights”	means any and all of the following in any jurisdiction: (a) trademarks, service marks, trade dress, trade names, business names, logos, Internet domain names, and other indicia of source, together with all goodwill associated therewith logos and all registrations and applications for registration therefor; (b) copyrights, copyrightable works, database rights and any registrations and applications for registration therefor; (c) inventions (whether or not patentable or reduced to practice), all improvements thereto, and all patents and patent applications, together with all reissues, continuations, continuations-in-part, revisions, divisional, extensions, and reexaminations in connection therewith; (d) software (including source code, executable code, data, databases and related documentation); (e) all other proprietary and intellectual property rights (other than Know-How); and (f) all copies and tangible embodiments of any of the foregoing (in whatever form or medium).

“Inter-Group Debt”	has the meaning as defined in Section 4.2(a).
“Inter-Group Liabilities”	has the meaning as defined in Section 4.2(a).
“Inter-Group Net-Debt Amount”	has the meaning as defined in Section 4.2(c).
“Inter-Group Receivables”	has the meaning as defined in Section 4.2(a).
“Joint Closing Conditions”	has the meaning as defined in Section 5.2(a).
“Know-How”	means any of the following in any jurisdiction: trade secrets, know-how, technologies, processes, techniques, protocols, methods, formulae, specifications, data, compositions, methodologies, research and development regarding any element of the Solar Business.
“Leased Real Property”	means the US Subsidiary’s facility located at 777 Campus Commons Road, Suite 200, Sacramento, California 95825 U.S.A.
“Liability”	means any liability (including any obligation) of whatever kind or nature (including whether known or unknown, absolute or contingent, accrued or unaccrued and whether due or to become due).
“Liens”	means any mortgage, pledge, lien, charge, security interest, easement, security agreement or other encumbrance or restriction, in each case if based on a right in rem (dingliches Recht), or any option or right of first refusal, in each case, on the use or transfer of any property.
“Litigation”	means any action, suit, or any administrative or judicial investigation, audit, hearing or proceeding, whether civil, criminal, administrative or arbitral, whether at law under contract or otherwise.
“Management Accounts”	has the meaning as defined in Section 8.5(a).
“Material Adverse Effect”	means, when used herein with respect to a Person, any fact, circumstance, development, effect or change that (a) is, has been or would reasonably be expected to be, individually or in the aggregate with other such items, materially and lastingly (nachhaltig) adverse to the business, assets, financial condition, operating results or operations of the Person and its subsidiaries (taken

as a whole), or (b) would materially adversely affect the ability of such Person, and if applying to the Companies, the Seller’s ability, to consummate the transactions contemplated by this Agreement or the other transaction documents on a timely basis; provided, however, that no effects or changes arising or related to any of the following shall be deemed to constitute, a Material Adverse Effect for purposes of clause (a) above: (i) general business or economic conditions in Germany or the United States of America or in any other territory; (ii) national or international political or social conditions in Germany or the United States of America or in any other territory; (iii) financial, banking or securities markets (including any disruption thereof or any decline in the price of securities generally or any market or index); (iv ) developments of the markets for photovoltaic solar products; (v) the announcement or pendency of this Agreement or the transactions contemplated hereby; (vi) changes of laws, regulations or accounting rules; (vii) natural disasters, military actions, sabotage or terrorism which neither cause any material damage to the assets used by the Companies nor materially disrupt the supply of raw materials to the Companies; (viii) changes which are exclusively or primarily attributable to any action, by Purchaser Parent or any of its subsidiaries other than their actions in the ordinary course of their businesses; or (ix) the failure of any of the Companies to meet any full or partial 2010 projections of earning, revenues or any other financial measure (regardless of whether such projections were made by Seller or independent third parties) but not including the underlying causes thereof; and provided, further, that for the purposes of clause (a) above, the exclusion of items contemplated by any of clause s (i), (ii), (iii), (iv), (vi) or (vii) above shall apply only to the extent the Person is not disproportionately affected relative to other similarly situated businesses in the industry or market in which the Person operates; and provided, further, that for the purposes of this Agreement, any reference to a Material Adverse Effect on Purchaser or Purchaser Parent shall be determined without regard to clause (a) of this definition.

	purposes of this Agreement, any reference to a Material Adverse Effect on Purchaser or Purchaser Parent shall be determined without regard to clause (a) of this definition.
“Material Contracts”	has the meaning as defined in Section 7.11(a).
“Most Recent Fiscal Year End”	has the meaning as defined in Section 7.5(a).
“New Packaging”	has the meaning as defined in the recitals to this Agreement.
“Owned Real Property”	means the Dietenheim facility of Target at Industriestr. 3, 89165 Dietenheim registered in the land register of the local court region (Amtsgerichtsbezirk) of Ulm, land register authority (Grundbuchamt) Dietenheim, land register region (Grundbuchbezirk) Dietenheim, no. 4830, plot 1102/1.
“Packaging Business”	has the meaning as defined in paragraph (C) of the Preamble.
“Parties”	means Seller, New Packaging, Purchaser and Purchaser Parent, collectively, each a “Party”.
“Permits”	has the meaning as defined in Section 7.7.
“Permitted Liens”	means (i) customary retention of title rights, liens, pledges or other security rights arising in the ordinary course of business in favor of suppliers, mechanics, workmen, carriers and the like, (ii) security rights granted to banks and other financial institutions over cash and other assets deposited with such banks or financial institutions that will, except for customary pledges (including for customary claims only) over bank accounts under the banks’ general terms and conditions (AGB-Pfandrecht), be released at Closing, (iii) encumbrances or rights of third parties created under applicable law including, without limitation, pledges and other security rights, in favor of Taxing Authorities or other governmental entities for Taxes that are not yet due and payable, ( iv) easements and similar rights in real property which do not materially impair the Companies’ ability to conduct their business as presently conducted, (v) any security rights

	granted to banks and other financial institutions with respect to Seller’s Group Financing that will be released at Closing, and (vi) with respect to leased assets, the interest of the owner under such leases.
“Person”	means an individual, a partnership, a corporation, a limited liability company, an association or any other legal entity, including any Governmental Authority.
“Preamble”	means the preamble of this Agreement.
“Pre-Effective Date Tax Period”	means any tax assessment period (e.g. Veranlagungszeitraum under German tax laws) or portion of it ending on or before the Effective Date.
“Purchase Price”	has the meaning as defined in Section 4.1(a).
“Purchaser”	has the meaning as defined in the recitals of this Agreement.
“Purchaser Closing Conditions”	has the meaning as defined in Section 5.2(c).
“Purchaser Indemnified Party”	has the meaning as defined in Section 9.7(a).
“Purchaser Parent”	has the meaning as defined in the recitals of this Agreement.
“Purchaser’s Bank Account”	has the meaning as defined in Section 4.5(a).
“Section”	means a section in this Agreement.
“Seller”	has the meaning as defined in the recitals of this Agreement.
“Seller Closing Condition”	has the meaning as defined in Section 5.2(b).
“Seller Tax Loss”	has the meaning as defined in Section 10.3(a)(ii).
“Seller Tax Saving”	means any decrease of any Tax assessed against any of the Seller and/or any taxable person or entity affiliated to Seller, including any increase of corporation tax credit (Körperschaftsteuerguthaben) within the meaning of section 37 of the German Corporate Income Tax Act (KStG) or similar tax credits under the tax laws of any other jurisdiction, however, excluding, for the avoidance of doubt, notional tax credits (such as increases of loss carry-forwards, timing differences or potential write-offs).

“Seller’s Bank Account”	has the meaning as defined in Section 4.5(a).
“Seller’s Best Knowledge”	means the actual knowledge (positive Kenntnis) of Birgit Wernicke, Marc Vogt, Michael Joy and Michael Mack, in each case, after reasonable inquiry with the person within the Seller’s Group or the Companies responsible for the relevant subject matter.
“Seller’s Group”	means Seller and its current and future, direct and indirect subsidiaries, including EPP GmbH, but other than the Companies.
“Seller’s Group Financing”	has the meaning as defined in Section 5.4(c).
“Seller’s Guarantees”	has the meaning as defined in Section 8.2(a).
“Seller’s Names”	has the meaning as defined in Section 8.8.
“Seller’s Pre-Closing Notice”	has the meaning as defined in Section 4.3(b).
“Solar Business”	has the meaning as defined in paragraph (C) of the Preamble.
“Spin-Off”	has the meaning as defined in paragraph (E) of the Preamble.
“Spin-Off-Agreement”	has the meaning as defined in paragraph (E) of the Preamble.
“Sold Share”	has the meaning as defined in paragraph (A) of the Preamble.
“Stated Purchase Price”	means that portion of the Purchase Price that is stated in Section 4.1(a)(i).
“Target”	has the meaning as defined in paragraph (A) of the Preamble.
“Target Amount”	has the meaning as defined in Section 4.1(b).
“Tax”	means any tax and ancillary tax within the meaning of section 3 German General Tax Code (Abgabenordnung) or within the meaning of any similar provisions under any foreign jurisdiction, including, but not limited to, income tax, corporate income tax, solidarity surcharge, trade tax, value added tax, wage tax and withholding tax, real estate tax, real estate transfer tax as well as any levies (Abgaben) and customs and exercise duties (Zölle),

	social security contributions and public subsidies, together with any interest, penalty or addition thereto imposed by any Taxing Authority.
“Taxing Authority”	means any public authority or social security authority in charge of imposing any Tax.
“Tax Loss”	has the meaning as defined in Section 10.1(a).
“Tax Refund”	means any repayment of any Tax received by any of the Companies, whether in cash or by way of an actual reduction of a tax payment obligations, by a Taxing Authority relating to any Pre-Effective Date Tax Period.
“Tax Return”	means any return, declaration, report, claim for refund, notice, form or information relating to any Tax and to be filed with a Taxing Authority, including any schedule or attachment thereto.
“Tax Saving”	means any decrease of any Tax assessed against any of the Companies, including any increase of corporation tax credit (Körperschaftsteuerguthaben) within the meaning of section 37 of the German Corporate Income Tax Act (KStG) or similar tax credits under the tax laws of any other jurisdiction, however, excluding, for the avoidance of doubt, notional tax credits (such as increases of loss carry-forwards, timing differences or potential write-offs).
“Transaction”	has the meaning as defined in paragraph (F) of the Preamble.
“Transitional Service Agreement”	has the meaning as defined in Section 8.1(e).
“US Subsidiary”	has the meaning as defined in paragraph (B) of the Preamble.
“US Subsidiary Shares”	has the meaning as defined in Section 7.2(a).
“VAT”	means value added tax (Umsatzsteuer).
“Working Capital”	has the meaning as defined in Section 4.1(b).

SECTION 2. SALE AND PURCHASE OF THE SOLD SHARE

2.1	Agreement to Sell and Purchase

Subject to the terms and conditions set forth herein, Seller hereby sells to Purchaser, and Purchaser hereby purchases from Seller, the Sold Share.

2.2	Share Transfer

At the Closing, Seller shall assign and transfer to Purchaser the Sold Share in accordance with Section 5.4(g) below.

2.3	Dividend and Profit Rights

The Sold Share shall be sold and transferred with all rights and obligations pertaining thereto, including the profit rights, provided that the profits of Target for the period beginning on 1 January 2010 and ending on the Effective Date and the profits for previous periods to the extent distributed to the Seller by the Effective Date shall be for the account of Seller.

SECTION 3. ENTERPRISE AGREEMENTS, SALE OF EPP GMBH

3.1	Current Enterprise Agreements

Seller, Target and EPP GmbH have entered into the following enterprise agreements:

(a)	a domination and profit transfer agreement dated 19 June 2002 as amended on 9 July 2002 between Seller as holding company and Target (the “ES Profit Transfer Agreement”); and

(b)	a profit transfer agreement dated 27 October 2008 between Target as holding company and EPP GmbH (the “EPP Profit Transfer Agreement”).

3.2	Termination of Enterprise Agreements

(a)

Seller shall procure (steht dafür ein) (i) that the fiscal year of Target will be changed prior to the Closing Date, so as to terminate at the date which is the later of (x) 30 April 2010 and (y) the end of the last calendar day of (aa) the month following the month in which the last of the Closing Conditions pursuant to Sections 5.2(a)(i) and 5.2(a)(ii) has been fulfilled or waived in accordance with this Agreement, if such fulfillment or waiver has not occurred until the 10th calendar day of such month, or (bb) the month in which the last of the Closing Conditions pursuant to Sections 5.2(a)(i) and 5.2(a)(ii) has been fulfilled or waived in accordance wit h this Agreement if such fulfillment or waiver has

occurred on or prior to the 10th calendar day of such month (the end of the last calendar day of the respectively amended fiscal year of Target herein, the “Effective Date”), and (ii) that the ES Profit Transfer Agreement will be terminated on and with effect as of the Effective Date, 24.00 hours pursuant to an agreement substantially in the form of the draft attached as Schedule 3.2 (a). Seller and Purchaser shall use commercially reasonable efforts to procure that the termination of the ES Profit Transfer Agreement is registered with the commercial register of Target promptly after the Closing Date.

(b)

Seller shall procure that (i) the fiscal year of EPP GmbH will be changed so as to terminate prior to the Effective Date (the date of termination of such fiscal year, the “EPP FY Date”), and (ii) the EPP Profit Transfer Agreement will be terminated no later than the EPP FY Date pursuant to an agreement substantially in the form of the draft attached as Schedule 3.2 (b). Seller shall use commercially reasonable efforts to procure that the termination of the EPP Profit Transfer A greement is registered, and shall procure that a respective new shareholders’ list of EPP GmbH is filed, in each case with the commercial register of EPP GmbH before or promptly after the date of the consummation of the EPP Share Transfer (the “EPP Effective Date”).

3.3	Conversion of Profit Transfer Receivables into Loan Receivables, Sale and Assignment

(a)

Prior to Closing, Seller shall convert its total profit rights for the period from 1 January 2010 until the Effective Date, 24.00 hours, under the ES Profit Transfer Agreement (the “ES Profit Transfer Receivable”) into a loan receivable in the amount equal to the face value of the ES Profit Transfer Receivable (the “ES Loan Receivable”) by way of executing a loan agreement with Target, effective from the day following the Effective Date, 0.00 hours, substantially in the form of the draft attached as Schedule 3.3(a).

(b)

Seller hereby sells and, subject to (aufschiebende Bedingung) the payments being made by Purchaser in accordance with Section 5.4(h) below, assigns its ES Loan Receivable to Purchaser, and Purchaser hereby accepts such sale and assignment. Seller shall procure that Target will grant its consent to such sale and assignment in the agreement a draft of which is attached as Schedule 3.3(a).

(c)	The purchase price for the ES Loan Receivable shall be equal to the nominal amount of the ES Loan Receivable as shown in the Effective Date Certificate (the “ES Loan Receivable Purchase Price”).

(d)

Subject to Closing, Purchaser shall indemnify (freistellen) and hold harmless Seller from any obligation of Seller under the ES Profit Transfer Agreement, including (i) to compensate Target for any loss arising or having arisen in the current or any previous fiscal year or (ii) to furnish security to any creditor of Target as a result of the termination of the ES Profit Transfer Agreement. In respect of any unfulfilled obligation of Target under the ES Profit Transfer Agreement towards Seller including any obligation to transfer to Seller any profit arising or having arisen in the current or any previous fiscal year (but excluding the ES Loan Receivable and the ES Profit Transfer Receivable) the

following shall apply: (i) Purchaser shall, subject to Closing, cause Target to, discharge in full any such obligation to Seller in accordance with the terms of the ES Profit Transfer Agreement and, simultaneously step by step (Zug-um-Zug) (ii) Seller shall, subject to Closing, pay to Purchaser (but not to Target) an amount equal to the amount of the obligation so to be discharged by Target. Seller’s and Purchaser’s claims under this Section 3.3 (d) shall be subject to a limitation period of 10 years.

(e)

Seller shall procure that, at least one day prior to the Effective Date, (i) Target and EPP GmbH will convert any profit rights of Target (the “EPP Profit Transfer Payable”) or any obligations of Target to compensate losses of EPP GmbH under the EPP Profit Transfer Agreement (the “EPP Loss Balancing Payable”), each for the period beginning on 1 January 2010 and ending on the EPP FY Date, if any, into a loan receivable of Target in the amount equal to the face value of such profit rights (the “EPP Loan Receivable”) or a loan payable of Target in the amount equal to the face value of such losses (the “EPP Loan Payable”), respectively, by way of executing a loan agreement between Target and EPP GmbH, effective from the day following the EPP FY Date, and (ii) Target will sell and assign its EPP Loan Receivable to Seller, or, as the case may be, Seller will assume by way of assumption of debt (befreiende Schuldübernahme) the EPP Loan Payable, in each case by way of a sale and transfer/assignment agreement (together with the EPP Share Transfer the “EPP Transfer”) (the agreements mentioned in lit. (i) and (ii) substantially in the form of the draft attached as Schedule 3.3 (e)). In respect of any unfulfilled obligations of Target under the EPP Profit Transfer Agreement towards EPP GmbH including any obligation to compensate EPP GmbH for any loss arising or having arisen in the current or any previous fiscal year (but excluding the EPP Loan Payable and the EPP Loss Balancing Payable) the following shall apply: (i) Purchaser shall, subject to Closing, cause Target to, discharge in full any such obligation to EPP GmbH in accordance with the terms of the EPP Profit Transfer Agreement, simultaneously step by step, and (ii) Seller shall, subject to Closing, pay to Purchaser (but not to Target) an amount equal to the amount of the obligation so to be discharged by Target. In addition, Seller and New Packaging shall indemnify and hold harmless Purchaser from any obligation of Purchaser and Target arising under the EPP Profit Transfer Agreement to furnish security to any creditor of EPP GmbH as a result of the termination of the EPP Profit Transfer Agreement an d under the EPP Transfer. Subject to Closing, Purchaser shall indemnify and hold harmless EPP GmbH from any obligation of EPP GmbH arising under the EPP Profit Transfer Agreement including to transfer any profits arising or having arisen in the current or any previous fiscal year (but excluding the EPP Loan Receivable and the EPP Profit Transfer Payable) to Target. Seller’s and Purchaser’s claims under this Section 3.3 (e) shall be subject to a limitation period of 10 years.

(f)

Seller shall (x) make promptly after the EPP FY Date - with discharging effect also for Target - a payment to EPP GmbH in the amount of the estimated EPP Loss Balancing Payable/EPP Loan Payable, if any, (y) cause the determination and auditing of the annual accounts of EPP GmbH for the fiscal year ending on the EPP FY Date without undue delay, and (z) make promptly after such annual accounts have been audited any additional payments to EPP GmbH - with discharging effect also for Target - needed to fully satisfy the EPP Loss Balancing Payable/EPP Loan Payable.

3.4	Sale of EPP GmbH

Prior to the Effective Date, but after the EPP FY Date, Seller shall purchase and accept the transfer, and shall procure that Target sells and transfers, all of Target’s share(s) in EPP GmbH to Seller pursuant to a share sale and transfer agreement substantially in the form of the draft attached as Schedule 3.4 (“EPP Share Transfer”).

SECTION 4. PURCHASE PRICE, PAYMENTS, GUARANTEE

4.1	Purchase Price

(a)	The purchase price for the Sold Share (the “Purchase Price”) shall be equal to

(i)	EUR 240,000,000 (in words: two hundred forty million Euro) (the “Stated Purchase Price”);

(ii)	plus an amount equal to the Cash and minus an amount equal to the Financial Debt (in each case, as defined below); and

(iii)

plus an amount by which the Working Capital exceeds the Target Amount, or minus an amount by which the Working Capital falls short of the Target Amount.

(b)	Definitions

“Cash” means the aggregate amount of:

(i)

any cash on hand (Kassenbestand), deposits with the federal reserve bank or other financial institutions (Bundesbank- und Guthaben bei Kreditinstituten) and cheques (all within the meaning of section 266 (2) B.IV. HGB) (to the extent finally credited and they are finally available to the Companies at their free disposition for repayment of payables, in each case within 14 days after Closing);

(ii)

the current cash value of non-current securities (Wertpapiere des Anlagevermögens; section 266 (2) A.III.5 HGB) and other securities (sonstige Wertpapiere; section 266 (2) B.III.2 HGB) but in both cases only if and to the extent such securities can be freely disposed of by the Companies and the respective cash is finally available to the Companies at their free disposition for repayment of payables, in each case within 14 days after Closing; and

(iii)

Inter-Group Liabilities;

provided, however, that for the avoidance of doubt, Cash shall not include (A) any EPP Loan Receivable, to the extent assumed by Seller prior to the Effective Date, (B) any trade receivables, (C) any interest bearing receivables between Target and US Subsidiary, and (D) any third party deposits and prepayments.

“Financial Debt” means the aggregate amount (including any accrued interest thereon and any prepayment penalty, premium or additional amount that could become payable thereon) of:

(i)	debentures (Anleihen; section 266 (3) C.1 HGB) and other liabilities under profit participations, (convertible) bonds, options or other instruments and profit participation rights (Genussscheine),

(ii)	liabilities of the Companies vis-à-vis banks or other credit institutions (Verbindlichkeiten gegenüber Kreditinstituten; section 266 (3) C.2 HGB) and other long term, interest bearing debt,

(iii)

liabilities vis-à-vis any members of Seller’s Group including liabilities vis-à-vis Affiliates of any member of Seller’s Group (including any liabilities of the Companies under any cash pooling arrangements with Seller’s Group, other Inter-Group Receivables, under the ES Profit Transfer Agreement (including the ES Loan Receivable), the EPP Loan Payable to the extent not assumed by Seller or any liability of Target for (negative) purchase price under the EPP Transfer to the extent not settled before the Effective Date), but excluding any liabilities to furnish security to any creditor of EPP GmbH as a result of the termination of the EPP Profit Transfer Agreement (section 266 (3) C.6 and 7 HGB),

(iv)	liabilities arising from leases which would qualify as ‘financial leases’ under IFRS (including assurances for a creditor against loss),

(v)	cheque liabilities and obligations under bills (Wechselverbindlichkeiten; section 266 (3) C.5 HGB),

(vi)

external liabilities of any third party excluding those liabilities set forth on Schedule 4.1 (b)(vi) (including any member of Seller’s Group) (y) for which any of the Companies has provided a direct or indirect guarantee, surety (Bürgschaft) or is in any other way liable for payment (including guarantees in the form of an agreement to repurchase or reimburse and assurance for a credito r against loss), or (z) which are secured by a pledge or any other encumbrances (other than encumbrances arising by the operation of law in the ordinary course of business),

(vii)

liabilities arising out of or in connection with any severance, retention or transaction bonuses, or any costs (e.g. advisor fees, but excluding any costs to the extent reflected in the calculation of the Working Capital), that may become payable (and disregarding the timing of when such liabilities would be recorded on the balance sheet) by Purchaser or the Companies in connection with the Transaction pursuant to Contracts entered into by the Companies or any member of the Seller’s Group prior to the Closing, and

(viii)

any accruals for pensions and other liabilities (Rückstellungen für Pensionen und ähnliche Verpflichtungen; section 266 (3) B.1 HGB), and any unfunded or underfunded pension liabilities or other employee benefits obligations including long services awards, jubilee payments, bonuses (to the extent not reflected in other accruals (sonstige Rückstellungen)), disability benefits, defined benefit obligations, termination and (par tial) retirement indemnities (including old-age part-time) or other post-retirement benefits and respective service costs.

Financial Debt shall not include (i) any EPP Loan Payable, to the extent assumed by Seller prior to the Effective Date, (ii) any trade payables (iii) any amounts for actual or accrued liabilities in relation to Taxes, and (iv) any interest bearing payables between Target and US Subsidiary.

“Working Capital” means the balance of the following line items, prepared in accordance with the sample statement attached hereto as Schedule 4.1 (b):

(i)	stock including prepaid stock (Vorräte; section 266 (2) B.I HGB),

(ii)	plus trade receivables (Forderungen aus Lieferungen und Leistungen; section 266 (2) B.II.1 HGB),

(iii)

plus trade receivables of the Companies against any members of Seller’s Group including trade receivables vis-à-vis Affiliates of any member of Seller’s Group (section 266 (2) B.II.2 and 3 HGB), however, for the avoidance of doubt, excluding any receivables under any cash pooling arrangements with Seller’s Group, any receivable of Target under the ES Profit Transfer Agreement and the EPP Profit Transfer Receivable and including value added tax (if any) on such trade receivables,

(iv)	plus other assets (sonstige Vermögensgegenstände; section 266 (2) B.II.4 HGB),

(v)	plus deferred expenses and accrued income (aktivische Rechnungsabgrenzungsposten, section 266 C. HGB),

(vi)	less tax accruals (Steuerrückstellungen, section 266 (3)B.2 HGB),

(vii)

less other accruals (sonstige Rückstellungen; section 266 (3) B.3 HGB), for the avoidance of doubt excluding any accruals for pensions, jubilees and partial retirement,

(viii)

less trade payables (Verbindlichkeiten aus Lieferungen und Leistungen, section 266 (3) C.4 HGB),

(ix)	less received prepayments (erhaltene Anzahlungen auf Bestellungen; section 266 (3) C.3 HGB),

(x)

less trade payables of the Companies against any members of Seller’s Group including trade payables vis-à-vis Affiliates of any member of Seller’s Group (section 266 (3) C.6 and 7 HGB), however, for the avoidance of doubt, excluding any payables under any cash pooling arrangements with Seller’s Group, the ES Profit Transfer Receivable and the EPP Profit Transfer Payable and including value added tax (if any) on such trade receivables,

(xi)	less other liabilities (sonstige Verbindlichkeiten; section 266 (3) C.8 HGB), and

(xii)

less deferred income and accrued expense (passivische Rechnungsabgrenzungsposten, section 266 (3) D HGB),

however, excluding any trade receivables or trade payables and received prepayments existing between Target and US Subsidiary;

in each case of Cash, Financial Debt and Working Capital as of the Effective Date 24.00 hours for the Companies aggregated and as shown in the Effective Date Certificate, prepared in accordance with Section 6, and in any event, without duplication, i.e. without accounting for any asset, liability, risk, transaction or other item more than once.

“Target Amount” means an amount of EUR 4,500,000 (in words: four million five hundred thousand Euro).

4.2	Settlement of Inter-Group Debt

(a)

“Inter-Group Debt” means the aggregate financial indebtedness of the Companies towards Seller’s Group as of the Effective Date 24.00 hours (the “Inter-Group Receivables”) and of Seller’s Group towards the Companies as of the Effective Date 24.00 hours (the “Inter-Group Liabilities”), as both are exclusively listed and described and shown with respective amounts as a of a specified date (which amounts shall be without prejudice to the calculation of the Inter-Group Debt) or calculation methods, set forth in Schedule 4.2 (a), comprising in each case all liabilities (including any accrued interest thereon) under all borrowings between the Companies and Seller’s Group including any owings under any cash pooling arrangements with Seller’s Group, but other than trade payables which shall be discharged in accordance with their respective terms; for the avoidance of doubt, any receivables or payables under the ES Profit Transfer Agreement and the EPP Profit Transfer Agreement shall not form part of the Inter-Group Debt.

(b)

The Parties agree and shall procure that with effect as of the Closing, (i) Seller and the respective member(s) of Seller’s Group sell(s) and assign(s) to Purchaser, the Inter-Group Receivables, and (ii) Purchaser assumes all Inter-Group Liabilities with full discharge of the respective member(s) of Seller’s Group as the original debtor(s) (befreiende Schuldübernahme), in each case of (i) and (ii) pursuant to a sale, transfer and assumption agreement, which already provides for the consent of the respective debtors, substantially in the form of the draft attached as Schedule 4.2(b).

(c)

If the nominal amount of the assigned Inter-Group Receivables minus the nominal amount of the assumed Inter-Group Liabilities, in each case, including any interest accrued thereon until the Effective Date (the “Inter-Group Net-Debt Amount”) is a positive amount, Purchaser shall pay as consideration for the assignment set forth under Section 4.2 (b) a purchase price equal to the Inter-Group Net-Debt Amount to Seller (also on behalf of the respective member of Seller’s Group, whose approval shall be contained in the sale, transfer and assumption agreement mentioned in Section 4.2(b)).

(d)	If the Inter-Group Net-Debt Amount is a negative amount, Seller (also on behalf of the respective member of Seller’s Group) shall pay as consideration for the assumption set forth under 4.2 (b), the Inter-Group Net-Debt Amount to Purchaser.

4.3	Payments at Closing

(a)	Not less than five Business Days prior to the Closing Date, Seller shall notify Purchaser in writing of Seller’s good faith estimate, in accordance with the principles set out in Section 6.2, of

(i)	the Purchase Price (including an estimate of the Cash, the Financial Debt and of the Working Capital (the “Estimated Purchase Price”));

(ii)	the Inter-Group Net-Debt Amount (the “Estimated Inter-Group Net-Debt Amount”); and

(iii)

the ES Loan Receivable Purchase Price (the “Estimated ES Loan Receivable Purchase Price”).

(b)

The notice given by Seller to Purchaser in accordance with Section 4.3(a) is hereinafter referred to as “Seller’s Pre-Closing Notice” and shall be supported by documentation outlining in reasonable detail the calculation of the individual estimates including their respective line items. Seller and Purchaser shall discuss and try to solve any differences regarding the Seller’s Pre-Closing Notice in good faith following delivery thereof. If and to the extent Seller and Purchaser (i) agree to any adjustment to the values included in the Seller’s Pre-Closing Notice, such agreement will be set forth in writing, or (ii) cannot agree on mutually acceptable values for the Seller’s Pre-Closing Notice, the Parties hereby agree to u se the Target Amount for Net Working Capital and all other amounts to be computed therein as calculated on the basis of the 2009 Audited Financial Statements, and in either case, the Estimated Purchase Price, Estimated Inter-Group Net-Debt Amount and Estimated ES Loan Receivable Purchase Price as contemplated by any revision to Seller’s Pre-Closing Notice as contemplated by this Section 4.3(b) shall be deemed to be the Estimated Purchase Price, Estimated Inter-Group Net-Debt Amount and Estimated ES Loan Receivable Purchase Price, for all purposes.

(c)	On the Closing Date, Purchaser shall pay to Seller in accordance with Section 5.4 an amount equal to

(i)	the Estimated Purchase Price,

(ii)	plus an amount equal to the Estimated ES Loan Receivable Purchase Price; and

(iii)

plus an amount equal to any positive Estimated Inter-Group Net-Debt Amount, or minus an amount equal to any negative Estimated Inter-Group Net-Debt Amount.

4.4	Settlement Payments after the Closing Date

(a)

If the Purchase Price, the Inter-Group Net-Debt Amount or the ES Loan Receivable Purchase Price payable to Seller as finally determined in accordance with Section 6 is higher or lower than the Estimated Purchase Price, the Estimated Inter-Group Net-Debt Amount or the Estimated ES Loan Receivable Purchase Price, respectively, the Parties shall pay any differences to the respective other Party within five Business Days after the Purchase Price, the Inter-Group Net-Debt Amount and the ES Loan Receivable Purchase Price have been finally determined in accordance with Section 6.

(b)

The amount of any payments to be made under Section 4.4(a) shall bear interest from and including the Closing Date up to but excluding the date of payment at a rate of EURIBOR plus 4% per annum (calculated daily on the basis of a year of 365 days and payable at the same time as the payment to which it relates). In addition, solely in the event that the Closing shall have occurred (i) pursuant to clause (y) of Section 5.1 and (ii) later than the fifth (5th) day following the first Business Day following the Effective Date, the payments of the Purchase Price, after determination pursuant to Section 4.4(a), shall bear interest from and excluding such fifth day until and excluding the date of the Closing, which interest shall computed in the same manners as proscribed by the immedia tely preceding sentence and upon the time of payments of such amounts contemplated by Section 4.4 (a).

(c)

The Parties agree that, upon all payments pursuant to this Section 4.4 having been made, all liabilities relating to payment of the Purchase Price, the Inter-Group Debt and the ES Loan Receivable Purchase Price shall be finally settled. Subject to the settlement of the Inter-Group Net-Debt Amount and the ES Loan Receivable Purchase Price in accordance with this Section 4 and any explicit rights under this Agreement, Seller shall not, and shall procure that no member of Seller’s Group will, raise any claims relating to Inter-Group Debt or the ES Loan Receivable against any of the Companies, and Purchaser shall not, and shall procure that none of the Companies will, raise any claims relating to the Inter-Group Debt or the ES Loan Receivable against any member of Seller’s Group.

4.5	Mode of Payment; Default; Set-off

(a)

Any payments to be made under this Agreement shall be made in Euro by irrevocable wire transfer of immediately available funds to the respective bank accounts. Payments to be made by Purchaser in accordance with this Agreement shall be made to the bank account as set forth in Seller’s Pre-Closing Notice (the “Seller’s Bank Account”). Payments to be made by Seller to Purchaser in accordance with this Agreement shall be made to a bank account notified by Purchaser to Seller not less than five Business Days prior to the relevant due date (the “Purchaser’s Bank Account”). Any such payment shall be deemed to have been duly made only upon the final crediting of the full amount payable (not taking into acco unt any fees, costs, charges, withholdings or other deductions on the amount paid except for fees, costs or charges of the recipient’s bank) to the relevant bank account on, and as of a value date no later than, the relevant due date.

(b)	Any failure by either Party to make any payment pursuant to this Section 4 when it is due shall result in such Party’s immediate default (Verzug), without any reminder by the other Party being required.

(c)	No Party shall be entitled to exercise any right of set-off or retention right with respect to its payment obligations pursuant to this Section 4.

4.6	Exchange Rate

Any amount of Cash, Financial Debt, Inter-Group Debt or Working Capital which is not denominated in Euro shall be translated for the purposes of calculating the Purchase Price, the Inter-Group Net-Debt Amount, the ES Loan Receivable Purchase Price, the Estimated Purchase Price, the Estimated Inter-Group Net-Debt Amount and the Estimated ES Loan Receivable Purchase Price into Euro. The exchange rate applied shall be:

(a)

for the purpose of calculating the Estimated Purchase Price, the Estimated Inter-Group Net-Debt Amount and the Estimated ES Loan Receivable Purchase Price the exchange rate which is published by the European Central Bank (the “Euro Reference Rate”) on the day immediately before the date when Seller’s Pre-Closing Notice is given or, if no Euro Reference Rate is published on this day, on the day when the Euro Reference Rate was last published before such date; and

(b)

for the purpose of calculating the Purchase Price, the Inter-Group Net-Debt Amount and the ES Loan Receivable Purchase Price the Euro Reference Rate on the Effective Date or, if no Euro Reference Rate is published on the Effective Date, on the day when the Euro Reference Rate was last published before the Effective Date.

For any currencies for which no Euro Reference Rate is quoted by the European Central Bank, the respective rate shall be determined in accordance with the exchange rates which are published by a first class European bank of international standing (to be chosen jointly by the Seller and Purchaser in good faith) as of the relevant day at or around 11.00 a.m. This shall apply respectively for any other references to Euro in this Agreement.

SECTION 5. CLOSING

5.1	Time and Place of Closing

The closing of the Transaction, i.e. the payments by Purchaser according to Section 4.3(c), the assignment and transfer of the Sold Share and the other actions referred to in Section 5.4 below, unless waived (together the “Closing”), shall take place on the date (the “Closing Date”) that is (x) the first Business Day following the Effective Date as determined pursuant to Section 3.2(a) if all of the Closing Conditions have been satisfied or waived as of such date, or (y) if not occurring on the date as contemplated by clause (x), the second (2nd) Business Day following the date (for avoidance of dou bt, in any event occurring after the Effective Date) on which all of

the Closing Conditions have been satisfied or waived (other than those Closing Conditions that by their terms will be satisfied at the Closing and in such case subject to the satisfaction or waiver thereof). The Closing shall take place in the offices of Heymann & Partner, Taunusanlage 1, 60329 Frankfurt am Main, or any other place agreed upon by the Parties.

5.2	Closing Conditions

(a)	The obligations of Purchaser and Seller to consummate the Closing are subject to the satisfaction of all of the following conditions precedent (the “Joint Closing Conditions”):

(i)	The Closing shall be permissible due to any merger control clearance or antitrust approvals having been obtained (including lapse of respective waiting periods without prohibition) for Germany and the countries as determined pursuant to Section 12(a).

(ii)

The review periods under section 53 para. 2 or, respectively, 3 AWV have expired or have been terminated by the Federal Ministry of Economics and Technology (Bundesministerium für Wirtschaft und Technologie) and the unconditional approval of the Federal Ministry of Economics and Technology has been obtained or is deemed to have been obtained.

(iii)

The EPP Transfer has been consummated.

(iv)	The fiscal year of Target has been changed so as to terminate on the Effective Date and the competent tax office has consented to such change.

(v)	No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any law or order which is in effect on the Closing Date, which has or would have the effect of prohibiting the transactions contemplated hereby or making such transactions illegal or subject to rescission.

(b)	The obligations of Seller to consummate the Closing are subject to the satisfaction of all of the following condition precedent (the “Seller Closing Condition”):

(i)

Each of Purchaser and Purchaser Parent shall have complied in all material respects with all covenants contained in this Agreement to be performed by it prior to the Closing Date (other than, to the extent any covenant non-compliance is capable of being cured, such non-compliance that has been cured within ten days after receipt of written notice from Seller of such non-compliance); and Seller shall have received certificates substantially in the form of the drafts as attached hereto as Schedule 5.2 (b) signed by an authorized officer of Purchaser Parent and managi ng director of Purchaser, as applicable, to such effect.

(c)	The obligations of Purchaser to consummate the Closing are subject to the satisfaction of all of the following conditions precedent (the “Purchaser Closing Conditions”):

(i)

Each of Seller and New Packaging shall have complied in all material respects with all covenants contained in this Agreement to be performed by it prior to the Closing Date (other than, to the extent any covenant non-compliance is capable of being cured, such non-compliance that has been cured within ten days after receipt of written notice from Purchaser of such non-compliance); and Purchaser shall have received certificates substantially in the form of the drafts as attached hereto as Schedule 5.2 (c) signed by a managing director of Seller and New Packaging , as applicable, to such effect.

(ii)	There shall not have occurred any Material Adverse Effect on the Companies between the date hereof and the date that would be the Closing Date in the absence of this Section 5.2 (c)(ii).

(iii)

There shall not exist any Liens on the Sold Share or any Liens, other than Permitted Liens, on any of the assets of the Companies.

(d)	To the extent permitted by applicable law, the Parties may jointly waive any Joint Closing Condition, and Seller and Purchaser may waive any of their respective unilateral closing conditions, in each case by providing written notice to the other Parties.

5.3	Right to Rescind

(a)

If the Closing shall not have occurred (i) by 2 September 2010; provided, however, the right to rescission under this clause (i) shall not be available by either Party until 2 November 2010 if, at 2 September 2010, (A) all of the Closing Conditions other than those set forth in Sections 5.2(a)(i), 5.2(a)(iii) and 5.2(a)(iv), and other than those Closing Conditions that are to be satisfied at the Closing itself, have been satisfied or waived or (B) the Closing shall not have occurred primarily as a result of the failure of the Effective Date to have occurred in accordance with Section 3.2 (for avoidance of doubt, other than the failure of Closing Conditions that are to be satisfied at the Closing itself not having been satisfied or waived ), or (ii) if all the Closing Conditions set forth in Section 5.2 have been satisfied or waived (as applicable), other than those Closing Conditions that by their nature are to be satisfied at the Closing (all of which are capable of being satisfied as of the Closing), and the Parties have failed to consummate the Closing following the date the Closing should have occurred pursuant to Section 5.1; provided that this Section 5.3 (a)(ii) may only be relied upon by a Party who shall have provided written notice to the other Party of its intent to rely on this Section 5.3 (a)(ii) following the date on which it is entitled to do so and the other Party shall have failed to close in breach of this Agreement after the Party delivering notice has provided the recipient Party with a right to cure such breach during the five (5) Business Day period f ollowing such notice, then in the case of clause (i) or (ii) above, each Party shall be entitled to rescind (zurücktreten) this Agreement by giving written notice to the other Parties; provided, however, that no Party may rescind this Agreement in reliance on this Section (a) if (x) the failure of any of the Closing Conditions to be satisfied or the Closing to have occurred is primarily the result of such Party’s breach of, or non-compliance with, this Agreement, (y) the document referred to in Section 5.5 has been executed by the Seller and the Purchaser, or

(z) the closing actions as described in Section 5.4 have been taken. Any termination right of Purchaser and Purchaser Parent can only be exercised jointly by both Purchaser and Purchaser Parent in order to be effective. Any termination right of Seller and EPP GmbH can only be exercised jointly by both Seller and EPP GmbH in order to be effective.

(b)

Upon termination of this Agreement, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to the other Parties (other than for breach of this Agreement prior to such termination), provided however, that the Confidentiality Agreement and Sections 1, 5.3 (b), 14.2 to 14.9 and Section 15 shall remain in full force and effect.

5.4	Closing Actions

On the Closing Date, the Parties undertake to take the following actions, either jointly or individually, as the case may be, simultaneously step by step (Zug um Zug):

(a)	delivery by Seller and receipt of the Purchaser of originals of the resignation letters or the revocations of the appointment, effective prior to or at Closing, of

(i)	Mr. Michael David Graham Joy as managing director (Geschäftsführer) of Target and as director of US Subsidiary;

(ii)	Mr. Michael Mack as proxy holder of Target and as director of US Subsidiary;

(iii)

Mr. Lee Ritter as treasurer of US Subsidiary; and

(iv)	Mrs. Ilse Buck, Mr. Markus Geiges, Mr. Jürgen Groß and Mr. Ulrich Stirmlinger, each as proxy holder of Target;

(b)

delivery by Seller and receipt of the Purchaser of copies of the agreements mentioned in Sections 3.2, 3.3(a), 3.3(e) and 3.4, providing inter alia for the fact that (i) the ES Profit Transfer Agreement has been terminated with effect as of the end of the Effective Date, (ii) the ES Profit Transfer Receivable has been converted into the ES Loan Receivable and (iii) the EPP Transfer has been effected;

(c)

delivery by Seller and receipt of Purchaser of the original of a document, substantially in the form of the draft attached as Schedule 5.4 (c), notarized if needed, that, fully and irrevocably provides, (i) the Companies have been released, or will be released only subject to payment of the amount specified in Section 5.4 (h) below in accordance with this Agreement, from all outstanding liabilities, including letters of credit, collateral, other encumbrances and guarantees, in relation to the obliga tions under the facilities agreements dated 28 September 2006 as amended and supplemented from time to time between IKB Deutsche Industriebank AG as facility agent and other financing parties and certain members of Seller’s Group and Target as borrowers and guarantors (the “Seller’s Group Financing”), (ii) the share pledge over the Sold Share and all other collaterals over assets of the Companies (including land charges), in both cases in connection with Seller’s Group Financing, have been released or will be released only subject to payment

of the amount specified in Section 5.4 (h) below in accordance with this Agreement, and (iii) all respective lending parties pursuant to Seller’s Group Financing have approved the transactions contemplated by this Agreement fully, irrevocably and unconditionally or only subject to payment of the amount specified in Section 5.4 (h) below in accordance with this Agreement;

(d)

delivery by Seller and receipt of the Purchaser of an accurate copy of an agreement substantially in the form of the draft attached as Schedule 5.4 (d), that, except for the Transitional Service Agreement as referred to under paragraph (f) below, any service and supply and other agreements with members of Seller’s Group and the cash pool employed between the members of Seller’s Group and Target, all of which are specifically listed in Schedule 5.4 (d), have been cancelled as of the Closing Date at the latest;

(e)	execution of an agreement by the Parties with respect to the sale, transfer or assumption of the Inter-Group Debt substantially in the form as attached hereto as Schedule 4.2(b);

(f)	execution of the Transitional Service Agreement among Seller, EPP GmbH and Target;

(g)	execution by Seller and Purchaser of a share transfer agreement regarding the Sold Share, substantially in the form attached hereto as Schedule 5.4 (g); and

(h)

payment by Purchaser in accordance with Section 4.3(c) of an amount equal to the Estimated Purchase Price (i) plus an amount equal to the Estimated ES Loan Receivable Purchase Price; (ii) plus an amount equal to any positive Estimated Inter-Group Net-Debt Amount or minus an amount equal to any negative Estimated Inter-Group Net-Debt Amount.

To the extent permitted by applicable law, each Party may waive any of the closing actions in this Section 5.4 by providing written notice thereof to the other Parties if and to the extent such Party is not responsible for such closing action pursuant to this Section 5.4.

5.5	Post-Closing Actions

(a)

Immediately after Closing has occurred, the Parties shall execute a document substantially in the form attached as Schedule 5.5 (a) confirming for declaratory purposes only (nur zu Beweiszwecken) in writing that the Closing Conditions have been fulfilled or waived, all actions to be taken on the Closing Date under Section 5.4 have been taken or waived in accordance with this Agreement and that as a consequence thereof the Sold Share has been transferred to Purchaser.

(b)	Immediately after Closing has occurred, Seller shall deliver to Purchaser a confirmation by fax from Seller’s bank that the amounts according to Section 5.4 have been credited to Seller’s Bank Account.

(c)	At Closing, and to be effective upon the occurrence of Closing, Seller and Purchaser will notify the acting notary public that a new shareholders’ list substantially in the form attached as Schedule 5.5 (c) shall be filed with the commercial register of Target.

SECTION 6. EFFECTIVE DATE FINANCIAL STATEMENTS

6.1	Preparation of Effective Date Financial Statements

(a)

As promptly as practicable, but, in any event, within 90 days after the Closing Date, Seller shall prepare, or cause to be prepared, and deliver to Purchaser (i) financial statements for each of the Companies as of the Effective Date 24.00 hours (comprising in case of Target (x) a balance sheet as of the Effective Date (24.00 hours) and (y) a profit and loss account for the period from 1 January 2010 until the Effective Date 24.00 hours together with an audit report prepared by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft thereon and in case of US Subsidiary an unaudited balance sheet as of the Effective Date (24.00 hours) without a profit and loss account) (the “Effective Date Financial Statements”); and (ii) on a consolidated basis a certificate (the &# 8220;Effective Date Certificate”) based on the Effective Date Financial Statements setting forth the calculation of the Cash, the Financial Debt, the Working Capital, the Inter-Group Liabilities and Inter-Group Receivable, the ES Loan Receivable, the ES Loan Receivable Purchase Price and the Purchase Price. For illustrative purposes only, attached as Schedule 6.1 (a) is a pro-forma sample calculation of each of Cash, the Financial Debt, the Working Capital, the Inter-Group Liabilities and Inter-Group Receivable, the ES Loan Receivable, the ES Loan Receivable Purchase Price and the Purchase Price calculated on the basis of the 2009 Unaudited Financial Statements , based on the assumption that 31 December 2009 was the Effective Date.

(b)

Purchaser will cooperate and assist, and shall cause the Companies to cooperate and assist, in a commercially reasonable manner, Seller and its representatives and advisors in the preparation of the Effective Date Financial Statements. Such cooperation and assistance shall include, without limitation, making available all relevant books and records of the Companies and any other relevant information relating to the Companies, providing access to the Companies’ premises, and allowing interviews with the Companies’ directors, officers and employees, each during normal business hours and upon reasonable notice and without, at the Purchaser’s reasonable discretion, disturbing the business operations of Purchaser or the Companies.

6.2	Accounting Principles

The Effective Date Financial Statements and the Seller’s Pre-Closing Notice shall be prepared, subject to deviations explicitly provided for in Section 4.1(b),

(a)	in the case of Target:

(i)

to the extent legally required, in compliance with the changes due to the German Act on the Modernization of the Accounting Law (BILMOG); provided, that for the purposes of calculating the items relating to the Purchase Price, this Section 6.2 (a)(i) shall apply only to the extent it was applied to and used in the preparation of the 2009 Unaudited Financial Statements and estimates of the Purchase Price; and

(ii)	subject to (i), in compliance with past practice (unter Wahrung der Grundsätze der Bilanzierungs- und Bewertungskontinuität) and unchanged exercise of all election rights for passivation and activation according to applicable laws, and

(iii)

subject to (i) and (ii), in accordance with, the generally accepted accounting principles as applied in Germany (HGB; Grundsätze ordnungsgemäßer Buchführung) for commercial annual financial statements (handelsrechtlicher Jahresabschluß), including the principles of lowest value and careful accounting (Niederstwert- und Vorsichtsprinzip), continuation of all past valuation methods, the principles of a prudent and wise businessman (Prinzipien und Handlungsweisen eines vorsichtigen und gewissenhaften Kaufmanns), and

(iv)	subject to (i) to (iii), on a basis consistent with the principles used in the preparation of the Audited Financial Statements and the 2009 Audited Financial Statements (provided that in case of any inconsistencies, the 2009 Audited Financial Statements shall prevail); and

(v)	subject to (i) to (iv), in accordance with the sample statement of Working Capital attached hereto as Schedule 4.1(b); and

(b)	in the case of US Subsidiary in accordance with:

(i)	the United States generally accepted accounting principles; and

(ii)	subject to (i), in accordance with the sample statement of Working Capital attached hereto as Schedule 4.1(b); and

(c)

The Effective Date Financial Statements shall be consistent in the format and level of detail as set forth in Schedule 7.5(b) and the Effective Date Certificate shall be prepared in accordance with the format as set forth in Schedule 6.1(a). Notwithstanding the foregoing, the following principles and specific accounting principles shall apply to the Effective Date Financial Statements:

(i)

The Effective Date Financial Statements shall be prepared on a going-concern basis, disregarding (x) the transactions contemplated hereby or any effects resulting therefrom, (y) any costs related to the integration of the Companies into Purchaser’s group taken at the request of Purchaser, and (z) any actions or intentions of Purchaser to the extent they would be or could be required, or would be permitted, by the accounting rules to be taken into account;

(ii)	subsequent events (wertaufhellende Tatsachen) shall only be taken into account if they became known prior to Purchaser’s delivery of any response to the preparation of the Effective Date Financial Statements in accordance with Section 6.1; and

(iii)

the accounting option with respect to the increase of the pension accruals pursuant to article 67 para. 1 of the Introductory Act for the German Commercial Code (EGHGB) shall be exercised so that the increase amount of the pension accruals will be distributed equally over 15 years.

6.3	Review of Effective Date Financial Statements and Effective Date Certificate

Seller shall, upon reasonable advance notice of Purchaser and during normal business hours, provide Purchaser and its advisors and representatives access to all relevant books and records and other information of Seller or any other member of the Seller’s Group if and to the extent such information relates to the Companies and is reasonably deemed necessary by Purchaser for the purpose of Purchaser’s review of the Effective Date Financial Statements pursuant to this Section 6.3, including access to managing directors and employees of the Seller and providing any of Seller’s calculations of the relevant items or amounts based upon the aforementioned definitions, policies and principles or any supporting information with respect thereto; provided that Seller’s managing director shall have the right to attend any meetings and participate in any conversat ions between Purchaser and its representatives or advisors with employees of the Seller for such purposes.

If Purchaser believes that the Effective Date Financial Statements have not been prepared in accordance with the principles set forth in Section 6.2 or Seller’s calculation (as set forth in the Effective Date Certificate) of any item or amount contained in the Effective Date Certificate (as delivered by Seller pursuant to Section 6.1) is not correct, Purchaser may, within 45 days after delivery of the respective documents referred to in Section 6.1, deliver a written notice to Seller disagreeing with Seller’s calculation and setting forth Purchaser’s calculation of the relevant items or amounts based upon the aforementioned definitions, policies and principles. Any such notice of disagreement shall specif y, in reasonable detail, those items or amounts as to which Purchaser disagrees and Purchaser shall be deemed to have agreed to all other items and amounts set forth in the Effective Date Financial Statements and the Effective Date Certificate delivered by Seller pursuant to Section 6.1.

6.4	Dispute Resolution

(a)

If Purchaser has duly delivered a notice of disagreement in accordance with Section 6.3, Purchaser and Seller shall, during the 30 day period following such delivery (or any other period of time mutually agreed upon between Seller and Purchaser), use all commercially reasonable efforts to reach an agreement on the disputed items or amounts. Any agreement on any of the disputed items or amounts shall be valid only if reflected in writing. If and to the extent that, during such period, Seller and Purchaser are unable to reach such agreement, thereafter either Party may refer the remaining differences to an internationally recognized firm of independent public accountants to decide upon them (the “Accounting Firm”) mutually agreed upon by Sell er and Purchaser. If Seller and

Purchaser cannot mutually agree upon the Accounting Firm within two weeks after either Party has requested its appointment, the Accounting Firm shall be appointed, upon request of either Party, by the Institute of Chartered Accountants (Institut der Wirtschaftsprüfer) in Düsseldorf (Germany).

(b)

The Accounting Firm, acting as an expert (Schiedsgutachter) and not as an arbitrator, shall, based on the provisions set forth in Section 4 and Section 6.2, decide whether and to what extent the Effective Date Financial Statements or the Effective Date Certificate require adjustment. The Accounting Firm, in making its determination, shall only take into account any remaining differences submitted to it and shall limit its determination to the scope and the maximum amount of the dispute between the Parties.

(c)

Purchaser and Seller shall cooperate in good faith with and assist, and shall cause their respective accountants and controlled Affiliates to cooperate with and assist, the Accounting Firm in the conduct of its review. Such cooperation and assistance shall include, without limitation, the making available to the Accounting Firm of all relevant books and records of the Companies and any member of the Seller’s Group, respectively, and any other information relating to the Companies and any member of the Seller’s Group, respectively. The Parties shall have adequate opportunity to present their views to the Accounting Firm (with attendance possibility for all Parties).

(d)

The Parties shall instruct the Accounting Firm to deliver its written opinion (including reasons for the Accounting Firm’s decision on each disputed item) to them no later than one month (or within any other period of time mutually agreed between the Parties) after the remaining differences have been referred to it. The decision of the Accounting Firm shall be conclusive and binding on the Parties (within the limits set forth in section 319 para. (1) BGB) and shall not be subject to any appeal. The fees and disbursements of the Accounting Firm shall be shared between Seller and Purchaser in proportion to their respective success and defeat as determined by the Accounting Firm (section 91a para. 1 German Code of Civil Procedure (ZPO)).

6.5	Final Amounts

For the purpose of the calculation of the Purchase Price, the Inter-Group Net-Debt Amount, and the ES Loan Receivable Purchase Price, the (final) Cash, Financial Debt, the Working Capital, and the ES Loan Receivable shall be the relevant amounts as shown in the Effective Date Certificate, delivered by Seller pursuant to Section 6.1, if and to the extent no notice of disagreement with respect thereto is duly and within the relevant time period delivered pursuant to Section 6.3 or, if and to the extent such a notice of disagreement is delivered, either as agreed by Purchaser and Seller or, in the absence of such agreement or for any disputed items or amounts not covered by any agreement, as shown in the binding Accounting Firm’s calculation delive red pursuant to Section 6.4.

SECTION 7. SELLER’S AND NEW PACKAGING’S REPRESENTATIONS

Seller hereby represents and warrants to Purchaser in the form of an independent undertaking (section 311 para. 1 BGB) that, except as set forth in the disclosure schedule attached hereto as Schedule 7 with sections corresponding to the sections of this Agreement (the “Disclosure Schedule”), the statements in this Section 7, except for those statements in this Section 7 which relate to New Packaging, are true and complete as of the date hereof and will be true and complete as of the Closing Date, and New Packaging hereby represents and warrants to Purchaser in the form of an independent undertaking (section 311 para. 1 B GB) that, except as

set forth in the Disclosure Schedule, the statements in Sections 7.1, 7.3 7.4, 7.8 and 7.10, in each case only if and to the extent such statements relate to New Packaging, are true and complete as of the date hereof and will be true and complete as of the Closing Date, provided in each case, however, that representations which are expressly made as of a specific date shall be true and complete only as of such date. The scope and content of each representation of Seller and, as applicable, New Packaging contained in this Section 7, as well as Seller’s and/or New Packaging’s liability arising thereunder, shall be exclusively defined by the provisions of this Agreement (in particular the limitations on Purchaser’s rights and remedies set forth in Section 9 below), which shall be an integral part of the representations of Seller and New Packaging, and no representation of Seller or New Packaging shall be construed as either a Seller’s or New Packaging’s guarantee (Garantie für die Beschaffenheit der Sache) within the meaning of sections 443 and 444 BGB.

7.1	Legal Organization of Seller, New Packaging and the Companies

(a)	Each of Seller and New Packaging is each a limited liability company duly incorporated, validly existing under German law, and has the requisite corporate power and authority to carry on their respective businesses as they are now being conducted.

(b)	The information in paragraphs (A) and (B) of the Preamble regarding Seller, the Companies and New Packaging is true and complete.

(c)	Target is a limited liability company duly incorporated and validly existing under German law and has the requisite corporate power and authority to carry on its business as it is now being conducted.

(d)	The US Subsidiary is a corporation duly incorporated, validly existing and in good standing under Delaware law and has the requisite corporate power and authority to own its assets and to carry on its business as it is being conducted.

7.2	Title in the Sold Share and US Subsidiary Shares

(a)	Seller is the sole legal and beneficial owner of the Sold Share and may freely dispose of the Sold Share. Target is the sole legal and beneficial owner of all capital stock of the US Subsidiary (the “US Subsidiary Shares”) and may freely dispose of the US Subsidiary Shares.

(b)	Other than the Sold Share and the US Subsidiary Shares, there is no other capital stock or equity securities, or right to acquire any capital stock or equity securities of the Companies authorized, issued, reserved for issuance or outstanding.

(c)

The Sold Share is free and clear of any security interests, Liens, pledges, or other encumbrances or third-party rights and is not subject to any transfer restrictions or pre-emption, option or similar acquisition rights, in each case except for rights provided under statutory law or under Target’s articles of association as in place on the date hereof and except as set forth in Schedule 7.2(c).

(d)	The Sold Share and the US Subsidiary Shares are validly issued, fully paid-in, not repaid and non-assessable (keine Nachschußpflicht).

(e)

Other than the interest in the US Subsidiary, Target does not hold, and is not obliged to acquire, directly or indirectly (via a subsidiaries, trustees or otherwise) any interests or participations in any other legal entity (other than the shares of EPP GmbH as of the date hereof, which shall be transferred to Seller prior to the Closing Date). US Subsidiary does not hold, and is not obliged to acquire, directly or indirectly any interests or participations in any other legal entity.

7.3	Sufficiency of Assets; Condition

(a)

The Companies own, or have a valid and continuing lease interest or right to use, all assets, properties and rights necessary or used to conduct the Solar Business as has been conducted since the Most Recent Fiscal Year End. No member of Seller’s Group (including New Packaging) or any of its Affiliates has retained or failed to deliver any asset or right of any kind or nature, which is owned by such party or to which it has rights, in either case, which are necessary to or used in the conduct of the Solar Business as has been conducted since the Most Recent Fiscal Year End or is currently proposed to be conducted in the future.

(b)	All of the material assets of the Companies are in reasonably good operating condition and repair, ordinary wear and tear excepted, and are usable in the ordinary course of business.

7.4	Authorization; No Insolvency; Corporate Governance

(a)

Each of Seller and New Packaging has all right, corporate power and authority to enter into this Agreement and each of the other transaction documents contemplated by this Agreement to which it is to be a party and to consummate the transactions contemplated hereby and thereby, including all shareholder approvals and the approval of the advisory board of the Seller. This Agreement and each other transaction document referred to in this Agreement when executed and delivered by Seller and New Packaging, as the case may be, will constitute, a valid and binding agreement of Seller and New Packaging, as the case may be, enforceable against Seller and New Packaging, respectively, in accordance with its terms.

(b)	Each Company has all right, corporate power and authority to enter into each of the other transaction documents contemplated by this Agreement to which it is to be a party and to consummate the transactions contemplated hereby and thereby.

(c)

Assuming compliance with any applicable requirements under merger control laws or any other regulatory requirements as set forth in Schedule 7.4 (c), the execution and performance of this Agreement by Seller, New Packaging and the Companies requires no approval or consent by any Governmental Authority and does not violate any applicable law, decision or order by any court or Governmental Authority binding on Seller, New Packaging or either Company.

(d)

No insolvency proceedings are applied for, commenced, terminated or rejected due to lack of assets with respect to Seller, New Packaging or any Company. None of Seller, New Packaging or any Company is over-indebted illiquid or otherwise insolvent under applicable laws, and no circumstances exist which would justify the initiation of insolvency or similar proceedings regarding Seller, New Packaging or any Company or their respective assets.

(e)	Schedule 7.4 (e) contains a copy of the current commercial register excerpt of Target. Such excerpt shows the true and complete facts of Target, which have to be registered in the commercial register.

(f)

Except for the ES Profit Transfer Agreement, the EPP Profit Transfer Agreement and the cash pooling agreement with Seller’s Group, no Company is a party to a domination and/or profit and loss transfer or other enterprise agreement (sections 291 et seq. AktG or respective provisions of foreign laws), a cash pooling agreement, any agreement of similar effect or any agreement which would permit any third party (including a member of Seller’s Group) to control, or vote at, any Company or obligate it to transfer its profits to such third party.

7.5	Financial Statements; Liabilities

(a)

Attached hereto as Schedule 7.5 (a) are true and correct copies of the audited financial statements of Target for the fiscal year ending 31 December 2008 (the “Audited Financial Statements” and the latest fiscal year of such Audited Financial Statements, the “Most Recent Fiscal Year End”). The Audited Financial Statements, and, as of the Closing Date, the 2009 Audited Financial Statements (i) have been prepared in a ccordance with the applicable statutory commercial provisions of the HGB and the generally accepted bookkeeping and accounting principles as applied in Germany (Grundsätze ordnungsgemäßer Buchführung), (ii) have been prepared on a basis consistent with the accounting and valuation principles and methods used in the preparation of Target’s financial statements for the preceding financial years (unless otherwise disclosed in the notes to the Audited Financial Statements) (unter Wahrung der Grundsätze der Bilanzierungs- und Bewertungskontinuität), and (iii) present a true and fair view of the assets and liabilities (Vermögenslage), financial position (Finanzlage) and earnings position (Ertragslage< /font>) of the Target as of the dates thereof.

(b)

Attached hereto as Schedule 7.5 (b) are true and correct copies of the unaudited 2009 balance sheet and profit and loss statement of Target, which were prepared in accordance with the applicable statutory commercial provisions of the HGB and the generally accepted bookkeeping and accounting principles as applied in Germany, were prepared on a basis consistent with the accounting and valuation principles and methods used in the preparation of Target’s balance sheets and profit and loss statements for the preceding financial years (unless required under applica ble statutory law) and present a true and fair view of the assets and liabilities (Vermögenslage), financial position (Finanzlage) and earnings position (Ertragslage) of Target as of the date thereof, other than adjustments which will not be material.

(c)

The Companies do not have any Liability (other than contingent liabilities) that have arisen since 31 December 2009, except and to the extent of (i) liabilities incurred in the ordinary course of business since 31 December 2009, (ii) liabilities that would be deducted as liabilities in the calculation of the Working Capital or Financial Debt, and (iii) liabilities that in the aggregate are not material to the Solar Business or the Companies.

(d)

To Seller’s Best Knowledge, the Companies do not have any contingent Liability, except and to the extent of (i) liabilities in the respective amounts reflected or reserved against in the 2009 Unaudited Financial Statements, (ii) liabilities incurred in the ordinary course of business, and (iii) liabilities that would be deducted as liabilities in the calculation of the Working Capital or Financial Debt.

7.6	Title to Assets; Encumbrances

Subject to Schedule 7.6, the Companies have good and valid title to, or, in the case of leased or licensed property and assets, valid leasehold interests or licenses in, all property and assets (whether real, personal, tangible or intangible) reflected in the 2009 Unaudited Financial Statements, and as of the Closing, the 2009 Audited Financial Statements, and in either case, those assets and interests acquired since the date of such financial statements, free and clear of all Liens (other than Permitted Liens), except for properties and assets which have been disposed of since the date of such financial statements, as applicable, in the ordi nary course of business or in connection with the EPP Transfer.

7.7	Compliance with Laws

Each Company is, and during the two years prior to the date hereof has been, in material compliance with all applicable laws, and none of the Companies has during the two years prior to the date hereof received any notice of any alleged material violation of law. The Companies hold, and at all time during the five years prior to the date hereof have held, all material governmental or regulatory licenses, consents, registrations, certificates, permits, authorizations or approvals required for the operation of the Solar Business and for the ownership, lease or operation of the Companies’ respective properties (collectively, the “Permits”), and all of such Permits are valid and in full force and effect, and the Companies have, during the two years prior to the date hereof, duly in all material respects performed and are and have been during the two years prior to the date hereof in material compliance with all of their respective obligations under such Permits. Each of the Companies is duly qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified.

7.8	Noncontravention

Except as set forth on Schedule 7.8, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the transactions referred to in Section 5.4), will: (i) conflict with or result in a breach of the articles of association, certificate of incorporation or bylaws or other organizational document of Seller, New Packaging or either Company; (ii) violate any law or decree to which Seller, New Packaging or either Company is, or its respective properties or assets are, subject; (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any Contract or Permit to which either Company is a party or by which it is bound; or (iv) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any Contract or Permit to which Seller is bound that would affect the Companies or Seller’s ability to enter into this Agreement or to consummate the transactions contemplated hereby, except, in the case of either clauses (ii) or (iii), for such conflicts, violations, breaches, defaults, accelerations, terminations, modifications, cancellations, rights or failures to give notice as would not, individually or in the aggregate, be material to the Solar Business or the Companies.

7.9	Intellectual Property Rights

(a)

Schedule 7.9 (a)(1) contains a complete and accurate list of all Intellectual Property Rights which are owned by and issued, registered or filed on behalf of any of the Companies and are material for the business of the Companies specifying as to each, as applicable: (i) the nature of such Intellectual Property Right, (ii) the owner of such Intellectual Property Right and (iii) the jurisdictions in which such Intellectual Property Right has been issued or registered, or in which an appl ication for such issuance or registration has been filed, and the patent, registration or application numbers. Schedule 7.9 (a)(2) sets forth a complete and accurate list of all agreements under which any third party has been granted a license or other right with respect to any material Intellectual Property Rights or Know-How owned by the Companies and agreements under which any third party (including Seller or any Affiliate of Seller) has granted to any of the Companies a license or other right to use any material Intellectual Property Rights or Know-How (other than licenses of mass-marketed software).

(b)

The Companies own all right, title and interest in and to, or have a valid and enforceable right to use, all material Intellectual Property Rights and Know-How necessary for the operation of the Solar Business as currently conducted, free and clear of all Liens, except for Permitted Liens (collectively, the “Company Intellectual Property Rights”). Except as set forth in Schedule 7.9 (b), (i) the Companies have paid all registration fees to the extent necessary to validly maintain all registrat ions with any regulatory authorities with respect to the Company Intellectual Property Rights, and (ii) none of the Companies has granted an exclusive license with respect to any Company Intellectual Property Rights to any third party (other than any of the Companies).

(c)

(i) None of the Company Intellectual Property Rights is subject to any outstanding judgment, injunction, order or decree issued against any of the Companies which materially restricts the use thereof by them and, to Seller’s Best Knowledge, no third party has challenged the ownership, validity, enforceability or use of any Company Intellectual Property Right, and there are no such claims against the Companies that were either made within the past six years or are presently pending; (ii) to Seller’s Best Knowledge, the Companies have not infringed or misappropriated any Intellectual Property Rights or Know-How of any third party; and (iii) to Seller’s Best Knowledge, no third party has infringed or misappropriated any Company Intellectual Property Rights.

(d)

(i) Neither Seller nor any of its Affiliates (other than the Companies) (A) license to or permit the use by the Companies of any of its or their Intellectual Property Rights or Know-How, or (B) share or co-own with the Companies any of its or their Intellectual Property Rights or Know-How, (ii) the Companies operate their businesses independently from Seller and its other Affiliates, and are not using or dependent on any facilities, resources, properties or assets owned, controlled, leased or licensed by Seller or any of its other Affiliates; and (iii) all Company Intellectual Property Rights will be owned or otherwise available for use by the Companies immediately following the Closing on terms and conditions identical to those under which the Companies owned or used such Company Intellectual Property Rights immediately prior to the Closing Date.

(e)

The Companies have taken all actions reasonably necessary to maintain and protect all of the Company Intellectual Property Rights, including the Companies’ ownership thereof (except to the extent ownership of such Company Intellectual Property Rights automatically vests in the Companies under applicable law), and including by executing written confidentiality agreements and invention or work product assignment agreements with all present and former employees and consultants. The Companies have not disclosed any Know-How or other confidential Company Intellectual Property Rights to any third party (including Seller or any Affiliate of Seller) other than pursuant to a written confidentiality agreement pursuant to which such third party agrees to protect such confidential information.

7.10	Litigation

(a)	There is not, and during the three (3) years prior to the date hereof has not been, any Litigation pending or, to the Seller’s Best Knowledge, threatened against either Company before any court, arbitrator or other Governmental Authority.

(b)

Neither Seller, New Packaging nor either Company is, or has been, in default under or in breach of any order, judgment or decree of any court, arbitrator or other Governmental Authority that is material to the Solar Business or the Companies, and neither Company is a party or subject to any such order, judgment or decree.

(c)

There is no Litigation pending against, or, to Seller’s Best Knowledge, threatened against any member of the Seller’s Group or the Companies before any court, arbitrator or

Governmental Authority which in any manner challenges or seeks to prevent, alter or materially delay the transactions contemplated by this Agreement.

7.11	Material Contracts

(a)

Schedule 7.11 (a) lists the following Contracts to which either of the Companies is, as of the date hereof, a party, where any primary contractual obligation (primäre Hauptleistungspflicht) or material secondary, accessory, contingent or future obligation thereunder have not been fulfilled: (i) any Contract pursuant to which the Solar Business sells any products providing for any “most favored nation” pricing or other similar pricing; (ii) any Contract that individually provides for any payme nt for or to the Companies after the date hereof of greater than 200,000 EUR (in words: Two Hundred Thousand Euro) (excluding however, any ordinary course accepted customer order or accepted purchase order); (iii) any Contract that requires the Companies to sell an unlimited amount of product or extends for a fixed term of greater than one (1) year unless it can be terminated by the Companies with less than (1) year without penalty; (iv) any Contracts with any sole source supplier or providing for any exclusive relationship; (v) any Contract expressly restricting the ability of the Companies to compete in any geographic region or with respect to any product; (vi) any Contracts which purport to bind Affiliates of the Companies; (vii) any partnership or joint venture; (viii) any Contract to acquire any other Person, equity interests, business or material non-inventory assets or to dispose of any Person, equity interests, business or material non-inventory assets; (ix) any Contract relating to indebtedness for borrowed money of the Companies or any guarantee of any Liability of any other Person (other than that which will be fully repaid prior to the Closing Date); or (x) to Seller’s Best Knowledge, agreements which the Seller reasonably believes are otherwise material to the Solar Business or the Companies (collectively, and together with the Contracts required to be listed on Schedule 7.9(a)(2) and the Contracts contemplated by Section 8.1(g)(vi) once entered into, the “Material Contracts”). Seller has delivered to the Purchaser true, correct and complete copies of all of the Material Contracts listed on Schedule < /font>7.11 (a).

(b)

Each Material Contract is a valid and binding agreement of either Company and, as of the date hereof, the counterparty(ies) thereto, as the case may be, and, as of the date hereof, is in full force and effect. Neither Company is in material default or material breach and, as of the date hereof, to Seller’s Best Knowledge, no event or condition has occurred which after notice or with the lapse of time or both would constitute a material default or material breach, in any respect under the terms of any Material Contract (with respect to default or breach by the counterparty as of the date hereof). As of the date hereof, neither Seller nor either Company has received any written notice of the intention of any party to terminate any Material Contract. Neither Seller nor either Company has received notice that any par ty considers either Company to be in material breach or material default thereunder or in potential material breach in a material respect or default thereunder.

7.12	Real Property

(a)

Schedule 7.12 (a) contains up-to-date copies of the complete land register and building lien register (Grundbuchauszug und Baulastenverzeichnis) for all real estate owned by the Companies. The Companies have clear title to all Owned Real Property, free and clear of any Liens (including unregistered or otherwise pending transfer (e.g. conveyance) (Auflassung)) except for Permitted Liens. No Owned Real Property is encroached (überbaut) and no buildings on the Owned Real Property encroach over neighboring properties.

(b)	Schedule 7.12 (b) sets forth the address of each Leased Real Property, and a list of all leases. The Companies hold a valid right to use or occupy each Leased Real Property pursuant to such lease.

(c)

None of the Companies has received any written notice from any Governmental Authority or Person of any pending or threatened condemnations (Enteignung), planned public redevelopment measures (Sanierungsmaßnahmen), annexation, special assessments charged on the premises (Erschließungskostenbeiträge), zoning or subdivision changes (Änderungen der Bauleitplanung und Parzellierung), affecting the Current Properties.

(d)	No third party is in possession of the Current Properties or any portion thereof. There are no leases, subleases, or other contracts granting to any third party the right to use or occupy any portion of the Owned Real Property or, to Seller’s Best Knowledge, the Leased Real Property.

7.13	Product Warranty; Product Liability

(a)

During the eighteen (18) months prior to the date hereof, neither Seller nor either Company has received any written claim with respect to the Solar Business that remains pending from any customer alleging that any of the products manufactured, sold, leased or delivered by the Companies has not conformed in all material respects with applicable contractual commitments or express and implied warranties or has requested repair or replacement thereof, in either case, that could reasonably result in a Liability (including those under the German Act on Product Liability (Produkthaftungsgesetz)) of the Companies in excess of the reserve for such items in the 2009 Unaudited Financial Statements or, once delivered, the 2009 Audited Financial Statements once delivered. Schedule 7.13 sets forth the standard warranty terms of the standard form customer Contract used, as of the date hereof, by the Companies and any material sales undertakings by the Companies entered into within the eighteen (18) months prior to the date hereof with terms materially less favorable to the Companies for which the Companies could reasonably have continuing material liability.

(b)

To Seller’s Best Knowledge, neither Seller nor either Company has any notice of, or Liability arising out of, any injury to individuals or property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by the Solar Business or either of the Companies or any material Liability for any recall of any such product.

7.14	Affiliate Transactions

Except as set forth in Schedule 7.14, neither Company

(a)	is a party to any Contract with, or

(b)	has since the Most Recent Fiscal Year End

(i)	entered into any transaction, including any transaction involving the making of any payment, benefit or transfer or acquisition of assets, with, or

(ii)	directly competed with,

any member of the Seller’s Group, or any their respective stockholders, officers, directors, members, employees, general partners or directors or, to Seller’s Best Knowledge, other Persons in which any of the foregoing Persons has an economic interest in excess of two percent (2%) of the ownership interests therein (other than the Spin-Off and Spin-Off Agreement, the EPP Transfer and the other agreements and transactions expressly referred to herein).

7.15	Customers and Suppliers

Schedule 7.15 lists (i) the ten (10) largest customers (by revenue) of the Solar Business during the fiscal year ended 31 December 2009 and (ii) the ten (10) largest suppliers (by cost) of the Solar Business during the fiscal year ended 31 December 2009 and each sole source supplier of any product not readily available to the market from alternative sources. No such customer or supplier has cancelled or otherwise terminated, or threatened in writing or, to Seller’s Best Knowledge, outside the ordinary course of business, orally to cancel or otherwise terminate, its relationship with the Solar Business or to decrease materiall y the quantity of products purchased from or sold to, respectively, the Solar Business during (x) with respect to written notice, the one (1) year period prior to the date hereof and (y) with respect to oral notice, the three (3) month period prior to the date hereof.

7.16	Employee and Labor Matters

(a)

As of the date hereof none of the Companies is experiencing, nor during a period of five years prior to the date hereof has any of the Companies, and to Seller’s Best Knowledge, there is no basis to expect any Company to experience (i) any strike or lockout of its employees or (ii) any lawsuit or dispute with any union, workers’ council or other body of employee representatives pending before any court, governmental authority or arbitrator (including any proceedings pending before any conciliation committee (Einigungsstellenverfahren)) and relating to labor relations or employment matters of a general nature (including lay-offs, restructurings or general working conditions).

(b)

Schedule 7.16 (b) sets forth, as of the date hereof, a true and complete list of all employees of the Companies stating the initials of the employees’ names, the commencement of employment, the date of birth, job title, annual base salaries, maximum amount of performance-related payments and agreed severance payments upon termination of employment. No employee has given and/or received written notice of termination of its employment and, to the Seller’s Best Knowledge, no employee has threatened to give such notice. Except as set forth in Schedule 7.16 (b), no employee is subject to special dismissals protection due to parental leave or a position in the works council or, to Seller’s Best Knowledge, to severe disability or maternity protection.

(c)	No legal disputes between Target and any employee, freelancer, managing director are pending, have been pending within the last twelve months or, to the Seller’s Best Knowledge, are threatening.

(d)	To Seller’s Best Knowledge, no free-lancer or consultant employed by any Company at any time prior to the Closing Date qualifies as an employee under any applicable law, and no temporary worker has a right to demand employment by any Company.

(e)

To Seller’s Best Knowledge and except as set forth in Schedule 7.16 (e), (i) the limitation in time (Befristung) of temporary employment contracts to which any Company is a party is valid and enforceable, and (ii) no person employed on a temporary basis has any claim against any Company for employment unlimited in time.

(f)	As of the date hereof, the Companies have paid all obligations under any employment contract when due and all employment related taxes and social security contributions have been duly calculated and paid.

(g)	No person formally addressed as employee of EPP GmbH has any claim for employment with any of the Companies nor any right to reject the transfer of its employment from any of the Companies to EPP GmbH in course of the Spin-Off or any other measure taken prior to the date hereof.

(h)

No employee has a claim for employment with the Companies due to the termination of their employment with EPP GmbH or any Affiliate of the Seller. In case of their termination, no employee of the Companies has a right for continuation of employment with the Seller or any other member of Seller’s Group.

(i)	The existing management committee (Wirtschaftsausschuss) was duly informed of the Transaction in accordance with sections 106 et seq. Works Constitutions Act (Betriebsverfassungsgessetz).

(j)

Schedule 7.16 (j) contains a true and complete list, as of the date hereof, of all collective bargaining agreements, agreements with unions or workers’ councils, social plans, and material standard practices (e.g. betriebliche Übungen, Gesamtzusagen) by which any Company is bound. The Company is in full compliance with any such agreements, plans, schemes and practices.

(k)

Except as set forth in Schedule 7.16 (k), (i) no collective bargaining agreements or other rules or arrangements applying otherwise than on an individual basis exist with respect to the requirements on the termination of employees of any Company, (ii) no Company has granted to any employee any termination period beyond the relevant period under applicable law, and (iii) no Company has granted any loans to directors, officers or employees.

(l)

Schedule 7.16 (l) sets forth all redundancy, work-sharing or short-time working schemes of any Company which are currently in effect or have been resolved or implemented within a period of five years prior to the date hereof. No Company has any outstanding obligation or liability under such schemes. No Company is bound by any restriction as to the closure, downsizing or other restructuring affecting the workforce of any of its businesses (or portions thereof), except for any restrictions under mandatory law.

(m)

Schedule 7.16 (m) correctly sets forth all (i) pension commitments (including retirement, widows’, dependants’ and disability pensions) and old-age part-time schemes and (ii) other employee benefit plans (whether funded or unfunded, on a defined benefit or defined contribution basis, or otherwise) relating to retirement, death, disability, medical benefits or anniversary payments by which the Companies are, as of the date hereof, bound (including plans which have been terminated, but in respect of which the Companies still have any obligations or liabilities), other than (A) mandatory employer’s contributions to statutory benefit schemes, (B) defined contribution schemes or (C) sick pay required under mandatory law. All the commitments, schemes and plans set forth, or required to be set forth, in Schedule 7.16 (m) (the “Benefit Plans”) are and have been during the two years prior to the date hereof established, amended and operated, in all material respects, in accordance with their terms and applicable law. To Seller’s Best Knowledge, any adjustments of pensions under the Benefit Plans have been made to the maximum extent permitted by applicable law. Tru e and complete copies of the latest actuarial report relating to the Benefit Plans have been delivered to Purchaser prior to the date hereof. To Seller’s Best Knowledge, all relevant data supplied by the Companies to the actuaries for the purpose of preparing such report are true and correct in all material respects as of the date as of which such report has been prepared. To Seller’s Best Knowledge, any pension or other obligations of the Companies under the Benefit Plans have been reflected in their Audited Financial Statements and their 2009 Unaudited Financial Statements pursuant to applicable law and in accordance with past practices. All contributions to the pension security fund (Pensionssicherungsverein) (or similar funds or institutions under the laws of any jurisdiction other than Germany) have been duly and timely paid.

(n)

Except as set forth in Schedule 7.16 (n) neither any Company nor Seller have granted or promised any compensation, severance or other payment or benefit to any (current or former) managing director or employee of any Company in connection with the Transaction or any divestiture of any Company. Neither the execution of this Agreement nor the consummation of the Transaction will result in, or accelerate, the payment or vesting of any benefit to any director, officer or employee. No employment terms of any employee of any Company have been varied (either by way o f amendment or the exercise of any discretion) in connection with or with a view to the Transaction or any divestiture of any Company.

(o)	The Companies are in compliance, in all material respects, with current German regulations regarding workplace safety.

7.17

Taxes

As of the date hereof and except as disclosed in Schedule 7.17:

(a)	all Tax Returns required to be filed with any Taxing Authority with respect to any Pre-Effective Date Tax Period by or on behalf of any of the Companies were filed when due;

(b)	none of the Companies is involved in any extraordinary tax audit or investigation (other than regular tax audits in the normal course of business) relating to any business activities prior to the date hereof; and

(c)	all Taxes which have been assessed (festgesetzt) in writing by any Taxing Authority which relate to any of the Companies were paid if and when due.

7.18	Insurance Coverage

Schedule 7.18 contains a true and complete list of all insurance policies relating to the assets, business or operations of the Companies, indicating any policies which will terminate or may be terminated by the insurer as a result of the consummation of the transactions contemplated by this Agreement. All such policies, (i) are in full force and effect at the date hereof and will be in full force and effect through and including the Closing Date, and (ii) there are no claims by any of the Companies pending under any of such policies as to which coverage has been questioned, denied or disputed by the insurer. All premiums for all such policies have been paid, and will be paid until Closing, when due.

7.19	Conduct of Business

Except for the actions set forth in Schedule 7.19, and except for any transactions contemplated by or any facts or events disclosed in this Agreement or in Schedule 7.19, in the period between the 31 December 2009 and the date hereof there has not been, in any case solely as it relates to either of the Companies:

(a)	any recapitalization or reorganization which materially changes the corporate structure or capitalization of the Companies;

(b)	any merger or other similar business combination between any of the Companies and any third party (including any member of Seller’s Group);

(c)	any declaration or payment of dividends or distribution of profit shares by any of the Companies to any member of Seller’s Group, except as made under the ES Profit Transfer Agreement;

(d)	any sale, issuance or other grant of any capital stock or equity securities in, or any right to acquire any equity securities, in either of the Companies;

(e)

any divestiture by any of the Companies of a shareholding or business with a value in excess of EUR 250,000 individually or in the aggregate or any sale, assignment, transfer, failure to maintain, abandonment, license or other disposition or encumbrance of any material non-inventory assets of the Companies or material Company Intellectual Property Rights, other than (i) transfers of Company Intellectual Property Rights from one Company to another Company, and (ii) non-exclusive licenses of Company Intellectual Property Rights in the ordinary course of business;

(f)

any execution, acceleration, termination, material modification or cancellation of any Material Contract outside the ordinary course of business (it being understood that the execution, acceleration, termination, material modification or cancellation of those Material Contracts listed in Schedule 7.11(a) need not be noted in Schedule 7.19), including entry into any commitment or other agreement regarding the lease or purchase of a manufacturing facility in the United States of America;

(g)	any incurrence or guarantee by any of the Companies of any indebtedness for borrowed money, other than indebtedness incurred from any of the Companies for members of Seller’s Group or incurred in the ordinary course of business and in amounts and on terms consistent with past practice;

(h)	settlement of any Litigation, pending or threatened, that has resulted or could reasonably be expected to result in any damages in excess of EUR 25,000 individually or EUR 100,000 in the aggregate or the imposition of any injunctive remedy or continuing obligation;

(i)	any investment by any of the Companies in, or the making of any loan to, any other company or entity (other than the other of the Companies) exceeding EUR 250,000 individually or in the aggregate;

(j)	any capital expenditure by any of the Companies, by additions or improvements to property, plant or equipment, in excess of EUR 250,000 individually or in the aggregate, except as provided in any plan or budget disclosed in writing to Purchaser prior to the date hereof;

(k)	any (i) lay-off with respect to a significant part of the workforce of the Companies or (ii) any actual or effective transfer of a significant part of the workforce of the Companies or any member of Seller’s Group to or from any member of Seller’s Group or the Companies, respectively;

(l)	any damage, destruction or other casualty loss (whether or not covered by insurance) materially adversely affecting the business or assets of any of the Companies;

(m)	any material change to the policy or practice with respect to the Companies’ accounting methodology other than as required by law;

(n)	any material change in the Companies’ Tax election, method of Tax accounting or the settlement of any claim for Taxes;

(o)	conduct outside of the ordinary course of business, or, to Seller’s Best Knowledge, any change, event or development or series of changes, events or developments which individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect on the Companies; and

(p)	any agreement, whether in writing or otherwise, to do any of the foregoing.

7.20	Environmental Matters

(a)	The Companies have at all times complied in all material respects and are in compliance in all material respects with all Environmental Laws, which compliance has included obtaining and complying at all times with all material Environmental Permits.

(b)

Neither Seller nor the Companies have, in the past two (2) years, received any written notice, report or other written information regarding any violation of, or any liability (contingent or otherwise) or investigatory, corrective or remedial obligation under, any Environmental Law with respect to the Companies’ or their predecessors’ past or current operations, properties or facilities.

(c)

Neither the Companies nor any predecessors have treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, released or exposed any Person to, any substance, or owned or operated their business or any other property or facility (and no such property or facility is contaminated by any such substance), so as to give rise to any material liabilities (contingent or otherwise) or investigatory, corrective or remedial obligations pursuant to Environmental Laws.

(d)

Seller and the Companies have furnished to Purchaser all environmental audits and reports and all other documents materially bearing on environmental, health and safety liabilities (as it relates to hazardous materials, substances or wastes), in each case relating to the Companies’, or their Affiliates’ or predecessors, past or current properties, facilities or operations which are in their possession.

7.21	Broker’s Fees

Other than the fees and expenses payable to Jefferies International Limited in connection with the transactions contemplated hereby which shall be borne by Seller, neither Seller nor either Company has entered into any contract to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated hereby for which the Companies or any Purchaser Indemnified Party could become liable or obligated to pay.

7.22	No Other Representations and Warranties

Subject to the representations, covenants and indemnities expressly contained in this Agreement, Purchaser agrees to accept the Sold Share and the Companies in the condition they are in on the Closing Date, based upon its own inspection, examination and determination with respect thereto (including the Due Diligence investigation conducted by it), without reliance upon any express or implied representations or warranties of any nature of Seller or any employee, advisor or other representative of Seller. Purchaser acknowledges that Seller makes no explicit or implied representations, warranties or guarantees and assumes no disclosure or similar obligations in connection with this Agreement and the transactions contemplated hereby, except as expressly set forth in this Agreement.

SECTION 8. COVENANTS

8.1	Conduct of Business Prior to Closing; Actions by the Companies

(a)

Except as disclosed in Schedule 8.1(a), except for any transactions in connection with the EPP Share Transfer, or except for any other transactions contemplated by this Agreement, from the date hereof to the Closing, Seller shall (i) procure that the Companies conduct their businesses, in all material respects, in the ordinary course of business, consistent with past practice and in compliance with law in all material respects, including not resolving or permitting the Companies to take any of the actions referred to in Sections 7.19(a) - 7.19(k), 7.19(m) - 7.19(n) and 7.19(p) to be taken, and (ii) take commercially reasonable efforts to keep the Solar Business as conducted as of the date hereof substantially intact in all material respects, including maintaining relationships with suppliers, customers and employees and maintaining its present operations, physical facilities and working conditions.

(b)

Without limiting the generality of the foregoing, Seller will not, and will cause the Companies not to, engage in any practice, take any action or enter into any transaction by or on behalf of the Companies that would have been prohibited pursuant to the first sentence of Section 8.1 (a) if the Companies were party to this Agreement and were bound by Section 8.1 (a) directly.

(c)

Purchaser is aware and agrees that (i) Target and Seller’s Group have entered into cash pooling arrangements within the meaning of Section 4.2(a), (ii) any such cash pooling arrangements with Seller’s Group or arranged or sponsored by external banks will be terminated prior to Closing, and (iii) Purchaser will need to provide sufficient financing for the Companies immediately at Closing.

(d)

Purchaser is aware and agrees that after the date hereof and prior to the Effective Date (i) Target will sell and transfer to Seller its shares in EPP GmbH, (ii) the EPP Profit Transfer Agreement will be terminated, and (iii) Target will sell and assign its EPP Loan Receivable to Seller or, as the case may be, Seller will assume the EPP Loan Payable, in each case by way of a sale and transfer/assignment agreement as contemplated by this Agreement.

(e)

Purchaser is aware and agrees that (i) EPP GmbH and Seller, respectively, are currently providing certain supplies and services to Target necessary for the operation of its business of the Companies and (ii) that such supplies and services shall be terminated as of Closing. Seller, EPP GmbH and Purchaser agree, and Seller shall procure, that Seller, EPP GmbH and Target shall enter into, effective as of Closing, for a transitional time period, a service agreement, substantially in the form of the draft attached hereto as Schedule 8.1(e) (the “Transitional Service Agreement”),

(f)

Purchaser is aware that the Companies are covered by group insurance policies maintained by the Seller’s Group and that the Companies may not be covered by such group insurance policies after Closing for losses arising from events occurring after the Closing Date. Purchaser shall undertake measures so that the current group insurance policies are replaced by other insurance policies for losses arising from events occurring after the Closing Date for the Companies at the latest on the Closing Date. Upon request of the Purchaser after the Closing, Seller shall use commercially reasonable efforts to notify the Seller’s Group’s insurance carrier of any available claims for recovery of losses arising out of any events related to the Companies or the Solar Business occurring on or prior to the Closing Date (to the extent the los s was not paid prior to the Effective Date or was not reflected as a liability or as an accrual in the Working Capital) and to collect such losses, and shall permit Purchaser or the Companies to participate and assist in any claims and collection procedures related thereto, and Seller will remit to Purchaser any such proceeds which Seller is required to remit with respect such claims made pursuant to this sentence.

(g)

From the date hereof until the Closing Date, Seller will not (i) make any change in, or commitment to change, any compensation or benefit of any officer or employee of the Companies, or make or agree to any bonus payment, fringe benefits, retention or severance arrangement with any officer or employee of the Companies, pursuant to any severance, retirement or other agreement with the Companies, except for (x) raises of salary or wages upon promotions or progression increases made in the ordinary course of business, (y) as required by law, or (z) changes of de minimis amounts; (ii) adopt any new employee benefit plan or prove any material increases in any material benefits under such employee benefit plans except in accordance with the terms of such plans or as required by applicable law; (iii) e nter into any employment contract related to any employees of the Companies other than for new, non-management employees who are entering into agreements on the standard terms and conditions for employment used by the Companies as of the date hereof; (iv) make any material change to the contractual payment terms of trade receivables and/or trade payables; (v) other than pursuant to the transactions contemplated by this Agreement, enter into any transactions with Affiliates; or (vi) execute, accelerate, terminate, materially modify or cancel any Contract that would be a Material Contract if entered into prior to the date hereof, other than within the ordinary course of business.

(h)

Prior to the Closing, Seller will cooperate with Purchaser to transfer, effective at the Closing, any bank accounts dedicated to the Solar Business accounts receivable, notify any Solar Business customers of any post-Closing accounts receivable, account changes and implement a process for forwarding Solar Business email and other communications from Seller to Purchaser or the Companies.

8.2	Release from Guarantees

Purchaser shall, prior to or at Closing:

(a)

undertake to endeavour the full and unconditional release of all relevant members of Seller’s Group with effect as of Closing from any obligations and liabilities relating to the guarantees, mortgages and other interests in real estate and other security interests which any member of Seller’s Group, or any third party on behalf of any member of Seller’s Group, has provided prior to the Closing Date in favor of, or on behalf of, Target or the US Subsidiary to any banks, other financial institutions, suppliers, customers or other third parties and which are exclusively listed (including the amount of the aggregate (actual or contingent) liability of Seller’s Group thereunder) in Schedule 8.2 (a) (the “Seller’s Guarantees”); or

(b)

to the extent that the relevant members of Seller’s Group are not released from any Seller’s Guarantees in accordance with Section 8.2(a) above assume, and indemnify and hold harmless Seller’s Group from, all obligations and liabilities relating to any Seller’s Guarantee up to the respective maximum amount for each of Seller’s Guarantees listed in Schedule 8.2 (a).

8.3	Cooperation

(a)

Without prejudice to the other provisions of this Agreement, the Parties shall each use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated hereby. Without limiting the generality of the foregoing, each of the Parties hereto shall use its commercially reasonable efforts to achieve the fulfillment of the applicable Closing Conditions and the closing actions pursuant to Section 5.4 as soon as reasonably practicable.

(b)

The Parties shall inform each other without undue delay, but at the latest within two Business Days after having been notified of the fulfillment of any Closing Condition set forth in Section 5.2. The Parties shall each make their representatives available for a teleconference on a weekly basis to discuss the status of the fulfillment of the Closing Conditions, if requested by any Party.

(c)

During a period of one (1) year after Closing, the Parties shall cooperate with each other, and shall use their commercially reasonable efforts to cause their respective representatives to cooperate with each other, to provide an orderly transition of the Solar Business from Seller to Purchaser and to minimize the disruption to the Solar Business resulting from the transactions contemplated in this Agreement as requested by any Party and at the requesting Party’s sole cost and expense, including bearing their own respective applicable overhead costs.

(d)	Each Party agrees that it shall not, prior to Closing, enter into any transaction outside the ordinary course of business which would reasonably be expected to prevent, delay or interfere with the consummation of the transactions contemplated by this Agreement.

(e)

Seller shall, and shall cause the Companies to, use commercially reasonable efforts to cooperate in connection with the arrangement of the Financing as may be reasonably requested by Purchaser and/or Purchaser Parent (provided that such requested cooperation does not unreasonably interfere with the ongoing operations of Seller, the Companies or any of their respective Affiliates and Purchaser shall pay any out-of-pocket expenses and other costs incurred by Seller, Purchaser, the Companies or any of their respective Affiliates in connection with such cooperation). Notwithstanding anything to the contrary set forth in this Agreement, neither Seller nor the Companies nor any of their respective representatives or Affiliates shall be required to pay any commitment or other similar fee or incur any other Liability in connection with the Financing.

8.4	Notice of Developments

From the date hereof until Closing, Seller and Purchaser will give prompt written notice to the other Party of (i) the existence of any fact or circumstance, or the occurrence of any event, which would be reasonably likely to cause a Closing Condition not to be satisfied by the date provided in Section 5.3(a), (ii) the receipt of any notice or other communication from any Governmental Authority or any securities market or securities regulator in connection with the transactions contemplated by this Agreement, or (iii) the breach of a representation or warranty; provided, however, that the delivery of any notice pursuant to this Section 8.4 shall not be deemed to amend or supplement this Agreement, and the failure to deliver any such notice shall not constitute a waiver by any Party of any right or condition in this Agreement.

8.5	Interim Financial Information

(a)

Between the date hereof and the Closing Date, Seller shall provide to Purchaser within fifteen (15) calendar days after the end of each calendar month, interim monthly management accounts for Companies (collectively, the “Management Accounts”). The Management Accounts shall be prepared in a manner consistent with the 2009 Unaudited Financial Statements and a sample of which is attached as Schedule 8.5 (a).

(b)

Before, and for one (1) year after, Closing to the extent permitted by law, Seller shall provide to Purchaser financial and other information regarding the Companies not already in the possession of the Companies or Purchaser or publicly available and is in the possession of the Seller, as is reasonably requested by the Purchaser or Purchaser Parent for purposes of complying with public company reporting requirements or for

other reasonable purposes relating to the operation of the Solar Business by Purchaser following the Closing, subject to applicable law.

(c)	Seller shall deliver to Purchaser the audited financial statements for the Companies’ fiscal year ending 31 December 2009 (the “2009 Audited Financial Statements”) by 22 March 2010.

(d)

Before, and for one (1) year after, the Closing, Seller shall cause the Companies to, request (including granting access to any relevant audit papers to the maximum extent permitted by applicable professional standards) any of their current or former auditors to cooperate with, and provide all necessary consents with respect to SEC filings of Purchaser Parent (including consents to either directly include in an SEC filing or incorporate by reference the auditor’s audit opinion for the respective years), all in connection with information related to the Companies, which is required in any filings to be made by Purchaser Parent with the U.S. Securities and Exchange Commission or required under any securities exchange on which securities of Purchaser Parent may be listed or traded, including audited financial statements as of and for the years ende d 31 December 2008 and 2009 in accordance with Rule 3-05 of Regulation S-X, which will also include a reconciliation of the 2008 Audited Financial Statements and the 2009 Audited Financial Statements to U.S. Generally Accepted Accounting Principles in accordance with Item 17 of Form 20-F (with an English translation), in each case at the sole cost and expense of Purchaser and, if requested by such auditor, pursuant to a separate engagement letter between Purchaser or Purchaser Parent and such auditor.

8.6	Reimbursement for Payments Related to Seller, EPP GmbH or the Companies after Closing

(a)	Subject to any other provision of this Agreement or the agreements and transactions contemplated by this Agreement

(i) If and to the extent Target or Purchaser receive payments after the Closing Date which relate to EPP GmbH or any other member of the Seller’s Group, Purchaser shall forward such payments to EPP GmbH or Seller (with discharging effect for Purchaser) without undue delay after having become actual knowledge (positive Kenntnis) of the attribution of such payments. The Guarantor hereby agrees to the foregoing.

(ii) If and to the extent any entity of Seller’s Group receives payments after the Closing Date which relate to the Companies, Seller shall forward, or shall cause to be forwarded, such payments to Target or the US Subsidiary (with discharging effect for the respective entity of Seller’s Group) without undue delay after the respective entity of Seller’s Group has become actual knowledge of the attribution of such payments.

(iii) The extent to which person a payment relates under this paragraph shall be determined in the following order and priority: (A) The allocation provided for in this Agreement including the agreements contemplated therein; (B) subject to lit. (A), the allocation provided for in the Spin-Off Agreement; and (C) subject to lit. (A) and (B), any allocation provided otherwise.

The obligations under this Section 8.6 shall terminate one (1) year after the Closing Date.

8.7	Covenant to Non-Compete

For a period of three years after the Closing Date, neither Seller nor New Packaging shall, and shall procure that none of their subsidiaries shall, directly or indirectly compete with or engage in any aspect of the Solar Business as conducted at any point during the one (1) year prior to the Closing, or as planned to be conducted as of the Closing Date in the future, or otherwise undertake any action related to, or assist or finance any other Person in, designing, developing, manufacturing or distributing specialty films or other products for the encapsulation of solar cells, thin film solar coatings or other active semiconductor materials in photovoltaic solar modules or any other related applications in the those countries in which either of the Companies currently or as of the Closing Date, or currently or as of t he Closing has plans in the future to, operate or sell, market, manufacture or distribute any products or services; provided, however, that the following activities shall be exempt from the covenant not to compete:

(a)	the Packaging Business as conducted by Seller’s Group as of the date hereof (excluding those activities Seller’s Group conducts for the account or in the interest of Target); or

(b)	the acquisition of a passive interest of 5% or less in an entity engaged in a competing business.

If a court of competent jurisdiction declares in a final judgment that any term or provision of this Section 8.7 is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provisions, to delete specific words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

8.8	Use of Seller’s Names

After the Closing Date, Purchaser shall procure that neither the Companies will use, or permit any third party to use, any name (as part of its corporate or trade names, logos, internet domain name or otherwise) which includes the name “Etimex”, or any name, trade name, trademark, internet domain name or logo listed in Schedule 8.8 (collectively the “Seller’s Names”). The Companies shall, however, have the limited, non-exclusive, royalty-free right and license (which right and license shall not be transferable or sublicenseable), (i) to use Seller’s Names for purposes of describing the historical relationship of the Companies with the Seller and its Affiliates, (ii) for a period of six (6 ) months after the Closing Date or such earlier time as the supply existing within one month of the Closing Date has been exhausted, to continue to use any brochures, sales literature, letterheads, printed forms and other documents and office and shipping supplies containing any Seller’s Name and to sell any products bearing any Seller’s Name, (iii) for a period of six (6) months after the Closing Date, to continue to use the “Etimex” mark solely in conjunction with the mark “Vistasolar” in connection with the operation of the Solar Business as conducted as of the Closing Date (and subject at all time to Seller’s right to exercise quality control with respect to the use of the Seller Names and the goodwill associated therewith). In connection with such limited use of the Seller Names permitted under this Section 8.6, Purchaser acknowledges that all use th ereof by the Companies and all goodwill associated therewith shall inure solely to the Seller’s benefit and shall not create in Purchaser’s or any of its Affiliates’ favour any right, title or interest in or to the Seller Names.

8.9	Transition

(a)

Between the date hereof and the Closing Date, upon reasonable advance request by Purchaser and to the extent permitted by law, Seller will permit Purchaser and its representatives and advisors to have reasonable access during normal business hours, and in a manner so as not to interfere unreasonably with the normal business operations of the Companies, to the premises, properties, personnel, contracts, accounting, financial, and other records in each case as is reasonably necessary or required for purposes of reasonable transition planning and compliance (including, for the avoidance of doubt, for the purpose of conducting certain minimally invasive environmental assessments and studies and compliance with the rules promulgated by the Securities and Exchange Commission). For the avoidance of doubt, no information obtained under this Section 8.9 (a) shall alter or affect the rights or obligations of the Parties under this Agreement. Between the date hereof and the Closing Date, Seller agrees that the Purchaser and its advisors and representatives will continue to have access to the Data Room on the terms and conditions of access provided to Purchaser, its advisors and representatives prior to the date hereof.

(b)

For a period of three years after the Closing Date, Purchaser, Seller and New Packaging will give access to each other and their respective representatives and advisors, upon reasonable request and in a reasonable scope and without disturbing the business of the respective other Party unreasonably, to accounting, financial, and other business-related records (and allow them to make copies thereof) of Seller or, respectively, the Purchaser and the Companies, as well as to any other information, respective management and employees, in each case to the extent necessary to Purchaser and the Companies or, Seller, respectively, in connection with any audit, investigation, dispute or litigation solely with respect to any third party, provided, that, the recipient Party for itself and its representatives and advisors, shall have agreed to be subject to reason able confidentiality or a contractual duty of confidentiality in relation to the Party granting access. This shall not apply if and to the extent such access is prohibited by law or confidentiality obligations or against the reasonable business interests of the Party which should grant access or relating to events occurring in periods after the Closing. For the avoidance of doubt, the foregoing shall not require any Party to take any such action if it (i) may result in a waiver or breach of any attorney/client privilege, or (ii) could reasonably be expected to result in a violation of applicable law. Each Party receiving access shall bear all costs and expenses in connection with its access and reimburse the other Party respectively.

(c)	Purchaser shall keep and procure that the Companies will keep, and Seller and EPP GmbH shall keep, all business books and records relating to any period prior to the Closing Date in accordance with any applicable statutory law, at least for five (5) years after Closing.

8.10	Litigation Support

In the event and for so long as any Party actively is contesting or defending against any Litigation commenced by any third party with respect to any fact, condition, practice, plan, occurrence, event, incident, action, failure to act or transaction occurring prior to the Closing Date and related to the Solar Business, the other Party will cooperate with the contesting or defending Party and its Affiliates in the contest or defense, make available its and its Affiliates’ personnel and provide such testimony and access to its and its Affiliates’ books and records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless such contesting or defending Party is entitled to indemnification therefor pursuant to Section 9 or Section 11.2, as applicable); provided, however, that, for the avoidance of doubt, the foregoing shall not require any Party to take any such action if it (a) may result in a waiver or breach of any attorney/client privilege, (b) could reasonably be expected to result in a violation of applicable law, or (c) providing such access or information would reasonably be expected to be unreasonably disruptive to its operations. The obligations of the Parties under this Section 8.10 shall terminate twelve (12) months after the Closing Date.

8.11	Exclusivity

(a)

From the date hereof until the Closing, Seller shall not, and shall cause its Affiliates and its and their officers, directors, employees and advisors (including legal counsel and financial advisors) not to, directly or indirectly: (i) initiate, solicit or knowingly and intentionally encourage or facilitate any inquiries with respect to, or the making of, any Acquisition Proposal; (ii) participate or engage in any discussions of an Acquisition Proposal or negotiations with, or furnish or disclose any material non-public information relating to the Companies or the Solar Business to, any Person in connection with any Acquisition Proposal; (iii) approve, endorse or recommend any Acquisition Proposal; or (iv) enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement relat ing to any Acquisition Proposal.

(b)

Seller shall, and shall cause its Affiliates and its and their officers, directors, employees and advisors (including legal counsel and financial advisors) to, immediately cease any existing solicitations, negotiations or discussions with any Person that has made or indicated an intention to make, has been invited to make, or has requested or been provided with non-public information relating to the Companies or the Solar Business relating to, any Acquisition Proposal during the one year prior to the date hereof. Seller shall promptly request that each Person who has executed a confidentiality agreement with Seller or any of its Affiliates in connection with such Person’s consideration of any such Acquisition Proposal return or destroy all non-public informat ion furnished to that Person or its representatives.

SECTION 9. INDEMNIFICATION

9.1	Restitution/Payment of Damages

(a)

If one or several of the statements made by Seller or EPP GmbH in Section 7 (other than Section 7.22) are not true and complete (a “Breach”), Seller or EPP GmbH (as the case may be) shall first have a right to cure the Breach within a period of 45 days after having received a written notice from Purchaser specifying the factual basis of the alleged Breach actually known to Purchaser by putting Purchaser or, at the sole discretion of the Purchaser, the Companies in the position in which it would be if there was no Breach (restitution in kind; Naturalrestitution). In case Seller refuses to or is not able to cure the respective Breach, or the Breach is not capable of being cured within the period set forth in the preceding sentence, Seller or EPP GmbH (as the case may be) shall pay in cash to Purchaser, or at the sole discretion of Purchaser, any of the Companies or any other Purchaser Indemnified Party, monetary damages (Schadensersatz in Geld) incurred by any Purchaser Indemnified Party, including consequential or indirect damages (Folgeschäden, mittelbare Schäden) including any business interruption damages, but (subject to Section 9.6(d)) excluding lost profits (entgangener Gewinn) and frustrated expenses (vergebliche Aufwendungen) within the meaning of section 284 BGB, internal administration and overhead costs or, without prejudice to claims for actual damages related to incorrect information, any losses based on the argument that the Purchase Price for the Sold Share was calculated on the basis of incorrect assumptions or information (“Damages”).

(b)	Any liability of Seller or EPP GmbH to indemnify or pay Damages for a Breach pursuant to Section 9.1 (a) to Purchaser is excluded if and to the extent:

(i)

all facts that constitute the basis of the relevant Breach (excluding, for the avoidance of doubt, the amount of Damages) are specifically disclosed in this Agreement (with such disclosure only applying to the respective guarantee to which such disclosure was made and to any other guarantee if and to the extent that it is reasonably transparent (erkennbar) from the relevant disclosure that the matter disclosed also pertains to such other guarantee) or that Seller can demonstrate with written evidence were actually known as of the date hereof by any of the following individuals: D. John Srivisal, John J. Dowling III, Timothy J. Wessel, Christopher L. Reed, Eric Nichols, Steve A. Burge or James P. Focareto;

(ii)	the Damage is attributable to Purchaser or Purchaser Parent or, after Closing, any of the Companies, causing (verursacht oder mitverursacht) or failing to mitigate the relevant Damage, in each case pursuant to section 254 of the German Civil Code (BGB);

(iii)

the Damage is directly attributable to Purchaser not having complied with any of the provisions of this Agreement;

(iv)	the Damage is attributable or is increased as a result of any change of law, regulation, directive, or administrative practice coming into effect on or following the date hereof;

(v)	the matter to which the Breach relates has been specifically taken into account in preparing and reasonably identified in the balance sheet included in the 2009 Unaudited Financial Statements as a long-term liability;

(vi)	the Damage is reflected as Financial Debt or a Liability in the Working Capital on the Effective Date Financial Statements;

(vii)

the Damage is collected by Purchaser or any Affiliate of Purchaser or any of the Companies pursuant to claims against any third party or an insurance company, net of any increase of the insurance premium or other respective monetary disadvantages due to such claim; or

(viii)

Purchaser or any Affiliate of Purchaser or any of the Companies has actually received any cash advantages provided by circumstances establishing a claim of Purchaser under Section 9.1, which would otherwise not be available (off-set of the advantage; Vorteilsausgleich).

If and to the extent that a payment in respect of a Breach has been made to Purchaser by Seller or such Breach has otherwise been remedied in accordance with this Section 9 by Seller, solely due to a circumstance for which any of Purchaser, Purchaser Parent or any of their subsidiaries (including after Closing, any of the Companies) receives a cash payment according to clause (vii) or (viii) above, an amount equal to such cash payment shall be paid by Purchaser to Seller within ten (10) Business Days after receipt of such payment.

(c)

For the avoidance of doubt, if and to the extent Purchaser or Purchase Parent is entitled to a claim, or payment in respect of the same factual circumstances (Lebenssachverhalt) under more than one provision of this Agreement, then the Purchaser or Purchaser Parent shall only be entitled to recover once (no double dip). This applies mutatis mutandis for any claims of EPP GmbH or Seller.

(d)

Paragraph (b) lit (ii) to (viii) shall apply mutatis mutandis to Seller’s or New Packaging’s monetary liability under or in connection with any indemnity or breach of any of the covenants provided for in this Agreement. Paragraph (b) lit (ii), (iii), (iv), (vii) and (viii) shall apply mutatis mutandis to Purchaser’s monetary liability under or in connection with any indemnity or breach of any of the covenants provided for in this Agreement.

(e)	On each occasion that any Party shall be entitled to indemnification under this Section 9, the relevant indemnified Party shall promptly pay the amount of such indemnification following the receipt of notice of a claim therefor.

9.2	Notification of Damage Claims and Remedial Measures

(a)

Purchaser shall inform Seller and/or EPP GmbH (each, the “Indemnifying Party”) of any Breach, together with a reasonably detailed description of its claim, and, if possible, the estimated amount of such claim, without undue delay (unverzüglich) by written notice to be delivered, at the latest, within two weeks after Purchaser has received actual knowledge of a Breach, in particular if third parties assert or threaten in writing claims against Purchaser or the Companies that would lead to a liability of the Indemnifying Party under or in connection with this Section 9.2 (a). In addition, Purchaser shall send copies of all documents and information required f or the assessment whether there are valid grounds for a Breach or the asserted or threatened claim to the Indemnifying Party upon request from time to time.

(b)

In case of such third parties’ claims, the Indemnifying Party shall have the opportunity to defend the claim addressee against such claims at the Indemnifying Party’s sole cost and expenses if the Indemnifying Party has unconditionally acknowledged in writing its obligation to indemnify the Purchaser Indemnified Parties under this Agreement. The Indemnifying Party must notify Purchaser of its intention to defend the claim addressee within twenty Business Days after receipt of notice from the Purchaser about such a third party claim. Notwithstanding the Indemnifying Party’s election to so assume the defense of any such claim, the Purchaser Indemnified Party shall have the right to employ at Purchaser’s sole cost and expenses, separate counsel and participate in (but not control) such defense. In the event that the Indemnifying Party has not assumed the defense of the claim after notice thereof, (i) the Purchaser Indemnified Party shall defend against the claim in any manner which is in compliance with its duty to mitigate damages pursuant to section 254 BGB and (ii) the Indemnifying Party will reimburse the Indemnified Party for the costs of defending against the claim if and to the extent such costs are Damages for which the Purchaser Indemnified Party is actually entitled to indemnification hereunder.

(c)

The Indemnifying Party shall not consent to a settlement or a consent judgment (Anerkenntnisurteil) of a third party claim it is defending or that a Purchaser Indemnified Party has made or could reasonably make a claim for indemnity hereunder without Purchaser’s prior written consent, not to be unreasonably withheld, unless to the extent that such settlement or judgment settles the matter in dispute and solely results in monetary damages in respect of which the consenting Indemnifying Party is liable pursuant to this Agreement. In case of other third party claims for which a Purchaser Indemnified Party shall seek indemnification, Purchaser shall only consent to a settlement or consent judgment with Seller’s prior written consent, not to be unreasonably withheld.

(d)

In the event and to the extent that Seller indemnifies Purchaser for a Breach in accordance with this Section 9, Purchaser shall promptly assign or procure to have assigned to Seller all claims Purchaser or the Companies might have against any third party (in particular insurances) in connection with the event that cause such losses for which Seller grants Purchaser indemnification under this Section 9. In the event that an assignment of such claims should not be possible for legal reasons, Purchaser shall procure that Seller be put in a position as if an assignment had been effected.

(e)

Any liability of Seller under this Section 9 shall be excluded if and solely to the extent that Seller thereby is prejudiced by a failure of Purchaser to comply with its obligations under this Section 9.2 and failure to provide notice in the matter as set forth in the first sentence of Section 9.1(a).

9.3	Monetary Limitations on Liability

(a)

Each of Seller and New Packaging will only be liable to cure a Breach or to pay Damages in accordance with Section 9.1 to the extent the individual claim by any Purchaser Indemnified Party exceeds EUR 100,000 (in words: one hundred thousand Euro), provided that claims out of a single event, cause, act or omission or, in each case, related series thereof shall be aggregated and be treated as one individual claim, and only if all indemnifiable individual claims above such threshold exceed an aggregate amount of EUR 1,000,000 (in words: one million Euro) (in which case only the excess amount shall be recoverable (Freibetrag nicht Freigrenze)). These limitations in this Section 9.3 (a) sha ll not apply to a Breach of or Damages from the following: all guarantees by New Packaging and the guarantees of Seller set forth in Sections 7.1, 7.2, 7.3(a), 7.4 (excluding 7.4(e)), 7.6, 7.14, 7.16(m), 7.17, 7.20 and 7.21. For the purposes of determining any Breach or Damage or applying the minimum amounts and thresholds in this Section 9.3 (a), where any representation includes any “materiality” or “Material Adverse Effect” qualification, the EUR 100,000 minimum claim amount set forth in this Section 9.3 (a) shall apply (to the extent applicable) but does not require a finding of a loss or limit any recovery of any loss in excess of such “materiality” or “Material Adverse Effect” qualification.

(b)

The total amount of Seller’s and New Packaging’s liability under or in connection with this Agreement, including both of (x) Seller’s obligation to make payment for obligations of New Packaging pursuant to Section 9.8 and (y) New Packaging’s obligations under Section 9.7(a)(ii), shall be limited to an aggregate amount of 10% of the Stated Purchase Price, provided, however, that this limitation in Section 9.3 (b) shall not apply to or take into account any matter contemplated by Section 9.3 (c), Section 9.3 (d) or Section 9.3 (e).

(c)

The total amount of each of Seller’s, Purchaser Parent’s and Purchaser’s liability under or in connection with this Agreement arising from a breach of any of its obligations (including covenants) under this Agreement (other than Section 8.7, which shall be governed by Section 9.3 (d) and both of (x) Seller’s obligation to make payment for obligations of New Packaging pursuant to Section 9.8 and (y) New Packaging’s obligations under Section 9.7(a)(ii), which shall be subject to Section 9.3 (b) as provided above), when taken together with all liabilities that may be collected pursuant to (but otherwise may be limited by) Secti on 9.3 (b), shall be limited to an aggregate amount equal to 20% of the Stated Purchase Price, provided, however, that this limitation in Section 9.3 (c) shall not apply to or take into account any matter contemplated by Section 9.3 (d) or Section 9.3 (e) except, for avoidance of doubt, as expressly set forth in the aggregation language of the limitation in this Section 9.3 (c).

(d)

The total amount of Seller’s and New Packaging’s liability under or in connection with the following matters, when taken together with all liabilities that may be collected pursuant to (but otherwise may be limited by) Section 9.3 (b) or 9.3 (c), shall be limited to an aggregate amount equal to 100% of the Stated Purchase Price, provided, however, that this limitation in Section 9.3 (d) shall not apply to or take into account any matter contemplated by Section 9.3 (e):

(i)	a Breach of or Damages from Seller’s guarantees contained in Sections 7.1, 7.2, 7.4 (excluding 7.4(e)), 7.17, and 7.20;

(ii)

a breach of any of New Packaging’s obligations (including covenants), for avoidance of doubt other than both of (x) Seller’s obligation to make payment for obligations of New Packaging pursuant to Section 9.8 and (y) New Packaging’s obligations under Section 9.7(a)(ii), which shall be subject to Section 9.3 (b) as provided above;

(iii)

a breach of any of Seller’s obligations (including covenants) arising under Section 8.7; and

(iv)	the obligations (including covenants) under Section 10.

(e)

Notwithstanding Section 9.3 (b), Section 9.3 (c) or Section 9.3 (d), New Packaging’s and, with respect to clause (iii) below, each of Seller’s, Purchaser’s and Purchaser Parent’s liability under or in connection with this Agreement for the following matters shall not be limited by any monetary limitation:

(i)	liability for a Breach of or Damages from any guarantees of New Packaging;

(ii)	liability under Section 9.7(a)(i) and/or 9.7(a)(iii); and

(iii)

for the avoidance of doubt, any obligations pursuant to Section 4.

(f)

For purposes of the application of the limitations set forth in Section 9.3 (b) through Section 9.3(d), the Parties agree that the order in time in which a claim that would be subject to such limitations is brought shall not affect the application of such limitations to the subject matter thereof. For example, for illustrative purposes only, the Parties intend that the application of Section 9.3 (b) through Section 9.3 (d) would provide that if a claim for a breach of covenants subject to Section 9.3 (c) resulting in an indemnification payment equal to 12% of the Stated Purchase Price and thereafter a claim for indem nification for a breach of a guarantee that would be subject to Section 9.3 (b) for a claim amount equal 9% of the Stated Purchase Price, the second claim shall not be limited by Section 9.3 (b) when applied (despite the fact that payments in excess of the limitation set forth therein have already been paid) but collection from such claim shall be limited to an amount equal to 8% of the Stated Purchase Price by the application of the aggregate limitation in Section 9.3 (c) resulting in aggregate collection for matters subject to Section 9.3 (b) and Section 9.3 (c) collectively not to exceed the maximum amount provided for in Section 9.3 (c).

(g)

Guarantor’s obligation and liability pursuant to Section 9.8 and the other provisions of this Agreement shall always be subject to statutory capital maintenance provisions (in particular, sec. 30 GmbHG) applicable to the Guarantor or its legal successor and shall at all times be limited to such amount as may be paid from time to time in compliance with these provisions subject to the following modification: For the purpose of calculating the assets required to maintain the registered share capital of the Guarantor in order to comply with its obligations under the above mentioned sections, the following adjustments shall apply: Such Liabilities of the Guarantor shall be disregarded which are owed to any member of Seller’s Group or, to the extent agreed or extended after the date hereof any (direct or i ndirect) shareholder of Seller. The limitations contained in this Section 9.3 (g) shall be referred to as “German Capital Maintenance Rules.”

9.4	Statute of Limitation

(a)

Any claims of Purchaser for a Breach pursuant to Section 9.1(a) shall become time-barred (Verjährung) upon expiry of 30 September 2011, except for Breaches of (i) the representations under Sections 7.1, 7.3(a), 7.4 (excluding 7.4(e)), 7.6, 7.14, 7.16(m), 7.17 and 7.21 which shall become time-barred three (3) years after the Closing Date and (ii) the representations under Sections 7.17 and 7.20 which shall become time-barred five (5) years after the Closing Date

(b)	Any claims of Purchaser or Seller pursuant to Section 10 shall become time barred in accordance with Section 10.7.

(c)

Any limitation period pursuant to this Section 9.4 shall be suspended (gehemmt) (i) for a period of three (3) months after delivery of a written notice to indemnifying party that there was a Breach or (ii) in the event that a statement of claims is filed with the competent court (in accordance with Section 15.2) within the applicable limitation period (section 204 para. 1 no. 1 BGB). In case of an interruption (Neubeginn), the new limitation period (section 213 BGB) shall be the longer of six months or the reminder of the initial limitation period. This Section 9.4 (c) shall apply mutatis mutandis to any limitation period pursuant to this Agreement, including Sections 9.6(c) and 9.7(d) (including any claims of Seller and/or New Packaging against Purchaser and/or Purchaser Parent).

9.5	No Additional Rights or Remedies

(a)	The Parties agree that the rights and remedies which the Parties may have with respect to the breach of any representation, warranty, covenant or agreement or with respect to any indemnity contained in this Agreement are limited to the rights and remedies explicitly contained herein.

(b)

Other than the rights and remedies under this Agreement, any and all rights and remedies of any legal nature which Purchaser or Purchaser Parent may otherwise have (except for claims for specific performance (primäre Erfüllungspflichten), against any member of Seller’s Group (including EPP GmbH) in connection with the sale of the Sold Share to Purchaser, this Agreement or the transactions contemplated hereby shall be excluded. In particular, without limiting the generality of the foregoing, Purchaser and Purchaser Parent hereby waive any rights and claims under statutory representations and warranties (sections 434 et seq. BGB), statutory, contractual or pre-contractual obligations (sections 2 80 to 282, 311 BGB) or frustration of contract (section 313 BGB) or tort (sections 823 et seq. BGB) and Purchaser and Purchaser Parent shall not have any right to rescind, cancel or otherwise terminate this Agreement or exercise any right or remedy which would have a similar effect, except for the termination rights set forth in Section 5.3. Section 377 HGB, and unless to the extent otherwise stated in Section 9.1(b)(i), Section 442 para. 1 BGB shall not apply. This paragraph applies mutatis mutandis to Seller’s and Guarantor’s claims against Purchaser and Purchaser Parent in connection with a breach of Purchaser’s and Purchaser Parent’s respective obligations under this Agreement.

(c)

The provisions of this Section 9.5 shall not affect any rights and remedies of the Parties for fraud (Arglist) or wilful misconduct (Vorsatz) nor any claims of Seller arising from a breach of Purchaser’s obligation to pay the Purchase Price, the Inter-Group Net-Debt Amount or the ES Loan Receivable Purchase Price in accordance with Section 4 or any claims of Purchaser or Seller to pay any adjustment amount contemplated thereby in accordance with Section 4.

(d)	For the avoidance of doubt, nothing in this Section 9.5 shall exclude the right of any of the Parties to enforce its rights and claims it may have hereunder by way of an injunctive relief (einstweilige Verfügung)).

9.6	Indemnities for Non-Compliance

(a)	Seller and New Packaging shall indemnify and hold harmless the Purchaser Indemnified Parties against any Damages arising from or in connection with a breach of any of its obligations (including covenants) under this Agreement other than a Breach.

(b)	Purchaser shall indemnify and hold harmless Seller against any Damages arising from or in connection with a breach of any of its obligations (including covenants) under this Agreement other than breaches pursuant to Section 11.

(c)

The obligations of any Party pursuant to any of the obligations (for avoidance of doubt, except as otherwise provided for in this Section 9) shall obligate performance of such Party for the following periods: (i) if the relevant obligation provides for a certain fixed term, the duration of such fixed term; and (ii) if the relevant obligation does not provide for a certain fixed term, such obligation shall expire on the second anniversary of the Closing Date. Any right of any Party to bring a claim under this Section 9.6 with respect to a violation of obligation shall become time-barred following the six (6) month anniversary of the expiration of such obligation as provided in the immediately preceding sentence, but in no event earlier than 30 September 2011.

(d)	In the event that a claim of a Party pursuant to this Section 9.6 arises from a violation of the covenants provided for in Section 8.7 or Section 13.2, the damage recoverable pursuant to this Section 9.6 shall also include loss of profit (entgangener Gewinn).

9.7	Excluded Liabilities

(a)

Notwithstanding anything to the contrary set forth in this Agreement, following the Closing, New Packaging shall indemnify and hold harmless Purchaser and Purchaser Parent and the Companies (each, a “Purchaser Indemnified Party”) from and against all Liabilities (including those arising under any Environmental Law), including costs and expenses (including reasonable attorneys’ fees and expenses), incurred by, imposed upon or asserted against any Purchaser Indemnified Party with respect to or related to any of the following Liabilities of any member of Seller’s Group, the Companies (excluding with respect to clause (i) or clause (iii) to the extent arising out of action of the Companies from and after the Closing) or any predecessor of the foregoing or any of their respecti ve businesses (collectively, the “Excluded Liabilities”):

(i)

any Liability that is not exclusively related to or arising out of the Solar Business, including any Liability related to or arising out of the operation, use or activity of, or any asset or liability of, the Packaging Business (including as conducted by any predecessor), any discontinued operation or any other business, or activity or operation (in each case other than the Solar Business) or any Liability under the EPP Transfer (including funding security to any creditors of EPP GmbH in connection with the termination of the EPP Profit Transfer Agreement) (excluding any Liability of Target to indemnify New Packaging under Section 5 of the agreement for the EPP Share Transfer), provided that if any such Liability is partly related to or arising out of the Solar Business, Seller shall only be obliged to indemnify the Purchaser Indemnified Party in acco rdance with this paragraph (i) on a pro-rata-basis in proportion to such percentage as represents that portion of the relevant Liability (measured by its face value) which is not related to or arising out of the Solar Business;

(ii)

any Liability related to or arising out of any facts, circumstances or activity existing, caused or occurring prior to the date of the closing of the transactions contemplated by that certain agreement, dated as of 24 May 2002, between BP Chemicals PlasTec GmbH, BP America Chemicals Company, BXL Plastics Limited, Etimex Technical Component GmbH, Etimex Primary Packaging GmbH, 3D Blowtech Corp. and BP International Limited; and

(iii)

any Liability related to or arising out of any facility or real property other than the Current Properties, including (A) any and all facilities or real property (other than the Current Properties) currently or formerly owned, operated, leased or occupied by any of the Companies, Seller or their respective Affiliates or predecessors, and (B) the transportation, treatment, storage or disposal of any hazardous materials or the arrangement for such activities at, to or from any site (other than their presence at the Current Properties) by, on behalf of, or in connection with any of the Companies, Seller or their respective Affiliates or predecessors and other than related to the Solar Business.

(b)	For avoidance of doubt, no Purchaser Indemnified Party shall be entitled to recover more than once for the same Liability for which indemnity is received under any other provision of this Section 9.

(c)	Subject to this Section 9.7, nothing in this Agreement shall exclude the rights of any Person under or in connection with the Spin-Off Agreement.

(d)	Any claims under this Section shall become time-barred three (3) years after Closing.

9.8	Collection; Guarantor’s Guarantees

(a)

Subject to Section 9.3(g), Guarantor hereby acknowledges and agrees that it assumes joint and several liability (haftet als Gesamtschuldner) as principal and not as surety (Bürgschaft), to Purchaser for the due and complete payment and performance of all of the obligations of Seller under and in connection with this Agreement. Seller hereby acknowledges and agrees that it assumes joint and several liability as principal and not as surety, to Purchaser for the due and complete payment and performance of all of the obligations of Guarantor under and in connection with this Agreement.

(b)

The provisions of this Section 9.8 shall continue to be effective or be reinstated, as the case may be, if at any time and to the extent that any payment of any of the Seller’s or respectively Guarantor‘s obligations is rescinded or must otherwise be returned by the payee thereof upon the insolvency, bankruptcy, reorganization or similar event of Seller or Guarantor, all as though such payment had not been made. Notwithstanding anything to the contrary contained herein, nothing in this Section 9.8 shall be deemed to constitute a waiver of, or prevent Guarantor or respectively Seller from asserting, any valid defense that may be assertable by Seller or respectively Guarantor.

(c)

Seller, Guarantor and Purchaser agree that Purchaser shall first try to collect from Guarantor any payment claims under and in connection with this Agreement either against the Seller in respect of which Guarantor has assumed joint and several liability in accordance with the first sentence of Section 9.8 (a) or against the Guarantor, in both cases unless and to the extent (i) Guarantor has not made the relevant payment when due (fällig) or has alleged it will not make such payment, (ii) making the relevant payment would not be allowed under German Capital Maintenance Rules or Guarantor alleges such non-allowance, or (iii) insolvency proceedings are applied for, commenced, or rejected due to lack of assets with respect to Guarantor or Guarantor is over indebted, (threatened) illiquid or otherwise insolvent under applicable laws.

(d)

In connection with (and no later than the effective time of) any transaction that constitutes a sale, dividend or other distribution or liquidation of all or a majority of either of Seller’s or New Packaging’s assets (excluding, for the avoidance of doubt, any dividend payments or distribution of liquidation proceeds or other distributions to the shareholder(s) of Seller of New Packaging, in each case if made in the form of cash), either in one transaction or a series of related transactions, Seller or New Packaging, as appropriate, shall ensure that the transferee(s) to such transaction to execute and deliver a Contract providing for the assumption of the obligations of such transferor Party pursuant to this Agreement, provided, that, in the event that the Seller enters into any such transaction(s), such Contract may provide for the termi nation of the transferee(s)’ obligations assumed thereunder at the earlier of the end of the contractual term of such obligation and the third anniversary of the Closing Date. Subject to the foregoing, the Contract shall provide that the transferee shall agree to assume joint and several liability in respect of all of the obligations of Seller or New Packaging, as appropriate, under and in connection with this Agreement, which assumption of liability shall relieve Seller and, as applicable, New Packaging, of any obligation under this Agreement in proportion to such percentage as represents that portion of Seller’s or, as applicable, New Packaging’s assets (measured by their fair market value), which has been transferred to the transferee(s), and for which Purchaser and Purchaser Parent shall be express third party beneficiaries thereof. Seller or New Packaging, as appropriate, shall deliver wr itten notice to Purchaser and Purchaser Parent of the actions and agreements contemplated by this Section 9.8 (d) at or prior to the effective time of the transaction, together with a copy of the Contract delivered in connection with this Section. If Seller or New Packaging is unable to obtain the Contract, such Party may propose to Purchaser and Purchaser Parent alternative arrangements to provide for the guaranty of such Party’s obligations under this Agreement, including assumption of such obligations by another creditworthy Person, in lieu of the Contract contemplated by this Section 9.8 (d), and Purchaser and Purchaser Parent may consent to such alternative arrangements, which consent shall not be unreasonably withheld or denied. Seller’s obligations pursuant to this Section 9.8 (d) shall cease to exis t on the third anniversary of the Closing Date.

9.9	Purchase Price Adjustment

Any payments made by the Seller to the Purchaser or the Companies pursuant to this Agreement or vice versa shall be deemed to constitute an adjustment of the Purchase Price. The Parties shall treat any such payments as an adjustment of the Purchase Price for all tax, accounting and financial reporting purposes.

9.10

Waiver

(a)

Seller and EPP GmbH hereby waive, and shall procure that any other member of Seller’s Group shall waive, irrevocably and unconditionally any and all claims - past or current, known or unknown, actual or contingent (including those the basis of which was laid prior to Closing), irrespective of its legal basis (e.g. contract, tort, unjustified enrichment) - they might have against any former, current or future employees, directors or officers of Purchaser, Purchaser Parent and, after Closing, the Companies. Purchaser and Purchaser Parent hereby waive, and shall procure that any of their respective current and future, direct and indirect subsidiaries (including after Closing, the Companies) shall waive, irrevocably and unconditionally, any and all claims - past or current, known or unknown, actual or contingent (including those for which the basis was laid prior to Closing), irrespective of its legal basis (e.g. contract, tort, unjustified enrichment) - they might have against any former, current or future employees, directors or officers of any member of the Seller’s Group.

(b)

Seller and EPP GmbH hereby waive, and shall procure that any other member of Seller’s Group shall waive, irrevocably and unconditionally any and all claims - past or current, known or unknown, actual or contingent (including those for which the basis was laid prior to Closing), irrespective of its legal basis (e.g. contract, tort, unjustified enrichment) - they might have against any of the Companies. After Closing, Purchaser and Purchaser Parent shall procure that the Companies shall waive, irrevocably and unconditionally, any and all claims - past or current, known or unknown, actual or contingent (including those for which the basis was laid prior to Closing), irrespective of its legal basis (e.g. contract, tort, unjustified enrichment) - they might have a gainst any member of the Seller’s Group.

(c)	The waivers pursuant to this Section 9.10 are subject to Closing and shall not apply for the following cases:

(i)	any liability arising out of willful misconduct (Vorsatz);

(ii)	any claims provided for in or contemplated by this Agreement and the agreements (including the agreement for the EPP Share Transfer) and transactions contemplated by this Agreement (including trade receivables and trade payables and claims mentioned in Section 10.6); and

(iii)

any claims of Target, EPP GmbH and Seller under the ES Profit Transfer Agreement, the EPP Profit Transfer Agreement and the Spin-Off Agreement.

SECTION 10. TAXES

10.1	Tax Indemnification

(a)	Subject to the provisions contained in this Section 10, Seller shall pay Purchaser an amount equal to any Indemnifiable Tax of any of the Companies in each case related to any Pre-Effective Date Tax Period, net of any Tax Saving related to the Indemnifiable Tax (the “Tax Loss”).

(b)	Seller shall not be liable for any Tax Loss to the extent Purchaser has breached any Tax Covenant pursuant to Section 10.2 and such breach has increased the relevant Tax Loss (without prejudice to any other rights of Seller under this Agreement arising from the breach).

(c)	Seller shall only be liable for any Tax Losses to the extent that the aggregate amount of such Tax Losses exceeds the aggregate amount of any accrued liabilities and any provisions for Taxes which are shown in the Effective Date Financial Statements and which have reduced the Purchase Price.

(d)

Seller shall not be responsible for any Tax liabilities attributable to periods ending on or before the Effective Date if and to the extent (i) they are resulting from any change in the accounting and taxation principles or practices of Target (including methods of submitting Tax Returns) introduced after the Closing Date or (ii) they are caused by any transaction, action, omission, declaration or any other means after the Closing Date, in each case unless any such above action was required by law, administrative guidelines, accounting rules or a Taxing Authority. Seller shall also not be responsible for any Tax liabilities attributable to periods ending on or before the Effective Date if and to the extent such Tax liabilities result from an amendment of Tax Return s relating to Pre-Effective Date Tax Periods after Closing, unless such amendment was required by law, or was made pursuant to an instruction by the Seller in accordance with Section 10.2(b) below.

10.2	Tax Covenants of Purchaser

(a)

Purchaser shall not take, and shall procure that after the Closing Date none of the Companies will take, any action or omit to take any action, the effect of which would give rise to any Tax liability (including any Tax indemnification liability) of Seller unless any such above action was required by law, administrative guidelines, accounting rules or a Taxing Authority. Purchaser shall not, and shall procure that none of the Companies shall, amend any Tax Returns relating to Pre-Effective Date Tax Periods after Closing, unless such amendment was required by law, or was made pursuant to an instruction by Seller in accordance with Section (b) below.

(b)

Purchaser will cause Target to file, make or change any Tax election/claim, and to file, make or amend any Tax Return or take any position on any return in respect of Pre-Effective Date Tax Periods, including but not limited to any Tax loss group relief claim, as reasonably instructed by Seller and at such Seller’s cost and expense, provided that such actions are in accordance with relevant law.

(c)

Purchaser shall (i) cause the Companies not to raise against Seller or its Affiliates any claims relating to group charges (Steuerumlagen) for trade tax or other Taxes (whether actual or notional) for any Pre-Effective Date Tax Period and (ii) indemnify and hold harmless Seller’s Group (and EPP GmbH) from all claims raised by any of the Companies with respect to such group charges. Likewise, Seller and EPP GmbH shall not raise against the Purchaser, the Companies or its Affiliates any claims relating to group charges (Steuerumlagen) for any Pre-Effective Date Tax Periods and shall indemnify and hold harmless the Purchaser, the Companies and its Affiliates from all such claims raised against the Companies or its Affiliates.

(d)	If and to the extent Purchaser fails to comply with any of its obligations under this Section 10.2 Purchaser shall indemnify and hold harmless Seller for increased Taxes (net of any Tax Savings) incurred by the Seller and its Affiliates, which result from such breaches.

10.3	Tax Refunds

(a)	Purchaser shall pay to Seller

(i)

the amount of any Tax Refund together with any interest received from a Taxing Authority on the reimbursed amount, net of any Increased Tax related to the Tax Refund, except to the extent such Tax Refunds were already reflected in Effective Date Financial Statements and had increased the Purchase Price,

and

(ii)

the amount of any utilized Tax Saving of Target, of Purchaser and/or of any taxable person or entity affiliated to Purchaser, if and to extent such Tax Saving is related to any increased Tax (net of Seller Tax Saving) (“Seller Tax Loss”) but only if and to the extent (x) such Seller Tax Loss is caused pursuant by (a) the fiscal unity (Organschaft) between Seller and Target, (b) an increased income at the level of Target (Organeinkommen) in a Pre-Effective Date Tax Period as assessed by the Taxing Authorities (e.g. following a tax audit) without taking into account any changes to the fiscal income of EPP GmbH as attributed to Target, and (y) such increase of the fiscal inco me of Target results in a utilized Tax Saving in the first two Tax periods ending after the Effective Date (steuerliche Umkehreffekte). For the purposes of this paragraph (ii) and paragraph (b) below, a Tax Saving of Target, of Purchaser and/or of any taxable person or entity affiliated to Purchaser shall be utilized if it has effectively reduced the Tax payable for a Tax period or resulted in an increased and paid out Tax refund.

(b)

Seller shall pay to the Purchaser the amount of any utilized Seller Tax Saving, if and to extent such Seller Tax Saving is related to (i) the fiscal unity (Organschaft) between Seller and Target, (ii) a reduction of the income at the level of Target (Organeinkommen) in a Pre-Effective Date Tax Period without taking into account any changes to the fiscal income of EPP GmbH as attributed to Target as assessed by the Taxing Authorities, and (iii) an increase of the income at the level of Target, the Purchaser, and/or any taxable person or entity affiliated to Purchaser in the first two tax periods ending after the Effective Date which has increased the Tax payable by the Target, the Purchaser, and/or any taxable person or entity affiliated to Purchaser.

(c)

If and to the extent (i) Seller has indemnified and held harmless Purchaser or the Companies from any Taxes imposed upon the Companies and (ii) such Taxes are no longer applicable as a result of appeals being filed or by reason of a court decision or a closing agreement or any other settlement agreement entered into in connection with an administrative or judicial proceeding, Purchaser shall reimburse or procure that the Companies reimburse Seller for the payments made by Seller under this Section 10 with respect to such Taxes, together with any interest received from a Taxing Authority on the reimbursed amounts.

(d)

Purchaser shall promptly notify Seller in writing of the receipt of any Tax Refund and any Taxes no longer applicable for which Seller has made payments under this Section 10. Seller shall notify Purchaser promptly of any Seller Tax Saving which could trigger a payment obligation of Seller under Section 10.3 (b).

(e)	Any amount payable pursuant to this Section 10.3 shall be due and payable within ten Business Days after the Tax Refund has been received by any of the Companies, the Seller or their respective Affiliates, as the case may be.

10.4	Indemnification Procedures

(a)	Any amount payable to the Purchaser pursuant to this Section 10 shall be due and payable not later than two (2) Business Days before the Indemnifiable Tax becomes due and payable to the Taxing Authority.

(b)

If, after the Closing, any Taxing Authority informs Purchaser or any of the Companies of a proposed audit, assessment, dispute or other circumstance relating to any Tax with respect to which Seller may incur any liability hereunder, Purchaser shall notify Seller of such matter and make available to Seller copies of the received documents and other relevant documents of the Companies pertaining thereto. Purchaser shall give such notice and deliver such documents promptly, latest within ten Business Days after Purchaser or any of the Companies has received the relevant information or documents, as the case may be, from the Taxing Authority, or at any earlier date if required to enable Seller to participate in any Tax audit or to review the relevant Tax assessment within the applicable period available for an appeal or other legal remedy. If P urchaser has reason to believe that a payment is to be made by Seller pursuant to Section 10.1, the Purchaser shall send a written notice to the Seller without undue delay and shall include an estimate of the amount of such payment obligation.

(c)

Purchaser agrees, and shall cause Target, (i) to give Seller and/or its representatives the opportunity to participate in any audits, disputes, administrative, judicial or other proceedings related to any Tax for any Pre-Effective Date Tax Period, (ii) to comply with any instructions given by Seller and/or its representatives in relation to the conducting of such proceedings, and (iii) to challenge and litigate any Tax assessment or other decision of any Taxing Authority related to such Tax as requested by Seller. When making any such instructions or requests, the Seller shall take reasonable economic interests of the Purchaser and any of the Companies into account. Seller will bear the reasonable cost and expenses (excluding any internal costs) of any such actions and proceedings requested by the Seller.

(d)	If Purchaser has failed to comply with any of its obligations set forth in this Section 10.4 Seller shall no longer be liable under Section 10.1 with respect to the relevant Tax Loss to the extent such non-compliance has caused or increased the Tax Loss.

10.5	Cooperation on Tax Matters

(a)

Purchaser and Seller, to the extent permitted by law, shall fully cooperate, and shall cause their representatives to fully cooperate, with each other in connection with all tax matters relating to any Pre-Effective Date Tax Period, including the preparation and filing of any Tax Return or the conducting of any audit, investigation, dispute or appeal or any other relevant communication with any Taxing Authority. Any Tax Returns relating in whole or in part to any Pre-Effective Date Tax Period shall be subject to the review and prior written consent of Seller, such consent not to be unreasonably withheld. Purchaser shall procure that any Tax Returns to be reviewed and approved by Seller will be furnished to Seller no later than 20 days prior to the due date of the relevant Tax Return.

(b)

Cooperation between Purchaser and Seller shall include (but shall not be limited to) the providing and making available of relevant books, records and information, and the reasonable assistance of relevant officers and employees of the Companies or, as the case may be, Seller or its Affiliates, to the extent necessary in connection with such tax matters and always provided that the Purchaser’s representatives shall be entitled to attend any meeting and participate in any discussion between Seller and/or its representatives any employee or officer of the Companies.

(c)	Purchaser shall keep Seller fully informed regarding the commencement of any audit or other proceeding which may give rise to a claim under this Section 10.

(d)	Each Party shall bear its own expenses and fees in connection with this Section 10.5.

10.6

VAT Group

(a)

Seller and Target form a VAT group (umsatzsteuerliche Organschaft) starting 1 January 2010. For the avoidance of doubt, it is the mutual understanding that the provisions pursuant to this Section 10 shall include VAT which is imposed on Target or refunded to the Target in respect of periods up until and including the Effective Date if the German Taxing Authorities object to the VAT group for a period between 1 January 2010 and the Effective Date. In this case, any payment pursuant to this Section 10 for VAT on sales and services provided between Target and Seller or vice versa which was previously treated as non taxable intra-VAT-group sales shall only be due and payable after receipt of an invoice which corresponds to the Germ an invoicing requirements as outlined in Section 14 of the German VAT Law (Umsatzsteuergesetz). For the avoidance of doubt, VAT refunds to Target which result from new or amended invoices by the Seller under this Section 10.6 shall not be considered to be a Tax refund with the meaning Section 10.3 (no double dip).

(b)

Seller and Target assume that the VAT group was not formed before 1 January 2010. For the avoidance of doubt, it is the mutual understanding that the provisions pursuant to this Section 10 shall include VAT which is imposed on Target or refunded to Target in respect of periods up until and including the Effective Date if the German Taxing Authorities confirm that a VAT group was formed before 1 January 2010. The last sentence of Section 10.6 (a) above shall apply mutatis mutandis.

9.6	Tax Limitation Period

Any claims of Seller and Purchaser under this Section 10 shall become time-barred upon the earlier of (i) the expiration of a limitation period of six months after the final and binding assessment (materiel bestandskräftig) of the relevant Tax and (ii) the fifth anniversary of the Effective Date; provided, that any of claims of Seller or Purchaser shall not become time-barred under lit. (ii) before (a) two weeks after an assessment regarding the relevant Tax has been rendered, and (b) if such assessment of the relevant Tax has been appealed, before the final and binding assessment resulting from such appeal. Until expiry of such Tax limitation period, the Seller may at any time demand that a tax audit by the competent Taxing Authority be conducted in respect of the Companies, provided, however, that the Seller shall give three months advance notice to the Purchaser before making such demand.

SECTION 11. REPRESENTATIONS OF AND INDEMNITY FROM PURCHASER AND PURCHASER PARENT

11.1	Representations

Purchaser and, where applicable, Purchaser Parent, represent and warrant in the form of an independent undertaking to Seller that the statements in this Section 11.1 are true and complete as of the date hereof and will be true and complete as of the Closing Date, provided, however, that representations which are expressly made as of a specific date shall be true and complete only as of such date. The scope and content of each representation of Purchaser and, where applicable, Purchaser Parent, contained in this Section 11.1, as well as Purchaser’s and, as applicable, Purchaser Parent’s, liability arising hereunder shall be exclusively defined by the provisions of this Agreement, which shall be an integral part of the representations of Purchaser and , as applicable, Purchaser Parent, and no representation of Purchaser or, as applicable, Purchaser Parent, shall be construed as a guarantee within the meaning of sections 443 and 444 BGB:

(a)

Purchaser is a company duly organized, validly existing and in good standing under the laws of Germany and has all requisite corporate or similar power and authority to own its assets and to carry on its business as presently conducted. Purchaser Parent is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all requisite corporate or similar power and authority to own its assets and to carry on its business as presently conducted.

(b)

The execution and performance by each of Purchaser and Purchaser Parent of this Agreement and the transactions contemplated hereby are within its corporate powers, do not violate the articles of association or by-laws of Purchaser, and have been duly authorized by all requisite corporate bodies, as necessary. This Agreement constitutes the valid and binding obligation of each of Purchaser and Purchaser Parent, respectively, enforceable in accordance with its terms, without any further condition unless otherwise specified herein.

(c)

Neither the execution and delivery of this Agreement by Purchaser or Purchaser Parent, nor the consummation of the transactions contemplated hereby (including the transactions referred to in Section 5.4) by Purchaser or Purchaser Parent, will: (i) conflict with or result in a breach of the articles of association, certificate of incorporation or bylaws or other organizational document of Purchaser or Purchaser Parent; (ii) violate any law or decree to which Purchaser or Purchaser Parent is, or its respective properties or assets are, subject; or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any material contract to which Purchaser or Purchaser Parent is

a party or by which it is bound (except for any actions to be taken pursuant to the Financing or any actions for the pledge of interests and other security under its credit facility), except, in the case of either clause (ii) or (iii), for such conflicts, violations, breaches, defaults, accelerations, rights or failures to give notice as would not, individually or in the aggregate, have a Material Adverse Effect on Purchaser.

(d)

Except with respect to the filings contemplated by Section 12(a), no consent, approval or authorization of, permit from, or declaration, filing or registration with any government or regulatory authority, or any other person or entity is required to be made or obtained by Purchaser or Purchaser Parent in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby other than filings pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

(e)

There is no lawsuit, investigation or proceeding pending against, or, to Purchaser’s knowledge, threatened in writing against Purchaser before any court, arbitrator or Governmental Authority which in any manner challenges or seeks to prevent, alter or materially delay the transactions contemplated by this Agreement.

(f)

Purchaser Parent has entered into financing arrangements (the “Financing”) which, together with cash on hand and available funds under Purchaser Parent’s credit facilities, constitute sufficient funds to enable Purchaser to make all payments required to be made for the consummation of the transactions contemplated hereby, including the payment of the Purchase Price.

(g)

Purchaser is purchasing the Sold Share for its own account and not with a view to or for sale in connection with any distribution thereof. Purchaser (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Sold Share and is capable of bearing the economic risks of such investment.

(h)

Other than the fees and expenses payable by Purchaser Parent to Deutsche Bank Securities Inc. for services as a financial advisor to Purchaser Parent in connection with the transactions contemplated hereby which shall be borne by Purchaser or Purchaser Parent, neither Purchaser nor Purchaser Parent has any obligation or liability to pay any fees or commissions to any broker, finder or agent with respect to any of the transactions contemplated by this Agreement for which Seller could become liable.

Seller and Guarantor acknowledge that neither Purchaser nor Purchaser Parent makes any explicit or implied representations, warranties or guarantees and assume no disclosure or similar obligations in connection with this Agreement and the transactions contemplated hereby, except as expressly set forth in this Agreement.

11.2	Indemnity in Case of Breach of Representation

(a)	Purchaser shall indemnify and hold harmless Seller and New Packaging, from and against and in respect of any and all losses asserted against, suffered or incurred by Seller

(b)	or New Packaging which arise out of a breach or inaccuracy of any representation of Purchaser under Section 11.1 above.

(c)	Any claims of Seller or New Packaging under this Section 11 shall become time-barred upon the expiry of 31 December 2011, except for breaches of the representations under Sections 11.1(a) - 11.1(c) which shall become time-barred 3 years after the Closing Date.

(d)	Section 9.1, Section 9.2 and Sections 9.3(a), 9.3(b) and 9.3(d) shall apply mutatis mutandis to Purchaser’s liability under or in connection with any indemnity or breach of any of the guarantees of Purchaser Parent or Purchaser.

11.3	Purchaser Parent Guaranty

Until the Closing, Purchaser Parent hereby acknowledges and agrees that it assumes joint and several liability (haftet als Gesamtschuldner) and absolutely, irrevocably and unconditionally guarantees, as principal and not as surety, to Seller the due and complete payment and performance of all of the obligations of Purchaser under or in connection with this Agreement and of any Person to whom Purchaser assigns such obligations in accordance with Section 14.5(a). If and to the extent for any reason Purchaser shall fail or be unable to duly and completely pay or perform its obligations under or in connection with this Agreement, then Purchaser Parent shall forthwith duly and completely pay or perform such obligations.

SECTION 12. MERGER CONTROL PROCEEDINGS / OTHER REGULATORY REQUIREMENTS

(a)

Purchaser (and Seller, to the extent any filing cannot be made by Purchaser on behalf of Seller under applicable law), shall make any filings, notifications or submissions necessary in connection with (i) the clearance under section 53 para. 3 AWV referred to in Section 5.2(a)(ii), and (ii) any merger control clearance or antitrust approval for Germany and the countries for which a filing will be made as determined pursuant to the next sentence, and any other filings with, or notifications to, any Governmental Authority required in connection with this Agreement, and such filings, notifications or submissions will be made without undue delay after the determination pursuant to the next sentence has been made, but in any event within 30 days following the date hereof (other than to the extent any delay in such filings, notifications or submissions has resulted from the failure of Seller to provide Purchaser with any information related to any member of the Seller’s Group or the Companies reasonably necessary for such filings, notifications or submissions on a prompt basis). Seller and Purchaser shall agree in good faith as soon as reasonably practicable (and in any event within five (5) Business Days after the date hereof) for which of the additional countries listed in Schedule 12 (a), if any (in addition to Germany), any merger control clearance or antitrust approval is reasonably likely to be required. In the event that the Purchaser and Seller cannot agree on the relevant additional countries, the Purchaser may determine the countries for which merger control clearance or antit rust approval is reasonably likely to be required.

(b)

In order to obtain all requisite approvals and clearances for the transactions contemplated by this Agreement under merger control laws or under any other applicable laws, the Parties shall (i) reasonably cooperate in all respects with each other in the preparation of any filing or notification and in connection with any submission, investigation or inquiry, (ii) supply to any competent authority as promptly as practicable any additional information requested pursuant to any applicable laws and take all other procedural actions required in order to obtain any necessary clearance or to cause any applicable waiting periods to commence and expire, and (iii) promptly provide each other or their respective legal advisors with copies of any written communication or a written summary of any non-written communication in connection with any proceedings, includ ing any correspondence from the antitrust authorities and the German Federal Ministry of Economics and Technology, all to the extent reasonably practicable; provided, that if and to the extent that any such disclosure would extend to business or trade secrets (Betriebs- oder Geschäftsgeheimnisse) of either of the Parties, such disclosure shall only be made to the legal advisors of the other Party which shall use such information for the purposes of this Section 12 only and shall otherwise keep the information so disclosed strictly confidential.

(c)	Neither Party shall discuss with the antitrust authorities or the German Federal Ministry of Economics and Technology without prior consultation with the other Parties.

(d)

In the event that any obligations or conditions (Auflagen und Bedingungen) or other agreements or measures are required by any competent merger control or other competent authority as a condition to the clearance of the transactions contemplated hereby, no Party shall be obliged to comply with or agree to any such obligations or conditions, enter into the required agreements or make the respective measures (in particular, to divest of a business line), unless otherwise agreed by the Party to whom they would be imposed (it being understood that for these purposes, conditions or obligations or other agreements or measures on either of the Companies shall be deemed imposed on the Purchaser) in writing, nor shall Seller take, or permit any member of the Seller’s Group to take, any such action without Purchaser’s prior written consent.

(e)

Without limiting the obligations of the Parties pursuant to Section 8.3, with respect to the Closing Conditions set forth in Section 5.2, if the consummation of the Closing is prohibited by any governmental authority or court, the Parties shall consult in good faith with each other to determine whether to contest such decision.

(f)

If any obligations, conditions, other agreements or measures are required by any competent merger control or other competent authority as a condition to the clearance of the transactions contemplated hereby, the Parties shall discuss in good faith whether and how the transactions contemplated by this Agreement could be consummated in light of any decision by a competent authority after the Closing Date prohibiting any transaction contemplated hereby or whether any amendment of this Agreement shall be agreed. Nothing in this Section 12 shall be deemed to be an agreement to enter into any further agreements or amendments to this Agreement following such good faith consultation.

(g)	Public Announcements, Non-Solicitation

SECTION 13. PUBLIC ANNOUNCEMENTS, NON-SOLICITATION

13.1	Public Disclosure and Confidentiality

(a)

No Party shall make any press release or similar public announcement with respect to this Agreement, and each Party shall keep confidential and not disclose to any third party the contents of this Agreement and any confidential information regarding the other Parties, disclosed to it in connection with this Agreement or its implementation; provided, however, that Seller and Guarantor acknowledge and agree that Purchaser Parent or Purchaser may disclose this Agreement, any summaries hereof or the transactions contemplated hereby or the status thereof in any filing to be made by such Party with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder or the Securities Act of 1933, as amended, and the rules and regulations thereunder. Seller shall keep confidential and no t disclose any business or trade secrets or other proprietary or confidential information of the Companies. The obligations under the preceding sentences shall not apply if expressly otherwise agreed upon with the other Parties, and except as may be specifically required in order to comply with the requirements of any applicable laws or the rules and regulations of any stock exchange and to the extent such information is already in the public domain through no fault of the disclosing party; provided, however, that in the event disclosure is required by applicable laws, the restricted Party shall disclose no more information than necessary and, to the extent reasonably possible, provide the other Party with prompt notice of such requirement prior to making any disclosure so that such other Party may seek an appropriate protective order. Nothing in this Section shall prevent any Party from making a claim against any other Party on the basis of this Agreement or defending itself against such claims. Notwithstan ding the foregoing, Seller shall have the right to disclose this Agreement and its content (i) to its shareholders and any representatives and advisors of its shareholders and (ii) to any potential acquirer (and its advisors and representatives) of Seller or EPP GmbH, provided always that the Persons to whom such disclosure is made are bound by contractual or professional duties of confidentiality which are no less strict than Seller’s respective obligations hereunder.

(b)

Seller hereby assigns without further, separate consideration, subject to the condition precedent (aufschiebende Bedingung) of occurrence of Closing, all rights and obligations under any non-disclosure and confidentiality agreement concluded in connection with the intended sale of the Sold Share with any potential acquirer to Purchaser. The Parties shall use commercially reasonable efforts to obtain the consent of the respective third party to such assignments, to the extent required, without undue delay after signing of this Agreement, provided that any fees, expenses or costs incurred by the Parties in connection therewith shall be borne by Purchaser with its prior consent provided that, if such consent is denied, Seller shall be released from its obligations pursuant to this senten ce of paragraph (b). For the avoidance of doubt, in the event that such consents cannot be obtained, Seller shall enforce such non-disclosure and confidentiality agreements for the benefit of the Companies at Purchaser’s sole cost and expense.

13.2	Non-Solicitation

For a period of twenty-four months from the Closing Date:

(a)

Purchaser shall not, and procure that neither of its Affiliates from time to time, directly or indirectly, solicit or entice away any employee or officer from any member of Seller’s Group, or employ any employee or officer of Seller’s Group who is first identified (including by name) solely as a result of Purchaser’s access to information or investigation of the Transaction; and

(b)

Seller and New Packaging shall not, and Seller shall procure that the members of Seller’s Group will not, directly or indirectly, solicit or entice away any employee or officer from Target or the US Subsidiary or employ any employee or officer of Target or the US Subsidiary, except for the persons listed in Schedule 13.2(b).

The foregoing, however, shall not prohibit general solicitations for employees, including through newspaper or similar advertisements of general circulation or through search firms or placing advertisements in own internal publications, provided that any such solicitation is not directed primarily at employees or officers of the respective business.

SECTION 14. MISCELLANEOUS

14.1

Interest

In the event that a Party is in default (Verzug) with payments under this Agreement, it shall pay default interest at a rate of EURIBOR plus 4% per annum from and including the date of default until but excluding the date when the overdue amount is paid (calculated daily on the basis of a year of 365 days and payable at the same time as the payment to which it relates). The right to claim further interest damages, if any, shall remain unaffected.

14.2	Costs and Expenses

(a)

All transfer taxes (including real estate transfer taxes), stamp duties, fees (including notarial fees), registration duties or other charges in connection with any regulatory requirements (including merger control and AWV proceedings) and other charges and costs payable in connection with the notarization and execution of this Agreement and the implementation of the transactions contemplated hereby shall be borne by Purchaser, provided that all transfer taxes, stamp duties, fees, registration duties or other charges and costs payable in connection with the closing action pursuant to Section 5.4(c) and the EPP Transfer shall be borne by Seller.

(b)	Each Party shall pay its own expenses, including the costs of its advisors, incurred in connection with this Agreement. Any Company transaction related expenses or transactions contemplated hereby shall be paid by Seller.

(c)	The fees and costs of Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft for the audit of the Effective Date Financial Statements shall be borne by Seller.

14.3

Notices

All notices under this Agreement must be in writing and will be deemed to have been duly given when

(a)	delivered by hand (with written confirmation of receipt);

(b)	sent by telefax; or

(c)	received when sent by courier or registered mail (return receipt requested);

in each case to the appropriate addresses and telefax numbers set forth in Schedule 14.3 (or to such other addresses and telefax numbers as a Party may designate by notice to the other Parties). The delivery of the notices to the legal counsel shall not substitute the delivery to the respective Party, unless expressly agreed in this Agreement.

14.4	Entire Agreement; Amendments and Waivers

(a)

This Agreement (including all Schedules hereto which constitute an integral part of this Agreement) contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings with respect thereto, except for the confidentiality agreement between Seller and Purchaser dated 19 November 2009 (the “Confidentiality Agreement”), which will remain in full force and effect until the Closing Date and, if this Agreement is terminated pursuant to Section 5.3, beyond the date of such termination as and to the extent provided for therein. From and after the Closing, Seller shall have no further rights or remedies under the Confidentiality Agreement.

(b)	Any provision of this Agreement (including this Section 14.4) may be amended or waived only if such amendment or waiver is (i) by written agreement executed by all Parties and explicitly refers to this Agreement or (ii) by notarized deed, if required by law.

14.5	Assignments, Third Parties

(a)

Neither Party may assign any of its rights or obligations under this Agreement without the prior consent of the other Parties, provided that (x) until Closing Purchaser may assign its rights or obligations in whole (but not in part) to any subsidiary of Purchaser Parent and (y) Purchaser and/or Purchaser Parent may assign its rights as collateral to financial institutions financing the Purchaser, Purchaser Parent or any of their respective Affiliates (including, after the Closing) the Companies.

(b)

Except as expressly set forth in this Agreement, this Agreement shall not grant any rights to, and is not intended to operate for the benefit of, any third parties (kein Vertrag zugunsten Dritter oder mit Schutzwirkung für Dritte), other than (i) those employees identified in Section 9.10, who are express third party beneficiaries of such Section 9.10 only, and (ii) the arrangers, agents and lenders under commitments for the Financing, who are be express third party beneficiaries of Section 15.2 (but of no other provision of this Agreement or of any of the rights and obligations under or in connection with this Agreement).

14.6	Set-off and Retention

Except as expressly set forth in this Agreement, no Party shall be entitled to any set-off (Aufrechnung) or retention (Zurückbehaltung) with respect to any rights or claims under this Agreement unless the right or claim of the Party claiming a right of set-off or retention has been acknowledged in writing by the respective other Party or has been confirmed by a final decision of a competent court.

14.7	Further Assurances

The Parties agree:

(a)	to furnish upon request to each other such further information;

(b)	to execute and deliver to each other such other documents; and

(c)	to do such other acts and things;

all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement at the cost of the requesting Party.

14.8	Severability

Should any provision of this Agreement, or any provision incorporated into this Agreement in the future, be or become invalid or unenforceable, the validity or enforceability of the other provisions of this Agreement shall not be affected thereby. The invalid or unenforceable provision shall be deemed to be substituted by a suitable and equitable provision which, to the extent legally permissible, comes as close as possible to the intent and purpose of the invalid or unenforceable provision. The same shall apply: (i) if the Parties have, unintentionally, failed to address a certain matter in this Agreement (Regelungslücke); in this case a suitable and equitable provision shall, to the extent legally permissible, be deemed to have been agreed upon which comes as close as possible to what the Parties in the light of the intent and purpose of this Agreement, would have agreed upon if they had considered the matter; or (ii) if any provision of this Agreement is invalid because of the scope of any time period or performance stipulated herein; in this case a legally permissible time period or performance shall, to the extent legally permissible, be deemed to have been agreed which comes as close as possible to the stipulated time period or performance.

14.9	Interpretation

Terms to which a German translation has been added shall be interpreted throughout this Agreement according to the meaning assigned to them by the German translation. In this Agreement, the term “including” shall mean including without limitation. The headings and table of contents are for organizational purposes only and shall not affect the interpretation of this Agreement. Any reference herein to a law or to a legal requirement law, with respect to any statute, ordinance, cite, rule or regulation, any provision thereof shall be deemed to include reference to all laws and or to such legal requirement and any legal requirement promulgated thereunder or provision thereof, as applicable, including any successor thereto, respectively, in each case, as may be amended.

SECTION 15. GOVERNING LAW, JURISDICTION

15.1	Governing Law

This Agreement shall be subject to and governed by the laws of the Federal Republic of Germany, excluding the conflict of laws provisions. The United Nations Convention on Contracts for the International Sale of Goods (CISG) shall not apply.

15.2	Jurisdiction

The courts of Frankfurt am Main, Germany, shall have the exclusive jurisdiction for all disputes arising out of or in connection with this Agreement, including any disputes relating to the Financing (including any dispute with the arrangers, agents and lenders under any commitment letters with respect thereto).

***

EX-10.6 3 exhibit_10-6.htm EXHIBIT 10.6 AIP exhibit_10-6.htm

EXHIBIT 10.6

SOLUTIA INC.

ANNUAL INCENTIVE PLAN

ARTICLE I

Purpose

The purpose of the Solutia Inc. Annual Incentive Plan is to promote the interest of Solutia Inc. (the “Company”) and its shareholders by providing incentives to participants for positively influencing the Company’s business results. The Solutia Inc. Annual Incentive Plan is designed to motivate participants to attain the performance goals approved by the Executive Compensation and Development Committee of the Board of Directors or by another committee appointed by the Board while preserving for the benefit of the Company the federal income tax deduction for performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended.

ARTICLE II

Definitions

The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

“Award” means, individually or collectively, an incentive award, which shall be determined and paid in accordance with the terms of this Plan.

“Board” means the Company’s Board of Directors, as constituted from time to time.

“Committee” means the Executive Compensation and Development Committee of the Board or by another committee appointed by the Board. The Committee shall be comprised exclusively of members of the Board who are "outside directors" within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the "Code") and Treasury Regulation 1.162-27(e)(3).

“Determination Date” means the applicable deadline for the establishment of performance goals permitting the compensation payable for such year hereunder to qualify as "qualified performance-based compensation" under Treasury Regulation 1.162-27(e).

”Payment Date” means the target date following the Performance Period on which Awards for the Performance Period, if any, are scheduled to be paid out to the Participants.

“Performance Goals” means goals established by the Committee as contingencies for Awards to become payable and/or distributable.

“Performance Period” means the designated period during which the Performance Goals must be satisfied with respect to the Award to which the Performance Goals relate.

“Plan” means this Solutia Inc. Annual Incentive Plan, as set forth herein and as hereafter amended from time to time.

“Subsidiary(ies)” means any corporation (other than the Company) in an unbroken chain of corporations, including and beginning with the Company, if each of such corporations, other than the last corporation in the unbroken chain, owns, directly or indirectly, more than fifty percent (50%) of the voting stock in one of the other corporations in such chain.

ARTICLE III

Eligibility

3.1 Eligible Employees. Without prejudice to Section 4.1, the Plan is applicable to all employees of the Company and its Subsidiaries (individually, a “Participant” and collectively, the “Participants”). All non-union employees and employees whose collective bargaining agreement allows for participation in the Plan, shall be eligible to participate in this Plan.

3.2 Employment Requirement. Except as otherwise provided by the Committee, as specifically defined in a Participant’s employment agreement, or as set forth in Section 3.2 herein, Awards shall be contingent upon the Participant’s remaining employed by the Company or a Subsidiary of the Company through the Payment Date specified by the Committee for such year. Any Participant whose employment terminates prior to the end of a Performance Period shall not be entitled to any Award under the Plan for that Performance Period with the exception of those Participants who have employment contracts specifically governing the terms of their Plan eligibility upon termination, and with the following limited exceptions,:

(a) In the event of the Participant’s death during the Performance Period, an Award may be payable under this Plan to the Participant's estate reflecting the Participant’s actual service for such Performance Period, provided that the applicable Performance Goals were otherwise satisfied, which shall be paid at the same time and in the same manner as Awards relating to such Performance Period are otherwise payable to active employees. The amount payable in such event shall be equal to the amount of such Award multiplied by a fraction the numerator of which is the number of full or partial calendar months elapsed in such Performance Period prior to termination of employment and the denominator of which is the number of full months within the Performance Period.

(b) In the event of the Participant’s Disability, the Committee has the sole and exclusive discretion for determining whether, when, and in what amounts, a Participant will remain eligible for the payment of his or her Award subject to compliance with the requirements of Code Section 162(m). For purposes of this Plan, if the Participant is a party to an employment agreement with the Company in which the term Disability is defined, “Disability” shall have the same meaning as in such employment agreement; otherwise, “Disability” shall mean any physical or mental disability which is determined to be total and permanent by a doctor selected in good faith by t he Company or the relevant Subsidiary.

(c) In the event of the Participant’s termination by the Company after the Performance Period, but before the Payment Date, the Participant shall be eligible for an Award if and only if (i) the Participant is eligible for severance from the Company under the terms of: (A) the Participant’s employment agreement (if any); or (B) an applicable Company separation pay plan in force at the time of the Participant’s termination; and (ii) the applicable Performance Goals for such Performance Period were otherwise satisfied. Any such Award shall be paid at the same time and in the same manner as Awards relating to such Performance Period are otherwise payable to active employees.

ARTICLE IV

Administrative Provisions

4.1 Plan Administration. The Committee shall have the right and authority, subject to the provisions herein, (a) to select employees to participate in the Plan; (b) to establish and administer the Performance Goals and the Award opportunities applicable to each Participant and certify whether the goals have been attained; (c) to construe and interpret the terms of the Plan and any agreement or instrument entered into under the Plan; (d) to adopt, establish, amend, or waive or rescind administrative rules, policies and procedures relating to the Plan and (e) to make all other determinations which may be necessary or advisable for the administration of the Plan. Any determination by the Committee pursuant to the Plan shall be final, binding and conclusive on all employees and Participants and anyone claiming under or through any of them.

4.2 Delegation by the Committee. The Committee in its sole discretion and on such terms and conditions as it may provide may delegate all or any part of its authority and powers under the Plan to one or more members of the Board and/or officers of the Company; provided, however, that the Committee may not delegate its authority or power if prohibited by law, or if such delegation would cause the Awards or other transactions under the Plan to cease to qualify for exemption under Code Section 162(m).

4.3. Compliance with Code Section 409A. Awards under the Plan are intended to comply with Code Section 409A and all Awards shall be interpreted in a manner that results in compliance with Section 409A, Department of Treasury regulations, and other interpretive guidance under Section 409A. Notwithstanding any provision of the Plan or an Award to the contrary, if the Committee determines that any Award does not comply with Code Section 409A, the Company may adopt such amendments to the Plan and the affected Award (without consent of the Participant) or adopt other policies or procedures or take any other actions that the Committee determines are necessary and appropriate to a) exempt the Plan and any Award from application of Code Section 409A and/or preserve the intended tax treatment of amounts payable with respect to the Award, or b) comply with the requirements of Code Section 409A.

ARTICLE V

Establishment and Attainment of Performance Goals and Award Opportunities

5.1 Establishment of Performance Goals. No later than the Determination Date for each Performance Period, the Committee shall establish in writing the Performance Goals for such year. Such Performance Goals may be based on such factors including, but not limited to: (a) revenue, (b) earnings per Share, (c) net income per Share, (d) Share price, (e) pre-tax profits, (f) net earnings, (g) net income, (h) operating income, (i) cash flow, (j) earnings before interest, taxes, depreciation and amortization, (k) sales, (l) total stockholder return relative to assets, (m) total stockholder return relative to peers, (n) financial returns (including, without limitation, return on assets, return on equity and ret urn on investment), (o) cost reduction targets, (p) customer satisfaction, (q) customer growth, (r) employee satisfaction, (s) gross margin, (t) revenue growth, (u) strategic initiatives or plans, or (v) any combination of the foregoing, or such other criteria as the Committee may determine. Performance Goals may be in respect of the performance of the Company, or any of its Subsidiaries or any combination thereof on either a consolidated, business unit or divisional level. Performance Goals may be absolute or relative (to prior performance of the Company or to the performance of one or more other entities or external indices) and may be expressed in terms of a progression within a specified range.

5.2 Award Calculation. No later than the Determination Date for each Performance Period, the Committee shall establish, in writing, the method for computing the amount of compensation which may become payable under the Plan to each Participant in the Plan for such Performance Period if the Performance Goals established by the Committee for such year are attained in whole or in part. Such method shall be stated in terms of an objective formula or standard that precludes discretion to increase the amount of the Award that would otherwise be due upon attainment of the goals and may be different for each Participant. No provision of this Plan shall preclude the Committee from exercising negative discretion with respect to any Award hereunder, within the meaning of Treasury Regulation 1.162-27(e)(2)(iii)(A).

5.3 Evaluation of Performance. Awards can only become payable under this Plan for any Performance Period on account of the attainment of the Performance Goals established by the Committee with respect to such Performance Period. The foregoing criteria shall have any reasonable definitions that the Committee may specify, which may include or exclude any or all of the following items, as the Committee may specify: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of currency fluctuations; effects of financing activities (e.g., effect on earnings per share of issuing convertible debt securities); expenses for restructuring, productivity initiatives or new business initiatives; non-operating items; acquisition expense s; effect of acquisitions; and effects of divestitures. Any such performance criterion or combination of such criteria may apply to the Participant's Award opportunity in its entirety or to any designated portion or portions of the Award opportunity, as the Committee may specify. The Committee may, in its absolute discretion, reduce or eliminate the Award regardless of the attainment of the Performance Goals based upon factors that the Committee deems relevant.

ARTICLE VI

Maximum Award

6.1 Maximum Award. The ECDC may establish limitations on the maximum Award that a Participant shall receive under the Plan in any Plan year. Notwithstanding the foregoing, the maximum Award payable in a Plan year to a Participant shall not exceed $7,500,000.

ARTICLE VII

Committee Certification: Payment of Awards

7.1 Certification of Awards. Payment of any Award under this Plan shall also be contingent upon the Committee's certifying in writing that the Performance Goals and any other material terms applicable to such Award were in fact satisfied, in accordance with applicable treasury regulations under Code Section 162(m). Unless and until the Committee so certifies, such Award shall not become due nor payable. The Committee will certify in writing the degree of achievement of each Performance Goal.

7.2 Method of Payment. Unless the Committee provides otherwise (a) Awards shall be paid following certification as provided under 7.1 above, and (b) such payment shall be made in cash (subject to any payroll tax withholding the Company may determine applies). Notwithstanding the foregoing, the Committee may in its sole and exclusive discretion determine whether the Awards shall be paid (a) in cash, (b) in Common Stock of the Company, or (c) a combination of cash and Common Stock of the Company. The number of shares of Common Stock that may be received by the Participant in settlement of an Award shall be based on the closing stock price of the Common Stock as of the date of certification of such Award by the Committee. 60;Awards of Common Stock will be issued under the Solutia Inc. 2007 Management Long-term Incentive Plan, or successor plan, at the time the Award is settled.

7.3 Shareholder Approval. This Plan shall be submitted to the Company’s shareholders for their approval with respect to Awards payable for the year 2010 and, to the extent necessary for purposes of IRS Code Section 162(m), this Plan shall be resubmitted to the Company’s shareholders for their reapproval with respect to Awards payable for the years commencing on and after 5th anniversary of initial shareholder approval.

ARTICLE VIII

Limitation of Rights

8.1 Not Employment Contract. Any provision of this Plan to the contrary notwithstanding, (a) Awards under this Plan are intended to qualify as "qualified performance-based compensation" under Treasury Regulation 1.162-27(e) and (b) any provision of the Plan that would prevent an Award under the Plan from so qualifying shall be administered, interpreted and construed to carry out such intention and any provision that cannot be so administered, interpreted and construed shall to that extent be disregarded. No provision of the Plan, nor the selection of any eligible employee to participate in the Plan, shall constitute an employment agreement or affect the duration of any Participant's employment, which shall remain "employment at will" unless an emplo yment agreement between the Company and the Participant provides otherwise. Both the Participant and the Company shall remain free to terminate employment at any time to the same extent as if the Plan had not been adopted. Further, nothing in this Plan shall be deemed to modify any terms and conditions of a Participant’s employment agreement.

8.2 Assignment and Alienation. No Participant shall have the right to alienate, assign, sell, transfer, pledge, or encumber his or her actual or anticipated right to receive an Award under the Plan.

8.3 Unfunded Plan. The Plan constitutes an unfunded, unsecured commitment of the Company. No Participant shall have any lien or any assets of the company or any subsidiary thereof by reason of any actual or anticipated right to receive an Award.

8.4 Discretion of Committee. Whether any Award is made under the Plan to any or all Participants will depend on the discretion of the Committee (or its delegate). Nothing in this document or any other document describing or referring to the Plan shall confer any right whatsoever on any person to be considered for any incentive commitments or Awards. This document does not purport to be complete and is subject to and governed by actions, rules and regulations of the Committee (or its delegate). The Plan may be amended, modified or terminated without notice by the Committee at any time, including (but not l imited to) any such amendment, modification or termination that reduces or eliminates any benefit otherwise to be paid or payable hereunder. The Plan will remain in effect until terminated by the Board.

8.5 Taxes. The Company will withhold any federal, state or local, domestic or foreign taxes as required by law or regulation or as the Company deems appropriate from any payments that it makes to Participants hereunder.

ARTICLE IX

Governing Law

9.1 Governing Law. The terms of this Plan shall be governed by the laws of the State of Delaware, without reference to the conflicts of laws principles thereof.

EX-10.8 4 exhibit_10-8.htm EXHIBIT 10.8 FORM OF STOCK OPTION AWARD AGMT. exhibit_10-8.htm

EXHIBIT 10.8

FORM OF

NON-QUALIFIED STOCK OPTION AGREEMENT

pursuant to the

SOLUTIA INC. 2007

MANAGEMENT LONG-TERM INCENTIVE PLAN

Grant Date:

Per Share Exercise Price:

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Solutia Inc., a company organized in the State of Delaware (the “Company”), and the Optionee (the “Optionee”), pursuant to the Solutia Inc. 2007 Management Long-Term Incentive Plan, as in effect and as amended from time to time (the “Plan”).

WHEREAS, it has been determined under the Plan the Company will grant the non-qualified stock option provided for herein to the Optionee;

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the grant of the option hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Optionee hereby acknowledges receipt of a true copy of the Plan and that the Optionee has read the Plan carefully and fully understands its content. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Option. The Company hereby grants to the Optionee, as of the Grant Date specified above, a non-qualified stock option (this “Stock Option”), identified by the Company as Optionee’s 2010 Solutia Inc. Long-Term Incentive Grant (and as confirmed on the Company’s stock administrator’s website www.benefits.ml.com), to acquire from the Company at the Per Share Exercise Price specified above. Except as otherwise provided by Section 11.12 of the Plan, the Partici pant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s stockholder interest in the Company for any reason.

3. No Dividend Equivalents. There is no guarantee by the Company that dividends will be paid. The Optionee shall not be entitled to receive a cash payment in respect of the Option Shares underlying this Stock Option on any dividend payment date for the Shares.

4. Vesting and Exercisability of this Stock Option.

4.1. Except as otherwise provided in this Section 4, the Stock Option subject to this grant shall become vested and exercisable pro rata on each of the first four anniversaries of the Grant Date specified above (one-fourth of the total grant per year), provided the Participant is then employed by the Company and/or one of its Subsidiaries or Affiliates.

4.2. Unless earlier terminated in accordance with the terms and provisions of the Plan and/or this Agreement, this Stock Option shall expire and shall no longer be exercisable after the expiration of ten years from the Grant Date (the “Option Period”).

4.3. Except as otherwise provided in this Section 4, if the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates for any reason prior to the vesting of all or any portion of the Stock Options awarded under this Agreement, such unvested portion of the Stock Options shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Stock Options.

4.4. If the Optionee’s employment with the Company and/or its Subsidiaries or Affiliates terminates due to the Optionee’s Disability, the Stock Options shall continue to vest on a regular schedule during the period of Disability regardless of a termination event. For purposes of this Agreement, “Disability,” if the Optionee is a party to an employment agreement, shall have the same meaning as in such employment agreement, otherwise, “Disability” shall mean any physical or mental disability which is determined to be total and permanent by a doctor selected in good faith by the Company or the relevant Subsidiary or Affiliate.

4.5. If the Optionee’s employment with the Company and/or its Subsidiaries or Affiliates terminates due to the Optionee’s death, this Stock Option shall become exercisable as to all the Option Shares as of the date of any such termination.

4.6. If the Optionee’s employment is terminated by the Company and/or its Subsidiaries or Affiliates the Stock Options will become vested on a pro rata basis as defined herein, if and only if the Optionee is a Severance Eligible Participant; i.e., if the Optionee is eligible for severance from the Company under the terms of: (a) the Participant’s employment agreement (if any); or (b) the terms of an applicable Company separation pay plan in force at the time of the Optionee’s termination. The Stock Options of Severance Eligible Participants shall vest as follows:

4.6.1

A pro rata amount of any unvested Stock Options in each of the four allotments described in Section 4.1 above shall vest in a percentage equal to: the number of full months in which the Optionee was employed from the Grant Date to the Optionee’s termination date, plus the number of full months in the Optionee’s severance period (i.e., the number of months’ salary which constitute the Optionee’s severance payments), divided by the number of full months between the Grant Date and the scheduled vesting date for the allotment of the Stock Option (see Attachment A for a sample calculation). The pro rata portion of the Stock Options shall vest immediately upon the Optionee’s termination date.

5. Method of Exercise and Payment. This Stock Option shall be exercised by the Optionee by delivering to the Company or its designated agent on any business day a written notice, in such manner and form as may be required by the Company, specifying the number of Option Shares the Optionee then desires to acquire (the “Exercise Notice”). The Exercise Notice shall be accompanied by payment of the aggregate Per Share Exercise Price specified above for such number of the Option Share s to be acquired upon such exercise. Such payment shall be made in the manner set forth in Section 5.6 of the Plan.

6. Existing Covenants. If Optionee violates any confidentiality, non-competition, or non-solicitation covenants to which Optionee is subject at the time of Optionee’s termination of employment pursuant to any separate agreement between Optionee and the Company and/or its Subsidiaries or Affiliates, all vested (and not exercised) and unvested Stock Options shall terminate immediately..

7. Non-transferability.

7.1. This Stock Option, and any rights or interests with respect thereto, issued under this Agreement, and the Plan shall not, be sold, exchanged, transferred, assigned or otherwise disposed of in any way at any time by the Optionee (or any beneficiary(ies) of the Optionee), other than by testamentary disposition by the Optionee or by the laws of descent and distribution. Any such Stock Option, and any rights and interests with respect thereto, shall not, be pledged or encumbered in any way at any time by the Optionee (or any beneficiary(ies) of the Optionee) and shall not be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, pledge, transfer, assign, encumber or otherwise dispose o f this Stock Option, or the levy of any execution, attachment or similar legal process upon this Stock Option, contrary to the terms of this Agreement and/or the Plan, shall be null and void and without legal force or effect.

7.2. During the Optionee’s lifetime, the Optionee may, with the consent of the Committee, transfer without consideration all or any portion of this Stock Option to one or more members of his or her Immediate Family, to a trust established for the exclusive benefit of one or more members of his or her Immediate Family, to a partnership in which all the partners are members of his or her Immediate Family, or to a limited liability company in which all the members are members of his or her Immediate Family. For purposes of this Agreement, “Immediate Family” means the Optionee’s children, stepchildren, grandchildren, parents, stepparents , grandparents, spouse, siblings (including half-brothers and half-sisters), in-laws, and all such relationships arising because of legal adoption; provided, however, that any such Immediate Family, or any such trust, partnership and limited liability company, shall agree to be and shall be bound by the terms and provisions of this Agreement and the Plan.

8. Entire Agreement; Amendment. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Executive Compensation and Development Committee (the “Committee”) shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Optionee. The Company shall give written notice to the Optionee of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

9. Acknowledgment of Employee. The award of this Option does not entitle Optionee to any benefit other than that granted under this Agreement. Any benefits granted under this Agreement are not part of the Optionee’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation. Optionee understands and accepts that the benefits granted under this Agreement are entirely at the discretion of the Company and that the Company retains the right to amend or terminate this Agreement and the Plan at any time, at its sole discretion and without notice.

10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the principles of conflict of laws thereof.

11. Withholding of Tax. The Company shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy any federal, state, local and foreign taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations in the U.S.) which the Committee, in its sole discretion, deems necessary to be withheld or remitted to comply with any tax law and/or any other applicable law, rule or regulation with respect to the Stock Option (or exercise thereof) and, if the Optionee fail s to do so, the Company may otherwise refuse to issue or transfer any Option Shares otherwise required to be issued pursuant to this Agreement.

12. No Right to Employment. Any questions as to whether and when there has been a termination of such employment and the cause of such termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of Employer to terminate the Optionee’s employment or service at any time, for any reason and with or without cause.

13. Notices. Any Exercise Notice or other notice which may be required or permitted under this Agreement shall be in writing, and shall be delivered in person or via facsimile transmission, email, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

13.1. If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Optionee, shall designate in writing from time to time.

13.2. If such notice is to the Optionee, at his or her email or home address as shown on the Company’s records, or at such other address as the Optionee, by notice to the Company, shall designate in writing from time to time.

14. Compliance with Laws. The issuance of this Stock Option (and the Option Shares upon exercise of this Stock Option) pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and any respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issu e this Stock Option or any of the Option Shares pursuant to this Agreement if any such issuance would violate any such requirements.

15. Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Optionee shall not assign any part of this Agreement without the prior express written consent of the Company.

16. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

17. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

18. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

Attachment A

Sample Vesting Calculation As Defined Under Section 4.6

Grant Date	4/21/2010
Termination Date	9/1/2010
a- Full Months of Service Between Grant Date and Term Date	4
b- Months of Severance	3
c- Total Months (a + b)	7
Stock Options	5,000

Stock Options	# of Months between Grant & Vest Date	Options Granted	Pro-rated Vest% Upon Term	Options Vested Upon Term
Vest Date #1 (4/21/2011) 25%	12	1,250	7/12=58.4%	730
Vest Date #2 (4/21/2012) 25%	24	1,250	7/24=29.2%	365
Vest Date #3 (4/21/2013) 25%	36	1,250	7/36=19.5%	244
Vest Date #4 (4/21/2014) 25%	48	1,250	7/48=14.6%	183
Total Stock Options Vested Upon Termination				1,522

EX-10.9 5 exhibit_10-9.htm EXHIBIT 10.9 FORM OF RESTRICTED STOCK AWARD AGMT. exhibit_10-9.htm

EXHIBIT 10.9

FORM OF

RESTRICTED STOCK AWARD AGREEMENT

pursuant to the

SOLUTIA INC. 2007 MANAGEMENT LONG-TERM INCENTIVE PLAN

Grant Date:

THIS RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Solutia Inc., a company organized in the State of Delaware (the “Company”), and the Participant (the “Participant”), pursuant to the Solutia Inc. 2007 Management Long-Term Incentive Plan, as in effect and as amended from time to time (the “Plan”).

WHEREAS, it has been determined under the Plan the Company will grant the shares of Restricted Stock provided herein to the Participant;

1. Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Restricted Stock Award. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of shares of Restricted Stock identified by the Company as Participant’s 2010 Solutia Inc. Long-Term Incentive Grant (and as confirmed on the Company’s stock administrator’s website www.benefits.ml.com). Except as otherwise provided by Section 11.12 of the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protecti on against potential future dilution of the Participant’s stockholder interest in the Company for any reason.

3. Vesting.

3.1 Except as otherwise provided in this Section 3, the Restricted Shares subject to this grant shall become unrestricted and vested 100% on the fourth anniversary of the Grant Date, provided the Participant is then employed by the Company and/or one of its Subsidiaries or Affiliates.

3.2 Except as otherwise provided in this Section 3, if the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates for any reason prior to the vesting of all or any portion of the Restricted Shares awarded under this Agreement, such unvested portion of the Restricted Shares shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such shares of Restricted Stock.

3.3 If the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates due to the Participant’s Disability, any unvested Restricted Shares shall continue to vest on a regular schedule during the period of Disability regardless of a termination event. For purposes of this Agreement, “Disability,” if the Participant is a party to an employment agreement, shall have the same meaning as in such employment agreement, otherwise, “Disability” shall mean any physical or mental disability which is

3.4 determined to be total and permanent by a doctor selected in good faith by the Company or the relevant Subsidiary or Affiliate.

3.5 If the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates due to the Participant’s death, any unvested Restricted Shares shall become vested as of the date of any such termination.

3.6 If the Participant’s employment is terminated by the Company and/or its Subsidiaries or Affiliates, the Restricted Shares will become vested on a pro rata basis as defined herein if and only if the Participant is a Severance Eligible Participant; i.e., if the Participant is eligible for severance from the Company under the terms of: (a) the Participant’s employment agreement (if any); or (b) the terms of an applicable Company separation pay plan in force at the time of the Participant’s termination. The Restricted Shares of Severance Eligible Participants shall vest as follows:

3.6.1

A pro rata amount of any unvested shares as described in Section 3.1 above shall vest in a percentage equal to: the number of full months in which the Participant was employed from the Grant Date to the Participant’s termination date, plus the number of full months in the Participant’s severance period (i.e., the number of months’ salary which constitute the Participant’s severance payments), divided by the number of full months between the Grant Date and the scheduled vesting date (see Attachment A for a sample calculation). The pro rata portion of the Restricted Shares shall vest immediately upon the Participant’s termination date.

3.7 Upon the occurrence of a Change in Control as defined in the Plan, any unvested Restricted Shares subject to this grant shall become unrestricted and vested immediately upon the Change in Control in accordance with Article X of the Plan, provided the Participant is employed by the Company on the day prior to the Change in Control.

3.8 If the Participant's employer ceases to be an Affiliate or Subsidiary of the Company, that event shall be deemed to constitute a termination of employment under Section 3.2 above.

4. Period of Restriction; Delivery of Unrestricted Shares. During the Period of Restriction, the Restricted Stock shall bear a legend as described in Section 6.4.2 of the Plan (if certificated) and the Company shall hold the Restricted Stock as escrow agent as set forth in Section 6.3 of the Plan. When shares of Restricted Stock awarded by this Agreement become vested, the Participant shall be entitled to receive unrestricted Shares and if the Participant’s stock is certificated and contain legends restricting the transfer of such Shares, the P articipant shall be entitled to receive new stock certificates free of such legends (except any legends requiring compliance with securities laws). In connection with the delivery of the unrestricted Shares pursuant to this Agreement, the Participant agrees to execute any documents reasonably requested by the Company.

5. Dividends and Other Distributions. There is no guarantee by the Company that dividends will be paid. During the Period of Restriction, all dividends and other distributions paid with respect to the Restricted Stock, whether paid in cash, Shares, or other property (the “Distributions”), shall be held by the Company and subject to the same vesting requirements and restrictions on transferability and forfeitability as the Restricted Stock with respect to which such Distributions w ere paid. The Distributions shall be paid at the time the Restricted Stock becomes vested pursuant to Section 3.

6. Existing Covenants. If Participant violates any confidentiality, non-competition, or non-solicitation covenants to which Participant is subject pursuant to any separate agreement between Participant and the Company and/or its Subsidiaries or Affiliates, all unvested Restricted Stock shall be cancelled and forfeited immediately.

7. Non-transferability. Restricted Stock, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Restricted Stock, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged or encumbered in any way by the Partici pant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of in any way any of the Restricted Stock, or the levy of any execution, attachment or similar legal process upon the Restricted Stock, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect.

8. Entire Agreement; Amendment. This Agreement, together with the Plan contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Executive Compensation and Development Committee (the “Committee”) shall have the right, in its sole discretion, to modify or amend this Agreement from time to t ime in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

9. Acknowledgment of Employee. The award of this Restricted Stock does not entitle Participant to any benefit other than that granted under this Agreement. Any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation. Participant understands and accepts that the benefits granted under this Agreement are entirely at the discretion of the Company and that the Company retains the right to amend or terminate this Agreement and the Plan at any time, at its sole discretion and without notice.

10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflict of laws thereof.

11. Withholding of Tax. The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with any tax law and/or any other applicable law, rule or regulation with respect to the Restricted Stock (or vesting thereof) and, if the Participant fails to do so, the Company may otherwise refuse to issue or transfer any R estricted Stock otherwise required to be issued pursuant to this Agreement.

12. No Right to Employment. Any questions as to whether and when there has been a termination of employment and the cause of such termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company to terminate the Participant’s employment or service at any time, for any reason and with or without cause.

13. Notices. Any notice which may be required or permitted under this Agreement shall be in writing and shall be delivered in person, or via facsimile transmission, email, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

13.1 If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

13.2 If such notice is to the Participant, at his or her email or home address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

14. Compliance with Laws. The issuance of the Restricted Stock or unrestricted Shares pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and any respective rules and regulations promulgated thereunder), and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Restricted Stock or unrestricted Shar es pursuant to this Agreement if such issuance would violate any such requirements.

15. Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign any part of this Agreement without the prior express written consent of the Company.

16. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

17. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

Attachment A

Sample Vesting Calculation As Defined Under Section 3.5

Grant Date	4/21/2010
Termination Date	9/1/2010
a- Full Months of Service Between Grant Date and Term Date	4
b- Months of Severance	3
c- Total Months (a + b)	7
Restricted Shares Granted	3,500

Restricted Shares	# of Months between Grant & Vest Date	Share Granted	Pro-rated Vest % Upon Term	Shares Vested Upon Term
Vest Date (4/21/2014) 100%	48	3,500	7/48=14.6%	511
Total Restricted Shares Vested Upon Termination				511
Total Restricted Shares Cancelled Upon Termination				2,989

EX-10.10 6 exhibit_10-10.htm EXHIBIT 10.10 FORM OF PERFORMANCE SHARES AGMT. exhibit_10-10.htm

EXHIBIT 10.10

FORM OF

PERFORMANCE STOCK AWARD AGREEMENT

pursuant to the

SOLUTIA INC. 2007 MANAGEMENT LONG-TERM INCENTIVE PLAN

Grant Date:

THIS PERFORMANCE STOCK AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Solutia Inc., a company organized in the State of Delaware (the “Company”), and the Participant (the “Participant”), pursuant to the Solutia Inc. 2007 Management Long-Term Incentive Plan, as in effect and as amended from time to time (the “Plan”).

WHEREAS, it has been determined under the Plan the Company will grant the shares of Performance Stock provided herein to the Participant;

1. Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Performance Stock Award. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of shares of Performance Stock identified by the Company as Participant’s 2010 Solutia Inc. Long-Term Incentive Grant (and as confirmed on the Company’s stock administrator’s website www.benefits.ml.com). Except as otherwise provided by Section 11.12 of the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protec tion against potential future dilution of the Participant’s stockholder interest in the Company for any reason.

3. Vesting.

3.1 Except as otherwise provided in this Section 3, the Performance Shares subject to this grant shall become unrestricted and vested on April 21, 2013, provided the Participant is then employed by the Company and/or one of its Subsidiaries or Affiliates and the Company meets the Performance goals set forth below against the Solutia comparison group of companies that are a subset of the S&P Chemical Index (as defined herein) for the period of January 1, 2010 up to and including December 31, 2012 (the “Performance Period”).

a. Total Shareholder Return: Total Shareholder Return (“TSR”) is defined as stock price appreciation including dividends paid. Fifty percent of the Performance Shares shall vest 100% at target if the TSR equals the 55th percentile of the comparison group for the Performance Period. A threshold level of 25% of the target shares shall vest if the TSR equals the 40th percentile. A maximum of 175% of the target shares shall vest if TSR equals the 75th percentile or higher. Vested Performance Shares will be interpolated for the percentile achieved at the end of the Performance Period. The TSR shall include reinvested dividends over the Performance Period and shall be calculated using the average closing price of the Company’s

common stock and the average closing price of the common stock of the companies in the Solutia comparison group within a ninety calendar day period, immediately preceding the beginning date of the Performance Period and the ending date of the Performance Period.

b. Relative Return on Capital: Return on Capital is defined as adjusted net operating profit less adjusted taxes divided by invested capital. Fifty percent of the Performance Shares shall vest 100% at target if the three year average return on capital (“ROC”) equals the 55th percentile of the Solutia comparison group three year average for the Performance Period. A threshold level of 25% of the target shares shall vest if the three year average ROC equals the 40th percentile. A maximum of 175% shall vest if the three year average ROC equals the 75th percentile or higher. Vested Performance Shares will be interpolated for the percentile achieved at the end of the Performance Period. ROC is subject to a $1 billion cumulative EBITDA threshold for the Performance Period before any payouts occur.

For purposes of this Agreement, the Solutia comparison group (a subset of the S&P Chemical Index) means: Dow Chemical Company, E.I. du Pont de Nemours and Company, PPG Industries Inc., Ashland Inc., Ecolab Inc., Eastman Chemical Company, The Lubrizol Corporation, RPM International Inc., Cytec Industries Inc., Valspar Corporation, Rockwood Holdings, Inc., Cabot Corporation, FMC Corporation, PolyOne Corporation, Albemarle Corporation, International Flavors & Fragrances, Inc., Sigma-Aldrich Corporation, OM Group, Inc. Olin Corporation, NewMarket Corporation, Stepan Company, A. Schulman Inc., H.B. Fuller Company, Sensient Technologies Corporation, Minerals Technologies Inc., Zep Inc., Quaker Chemical Corporation, Calgon Carbon Corporation, Penford Corporation, Balchem Corporation, and Arch Chemicals Inc. The Committee r eserves the right to adjust the companies in this comparison group as defined if, for instance, during the Performance Period, a company in the comparison group is acquired or becomes no longer publicly traded.

3.2 Except as otherwise provided in this Section 3, if the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates for any reason prior to the vesting of all or any portion of the Performance Shares awarded under this Agreement, such unvested portion of the Performance Shares shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such shares of Performance Stock.

3.3 If the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates due to the Participant’s Disability, any unvested Performance Shares shall only vest if the Company meets the Performance goals set forth in Section 3.1 above, and shall become vested on April 21, 2013 during the period of Disability regardless of a termination event. For purposes of this Agreement, “Disability,” if the Participant is a party to an employment agreement, shall have the same meaning as in such employment agreement, otherwise, “Disability” shall mean any physical or mental disability which is determined to be total and perman ent by a doctor selected in good faith by the Company or the relevant Subsidiary or Affiliate.

3.4 If the Participant’s employment with the Company and/or its Subsidiaries or Affiliates terminates due to the Participant’s death, any unvested Performance Shares shall only vest if the Company meets the Performance goals set forth in Section 3.1 above, and shall become vested on April 21, 2013.

3.5 If the Participant’s employment is terminated by the Company and/or its Subsidiaries or Affiliates, the Performance Shares will be become vested on a pro rata basis as defined herein if and only if the Participant is a Severance Eligible Participant; i.e., if the Participant is eligible for severance from the Company under the terms of: (a) the Participant’s employment agreement (if any); or (b) the terms of an applicable Company separation pay plan in force at the time of the Participant’s termination. The Performance Shares of Severance Eligible Participants shall vest as follows:

3.6 A pro rata amount of any unvested shares shall vest in a percentage equal to: the number of full months in which the Participant was employed from the Grant Date to the Participant’s termination date, plus the number of full months in the Participant’s severance period (i.e., the number of months’ salary which constitute the Participant’s severance payments), divided by the number of full months between the Grant Date and the scheduled vesting date of the Performance Shares (see Attachment A for a sample calculation). The pro rata portion of the Performance Shares shall only vest if the Company meets the Performance goals set forth in Section 3.1 above, and shall not become unrestricted and vest ed until April 21, 2013.

3.7 If a Change in Control as defined in the Plan occurs during the Performance Period, the Performance Period shall be amended to extend from January 1, 2010 through the date of the Change in Control ("Amended Performance Period"). Upon a Change in Control, any unvested Performance Shares subject to this grant shall become unrestricted and vested if the Company meets the Performance goals set forth in Section 3.1 above during the Amended Performance Period (or during the Performance Period, if the Change in Control occurs after December 31, 2012), provided the Participant is employed by the Company on the day prior to the Change in Control. ;

3.8 If the Participant's employer ceases to be an Affiliate or Subsidiary of the Company, that event shall be deemed to constitute a termination of employment under Section 3.2 above.

4. Period of Restriction; Delivery of Unrestricted Shares. During the Period of Restriction, the Performance Stock shall bear a legend as described in Section 6.4.2 of the Plan (if certificated) and the Company shall hold the Performance Stock as escrow agent as set forth in Section 6.3 of the Plan. When shares of Performance Stock awarded by this Agreement become vested, the Participant shall be entitled to receive unrestricted Shares and if the Participant’s stock is certificated and contain legends restricting the transfer of such Shares, th e Participant shall be entitled to receive new stock certificates free of such legends (except any legends requiring compliance with securities laws). In connection with the delivery of the unrestricted Shares pursuant to this Agreement, the Participant agrees to execute any documents reasonably requested by the Company.

5. Dividends and Other Distributions. There is no guarantee by the Company that dividends will be paid. During the Period of Restriction, all dividends and other distributions paid with respect to the Performance Stock, whether paid in cash, Shares, or other property (the “Distributions”), shall be held by the Company and subject to the same vesting requirements and restrictions on transferability and forfeitability as the Performance Stock with respect to which such Distributions were paid. The Distributions shall be paid at the time the Performance Stock becomes vested pursuant to Section 3.

6. Existing Covenants. If Participant violates any confidentiality, non-competition, or non-solicitation covenants to which Participant is subject pursuant to any separate agreement between Participant and the Company and/or its Subsidiaries or Affiliates, all unvested Performance Stock shall be cancelled and forfeited immediately.

7. Non-transferability. Performance Stock, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Performance Stock, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged or encumbered in any way by the Parti cipant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of in any way any of the Performance Stock, or the levy of any execution,

8. attachment or similar legal process upon the Performance Stock, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect.

9. Entire Agreement; Amendment. This Agreement, together with the Plan contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Executive Compensation and Development Committee (the “Committee”) shall have the right, in its sole discretion, to modify or amend this Agreement from time to t ime in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

10. Acknowledgment of Employee. The award of this Performance Stock does not entitle Participant to any benefit other than that granted under this Agreement. Any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation. Participant understands and accepts that the benefits granted under this Agreement are entirely at the discretion of the Company and that the Company retains the right to amend or terminate this Agreement and the Plan at any time, at its sole discretion an d without notice. The award will appear as two grants on the Company’s stock administrator’s website, one for each performance goal. By accepting the grant agreement once, the full Performance Stock award is accepted.

11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflict of laws thereof.

12. Withholding of Tax. The Company shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes of any kind (including, but not limited to, the Participant’s FICA and SDI obligations) which the Company, in its sole discretion, deems necessary to be withheld or remitted to comply with any tax law and/or any other applicable law, rule or regulation with respect to the Performance Stock (or vesting thereof) and, if the Participant fails to do so, the Company may otherwise refuse to issue or transfer any Performance Stock otherwise required to be issued pursuant to this Agreement.

13. No Right to Employment. Any questions as to whether and when there has been a termination of employment and the cause of such termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company to terminate the Participant’s employment or service at any time, for any reason and with or without cause.

14. Notices. Any notice which may be required or permitted under this Agreement shall be in writing and shall be delivered in person, or via facsimile transmission, email, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

14.1 If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

14.2 If such notice is to the Participant, at his or her email or home address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

15. Compliance with Laws. The issuance of the Performance Stock or unrestricted Shares pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and any respective rules and regulations promulgated

16. thereunder), and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Performance Stock or unrestricted Shares pursuant to this Agreement if such issuance would violate any such requirements.

17. Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign any part of this Agreement without the prior express written consent of the Company.

18. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

19. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

20. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

Attachment A

Sample Vesting Calculation As Defined Under Section 3.5.1

Grant Date	4/21/2010
Termination Date	8/1/2010
a- Full Months of Service Between Grant Date and Term Date	4
b- Months of Severance	3
c- Total Months (a + b)	7
Performance Shares Granted	3,500

Performance Shares	# of Months between Grant & Vest Date	Shares Granted	Pro-rated Vest% Upon Term	Shares that Vest on 4/21/2013 Subject to Meeting Performance Criteria
Vest Date (4/21/2013) 100%	36	3,500	7/36=19.4%	679
Represents the pro-rata portion of the Performance Shares that vest if the Company meets the Performance goals set forth in Section 3.1				679
Represents the Total Performance Shares Cancelled Upon Termination				2,821

EX-10.11 7 exhibit_10-11.htm EXHIBIT 10.11 FORM OF DIRECTOR RESTRICTED STOCK AWARD exhibit_10-11.htm

EXHIBIT 10.11

FORM OF

RESTRICTED STOCK AWARD AGREEMENT

pursuant to the

SOLUTIA INC. NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN

Participant:

Grant Date:

Number of Shares of Restricted Stock granted:

THIS RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Solutia Inc., a company organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Solutia Inc. Non-Employee Director Stock Compensation Plan as in effect and as amended from time to time (the “Plan”).

WHEREAS, it has been determined under the Plan that the Company will grant the shares of Restricted Stock provided herein to the Participant;

1. Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Restricted Stock Award. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of shares of Restricted Stock specified above. Except as otherwise provided by Section 10.12 of the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s stockholder interest in the Company for any reason.

3. Vesting.

3.1 Except as otherwise provided in this Section 3, one-third of the Restricted Stock subject to this grant shall vest immediately and the remaining Restricted Stock shall become unrestricted and vested pro rata on each of the first two anniversaries of the Grant Date specified above (one-third of the total grant on the first anniversary and one-third on the second anniversary of the Grant Date).

3.2 Except as otherwise provided in this Section 3, if the Participant’s service on the Board terminates for any reason, including but not limited to the Participant’s Disability, prior to the vesting of all or any portion of the Restricted Stock awarded under this Agreement, such unvested portion of the Restricted Stock shall continue to vest according to the vesting schedule set forth in Section 3.1. For purposes of this Agreement, “Disability” shall mean any physical or mental disability which is determined to be total and permanent by a doctor selected in good faith by the Company.

3.3 If the Participant’s service on the Board terminates due to the Participant’s death, the Restricted Stock shall become vested as of the date of any such termination.

4. Period of Restriction; Delivery of Unrestricted Shares. During the Period of Restriction, the Restricted Stock shall bear a legend as described in Section 6.4.2 of the Plan (if certificated) and the Company shall hold the Restricted Stock as escrow agent as set forth in Section 6.3 of the Plan. When shares of Restricted Stock awarded by this Agreement become vested, the Participant shall be entitled to receive unrestricted Shares and if the Participant's stock certificates contain legends restricting the transfer of such Shares, the Particip ant shall be entitled to receive new stock certificates free of such legends (except any legends requiring compliance with securities laws). In connection with the delivery of the unrestricted Shares pursuant to this Agreement, the Participant agrees to execute any documents reasonably requested by the Company.

6. Non-transferability. Restricted Stock, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Restricted Stock, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged or encumbered in any way by the Partici pant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of in any way any of the Restricted Stock, or the levy of any execution, attachment or similar legal process upon the Restricted Stock, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect.

7. Entire Agreement; Amendment. This Agreement, together with the Plan contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Board Committee responsible for Director compensation shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflict of laws thereof.

9. Notices. Any notice which may be required or permitted under this Agreement shall be in writing and shall be delivered in person, or via facsimile transmission, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

9.1 If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

9.2 If such notice is to the Participant, at his or her email or home address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

10. Compliance with Laws. The issuance of the Restricted Stock or unrestricted shares pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act and the respective rules and regulations promulgated thereunder), and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Restricted Stock or unrestricted Shares pursu ant to this Agreement if such issuance would violate any such requirements.

11. Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign any part of this Agreement without the prior express written consent of the Company.

12. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

13. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

14. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

15. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Grant Date specified above.


Participant Name


Participant Signature


Date

EX-10.12 8 exhibit_10-12.htm EXHIBIT 10.12 FORM OF DIRECTOR RESTRICTED STOCK UNIT exhibit_10-12.htm

EXHIBIT 10.12

FORM OF

RESTRICTED STOCK UNIT AWARD AGREEMENT

pursuant to the

SOLUTIA INC. NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN

Participant:

Grant Date:

Number of Restricted Stock Units granted:

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Solutia Inc., a company organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Solutia Inc. Non-Employee Director Stock Compensation Plan as in effect and as amended from time to time (the “Plan”).

WHEREAS, it has been determined under the Plan that the Company will grant the Restricted Stock Units provided herein to the Participant;

1. Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Restricted Stock Unit Award. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of Restricted Stock Units specified above. Except as otherwise provided by Section 10.12 of the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s stockholder interest in the Company for any reason. The Participant shall not have the rights of a stockholder in respect of any Share underlying this Award until such Share is delivered to the Participant in accordance with Section 4.

3. Vesting.

3.1 Except as otherwise provided in this Section 3, one-third of the Restricted Stock Units subject to this grant shall vest immediately and the remaining Restricted Stock Units shall become

3.2 unrestricted and vested pro rata on each of the first two anniversaries of the Grant Date specified above (one-third of the total grant on the first anniversary and one-third on the second anniversary of the Grant Date).

3.3 Except as otherwise provided in this Section 3, if the Participant’s service on the Board terminates for any reason, including but not limited to the Participant’s Disability, prior to the full vesting of all or any portion of the Restricted Stock Units awarded under this Agreement, such unvested portion of the Restricted Stock Units shall continue to vest according to the vesting schedule set forth in Section 3.1. For purposes of this Agreement, “Disability” shall mean any physical or mental disability which is determined to be total and permanent by a doctor selected in good faith by the Company.

3.4 If the Participant’s service on the Board terminates due to the Participant’s death, the Restricted Stock Units shall become vested as of the date of any such termination.

4. Delivery of Shares. Subject to the terms of the Plan, if the Restricted Stock Units awarded by this Agreement become vested, the Company shall promptly distribute to the Participant the number of Shares equal to the number of Restricted Stock Units that so vested; provided that the Company may defer distribution of Shares to a date the Participant is not subject to any Company “blackout” policy or other trading restriction imposed by the Company; provided that any distribution of Shares shall in any event be made by the date that is 2-1/2 m onths from the end of the calendar year in which the applicable Restricted Stock Units vested. In connection with the delivery of the Shares pursuant to this Agreement, the Participant agrees to execute any documents reasonably requested by the Company.

5. Dividends and Other Distributions. There is no guarantee by the Company that dividends will be paid. All dividends and other distributions paid with respect to the Shares underlying the Restricted Stock Units, whether paid in cash, Shares, or other property (the “Distributions”), shall be held by the Company and subject to the same vesting requirements and restrictions on transferability and forfeitability as the Restricted Stock Unit with respect to which such Distributions we re paid. The Distributions shall be paid at the time the Shares underlying the Restricted Stock Units are delivered pursuant to Section 4.

6. Non-transferability. Restricted Stock Units, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Restricted Stock Unit, and any rights and interests with respect thereto, shall not, prior to delivery of Shares, be pledged or encumbered in any way by the Participant (or any beneficiary(ies) of the Participant) and shall not, prior to delivery of Shares, be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of in any way any of the Restricted Stock Units, or the levy of any execution, attachment or similar legal process upon the Restricted Stock Units, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect.

8. the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the principles of conflict of laws thereof.

10. Notices. Any notice which may be required or permitted under this Agreement shall be in writing and shall be delivered in person, or via facsimile transmission, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

10.1 If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

10.2 If such notice is to the Participant, at his or her email or home address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

11. Compliance with Laws. The issuance of any Shares pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act and the respective rules and regulations promulgated thereunder), and any other law or regulation applicable thereto. The Company shall not be obligated to issue any Shares pursuant to this Agreement if such issuance would violate any such requirement s.

12. Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign any part of this Agreement without the prior express written consent of the Company.

13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

14. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

15. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

16. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any

17. other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Grant Date specified above.


	Participant Name


	Participant Signature


	Date

EX-18.1 9 exhibit_18-1.htm EXHIBIT 18.1 PREFERABILITY LETTER exhibit_18-1.htm

EXHIBIT 18.1

April 23, 2010

Solutia Inc.

575 Maryville Centre Drive

St. Louis, Missouri 63166

Dear Sirs/Madams:

At your request, we have read the description included in your Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarter ended March 31, 2010, of the facts relating to Solutia Inc.’s (the “Company”) change in accounting principle for inventories in the United States, excluding supplies, from the Last-In, First-Out (“LIFO”) method to the First-In, First-Out (“FIFO”) method. We believe, on the basis of the facts so set forth and other information furnished to us by appropriate officials of the Company, that the accounting change described in your Form 10-Q is to an alternative accounting principle that is preferable under the circumstances.

We have not audited any consolidated financial statements of Solutia Inc. and its consolidated subsidiaries as of any date or for any period subsequent to December 31, 2009. Therefore, we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q, on the related information furnished to us by officials of the Company, or on the financial position, results of operations, or cash flows of Solutia Inc. and its consolidated subsidiaries as of any date or for any period subsequent to December 31, 2009.

Yours truly,

/s/Deloitte & Touche LLP

St. Louis, Missouri

April 23, 2010

EX-31.1 10 exhibit_31-1.htm EXHIBIT 31.1 exhibit_31-1.htm

EXHIBIT 31.1

Certification

I, Jeffry N. Quinn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Solutia Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: April 27, 2010


By:	/s/ Jeffry N. Quinn
	Name:	Jeffry N. Quinn
	Title:	President, Chief Executive Officer and Chairman of the Board

EX-31.2 11 exhibit_31-2.htm EXHIBIT 31.2 exhibit_31-2.htm

EXHIBIT 31.2

Certification

I, James M. Sullivan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Solutia Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: April 27, 2010

	By:	/s/ James M. Sullivan
		Name: James M. Sullivan
		Title: Executive Vice President and Chief Financial Officer

EX-32.1 12 exhibit_32-1.htm EXHIBIT 32.1 exhibit_32-1.htm

EXHIBIT 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Jeffry N. Quinn, Chief Executive Officer of Solutia Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 27, 2010

By:	/s/ Jeffry N. Quinn
	Name:	Jeffry N. Quinn
	Title:	President, Chief Executive Officer and Chairman of the Board

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Solutia Inc. and will be retained by Solutia Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 13 exhibit_32-2.htm EXHIBIT 32.2 exhibit_32-2.htm

EXHIBIT 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, James M. Sullivan, Chief Financial Officer of Solutia Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


By:	/s/ James M. Sullivan
	Name:	James M. Sullivan
	Title:	Executive Vice President and Chief Financial Officer

Dated: April 27, 2010A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Solutia Inc. and will be retained by Solutia Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1 14 exhibit_99-1.htm EXHIBIT 99.1 PRESS RELEASE exhibit_99-1.htm

Exhibit 99.1

NEWS



FOR IMMEDIATE RELEASE
	Solutia Inc. 575 Maryville Centre Drive St. Louis, Missouri 63141 P.O. Box 66760 St. Louis, Missouri 63166-6760
	Media: Melissa Zona – +1 (314) 674-5555 Investors: Susannah Livingston – +1 (314) 674-8914

Solutia Announces Exit of the Primary Accelerators Business

Continues focus on high-value products with world-leading positions

ST LOUIS - April 22, 2010 – Solutia Inc. (NYSE: SOA) announced today that it will exit the Primary Accelerators business and discontinue Primary Accelerators production at its facility at the Monsanto Antwerp site in Belgium. Production of Primary Accelerators is scheduled to stop in the second half of 2010.

“This decision is consistent with Solutia’s overall strategy to focus on businesses that are market leaders with a sustainable competitive advantage,” said Mike Donnelly, President and General Manager of Solutia’s Technical Specialties division. “As the Primary Accelerators market is oversupplied with low-cost Asian producers and there are few barriers to entry, Solutia has determined this business no longer meet our strategic criteria.”

This decision does not affect the Santoflex PPD manufacturing operations at Antwerp, including production of 4-ADPA, the key intermediate for Solutia’s Santoflex® line of antidegradants. “Our patents and scale in the PPD business give us a sustainable competitive advantage,” added Donnelly, “allowing us to deliver value to both customers and shareholders.”

This action regarding Primary Accelerators is a necessary and strategic step in positioning Solutia’s Flexsys portfolio to remain the global leader in the manufacture and supply of high-quality rubber chemicals that have a competitive advantage in the market. Over the coming months, Solutia will work closely with customers, suppliers, and Monsanto to provide a smooth transition out of the Primary Accelerators business.

###

NOTE TO EDITORS: Solutia, Flexsys and Santoflex are trademarks of Solutia Inc. and/or its subsidiaries.

Forward Looking Statements

This press release contains forward-looking statements, including, but not limited to statements about projected financial performance, which can be identified by the use of words such as “believes,” “expects,” “may,” “will,” “intends,” “plans,” “estimates” or “anticipates,” or other comparable terminology, or by discussions of strategy, plans or intentions. These statements are based on management’s current expectations and assumptions about the industries in which Solutia operates and Solutia's ability to raise additional funds which is subject to market conditions. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achie vements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the accuracy of our assumptions, the ability of third parties to finance an acquisition, and those risk and uncertainties described in Solutia’s most recent Annual Report on Form 10-K, including under “Cautionary Statement About Forward Looking Statements” and “Risk Factors”, and Solutia’s quarterly reports on Form 10-Q. These reports can be accessed through the “Investors” section of Solutia’s website at www.solutia.com. Solutia disclaims any intent or obligation to update or revise any forward-looking statements in response to new information, unforeseen events, changed circumstances or any other occurrence.

Corporate Profile

Solutia is a market-leading performance materials and specialty chemicals company. The company focuses on providing solutions for a better life through a range of products, including: Saflex® interlayer for laminated glass; CPFilms™ aftermarket window films sold under the VistaTM brand and others; and technical specialties including the Flexsys family of chemicals for the rubber industry, Skydrol® aviation hydraulic fluid and Therminol® heat transfer fluid. Solutia’s businesses are world leaders in eac h of their market segments. With its headquarters in St. Louis, Missouri, USA, the company operates globally with approximately 3,300 employees in more than 50 worldwide locations. More information is available at www.Solutia.com.

Source: Solutia Inc.

St. Louis

4/22/10

GRAPHIC 15 logo.gif LOGO begin 644 logo.gif M1TE&.#EA$@%@`/<````E3A`S62!`9$!<>F!WD6^$FW^2IM,C+=8Q.MD_1]M, M5-Y:8N%H;^-U>X"2IX^?L9^MO*^[Q[_(T^:$B>F1ENR>H^^ML?&[OL_6WM_D MZ?3)R_?6U^_Q]/KDY?___P`````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M`````````````````````"'Y!`$``/\`+``````2`6````C_`#T('$BPH,&# M"!,J7,BPH<.'"!M8@$BQHL6+&#-JW,BQHT>&'!`<.'#AH\F3*%.J7,DR88># M&T8>J-"RILV;.'.:3'!@P<$%(U_J'$JTJ%&;#&32/,JTJ=.G&A7(I."0`@>H M6+-JO5E!IM"%#0X@N+JUK-FS&3M,;-AUI$^T<..>I9`@P<:P=N7JW>O4@LP# M?`,+%IQ4YN##B,^V'9FXL>.G0`$_GDQYZ(:OE3-K+CMRP^;/B6,>H'J2PD@% MH%,+_HM2P\@&JF/+%3UR@NS;N`EV^$LZM^_8?S'_'KYYP0+/Q),K?RARN7/* MG9]+5TFV)<_IV#^:/IV]>]R_!U![_Q^_%;QD\NB?@H=M,GKZ]Q!E(C?9'+[] MAALHE$PY_[[__ZEE8,"`!!9HX($()JC@@@PVZ."#$!H(8$H2`&#AA1AFJ.&& M'';HX8<@ABCBB!E.B%*%)*:HXHHLMABBB2>AZ.*,--9HXX4PFB3CC3SVZ".' M.7ZT8X653';DI(8.>!``AE)V*$`! M$G@@00$?.D!`FF&"Z8``&0K@P)QTTMGFA0Z`J&:*67*T)890CDB6`048(!": M0/Z)HP$:&GHG``)(("D&'F0@J01KEOAAD1YD*F*?&REJ89$&J5 M&YKYH0>,9O_H:(=4Q@KDAQETR>JGH&8DJH6G/MKJKAE&`&NKOQXKJP?"7EBK MA\1J:"P`#W@Y8J^^ONC!D="FJJ$`E2+[JJT7SLKALTM"6R6XGH*(+4:_7DB6 M`U\VVFF'78H++;D6FKLANKP`FF M!Q%T2.F&DKXJ\[(4`_"RAB=#BE#1&]L,$<@E"CLRT`MG&+2'&6"@X<\.K[PQ MAQQH7&+28SOM$-0;ZXSA5>WBF/35'8J,--E&6PQSJRM/_:K99^O_B:$`5W$H ML@1J4\E!VQ?"+7"]`!BK==?0_GMRF4Q#S'=#OYIL$./?&N1UX@8)RRE!G$O^ M.<0:%OEXA@$$OO?E"\4K0`8#88`XZP1<6KD``_3N>^D6"F"`I!"H3>0`QKN< M>@&W`P!!\TW#KA#:5U:/I4`/#%"M]`11;_WW/PI$@`%C4LF]0-Z#K[Z-(^<+ M[ODIKR]_]0(%H";A\,<___Y(#I2[POD+H``'"*KJG*0"5B&@;T1RGH_\I3\* M5`U/&M@1VAR``1$,TG8,D\$<_84]'301:T*H&=>LI24:(&%QQ*)"&%U@)BW, M8`46`,(8WB%D_SAH$M>\1HC08RCH@9%P,307=`T:6U(8+,:1B'/TXV,X<)X3KF0#"&A`5XS"@:X$\2,:J(`! M+<+`-IZD`R*99$,L\):RF.:.-2&D),5#E+`T@)`)`:1#1F+)BX@&CAYY80U7 M2<>$:+(F9;2)`F"C`%C:1)0><")"_$(!!0AG(4:LY4$B693(Q"%-&`!AJPC&!>"PZ(<$20)P.0Q#T*! M5GH@*8)TX#Q5(O^5.J93FDL1R&@ZXAK8U,<#?AE(4AIRP0I<(*`(I<`^"_)` MHFRG(4"IP#\'@IF!$L0"WN0(*G$2'@9LE""()(@&2+F1!"B``S$AY0%.F,N$ M-`"#%.@D18)3%!,6!`%Y$SR(&FM9FYI0@#UI56=U%&"7^;R3 M(>[A2%O\N)8#-&`"!]"`!=BH4F6ZA*$S+8@%YFJ>D23`.&]5`!=W`Q%KYI(# M+U&`<49#&@U,U`,4T(!.OZC*L-9$`X]\I$!$2T&4@?BW(30_BEP;_.E2E M$]"J099J3P^`<*U_">)%'R*5J@HUL?,!2@_+^,(&'N"QJ.HG<2\(0Z?:I;F. M#>8Z#_+0SWJ`@89MR1L5\DD/Q)2R6U6`/1N0%TP.9*D@3$I3NX)#Z3*0((RA M8V('`LVOKG$T`TV@2@VR`2]R8+2R3>Q#!6(!#5R`BTM=BFAZ`Y@&E.2_QJ7H M&EX'Z+(9C+$K`(%C%CHDDM$GD>)IH&N>7DBE`Y(I0,&1D!2 M4).`-KY0(.0\KD%Z(M`%1/*.XP5R4=7H7X@FF"JFN0HA%4":PG"1@;V12&PE M(D0J-03D!04"%)ZT*1+.KI4D#O;K5V**4)PG@@`5^S&""'#BVA+0P:_F[ M`+`F]CPB>BFU9`;JW$X"1K"^G>JA/3/K MH7K`-;O1``706&>!,,`GB<3O0%P*1S^7\\[+?DNR?SJ3%)+D/#J%=$D:()X% M6!*5T(5F2`0RW/YJP)Z:!.QU!`)8JL13(.OV;2TG0..];."E$7DQ(OM#Y/ZB M1$>@*8#^M: MU0.%34(%FL(.`!:TH[]6HF"[S)BN!!7@@!WS1QV-P=V\Q36N>6LGBRG4F".@ MJ8%I`!9#`DJQ0-#%)S2Y0$3KT>^NY8669"5L*6K(OP35((#]2K$'TA;A=*#B ML#;U0"S`@)>?FH%Y:0N_QRP2LH:%A@4Y][1AV_"P]K4@4$;EQE7@BQ`M7'7^@&^@L717G$"4%4G01@`]*4+1^T#H>9\+J!3;U?>`Q?H ;SP1F2?G,-X3-&Z8(61EBT@AB/(RPWTQ````[ ` end -----END PRIVACY-ENHANCED MESSAGE-----

DELAWARE	43-1781797
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI	63166-6760
(Address of principal executive offices)	(Zip Code)

Class		Outstanding at March 31, 2010
Common Stock, $0.01 par value		121,353,399