-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EdKv51cv9YTmoqM4SkOgyvjE0llOuSnpjrJjhlv28eOkpRM8BVMGqMGPa+lPdrb4 VThQ2IioY3dhgoS3hWQ+Ew== 0001068800-04-000146.txt : 20040223 0001068800-04-000146.hdr.sgml : 20040223 20040223171740 ACCESSION NUMBER: 0001068800-04-000146 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 20040130 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLUTIA INC CENTRAL INDEX KEY: 0001043382 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 431781797 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13255 FILM NUMBER: 04622761 BUSINESS ADDRESS: STREET 1: 575 MARYVILLE CENTRE DRIVE STREET 2: P O BOX 66760 CITY: ST. LOUIS STATE: MO ZIP: 63166-6760 BUSINESS PHONE: 3146741000 MAIL ADDRESS: STREET 1: P O BOX 66760 CITY: ST. LOUIS STATE: MO ZIP: 63166-6760 FORMER COMPANY: FORMER CONFORMED NAME: QUEENY CHEMICAL CO DATE OF NAME CHANGE: 19970804 8-K 1 form8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 30, 2004 SOLUTIA INC. ------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE -------- (STATE OF INCORPORATION) 001-13255 43-1781797 --------- ---------- (COMMISSION (IRS EMPLOYER FILE NUMBER) IDENTIFICATION NO.) 575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI 63166-6760 - --------------------------------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (314) 674-1000 -------------- REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE ITEM 5. OTHER EVENTS. On February 3, 2004, Solutia issued a press release announcing that its subsidiary, Solutia Europe SA/NV had successfully restructured its 6.25% Euro Notes, due in 2005. The Terms and Conditions of the Euro Notes were amended and restated in connection with the restructuring, as described in the press release. Subsequently, Solutia Europe entered into a Fiscal Agency Agreement, a Collateral Agency Agreement and various collateral documents pursuant to which, among other things, KBC Bank NV was appointed as Collateral Agent for the holders of the Euro Notes and Solutia Europe granted to the Collateral Agent security interests in substantially all of its assets. In addition, three Solutia Europe subsidiaries, Solutia Services International SCA/Comm.VA, or SSI, Amcis AG and CarboGen AG, which are referred to collectively as the Subsidiary Guarantors, entered into the Collateral Agency Agreement, guarantees of Solutia Europe's obligations in respect of the Euro Notes, and various collateral documents pursuant to which the Subsidiary Guarantors granted to the Collateral Agent security interests in certain of their respective assets. Additionally, to the extent that certain minority shareholders of Solutia Europe's subsidiary, CP Films Vertriebs GmbH, or CPFilms Germany, approve CPFilms Germany's participation in the restructuring, CP Films Germany will enter into the Collateral Agency Agreement, a guarantee of Solutia Europe's obligations in respect of the Euro Notes and certain collateral documents pursuant to which CP Films Germany will grant to the Collateral Agent security interests in certain of its assets, subject to certain limitations and restrictions. Solutia Europe anticipates that CP Films Germany will enter into such documentation later this year, and Solutia anticipates filing that documentation in another Report on Form 8-K after it is executed. Solutia Europe also entered into an Agreement of Understanding and Restructuring with members of the Ad-Hoc Committee of the holders of the Euro Notes that sets forth, among other items, the process for implementing the guarantees, the security and the pledges associated with the restructuring. A copy of the press release, the Terms and Conditions of the Euro Notes, the Fiscal Agency Agreement, the Collateral Agency Agreement, the guarantees of the Subsidiary Guarantors and substantially all of the collateral documents entered into by Solutia Europe and the Subsidiary Guarantors are filed as exhibits to this Report on Form 8-K and are incorporated herein by reference. Pursuant to the Agreement of Understanding and Restructuring, Solutia Europe agreed to file a Report on Form 8-K relating to the restructuring, in form and substance acceptable to the Ad-Hoc Committee of the holders of Euro Notes. This Report on Form 8-K is being filed in order to comply with that obligation. The press release highlights the material amendments to the Terms and Conditions of the Euro Notes, including the addition of covenants affecting the ability of Solutia Europe and its subsidiaries to transfer cash out of those entities until the Euro Notes are paid. One of those covenants prohibits Solutia Europe from paying any principal or interest on its Convertible Subordinated Bonds. These Convertible Subordinated Bonds are presently outstanding in the principal amount of approximately BEF 4,950,000,000, and are held by two subsidiaries of Solutia Inc., Solutia Europe's ultimate parent company. The Convertible Subordinated Bonds provide for cash payment of interest on January 26 of each year, generally at the rate of 5 percent per annum, are subordinated to the Euro Notes and are convertible into equity of Solutia Europe. Solutia Europe did not make the interest payment due on the Convertible Subordinated Bonds due on or about January 26, 2004. In addition, so long as the Euro Notes are outstanding, Solutia Europe does not intend to pay the interest that will come due on any of the Convertible Subordinated Bonds that are not converted into equity. Such a failure to pay interest will result in the Convertible Subordinated Bonds being in default and will entitle the holders (presently Monchem International, Inc. and Solutia Investments, LLC) to take certain actions. However, if the holders of the Convertible Subordinated Bonds take such action, or if Solutia Europe makes payment on these bonds prior to repayment of the Euro Notes, this will cause an event of default under the Euro Notes and will entitle the holders of the Euro Notes to enforce their rights under the subordination provisions of the Convertible Subordinated Bonds. The Mortgage Agreement, the Mortgage Mandate Agreement and the Floating Charge Agreement, which are filed as exhibits to this Report on Form 8-K, are the English translations of such documents. The definitive versions of such documents, which are substantively the same as the English translations thereof, are in Dutch and are available from Solutia Europe upon request. The description set forth herein does not purport to be complete and is subject to the detailed provisions of the documents attached as exhibits to this Report on Form 8-K attached hereto, which are incorporated by referenced in their entirety, and the other documentation entered into by Solutia Europe and the Subsidiary Guarantors, copies of which Solutia Europe will furnish to a noteholder of the Euro Notes upon request. In addition to the specific restrictions set forth in the respective documents, the rights and obligations under such documents are further restricted pursuant to the applicable laws and regulations governing Solutia Europe and its subsidiaries and such documents. Existing and prospective holders of the Euro Notes should review all of the relevant documentation and consult with their European and U.S. legal counsel and advisors. Solutia Europe has also filed a Supplement to the Offering Circular dated February 11, 2000 relating to the Euro Notes with the Luxembourg Stock Exchange. Copies of the Supplement are available at the offices of the Luxembourg Paying Agent for the Euro Notes. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits listed below are filed as part of this report. Exhibit Number Description - -------------- ----------- 99.1 Press Release 99.2 Terms and Conditions of Euro Notes 99.3 Fiscal Agency Agreement dated February 11, 2004 among Solutia Europe SA/NV, Kredietbank SA Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent 99.4 The Collateral Agency Agreement dated February 11, 2004 among KBC Bank NV, as Collateral Agent, Solutia Europe SA/NV and the Subsidiary Guarantors 99.5 Form of Global Note 99.6 Subsidiary Guaranty dated February 11, 2004 of Amicis AG 99.7 Subsidiary Guaranty dated February 11, 2004 of CarboGen AG 99.8 Subsidiary Guaranty dated February 17, 2004 of Solutia Services International SCA/Comm.VA 99.9 Commercial Receivable Pledge Agreement dated February 11, 2004 between Solutia Europe SA/NV and KBC Bank NV 99.10 Mortgage Agreement dated February 11, 2004 between Solutia Europe SA/NV and KBC Bank NV 99.11 Mortgage Mandate Agreement dated February 11, 2004 between Solutia Europe SA/NV and KBC Bank NV 99.12 Floating Charge Agreement dated February 11, 2004 between Solutia Europe SA/NV and KBC Bank NV 99.13 Share Pledge Agreement dated February 11, 2004 between Solutia Europe SA/NV and KBC Bank NV (relating to Amcis AG) 99.14 Share Pledge Agreement dated February 11, 2004 between Solutia Europe SA/NV and KBC Bank NV (relating to CarboGen AG) 99.15 Commercial Share Pledge Agreement dated February 17, 2004 between Solutia Europe SA/NV and KBC Bank NV (relating to Services International SCA/Comm.VA) 99.16 Trademark Pledge Agreement between Amcis AG and KBC Bank NV 99.17 Trademark Pledge Agreement between CarboGen AG and KBC Bank NV 99.18 Assignment Agreement between Amcis AG and KBC Bank NV 99.19 Assignment Agreement between CarboGen AG and KBC Bank NV 99.20 Commercial Receivable Pledge Agreement dated February 11, 2004 between Solutia Services International SCA/Comm.VA and KBC Bank NV SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. SOLUTIA INC. --------------------------- (Registrant) /s/ Rosemary L. Klein --------------------------- Assistant Secretary DATE: FEBRUARY 23, 2004 EX-99.1 CHARTER 3 exh99p1.txt Exhibit 99.1 [Solutia logo] News Solutia Inc. 575 Maryville Centre Drive St. Louis, Missouri 63141 P.O. Box 66760 St. Louis, Missouri 63166-6760 FOR IMMEDIATE RELEASE REORGANIZATION INFORMATION LINE: (800) 298-2303 REORGANIZATION WEBSITE: www.solutia.com/reorganization MEDIA: Glenn Ruskin (314) 674-3804 EQUITY INVESTORS: Marleen Judge (314) 674-7777 DEBT INVESTORS: Kevin Wilson (314) 674-4905 SOLUTIA FINALIZES RESTRUCTURING OF EURO NOTES ST. LOUIS, FEB. 3, 2004 --- Solutia Inc. (OTCPK: SOLUQ) announced today that its subsidiary, Solutia Europe S.A./N.V., has successfully restructured its 6.25% Euro Notes, due in 2005. The restructuring was completed as planned on Jan. 30, 2004, at which time Solutia Europe and the requisite Euro Note holders entered into definitive documents setting forth the terms and conditions of the restructuring. The restructuring allows Solutia Europe to continue normal operations while Solutia Inc. and its domestic subsidiaries reorganize under Chapter 11 of the United States Bankruptcy Code. "We are pleased to have finalized the Euro Note restructuring, which is beneficial for both the holders of the Euro Notes and for Solutia Europe," said Jeffry N. Quinn, senior vice president, general counsel and chief restructuring officer, Solutia Inc. "By extending the maturity of the Euro Notes, we have given ourselves time to finalize the reorganization of Solutia Inc. and its domestic subsidiaries in the United States prior to the maturity of the Euro Notes." The Euro Notes were amended in the following manner in the restructuring: 1. Elimination of the cross default provisions in the Euro Notes that would have resulted in their default and acceleration upon the filing of a Chapter 11 proceeding by Solutia Inc. 2. The maturity of the notes was extended to Dec. 15, 2008 from the current Feb. 15, 2005 maturity. 3. Interest on the notes was fixed at the rate of 10% per annum, payable semi annually. 4. Holders of the Euro Notes will be granted security interests in substantially all of the assets of Solutia Europe S.A./N.V. and certain of its subsidiaries (excluding Flexsys Holding BV), which subsidiaries will be added as guarantors of the Euro Notes, all to the extent permitted under applicable law and as further provided in the underlying documentation implementing the restructuring. 5. Certain redemption provisions were added that allow partial redemption of the Euro Notes as a result of permitted asset sales and full redemption in certain circumstances. Full redemption is barred for 18 months; thereafter, full redemption is allowed at 105% of principal for the next year, 103% of principal for the year thereafter, 101% of principal for the year after that and at par thereafter. 6. Covenants were added that have the effect of limiting the ability of Solutia Europe S.A./N.V. and its subsidiaries to transfer assets or cash out of those entities until the Euro Notes are paid. 7. Solutia Europe S.A./N.V. agreed to certain financial reporting requirements and to indemnify Euro Note holders against certain liabilities. Solutia Europe and the holders of the Euro Notes also entered into an Agreement of Understanding that sets forth, among other items, the process for implementing the guarantees, security and pledges associated with the restructuring. The finalization and implementation of the security and pledges will take place over the course of the next several weeks. # # # FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by the forward-looking statements. Assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, among other things: (i) the ability of Solutia to develop, prosecute, confirm and consummate one or more Chapter 11 plans of reorganization; (ii) the potential adverse impact of the Chapter 11 filing on Solutia's operations, management and employees, and the risks associated with operating businesses under Chapter 11 protection; (iii) the ability of Solutia to comply with the terms of the DIP financing facility; (iv) world economic conditions, competitive pressures, gain or loss of significant customers, labor relations and disruption of operations, raw material and energy costs, currency and interest rate fluctuations, success in implementing pricing actions and managing spending, operating rates, cost of debt, environmental compliance and remediation and other factors; (v) customer response to the Chapter 11 filing; and (vi) the risk factors or uncertainties listed from time to time in Solutia's filings with the Securities and Exchange Commission and with the U.S. Bankruptcy Court in connection with the Company's Chapter 11 filing. Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. CORPORATE PROFILE On Dec. 17, 2003, Solutia Inc., and 14 of its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. Solutia's affiliates outside the United States were not included in the Chapter 11 filing. Additional information on Solutia's Chapter 11 reorganization is available from the Company's web site, www.solutia.com. Solutia (http://www.solutia.com) uses world-class skills in applied chemistry to create value-added solutions for customers, whose products improve the lives of consumers every day. Solutia is a world leader in performance films for laminated safety glass and after-market applications; process development and scale-up services for pharmaceutical fine chemicals; specialties such as water treatment chemicals, heat transfer fluids and aviation hydraulic fluid and an integrated family of nylon products including high-performance polymers and fibers. Solutia ...Solutions For a Better Life. Source: Solutia Inc. St. Louis Date: 2/3/04 EX-99.2 BYLAWS 4 exh99p2.txt Exhibit 99.2 Execution copy SCHEDULE 1 TO FISCAL AGENCY AGREEMENT DATED ON OR ABOUT FEBRUARY 10, 2004 (EURO)200,000,000 10.00 PERCENT SENIOR SECURED NOTES DUE 2008 OF SOLUTIA EUROPE SA/NV TERMS AND CONDITIONS OF THE NOTES The (euro)200,000,000 6.25 percent Notes due 2005 (the "Original Notes") of Solutia Europe SA/NV (the "Issuer"), as amended and restated, the (euro)200,000,000 10.00 percent Notes due 2008 to which these Terms and Conditions of Notes are affixed and are incorporated by reference therein (these Terms and Conditions of Notes, as amended, modified or supplemented from time to time, including all exhibits and schedules hereto, the "Terms and Conditions of Notes" and such Notes, as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, the "Notes"), was duly authorized pursuant to a decision of the Board of Directors of the Issuer dated 29 January, 2004. The amendment and restatement of the terms of the Notes was approved by the requisite majority of the holders of the Original Notes pursuant to a meeting of the holders of the Original Notes held at the Sheraton Brussels Airport Hotel, Brussels National Airport, 1930 Zaventem, Belgium, on 29 January 2004. In connection with the Notes, the Issuer will enter into the Fiscal Agency Agreement dated on or about February 10, 2004 (as amended, modified or supplemented from time to time, the "Fiscal Agency Agreement") with Kredietbank S.A. Luxembourgeoise, as fiscal agent and paying agent (together with its successors and assigns, the "Fiscal Agent"), and KBC Bank NV as principal paying agent (together with its successors and assigns, the "Principal Paying Agent"). The holders of the Notes (the "Noteholders") and the holders (the "Couponholders") of the coupons appertaining thereto (the "Coupons") will be entitled to the benefit of, be bound by, and be deemed to have notice of, all of the provisions of the Fiscal Agency Agreement. In connection with the amendment of the Notes, the Issuer has agreed to pledge or otherwise grant security interests or Liens in certain of its assets to the Collateral Agent as further contemplated by these Terms and Conditions of Notes, the Collateral Agency Agreement and the other Credit Documents and to cause its Subsidiaries to enter into the Subsidiary Guaranties and to pledge or otherwise grant Liens in certain of their assets to the Collateral Agent as further contemplated by these Terms and Conditions of Notes, the Collateral Agency Agreement and the other Credit Documents. Capitalized terms used herein without definition shall have meanings ascribed to such terms in the Fiscal Agency Agreement. 1. INTEREST The Notes bear interest at a rate of 6.25 percent per annum for all periods prior to 29 January 2004 and at a rate of 10.00 percent per annum from and after 29 January 2004. Interest on each Execution copy Note will cease to accrue from the due date for redemption thereof unless (i) such redemption is pursuant to the provisions under Section 9 hereof and/or (ii) upon due presentation of the Note, the payment of principal is improperly withheld or refused. In either such event, the affected Notes will continue to bear interest (both before and after judgment) until such Notes shall be paid in full or until the seventh day after the date on which notice is given to the affected Noteholders to the effect that the funds for the payment of principal in respect of all outstanding Notes have been received by the Principal Paying Agent and are available for collection (provided that sufficient funds have actually been received and are available for such purpose), whichever is earlier. In addition to the foregoing, from 29 January 2004 through 14 February 2004, the interest on the Notes will accrue at an additional 4.00 percent per annum (the "Additional Interest") over and above relevant rate of interest of the Notes. The Additional Interest was prepaid by the Issuer on 17 December 2003 and the obligation was expressly discharged. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Notes and, to the extent permitted by applicable law, any interest payments thereon not paid when due, shall thereafter bear interest (including post-petition interest in any proceeding under applicable bankruptcy or insolvency laws) payable upon demand at a rate that is 2.00 percent per annum in excess of the interest rate otherwise payable under the Notes. Payment or acceptance of the increased rates of interest provided for in this paragraph is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent or any Noteholder. Interest on the Notes will be payable (i) annually in arrears on 14 February 2004 and (ii) thereafter semi-annually in arrears on 14 August and 14 February of each year (commencing on 14 August 2004), until and including 14 August 2008, and (iii) in arrears on 15 December 2008 (each such date described in clauses (i), (ii) and (iii), an "Interest Payment Date"), subject to the provisions under Section 3 hereof. Whenever it is necessary to compute any amount of interest in respect of the Notes for a period of less than a full year, such interest shall be calculated on the basis of the actual number of days elapsed divided by the actual number of days in the period from and including the immediately preceding Interest Payment Date (or, if none, the Amendment Date) to but excluding the next scheduled Interest Payment Date. 2. FORM AND DENOMINATIONS The Notes are in bearer form, serially numbered, in the denominations of (euro)1,000, (euro)10,000, and (euro)100,000. The Notes are initially represented by a permanent global note ("Permanent Global Note") in bearer form without Coupons attached. Notes of one denomination may not be exchanged for Notes of any other denomination. Title to the Notes and any interest Coupon, if applicable, will pass (i) by entry of the transfer in a securities account as long as the Notes are represented by a Permanent Global Note and (ii) by delivery of the Notes and any Coupons if the Notes are represented by definitive notes. The A-2 Execution copy holder of any Note or Coupon will (except as otherwise provided by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder. 3. PAYMENTS AND PAYING AGENTS Payments of principal and interest in respect of Notes and Coupons will be made against presentation and surrender (or, in the case of partial payment, endorsement) of Notes or the appropriate Coupons (as the case may be) only at the specified offices of the paying agents named in the Fiscal Agency Agreement or at the offices of such other paying agents outside the United States as the Issuer may appoint from time to time (together with the Fiscal Agent, the "Paying Agents"). Such payments will be made in euro, at the direction of the holder of any Note or Coupon, and subject to applicable laws and regulations, by a euro check drawn on, or by transfer to a euro account (or any other account to which euro may be credited or transferred) maintained by the holder with a bank located in the principal financial centre of any member state of the European Communities. No payment on the Notes will be made by mail to an address in the United States or its possessions or by transfer to an account maintained by the holder in the United States or its possessions. The Issuer, with the approval of the Fiscal Agent, may change any of the Paying Agents or their specified offices, but (i) the Issuer may not permit payments to be made out of the United States office of a Paying Agent, (ii) the Issuer must maintain a Paying Agent in Luxembourg, and (iii) as long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that Exchange so require, the Principal Paying Agent must be a direct participant in the BNB System. Notice of any change in the Paying Agents or in their specified offices will be given to the Noteholders and Couponholders in accordance with the provisions under Section 14 hereof. If the date for payment on any Note is not a Business Day, then the holder thereof shall not be entitled to payment of the amount due until the next following Business Day nor to any further interest or other payment in respect of such delay. Any monies paid by the Issuer or any Subsidiary Guarantor to the Principal Paying Agent or a Paying Agent for payment of principal, interest or Additional Amounts which remain unclaimed for two years after such monies have become due and payable will be repaid to the Issuer or such Subsidiary Guarantor upon its written request and the Noteholders may thereafter look only to the Issuer or such Subsidiary Guarantor, as the case may be, for payment thereof. If a Note is presented for redemption without all unmatured Coupons relating thereto, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amount of principal due for payment; provided, however, that if the gross amount available for payment is less than the principal amount of such Note, the sum deducted will be that proportion of the aggregate amount of such missing Coupons which the gross amount actually available for payment bears to the principal amount of such Note. Each sum of principal so deducted shall be paid in the manner described above against presentation and (provided that payment is made in full) surrender of the relevant missing Coupons. A-3 Execution copy 4. STATUS The Notes constitute direct unconditional senior secured obligations of the Issuer and will at all times rank pari passu among themselves and senior to substantially all present and future unsecured obligations of the Issuer to the extent permitted by applicable law, other than obligations preferred by mandatory provisions of law. Each Subsidiary Guaranty constitutes direct unconditional senior secured obligations of the Subsidiary Guarantor party thereto other than obligations preferred by mandatory provisions of law and except to the extent expressly set forth in the relevant Subsidiary Guaranty. 5. REDEMPTION, PURCHASE AND CANCELLATION (a) Optional Redemption (i) The Issuer may, at its option, redeem the Notes in whole or in part in increments of not less than (euro)10,000,000 in principal amount of the Notes, upon at least 30 days' but not more than 60 days' notice to the Fiscal Agent, the Collateral Agent and the Noteholders, in each case solely with Net Cash Proceeds actually received by the Issuer from any Disposition of assets permitted by these Terms and Conditions of Notes at their principal amount together with interest accrued (if any) thereon and arrears of interest (if any) in respect thereof to but excluding the date fixed for redemption, and any Additional Amounts payable under the Notes. (ii) On or after 1 August 2005, the Issuer may, at its option, redeem the Notes in whole, but not in part, upon at least 30 days' but not more than 60 days' notice to the Fiscal Agent, the Collateral Agent and the Noteholders, at the redemption price (expressed as percentages of principal amount) set forth below together with interest accrued (if any) on the principal amount and arrears of interest (if any) in respect thereof to but excluding the date fixed for redemption, and any Additional Amounts payable under the Notes, if redeemed during the twelve-month period beginning on 1 August of the years indicated below: Year Percentage -------------- ---------- 2005 105.00% 2006 103.00% 2007 101.00% 2008 and thereafter 100.00% (iii) Any redemption pursuant to clause (i) or (ii) above shall be made pursuant to the following provisions: A-4 Execution copy (1) If the Issuer elects to redeem Notes pursuant to the optional redemption provisions of clause (i) or (ii) above, it will furnish to the Fiscal Agent, the Collateral Agent and the Noteholders, at least 30 days, but not more than 60 days, before a redemption date, an officers' certificate setting forth (w) the section of these Terms and Conditions of Notes pursuant to which the redemption shall occur, (x) the redemption date, (y) the principal amount of Notes to be redeemed and (z) the redemption price. (2) If less than all of the Notes are to be redeemed or purchased pursuant to the optional redemption provisions of clause (i) above, the Fiscal Agent will select Notes for redemption or repurchase as follows: (I) if the Notes are listed on any national securities exchange or regulated market, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (II) if the Notes are not listed on any national securities exchange or regulated market, on a pro rata basis, by lot or by such method as the Fiscal Agent deems fair and appropriate. In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Fiscal Agent from the outstanding Notes not previously called for redemption or purchase. The Fiscal Agent will promptly notify the Issuer in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or repurchased. Notes and portions of Notes selected will be in amounts of (euro)1,000 or whole multiples of (euro)1,000; except that if all of the Notes of a holder are to be redeemed, the entire outstanding amount of Notes held by such holder, even if not a multiple of (euro)1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of these Terms and Conditions of Notes that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase. (3) At least 30 days but not more than 60 days before a redemption date, the Issuer will mail or cause to be mailed, by first class mail, a notice of redemption to each holder whose Notes are to be redeemed at its registered address. A-5 Execution copy The notice will identify the notes to be redeemed and will state: (I) the redemption date; (II) the redemption price; (III) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; (IV) the name and address of the Fiscal Agent; (V) that Notes called for redemption must be surrendered to the Fiscal Agent to collect the redemption price; (VI) that, unless the Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; and (VII) the paragraph of the Notes and/or section of these Terms and Conditions of Notes pursuant to which the Notes called for redemption are being redeemed. At the Issuer's request (which may be revoked at any time in writing prior to the time at which the Fiscal Agent shall have given such notice to the Noteholders), the Fiscal Agent will give the notice of redemption in the Issuer's name and at its expense; provided, however, that the Issuer has delivered to the Fiscal Agent, at least 35 days prior to the redemption date, an officers' certificate requesting that the Fiscal Agent give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. (4) Once notice of redemption is mailed in accordance with clause (3) above, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. If mailed in the manner herein, the notice shall be conclusively presumed to have been given whether or not the Noteholder receives such notice. Failure to give notice or any defect in the notice to any Noteholder shall not affect the validity of the notice to any other Noteholder. A-6 Execution copy (5) One Business Day prior to the redemption or purchase date, the Issuer will deposit with the Fiscal Agent money sufficient to pay the redemption or purchase price of, and accrued interest (if any), arrears of interest (if any) and Additional Amounts (if any) on, all Notes to be redeemed or purchased on that date. The Fiscal Agent will promptly return to the Issuer any money deposited with the Fiscal Agent by the Issuer in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest (if any), arrears of interest (if any) and Additional Amounts (if any) on, all Notes to be redeemed or purchased. If the Issuer complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption because of the failure of the Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and under Section 1 hereof. (6) Upon surrender of a Note that is redeemed or purchased in part, the Issuer will issue and, upon receipt of an order from the Issuer to authenticate a new Note, the Fiscal Agent will authenticate for the holder of such Note at the expense of the Issuer a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. (b) Final Redemption. Unless previously redeemed or purchased and cancelled, the Issuer will repay the Notes at 100 percent of their principal amount on 15 December 2008. The Notes may not be redeemed at the option of the Issuer except as set forth in Sections 5(a) and 5(c) hereof. (c) Redemption for Tax Reasons. The Issuer may, at its option, redeem the Notes in whole, but not in part, upon at least 30 days' but not more than 60 days' notice (subject as provided below) to the holders of such Notes at their principal amount together with interest accrued (if any) thereon and arrears of interest (if any) in respect thereof to but excluding the date fixed for redemption, and any Additional Amounts payable under the Notes; provided, that the Issuer shall provide to the Fiscal Agent and the Collateral Agent an opinion in writing of a reputable firm of lawyers of good standing (such opinion to be in a form, and such firm to be a firm, to which the Fiscal Agent shall have no reasonable objection) to the effect the Issuer will be required to pay Additional Amounts under the A-7 Execution copy Notes upon the next due date for a payment in respect of the Notes (for reasons outside its control and after taking reasonable measures to avoid such obligation) by reason of: (i) any actual change in or amendment to the laws, regulations or rulings of the Kingdom of Belgium or any political subdivision or taxing authority thereof or therein; or (ii) any actual change in the official application or interpretation of such laws, regulations or rulings; or (iii) any action which shall have been taken by any taxing authority or any court of competent jurisdiction of the Kingdom of Belgium or any political subdivision or taxing authority thereof or therein, whether or not such action was taken or brought with respect to the Issuer, or (iv) any actual change in the official application or interpretation of, or any actual execution, or amendment to, any treaty or treaties affecting taxation to which the Kingdom of Belgium is or is to be a party, which change, amendment or execution becomes effective on or after the Amendment Date. No such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay Additional Amounts if a payment in respect of the Notes were then due. (d) Purchase. The Parent and any of its Subsidiaries (including the Issuer) may at any time purchase Notes in the open market or otherwise at any price (provided that they are purchased together with all unmatured Coupons relating to them). Any purchase by tender shall be made available to all Noteholders alike. The Notes so purchased, while held by or on behalf of the Parent or any such subsidiary, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of the provisions of Section 10 hereof. (e) Cancellation. All Notes redeemed or purchased pursuant to this Section 5 and any unmatured Coupons attached to or surrendered with them will be cancelled and may not be re-issued or resold. 6. PAYMENT OF ADDITIONAL AMOUNTS All payments of principal and interest in respect of the Notes will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature A-8 Execution copy imposed or levied by or on behalf of the Kingdom of Belgium, the United States, or by any other Governmental Authority, or any political subdivision or taxing authority thereof or therein, unless such withholding or deduction is required by law. In such event, the Issuer will pay such additional amounts ("Additional Amounts") as shall be necessary in order that the net amounts received by any Noteholder or Couponholder, after such withholding or deduction, shall equal the respective amounts of principal and interest which would have been receivable in respect of the Note or Coupon (as the case may be) in the absence of such withholding or deduction; provided, however, that no such Additional Amounts shall be payable with respect to: (a) any Note or Coupon presented for payment by, or on behalf of, a holder who is liable for such taxes or duties in respect of such Note or Coupon by reason of his having some connection with the Kingdom of Belgium or the United States, other than the mere holding of such Note or Coupon or the receipt of payments in respect thereto; or (b) any Note or Coupon presented for payment more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such Additional Amounts on presenting the same for payment on such thirtieth day; or (c) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge; or (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal or interest, if any, with respect to such Note or Coupon; or (e) any tax, duty, levy, assessment or other governmental charge that would not have been imposed but for the fact that such Noteholder or Couponholder presented (if presentation is required) such Note or Coupon for payment in the applicable taxing jurisdiction, unless such Note or Coupon could not have been presented for payment elsewhere; or (f) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Noteholder or Couponholder or the beneficial owner of the Note or Coupon with a request of the Issuer or any Subsidiary Guarantor (a) to provide information concerning the nationality, residence or identity of the Noteholder or Couponholder or such beneficial owner or (b) to make any declaration or other similar claim or satisfy any information or reporting requirements, which, in the case of (a) or (b) is required or imposed by a statute, treaty, regulation or administrative practice of the applicable taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or other governmental charge; or (g) in relation to Additional Amounts in respect of taxes and duties imposed or levied by the Kingdom of Belgium only, any Note or Coupon held by or on behalf of a holder who, at A-9 Execution copy the time of issue of the Notes, was not an eligible investor within the meaning of Article 4 of the Royal Decree on 26 May 1994 on the deduction of withholding tax or who was an eligible investor at the time of issue of the Notes but, for reasons within the holder's control, ceased to be an eligible investor or, at any relevant time on or after the issue of the Notes, otherwise failed to meet any other condition for the exemption of Belgian withholding tax pursuant to the law of 6 August 1993 relating to certain securities; or (h) any combination of (a) to (g); nor, in any case, with respect to the Issuer shall Additional Amounts be paid to any holder who is not the sole beneficial owner of such Note or Coupon to the extent that a beneficial owner thereof would not have been entitled to payment of Additional Amounts had such beneficial owner been the holder of such Note or Coupon. The Issuer shall be entitled to appoint an additional paying agent in the event payments by such paying agent will avoid the payment of an Additional Amount pursuant to this Section 6. 7. AFFIRMATIVE COVENANTS OF THE CREDIT PARTIES So long as any principal of or interest on or any other Obligation (whether or not due), other than indemnification obligations for which no claim has been asserted, shall remain unpaid, the Issuer will, and will cause each of its Subsidiaries to, unless the Requisite Noteholders shall otherwise consent in writing: (a) Additional Subsidiary Guaranties and Collateral Security. Solely to the extent permitted by applicable law, cause: (i) each Subsidiary of the Issuer that is not a Subsidiary Guarantor as of the Amendment Date or pursuant to the Agreement of Understanding to execute and deliver to the Collateral Agent promptly and in any event within 20 Business Days after the formation, acquisition or change in status of such Person that causes it to become the Issuer's Subsidiary: (1) a Subsidiary Guaranty governed by the laws of the State of New York guaranteeing the Obligations in form and substance substantially similar to the Subsidiary Guaranties executed on or about the Amendment Date (excluding any limitations on the amount of the Obligations guarantied except to the extent required by law) and reasonably satisfactory to the Collateral Agent or Requisite Noteholders; (2) one or more Collateral Documents governed by the laws of the jurisdiction of organization of such Subsidiary pursuant to which first priority perfected security interests in substantially all of the assets of such A-10 Execution copy Subsidiary (subject only to Permitted Liens and excluding assets the pledge of which is not commercially reasonable) are pledged or otherwise granted to the Collateral Agent in form and in substance substantially similar to the Collateral Documents executed on or about the Amendment Date and reasonably satisfactory to the Collateral Agent or Requisite Noteholders; (3) if such Subsidiary has any Subsidiaries, a Pledge Agreement governed by the laws of the jurisdiction or organization of such Subsidiary pursuant to which first priority perfected security interests in all of the Capital Stock of such Subsidiaries (subject to Permitted Liens imposed by mandatory operation of law) are granted to the Collateral Agent in form and substance substantially similar to the Pledge Agreements executed on or about the Amendment Date and reasonably satisfactory to the Collateral Agent or Requisite Noteholders, together with, to the extent required by the laws of the jurisdiction of incorporation of such Subsidiary in order to create a first priority perfected security interest: (I) certificates (if any) evidencing all of the Capital Stock of any Person directly owned by such Subsidiary; (II) undated stock powers or other appropriate instrument of assignment executed in blank with signature guaranteed; (III) evidence that appropriate entries have been made in the stock register indicating such pledge; and (IV) such opinions of counsel and such approving certificate of such Subsidiary as the Collateral Agent may reasonably request. (4) to the extent that such Subsidiary holds a fee interest in real property with a Current Value in excess of (euro)1,000,000, one or more Mortgages pursuant to which a perfected, first priority Lien in such real property can be created (except as to priority solely in respect of any Permitted Lien), each in form and substance reasonably satisfactory to the Collateral Agent or Requisite Noteholders, together with such other agreements, instruments and documents as the Collateral Agent or Requisite Noteholders may require; provided that the amount secured by such Mortgage may be limited to 120 percent of the fair market value of such real property if such limitation will reduce filing or recordation fees in connection therewith; and A-11 Execution copy (5) such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by the Collateral Agent or Requisite Noteholders in order to create, perfect, establish the priority of or otherwise protect any Lien purported to be covered by any such Collateral Document or otherwise to effect the intent that such Subsidiary shall become bound by all of the terms, covenants and agreements applicable to such Subsidiary contained in the Credit Documents and that substantially all of the property and assets of such Subsidiary shall become Collateral for the Obligations guaranteed by such Subsidiary pursuant to the Subsidiary Guaranty entered into by such Subsidiary. (ii) each Credit Party that owns the Capital Stock of any Subsidiary of any Credit Party that has not been pledged to the Collateral Agent to execute and deliver promptly and in any event within 20 Business Days after the earlier of the issuance or acquisition of such Capital Stock a Pledge Agreement governed by the laws of the jurisdiction of organization of such Subsidiary pursuant to which first priority perfected security interests in all of such Capital Stock of such Subsidiary are pledged to the Collateral Agent in form and in substance substantially similar to the Pledge Agreements executed on or about the Amendment Date and conforming to the definition thereof or otherwise reasonably acceptable to the Collateral Agent or Requisite Noteholders, together with, to the extent required by the laws of the jurisdiction of incorporation of such Subsidiary to create a first priority perfected security interest: (1) certificates (if any) evidencing all of the Capital Stock of such Subsidiary owned by the Credit Party; (2) undated stock powers or other appropriate instruments of assignment executed in blank with signature guaranteed; (3) evidence that appropriate entries have been made in the stock register indicating such pledge; (4) such opinion(s) of counsel and such approving certificate of such Subsidiary as the Collateral Agent or Requisite Noteholders may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares; and (5) such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by the Collateral Agent or Requisite Noteholders; A-12 Execution copy (iii) any Credit Party that acquires or otherwise owns any Intercompany Indebtedness Owed to any Credit Party that has not been pledged to the Collateral Agent pursuant to a Collateral Document to execute and deliver promptly and in any event within 20 Business Days after the acquisition of such Indebtedness a Collateral Document (or, if such Credit Party has already executed and delivered a relevant Collateral Document, a supplement thereto), together with, to the extent required by the laws of the jurisdiction of incorporation of such Subsidiary to create a first priority perfected security interest: (1) any promissory note(s) evidencing all such Indebtedness; (2) undated endorsement or other appropriate instruments of assignment executed in blank with signature guaranteed; (3) evidence that the obligor of such indebtedness has received notice of such pledge; (4) such opinion(s) of counsel and such approving certificate of such Credit Party as the Collateral Agent or Requisite Noteholders may reasonably request in respect of complying with any legend on any such promissory note or any other matter relating to such Indebtedness; and (5) such other agreements, instruments, approvals, legal opinions or other documents requested reasonably by the Collateral Agent or Requisite Noteholders. For the avoidance of any doubt, it is understood that no provision herein shall be construed to permit any Intercompany Indebtedness Owed to Credit Parties that is otherwise prohibited by other provisions of these Terms and Conditions of Notes. (b) Preservation of Existence, Etc. Except as provided in Section 8(c), maintain and preserve its existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction (to the extent applicable in the relevant jurisdiction) in which the character of the properties owned or leased by it or in which the transaction of its material business makes such qualification necessary. (c) Keeping of Records and Books of Account. Keep adequate records and books of account in accordance with local accounting procedures, with complete entries made to permit the preparation of financial statements in accordance with GAAP. A-13 Execution copy (d) Maintenance of Properties, Etc. Maintain and preserve all of its material properties which are necessary or used in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the provisions of all material leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder; provided, however, that nothing in this Section 7(d) shall prevent any Subsidiary Guarantor from discontinuing the operation and maintenance of any of its properties or assets if such discontinuance is, in the reasonable judgment of the Issuer or such Subsidiary Guarantor, desirable in the conduct of its business and if such discontinuance is not materially adverse to either the Issuer or the Subsidiaries Guarantors or the ability of the Issuer or the Subsidiaries Guarantors to otherwise satisfy their respective obligations under the Credit Documents. (e) Maintenance of Insurance. Maintain insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and which insurance shall not be less than the amount, adequacy and scope than the insurance maintained by or for the Issuer and its Subsidiaries on the Amendment Date (it being understood that the amount, adequacy and scope of any global insurance policies maintained by Parent or its Affiliates (the "Global Policies") may be changed in any manner provided that any such change does not materially affect the amount, adequacy or scope of the Issuer or the Subsidiary Guarantors' insurance coverage); provided, however, that if Collateral is sold pursuant to these Terms and Conditions of Notes, the level of insurance may be reduced in a commercially reasonable manner. To the extent permitted pursuant to applicable law, as soon as practicable after the Amendment Date, the Issuer shall take all steps necessary to grant to the Collateral Agent a perfected Lien on its insurance polices and its rights with respect to insurance obtained by its Affiliates, it being understood that such steps may include the inclusion of lenders loss payable endorsements directly or indirectly for the benefit of the Collateral Agent, in form and substance satisfactory to the Collateral Agent, which may provide that all insurance proceeds in excess of (euro)1,000,000 or payable after the insurer has received written notice from the Collateral Agent that an Event of Default then exists and is continuing (until a contrary notice is received), shall be payable directly to the Collateral Agent; provided, however, that the Collateral Agent shall assign such proceeds to the Issuer for the purpose of reinvestment to the extent that such reinvestment is approved by Requisite Noteholders or, if an Event of Default has not occurred and is continuing, is not objected to by Requisite Noteholders within 45 days after the Noteholders have been notified thereof. All certificates of insurance, to the extent practicable, shall provide for not less than 30 days' prior written notice to the Collateral Agent of the exercise of any right of cancellation. If any Credit Party or any of its Subsidiaries fails to maintain such insurance, the Collateral Agent may arrange for such insurance, but at the Issuer's expense and without any responsibility on the Collateral Agent's part for obtaining the insurance, the solvency of the insurance A-14 Execution copy companies, the adequacy of the coverage, or the collection of claims. Upon the occurrence and during the continuance of an Event of Default, to the extent practicable, the Collateral Agent shall have the right, in the name of the Noteholders, any Credit Party and its Subsidiaries, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims that relate to the Collateral under any such insurance policies. (f) Further Assurances. Solely to the extent permitted by applicable law, take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents contemplated by the Agreement of Understanding or as the Collateral Agent or Requisite Noteholders may reasonably require from time to time in order to: (i) to carry out more effectively the purposes of these Terms and Conditions of Notes and the other Credit Documents, including the Agreement of Understanding; (ii) subject to valid and perfected Liens any of the Collateral of any Credit Party and its Subsidiaries (excluding, however, Collateral otherwise required pursuant to Section 7(a) or 7(g) hereof the pledge of which is not commercially reasonable), (iii) establish and maintain the validity and effectiveness of any of the Credit Documents and the validity, perfection and priority of the Liens intended to be created thereby; and (iv) better assure, convey, grant, assign, transfer and confirm unto the Collateral Agent and the Noteholders, as the case may be, the rights now or hereafter intended to be granted to it under these Terms and Conditions of Notes or any other Credit Document. In furtherance of the foregoing, to the maximum extent permitted by applicable law, each Credit Party authorizes the Collateral Agent or Requisite Noteholders to execute any such agreements, instruments or other documents in such Credit Party's name and to file such agreements, instruments or other documents in any appropriate filing office. (g) After Acquired Real Property. Upon the acquisition by it after the Amendment Date of any fee interest in any real property (wherever located) with a Current Value in excess of (euro)1,000,000 (each such interest being an "After Acquired Property"); immediately so notify the Collateral Agent and the Noteholders, setting forth with specificity a description of the interest acquired, the location of the real property, any structures or improvements thereon and either an appraisal or such Credit Party's good-faith estimate of the current value of such real property (the "Current Value"). Any Credit Party which A-15 Execution copy has acquired such After Acquired Property shall as promptly as practicable but in any event within 60 days, to the extent permitted pursuant to applicable law, furnish to the Collateral Agent the following, each in form and substance satisfactory to the Collateral Agent or Requisite Noteholders: (i) a Mortgage with respect to such real property and related assets located at the After Acquired Property, each duly executed by such Person and in recordable form; provided that the amount secured by such Mortgage may be limited to the fair market value of the After Acquired Property if such limitation will reduce filing or recordation fees in connection therewith; (ii) evidence of the recording of the Mortgage referred to in clause (i) above in such office or offices as may be necessary or, in the opinion of the Collateral Agent, desirable to create and perfect a valid and enforceable lien on the property purported to be covered thereby or to otherwise protect the rights of the Collateral Agent and the Noteholders thereunder; and (iii) such other documents or instruments (including guarantees and opinions of counsel) as the Collateral Agent or Requisite Noteholders may reasonably require. (h) (i) Inspection Rights and Related Matters. Permit any authorized representatives designated by the Collateral Agent or any Noteholder or Noteholders holding individually or collectively in excess of 10 percent of the principal amount of Notes to visit and inspect any of the properties of the Issuer or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that the Issuer may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested or at any time or from time to time following the occurrence and during the continuance of an Event of Default; provided that any such authorized representatives designated by the Collateral Agent and the Collateral Agent or any such Noteholder or Noteholders enter into a confidentiality agreement with respect to confidential information obtained in connection with this Section 7(h) reasonably satisfactory to the Issuer. (ii) provide with reasonable promptness, such information and data with respect to the Issuer or any of its Subsidiaries as from time to time may be reasonably requested by the Collateral Agent or any Noteholder or Noteholders holding individually or collectively in excess of 10 percent of the principal amount of the Notes; provided that any such authorized representatives designated by the Collateral Agent and the Collateral Agent or any such Noteholder or Noteholders enter into a confidentiality agreement with respect to confidential information obtained in connection with this Section 7(h) reasonably satisfactory to the Issuer. A-16 Execution copy (iii) together with the filing of the financial statements of the Issuer and its Subsidiaries required by clause (m) of Section 9, on an annual basis, cause to be furnished to Collateral Agent a certificate of an Authorized Officer of the Issuer stating that such Authorized Officer has reviewed the provisions of the Terms and Conditions of Notes and the other Credit Documents and has made or caused to be made under his or her supervision a review of the condition and operations of the Issuer and its Subsidiaries during the period covered by such annual financial statements with a view to determining whether the Issuer and its Subsidiaries were in compliance with all of the provisions of the Terms and Conditions of Notes and such Credit Documents at the times such compliance is required hereby and thereby, and that such review has not disclosed, and such Authorized Officer has no knowledge of, the existence during such period of an Event of Default or Default or, if an Event of Default or Default existed, describing the nature and period of existence thereof and the action which the Issuer and its Subsidiaries propose to take or have taken with respect thereto. (i) Deposit Accounts. No Credit Party shall establish or maintain any deposit account, securities or similar account with any bank or other institution or Person (a "Deposit Account") unless the Collateral Agent has received a perfected security interest in such Deposit Account prior to the deposit of any amount into such Deposit Account; provided that this clause (i) shall not apply to certain Deposit Accounts of SSI to the extent expressly set forth in the relevant Collateral Documents; provided that the Credit Parties shall grant a perfected security interest in their respective Deposit Accounts as soon as reasonably practicable after the Amendment Date. 8. CERTAIN NEGATIVE COVENANTS OF THE CREDIT PARTIES So long as any principal of or interest on or any other Obligation (whether or not due), other than indemnification obligations for which no claim has been asserted, shall remain unpaid, the Issuer shall not, and shall not permit any of its Subsidiaries to, unless the Requisite Noteholders shall otherwise consent: (a) Liens, Etc. Create, incur, assume or suffer to exist any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sell any of its or any of its Subsidiaries' property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of Accounts) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. (b) Indebtedness and Contingent Obligations. Create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to any Indebtedness or Contingent Obligations other than Permitted Indebtedness. A-17 Execution copy (c) Fundamental Changes; Dispositions. Wind-up, liquidate or dissolve, or merge, consolidate or amalgamate with any Person, or convey, sell, lease or sublease, transfer or otherwise dispose of, whether in one transaction or a series of related transactions, all or any part of its or any of its Subsidiaries' business, property or assets, whether now owned or hereafter acquired (or agree to do any of the foregoing), or purchase or otherwise acquire, whether in one transaction or a series of related transactions, all or substantially all of the assets of any Person (or any division thereof) (or agree to do any of the foregoing); provided, however, that any Credit Party and its Subsidiaries may (i) sell Inventory in the ordinary course of business, (ii) dispose of obsolete or worn-out equipment or equipment no longer used in the ordinary course of business, (iii) sell or otherwise dispose of other property or assets for cash in an aggregate amount not less than the fair market value of such property or assets; and (iv) sell or otherwise dispose of the Issuer's interest in real property located at Louvain-la-Neuve, Belgium for cash in an aggregate amount not less than the fair market value of such property (or on terms expressly required in the Issuer's existing agreement with the University of Louvain-la-Neuve, Belgium with respect to such real property); provided that the Net Cash Proceeds of such Dispositions in the case of clauses (ii) and (iii) above, do not exceed (euro)15,000,000 in the aggregate in any Fiscal Year. Notwithstanding all of the foregoing: (A) any Subsidiary of the Issuer (other than SSI) (such Subsidiary, the "Target Subsidiary") may consolidate with, merge into or transfer all or part of its properties and assets to the Issuer or a Subsidiary Guarantor; provided that concurrently with such consolidation, merger or transfer of assets, Collateral Documents (or amendments to the existing Collateral Documents) are entered into in form and substance acceptable to the Collateral Agent or Requisite Noteholders granting to the Collateral Agent Liens on substantially all of the assets of the Target Subsidiary; (B) the SSI Capital Decrease may occur; and (C) the Issuer may cause Carbogen to liquidate or dissolve in the event that the Issuer determines, in the exercise of its business judgment, A-18 Execution copy that such liquidation or dissolution will maximize the value of the business interests of the Issuer taken as a whole. In connection with such liquidation or dissolution, the Issuer may sell or otherwise dispose of all or substantially all of Carbogen's assets. (d) Loans, Advances, Investments, Etc. Make, or commit or agree to make, any loan, advance, guarantee of obligations, other extension of credit or capital contributions to, or hold or invest in or commit or agree to hold or invest in, or purchase or otherwise acquire or commit or agree to purchase or otherwise acquire any shares of the Capital Stock, bonds, notes, debentures or other securities of, or make or commit or agree to make any other investment in, any other Person, or purchase or own any futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, except for: (i) investments consisting of Intercompany Indebtedness Owed to Credit Parties existing on the date hereof, as set forth on IV(h)-2 to the Agreement of Understanding, but not any increase in the amount thereof as set forth in such Schedule or any other modification of the terms thereof except as expressly provided in Section 8(i)(iii)(l) hereof, (ii) loans and advances by a Subsidiary Guarantor to the Issuer or from the Issuer to a Subsidiary Guarantor so long as such loans and advances meet the requirements of clause (e)(i) of the definition of "Permitted Indebtedness," (iii) Permitted Investments, (iv) Hedging Agreements entered into in the ordinary course of business and not for speculative purposes, (v) loans and advances to employees of the Credit Parties in the ordinary course of business and not exceeding in the aggregate amount at any one time outstanding (euro)10,000, (vi) capital contributions from the Issuer to the Subsidiary Guarantors in an aggregate amount not to exceed (euro)10,000,000; (vii) investments in deposit accounts permitted under Section 7(i) in the ordinary course of business; and (viii) transactions expressly permitted pursuant to Sections 8(e)(4), 8(e)(5) and 8(e)(6). A-19 Execution copy (e) Restricted Payments. (i) Declare or pay any dividend or other distribution, direct or indirect, on account of any Capital Stock of the Issuer or any of its Subsidiaries, now or hereafter outstanding; (ii) make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Capital Stock of the Issuer or any of its Subsidiaries, or any direct or indirect parent of any Credit Party, now or hereafter outstanding; (iii) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options or other rights for the purchase or acquisition of shares of any class of Capital Stock of the Issuer or any of its Subsidiaries, now or hereafter outstanding; (iv) return any Capital Stock to any shareholders or other equity holders of the Issuer or any of its Subsidiaries, or make any other distribution of property, assets, shares of Capital Stock, warrants, rights, options, obligations or securities thereto as such; (v) pay any management fees or any other fees or expenses (including the reimbursement thereof by the Issuer or any of its Subsidiaries) pursuant to any management, consulting, trademark, royalty or other services agreement to any of the shareholders or other equityholders of the Issuer or any of its Subsidiaries or other Affiliates thereof who are not Credit Parties (other than payments for products and services (other than those covered by the Issuer Trademark Agreement and the Issuer Royalty Agreement) to the extent permitted by Section 8(f) hereof); or (vi) pay or prepay any principal, interest or any other amounts under, or redeem, purchase, retire, defease (including in substance or legal defeasance), or make sinking fund or similar payments with respect to, the Issuer Convertible Subordinated Bonds or Indebtedness described in clause (c)(ii) or in clause (k) of the definition of Permitted Indebtedness; provided, however, that (1) dividends or other distribution may be made by any Subsidiary of the Issuer to the Issuer (or proportional dividends and distributions to the Parent in respect of its one share of Capital Stock of SSI); A-20 Execution copy (2) capital contributions may be made by the Issuer to the Subsidiary Guarantors, including without limitation, in exchange for Capital Stock of such Subsidiary in any aggregate amount not to exceed the amount set forth in Section 8(d)(vi); (3) so long as no Event of Default shall have occurred and be continuing, the Issuer may pay to the Parent (I) trademark license fees to the extent expressly required by the Issuer Trademark Agreement, as in effect on December 16, 2003; and (II) royalty payments to the extent expressly required by the Issuer Royalty Agreement, as in effect on December 16, 2003; (4) the Issuer may repurchase the Capital Stock of CPFilms Germany not owned by the Issuer, and CPFilms Germany may make dividends or distributions in respect of its Capital Stock to Persons other than the Issuer to the extent (I) the aggregate amount of all such purchases, dividends and distributions does not exceed (euro)750,000; and (II) both before and after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and; (5) the Issuer may convert all or a portion of the Issuer Convertible Subordinated Bonds into Capital Stock of the Issuer to the extent permitted under Section 8(h); and (6) the SSI Capital Decrease may occur. (f) Transactions with Affiliates. Enter into, renew, extend or be a party to any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration, on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm's length transaction with a Person that is A-21 Execution copy not an Affiliate thereof, and in any event on terms no less favorable to it or its Subsidiaries than was obtainable pursuant to past practice; provided that, subject to any limitations set forth -------- in the Collateral Agency Agreement, the Issuer may acquire up to (euro)10,000,000 of operating assets from Solutia UK or other Affiliates that are transferred to the Issuer's facilities in Belgium and are necessary or desirable for the prudent operation of the Issuer's business for fair consideration on terms no less favorable to it than would be obtainable in a comparable arms length transaction with a Person that is not an Affiliate of the Issuer. (g) Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to exist or become effective any consensual encumbrance or consensual restriction of any kind on the ability of any Subsidiary of any Credit Party to (i) pay dividends or to make any other distribution on any shares of Capital Stock of such Subsidiary owned by any Credit Party or any of its Subsidiaries; (ii) pay any Indebtedness owed to any Credit Party or any of its Subsidiaries; (iii) to make loans or advances to any Credit Party or any of its Subsidiaries; or (iv) transfer any of its property or assets to any Credit Party or any of its Subsidiaries; provided, however, that this Section 8(g) shall not apply to encumbrances or restrictions: (1) under these Terms and Conditions of Notes and the other Credit Documents; and (2) on cash or other deposits imposed by leases, customer contracts or other agreements not involving the incurrence of Indebtedness entered into in the ordinary course of business with a Person that is not an Affiliate. (h) Limitation on Issuance of Capital Stock. Issue or sell or enter into any agreement or arrangement for the issuance and sale of any shares of its Capital Stock, any securities convertible into or exchangeable for its Capital Stock or any warrants; provided, however, that nothing in this section shall prohibit the issuance of Capital Stock of the Issuer in connection with the conversion of the Issuer Convertible Subordinated Bonds; provided that such Capital Stock shall not be subject to mandatory redemption or provide for any dividend or distribution of any kind prior to the payment in full of all Obligations; provided, further that nothing in this section shall prohibit the issuance of Capital Stock of any Subsidiary of a Credit Party to the Issuer on account of capital contributions A-22 Execution copy permitted pursuant to Section 8(d)(vi) or any distributions or off sets in connection with the issuance of Capital Stock to the Issuer in connection with the SSI Capital Decrease. (i) Modifications of Organizational Documents and Certain Other Agreements; Etc. (i) Except to the extent permitted by Section 8(c), amend, modify or otherwise change its name, jurisdiction of organization or organizational identification number; (ii) Except to the extent permitted by Section 8(c), amend, modify or otherwise change its certificate of incorporation or bylaws (or other similar organizational documents), including, without limitation, by the filing or modification of any certificate of designation, or any agreement or arrangement entered into by it, with respect to any of its Capital Stock (including any shareholders' agreement), or enter into any new agreement with respect to any of its Capital Stock, except any such amendments, modifications or changes or any such new agreements or arrangements pursuant to this clause (ii) that either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect and could not be adverse in any material respect to the Collateral Agent or the Noteholders; provided that an amendment to the organizational documents of a Credit Party that provides for the issuance of Capital Stock of such Credit Party (1) in connection with the conversion of the Issuer Convertible Subordinated Bonds into the Capital Stock of the Issuer as permitted under Section 8(h) hereof, (2) to the Issuer in connection with the SSI Capital Decrease, (3) to the Issuer in connection with capital investments permitted pursuant to Section 8(d)(vi), or (4) as required in order to ensure compliance with changes in applicable local law, shall be permitted under this Clause (ii) (iii) amend, modify or change (or permit the amendment, modification or other change in any manner of) any of the provisions of (1) any Intercompany Indebtedness Owed to Credit Parties, including the Solutia UK Note, other than amendments extending the maturity thereof to a date no later than December 15, 2008; (2) the Issuer Trademark Agreement other than extensions of the term thereof; (3) the Issuer Royalty Agreement other than extensions of the term thereof; or (4) the Issuer Convertible Subordinated Bonds, except (i) as is required in connection with the conversion of all or a portion of the Issuer Convertible A-23 Execution copy Subordinated Bonds into Capital Stock of the Issuer as permitted under Section 8(h) hereof or (ii) to provide that payments that otherwise would be required to be paid in cash may not be paid in cash so long as any Obligations are outstanding or the subordination provisions set forth therein are made more restrictive to the holders thereof. (j) Compromise of Accounts and Related Matters. (A) Compromise or adjust any Account (or extend the time of payment thereof) or grant any discounts, rebates, allowances or credits other than in the ordinary course of its business or (B) assign any Accounts except to the Collateral Agent or in connection with Dispositions permitted pursuant to Section 8(c)(iii); provided, however, that during the existence of an Event of Default that is continuing, no such compromises, adjustments or grants may be given to the Parent or any Affiliates, except as otherwise agreed to by the Collateral Agent or Requisite Noteholders. (k) Certain Agreements. Agree to any material amendment or other material change to or material waiver of any of its rights under any Material Contract that could reasonably be expected to have a Material Adverse Effect on the Issuer's or any Subsidiary Guarantor's rights under such Material Contract. (l) Sales and Lease-Backs. Directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an operating lease or a Capitalized Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) that the Issuer or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person; or (ii) that the Issuer or any of its Subsidiaries intends to use for substantially the same purpose as any other property that has been or is to be sold or transferred by the Issuer or any of its Subsidiaries to any Person in connection with such lease. (m) Conduct of Business. Engage in any business other than (i) the businesses engaged in by the Issuer and its Subsidiaries or the Parent or any of its Subsidiaries on the Amendment Date and similar or related businesses except to such extent as is not material to the Issuer and its Subsidiaries taken as a whole; and (ii) such other lines of business as may be consented to by Requisite Noteholders. A-24 Execution copy (n) Fiscal Year. Change its Fiscal Year-end from December 31st. 9. EVENTS OF DEFAULT "Event of Default", wherever used herein with respect to the Notes or any other Credit Document, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest upon the Notes or any fee, indemnity or other amount payable under any Credit Document (other than payment of the principal of the Notes) when it becomes due and payable, and continuance of such default for a period of 10 days; or (b) default in the payment of the principal of the Notes; or (c) default in the performance, or breach, of Sections 7(a), 7(b) or 7(i) or Sections 8(c), 8(d), 8(e), 8(g) 8(h), 8(i), 8(j)(B), 8(l), 8(n) or the creation by any Credit Party of any Liens or Indebtedness that constitutes a default in the performance, or breach of, Sections 8(a) or 8(b); or (d) default in the performance, or breach, of any covenant of any Credit Party in the Notes or any other Credit Document (other than a covenant a default in whose performance or whose breach is specifically dealt with elsewhere in this Section 9), and continuance of such default or breach for a period of 45 days after the earlier of (A) an Officer of a Credit Party becoming aware of such Default or (B) there has been given, by registered or certified mail, to such Credit Party by the Collateral Agent or holders of not less than 25 percent in aggregate principal amount of the Notes Outstanding of a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) (A) failure of the Issuer or any of its Subsidiaries to pay any principal of, or interest on, or any other amount payable in respect of any Indebtedness or Contingent Obligation of the Issuer or any Subsidiary Guarantor (as the case may be), that is outstanding in a principal amount that exceeds, individually or in the aggregate (euro)10,000,000 when the same becomes due and payable and such failure shall continue after the applicable grace period, if any, specified in the applicable agreement; or (B) breach or default by the Issuer or any of its Subsidiaries with respect to any other material term of (a) one or more items of Indebtedness or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (A) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), A-25 Execution copy if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); provided, however, that this subclause (e) shall not apply (x) to Indebtedness the payment of which is prohibited by Section 8(e), (y) to the conversion of all or a portion of the Issuer Convertible Subordinated Bonds into Capital Stock of the Issuer as permitted under Section 8(h), or (z) with respect to the SSI Capital Decrease. (f) any representation or warranty made by the Issuer on the Amendment Date pursuant to Section IV of the Agreement of Understanding or any other representation or warranty made or deemed made by or on behalf of any Credit Party or by any officer of the foregoing under or in connection with any Credit Document or under or in connection with any report, certificate, or other document delivered to the Collateral Agent or any Noteholder pursuant to any Credit Document shall have been incorrect in any material respect when made or deemed made; or (g) it is or will become unlawful for any Credit Party to perform or comply with any of its obligations under or in respect of any Credit Document to which it is a party; or (h) any Credit Document is not (or is claimed by any Credit Party not to be) in full force and effect; or (i) any Collateral Document, after delivery thereof pursuant hereto, shall for any reason, except to the extent permitted by the terms hereof or thereof, fail or cease to create a valid and perfected and first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent on any Collateral purported to be covered thereby and such failure continues for a period of 20 consecutive days; or (j) the entry by a court of competent jurisdiction of a (i) decree or order for relief in respect of any Credit Party, other than Carbogen, in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudging any Credit Party, other than Carbogen, a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Credit Party under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Credit Party or of any A-26 Execution copy substantial part of its property, or ordering the winding up or liquidation of its affairs and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (k) the commencement by any Credit Party, other than Carbogen, of a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of such Credit Party in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of such Credit Party or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by such Credit Party in furtherance of any such action; provided, however, that for the avoidance of doubt, a gerechtelijk akkoord/concordat judiciaire (judicial composition) will not constitute an event of default; or (l) any event which, under the laws of any Credit Party's jurisdiction of incorporation has an analogous effect to any of the events referred to in paragraphs (j) and (k) above; or (m) failure to comply with the following reporting requirements (i) within 60 days after the end of each fiscal quarter of the Issuer and its Subsidiaries (or, in the case of the fiscal quarter which is the last quarter of its fiscal year, 110 days after the end of such fiscal quarter), commencing with the first fiscal quarter of the Issuer and its Subsidiaries ending after the Amendment Date, cause to be filed with the SEC on the Parent's SEC Form 8-K consolidated and consolidating balance sheets, consolidated and consolidating statements of operations and retained earnings and consolidated and consolidating statements of cash flows of the Issuer and its Subsidiaries, each as at the end of such quarter, and for the period commencing at the end of the immediately preceding Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the figures for the corresponding date or period of the immediately preceding Fiscal Year, all in reasonable detail and certified by an Authorized Officer of the Issuer or a designee who is an Authorized Officer of the Parent (such certificate to be furnished to the Collateral Agent and not filed on the Parent's SEC Form 8-K) as fairly presenting, in all material respects, the financial position of the Issuer and its Subsidiaries, each as of the end of such quarter and the results of operations and cash flows of the Issuer and its Subsidiaries for such quarter, in accordance with GAAP applied in a manner consistent with that of the A-27 Execution copy most recent audited financial statements of the Issuer and its Subsidiaries, subject to normal year-end audit adjustments and the absence of footnotes; and (ii) within 110 days after the end of each Fiscal Year of the Issuer and its Subsidiaries, cause to be filed with the SEC on the Parent's SEC Form 8-K consolidated and consolidating balance sheets, consolidated and consolidating statements of operations and retained earnings and consolidated and consolidating statements of cash flows of the Issuer and its Subsidiaries, each as at the end of such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the immediately preceding Fiscal Year, all in reasonable detail and prepared in accordance with GAAP. (n) Monchem International, Inc. and Solutia Investments, LLC at any time holds, owns and controls less than all of the aggregate outstanding principal amount of the Issuer Convertible Subordinated Bonds or Monchem International, Inc. or Solutia Investments, LLC at any time after the date hereof sells, transfers, conveys, pledges, hypothecates or otherwise disposes of all or any portion of the Issuer Convertible Subordinated Bonds (or any interest therein) owned by it; provided, however, that up to 65 percent of the aggregate principal amount of the Issuer Convertible Subordinated Bonds may be pledged to secure the debtor in possession financing facilities of Monchem International Inc. and Solutia Investment, LLC; provided, further that the conversion of all or a portion of the Issuer Convertible Subordinated Bonds into Capital Stock of the Issuer permitted under Section 8(h) shall not constitute an Event of Default under this Section 9(n); or (o) any Credit Party makes any payment whatsoever (whether or not such payment is due and owing thereunder and whether such payment is with respect to principal, interest, or other amounts) on the Issuer Convertible Subordinated Bonds, it being expressly understood and agreed that the Collateral Agent and the Noteholders do not consent to the use of the Collateral, including any cash collateral securing the Obligations, to make payment on the Issuer Convertible Subordinated Bonds and that if any such payment is made, the cash, and proceeds of such cash, will still be subject to Liens in favor of the Collateral Agent to secure the Obligations; provided, however, that conversion of all or a portion of the Issuer Convertible Subordinated Bonds into Capital Stock of the Issuer permitted under Section 8(h) shall not constitute an Event of Default under this Section 9(o); or (p) the Issuer fails to deliver a notice by registered or certified mail to be received by the Collateral Agent and the Noteholders at least 5 Business Days prior to the making of any payment on the Issuer Convertible Subordinated Bonds which notice shall indicate the time, place and amount of payment that is to be made on the Issuer Convertible Subordinated Bonds; provided that the conversion of all or a portion of the Issuer Convertible Subordinated Bonds into Capital Stock of the Issuer permitted under Section 8(h) shall not constitute an Event of Default under this Section 9(p); or A-28 Execution copy (q) (i) the Issuer Trademark Agreement or the Issuer Royalty Agreement is amended, modified or terminated (other than amendments which solely extend the term thereof through at least December 15, 2008 and amendments which solely reduce the license fees, royalty and the percentages relating thereto paid or payable by any Credit Party); (ii) any party under the Issuer Trademark Agreement or the Issuer Royalty Agreement (other than the Issuer) shall breach any of its obligations thereunder; (iii) the license fees and percentages relating thereto paid or payable by any Credit Party under the Issuer Trademark Agreement after the Amendment Date is higher than the license fees and percentages relating thereto in effect on the Amendment Date; or (iv) the royalty and percentages relating thereto paid or payable by any Credit Party under the Issuer Royalty Agreement after the Amendment Date is higher than the royalty and percentages relating thereto in effect on the Amendment Date; or (r) (i) the entry by a court of competent jurisdiction of a judgment ordering that any holder or owner of the Issuer Convertible Subordinated Bonds may take action to enforce their rights or remedies under or with respect to the Issuer Convertible Subordinated Bonds and such order remains unstayed and in effect for a period of 30 consecutive days; or (ii) any holder or owner of the Issuer Convertible Subordinated Bonds takes any action to enforce their rights or remedies under or with respect to the Issuer Convertible Subordinated Bonds; or (s) any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of (euro)5,000,000 or (ii) in the aggregate at any time an amount in excess of (euro)10,000,000 in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage, shall be entered or filed against the Issuer or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder, and such judgment, writ or warrant remains unstayed and in effect for a period of 30 consecutive days; or (t) the Parent or any of its Subsidiaries (other than the Credit Parties) shall create or otherwise cause, incur, assume, suffer or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of any Credit Party, other than in accordance with these Terms and Conditions of Notes (i) to pay dividends or to make any other distribution on any shares of Capital Stock of such Subsidiary owned by any Credit Party or any of its Subsidiaries, (ii) to pay or prepay or to subordinate any Indebtedness owed to any Credit Party or any of its Subsidiaries (other than the prohibition of prepayment of the Solutia UK Note set forth in the DIP Credit A-29 Execution copy Agreement as in effect on the Amendment Date), (iii) to make loans or advances to any Credit Party or any of its Subsidiaries or (iv) to transfer any of its property or assets to any Credit Party or any of its Subsidiaries; provided, however, that nothing in any of clauses (i) through (iv) of this paragraph (t) shall prohibit or restrict compliance with any applicable law, rule or regulation (including, without limitation, applicable currency control laws and applicable state corporate statutes restricting the payment of dividends in certain circumstances); or (u) a Material Adverse Effect has occurred; If an Event of Default (other than an Event of Default under paragraphs (a), (j), (k), (l) or (p) shall have occurred and be continuing, Requisite Noteholders may declare by delivery of a notice to the Issuer by registered or certified mail, the principal of such Noteholder's Notes, together with any accrued interest and Additional Amounts and all other Obligations, to be due and payable immediately. If an Event of Default under paragraph (a) shall have occurred and be continuing, any Noteholder may declare the principal of such Noteholder's Notes, together with any accrued interest and Additional Amounts and all other Obligations, to be due and payable immediately. If an Event of Default under paragraphs (j), (k), (l) or (p) above shall have occurred and be continuing, then the principal of the Notes, together with any accrued interest and all other Obligations, will be due and payable immediately without any declaration or other act on the part of any Noteholder (such an event, the "acceleration") (it being understood that if the Issuer fails to deliver the notice described in paragraph (p) above with respect to any payment on the Issuer Convertible Subordinated Bonds, then the acceleration as a result of paragraph (p) above shall automatically occur on the fifth Business Day prior to the date that such payment is made on the Issuer Convertible Subordinated Bonds). Past defaults may be waived by the consent of Requisite Noteholders; provided, however, that a default in the payment of principal of Notes or in respect of a covenant or provision of the Notes cannot be modified or amended without the approval of all Noteholders or otherwise in accordance with the provisions of Article 568 of the Belgium Company Law. 10. MODIFICATION OF FISCAL AGENCY AGREEMENT AND NOTES The Fiscal Agency Agreement or the Terms and Conditions of Notes may be amended by the Issuer and the Fiscal Agent with the consent of the Collateral Agent, but without the consent of the holder of any Note or Coupon, for the purposes of curing any ambiguity, or of curing, correcting or supplementing any defective provisions contained therein or in any other manner which the Issuer and the Fiscal Agent with the consent of the Collateral Agent may deem necessary or desirable and which will not be inconsistent with the Notes or any Coupons and which will not adversely affect the interests of the Collateral Agent or the holders of Notes or any Coupons. The Fiscal Agency Agreement contains provisions for convening meetings of Noteholders to consider matters relating to the Notes, including the modification of any provision of the Notes and the other Credit Documents. A-30 Execution copy All meetings of Noteholders will be held in accordance with the Belgian Company Code ("Belgian Company Law"). Such a meeting may be convened by Noteholders holding not less than 20 percent in principal amount of the Notes Outstanding. The quorum at any such meeting convened to consider a Resolution will be two or more persons holding or representing at least 50 percent of the aggregate principal amount of the Notes then Outstanding, or at any adjourned meeting after publication of a new convening notice pursuant to Section 14 hereof two or more persons being or representing Noteholders whatever the aggregate principal amount of the Notes Outstanding so held or represented. A Resolution requires the approval of Noteholders holding or representing at least 75 percent of the aggregate principal amount of the Notes Outstanding present or represented at the meeting and taking part in the vote. If, however, a Resolution is adopted by Noteholders holding or representing less than one-third of the aggregate principal amount of the Notes Outstanding (whether present or represented at the meeting or not), such Resolution is not binding unless approved by the Belgian Court of Appeal in the district where the Issuer's registered office is located. The above quorum and special majority requirements do not apply to Resolutions relating to interim measures or to the appointment of a representative of the Noteholders. In such a case, the Resolutions are adopted by Noteholders holding or representing at least a majority of the aggregate principal amount of the Notes Outstanding present or represented at the meeting. A Resolution duly passed in accordance with the provisions of Belgian Company Law at any meeting of Noteholders will be binding on all Noteholders, whether or not they are present at the meeting and whether or not they vote in favor thereof, and on all Couponholders. The matters listed in Article 568 of the Belgian Company Law in respect of which a Resolution may be adopted include modifying or suspending the date of maturity of Notes, postponing any day for payment of interest thereon, reducing the rate of interest applicable in respect of such Notes, deciding urgent interim actions in the common interest of Noteholders, accepting a security in favor of the Noteholders, accepting a transformation of Notes into shares on conditions proposed by the Issuer, and appointing a special agent of the Noteholders to implement the resolutions of the meeting of Noteholders. 11. REPLACEMENT OF NOTES AND COUPONS If any Note or Coupon is mutilated or defaced or is apparently destroyed, lost or stolen, it may be replaced at the specified office of the Principal Paying Agent subject to all applicable laws and stock exchange requirements upon payment by the claimant of the expenses incurred in connection therewith and on such terms and with such indemnity as the Issuer and the Agent may require. Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued. Notwithstanding the above, in the case of destruction, loss, theft, or any other event of involuntary dispossession of a Note in bearer form the provisions of the Belgian Law of 24 July 1921 relating to involuntary dispossession of bearer securities, as amended on 22 July 1991 (the "Law") will apply. Provided such event of involuntary dispossession with respect to any Note has been notified and published in accordance with the procedure of opposition provided for by the Law, this will impose certain obligations upon the Issuer or the Agent including attaching such Note, reinvesting the principal and, in some cases, the revenues of such Note as specified, A-31 Execution copy and refusing any payment on such Note for a period of four years starting from the first of January following the first publication in the Bulletin of Oppositions ("Bulletin des oppositions/Bulletijn der met verzet aangetekende waarden"). 12. INTENTIONALLY OMITTED 13. PRESCRIPTION Under New York's statute of limitations, any legal action upon the Notes or Coupons must be commenced within six years after the payment thereof is due. Thereafter, Notes and Coupons will become generally unenforceable. 14. NOTICES Notices to holders of the Notes will be given at least once by publication in one daily newspaper in the English language of general circulation in London and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, in a daily newspaper of general circulation in Luxembourg. If publication in either London or Luxembourg is impractical, notices shall be published by such means as will, so far as may be reasonably practicable, approximate publication in such newspaper. Such publication is expected to be made in the Luxemburger Wort in Luxembourg and the Financial Times in London. Such notices will be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. In addition to the above publications, with respect to notices for a meeting of the Noteholders, any convening notice for such meeting shall be made in accordance with Article 568 of the Belgian Company Law, by an announcement to be inserted twice, with an interval of not less than eight days, the second time at least eight days prior to the meeting, in the Belgian State Gazette ("Moniteur belge - Belgisch Staatsblad") and in a paper issued in the district in which the Issuer has its seat and in a paper issued in the capital of every province in Belgium. Resolutions to be submitted to the meeting of the Noteholders must be described in the convening notice. In addition, the convening notice shall specify the procedures in respect of voting on resolutions to be decided by the meeting. All notices to the Noteholders shall also be sent to the Collateral Agent at its address provided in the Collateral Agency Agreement. In addition to the foregoing, the Issuer shall send copies of all notices sent to the Noteholders and the Collateral Agent pursuant to this Agreement, the Collateral Agency Agreement and the other Credit Documents to any Person or Persons that certify to the Issuer that it or they own directly or indirectly more than 10 percent of the aggregate principal amount of the Notes at the address identified by such Person or Persons in writing to the Issuer. A-32 Execution copy All notices to the Issuer shall be sent to the following address (or any other substitute address): Solutia Europe SA/NV Parc Scientifique Fleming Boondaelse Steenweg 6 Rue Laid Burniat 3 B-1050 Brussels B-1348 Louvain-Le-Neuve Belgium Belgium Fax: ++3210481224 Attention: For the Attention of the Chief Legal Counsel All notices to the Collateral Agent shall be sent to the following address (or any other substitute address): KBC Bank NV --------------------------- Havenlaan 12 --------------------------- B-1080 Brussels --------------------------- Belgium Fax: ++3224294920 Anntention: Mr. Dirk De Bleser 15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL THE FISCAL AGENCY AGREEMENT, THE NOTES AND THE COUPONS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT FOR THE PROVISIONS REGARDING MEETS OF NOTEHOLDERS WHICH WILL BE CONSTRUED IN ACCORDANCE WITH BELGIAN LAW. The Issuer hereby irrevocably submits to the non-exclusive jurisdiction of any state or United States Federal court sitting in the Borough of Manhattan, New York City, State of New York and of any Belgian court sitting in Brussels over any suit, action or proceeding arising out of or relating to the Fiscal Agency Agreement, the Collateral Agency Agreement, the Notes, the Coupons and the other Credit Documents. The Issuer irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. As long as any of the Obligations remain outstanding, the Issuer will at all times have an authorized agent for service of process in New York City and a registered office in Belgium, upon whom process may be served in any suit, action or proceeding arising out of or relating to the Fiscal Agency Agreement, the Collateral Agency Agreement, the Notes, the Coupons and the other Credit Documents. Service of process upon such agent and written notice of such service mailed or delivered to the Issuer shall to the extent permitted by law be deemed in every respect effective service of process upon the Issuer in any such suit, action or proceeding. The Issuer hereby appoints CT Corporation System, 111 Eighth Avenue, New York, New York 10011 and its A-33 Execution copy registered office in Belgium as its agents for such purpose, and covenants and agrees that (i) service of process in any such suit, action or proceeding may be made upon it at the specified office of any such agent (or such other address or at the office of any other authorized agent which the Issuer may designate by written notice to the Collateral Agent) and (ii) prior to any termination of any such agency for any reason, it will so appoint a successor thereto as agent hereunder. THE ISSUER AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE FISCAL AGENCY AGREEMENT, THE COLLATERAL AGENCY AGREEMENT, THE NOTES, THE COUPONS AND THE OTHER CREDIT DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE ISSUER (I) ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT THE COLLATERAL AGENT AND THE NOTEHOLDERS HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THE CREDIT DOCUMENTS TO WHICH THEY ARE PARTY OR ACCEPTING THE BENEFITS THEREOF, AS THE CASE MAY BE, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS, AND (II) FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF ANY CREDIT DOCUMENTS. In the event of litigation, these Terms and Conditions of Notes may be filed as a written consent to a trial by the court. 16. INDEMNIFICATION The Issuer (the "Indemnitor") agrees to indemnify each Noteholder and their respective control persons, affiliates, agents, representatives and assigns (collectively, the "Indemnitees") from and against any and all liabilities which may be incurred by them (i) based on the conduct of the Issuer, the Subsidiary Guarantors or any of their respective Affiliates, or (ii) which asserts that any of the agreements or transactions provided for in these Terms and Conditions of Notes and the other Credit Documents conflicts with or violates any contract, agreement, order, proceeding, duty or law applicable to the Issuer or any of its Subsidiaries or Affiliates. Promptly after receipt by an Indemnitee of notice of any claim or the commencement of any action, the Indemnitee shall, if a claim in respect thereof is to be made against an Indemnitor under this Section 16, notify the Indemnitor in writing of the claim or the commencement of that action; provided, however, that the failure to notify the Indemnitor shall not relieve it from any A-34 Execution copy liability which it may have under this Section 16 except to the extent it has been materially prejudiced by such failure. If any such claim or action shall be brought against an Indemnitee, and it shall notify the Indemnitor thereof, the Indemnitors shall be entitled to participate therein and to assume the defense thereof with counsel reasonably satisfactory to the Indemnitee. After notice from the Indemnitor to the Indemnitee of its election to assume the defense of such claim or action, the Indemnitor shall not be liable to the Indemnitee under this Section 16 for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnitor has and continues to fully and adequately assume the defence thereof and counsel to the relevant Indemnitee has not determined that a conflict of interest between the Indemnitor and such Indemnitee exists. The provisions of this Section 16 shall survive the termination of these Terms and Conditions of Notes and the other Credit Documents. 17. ENGLISH LANGUAGE; SEVERABILITY. The official language of these Terms and Conditions of Notes is English, and no translation thereof shall be binding or consulted in order to interpret these Terms and Conditions of Notes. In case any provision in these Terms and Conditions of Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions, or of such provision in any other jurisdiction, shall not in any way be affected or impaired thereby. 18. EXPENSES, ETC. The Issuer will pay on demand, all costs, expenses and fees incurred by or on behalf of the Collateral Agent as provided in the Collateral Agency Agreement. Without limitation of the foregoing or any other provision of any Credit Document, the Issuer agrees to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions payable in connection with the Fiscal Agency Agreement, any Mortgage or any other Credit Document. 19. DEFINITIONS. "Accounts" means, as to each Credit Party or any of its Subsidiaries, all -------- present and future rights of such Credit Party or such Subsidiary, as the case may be, to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, or (c) for a secondary obligation incurred or to be incurred. "Additional Amounts" shall have the meaning set forth in Section 6 of the ------------------ Terms and Conditions of Notes. A-35 Execution copy "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10 percent or more of the Capital Stock having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Notwithstanding anything herein to the contrary, in no event shall the Collateral Agent or any Noteholder in such capacity be considered an "Affiliate" of any Credit Party and the Parent and its Subsidiaries (other than the Credit Parties) shall be deemed to be Affiliates of the Credit Parties. "After Acquired Property" has the meaning specified therefor in Section 7(g) ----------------------- of the Terms and Conditions of Notes. "Agreement of Understanding" means the Agreement of Understanding and -------------------------- Restructuring dated 30 January, 2004 among the Issuer and the holders of the Original Notes party thereto, as such agreement may be amended, modified or supplemented from time to time, including all exhibits and schedules to any of the foregoing. "Amendment Date" means the date of the amendment and restatement of the -------------- Original Notes as contemplated by these Terms and Conditions of Notes. "Amcis" means Amcis AG, a corporation organized under the laws of ----- Switzerland. "Authorized Officer" means, with respect to any Person, the chief executive ------------------ officer, chief financial officer, president, treasurer, assistant treasurer, controller, assistant controller or a director on the Board of Directors of such Person. "Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. Section --------------- 101, et seq.), as amended, and any successor statute. "Board of Directors" means, with respect to any Person, the board of ------------------ directors (or comparable managers) of such Person or any committee thereof duly authorized to act on behalf of the board in accordance with applicable law. "Business Day" means any day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City, Brussels, Belgium, Frankfurt, Germany or Zurich, Switzerland are authorized or required to close, and with respect to payments of principal and interest in respect of the Notes and Coupons, means, in respect of any place of presentation, any day on which banks are open for presentation and payment of bearer debt securities and for dealings in foreign currencies in such place of presentation and, in the case of payment by transfer to a euro account as referred to above, on which the Trans-European Automated Real-Time Gross Express Settlement Transfer (TARGET) System is operating and, in the case of a transfer through the BNB System, a day on which such system is operating. "Capital Expenditures" means, with respect to any Person for any period, the -------------------- aggregate of all expenditures by such Person and its Subsidiaries during such period that in accordance with GAAP are or should be included in "property, plant and equipment" or in a similar fixed asset A-36 Execution copy account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period. "Capital Stock" means (a) with respect to any Person that is a corporation, ------------- any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (b) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person. "Capitalized Lease" means, with respect to any Person, any lease of real or ----------------- personal property by such Person as lessee that is required under GAAP to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means, with respect to any Person, ----------------------------- obligations of such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Carbogen" means Carbogen AG, a corporation organized under the laws of -------- Switzerland. "Collateral" means all of the property and assets and all interests therein ---------- and proceeds thereof now owned or hereafter acquired by any Credit Party upon which a Lien is granted or purported to be granted by such Credit Party as security for all or any part of the Obligations. "Collateral Agency Agreement" means the Collateral Agency Agreement dated on --------------------------- or about the Amendment Date among the Issuer, any Subsidiary Guarantors party thereto and the Collateral Agent as contemplated by Section III of the Agreement of Understanding, as such agreement may be amended, modified or supplemented from time to time, including all exhibits and schedules to any of the foregoing. "Collateral Agent" means, in its capacity as Collateral Agent under the ---------------- Collateral Agent Agreement and its successors and assigns. "Collateral Documents" means the Pledge Agreements, the Security Agreements, -------------------- the Mortgages, and all other instruments or documents delivered by any Credit Party pursuant to the Agreement of Understanding or any of the other Credit Documents in order to grant to the Collateral Agent a Lien on any real, personal or mixed property of that Credit Party as security for any of the Obligations of the relevant Credit Party. "Contingent Obligation" means, with respect to any Person, any obligation of --------------------- such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor; A-37 Execution copy (b) the obligation to make take-or-pay or similar payments, if such payments are required pursuant to applicable contract terms regardless of failure by any other party or parties to such contract to comply with their obligations thereunder; (c) any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation, or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term "Contingent Obligation" shall not include (1) customary indemnification obligations which are (I) provided in the ordinary course to the directors, officers, employees, agents, independent contractors or service providers of the Issuer or any of its Subsidiaries, or (II) in connection with the sale or disposition of property, (2) indemnification obligations given in the Credit Documents, (3) any product warranties extended in the ordinary course of business. A-38 Execution copy The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Person is required to perform thereunder), as determined by such Person in good faith. "CPFilms Germany" means CPFilms Vertriebs GMBH, a limited liability company --------------- organized under the laws of Germany. "Credit Document" means the Agreement of Understanding, the Fiscal Agency --------------- Agreement, the Collateral Agency Agreement, the Notes (including without limitation the Terms and Conditions of Notes), the Subsidiary Guaranties, the Collateral Documents and other agreement, instrument, and other document executed and delivered pursuant hereto or thereto or otherwise evidencing or securing any Note or any other Obligation, as amended, modified or supplemented from time to time. "Credit Party" means the Issuer and the Subsidiary Guarantors. ------------ "Current Value" has the meaning specified therefor in Section 7(g) of the ------------- Terms and Conditions of Notes. "Default" means an event which, with the giving of notice or the lapse of ------- time or both, would constitute an Event of Default. "Disposition" means any transaction, or series of related transactions, ----------- pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person, excluding any sales of Inventory in the ordinary --------- course of business on ordinary business terms. "Euro" or "(euro)" means the single currency of participating member states ---- ------ of the European Union. "Event of Default" means any of the events set forth in Section 9 of the ---------------- Terms and Conditions of Notes. "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Fiscal Agency Agreement" means the Fiscal Agency Agreement dated on or ----------------------- about February 10, 2004 among the Issuer, the Fiscal Agent and the Principal Paying Agent, as amended, modified or supplemented from time to time, including all amendments and any exhibits or schedules to any of the foregoing. "Fiscal Agent" has the meaning set forth in the introductory paragraphs of ------------ the Terms and Conditions of Notes. A-39 Execution copy "Fiscal Year" means the fiscal year of the Issuer and its Subsidiaries ----------- ending on December 31 of each year. "GAAP" means generally accepted accounting principles in effect from time to ---- time in the United States applied on a basis consistent with that of the most recent US GAAP financial statements of the Issuer and its Subsidiaries. "Governmental Authority" means any nation or government, any Federal, state, ---------------------- city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Hedging Agreement" means any interest rate, foreign currency, commodity or ----------------- equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement. "Indebtedness" means, with respect to any Person, without duplication, ------------ (A) all indebtedness of such Person for borrowed money; (B) all obligations of such Person for the deferred purchase price of property or services (other than trade payables or other accounts payable incurred in the ordinary course of such Person's business and not outstanding for more than 90 days after the date such payable becomes due); (C) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or upon which interest payments are customarily made; (D) all reimbursement, payment or other obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such Person, even though the rights and remedies of the lessor, seller and/or lender thereunder may be limited to repossession or sale of such property; (E) all Capitalized Lease Obligations of such Person; (F) all obligations and liabilities, contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities; (G) all obligations and liabilities, calculated on a basis satisfactory to the Collateral Agent and in accordance with accepted practice, of such Person under Hedging Agreements; (H) all Contingent Obligations; and A-40 Execution copy (I) all obligations referred to in clauses (A) through (H) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. provided, however, that Indebtedness shall not include (i) obligations and liabilities in respect of synthetic lease facilities that are accounted for as operating leases in accordance with GAAP, including Guarantees of loans then outstanding by the lenders under any such facility to the lessor thereunder); (ii) obligations of the Issuer or any of Subsidiary Guarantor arising from agreements of the Issuer or a Subsidiary Guarantor providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary permitted under the Terms and Conditions of Notes, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that: (A) such obligations are not reflected on the balance sheet of the Issuer or any of its Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet shall not be deemed to be reflected on such balance sheet for purposes of this clause (i)); and (B) the maximum assumable liability in respect of all such obligations shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer and its Subsidiaries in connection with such disposition, (iii) obligations arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of day-light overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such obligations are extinguished within three business days of incurrence; or (e) purchase price holdbacks in connection with purchasing in the ordinary course of business of the Issuer and its Subsidiaries. "Insolvency Proceeding" means any proceeding commenced by or against any --------------------- Person under any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments A-41 Execution copy for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief. "Intercompany Indebtedness Owed to Credit Parties" means any Indebtedness of ------------------------------------------------ the Parent or any of its Subsidiaries or Affiliates owing to any of the Credit Parties. "Inventory" means, with respect to any Person, all goods and merchandise of --------- such Person, including, without limitation, all raw materials, work-in-process, packaging, supplies, materials and finished goods of every nature used or usable in connection with the shipping, storing, advertising or sale of such goods and merchandise, whether now owned or hereafter acquired, and all such other property the sale or other disposition of which would give rise to an Account or cash. "Issuer Convertible Subordinated Bonds" means the Convertible Bond Issue and ------------------------------------- Subscription Agreement dated January 26, 1999 between the Issuer (as successor to Solutia Europe Holdings SCA) and Monchem International, Inc. and Solutia Investments, LLC pursuant to which the Issuer issued intercompany bonds in the amount of BEF 495,000,000 to Monchem International, Inc. and in the amount of BEF 4,455,000,000 to Solutia Investments, LLC. "Issuer Royalty Agreement" means that certain Agreement relating to royalty ------------------------ dated as of 1 September 1997 by and between the Issuer and the Parent. "Issuer Trademark Agreement" means that certain Trademark License Agreement -------------------------- dated as of 1 September 1997 by and between the Issuer and the Parent. "Lease" means any lease of real property to which any Credit Party or any of ----- its Subsidiaries is a party as lessor or lessee. "Lien" means any mortgage, deed of trust, pledge, lien (statutory or ---- otherwise), security interest, charge or other encumbrance of any nature, including, without limitation, any conditional sale or title retention arrangement, any Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security; provided, that in no event shall an operating lease be deemed to constitute a Lien. "Material Adverse Effect" means a material adverse effect on any of ----------------------- (a) the operations, business, assets, properties or condition (financial or otherwise) of Issuer or of the Credit Parties taken as a whole; (b) the ability of any Credit Party to perform any of its obligations under any Credit Document to which it is a party; (c) the legality, validity or enforceability of the Fiscal Agency Agreement or any other Credit Document; (d) the rights and remedies of the Collateral Agent or any Noteholder under any Credit Document; or A-42 Execution copy (e) the validity, perfection or priority of a Lien in favor of the Collateral Agent on any of the Collateral. "Material Contract" means, with respect to any Credit Party, (a) each ----------------- contract or agreement to which such Credit Party is a party involving aggregate consideration payable to or by such Credit Party of (euro)40,000,000 or more (other than purchase orders in the ordinary course of the business of such Credit Party and other than contracts that by their terms may be terminated by such Credit Party in the ordinary course of its business upon less than 60 days' notice without penalty or premium) in any Fiscal Year and (b) all other contracts or agreements material to the business, operations, condition (financial or otherwise), performance or properties of the Credit Parties taken as a whole. "Mortgages" means, collectively (i) the Mortgage Agreement (hypotheek --------- overeenkomst) and the Mortgage Mandate (hypothecaire volmacht) made by the Issuer pursuant to the Agreement of Understanding in favor of the Collateral Agent, securing the Obligations as provided therein and delivered to the Collateral Agent, as such documents may hereafter be amended, supplemented or otherwise modified from time to time and (ii) a mortgage, mortgage mandate, deed of trust or deed on real property to secure debt, in form and substance reasonably satisfactory to the Collateral Agent, made by a Credit Party in favor of the Collateral Agent securing the Obligations and delivered to the Collateral Agent pursuant to the Credit Documents. "Net Cash Proceeds" means, with respect to any Disposition by any Person or ----------------- any of its Subsidiaries, the amount of cash received from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary, in connection therewith after deducting therefrom only: (a) the amount of any Indebtedness secured by any Lien permitted by Section 8(a) of the Terms and Conditions of Notes on any asset (other than Indebtedness assumed by the purchaser of such asset) which is required to be, and is, repaid in connection with such Disposition (other than the Obligations); (b) expenses related to the Disposition (including legal, accounting and investment banking fees, and brokerage and sales commissions) and any relocation, redundancy and closing costs incurred as a result thereof, incurred by such Person or such Subsidiary; (c) transfer taxes paid to any taxing authorities by such Person or such Subsidiary in connection therewith; (d) net income taxes to be paid in connection with such Disposition (after taking into account any tax credits or deductions directly arising from or as a result of such Disposition and any tax sharing arrangements); and (e) any reserves for adjustments in respect of the sale price of such assets and for future liabilities established in accordance with GAAP, in each case to the extent, but only to the extent, that the amounts so deducted are (x) actually paid to a Person that, except in the case of out-of-pocket expenses, is not an Affiliate of A-43 Execution copy such Person or any of its Subsidiaries and properly attributable to such transaction or to the asset that is the subject thereof. "Obligations" means all present and future indebtedness, obligations, and ----------- liabilities of each Credit Party to the Collateral Agent and the Noteholders, whether or not the right of payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 9 of the Terms and Conditions of Notes, which may arise under, out of, or in connection with, the Fiscal Agency Agreement, the Notes, the Collateral Agency Agreement, any Subsidiary Guaranty or any other Credit Document, or any other document made, delivered or given in connection herewith or therewith. "Outstanding" means, as of the date of determination, all Notes theretofore ----------- authenticated and delivered under the Fiscal Agency Agreement, except: (a) Notes theretofore cancelled by the Agent or delivered to the Agent for cancellation; (b) Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Agent or any applicable Paying Agent (other than the Issuer, the Parent or any Subsidiary Guarantor) in trust or set aside and segregated in trust by the Issuer, the Parent or any Subsidiary Guarantor (if the Issuer, the Parent or any Subsidiary Guarantor shall act as its own or their own Paying Agent) for the Noteholders; provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the terms of the Notes or provision therefor reasonably satisfactory to the Fiscal Agent has been made; and (c) Notes that have been exchanged for or in lieu of which other Notes have been authenticated and delivered pursuant to the terms of the Notes or the Fiscal Agency Agreement, other than any such Notes in respect of which there shall have been presented to the Fiscal Agent proof satisfactory to it that such Notes are held by a bona fide purchaser in which hands such Notes are valid obligations of the Issuer; provided, however, that in determining whether the Noteholders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder as of any date, Notes owned by the Issuer, the Parent or any Subsidiary Guarantor or any other obligor upon the Notes or any affiliate of the Issuer, the Parent or any Subsidiary Guarantor or such other obligor shall be disregarded and deemed not to be Outstanding, except that (i) in determining whether the Fiscal Agent shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Fiscal Agent knows to be so owned shall be so disregarded, and (ii) Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee established to the satisfaction of the Fiscal Agent the pledgee's rights so to act with respect to such Notes and that the pledgee is not the Issuer, the Parent or any Subsidiary Guarantor or any other obligor A-44 Execution copy upon the Notes or any affiliate of the Issuer, the Parent or any Subsidiary Guarantor or such other obligor. "Parent" means Solutia Inc., a corporation organized under the laws of the ------ State of Delaware, United States. "Permitted Indebtedness" means: ---------------------- (a) any Indebtedness owing to the Collateral Agent or any Noteholder under the Fiscal Agency Agreement, the Notes, the Subsidiary Guaranties and/or the other Credit Documents; (b) any Indebtedness listed on Schedule IV(m) to the Agreement of Understanding and the extension of maturity, refinancing or modification of the terms thereof; provided, however, that (i) such extension, refinancing or modification is pursuant to terms that are not less favorable to the Credit Parties than the terms of the Indebtedness being extended, refinanced or modified, other than with respect to the rate of interest which shall not be greater than the then applicable market rate of interest that is appropriate for such Indebtedness at the time of such refinancing, and (ii) after giving effect to such extension, refinancing or modification, the principal amount of such Indebtedness is not greater than the amount of Indebtedness outstanding immediately prior to such extension, refinancing or modification; (c) the following Indebtedness: (i) the Issuer Convertible Subordinated Bonds; (ii) obligations described in clause (b) of the definition of Indebtedness in favor of the Parent or any of its Affiliates that filed a bankruptcy proceeding in the United States and which was incurred prior to the commencement of such bankruptcy proceedings in December, 2003 in an aggregate amount of not more than (euro)8,000,000; and (iii) obligations of Issuer owed to a Governmental Authority in Belgium under a cash backed guaranty of environmental liabilities to the extent required by such Governmental Authority; (d) Indebtedness evidenced by Capitalized Lease Obligations entered into in order to finance Capital Expenditures made by the Credit Parties; provided that the aggregate amount of such Capital Lease Obligations, together with the Indebtedness permitted pursuant to clause (e) of the definition of Permitted Indebtedness shall not exceed (euro)8,000,000 outstanding at any time; (e) Indebtedness secured by a Lien permitted by clause (f) of the definition of "Permitted Lien"; (f) Indebtedness of any Credit Party to any other Credit Party, to the extent such Indebtedness is (i) evidenced by a promissory note or other written agreement or instrument, (ii) pledged to the Collateral Agent pursuant to the relevant Collateral Document, and (iii) subordinated to the Obligations; A-45 Execution copy (g) unsecured Indebtedness under any Hedging Agreement of any Credit Party entered into in the ordinary course of business and not for speculative purposes; (h) letters of credit that are issued after the Amendment Date, in an aggregate stated amount for all such letters of credit under this subclause (h) not in excess of (euro)1,000,000 outstanding at any time; (i) other unsecured Indebtedness of the Credit Parties incurred after 29 January 2004 in an aggregate principal amount outstanding at any time not exceeding (euro)15,000,000; (j) (x) guarantees that are set forth on IV(o) to the Agreement of Understanding and which are outstanding on the Amendment Date and (y) guarantees that are issued after the Amendment Date, in an aggregate stated amount for all such guarantees under this subclause (x) and (y) not in excess of (euro)5,000,000 outstanding at any time; and (k) other unsecured Indebtedness of the Issuer incurred after 29 January 2004 to acquire operating assets for the Issuer pursuant to the proviso set forth in Section 8(f); provided that such Indebtedness shall not mature or be payable prior to the payment in full of the Obligations and shall be subordinated to the Obligations. "Permitted Investments" means --------------------- (a) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case, maturing within one year from the date of acquisition thereof; (b) commercial paper, maturing not more than one year after the date of issue rated P-1 by Moody's or A-1 by Standard & Poor's; (c) certificates of deposit maturing not more than one year after the date of issue, issued by commercial banking institutions and money market or demand deposit accounts maintained at commercial banking institutions, each of which is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $300,000,000; (d) repurchase agreements having maturities of not more than 90 days from the date of acquisition which are entered into with major money center banks included in the commercial banking institutions described in clause (c) above; (e) money market accounts maintained with mutual funds having assets in excess of $2,500,000,000; and (f) tax exempt securities rated A or better by Moody's or A+ or better by Standard & Poor's A-46 Execution copy (g) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody's or S&P; (h) Indebtedness with a rating of "A" or higher from S&P or "A2" or higher from Moody's; (i) any securities received or other investments made as a result of the receipt of non-cash consideration from an asset sale that was made pursuant to and in compliance with Section 8(c)(A), (B) or (C); (j) receivables owing to the Issuer or any of its Subsidiaries, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms (including such reasonable concessionary terms agreed by the Issuer or such Subsidiary) and otherwise in compliance with the Terms and Conditions of Notes, including Section 8(f) thereof; and (k) overnight investments with KBC Bank in Brussels, Belgium. "Permitted Liens" means: --------------- (a) Liens securing the Obligations; (b) Liens for taxes, assessments and governmental charges with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP; (c) Liens imposed by law, such as carriers', warehousemen's, mechanics', materialmen's, vendors of raw materials and other similar Liens arising in the ordinary course of business and securing obligations (other than Indebtedness for borrowed money) that are not overdue by more than 30 days or are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (d) Liens described on Schedule IV(n) to the Agreement of Understanding, including the extension of maturity, refinancing and other modification of the terms thereof; provided, however, that (i) such extension, refinancing or modification is pursuant to terms that are not less favorable to the Credit Parties and the Noteholders than the terms of the Lien being extended, refinanced or modified, and (ii) after giving effect to such extension, refinancing or modification, the principal amount of such Indebtedness secured by the Lien is not greater than the amount of Indebtedness secured by the Lien immediately prior to such extension, refinancing or modification; (e) Liens required by the Indebtedness of the Issuer described in clause (c)(iii) of the definition of Permitted Indebtedness; A-47 Execution copy (f) (i) purchase money Liens on equipment acquired or held by any Credit Party in the ordinary course of its business to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition of such equipment or (ii) Liens existing on such equipment at the time of its acquisition; provided, however, that for both clauses (i) and (ii), that (A) no such Lien shall extend to or cover any other property of any Credit Party and (B) the aggregate principal amount of Indebtedness secured by any or all such Liens, together with all Capital Lease Obligations permitted pursuant to clause (d) of the definition of Permitted Indebtedness shall not exceed the amount permitted by clause (e) of the definition of Permitted Indebtedness; (g) easements, zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (i) secure obligations for the payment of money or (ii) materially impair the value of such property or its use by any Credit Party in the normal conduct of such Person's business; (h) Liens securing Indebtedness permitted by subsection (c) of the definition of Permitted Indebtedness; (i) any deposit or pledge as security for the performance of any bid, tender, contract, lease or undertaking not directly or indirectly in connection with the securing of Indebtedness and not for the benefit of any Affiliate of the Issuer; any deposit or pledge with any governmental agency required or permitted to qualify any Credit Party to conduct business, to maintain self-insurance or to obtain the benefits of any law pertaining to workmen's compensation, unemployment insurance, old age pensions, social security or similar matters, or to obtain any stay or discharge in any legal or administrative proceedings; deposits or pledges to obtain the release of mechanics', workmen's, repairmen's, materialmen's or warehousemen's liens or the release of property in the possession of a common carrier; (j) banker's Liens, rights of setoff and Liens to secure the performance of bids, tenders, trade or government contracts (other than for borrowed money), leases, liens, statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; provided that none of the items set forth in this clause (j) shall be for the benefit of any Affiliate of Issuer. "Person" means any individual, corporation, partnership, joint venture, ------ limited liability company, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Pledge Agreements" means collectively, (a) the Commercial Share Pledge ----------------- Agreement and the Share Pledge Agreements made by the Issuer on or about the Amendment Date as contemplated by Section III of the Agreement of Understanding, in each case in favor of the Collateral Agent, providing for the pledge by the Issuer pursuant to applicable law of all of the Capital Stock of SSI, Amcis, Carbogen and, if required pursuant to the Agreement of Understanding, CPFilms A-48 Execution copy Germany as provided therein and delivered to the Collateral Agent, as such documents may hereafter be amended, supplemented or otherwise modified from time to time and (b) any pledge agreement or similar agreement or instrument in form and substance satisfactory to the Collateral Agent or Requisite Noteholders made by a Credit Party in favor of the Collateral Agent, providing for the pledge by such Credit Party to the extent permitted pursuant to applicable law of the Capital Stock of any of its Subsidiaries or of any other Person owned by such Credit Party pursuant to Section 7 of the Terms and Conditions of Notes and otherwise in accordance with the requirements of law of the applicable jurisdiction. "Principal Paying Agent" has the meaning set forth in the introductory ---------------------- paragraphs of the Terms and Conditions of Notes. "Relevant Date" means whichever is the later of (a) the date on which such ------------- payment first becomes due and (b) if the full amount of the moneys payable has not been made available to the Principal Paying Agent on or prior to such date, the date on which, the full amount of such moneys having been made available, notice to that effect shall have been given to the Noteholders in accordance with the notice provisions described herein. "Requisite Noteholders" means either (a) Noteholders having or holding more --------------------- than 50 percent of the aggregate principal amount of the Notes or (b) Noteholders having or holding a requisite principal amount of Notes acting pursuant to a Resolution. "Resolution" means a resolution of Noteholders duly passed at a meeting ---------- called and held in accordance with Belgian Company Law. "SEC" means the Securities and Exchange Commission or any other similar or --- successor agency of the Federal government administering the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, or any -------------- similar Federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time. "Security Agreements" means, collectively (i)(a) the Floating Charge ------------------- (overeenkomst pand op handelszaak / contrat de gage sur fonds de commerce), the Floating Charge Mandate (mandaat pand op handelszaak / contrat de gage sur fonds de commerce) and the Commercial Receivables Pledge Agreement made by the Issuer on or about the Amendment Date as contemplated by Section III of the Agreement of Understanding, (b) the Commercial Receivables Pledge Agreement made by SSI on or about the Amendment Date as contemplated by Section III of the Agreement of Understanding, (c) the Trademark Pledge Agreement, the Assignment Agreement and any other related Collateral Documents made by Amcis on or about the Amendment Date as contemplated by Section III of the Agreement of Understanding, (d) the Trademark Pledge Agreement, the Assignment Agreement and any other related Collateral Documents made by Carbogen on or about the Amendment Date as further contemplated by Section III of the Agreement of Understanding, and (e) if required pursuant to the Agreement of Understanding, the Commercial Global Assignment Agreement, the Security Transfer Agreement and any other related Collateral Documents made by CPFilms Germany on or about the Amendment Date as further contemplated by Section III of the Agreement of Understanding, in each case in favor of A-49 Execution copy the Collateral Agent and delivered to the Collateral Agent, as such documents may hereafter be amended, supplemented or otherwise modified from time to time, and (ii) any security agreement or similar agreement or instrument in form and substance reasonably satisfactory to the Collateral Agent or Requisite Noteholder made by a Credit Party in favor of the Collateral Agent, providing for the granting of a security interest in any property of such Credit Party pursuant to Section 7 of the Terms and Conditions of Notes and to the fullest extent permitted by applicable local law. "Solutia UK Note" means the Indebtedness evidenced by the Loan Agreement --------------- dated as of December 31, 2002 between SSI and Solutia UK Holdings Ltd. "SSI" means Solutia Services International SCA/Comm.VA, a "commanditaire --- vennootschap op aandelen/societe en commandite par actions" organized under the laws of Belgium. "SSI Capital Decrease" means the reduction of SSI's Capital Stock in an -------------------- amount of up to (euro)200,000,000, which reduction shall be effected partially by the recharacterization of SSI's loan receivable from the Issuer in the amount of approximately (euro)178,800,000 and partially by reversing past payments of interest related to such loan. "Subsidiary" means, with respect to any Person at any date, any corporation, ---------- limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity (a) the accounts of which would be consolidated with those of such Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP or (b) of which more than 50 percent of (i) the outstanding Capital Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such Person, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such Person. It is understood that Flexsys Holdings BV is not a "Subsidiary". "Subsidiary Guarantor" means (i) each of SSI, Amcis, Carbogen and, if -------------------- required pursuant to the Agreement of Understanding, CPFilms Germany, and (ii) each other Subsidiary of the Issuer which guarantees, pursuant to Section 7(a) of the Terms and Conditions of Notes or otherwise, all or any part of the Obligations. "Subsidiary Guaranty" means (i) each guaranty substantially in the form of ------------------- Exhibit A-1 (SSI), Exhibit A-2 (CPFilms Germany), and Exhibit A-3 (Amcis and Carbogen) to the Agreement of Understanding, made by each Subsidiary Guarantor described in clause (i) of the definition thereof in favor of the Collateral Agent on or about the Amendment Date and (ii) any other guaranty made by any Subsidiary of the Issuer in favor of the Collateral Agent guarantying obligations of the Issuer under the Notes and the other Credit Documents pursuant to Section 7(a) of the Terms and Conditions of Notes and otherwise in accordance with the requirements of law of the applicable jurisdiction. A-50 Execution copy "Target Subsidiary" has the meaning specified in Section 8(c)(iii)(A) of the ----------------- Terms and Conditions of Notes. "Term Sheet" means that certain Term Sheet attached as Exhibit A to that ---------- certain Agreement entered into in December 2003 among the Parent, the Issuer and certain Noteholders. "Terms and Conditions of Notes" means that certain Schedule 1 to the Fiscal ----------------------------- Agency Agreement as amended, supplemented or otherwise modified from time to time. A-51 EX-99.3 VOTING TRUST 5 exh99p3.txt Exhibit 99.3 Execution copy Dated 11 February 2004 SOLUTIA EUROPE SA/NV FISCAL AGENCY AGREEMENT (euro)200,000,000 10.00 percent Senior Secured Notes due 2008 Execution copy TABLE OF CONTENTS PAGE ---- 1 APPOINTMENT OF FISCAL AGENT AND PAYING AGENTS.......................1 2 AMOUNT; EXECUTION...................................................1 3 AUTHORIZED REPRESENTATIVES..........................................1 4 FORM OF THE NOTES AND EXCHANGE OF NOTES.............................2 5 RELIANCE ON INSTRUCTIONS............................................3 6 ISSUER'S REPRESENTATIONS AND WARRANTIES.............................3 7 PAYMENT OF NOTE PRINCIPAL AND INTEREST; INTEREST PAYMENT DATES; RECORD DATES...............................................3 8 DUTIES OF THE PRINCIPAL PAYING AGENT AND FISCAL AGENT...............4 9 LIABILITY...........................................................5 10 INDEMNIFICATION BY ISSUER...........................................5 11 INDEMNIFICATION BY THE PAYING AGENTS................................5 12 COMPENSATION OF THE PAYING AGENTS...................................6 13 MEETING OF THE NOTEHOLDERS..........................................6 14 NOTICES.............................................................6 15 RESIGNATION OR REMOVAL OF AGENT OR A PAYING AGENT...................7 16 BENEFIT OF AGREEMENT................................................7 17 NOTES HELD BY A PAYING AGENT........................................7 18 COUNTERPARTS........................................................8 19 GOVERNING LAW.......................................................8 20 SUBMISSION TO NY JURISDICTION.......................................8 21 ENGLISH.............................................................8 22 SEVERABILITY........................................................8 23 MODIFICATION OF FISCAL AGENCY AGREEMENT.............................8 24 COLLATERAL AGENCY AGREEMENT AND CERTAIN OTHER DOCUMENTS.............9 25 CLEARING AGREEMENT..................................................9 26 PRIOR FISCAL AGENCY AGREEMENT.......................................9 i Execution copy THIS AGREEMENT dated as of 11 February 2004 AMONG: (1) SOLUTIA EUROPE SA/NV a societe anonyme/naamloze vennootschap (limited liability company) organized under the laws of Belgium (the "ISSUER"); (2) KREDIETBANK S.A. LUXEMBOURGEOISE acting through its office at 43 boulevard Royal, 2955 Luxembourg, as fiscal agent and paying agent (Kredietbank S.A. Luxembourgeoise or any successor or additional fiscal and paying agent appointed hereunder being called the "FISCAL AGENT"); (3) KBC BANK NV acting through its registered office at Havenlaan 2, 1080 Brussels, Belgium, and registered in the Register of Legal Persons under number 0462.920.226, as principal paying agent (KBC Bank NV or any successors appointed hereunder being called the "PRINCIPAL PAYING AGENT" or together with the Fiscal Agent, the "PAYING AGENTS"). WHEREAS on 11 February 2000, the Issuer agreed to issue euro 200,000,000 6.25 percent Notes due 2005 (the "ORIGINAL NOTES") pursuant to a subscription agreement dated 11 February 2000, and the Paying Agents, subject to the terms and conditions set forth in a fiscal agency agreement dated as of 11 February 2000 agreed to act as the fiscal agent, paying agent and principal paying agent in respect of the Original Notes. WHEREAS the Issuer has agreed to amend and restate the Original Notes as euro 200,000,000 10.00 percent Notes due 2008 together with the Terms and Conditions of Notes annexed thereto (the Terms and Conditions of Notes, as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, the "TERMS AND CONDITIONS OF NOTES" and such Notes, as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, the "NOTES") in accordance with a meeting of the holders of the Original Notes held on 29 January 2004. In connection therewith, the Issuer is entering into this Agreement and has also entered into the Agreement of Understanding and Restructuring dated 30 January 2004 with the holders of the Notes party thereto. WHEREAS the Paying Agents, subject to the terms and conditions set forth in this Agreement, agree to act as the fiscal agent, paying agent and principal paying agent in respect of the Notes. All terms not otherwise defined herein shall have the meanings set forth in the Terms and Conditions of Notes attached as Schedule 1 hereto. NOW, THEREFORE, for due and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1 APPOINTMENT OF FISCAL AGENT AND PAYING AGENTS The Issuer hereby appoints the Fiscal Agent to act, on the terms and conditions specified herein and in the Notes, as fiscal and paying agent for the Notes, the Principal Paying Agent as principal paying agent for the Notes and the Paying Agents as paying agents for the Notes. 2 AMOUNT; EXECUTION 2.1 The aggregate principal amount of Notes which may be amended and restated hereunder is euro 200,000,000. 2.2 Each of the Global Note and the Definitive Notes, if any, (each as defined in Section 4 below), shall be executed by or on behalf of the Issuer by the manual or facsimile signature of two directors being Authorized Representatives (as defined in Section 3 hereof) of the Issuer and authenticated manually by or on behalf of the Principal Paying Agent. 3 AUTHORIZED REPRESENTATIVES From time to time the Issuer will furnish the Principal Paying Agent with a certificate of the Issuer certifying the incumbency and specimen signatures of directors authorized to execute Notes on behalf of 1 Execution copy the Issuer (each an "AUTHORIZED REPRESENTATIVE"). Until the Principal Paying Agent receives a subsequent incumbency certificate of the Issuer, the Principal Paying Agent shall be entitled to rely on the last such certificate delivered to it for purposes of determining the Authorized Representatives. The Principal Paying Agent shall have no responsibility to the Issuer to determine by whom or by what means a facsimile signature may have been affixed on the Notes or the Coupons, if any, or to determine whether any facsimile or manual signature is genuine, if such facsimile or manual signature resembles the specimen signatures filed with the Principal Paying Agent by a duly authorized officer of the Issuer and the Principal Paying Agent believes such facsimile or manual signature to be genuine. Any Note or Coupon bearing the manual or facsimile signature of a person who is an Authorized Representative on the date such signature is affixed shall bind the Issuer after the completion thereof by the Principal Paying Agent, notwithstanding that such persons shall have ceased to hold office on the date such Note, with attached Coupons, if applicable, is authenticated and delivered by the Principal Paying Agent. 4 FORM OF THE NOTES AND EXCHANGE OF NOTES With regard to the issuance of Notes: 4.1 THE PERMANENT GLOBAL NOTE: The Notes will initially be represented by a permanent global note (the "PERMANENT GLOBAL NOTE" or the "GLOBAL NOTE"), without coupons, substantially in the form of Schedule 2 hereto. Immediately before amending the Original Notes, the Issuer shall deliver to the Principal Paying Agent, and the Principal Paying Agent shall authenticate, the duly executed Permanent Global Note. The Principal Paying Agent shall then return the Permanent Global Note to or to the order of the Issuer for delivery to the National Bank of Belgium (the "BNB") or a depositary for the BNB as operator of the X/N clearing system (the "BNB SYSTEM") for credit to the account of the Principal Paying Agent with the BNB System. The Principal Paying Agent will transfer all interests in the Permanent Global Note to the BNB as operator of the BNB System in exchange for the existing global note, which shall then be cancelled and returned to the Issuer. 4.2 THE DEFINITIVE NOTES: The Global Note will become exchangeable in whole, but not in part (free of charge to the holder), for Notes in definitive form (the "DEFINITIVE NOTES") in the denominations of euro 1,000, euro 10,000 and euro 100,000 if (i) the Euroclear System ("EUROCLEAR"), Clearstream Banking, societe anonyme ("CLEARSTREAM, LUXEMBOURG") or the BNB System are closed for a continuous period of 14 days (other than by reason of public holidays) or (ii) default is made in any payment under or in relation to the Global Note or, (iii) the Issuer would suffer a material disadvantage as a result of a change in laws or regulations (taxation or otherwise) or as a result of a change in the practice of the BNB System, Euroclear and/or Clearstream, Luxembourg which would not be suffered were the Notes in definitive form and a certificate to such effect signed by two duly authorized officers of the Issuer is given to the Principal Paying Agent. Thereupon (in the case of (iii) above) the Issuer may give notice to the Principal Paying Agent, the Collateral Agent and the Noteholders of its intention to exchange the Global Note for Definitive Notes on the Definitive Exchange Date (defined below). On any Definitive Exchange Date, the Global Note shall be surrendered to or to the order of the Principal Paying Agent. In exchange for the Global Note, the Issuer will deliver, or procure the delivery of, an equal aggregate principal amount of Definitive Notes (having attached to them all Coupons in respect of interest which has not already been paid on the Global Note), security printed in accordance with any applicable legal and stock exchange requirements and in or substantially in the form set out in this Agreement. On exchange of the Global Note, the Issuer will ensure that it is cancelled and, if the holder so requests, returned to the holder together with any relevant Definitive Notes. No Definitive Notes delivered in exchange for the Global Note will be mailed or otherwise delivered to any location in the United States in connection with such exchange. If Definitive Notes have not been delivered by 5:00 p.m. (Brussels time) on the Definitive Exchange Date, then at 5:00 p.m. (Brussels time) on the Definitive Exchange Date, the holder(s) of the Global Note will cease to have any rights thereunder and Accountholders will acquire directly against the Issuer all those rights that they would have had if they had been the holders of Definitive Notes in an aggregate principal 2 Execution copy amount equal to the amount of Notes they were shown as holding on the records of Euroclear and/or Clearstream, Luxembourg. Each Definitive Note will be security printed in accordance with applicable legal and stock exchange requirements and will be in substantially the form set out in Schedule 3 hereto and will have attached to it Coupons (in substantially the form set out in Schedule 4 hereto). The Terms and Conditions of Notes attached as Schedule 1 hereto will be affixed to the Notes. "ACCOUNTHOLDER" means, for so long as any of the Notes are represented by the Global Note and the Global Note is held by or on behalf of BNB, each person who is, from time to time, shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular principal amount of Notes. "DEFINITIVE EXCHANGE DATE" means the date falling not less than 60 days after that date on which the relevant event occurs or notice is given and on which date banks are open for business in the city in which the specified office of the Principal Paying Agent is located and in the city in which the relevant clearing system is located. 5 RELIANCE ON INSTRUCTIONS No Paying Agent shall incur any liability to the Issuer in acting hereunder pursuant to instructions which such Paying Agent reasonably believed in good faith to be genuine and to have been given by an Authorized Representative. 6 ISSUER'S REPRESENTATIONS AND WARRANTIES Each Paying Agent is entitled to assume that the issuance and delivery of the Notes by the Issuer have been duly and validly authorized by the Issuer and that the Notes, when completed, authenticated and delivered pursuant hereto, will constitute the legal, valid and binding obligations of the Issuer. 7 PAYMENT OF NOTE PRINCIPAL AND INTEREST; INTEREST PAYMENT DATES; RECORD DATES 7.1 PAYMENT TO AGENT: the Issuer will, on each date on which any payment in respect of the Notes becomes due, transfer to the Principal Paying Agent by 11:00 a.m. Brussels time such amount as may be required for the purposes of such payment. The Issuer will procure the delivery to the Principal Paying Agent by 10:00 a.m. (local time in the city of the Principal Paying Agent's specified office) on the second business day in the city of the Principal Paying Agent's specified office before the due date for any such payment a copy of irrevocable instructions issued by it for such payment to be made to the Principal Paying Agent. For the purposes of this sub-Clause 7.1, the date on which a payment in respect of the Notes becomes due means the first date on which the holder of a Note or Coupon could claim the relevant payment by transfer to an account under the Notes, but disregarding the necessity for it to be a business day in any particular place of presentation. 7.2 NOTIFICATION OF NON-PAYMENT: The Principal Paying Agent will forthwith notify by fax the Issuer and each other Paying Agent if it has not by the due date for any payment due in respect of the Notes received the full amount so payable on such date. 7.3 PAYMENT BY PAYING AGENTS: Unless they receive a notification from the Principal Paying Agent under sub-Clause 7.2, each Paying Agent will, subject to and in accordance with the Notes, pay or cause to be paid on behalf of the Issuer on and after each due date therefor the amounts due in respect of the Notes and Coupons and, in the case of each Paying Agent other than the Principal Paying Agent, will be entitled to claim any amounts so paid from the Principal Paying Agent. If any payment provided for in sub-Clause 7.1 of this Section is made late but otherwise in accordance with this Agreement, the Paying Agents may nevertheless make payments in respect of the Notes and Coupons. However, unless and until the full amount of any such payment has been made to the Principal Paying Agent, the Paying Agents will not be bound to make such payments. 3 Execution copy 7.4 REIMBURSEMENT OF PAYING AGENTS: The Principal Paying Agent will on demand promptly reimburse each other Paying Agent for payments in respect of the Notes and Coupons properly made by it in accordance with the Notes and this Agreement. 7.5 LATE PAYMENT: If the Principal Paying Agent has not by the due date for any payment in respect of the Notes received the full amount payable on such date but receives it later, it will forthwith give notice to each other Paying Agent and Noteholders that it has received such full amount. 7.6 METHOD OF PAYMENT TO AGENT: Unless otherwise provided in the Notes, all sums payable to the Principal Paying Agent hereunder will be paid in euros and in immediately available or same day funds to such account with such bank in Brussels as the Principal Paying Agent may from time to time notify to the Issuer. 7.7 MONEYS HELD BY AGENT: The Principal Paying Agent may deal with moneys paid to it under this Agreement in the same manner as other moneys paid to it as a banker by its customers except that (1) it may not exercise any lien, right of set-off or similar claim in respect of them, (2) it shall not be liable to anyone for interest on any sums held by it under this Agreement unless any payment to any person hereunder or under any Note is not made as a result of the negligence, bad faith or wilful misconduct of the Principal Paying Agent and (3) money held by it need not be segregated except as required by law. Any monies paid by the Issuer to the Principal Paying Agent for payment of principal or interest which remain unclaimed for two years after such monies have become due and payable will be repaid to the Issuer upon its written request and the holder may thereafter look only to the Issuer for payment hereof. 7.8 PARTIAL PAYMENTS: If on presentation of a Note or Coupon only part of the amount payable in respect of it is paid (except as a result of deduction of tax as permitted by the terms and conditions of the Notes) the Paying Agent to whom the Note or Coupon is presented shall procure that such Note or Coupons shall have attached to it or endorsed on it a memorandum of the amount paid and the date of payment. 7.9 PAYMENT OF INTEREST IN THE UNITED STATES: Notwithstanding any other provision herein, no payment with respect to interest or principal on any Note may be made at the office of any Paying Agent in the United States, and any otherwise allowable payment may be made only upon presentation and surrender at such office outside the United States of the Note, in the case of principal, or presentation of a global Note or presentation and surrender of the applicable Coupon, in the case of interest. No payment on a Note shall be made by transfer to an account in, or by mail to an address in, the United States (other than to a financial institution or for persons for which the financial institution has collected such payment). 7.10 BNB SYSTEM: As long as the Notes or the Global Note shall be held in, or on behalf of, the BNB System, the provisions of this Clause 7 shall be supplemented and/or superseded to the extent necessary by (i) the relevant provisions of the Clearing Agreement executed on or about 11 February 2000 between, the Issuer, the Principal Paying Agent and the Belgian National Bank as operator of the BNB System (the "CLEARING AGREEMENT"), (ii) the regulations of the BNB System and (iii) any applicable provisions of Belgian law and regulation; provided that the Issuer shall, and the Principal Paying Agent and the Paying Agent shall jointly and severally, give equivalent effect to sub-Clause 7.1 and sub-Clause 7.6 and the Paying Agent undertakes to the Issuer to comply with its obligations under the Clearing Agreement. 8 DUTIES OF THE PRINCIPAL PAYING AGENT AND FISCAL AGENT In accordance with the terms and conditions of the Notes and this Agreement or if otherwise requested by the Issuer, the Principal Paying Agent will or will procure that the Paying Agent will: 8.1 receive requests to effect exchanges of the Global Note to Definitive Notes; 4 Execution copy 8.2 maintain a record of the Global Note and the certificate number or numbers of all Definitive Notes and Coupons delivered hereunder; 8.3 carry out such other acts as may be necessary to give effect to the terms and conditions of the Notes with respect to payment, transfer, cancellation and replacement (if any Note or Coupon is mutilated or defaced or is apparently destroyed, lost or stolen, it may be replaced at the specified office of any Paying Agent subject to all applicable laws and stock exchange requirements upon payment by the claimant of the expenses incurred in connection therewith and on such terms and with such indemnity as the Issuer and the Principal Paying Agent may require; mutilated or defaced Notes of Coupons must be surrendered before replacements will be issued); and the Fiscal Agent will: 8.4 upon and in accordance with the instructions of the Issuer received at least 5 days before the proposed publication date, arrange for the publication of any notice which is to be given to the Noteholders and supply a copy thereof to each other Paying Agent, the Collateral Agent, the BNB System, Euroclear, Clearstream, Luxembourg and, so long as the Notes are listed thereon, the Luxembourg Stock Exchange. 9 LIABILITY Neither the Paying Agents nor their officers or employees shall be liable for any act or omission hereunder except in the case of negligence, bad faith or wilful misconduct. The duties and obligations of the Paying Agents and their officers and employees shall be determined by the express provisions of this Agreement and they shall not be liable except for the performance of such duties and obligations as are specifically set forth herein and no implied covenants shall be read into this Agreement against them. The Paying Agents may consult with counsel and shall be fully protected in any action reasonably taken in good faith in accordance with the reasonable advice of counsel. Neither the Paying Agents nor their officers or employees shall be required to ascertain whether any issuance or sale of Notes (or any amendment or termination of this Agreement) have been duly authorized or are in compliance with any other agreement to which the Issuer is a party (whether or not the Paying Agents are also a party to such other agreement). 10 INDEMNIFICATION BY ISSUER The Issuer agrees to indemnify and hold harmless each of the Paying Agents and each of its respective directors, officers and employees from and against any and all liabilities (including liability for penalties), losses, claims, damages, actions, suits, judgments, demands, costs and expenses (including legal fees and expenses) arising out of or in connection with its or their respective performance under this Agreement, except to the extent that they are caused by the negligence, bad faith or wilful misconduct of each such Paying Agent or the directors, officers and employees of each such Paying Agent. The foregoing indemnity includes, but is not limited to, any action taken or omitted in good faith within the scope of this Agreement upon telephone, telecopier or other electronically transmitted instructions, if authorized herein, received from or reasonably believed by each of the Paying Agents in good faith to be genuine and to have been given by, an Authorized Representative. This indemnity shall survive the resignation or removal of any Paying Agent and the satisfaction or termination of this Agreement. 11 INDEMNIFICATION BY THE PAYING AGENTS Each of the Paying Agents agree severally to indemnity and hold harmless the Issuer and its directors, officers and employees from and against any and all liabilities (including liability for penalties), losses, claims, damages, actions, suits, judgments, demands, costs and expenses (including legal fees and expenses) arising out of or in connection with its performance, in any capacity, under this Agreement, except to the extent that they are caused by the negligence, bad faith or wilful misconduct of the Issuer. This indemnity shall survive the resignation or removal of any Paying Agent and the satisfaction or termination of this Agreement. 5 Execution copy 12 COMPENSATION OF THE PAYING AGENTS The Issuer agrees to pay the compensation of each of the Paying Agents at such rates as shall be agreed upon from time to time and to reimburse each Paying Agent for reasonable out-of-pocket expenses (including costs of preparation of the Notes and reasonable legal fees and expenses), disbursements and advances incurred or made in accordance with any provisions of this Agreement. The obligations of the Issuer to each of the Paying Agents pursuant to this Section shall survive the resignation or removal of any Paying Agent and the satisfaction or termination of this Agreement. 13 MEETING OF THE NOTEHOLDERS Attached hereto as Schedule 5 are the provisions for meetings of the Noteholders. 14 NOTICES 14.1 All communications by or on behalf of the Issuer relating to the issuance, transfer, exchange or payment of Notes or interest thereon shall be directed to the Principal Paying Agent at its address set forth in sub-Clause 14.2(iv) hereof (or such other address as the Principal Paying Agent shall specify in writing to the Issuer). 14.2 Notices and other communications hereunder shall (except to the extent otherwise expressly provided) be in writing and shall be addressed as follows, or to such other addresses as the parties hereto shall specify from time to time: (i) if to the Issuer: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Attention: Legal Department Fax no.: +32 10 48 12 24 (ii) if to the Collateral Agent: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Attention: Mr. Dirk De Bleser Fax no.: +32 2 429 49 20 6 Execution copy (iii) if to the Fiscal Agent: Kredietbank S.A. Luxembourgeoise 43 boulevard Royal 2955 Luxembourg Luxembourg Attention: Back-Office Emissions Fax no.: +352 47 97 73 907 (iv) if to KBC Bank NV as the Principal Paying Agent: KBC Bank NV Havenlaan 2 B-1080 Brussels Belgium Attention: Mrs. Marie-Therese Broothaers Fax no.: +32 2 429 52 73 15 RESIGNATION OR REMOVAL OF AGENT OR A PAYING AGENT Subject to the limitations contained in the Terms and Conditions of Notes, the Principal Paying Agent may at any time resign as such agent or a Paying Agent may at any time resign as such paying agent by giving written notice to the Issuer and the Collateral Agent of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall be not less than 30 days after the giving of such notice by the Principal Paying Agent or a Paying Agent to the Issuer and the Collateral Agent. The Principal Paying Agent or a Paying Agent may be removed at any time by the filing with it of an instrument in writing signed by a duly authorized officer of the Issuer and specifying such removal and the date upon which it is intended to become effective. Such registration or removal shall take effect on the date of the appointment by the Issuer of a successor agent or paying agent and the acceptance of such appointment by such successor Agent or Paying Agent, which successor shall be a reputable and substantial bank or financial institution. In the event of resignation by the Principal Paying Agent or a Paying Agent, if a successor agent or paying agent has not been appointed by the Issuer within three months after the giving of notice by the Principal Paying Agent or such Paying Agent of its intention to resign, the Principal Paying Agent or such Paying Agent may appoint as successor Agent or Paying Agent a reputable and substantial bank or financial institution. Subject to the limitations contained in the Terms and Conditions, the Issuer may appoint a successor agent and additional or successor paying agents and shall forthwith give notice of any such appointment to the continuing Agent and each continuing Paying Agent, the Collateral Agent and the Noteholders, whereupon the Issuer, the continuing Agent and each continuing Paying Agent and the additional or successor agent or paying agent shall acquire and become subject to the same rights and obligations between themselves as if they had entered into an agreement in the form mutatis mutandis of this Agreement. 16 BENEFIT OF AGREEMENT This Agreement is solely for the benefit of the parties hereto, their successors, assigns and any additional Agent or Paying Agent appointed in accordance with Section 15 above and the holders from time to time of the Notes and no other person shall acquire or have the right under or by virtue hereof. 17 NOTES HELD BY A PAYING AGENT Each of the Paying Agents, in its individual or other capacity, may become the owner or pledgee of the Notes with the same rights it would have if it were not acting as fiscal and/or paying agent hereunder. 7 Execution copy 18 COUNTERPARTS This Agreement may be executed by the parties hereto in any number of counterparts, and by each of the parties hereto in separate counterparts, each such counterpart, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 19 GOVERNING LAW This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York without regard to the conflicts of laws principles thereof. 20 SUBMISSION TO NY JURISDICTION The Issuer hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement or the Notes. The Issuer irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. As long as any of the Notes or any of the Coupons appertaining thereto remain outstanding, the Issuer will at all times have an authorized agent for service of process in New York City, upon whom process may be served in any suit, action or proceeding arising out of or relating to this Agreement or any Note or any of the Coupons appertaining thereto. Service of process upon such agent and written notice of such service mailed or delivered to the Issuer shall to be extent permitted by law be deemed in every respect effective service of process upon the Issuer in any such suit, action or proceeding. The Issuer hereby appoints CT Corporation System, 111 Eighth Avenue, New York, New York 10011 as its agent for such purpose, and covenants and agrees that (i) service of process in any such suit, action or proceeding may be made upon it at the specified office of such agent (or such other address or at the office of any other authorized agent which the Issuer may designate by written notice to the Principal Paying Agent) and (ii) prior to any termination of such agency for any reason, it will so appoint a successor thereto as agent hereunder. 21 ENGLISH This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. 22 SEVERABILITY If one or more provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, or enforceability of the remaining provisions shall not in any way be affected or impaired. In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Agreement and which in economic effect comes as close as practicable to the provision being replaced. 23 MODIFICATION OF FISCAL AGENCY AGREEMENT This Agreement, including the Schedules hereto, may be amended by the Issuer and the Principal Paying Agent, without the consent of the Collateral Agent or the holder of any Note or Coupon, for the purposes of curing any ambiguity, or of curing, correcting or supplementing any defective provisions contained herein or therein or in any other manner which the Issuer and the Principal Paying Agent may deem necessary or desirable and which will not be inconsistent with the Notes or any Coupons and which will not adversely 8 Execution copy affect the interests of the holders of Notes or any Coupons, provided the foregoing shall not be in derogation of the right of the Issuer to amend the terms of the Notes as provided in Schedule 5. 24 COLLATERAL AGENCY AGREEMENT AND CERTAIN OTHER DOCUMENTS Attached hereto as Schedule 6 is the Collateral Agency Agreement. Certain Subsidiaries Guaranties and Collateral Documents will be entered into in connection with the Notes. KBC Bank NV has been appointed by Requisite Noteholders as Collateral Agent pursuant to a meeting of the Noteholders held on 29 January 2004, the Agreement of Understanding and the Collateral Agency Agreement. KBC Bank NV, in its capacity as Collateral Agent, shall not act or be deemed to act as agent or representative of or for the Issuer or any of its Subsidiaries. 25 CLEARING AGREEMENT As long as the Notes (or the Global Note(s) representing the Notes shall be held in, or on behalf of, the BNB System, the provisions of this Agreement shall be supplemented and/or superseded to the extent necessary by the relevant provisions of the Clearing Agreement, the regulations of the BNB System and any applicable provisions of Belgian law and regulation. 26 PRIOR FISCAL AGENCY AGREEMENT The parties hereto agree that for all purposes with respect to the amended and restated Notes, this Fiscal Agency Agreement supersedes the Fiscal Agency Agreement dated as of February 11, 2000 among the Issuer, the Paying Agents and Solutia Inc. 9 Execution copy IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by their officers thereunto duly authorized, all as of the day and year first above written. - ----------------------------------------------------------------------------- SOLUTIA EUROPE SA/NV By: /s/ Kristel Deroover -------------------------------- Name: Kristel Deroover Title: Attorney - ----------------------------------------------------------------------------- KREDIETBANK S.A. LUXEMBOURGEOISE By: /s/ Luc Bauduin -------------------------------- Name: Luc Bauduin Title: General Manager - ----------------------------------------------------------------------------- KBC BANK NV By: /s/ Luc Bauduin -------------------------------- Name: Luc Bauduin Title: General Manager - ----------------------------------------------------------------------------- S-1 Fiscal Agency Agreement EX-99.4 ACQ AGREEMNT 6 exh99p4.txt Exhibit 99.4 Execution copy COLLATERAL AGENCY AGREEMENT DATED 11 FEBRUARY 2004 AMONG SOLUTIA EUROPE SA/NV, AS ISSUER, AMCIS, AG AND CARBOGEN AG, AS SUBSIDIARY GUARANTORS, AND KBC BANK NV, AS COLLATERAL AGENT RELATING TO SOLUTIA EUROPE SA/NV EUR 200,000,000 10.00 PERCENT NOTES DUE 2008 Execution copy CONTENTS CLAUSE PAGE 1. DEFINITIONS; INTERPRETATION.........................................2 2. APPOINTMENT OF THE COLLATERAL AGENT AND RELATED MATTERS.............2 3. ENFORCEMENT OF SECURITY.............................................5 4. PROCEEDS OF ENFORCEMENT.............................................6 5. RESPONSIBILITY OF THE COLLATERAL AGENT..............................7 6. EXPENSES AND INDEMNITIES............................................9 7. RESIGNATION OF THE COLLATERAL AGENT................................10 8. NOTICES............................................................11 9. GENERAL............................................................12 i Execution copy This Collateral Agency Agreement is dated 11 February 2004 among: (1) SOLUTIA EUROPE SA/NV, a limited liability company organised under Belgian law (the "ISSUER"); (2) Amcis, AG, a company organised under Swiss law ("AMCIS") and Carbogen AG, a company organised under Swiss law, ("CARBOGEN" and together with Amcis and any other subsidiary of the Issuer that enters into this Agreement as contemplated by Section 9.12 hereof, individually a "SUBSIDIARY GUARANTOR" and collectively the "SUBSIDIARY GUARANTORS"); (3) KBC Bank NV, acting through its registered office at Havenlaan 2, 1080 Brussels, Belgium, and registered in the Register of Legal Persons under number 0462.920.226, acting as collateral agent as set out herein (together with its successors and assigns as provided herein, the "COLLATERAL AGENT"); and (4) the Noteholders party hereto. WHEREAS: (A) The Issuer has agreed to amend and restate its euro 200,000,000 6.25 percent Notes due 2005 (the "ORIGINAL NOTES"), with its euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, including all exhibits and schedules hereto, the "TERMS AND CONDITIONS OF NOTES" and such Notes, as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, the "NOTES"). In connection with the Notes, the Issuer has entered into to the Fiscal Agency Agreement dated 11 February 2004 (as amended, modified, supplemented or replaced from time to time, together with all exhibits and schedules thereto, the "FISCAL AGENCY AGREEMENT") among the Issuer, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent (together with its successors and assigns, the "FISCAL AGENT") and KBC Bank NV as principal paying agent (together with its successors and assigns, the "PRINCIPAL PAYING AGENT") and the Agreement of Understanding and Restructuring dated 30 January 2004 (as amended, modified, supplemental or replaced from time to time, together with all exhibits and schedules thereto, the "AGREEMENT OF UNDERSTANDING") among the Issuer and the Noteholders party thereto. The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) As contemplated by the Agreement of Understanding and the Fiscal Agency Agreement, the Subsidiary Guarantors have agreed to provide Subsidiary Guaranties for the benefit of the Collateral Agent and the Noteholders, and the Issuer and the Subsidiary Guarantors have agreed to enter into the Collateral Documents and provide Collateral for the Obligations to the Collateral Agent. (C) Pursuant to Section 2.1(c) of this Agreement, the Collateral Agent is the joint creditor, together with the respective Noteholders, of all the Obligations. (D) Requisite Noteholders pursuant to the Second Noteholders Meeting (as defined in the Agreement of Understanding) and the Agreement of Understanding desire that the Collateral Agent be appointed as agent for the Noteholders and the Collateral should be vested in the Collateral Agent, and the Collateral Agent agrees to act as agent for the Noteholders, all as set out in this Agreement. 1 Execution copy (E) Additional Subsidiaries of the Issuer may enter into this Agreement from time to time, including Solutia Services International SCA/Comm. VA, a company organised under Belgian law ("SSI"), and CPFilms Vertriebs GmbH, a limited liability company organised under the laws of Germany ("CPFILMS GERMANY"), and, in connection therewith, such Subsidiaries will enter into a Subsidiary Guaranty and other Credit Documents. (F) The Collateral Documents, among other things, grant to the Collateral Agent a security interest in, and a lien on, certain real and personal property of the Issuer and the Subsidiary Guarantors and any proceeds thereof and the Issuer and the Subsidiary Guarantors may in the future grant to the Collateral Agent a security interest in, and/or lien on, additional real and personal property of such Credit Parties (hereinafter all of such collateral shall be referred to collectively as the "COLLATERAL"). 1. DEFINITIONS; INTERPRETATION 1.1 DEFINITIONS All terms not otherwise defined herein shall have the meanings set forth in the Terms and Conditions of Notes annexed hereto as Exhibit A. 1.2 HEADINGS Headings in this Agreement are for convenience of reference only and are not party of the substance hereof or thereof. 1.3 PLURAL TERMS All terms defined in this Agreement in the singular form shall have comparable meanings when used in the plural form and vice versa. 1.4 TIME All references in this Agreement to a time of day means Central European Time, unless otherwise indicated. 1.5 OTHER INTERPRETATIVE PROVISIONS References in this Agreement to "Recitals", "Sections", "Exhibits" and "Schedules" are to recitals, sections, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement to any document, instrument or agreement shall (a) include all exhibits, schedules and other attachments thereto, (b) include all documents, instruments or agreements issued or executed in replacement thereof, and (c) mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words "include" and "including" and words of similar import when used in this Agreement shall not be construed to be limiting or exclusive. 2. APPOINTMENT OF THE COLLATERAL AGENT AND RELATED MATTERS 2.1 APPOINTMENT AND DUTIES OF THE COLLATERAL AGENT; COLLATERAL AGENT AS JOINT CREDITOR (a) The Requisite Noteholders acting pursuant to the Second Noteholders Meeting have approved the Appointment of the Collateral Agent and, as a result thereof and pursuant hereto, KBC 2 Execution copy Bank NV is hereby irrevocably appointed to act as collateral agent hereunder and under the Subsidiary Guaranties and the Collateral Documents on behalf of and for the benefit of the Noteholders with such powers as are expressly granted to the Collateral Agent by the terms of this Agreement, the Subsidiary Guaranties and the Collateral Documents, together with such other powers as are reasonably incidental thereto. The Collateral Agent hereby accepts such appointment, and agrees to act as Collateral Agent as set out herein and therein. The Credit Parties, by execution of a counterpart hereof, and the Collateral Agent acknowledge that the Collateral Agent, as joint creditor of the Obligations, acts in respect of the Collateral, the Subsidiary Guaranties and the Collateral Documents, in its own name and for its own account, and for the benefit of the Noteholders, as set out herein. (b) In furtherance but not in limitation of the foregoing, the Collateral Agent is authorised to: (i) perform the duties and to exercise the rights, powers and discretions of a secured creditor under the applicable law in respect of the Subsidiary Guaranties, the Collateral Documents and the Collateral, together with any other incidental rights, powers and discretions; (ii) execute each Subsidiary Guaranty and Collateral Document expressed to be executed by the Collateral Agent; and (iii) take the steps required to perfect the Collateral. (c) The Issuer and each Subsidiary Guarantor agree that the Collateral Agent shall be the joint creditor (together with the relevant Noteholders) of each and every obligation of the Issuer and of each Subsidiary Guarantor towards the Noteholders under the Notes and under each Subsidiary Guaranty, and the other Credit Documents to which the Issuer or such Subsidiary Guarantor is party, as the case may be. Accordingly, the Collateral Agent will have its own independent right to demand performance by the Issuer and each Subsidiary Guarantor of those obligations. However, any discharge of such obligations to one of the Collateral Agent or a Noteholder shall, to the same extent, discharge the corresponding obligation owing to the other. Without limiting or affecting the Collateral Agent's rights against the Issuer or any Subsidiary Guarantor (whether under this paragraph or under any provision of any Collateral Document), the Collateral Agent agrees for the benefit of each Noteholder (on a several and divided basis) that, subject as set out in the next sentence, it will not exercise its rights as a joint creditor with a Noteholder except as provided in this Collateral Agency Agreement. However, for the avoidance of doubt, nothing in the previous sentence shall in any way limit the Collateral Agent's right to act in the protection or preservation of rights under or to enforce any Subsidiary Guaranty or Collateral Document or other Credit Document (or to do any act reasonably incidental to any of the foregoing). 2.2 POSITION OF THE COLLATERAL AGENT (a) To the extent that it is a Noteholder, the Collateral Agent shall have the same rights and powers as any other Noteholder and may exercise such rights and powers as though it were not the Collateral Agent. (b) The Collateral Agent may: (i) carry on any business with a Noteholder, the Issuer, a Subsidiary Guarantor, or any of their respective Affiliates; and 3 Execution copy (ii) retain any profits or remuneration it receives in relation to any other business it carries on with a Noteholder, the Issuer, a Subsidiary Guarantor, or any of their respective Affiliates. 2.3 RELIANCE The Collateral Agent may: (a) rely on any notice or document believed by it in good faith to be genuine and correct and to have been signed by, or with the authority of, the proper Person or Persons; (b) rely on any statement made by any Person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; (c) rely on the written direction of the Requisite Noteholders or certifying that the Persons signing such direction constitute the Requisite Noteholders; (d) engage, pay for and rely on professional advisers selected by it; and (e) act under the Subsidiary Guaranties and the Collateral Documents through its personnel and agents. 2.4 REQUISITE NOTEHOLDERS' INSTRUCTIONS (a) The Collateral Agent shall be entitled to act and shall be fully protected if it acts upon the instructions of the Requisite Noteholders in the exercise of any right, power or discretion or any matter not expressly provided for in the Subsidiary Guaranties or the Collateral Documents. Any such instructions given by the Requisite Noteholders will be binding on all the Noteholders. In the absence of instructions from the Requisite Noteholders, the Collateral Agent may act as it considers to be in the best interests of all the Noteholders. (b) The Collateral Agent may assume that, unless it has received notice to the contrary, any right, power, authority or discretion vested in any Noteholder has not been exercised. (c) The Collateral Agent may require the receipt of security reasonably satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions of the Requisite Noteholders. (d) Persons indirectly holding Notes through accounts held with intermediary institutions shall be entitled to instruct the Collateral Agent, shall be deemed to be a "Noteholder" for purposes of such instructions and the Collateral Agent shall be entitled to rely thereon. 2.5 APPOINTMENT OF CO-COLLATERAL AGENT The Collateral Agent may and, upon the request of the Requisite Noteholders, shall, upon the consent of the Issuer (which consent shall not be unreasonably withheld and shall not be required if an Event of Default has occurred and is continuing) and by an instrument in writing delivered to the Issuer, the Subsidiary Guarantors and each Noteholder, appoint a bank or trust company or an individual to act as separate Collateral Agent or co-Collateral Agent in a jurisdiction where the Collateral Agent is disqualified from acting or for any other purpose deemed by the Collateral Agent or the Requisite Noteholders to be advantageous to their respective interests, such separate Collateral Agent or co-Collateral Agent to exercise only such rights and to have only such duties as shall be specified in the instrument of appointment. The Issuer will pay the reasonable compensation and expenses of any such 4 Execution copy separate Collateral Agent or co-Collateral Agent and, if requested by the Collateral Agent, such separate Collateral Agent or co-Collateral Agent or the Requisite Noteholders, the Issuer and the Subsidiary Guarantors will enter into an amendment to this Agreement, satisfactory in substance and form to the Collateral Agent or the Requisite Noteholders and such separate Collateral Agent or co-Collateral Agent, confirming the rights and duties of such separate Collateral Agent or co-Collateral Agent. 3. ENFORCEMENT OF SECURITY (a) Subject to the terms of this Agreement and the relevant Subsidiary Guaranties and Collateral Documents, the Requisite Noteholders may give or refrain from giving instructions to the Collateral Agent to enforce or to refrain from enforcing or otherwise exercising its rights and remedies under or pursuant to the Subsidiary Guaranties, the Collateral Documents and the Collateral as Requisite Noteholders see fit. If so instructed by the Requisite Noteholders, the Collateral Agent shall enforce or otherwise exercise its rights and remedies under or pursuant to the Collateral Documents and the Collateral in its own name and for its account as a joint creditor of the relevant Noteholders. (b) Subject to the terms of this Agreement, the Collateral Agent shall enforce or refrain from enforcing or otherwise exercising its rights and remedies under or pursuant to the Subsidiary Guaranties, the Collateral Documents and the Collateral in such manner as the Requisite Noteholders shall instruct or, in the absence of such instructions, as it sees fit and, subject as required by applicable law, solely having regard to the interests of the Noteholders. (c) The Collateral Agent shall at all times (whether before or after the occurrence and continuance of an Event of Default) have the right and authority to direct the time, method and place of conducting any proceeding or the exercise of any right or remedy available to the Collateral Agent with respect to the Collateral or for taking any other action authorised by the Collateral Documents; provided that (i) following the occurrence and continuance of an Event of Default, upon delivering to the Collateral Agent a notice (a "NOTICE OF ENFORCEMENT") stating (a) that an Event of Default has occurred and is continuing, and (b) the aggregate principal amount of the Notes held by the Noteholders delivering such notice, the Requisite Noteholders shall have the right to assume such right and authority of the Collateral Agent and thereafter shall have the exclusive right and authority to direct the Collateral Agent as to such matters and (ii) nothing in this Section 3 shall impair the right of the Collateral Agent in its discretion to take any action deemed proper by the Collateral Agent which is not inconsistent with the direction by the Requisite Noteholders. (d) A Notice of Enforcement shall be deemed to have been given when such Notice of Enforcement has actually been received by the Collateral Agent and to have been rescinded when the Collateral Agent has actually received a notice of such rescindment. A Notice of Enforcement shall be deemed to be in effect at all times after such Notice of Enforcement has been given until such time, if any, as such Notice of Enforcement has been rescinded. (e) If: (i) upon enforcement of any of the Collateral, the Collateral Agent sells or otherwise disposes of any asset; or (ii) the Issuer or any Subsidiary sells or otherwise disposes of an asset either when permitted to do so under the Notes or at the request of or with the consent of the Requisite Noteholders upon the occurrence and continuance of an Event of Default under the Notes, 5 Execution copy the Collateral Agent is authorised to, and, at the request of the Issuer or the Requisite Noteholders, as applicable, shall execute in the name and on behalf of itself and each Noteholder, without the need for any further referral to or authority from such Noteholder, as the case may be: (A) a release of the Liens on such asset; and/or (B) if such asset comprises all of the Capital Stock of a Subsidiary Guarantor, a release of (i) all present and future liabilities (both actual and contingent) of such Subsidiary Guarantor under the Notes and (ii) the Liens created by the Collateral Documents with respect to any Collateral of such Subsidiary Guarantor. provided that in each such case the proceeds are to be applied in the manner provided for in this Agreement and the Terms and Conditions of Notes. 4. PROCEEDS OF ENFORCEMENT 4.1 APPLICATION OF PROCEEDS Subject to the rights of any preferential creditor(s) the net proceeds of enforcement of any of the Subsidiary Guaranties, the Collateral Documents or the Collateral shall be applied by the Collateral Agent in the following order: (a) FIRST, in payment of all costs, charges, expenses, losses and liabilities incurred by or on behalf of the Collateral Agent in connection with carrying out its duties or exercising its powers and discretions under this Agreement, the Subsidiary Guaranties and the Collateral Documents; (b) SECOND, in payment of all costs, charges, expenses, losses and liabilities incurred by or on behalf of the Fiscal Agent in connection with carrying out its duties or exercising its powers and discretions under the Fiscal Agency Agreement; (c) THIRD, in payment of the principal of and interest on and any premium on (if any) Notes in accordance with the Fiscal Agency Agreement and the Terms and Conditions of the Notes, it being understood that the Collateral Agent may pay such amounts to the Principal Paying Agent for application by the Principal Paying Agent to such amounts; (d) FOURTH, in payment of any other costs, charges, expenses, losses, liabilities and other amounts owing in respect of the other Obligations; (e) FIFTH, in payment of the surplus (if any) to the Issuer, for its account and for the account of the Subsidiary Guarantors as the case may be or as a court of competent jurisdiction may otherwise direct. 4.2 VALID DISCHARGE An acknowledgement of receipt signed by the relevant person to whom payments are to be made under this Clause 4 shall constitute a valid discharge of the Collateral Agent's duties with respect to such proceeds. 6 Execution copy 5. RESPONSIBILITY OF THE COLLATERAL AGENT 5.1 RESPONSIBILITY (a) The Collateral Agent shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or (iii) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Collateral Agent). (b) Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 5.2 EXCLUSION OF LIABILITY (a) The Collateral Agent shall not be liable to any Noteholder for any action taken or not taken by it in connection with any Subsidiary Guaranty or Collateral Document, unless caused by its gross negligence or wilful misconduct. (b) No party (other than the Collateral Agent) may commence any case or proceeding against any officer, employee or agent of the Collateral Agent in respect of any claim it may have against the Collateral Agent or in respect of any act or omission of any kind by that officer, employee or agent. Any officer, employee or agent of the Collateral Agent may rely on this Subclause. 5.3 DEFAULT (a) The Collateral Agent shall not be obliged to monitor or enquire whether an Event of Default has occurred. The Collateral Agent shall not be deemed to have knowledge of the occurrence of any Events of Default unless and until it shall have received written notice from any Credit Party or any Noteholder describing such Event of Default in reasonable detail. (b) If the Collateral Agent: (i) receives notice from a Noteholder referring to this Agreement, describing an Event of Default and stating that the event is an Event of Default; or (ii) becomes aware of the non-payment of any principal or interest on the Notes by the Issuer that constitutes an Event of Default, then the Collateral Agent shall promptly notify the Noteholders of such event in accordance with Section 14 of the Terms and Conditions of Notes. 7 Execution copy 5.4 INFORMATION (a) To the extent that a Noteholder has provided its address tot the Collateral Agent, the Collateral Agent shall promptly deliver to the Noteholders the original or a copy of any document which is delivered to the Collateral Agent for such purpose. (b) Except where a Subsidiary Guaranty or a Collateral Document specifically provides otherwise, the Collateral Agent shall not be obliged to review or check the adequacy, accuracy or completeness of any document it delivers to the Noteholders or the Credit Parties. (c) Except as provided above, the Collateral Agent shall have no duty: (i) either initially or on a continuing basis to provide any Noteholder with any credit or other information concerning the risks arising under or in connection with the Notes, Subsidiary Guaranties or Collateral Documents (including any information relating to the financial condition or affairs of the Issuer or the Subsidiary Guarantors or the nature or extent of recourse against any party or its assets) whether coming into its possession before, on or after the date of this Agreement; or (ii) unless specifically requested to do so by a Noteholder or expressly required under this Agreement or a Collateral Document, to request any certificate or other document from the Issuer or any Subsidiary Guarantor. (d) In acting as the Collateral Agent, the agency division of the Collateral Agent is treated as a separate entity from its other divisions and departments. Any information acquired by the Collateral Agent which, in its opinion, is acquired by it other than in its capacity as the Collateral Agent may be treated as confidential by the Collateral Agent and shall not be treated as information possessed by the Collateral Agent in its capacity as such. (e) The Collateral Agent will maintain confidential (and will cause its employees and agents to maintain confidential) any confidential information that it may receive from any Credit Party in its capacity as Collateral Agent pursuant to any Collateral Document in accordance with its established practices for keeping information confidential (which shall be in compliance with laws applicable to it) and, prior to the occurrence and continuance of an Event of Default, shall not disclose such information to third parties without the prior consent of the relevant Credit Party, except for disclosure: (a) to legal counsel, accountants and other professional advisors to the Collateral Agent; (b) to regulatory officials having jurisdiction over the Collateral Agent; (c) as required by applicable law or in connection with any legal proceeding after prior notification to the Issuer; (d) to any Noteholder or its legal counsel, accountants and other professional advisors, provided that such Noteholder shall have agreed in writing to keep such information confidential in the same manner as the Collateral Agent has agreed pursuant to this paragraph; (e) to account debtors and other persons as expressly required or permitted pursuant to the Credit Documents; and (f) of information that has been previously disclosed publicly without breach of this provision; provided that this paragraph shall not apply after the occurrence and during the continuance of any Event of Default. 5.5 COMPLIANCE The Collateral Agent may refrain from taking any action (including disclosing any information) which, in its opinion constitutes a breach of any law or regulation, and may take any action which, in its opinion, is reasonable necessary or desirable to comply with any law or regulation. 8 Execution copy 5.6 EVIDENCE AND CALCULATIONS - ACCOUNTS Accounts maintained by the Collateral Agent in connection with this Agreement shall be prima facie evidence of the matters to which they relate for the purpose of any litigation or arbitration proceedings. 5.7 TERMINATION When all of the Obligations have been indefeasibly paid in full this Agreement shall terminate and the Collateral Agent will execute and deliver to the respective Issuer and Subsidiary Guarantors, at the expense of the Issuer, the proper instruments acknowledging the termination of this Agreement, and will duly assign, transfer and deliver to the Issuer and Subsidiary Guarantors, at the expense of the Issuer and without recourse, representation or warranty of any kind whatsoever (except with respect to the absence of any liens created by or arising under the Collateral Agent), such of the Collateral of the respective Issuer and Subsidiary Guarantors as may be in possession of the Collateral Agent and has not theretofore been disposed of, applied or released. 6. EXPENSES AND INDEMNITIES (a) The Issuer agrees to indemnify and hold harmless the Collateral Agent and its directors, officers, employees, agents and advisors from and against any and all claims, losses, liabilities, obligations, damages and expenses (including reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against the Collateral Agent or any such Person (hereinafter the "INDEMNIFICATION AMOUNT") arising out of, related to or in connection with (i) this Agreement or any Subsidiary Guaranty or Collateral Document (including the enforcement of any Subsidiary Guaranty or Collateral Document) or (ii) any refund or adjustment of any amount paid or payable to the Collateral Agent under or in respect of any Subsidiary Guaranty or Collateral Document or any Collateral, or any interest thereon, which may be ordered or otherwise required by any Person, except to the extent such claims, losses, liabilities, damages and expenses are found by a court of competent jurisdiction to have resulted from such Person's gross negligence or wilful misconduct. If the Issuer fails to pay on demand the Indemnification Amount, interest will accrue thereon at a rate per annum equal to that specified in Section 1 of the Terms and Conditions of Notes from the scheduled date for payment thereof until the actual date of payment and such interest shall be added to the Indemnification Amount. (b) The Issuer agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable out-of-pocket expenses, including the reasonable fees and expenses of its counsel (and any local counsel) and of any experts and agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement and the other Subsidiary Guaranties and Collateral Documents including all filings, fees and other matters relating to or in connection with the perfection of Liens in the Collateral, (ii) the custody or preservation of, or the sale of, collection from, or other realisation upon, any of the Collateral, (iii) the exercise or enforcement (whether through negotiations, legal proceedings or otherwise) of any of the rights or remedies of the Collateral Agent under the Subsidiary Guaranties or the Collateral Documents or (iv) the failure by any Credit Party or any other Person (other than the Collateral Agent) to perform or observe any of the provisions of the Subsidiary Guaranties, Collateral Documents or any other Credit Document. The Issuer hereby agrees to pay to the Collateral Agent, for its own account, an annual fee in an amount agreed upon by the Issuer and the Collateral Agent from time to time, which shall be payable by the Issuer annually in advance on the date hereof and on each anniversary hereof. 9 Execution copy (c) The obligations of the Issuer under this Section 6 shall survive the payment and performance of the Obligations and the termination of this Agreement and all other Credit Documents. 7. RESIGNATION OF THE COLLATERAL AGENT (a) The Collateral Agent may resign and appoint any of its affiliates as successor Collateral Agent by giving 30 days' prior written notice to the Issuer and the Requisite Noteholders. (b) Alternatively, the Collateral Agent may resign by giving 30 days' prior written notice to the Issuer, the Subsidiary Guarantors and the Noteholders, in which case the Requisite Noteholders may appoint a successor Collateral Agent; provided that, if an Event of Default has not occurred and is continuing, such successor shall be reasonably acceptable to the Issuer. (c) If no successor Collateral Agent has been appointed under paragraph (b) above within 60 days after notice of resignation was given, the Collateral Agent may appoint a successor Collateral Agent who is reasonably acceptable to the Requisite Noteholders and the Issuer. (d) Any successor Collateral Agent shall be a bank licensed to conduct banking business in the European Community that is eligible to act in the capacity as Collateral Agent. (e) The resignation of the Collateral Agent and the appointment of any successor Collateral Agent shall become effective upon notification of the successor Collateral Agent to the Issuer, the Subsidiary Guarantors and the Noteholders that it accepts its appointment. Upon receipt of such notification, the successor Collateral Agent will succeed to the position of the Collateral Agent and the term "COLLATERAL AGENT" will mean the successor Collateral Agent. (f) The retiring Collateral Agent shall, at the Issuer's cost and expense, make available to the successor Collateral Agent such documents and records and provide such assistance as the successor Collateral Agent may reasonably request for the purposes of performing its functions as the Collateral Agent under this Agreement, the Subsidiary Guaranties and the Collateral Documents. (g) Upon its resignation becoming effective, this Clause shall continue to benefit the retiring Collateral Agent in respect of any action taken or not taken by it in connection with this Agreement, the Subsidiary Guaranties or the Collateral Documents while it was the Collateral Agent, and, subject to paragraph (f) above, it will have no further obligations under any Subsidiary Guaranty or Collateral Document. (h) The Requisite Noteholders may, by notice to the Collateral Agent, require the Collateral Agent to resign under paragraph (b) above. (i) Notwithstanding the foregoing, the appointment of a successor Collateral Agent shall not be effective unless and until all actions have been taken to ensure that all Liens (including the perfection thereof) under the Collateral Documents will be maintained after giving effect to the appointment of such successor Collateral Agent. Both the retiring and successor Collateral Agent shall use commercially reasonable efforts to minimise any fees and expenses in connection with this clause (i). 10 Execution copy 8. NOTICES 8.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter. 8.2 ADDRESSES The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with its name below or any other substitute address, fax number or department or officer as any party may notify to the other parties by not less than five Business Days' notice. ISSUER: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Fax: +32 10 48 12 24 Attention: Legal Department COLLATERAL AGENT: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Fax: +32 2 429 49 20 Attention: Mr. Dirk De Bleser 8.3 DELIVERY Any communication or document made or delivered by one person to another under or in connection with this Agreement will only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 9.2 (Addresses), if addressed to that department or officer. 11 Execution copy 9. GENERAL 9.1 THIRD PARTY BENEFICIARIES; FREE EXERCISE OF RIGHTS Nothing expressed in or to be implied from this Agreement is intended to give, or shall be construed to give, any Person (including the Issuer and its Subsidiaries), other than the Noteholders and the Collateral Agent, their permitted successors and assigns hereunder and the indemnities referred to in Section 6 hereof, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or under or by virtue of any provision herein. Each Noteholder may exercise its rights and remedies under and in accordance with the Credit Documents and all related documents, instruments and agreements for its sole benefit and no Noteholder shall have any obligation or duty to exercise any such rights or duties for the benefit of any other Noteholder. None of the Noteholders party hereto or any of their respective successors and assigns shall have any obligations or liabilities pursuant hereto. Amendments or waivers hereto with the consent of the Requisite Noteholders shall not require any further consent of any Noteholder party hereto. 9.2 AMENDMENTS; WAIVERS Any term, covenant, agreement or condition of this Agreement or any of the Subsidiary Guaranties or Collateral Documents may be amended or waived if such amendment or waiver is in writing and is signed by the Requisite Noteholders; provided, however that: (a) Any amendment or waiver which affects the rights or duties of the Collateral Agent must be in writing and be signed by the Collateral Agent; (b) Any amendment to Section 6 of this Agreement or this Section 9.2 must be in writing and acknowledged and agreed to by the Issuer. 9.3 NO WAIVER No failure or delay by the Collateral Agent or the Noteholders in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Agreement are cumulative and are not exclusive of any remedies provided by law. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. 9.4 SEVERABILITY Each of the provisions of this Agreement is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Agreement and which in its economic effect comes as close as practicable to the provision being replaced. 12 Execution copy 9.5 BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Collateral Agent and the Noteholders and their respective successors and assigns. 9.6 ASSIGNMENT Except as expressly provided herein, no party may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other parties hereto. 9.7 GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE ISSUER, THE SUBSIDIARY GUARANTORS AND THE COLLATERAL AGENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 9.8 JURISDICTION Each of the Issuer, the Subsidiary Guarantors and the Collateral Agent hereby irrevocably submits to the non-exclusive jurisdiction of any state or United States Federal court sitting in the Borough of Manhattan, New York City, State of New York and of any Belgian court sitting in Brussels over any suit, action or proceeding arising out of or relating to this Agreement. Each of the Issuer, the Subsidiary Guarantors and the Collateral Agent irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. 9.9 INDEPENDENT INVESTIGATION None of the Collateral Agent or any Noteholder, nor any of its respective directors, officer, agents or employees, shall be responsible to any other such Persons for the solvency or financial condition of any Credit Party or the ability of any Credit Party to repay any of the Obligations, or for the value, sufficiency, existence or ownership of any of the Collateral, or the statements of any Credit Party, oral or written, or the validity, sufficiency or enforceability of any of the Obligations or any document or agreement executed or delivered in connection with or pursuant to any of the foregoing. 9.10 JURY TRIAL THE ISSUER, THE SUBSIDIARY GUARANTORS AND THE COLLATERAL AGENT, EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE SUBSIDIARY GUARANTIES OR THE COLLATERAL DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE ISSUER, THE SUBSIDIARY GUARANTORS 13 Execution copy AND THE COLLATERAL AGENT, EACH (I) ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT THE ISSUER, THE SUBSIDIARY GUARANTORS AND THE COLLATERAL AGENT, HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, THE SUBSIDIARY GUARANTIES AND THE COLLATERAL DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS, AND (II) FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS AGREEMENT, THE SUBSIDIARY GUARANTIES AND THE COLLATERAL DOCUMENTS. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 9.11 ENGLISH LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. 9.12 ADDITIONAL SUBSIDIARY GUARANTORS Each Subsidiary of the Issuer (including SSI and CPFilms Germany) which enters into a Subsidiary Guaranty after the date hereof shall execute a counterpart to this Agreement in the form of Exhibit B hereto and thereby become a Subsidiary Guarantor for all purposes hereof, including for purposes of Section 2.1 (c) hereof. 9.13 FURTHER ASSURANCES The Issuer and each Subsidiary Guarantor covenants and agrees to execute and deliver all such agreements, instruments and documents and to take all such further actions as the Collateral Agent may reasonably deem necessary from time to time to carry out the intent and purposes of this Agreement and to consummate the transactions contemplated hereby. 9.14 COUNTERPARTS; EFFECTIVENESS This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each party hereto. 14 Execution copy IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered by its duly authorised officers as of the date first above written. By execution below, the Noteholders identified below consent to this Agreement and the transactions contemplated hereby: DB DISTRESSED OPPORTUNITIES FUND, L.P. DB DISTRESSED OPPORTUNITIES FUND, LTD. SPHINX DISTRESSED FUND SPC SOUTH DAKOTA INVESTMENT COUNCIL HFR ASSET MANAGEMENT, LLC LIGHTHOUSE MULTI-STRATEGY MASTER FUND, L.P. THE OPPORTUNITY FUND LLC POST TOTAL RETURN FUND, L.P. POST HIGH YIELD, L.P. POST BALANCED FUND, L.P. POST OPPORTUNITY FUND, L.P. MW POST PORTFOLIO FUND LTD. MW POST OPPORTUNITY OFFSHORE FUND, LTD. MW POST LONG/SHORT OPPORTUNITY FUND, LTD. SPRUGOS INVESTMENTS IV, LLC By: POST ADVISORY GROUP, LLC By: _______________________________________________ Lawrence A. Post Title: Chief Executive Officer S-1 Collateral Agency Agreement Execution copy FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P. FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P. FARALLON CAPITAL PARTNERS, L.P. TINICUM PARTNERS, L.P. FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P. By: FARALLON PARTNERS, L.L.C. By: _______________________________________________ Monica R. Landry Title: Managing Member FARALLON CAPITAL OFFSHORE INVESTORS, INC. By: FARALLON CAPITAL MANAGEMENT, L.L.C. By: _______________________________________________ Monica R. Landry Title: Managing Member S-2 Collateral Agency Agreement Execution copy WATERSHED CAPITAL PARTNERS, L.P. WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P. By: WS PARTNERS, L.L.C. By: _______________________________________________ Meridee Moore Title: Senior Managing Member WATERSHED CAPITAL PARTNERS (OFFSHORE), LTD. By: WATERSHED ASSET MANAGEMENT, L.L.C. By: _______________________________________________ Meridee Moore Title: Senior Managing Member S-3 Collateral Agency Agreement Execution copy CASPIAN CAPITAL PARTNERS, L.P. MARINER OPPORTUNITIES FUND, LP MARINER LDC By: MARINER INVESTMENT GROUP, INC. By: _______________________________________________ Peter O'Rourke Title: General Counsel and Assistant Secretary MARINER OPPORTUNITIES II, LP By: OPPORTUNITIES II, L.L.C. By: _______________________________________________ Jonathan Rosenstein Title: Managing Member TRILOGY PORTFOLIO COMPANY LLC By: TRILOGY CAPITAL, LLC By: _______________________________________________ Jonathan Rosenstein Title: Managing Member S-4 Collateral Agency Agreement Execution copy KBC BANK NV, AS COLLATERAL AGENT By KBC Bank as Collateral Agent Name: Dirk De Belser Title: Head Operations & Accounting SOLUTIA EUROPE SA/NV By /s/ Kristel Deroover Name: Kristel Deroover Title: Attorney AMCIS AG By /s/ Kristel Deroover Name: Kristel Deroover Title: Attorney CARBOGEN AG By /s/ Kristel Deroover Name: Kristel Deroover Title: Attorney S-5 Collateral Agency Agreement EX-99.5 HOLDERS RTS 7 exh99p5.txt Exhibit 99.5 FORM OF GLOBAL NOTE ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. ISIN: [BE0116958738] SOLUTIA EUROPE SA/NV (INCORPORATED WITH LIMITED LIABILITY IN BELGIUM) (euro)200,000,000 10.00 percent Senior Secured Notes due 2008 UNCONDITIONALLY AND IRREVOCABLY GUARANTEED BY CERTAIN SUBSIDIARIES OF THE ISSUER GLOBAL NOTE Solutia Europe SA/NV, a societe anonyme/naamloze vennootschap organized under the laws of Belgium (the "ISSUER"), for value received, hereby promises to pay to the bearer upon presentation and surrender hereof on 15 December 2008, unless earlier redeemed on the terms and in the manner described in the Terms and Conditions of Notes annexed hereto, the principal sum of EURO TWO HUNDRED MILLION or such lesser amount as shall be the outstanding principal amount hereof after deduction of the aggregate principal amount of Definitive Notes issued in exchange for a portion or portions hereof, in euro and to pay interest (if any) on such principal sum calculated and payable as provided in the Terms and Conditions of Notes together with any other sums payable under the Terms and Conditions of Notes (including, but not limited to, any Additional Amounts and other Obligations). The Issuer was incorporated as a societe anonyme/naamloze vennootschap under Belgian law by deed passed on 11 April 1997 and published in the Annexes du Moniteur belge (Annexes to the Belgian Official Gazette) of 25 April 1997, No. 970425-24. The share capital of the Issuer is EUR 11,549,000 represented by 20,290 ordinary shares in registered form sans valeur nominale (without par value), each share carrying the same rights as the others. The Issuer has been formed for an unlimited term. This Global Note is issued in respect of an issue of euro 200,000,000 principal amount of 10.00 percent Senior Secured Notes due 15 December 2008 (the "NOTES") of the Issuer and is governed by the Terms and Conditions of Notes annexed hereto and incorporated herein by reference, and by a Fiscal Agency Agreement dated 11 February 2004 (as it may be amended from time to time, the "FISCAL AGENCY AGREEMENT") among the Issuer, Kredietbank S.A. Luxembourgeoise as Fiscal Agent and Paying Agent and KBC Bank NV as Principal Paying Agent. Capitalised terms used herein but not otherwise defined shall have the meanings assigned to them in the Fiscal Agency Agreement, including the Terms and Conditions of Notes annexed thereto. This Global Note amends and restates and evidences indebtedness previously evidenced by the (euro)200,000,000 6.25 percent Notes due 2005 of the Issuer which are referred to as the Original Notes in the Terms and Conditions of Notes annexed hereto. This Global Note shall be exchangeable in whole but not in part for definitive Notes if (i) Morgan Guaranty Trust Company of New York, as operator of the Euroclear System, Clearstream Banking, societe anonyme ("CLEARSTREAM, LUXEMBOURG") or the BNB System are closed for a continuous period of 14 days (other than by reason of public holidays) or (ii) default is made in payment under or in relation to the Global Note or (iii) if the Issuer would suffer a material disadvantage as a result of a change in laws or regulations (taxation or otherwise) or as a result of a change in the practice of the BNB System, Euroclear and/or Clearstream, Luxembourg which would not be suffered were the Notes in definitive form and a certificate to such effect signed by two duly authorised officers of the Issuer is given to the Fiscal Agent and the Principal Paying Agent. Thereupon (in the case of (iii) above), the Issuer may given written notice to the Fiscal Agent and the Principal Paying Agent and the Noteholders of its intention to exchange the Global Note for definitive Notes on the Exchange Date (as defined below). On the Exchange Date, definitive Notes in bearer form in denominations of euro 1,000, euro 10,000 and euro 100,000 will be issued and delivered in full exchange for this Global Note to Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system and Clearstream, Luxembourg, for the accounts of the holders of interests in the Global Note. An exchange for Definitive Notes will be made at no charge to the holders of the interests in the Global Note being exchanged. No Definitive Notes delivered in exchange for the Global Note will be mailed or otherwise delivered to any location in the United States in connection with such exchange. The term "Exchange Date" means the date falling 60 days after that date on which a relevant event (described above) occurs or notice is given and on which date banks are open for business in the city in which the specified office of the Principal Paying Agent is located and the city in which the relevant clearing system is located. This Global Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York. The list of all issues of notes or bonds by the Issuer prior to the issue of the Notes, together with the aggregate outstanding principal and security interest, if any, in respect of each issue is set out in Appendix A hereto. 2 IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed. Date: 11 February 2004 SOLUTIA EUROPE SA/NV By: By: ----------------------------- ----------------------------------- Director Director ATTEST: Authorized Signatory [Seal] 3 EX-99.6 ADVSER CONTR 8 exh99p6.txt Exhibit 99.6 AMCIS AG SUBSIDIARY GUARANTY FOR VALUE RECEIVED, Amcis AG, a company limited by shares organized under the laws of Switzerland (the "Guarantor"), hereby irrevocably and unconditionally guarantees, for the benefit of the Collateral Agent and the holders of Notes (as hereinafter defined), as primary obligor and not merely as surety, the full and punctual payment when due, subject to any applicable grace period (whether at stated maturity, upon declaration of acceleration, upon call for redemption, or otherwise), of all Guarantied Obligations (as hereinafter defined) (including amounts that would become due but for the operation of the automatic stay under any bankruptcy, insolvency or similar law). Upon failure by the Issuer to pay punctually any such amount, the Guarantor shall forthwith pay the amount not so paid. Notwithstanding anything agreed in this Guaranty, this Guaranty (as the same may be subsequently amended or novated), including the obligation of the Guarantor as a Remaining Guarantor (as defined below): (a) is limited to the maximum amount of the Guarantor's profits and reserves which are available for distribution as dividends in accordance with Articles 671, 671a to 673 and 675 of the Swiss Code of Obligations (the "AVAILABLE AMOUNT") at the time that the Guarantor is required to make a payment. Promptly after having been requested to make a payment under this Guaranty, the Guarantor shall (i) use its best efforts to ensure that, if so requested by the Collateral Agent or Requisite Noteholders, a meeting of its general assembly of shareholders is duly held, within 30 Business Days the latest following such request, to approve or confirm, as the case may be, the requested payment up to the Available Amount; and (ii) pay promptly the Available Amount (plus the Swiss Withholding Tax (if any) in accordance with paragraph (b) below), it being understood that the said shareholders' resolution (if any) may be requested by the Collateral Agent or Requisite Noteholders to be taken prior to or following the payment by the Guarantor of the amount requested by the Collateral Agent or Requisite Noteholders under this Guaranty. (b) In relation to this Guaranty, the Guarantor shall, if and to the extent required by applicable law in force at the relevant time, subject to any applicable double taxation treaty, pay any Swiss withholding tax (the "SWISS WITHHOLDING TAX"), at the rate of 35 per cent (or such other then applicable rate) from any payment under this Guaranty and pay such Swiss Withholding Tax to the Swiss Federal tax administration and, with respect to such payments made, shall not be obliged to gross-up and indemnify the Collateral Agent and the Noteholder even if such gross-up or indemnification is generally provided for in the Terms and Conditions of Notes and/or in this Guaranty. (c) The Guarantor shall use its best efforts to ensure that its direct parent company (or, if appropriate, any of its affiliate companies) will take all steps necessary 1 (i) to obtain without delay a full or partial refund of the said withholding tax payment, if and to the extent permissible under the applicable provisions of the relevant double taxation treaty; and (ii) to make sure that the party receiving such refund (if any) will pay such amount to the Collateral Agent, which payment shall be accounted as a payment by the Guarantor under this Guaranty. For purposes hereof, those certain (euro)200,000,000 6.25 percent Notes due 2005 (the "ORIGINAL NOTES"), of Solutia Europe SA/NV a company limited by shares organized under the laws of Belgium (the "ISSUER"), including the terms and conditions affixed thereto and incorporated by reference therein, as amended and restated by those certain (euro)200,000,000 10.00 percent Notes due 2008 of the Issuer, including the terms and conditions affixed thereto and incorporated by reference therein (the terms and conditions of notes, as amended, modified or supplemented from time to time, including all exhibits and schedules thereto, the "TERMS AND CONDITIONS OF NOTES") and as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, shall be referred to as the "NOTES". The Notes amend and restate and evidence indebtedness previously evidenced by the Original Notes and, in connection therewith, the Issuer has entered into the Fiscal Agency Agreement dated 11 February 2004 with Kredietbank S.A. Luxembourgeoise, as fiscal agent and paying agent (together with its successors and assigns, the "FISCAL AGENT"), and KBC Bank NV, as the principal paying agent (together with its successors and assigns, the "PRINCIPAL PAYING AGENT") and the Agreement of Understanding and Restructuring dated 30 January 2004 (as amended from time to time, the "AGREEMENT OF UNDERSTANDING") with the Noteholders party thereto. All terms not otherwise defined herein shall have the meanings set forth in the Terms and Conditions of Notes. For purposes hereof, the "COLLATERAL AGENT" refers to KBC BANK NV, as collateral agent (together with its successors and assigns, the "COLLATERAL AGENT"), appointed pursuant to the Collateral Agency Agreement dated 11 February 2004 (as it may be amended from time to time, the "COLLATERAL AGENCY AGREEMENT") among the Issuer, the Subsidiary Guarantors party thereto, the Collateral Agent and the Noteholders party thereto. The term "GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and includes any and all Obligations (as defined in the Terms and Conditions of Notes) of the Issuer to the Collateral Agent or any of the Noteholders, including all obligations of the Issuer in respect of the principal of, and interest on, the Notes and all other obligations of the Issuer under or evidenced by the Notes, the Fiscal Agency Agreement, the Collateral Agency Agreement and the other Credit Documents to which the Issuer is party, including all costs, expenses (including, without limitation, legal fees and expenses of counsel and allocated costs of internal counsel), indemnities and liabilities of whatsoever nature, now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Notes, this Guaranty, the Fiscal Agency Agreement, the Collateral Agency Agreement and the other Credit Documents, including those arising under successive transactions under the Credit Documents which shall either continue the Obligations of the Issuer or from time to time renew them after they have been satisfied. 2 Any interest on any portion of the Guarantied Obligations that accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Issuer (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceeding had not been commenced) shall be included in the Guarantied Obligations because it is the intention that the Guarantied Obligations should be determined without regard to any rule of law or order that may relieve Issuer of any portion of such Guarantied Obligations. The Collateral Agent or any Noteholder may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation (other than the limitations set forth in this Guaranty), impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security now or hereafter held by or for the benefit of the Collateral Agent or any Noteholder in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Collateral Agent or the Noteholder, or any of them, may have against any such security, as the Collateral Agent or any Noteholder in its discretion may determine, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (f) exercise any other rights available to the Collateral Agent or the other Noteholders, or any of them, under the Credit Document, at law or in equity. The obligations of the Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Issuer, any other Credit Party or any other Person under the Notes or any other Credit Document or other agreement or instrument by the Collateral Agent, any Noteholder or any other Person or by operation of law; (b) any invalidity, irregularity, illegality or unenforceability of the Notes or any other Credit Document, or any provision of applicable law or regulation purporting to prohibit the payment of the principal of or interest on the Notes or any other Credit Document or any other amounts payable under the Notes; 3 (c) the existence of any claim, set-off or other rights that the Guarantor may have at any time against the Issuer, any other Credit Party or any other Person, whether or not arising in connection with this Subsidiary Guaranty, the Notes or any other Credit Document or otherwise; or (d) any other act or omission to act or delay of any kind by the Issuer, the Guarantor, and other Credit Party, the Collateral Agent, any Noteholders or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations under this Subsidiary Guaranty or any other Credit Document. The Guarantor hereby waives notice of acceptance of this Guaranty or any other Credit Document and also presentment, demand, protest and notice of dishonor, and promptness in commencing suit against the Issuer or any other Credit Party and/or in giving any notice to or of making any claim or demand hereunder or under any other Credit Document upon the Guarantor or any other Person. No failure or delay by the Collateral Agent in exercising any right, power or privilege under this Guaranty or under any other Credit Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. This Guaranty is a guarantee of payment and not of collection, and the Guarantor hereby agrees that the obligations under this Guaranty are independent of the obligations of the Issuer or any other Credit Party and that a separate action may be brought and prosecuted against the Guarantor whether or not action is brought against the Issuer or any other Credit Party or whether or not the Issuer or any other Credit Party is joined in such action. The Guarantor's obligations under this Guaranty and the other Credit Documents shall remain in full force and effect until the principal of, and interest on, the Notes and all other amounts payable by the Issuer under the Notes and payable by the Guarantor under this Guaranty and all other Guarantied Obligations shall have been paid in full. If at any time any payment of the principal of, and interest on, the Notes or any other amount payable by the Issuer under the Notes or any other Guarantied Obligation is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Issuer or any other Credit Party or similar circumstance, the Guarantor's obligations under this Guaranty with respect to such payment shall be reinstated as though such payment had been due but not made at such time. The Guarantor shall be subrogated to all rights of the Collateral Agent and the Noteholders against the Issuer in respect of any amounts paid to the Collateral Agent and the Noteholders by the Guarantor pursuant to the provisions of this Guaranty; provided, however, until the Guarantied Obligations shall have been paid in full, Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Issuer or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Issuer, (ii) any right to enforce, or to participate in, any claim, right or remedy that the Collateral Agent or any Noteholder now has or may hereafter have against the 4 Issuer, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Collateral Agent or any Noteholder and (b) any right of contribution Guarantor now has or may hereafter have against any other guarantor of any of the Guarantied Obligations. Guarantor further agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Issuer or against any collateral or security, and any rights of contribution Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights of the Collateral Agent and any Noteholders may have against the Issuer, to all right, title and interest the Collateral Agent and any Noteholders may have in any such collateral or security, and to any right the Collateral Agent and any Noteholders may have against such other guarantor. Any indebtedness of the Issuer or any other Credit Party now or hereafter held by Guarantor is subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of such Person to Guarantor collected or received by Guarantor after an Event of Default has occurred and is continuing, and any amount paid to Guarantor on account of any subrogation, reimbursement, indemnification or contribution rights referred to in the preceding paragraph when all Guarantied Obligations have not been paid in full, shall be held in trust for the Collateral Agent on behalf of the Noteholders and shall forthwith be paid over to the Collateral Agent for the benefit of the Noteholders to be credited and applied against the Guarantied Obligations. In order to provide for just and equitable contribution among the Guarantor and the other Subsidiary Guarantors party to the Agreement of Understanding (for purposes of this paragraph individually a "GUARANTOR" and collectively, the "GUARANTORS"), in connection with the execution of their respective Subsidiary Guaranties, the Guarantors have agreed among themselves that if any such Guarantor satisfies some or all of the Obligations (a "FUNDING GUARANTOR"), the Funding Guarantor shall be entitled to contribution from the other Guarantors that have positive Maximum Net Worth (as defined below) for all payments made by the Funding Guarantor in satisfying the Guarantied Obligations, so that each Guarantor that remains obligated under this Guaranty or any other guaranty for the Guarantied Obligations at the time that a Funding Guarantor makes such payment (a "REMAINING GUARANTOR") and has a positive Maximum Net Worth shall bear a portion of such payment equal to the percentage that such Remaining Guarantor's Maximum Net Worth bears to the aggregate Maximum Net Worth of all Remaining Guarantors that have positive Maximum Net Worth. As used herein, "NET WORTH" means, with respect to any Guarantor, the amount, as of the respective date of calculation, by which the sum of a Person's assets (including subrogation, indemnity, contribution, reimbursement and similar rights that such Guarantor may have), determined on the basis of a "fair valuation" or their "fair saleable value" (whichever is the applicable test under Section 548 and other relevant provisions of the Bankruptcy Code and the relevant state fraudulent conveyance or transfer laws), is greater than the amount that will be required to pay all of such Person's debts, in each case matured or unmatured, contingent or otherwise, as of the date of calculation, but excluding liabilities arising under this Guaranty or any other guaranty for the Obligations and excluding, to the maximum extent permitted by applicable law with the objective of avoiding rendering such Person insolvent, liabilities subordinated to the Obligations arising out of loans or advances made to such Person by any other Person. "MAXIMUM NET 5 WORTH" means, with respect to any Guarantor, the greatest of the Net Worths of such Guarantor calculated as of the following dates: (A) the date on which such Person becomes a Guarantor, and (B) the date on which such Guarantor expressly reaffirms this Guaranty or the other guaranty to which it is a party. The meaning of the terms "FAIR VALUATION" and "FAIR SALEABLE VALUE" and the calculation of assets and liabilities shall be determined and made in accordance with the relevant provisions of the Bankruptcy Code and applicable state fraudulent conveyance or transfer laws. The rights and obligations of each Guarantor established pursuant to this paragraph (and the related paragraphs of the other Subsidiary Guaranties) shall be subject to the restrictions and limitations benefiting the Collateral Agent and the Noteholders set forth in the preceding two paragraphs. Guarantor agrees to pay, or cause to be paid, on demand, and to save the Collateral Agent harmless against liability for, (i) any and all costs and expenses (including fees, costs of settlement and disbursements of counsel and allocated costs of internal counsel) incurred or expended by the Collateral Agent in connection with the enforcement of or preservation of any rights under this Guaranty and (ii) any and all costs and expenses (including those arising from rights of indemnification) required to be paid by Guarantor under the provisions of any other Credit Document to which it is party. Any monies paid by the Guarantor to the Principal Paying Agent or a Paying Agent for payment of Guarantied Obligations which remain unclaimed for two years after such monies have become due and payable will be repaid to the Guarantor and the beneficiaries of this Guaranty may thereafter look only to the Issuer and the other Credit Parties, as the case may be, for payment thereof. All of the provisions of this Guaranty shall be binding upon the Guarantor and its successors, permitted transferees and assigns and inure to the benefit of, and be enforceable by, the Collateral Agent and its successors, transferees and assigns and Requisite Noteholders as defined and provided in the Collateral Agency Agreement; it being understood that the rights and remedies under this Guaranty shall not be enforceable by an individual holder of a legal or beneficial interest of a Note unless such holder is acting with the instructions or at the request of Requisite Noteholders. The Guarantor hereby further agrees that any amounts to be paid under this Guaranty shall be paid without deduction or withholding for or on account of any present or future taxes, assessments, duties or governmental charges of any nature whatsoever imposed, levied or collected by or in or on behalf of the United States or any other Governmental Authority or by or on behalf of any political subdivision or authority therein having power to tax, unless such deduction or withholding is required by law. In such event, the Guarantor shall pay such additional amounts of principal and interest and other amounts as may be necessary in order that the net amounts received by the Collateral Agent and the Noteholders, as the case may be, after such deduction or withholding shall not be less than the respective amounts of principal and interest and other amounts which would have been received had no such deduction or withholding been required. No such additional amounts shall, however, be payable with respect to: 6 (a) any Note or Coupon presented for payment by, or on behalf of, a holder who is liable for such taxes or duties in respect of such Note or Coupon by reason of his having some connection with the Kingdom of Belgium or the United States, other than the mere holding of such Note or Coupon or the receipt of payments in respect thereto; or (b) any Note or Coupon presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on such thirtieth day; or (c) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge; or (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal or interest, if any, with respect to such Note or Coupon; or (e) any tax, duty, levy, assessment or other governmental charge that would not have been imposed but for the fact that such Noteholder or Couponholder presented (if presentation is required) such Note or Coupon for payment in the applicable taxing jurisdiction, unless such Note or Coupon could not have been presented for payment elsewhere; or (f) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Noteholder or Couponholder or the beneficial owner of the Note or Coupon with a request of the Issuer or the Guarantor (a) to provide information concerning the nationality, residence or identity of the Noteholder or Couponholder or such beneficial owner or (b) to make any declaration or other similar claim or satisfy any information or reporting requirements, which, in the case of (a) or (b), is required or imposed by a statute, treaty, regulation or administrative practice of the applicable taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or other governmental charge; or (g) in relation to additional amounts in respect of taxes and duties imposed or levied by the Kingdom of Belgium only to any holder who is not the sole beneficial owner of such Note or Coupon to the extent that a beneficial owner thereof, any Note or Coupon held by or on behalf of a holder who, at the time of issue of the Notes, was not an eligible investor within the meaning of Article 4 of the Royal Decree on 26 May, 1994 on the deduction of withholding tax or who was an eligible investor at the time of issue of the Notes but, for reasons within the holder's control, ceased to be an eligible investor or, at any relevant time on or after the issue of the Notes, otherwise failed to meet any other condition for the exemption of Belgian withholding tax pursuant to the law of 6 August, 1993 relating to certain securities; or (h) any combination of (a) to (g); nor in any case, with respect to the Issuer or the Guarantor shall additional amounts be paid to any holder who is not the sole beneficial owner of such Note or Coupon to the extent that a beneficial owner thereof would not have been entitled to the additional amounts had such beneficial owner been the holder of such Note or Coupon. 7 As used herein, "Relevant Date" means whichever is the later of (i) the date on which such payment first becomes due and (ii) if the full amount of the moneys payable has not been made available to the Fiscal Agent on or prior to such date, the date on which, the full amount of such moneys having been made available, notice to that effect shall have been given to the Noteholders in accordance with the notice provisions described in the Terms and Conditions of the Notes. The obligation of the Guarantor to make payments of principal of, or interest on, or other amount due under this Guaranty shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the currency specified in the Notes except to the extent that such tender or recovery shall result in the effective receipt by the Collateral Agent or the relevant Noteholder of the full amount of the currency specified in the Notes, and accordingly the primary obligation of the Guarantor shall be enforceable as an alternative or additional cause of action for the purpose of recovery in the judgment currency of the amount (if any) by which such effective receipt shall fall short of the full amount of the currency specified in the Notes and shall not be affected by a judgment being obtained for any other sum due under this Guaranty. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTOR, THE COLLATERAL AGENT AND THE OTHER NOTEHOLDERS HEREIN SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The Guarantor hereby agrees, for the benefit of the Collateral Agent, and the holders of the Notes (i) to be bound by the covenants in Sections 7 and 8 of the Terms and Conditions of the Notes that are applicable to such Guarantor as a Subsidiary of the Issuer, and (ii) to take any and all actions (or omit to take any and all actions) in order to not cause a Default or an Event of Default by Guarantor under such covenants in the Terms and Conditions of the Notes. The Guarantor hereby represents and warrants to the Collateral Agent that the statements set forth in Section IV to the Agreement of Understanding applicable to the Guarantor are true, correct and complete on and as of the date of this Subsidiary Guaranty. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any state or United States Federal court sitting in the Borough of Manhattan, New York City, State of New York and of any Belgian court sitting in Brussels over any suit, action or proceeding arising out of or relating to this Guaranty or any other Credit Document to which it is a party. The Guarantor irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. As long as any of the Guarantied Obligations remain outstanding, the Guarantor will at all times have an authorized agent for service of process in New York City and in Belgium, upon whom process may be served in any suit, action or proceeding arising out of or relating to this Guaranty or any other Credit Document to which it is a party. Service of 8 process upon such agent and written notice of such service mailed or delivered to the Guarantor shall to the extent permitted by law be deemed in every respect effective service of process upon the Guarantor in any such suit, action or proceeding. The Guarantor hereby appoints CT Corporation System, 111 Eighth Avenue, New York, New York 10011 and the Issuer as its agents for such purpose, and covenants and agrees that (i) service of process in any such suit, action or proceeding may be made upon it at the specified office of any such agent (or such other address or at the office of any other authorized agent which the Guarantor may designate by written notice to the Collateral Agent) and (ii) prior to any termination of any such agency for any reason, it will so appoint a successor thereto as agent hereunder. GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, COLLATERAL AGENT ON BEHALF OF ITSELF AND EACH NOTEHOLDER, EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, COLLATERAL AGENT ON BEHALF OF ITSELF AND EACH NOTEHOLDER, EACH (I) ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT GUARANTOR AND COLLATERAL AGENT HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS GUARANTY OR ACCEPTING THE BENEFITS THEREOF, AS THE CASE MAY BE, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS, AND (II) FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. If one or more provisions contained in this Subsidiary Guaranty shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, or enforceability of the remaining provisions shall not in any way be affected or impaired. This Guaranty may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the 9 written concurrence of Collateral Agent and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. The Collateral Agent has been appointed to act as Collateral Agent pursuant to the Collateral Agency Agreement. The Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action, solely in accordance with this Guaranty and the Collateral Agency Agreement. Collateral Agent shall at all times be the same Person that is Collateral Agent under the Collateral Agency Agreement. Written notice of resignation by Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute notice of resignation as Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party; removal of Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute removal as Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party; and appointment of a successor Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute appointment of a successor Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party. Upon the acceptance of any appointment as Collateral Agent under Section 7 of the Collateral Agency Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party, and the retiring or removed Collateral Agent under this Guaranty shall promptly (i) transfer to such successor Collateral Agent all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party, and (ii) take such other actions as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the rights created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Guaranty and other Credit Documents to which the Guarantor is party. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Guaranty and other Credit Documents to which the Guarantor is party shall inure to its benefit as to any actions taken or omitted to be taken by it under this Guaranty or the other Credit Documents to which the Guarantor is party while it was Collateral Agent hereunder. All notices and other communications under this Guaranty shall be in writing and shall be personally delivered or sent by prepaid courier, by overnight, registered or certified mail (postage prepaid), or by prepaid telex, telecopy or telegram, and shall be deemed given when received by the intended recipient thereof. Unless otherwise specified in a notice given in accordance with the foregoing provisions of this Section, all notices and other communications shall be given to the parties hereto at their respective addresses (or to their respective telex or telecopier numbers) indicated in the Agreement of Understanding. This Guaranty is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Guaranty. 10 IN WITNESS WHEREOF, the Guarantor and the Collateral Agent has caused this Subsidiary Guaranty to be duly executed by its duly authorized officer. AMCIS AG By /s/ Kristel Deroover --------------------------------------- Name: Kristel Deroover ----------------------------- Title: Attorney ---------------------------- KBC BANK NV By /s/ Dirk De Bleser --------------------------------------- Name: Dirk De Bleser ----------------------------- Title: Head Operations & Accounting ---------------------------- Dated: 11 February 2004 S-1 EX-99.7 DISTR CONTR 9 exh99p7.txt Exhibit 99.7 CARBOGEN AG SUBSIDIARY GUARANTY FOR VALUE RECEIVED, Carbogen AG, a company limited by shares organized under the laws of Switzerland (the "GUARANTOR"), hereby irrevocably and unconditionally guarantees, for the benefit of the Collateral Agent and the holders of Notes (as hereinafter defined), as primary obligor and not merely as surety, the full and punctual payment when due, subject to any applicable grace period (whether at stated maturity, upon declaration of acceleration, upon call for redemption, or otherwise), of all Guarantied Obligations (as hereinafter defined) (including amounts that would become due but for the operation of the automatic stay under any bankruptcy, insolvency or similar law). Upon failure by the Issuer to pay punctually any such amount, the Guarantor shall forthwith pay the amount not so paid. Notwithstanding anything agreed in this Guaranty, this Guaranty (as the same may be subsequently amended or novated), including the obligation of the Guarantor as a Remaining Guarantor (as defined below): (a) is limited to the maximum amount of the Guarantor's profits and reserves which are available for distribution as dividends in accordance with Articles 671, 671a to 673 and 675 of the Swiss Code of Obligations (the "AVAILABLE AMOUNT") at the time that the Guarantor is required to make a payment. Promptly after having been requested to make a payment under this Guaranty, the Guarantor shall (i) use its best efforts to ensure that, if so requested by the Collateral Agent or Requisite Noteholders, a meeting of its general assembly of shareholders is duly held, within 30 Business Days the latest following such request, to approve or confirm, as the case may be, the requested payment up to the Available Amount; and (ii) pay promptly the Available Amount (plus the Swiss Withholding Tax (if any) in accordance with paragraph (b) below), it being understood that the said shareholders' resolution (if any) may be requested by the Collateral Agent or Requisite Noteholders to be taken prior to or following the payment by the Guarantor of the amount requested by the Collateral Agent or Requisite Noteholders under this Guaranty. (b) In relation to this Guaranty, the Guarantor shall, if and to the extent required by applicable law in force at the relevant time, subject to any applicable double taxation treaty, pay any Swiss withholding tax (the "SWISS WITHHOLDING TAX"), at the rate of 35 per cent (or such other then applicable rate) from any payment under this Guaranty and pay such Swiss Withholding Tax to the Swiss Federal tax administration and, with respect to such payments made, shall not be obliged to gross-up and indemnify the Collateral Agent and the Noteholder even if such gross-up or indemnification is generally provided for in the Terms and Conditions of Notes and/or in this Guaranty. (c) The Guarantor shall use its best efforts to ensure that its direct parent company (or, if appropriate, any of its affiliate companies) will take all steps necessary 1 (i) to obtain without delay a full or partial refund of the said withholding tax payment, if and to the extent permissible under the applicable provisions of the relevant double taxation treaty; and (ii) to make sure that the party receiving such refund (if any) will pay such amount to the Collateral Agent, which payment shall be accounted as a payment by the Guarantor under this Guaranty. For purposes hereof, those certain (euro)200,000,000 6.25 percent Notes due 2005 (the "ORIGINAL NOTES"), of Solutia Europe SA/NV a company limited by shares organized under the laws of Belgium (the "ISSUER"), including the terms and conditions affixed thereto and incorporated by reference therein, as amended and restated by those certain (euro)200,000,000 10.00 percent Notes due 2008 of the Issuer, including the terms and conditions affixed thereto and incorporated by reference therein (the terms and conditions of notes, as amended, modified or supplemented from time to time, including all exhibits and schedules thereto, the "TERMS AND CONDITIONS OF NOTES") and as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, shall be referred to as the "NOTES". The Notes amend and restate and evidence indebtedness previously evidenced by the Original Notes and, in connection therewith, the Issuer has entered into the Fiscal Agency Agreement dated 11 February 2004 with Kredietbank S.A. Luxembourgeoise, as fiscal agent and paying agent (together with its successors and assigns, the "FISCAL AGENT"), and KBC Bank NV, as the principal paying agent (together with its successors and assigns, the "PRINCIPAL PAYING AGENT") and the Agreement of Understanding and Restructuring dated 30 January 2004 (as amended from time to time, the "AGREEMENT OF UNDERSTANDING") with the Noteholders party thereto. All terms not otherwise defined herein shall have the meanings set forth in the Terms and Conditions of Notes. For purposes hereof, the "COLLATERAL AGENT" refers to KBC BANK NV, as collateral agent (together with its successors and assigns, the "COLLATERAL AGENT"), appointed pursuant to the Collateral Agency Agreement dated 11 February 2004 (as it may be amended from time to time, the "COLLATERAL AGENCY AGREEMENT") among the Issuer, the Subsidiary Guarantors party thereto, the Collateral Agent and the Noteholders party thereto. The term "GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and includes any and all Obligations (as defined in the Terms and Conditions of Notes) of the Issuer to the Collateral Agent or any of the Noteholders, including all obligations of the Issuer in respect of the principal of, and interest on, the Notes and all other obligations of the Issuer under or evidenced by the Notes, the Fiscal Agency Agreement, the Collateral Agency Agreement and the other Credit Documents to which the Issuer is party, including all costs, expenses (including, without limitation, legal fees and expenses of counsel and allocated costs of internal counsel), indemnities and liabilities of whatsoever nature, now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Notes, this Guaranty, the Fiscal Agency Agreement, the Collateral Agency Agreement and the other Credit Documents, including those arising under successive transactions under the Credit Documents which shall either continue the Obligations of the Issuer or from time to time renew them after they have been satisfied. 2 Any interest on any portion of the Guarantied Obligations that accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Issuer (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceeding had not been commenced) shall be included in the Guarantied Obligations because it is the intention that the Guarantied Obligations should be determined without regard to any rule of law or order that may relieve Issuer of any portion of such Guarantied Obligations. The Collateral Agent or any Noteholder may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation (other than the limitations set forth in this Guaranty), impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security now or hereafter held by or for the benefit of the Collateral Agent or any Noteholder in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Collateral Agent or the Noteholder, or any of them, may have against any such security, as the Collateral Agent or any Noteholder in its discretion may determine, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (f) exercise any other rights available to the Collateral Agent or the other Noteholders, or any of them, under the Credit Document, at law or in equity. The obligations of the Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Issuer, any other Credit Party or any other Person under the Notes or any other Credit Document or other agreement or instrument by the Collateral Agent, any Noteholder or any other Person or by operation of law; (b) any invalidity, irregularity, illegality or unenforceability of the Notes or any other Credit Document, or any provision of applicable law or regulation purporting to prohibit the payment of the principal of or interest on the Notes or any other Credit Document or any other amounts payable under the Notes; 3 (c) the existence of any claim, set-off or other rights that the Guarantor may have at any time against the Issuer, any other Credit Party or any other Person, whether or not arising in connection with this Subsidiary Guaranty, the Notes or any other Credit Document or otherwise; or (d) any other act or omission to act or delay of any kind by the Issuer, the Guarantor, and other Credit Party, the Collateral Agent, any Noteholders or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations under this Subsidiary Guaranty or any other Credit Document. The Guarantor hereby waives notice of acceptance of this Guaranty or any other Credit Document and also presentment, demand, protest and notice of dishonor, and promptness in commencing suit against the Issuer or any other Credit Party and/or in giving any notice to or of making any claim or demand hereunder or under any other Credit Document upon the Guarantor or any other Person. No failure or delay by the Collateral Agent in exercising any right, power or privilege under this Guaranty or under any other Credit Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. This Guaranty is a guarantee of payment and not of collection, and the Guarantor hereby agrees that the obligations under this Guaranty are independent of the obligations of the Issuer or any other Credit Party and that a separate action may be brought and prosecuted against the Guarantor whether or not action is brought against the Issuer or any other Credit Party or whether or not the Issuer or any other Credit Party is joined in such action. The Guarantor's obligations under this Guaranty and the other Credit Documents shall remain in full force and effect until the principal of, and interest on, the Notes and all other amounts payable by the Issuer under the Notes and payable by the Guarantor under this Guaranty and all other Guarantied Obligations shall have been paid in full. If at any time any payment of the principal of, and interest on, the Notes or any other amount payable by the Issuer under the Notes or any other Guarantied Obligation is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Issuer or any other Credit Party or similar circumstance, the Guarantor's obligations under this Guaranty with respect to such payment shall be reinstated as though such payment had been due but not made at such time. The Guarantor shall be subrogated to all rights of the Collateral Agent and the Noteholders against the Issuer in respect of any amounts paid to the Collateral Agent and the Noteholders by the Guarantor pursuant to the provisions of this Guaranty; provided, however, until the Guarantied Obligations shall have been paid in full, Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Issuer or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Issuer, (ii) any right to enforce, or to participate in, any claim, right or remedy that the Collateral Agent or any Noteholder now has or may hereafter have against the 4 Issuer, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Collateral Agent or any Noteholder and (b) any right of contribution Guarantor now has or may hereafter have against any other guarantor of any of the Guarantied Obligations. Guarantor further agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Issuer or against any collateral or security, and any rights of contribution Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights of the Collateral Agent and any Noteholders may have against the Issuer, to all right, title and interest the Collateral Agent and any Noteholders may have in any such collateral or security, and to any right the Collateral Agent and any Noteholders may have against such other guarantor. Any indebtedness of the Issuer or any other Credit Party now or hereafter held by Guarantor is subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of such Person to Guarantor collected or received by Guarantor after an Event of Default has occurred and is continuing, and any amount paid to Guarantor on account of any subrogation, reimbursement, indemnification or contribution rights referred to in the preceding paragraph when all Guarantied Obligations have not been paid in full, shall be held in trust for the Collateral Agent on behalf of the Noteholders and shall forthwith be paid over to the Collateral Agent for the benefit of the Noteholders to be credited and applied against the Guarantied Obligations. In order to provide for just and equitable contribution among the Guarantor and the other Subsidiary Guarantors party to the Agreement of Understanding (for purposes of this paragraph individually a "GUARANTOR" and collectively, the "GUARANTORS"), in connection with the execution of their respective Subsidiary Guaranties, the Guarantors have agreed among themselves that if any such Guarantor satisfies some or all of the Obligations (a "FUNDING GUARANTOR"), the Funding Guarantor shall be entitled to contribution from the other Guarantors that have positive Maximum Net Worth (as defined below) for all payments made by the Funding Guarantor in satisfying the Guarantied Obligations, so that each Guarantor that remains obligated under this Guaranty or any other guaranty for the Guarantied Obligations at the time that a Funding Guarantor makes such payment (a "REMAINING GUARANTOR") and has a positive Maximum Net Worth shall bear a portion of such payment equal to the percentage that such Remaining Guarantor's Maximum Net Worth bears to the aggregate Maximum Net Worth of all Remaining Guarantors that have positive Maximum Net Worth. As used herein, "NET WORTH" means, with respect to any Guarantor, the amount, as of the respective date of calculation, by which the sum of a Person's assets (including subrogation, indemnity, contribution, reimbursement and similar rights that such Guarantor may have), determined on the basis of a "fair valuation" or their "fair saleable value" (whichever is the applicable test under Section 548 and other relevant provisions of the Bankruptcy Code and the relevant state fraudulent conveyance or transfer laws), is greater than the amount that will be required to pay all of such Person's debts, in each case matured or unmatured, contingent or otherwise, as of the date of calculation, but excluding liabilities arising under this Guaranty or any other guaranty for the Obligations and excluding, to the maximum extent permitted by applicable law with the objective of avoiding rendering such Person insolvent, liabilities subordinated to the Obligations arising out of loans or advances made to such Person by any other Person. "MAXIMUM NET 5 WORTH" means, with respect to any Guarantor, the greatest of the Net Worths of such Guarantor calculated as of the following dates: (A) the date on which such Person becomes a Guarantor, and (B) the date on which such Guarantor expressly reaffirms this Guaranty or the other guaranty to which it is a party. The meaning of the terms "FAIR VALUATION" and "FAIR SALEABLE VALUE" and the calculation of assets and liabilities shall be determined and made in accordance with the relevant provisions of the Bankruptcy Code and applicable state fraudulent conveyance or transfer laws. The rights and obligations of each Guarantor established pursuant to this paragraph (and the related paragraphs of the other Subsidiary Guaranties) shall be subject to the restrictions and limitations benefiting the Collateral Agent and the Noteholders set forth in the preceding two paragraphs. Guarantor agrees to pay, or cause to be paid, on demand, and to save the Collateral Agent harmless against liability for, (i) any and all costs and expenses (including fees, costs of settlement and disbursements of counsel and allocated costs of internal counsel) incurred or expended by the Collateral Agent in connection with the enforcement of or preservation of any rights under this Guaranty and (ii) any and all costs and expenses (including those arising from rights of indemnification) required to be paid by Guarantor under the provisions of any other Credit Document to which it is party. Any monies paid by the Guarantor to the Principal Paying Agent or a Paying Agent for payment of Guarantied Obligations which remain unclaimed for two years after such monies have become due and payable will be repaid to the Guarantor and the beneficiaries of this Guaranty may thereafter look only to the Issuer and the other Credit Parties, as the case may be, for payment thereof. All of the provisions of this Guaranty shall be binding upon the Guarantor and its successors, permitted transferees and assigns and inure to the benefit of, and be enforceable by, the Collateral Agent and its successors, transferees and assigns and Requisite Noteholders as defined and provided in the Collateral Agency Agreement; it being understood that the rights and remedies under this Guaranty shall not be enforceable by an individual holder of a legal or beneficial interest of a Note unless such holder is acting with the instructions or at the request of Requisite Noteholders. The Guarantor hereby further agrees that any amounts to be paid under this Guaranty shall be paid without deduction or withholding for or on account of any present or future taxes, assessments, duties or governmental charges of any nature whatsoever imposed, levied or collected by or in or on behalf of the United States or any other Governmental Authority or by or on behalf of any political subdivision or authority therein having power to tax, unless such deduction or withholding is required by law. In such event, the Guarantor shall pay such additional amounts of principal and interest and other amounts as may be necessary in order that the net amounts received by the Collateral Agent and the Noteholders, as the case may be, after such deduction or withholding shall not be less than the respective amounts of principal and interest and other amounts which would have been received had no such deduction or withholding been required. No such additional amounts shall, however, be payable with respect to: 6 (a) any Note or Coupon presented for payment by, or on behalf of, a holder who is liable for such taxes or duties in respect of such Note or Coupon by reason of his having some connection with the Kingdom of Belgium or the United States, other than the mere holding of such Note or Coupon or the receipt of payments in respect thereto; or (b) any Note or Coupon presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on such thirtieth day; or (c) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge; or (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal or interest, if any, with respect to such Note or Coupon; or (e) any tax, duty, levy, assessment or other governmental charge that would not have been imposed but for the fact that such Noteholder or Couponholder presented (if presentation is required) such Note or Coupon for payment in the applicable taxing jurisdiction, unless such Note or Coupon could not have been presented for payment elsewhere; or (f) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Noteholder or Couponholder or the beneficial owner of the Note or Coupon with a request of the Issuer or the Guarantor (a) to provide information concerning the nationality, residence or identity of the Noteholder or Couponholder or such beneficial owner or (b) to make any declaration or other similar claim or satisfy any information or reporting requirements, which, in the case of (a) or (b), is required or imposed by a statute, treaty, regulation or administrative practice of the applicable taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or other governmental charge; or (g) in relation to additional amounts in respect of taxes and duties imposed or levied by the Kingdom of Belgium only to any holder who is not the sole beneficial owner of such Note or Coupon to the extent that a beneficial owner thereof, any Note or Coupon held by or on behalf of a holder who, at the time of issue of the Notes, was not an eligible investor within the meaning of Article 4 of the Royal Decree on 26 May, 1994 on the deduction of withholding tax or who was an eligible investor at the time of issue of the Notes but, for reasons within the holder's control, ceased to be an eligible investor or, at any relevant time on or after the issue of the Notes, otherwise failed to meet any other condition for the exemption of Belgian withholding tax pursuant to the law of 6 August, 1993 relating to certain securities; or (h) any combination of (a) to (g); nor in any case, with respect to the Issuer or the Guarantor shall additional amounts be paid to any holder who is not the sole beneficial owner of such Note or Coupon to the extent that a beneficial owner thereof would not have been entitled to the additional amounts had such beneficial owner been the holder of such Note or Coupon. 7 As used herein, "Relevant Date" means whichever is the later of (i) the date on which such payment first becomes due and (ii) if the full amount of the moneys payable has not been made available to the Fiscal Agent on or prior to such date, the date on which, the full amount of such moneys having been made available, notice to that effect shall have been given to the Noteholders in accordance with the notice provisions described in the Terms and Conditions of the Notes. The obligation of the Guarantor to make payments of principal of, or interest on, or other amount due under this Guaranty shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the currency specified in the Notes except to the extent that such tender or recovery shall result in the effective receipt by the Collateral Agent or the relevant Noteholder of the full amount of the currency specified in the Notes, and accordingly the primary obligation of the Guarantor shall be enforceable as an alternative or additional cause of action for the purpose of recovery in the judgment currency of the amount (if any) by which such effective receipt shall fall short of the full amount of the currency specified in the Notes and shall not be affected by a judgment being obtained for any other sum due under this Guaranty. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTOR, THE COLLATERAL AGENT AND THE OTHER NOTEHOLDERS HEREIN SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The Guarantor hereby agrees, for the benefit of the Collateral Agent, and the holders of the Notes (i) to be bound by the covenants in Sections 7 and 8 of the Terms and Conditions of the Notes that are applicable to such Guarantor as a Subsidiary of the Issuer, and (ii) to take any and all actions (or omit to take any and all actions) in order to not cause a Default or an Event of Default by Guarantor under such covenants in the Terms and Conditions of the Notes. The Guarantor hereby represents and warrants to the Collateral Agent that the statements set forth in Section IV to the Agreement of Understanding applicable to the Guarantor are true, correct and complete on and as of the date of this Subsidiary Guaranty. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any state or United States Federal court sitting in the Borough of Manhattan, New York City, State of New York and of any Belgian court sitting in Brussels over any suit, action or proceeding arising out of or relating to this Guaranty or any other Credit Document to which it is a party. The Guarantor irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. As long as any of the Guarantied Obligations remain outstanding, the Guarantor will at all times have an authorized agent for service of process in New York City and in Belgium, upon whom process may be served in any suit, action or proceeding arising out of or relating to this Guaranty or any other Credit Document to which it is a party. Service of 8 process upon such agent and written notice of such service mailed or delivered to the Guarantor shall to the extent permitted by law be deemed in every respect effective service of process upon the Guarantor in any such suit, action or proceeding. The Guarantor hereby appoints CT Corporation System, 111 Eighth Avenue, New York, New York 10011 and the Issuer as its agents for such purpose, and covenants and agrees that (i) service of process in any such suit, action or proceeding may be made upon it at the specified office of any such agent (or such other address or at the office of any other authorized agent which the Guarantor may designate by written notice to the Collateral Agent) and (ii) prior to any termination of any such agency for any reason, it will so appoint a successor thereto as agent hereunder. GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, COLLATERAL AGENT ON BEHALF OF ITSELF AND EACH NOTEHOLDER, EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, COLLATERAL AGENT ON BEHALF OF ITSELF AND EACH NOTEHOLDER, EACH (I) ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT GUARANTOR AND COLLATERAL AGENT HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS GUARANTY OR ACCEPTING THE BENEFITS THEREOF, AS THE CASE MAY BE, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS, AND (II) FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. If one or more provisions contained in this Subsidiary Guaranty shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, or enforceability of the remaining provisions shall not in any way be affected or impaired. This Guaranty may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the 9 written concurrence of Collateral Agent and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. The Collateral Agent has been appointed to act as Collateral Agent pursuant to the Collateral Agency Agreement. The Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action, solely in accordance with this Guaranty and the Collateral Agency Agreement. Collateral Agent shall at all times be the same Person that is Collateral Agent under the Collateral Agency Agreement. Written notice of resignation by Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute notice of resignation as Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party; removal of Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute removal as Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party; and appointment of a successor Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute appointment of a successor Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party. Upon the acceptance of any appointment as Collateral Agent under Section 7 of the Collateral Agency Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party, and the retiring or removed Collateral Agent under this Guaranty shall promptly (i) transfer to such successor Collateral Agent all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party, and (ii) take such other actions as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the rights created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Guaranty and other Credit Documents to which the Guarantor is party. After any retiring or removed Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Guaranty and other Credit Documents to which the Guarantor is party shall inure to its benefit as to any actions taken or omitted to be taken by it under this Guaranty or the other Credit Documents to which the Guarantor is party while it was Collateral Agent hereunder. All notices and other communications under this Guaranty shall be in writing and shall be personally delivered or sent by prepaid courier, by overnight, registered or certified mail (postage prepaid), or by prepaid telex, telecopy or telegram, and shall be deemed given when received by the intended recipient thereof. Unless otherwise specified in a notice given in accordance with the foregoing provisions of this Section, all notices and other communications shall be given to the parties hereto at their respective addresses (or to their respective telex or telecopier numbers) indicated in the Agreement of Understanding. This Guaranty is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Guaranty. 10 IN WITNESS WHEREOF, the Guarantor and the Collateral Agent has caused this Subsidiary Guaranty to be duly executed by its duly authorized officer. CARBOGEN AG By /s/ Kristel Deroover ----------------------------------------- Name: Kristel Deroover ---------------------------- Title: Attorney ---------------------------- KBC BANK NV By /s/ Dirk De Bleser ----------------------------------------- Name: Dirk De Bleser ---------------------------- Title: Head Operations & Accounting ---------------------------- Dated: 11 February 2004 S-1 EX-99.8 O&D BENEFTS 10 exh99p8.txt Exhibit 99.8 Execution version SOLUTIA SERVICES INTERNATIONAL SCA/ COMM. VA FORM OF SUBSIDIARY GUARANTY FOR VALUE RECEIVED, Solutia Services International SCA/Comm.VA a "commanditaire vennootschap op aandelen/societe en commandite par actions" organized under the laws of Belgium (the "GUARANTOR"), hereby irrevocably and unconditionally guarantees, for the benefit of the Collateral Agent and the holders of Notes (as hereinafter defined), as primary obligor and not merely as surety, the full and punctual payment when due, subject to any applicable grace period (whether at stated maturity, upon declaration of acceleration, upon call for redemption, or otherwise), of all Guarantied Obligations (as hereinafter defined) (including amounts that would become due but for the operation of the automatic stay under any bankruptcy, insolvency or similar law). Upon failure by the Issuer to pay punctually any such amount, the Guarantor shall forthwith pay the amount not so paid. For purposes hereof, those certain (euro)200,000,000 6.25 percent Notes due 2005 (the "ORIGINAL NOTES"), of Solutia Europe SA/NV a company limited by shares organized under the laws of Belgium (the "ISSUER"), including the terms and conditions affixed thereto and incorporated by reference therein, as amended and restated by those certain (euro)200,000,000 10.00 percent Notes due 2008 of the Issuer, including the terms and conditions affixed thereto and incorporated by reference therein (the terms and conditions of notes, as amended, modified or supplemented from time to time, including all exhibits and schedules thereto, the "TERMS AND CONDITIONS OF NOTES") and as amended, modified, supplemented or replaced from time to time, including all exhibits and schedules thereto, shall be referred to as the "NOTES". The Notes amend and restate and evidence indebtedness previously evidenced by the Original Notes and, in connection therewith, the Issuer has entered into the Fiscal Agency Agreement dated 11 February 2004 with Kredietbank S.A. Luxembourgeoise, as fiscal agent and paying agent (together with its successors and assigns, the "FISCAL AGENT"), and KBC Bank NV, as the principal paying agent (together with its successors and assigns, the "PRINCIPAL PAYING AGENT") and the Agreement of Understanding and Restructuring dated 30 January, 2004 (as amended from time to time, the "AGREEMENT OF UNDERSTANDING") with the Noteholders party thereto. All terms not otherwise defined herein shall have the meanings set forth in the Terms and Conditions of Notes. For purposes hereof, the "COLLATERAL AGENT" refers to KBC Bank NV, as collateral agent (together with its successors and assigns, the "COLLATERAL AGENT"), appointed pursuant to the Collateral Agency Agreement dated 11 February 2004 (as it may be amended from time to time, the "COLLATERAL AGENCY AGREEMENT") among the Issuer, the Subsidiary Guarantors party thereto, the Collateral Agent and the Noteholders party thereto. The term "GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and includes any and all Obligations (as defined in the Terms and Conditions of Notes) of the Issuer to the Collateral Agent or any of the Noteholders, including all obligations of the Issuer in respect of the principal of, and interest on, the Notes and all other obligations of the Issuer under or evidenced by the Notes, the Fiscal Agency Agreement, the Collateral Agency Agreement and the other Credit Documents to which the Issuer is party, including all costs, expenses (including, 1 Execution version without limitation, legal fees and expenses of counsel and allocated costs of internal counsel), indemnities and liabilities of whatsoever nature, now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Notes, this Guaranty, the Fiscal Agency Agreement, the Collateral Agency Agreement and the other Credit Documents, including those arising under successive transactions under the Credit Documents which shall either continue the Obligations of the Issuer or from time to time renew them after they have been satisfied. Any interest on any portion of the Guarantied Obligations that accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Issuer (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceeding had not been commenced) shall be included in the Guarantied Obligations because it is the intention that the Guarantied Obligations should be determined without regard to any rule of law or order that may relieve Issuer of any portion of such Guarantied Obligations. The Collateral Agent or any Noteholder may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security now or hereafter held by or for the benefit of the Collateral Agent or any Noteholder in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Collateral Agent or the Noteholder, or any of them, may have against any such security, as the Collateral Agent or any Noteholder in its discretion may determine, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (f) exercise any other rights available to the Collateral Agent or the other Noteholders, or any of them, under the Credit Document, at law or in equity. The obligations of the Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Issuer, any other Credit Party or any other Person under the Notes or any other Credit Document or other agreement or instrument by the Collateral Agent, any Noteholder or any other Person or by operation of law; 2 Execution version (b) any invalidity, irregularity, illegality or unenforceability of the Notes or any other Credit Document, or any provision of applicable law or regulation purporting to prohibit the payment of the principal of or interest on the Notes or any other Credit Document or any other amounts payable under the Notes; (c) the existence of any claim, set-off or other rights that the Guarantor may have at any time against the Issuer, any other Credit Party or any other Person, whether or not arising in connection with this Subsidiary Guaranty, the Notes or any other Credit Document or otherwise; or (d) any other act or omission to act or delay of any kind by the Issuer, the Guarantor, and other Credit Party, the Collateral Agent, any Noteholders or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations under this Subsidiary Guaranty or any other Credit Document. The Guarantor hereby waives notice of acceptance of this Guaranty or any other Credit Document and also presentment, demand, protest and notice of dishonor, and promptness in commencing suit against the Issuer or any other Credit Party and/or in giving any notice to or of making any claim or demand hereunder or under any other Credit Document upon the Guarantor or any other Person. No failure or delay by the Collateral Agent in exercising any right, power or privilege under this Guaranty or under any other Credit Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. This Guaranty is a guarantee of payment and not of collection, and the Guarantor hereby agrees that the obligations under this Guaranty are independent of the obligations of the Issuer or any other Credit Party and that a separate action may be brought and prosecuted against the Guarantor whether or not action is brought against the Issuer or any other Credit Party or whether or not the Issuer or any other Credit Party is joined in such action. The Guarantor's obligations under this Guaranty and the other Credit Documents shall remain in full force and effect until the principal of, and interest on, the Notes and all other amounts payable by the Issuer under the Notes and payable by the Guarantor under this Guaranty and all other Guarantied Obligations shall have been paid in full. If at any time any payment of the principal of, and interest on, the Notes or any other amount payable by the Issuer under the Notes or any other Guarantied Obligation is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Issuer or any other Credit Party or similar circumstance, the Guarantor's obligations under this Guaranty with respect to such payment shall be reinstated as though such payment had been due but not made at such time. The Guarantor shall be subrogated to all rights of the Collateral Agent and the Noteholders against the Issuer in respect of any amounts paid to the Collateral Agent and the Noteholders by the Guarantor pursuant to the provisions of this Guaranty; provided, however, until the Guarantied Obligations shall have been paid in full, Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against the Issuer or any of its assets in connection with this Guaranty or the performance by Guarantor 3 Execution version of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against the Issuer, (ii) any right to enforce, or to participate in, any claim, right or remedy that the Collateral Agent or any Noteholder now has or may hereafter have against the Issuer, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Collateral Agent or any Noteholder and (b) any right of contribution Guarantor now has or may hereafter have against any other guarantor of any of the Guarantied Obligations. Guarantor further agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification Guarantor may have against the Issuer or against any collateral or security, and any rights of contribution Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights of the Collateral Agent and any Noteholders may have against the Issuer, to all right, title and interest the Collateral Agent and any Noteholders may have in any such collateral or security, and to any right the Collateral Agent and any Noteholders may have against such other guarantor. Any indebtedness of the Issuer or any other Credit Party now or hereafter held by Guarantor is subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of such Person to Guarantor collected or received by Guarantor after an Event of Default has occurred and is continuing, and any amount paid to Guarantor on account of any subrogation, reimbursement, indemnification or contribution rights referred to in the preceding paragraph when all Guarantied Obligations have not been paid in full, shall be held in trust for the Collateral Agent on behalf of the Noteholders and shall forthwith be paid over to the Collateral Agent for the benefit of the Noteholders to be credited and applied against the Guarantied Obligations. In order to provide for just and equitable contribution among the Guarantor and the other Subsidiary Guarantors party to the Agreement of Understanding (for purposes of this paragraph individually a "GUARANTOR" and collectively, the "GUARANTORS"), in connection with the execution of their respective Subsidiary Guaranties, the Guarantors have agreed among themselves that if any such Guarantor satisfies some or all of the Obligations (a "FUNDING GUARANTOR"), the Funding Guarantor shall be entitled to contribution from the other Guarantors that have positive Maximum Net Worth (as defined below) for all payments made by the Funding Guarantor in satisfying the Guarantied Obligations, so that each Guarantor that remains obligated under this Guaranty or any other guaranty for the Guarantied Obligations at the time that a Funding Guarantor makes such payment (a "REMAINING GUARANTOR") and has a positive Maximum Net Worth shall bear a portion of such payment equal to the percentage that such Remaining Guarantor's Maximum Net Worth bears to the aggregate Maximum Net Worth of all Remaining Guarantors that have positive Maximum Net Worth. As used herein, "NET WORTH" means, with respect to any Guarantor, the amount, as of the respective date of calculation, by which the sum of a Person's assets (including subrogation, indemnity, contribution, reimbursement and similar rights that such Guarantor may have), determined on the basis of a "fair valuation" or their "fair saleable value" (whichever is the applicable test under Section 548 and other relevant provisions of the Bankruptcy Code and the relevant state fraudulent conveyance or transfer laws), is greater than the amount that will be required to pay all of such 4 Execution version Person's debts, in each case matured or unmatured, contingent or otherwise, as of the date of calculation, but excluding liabilities arising under this Guaranty or any other guaranty for the Obligations and excluding, to the maximum extent permitted by applicable law with the objective of avoiding rendering such Person insolvent, liabilities subordinated to the Obligations arising out of loans or advances made to such Person by any other Person. "MAXIMUM NET WORTH" means, with respect to any Guarantor, the greatest of the Net Worths of such Guarantor calculated as of the following dates: (A) the date on which such Person becomes a Guarantor, and (B) the date on which such Guarantor expressly reaffirms this Guaranty or the other guaranty to which it is a party. The meaning of the terms "FAIR VALUATION" and "FAIR SALEABLE VALUE" and the calculation of assets and liabilities shall be determined and made in accordance with the relevant provisions of the Bankruptcy Code and applicable state fraudulent conveyance or transfer laws. The rights and obligations of each Guarantor established pursuant to this paragraph (and the related paragraphs of the other Subsidiary Guaranties) shall be subject to the limitations set forth in the next paragraph and the restrictions and limitations benefiting the Collateral Agent and the Noteholders set forth in the preceding two paragraphs. The Guarantor hereby represents and warrants that as of the date hereof, its net assets (after giving effect to the SSI Capital Decrease) (as determined by Article 617 of the Belgian Company Code and accounting principles generally accepted in Belgium) are not less than (euro)104,000,000. Based on the representation and warranty set forth in the preceding sentence, the Guarantied Obligations in respect of principal under this Guaranty shall be limited to the higher of (a) (euro)90,000,000 and (b) the Guarantor's net assets (as determined by Article 617 of the Belgian Company Code and accounting principles generally accepted in Belgium) as shown by its most recent financial statements from time to time. The Guarantor agrees to pay, or cause to be paid, on demand, and to save the Collateral Agent harmless against liability for, (i) any and all costs and expenses (including fees, costs of settlement and disbursements of counsel and allocated costs of internal counsel) incurred or expended by the Collateral Agent in connection with the enforcement of or preservation of any rights under this Guaranty and (ii) any and all costs and expenses (including those arising from rights of indemnification) required to be paid by Guarantor under the provisions of any other Credit Document to which it is party. Any monies paid by the Guarantor to the Principal Paying Agent or a Paying Agent for payment of Guarantied Obligations which remain unclaimed for two years after such monies have become due and payable will be repaid to the Guarantor and the beneficiaries of this Guaranty may thereafter look only to the Issuer and the other Credit Parties, as the case may be, for payment thereof. All of the provisions of this Guaranty shall be binding upon the Guarantor and its successors, permitted transferees and assigns and inure to the benefit of, and be enforceable by, the Collateral Agent and its successors, transferees and assigns and Requisite Noteholders as defined and provided in the Collateral Agency Agreement; it being understood that the rights and remedies under this Guaranty shall not be enforceable by an individual holder of a legal or 5 Execution version beneficial interest of a Note unless such holder is acting with the instructions or at the request of Requisite Noteholders. The Guarantor hereby further agrees that any amounts to be paid under this Guaranty shall be paid without deduction or withholding for or on account of any present or future taxes, assessments, duties or governmental charges of any nature whatsoever imposed, levied or collected by or in or on behalf of the United States or any other Governmental Authority or by or on behalf of any political subdivision or authority therein having power to tax, unless such deduction or withholding is required by law. In such event, the Guarantor shall pay such additional amounts of principal and interest and other amounts as may be necessary in order that the net amounts received by the Collateral Agent and the Noteholders, as the case may be, after such deduction or withholding shall not be less than the respective amounts of principal and interest and other amounts which would have been received had no such deduction or withholding been required. No such additional amounts shall, however, be payable with respect to: (a) any Note or Coupon presented for payment by, or on behalf of, a holder who is liable for such taxes or duties in respect of such Note or Coupon by reason of his having some connection with the Kingdom of Belgium or the United States, other than the mere holding of such Note or Coupon or the receipt of payments in respect thereto; or (b) any Note or Coupon presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on such thirtieth day; or (c) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge; or (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payment of principal or interest, if any, with respect to such Note or Coupon; or (e) any tax, duty, levy, assessment or other governmental charge that would not have been imposed but for the fact that such Noteholder or Couponholder presented (if presentation is required) such Note or Coupon for payment in the applicable taxing jurisdiction, unless such Note or Coupon could not have been presented for payment elsewhere; or (f) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the Noteholder or Couponholder or the beneficial owner of the Note or Coupon with a request of the Issuer or the Guarantor (a) to provide information concerning the nationality, residence or identity of the Noteholder or Couponholder or such beneficial owner or (b) to make any declaration or other similar claim or satisfy any information or reporting requirements, which, in the case of (a) or (b), is required or imposed by a statute, treaty, regulation or administrative practice of the applicable taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or other governmental charge; or (g) in relation to additional amounts in respect of taxes and duties imposed or levied by the Kingdom of Belgium only to any holder who is not the sole beneficial owner of such Note or 6 Execution version Coupon to the extent that a beneficial owner thereof, any Note or Coupon held by or on behalf of a holder who, at the time of issue of the Notes, was not an eligible investor within the meaning of Article 4 of the Royal Decree on 26 May, 1994 on the deduction of withholding tax or who was an eligible investor at the time of issue of the Notes but, for reasons within the holder's control, ceased to be an eligible investor or, at any relevant time on or after the issue of the Notes, otherwise failed to meet any other condition for the exemption of Belgian withholding tax pursuant to the law of 6 August, 1993 relating to certain securities; or (h) any combination of (a) to (g); nor in any case, with respect to the Issuer or the Guarantor shall additional amounts be paid to any holder who is not the sole beneficial owner of such Note or Coupon to the extent that a beneficial owner thereof would not have been entitled to the additional amounts had such beneficial owner been the holder of such Note or Coupon. As used herein, "Relevant Date" means whichever is the later of (i) the date on which such payment first becomes due and (ii) if the full amount of the moneys payable has not been made available to the Fiscal Agent on or prior to such date, the date on which, the full amount of such moneys having been made available, notice to that effect shall have been given to the Noteholders in accordance with the notice provisions described in the Terms and Conditions of the Notes. The obligation of the Guarantor to make payments of principal of, or interest on, or other amount due under this Guaranty shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the currency specified in the Notes except to the extent that such tender or recovery shall result in the effective receipt by the Collateral Agent or the relevant Noteholder of the full amount of the currency specified in the Notes, and accordingly the primary obligation of the Guarantor shall be enforceable as an alternative or additional cause of action for the purpose of recovery in the judgment currency of the amount (if any) by which such effective receipt shall fall short of the full amount of the currency specified in the Notes and shall not be affected by a judgment being obtained for any other sum due under this Guaranty. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTOR, THE COLLATERAL AGENT AND THE OTHER NOTEHOLDERS HEREIN SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The Guarantor hereby agrees, for the benefit of the Collateral Agent, and the holders of the Notes (i) to be bound by the covenants in Sections 7 and 8 of the Terms and Conditions of the Notes that are applicable to such Guarantor as a Subsidiary of the Issuer, and (ii) to take any and all actions (or omit to take any and all actions) in order to not cause a Default or an Event of Default by Guarantor under such covenants in the Terms and Conditions of the Notes. 7 Execution version The Guarantor hereby represents and warrants to the Collateral Agent that the statements set forth in Section IV to the Agreement of Understanding applicable to the Guarantor are true, correct and complete on and as of the date of this Subsidiary Guaranty. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any state or United States Federal court sitting in the Borough of Manhattan, New York City, State of New York and of any Belgian court sitting in Brussels over any suit, action or proceeding arising out of or relating to this Guaranty or any other Credit Document to which it is a party. The Guarantor irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. As long as any of the Guarantied Obligations remain outstanding, the Guarantor will at all times have an authorized agent for service of process in New York City and will not change its registered office in Belgium, upon whom process may be served in any suit, action or proceeding arising out of or relating to this Guaranty or any other Credit Document to which it is a party. Service of process upon such agent and written notice of such service mailed or delivered to the Guarantor shall to the extent permitted by law be deemed in every respect effective service of process upon the Guarantor in any such suit, action or proceeding. The Guarantor hereby appoints CT Corporation System, 111 Eighth Avenue, New York, New York 10011 as its agents for such purpose, and covenants and agrees that (i) service of process in any such suit, action or proceeding may be made upon it at the specified office of any such agent (or such other address or at the office of any other authorized agent which the Guarantor may designate by written notice to the Collateral Agent) and (ii) prior to any termination of any such agency for any reason, it will so appoint a successor thereto as agent hereunder. GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, COLLATERAL AGENT ON BEHALF OF ITSELF AND EACH NOTEHOLDER, EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, COLLATERAL AGENT ON BEHALF OF ITSELF AND EACH NOTEHOLDER, EACH (I) ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT GUARANTOR AND COLLATERAL AGENT HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS GUARANTY OR ACCEPTING THE BENEFITS THEREOF, AS THE CASE MAY BE, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS, AND (II) FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, 8 Execution version AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. If one or more provisions contained in this Subsidiary Guaranty shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, or enforceability of the remaining provisions shall not in any way be affected or impaired. This Guaranty may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall in any event be effective without the written concurrence of Collateral Agent and, in the case of any such amendment or modification, Guarantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. The Collateral Agent has been appointed to act as Collateral Agent pursuant to the Collateral Agency Agreement. The Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action, solely in accordance with this Guaranty and the Collateral Agency Agreement. Collateral Agent shall at all times be the same Person that is Collateral Agent under the Collateral Agency Agreement. Written notice of resignation by Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute notice of resignation as Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party; removal of Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute removal as Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party; and appointment of a successor Collateral Agent pursuant to Section 7 of the Collateral Agency Agreement shall also constitute appointment of a successor Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party. Upon the acceptance of any appointment as Collateral Agent under Section 7 of the Collateral Agency Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party, and the retiring or removed Collateral Agent under this Guaranty shall promptly (i) transfer to such successor Collateral Agent all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Guaranty and the other Credit Documents to which the Guarantor is party, and (ii) take such other actions as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the rights created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Guaranty and other Credit Documents to which the Guarantor is party. After any retiring or removed Collateral Agent's resignation or 9 Execution version removal hereunder as Collateral Agent, the provisions of this Guaranty and other Credit Documents to which the Guarantor is party shall inure to its benefit as to any actions taken or omitted to be taken by it under this Guaranty or the other Credit Documents to which the Guarantor is party while it was Collateral Agent hereunder. All notices and other communications under this Guaranty shall be in writing and shall be personally delivered or sent by prepaid courier, by overnight, registered or certified mail (postage prepaid), or by prepaid telex, telecopy or telegram, and shall be deemed given when received by the intended recipient thereof. Unless otherwise specified in a notice given in accordance with the foregoing provisions of this Section, all notices and other communications shall be given to the parties hereto at their respective addresses (or to their respective telex or telecopier numbers) indicated in the Agreement of Understanding. This Guaranty is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Guaranty. IN WITNESS WHEREOF, the Guarantor and the Collateral Agent has caused this Subsidiary Guaranty to be duly executed by its duly authorized officer. SOLUTIA SERVICES INTERNATIONAL SCA/COMM.VA By /s/ Kristel DeRoover ---------------------------------- Name: Kristel DeRoover ------------------------- Title: Ad Hoc Manager ------------------------ By /s/ Paul Plasschaert ----------------------------------- Name: Paul Plasschaert -------------------------- Title: Permanent representative of Solutia Europe NV/SA, manager of Solutia Services International SCA/Comm. VA ------------------------- KBC BANK NV By /s/ Dirk De Bleser ----------------------------------- Name: Dirk De Bleser -------------------------- Title: Head Operations & Accounting ------------------------- Dated: 17 February, 2004 10 EX-99.9 CUST CONTRCT 11 exh99p9.txt Exhibit 99.9 Execution copy COMMERCIAL RECEIVABLES PLEDGE AGREEMENT DATED 11 FEBRUARY 2004 BETWEEN SOLUTIA EUROPE SA/NV AS PLEDGOR AND KBC BANK NV AS PLEDGEE Execution copy TABLE OF CONTENTS 1. DEFINITIONS........................................................4 2. PLEDGE.............................................................5 3. RECEIVABLES........................................................5 4. COLLECTION OF RECEIVABLES AND NOTIFICATION.........................6 5. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS.......................8 6. CONTINUING SECURITY AND OTHER MATTERS.............................10 7. ENFORCEMENT.......................................................11 8. APPLICATION OF PROCEEDS...........................................11 9. DISCHARGE OF THE PLEDGE...........................................11 10. DUTIES OF THE PLEDGEE.............................................12 11. RESPONSIBILITY OF THE PLEDGEE.....................................12 12. EXPENSES..........................................................12 13. NOTICES...........................................................12 14. GENERAL...........................................................13 SIGNATORIES.............................................................15 2 Execution copy COMMERCIAL RECEIVABLES PLEDGE AGREEMENT BETWEEN: (1) SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the PLEDGOR); AND: (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises, under enterprise number 0462.920.226 and acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE). WHEREAS: (A) The Pledgor and the Noteholders have agreed to amend and restate the Pledgor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Pledgor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Pledgor will enter into the Fiscal Agency Agreement dated 11 February 2004 among the Pledgor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor grant a receivables pledge to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor towards each of the Noteholders under the Notes and the other Credit Documents to which the Pledgor is party, and that accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Notes and the other Credit Documents. (D) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the Receivables (as defined below) in favour of the Pledgee under the following terms (the AGREEMENT). 3 Execution copy THE PARTIES HAVE AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires: BANK ACCOUNTS means the bank and other accounts referred to in Clause 3.1 of this Agreement; COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated 11 February 2004 among the Pledgor, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time; FLOATING CHARGE AGREEMENT means the floating charge agreement (pand op handelszaak overeenkomst/contrat de gage sur fonds de commerce) dated on or about the date of this Agreement between the Pledgor and the Pledgee, as amended, modified or supplemented from time to time; GROUP means Solutia, Inc. and its Subsidiaries and Affiliates owned by Solutia, Inc. and its Subsidiaries; INSURANCE RECEIVABLES means the insurance receivables referred to in Clause 3.1 of this Agreement. INTRA-GROUP RECEIVABLES means the intra-group receivables referred to in Clause 3.1 of this Agreement and all sums owing to the Pledgor by other members of the Group referred to in Clause 3.1 of this Agreement; PLEDGE means the pledge of the Receivables created or arising pursuant to this Agreement; RECEIVABLES means the receivables referred to in Clause 3.1 of this Agreement and all sums owing to the Pledgor referred to in Clause 3.1 of this Agreement; SECURED OBLIGATIONS means all present and future, actual and contingent indebtedness, obligations, and liabilities of the Pledgor to the Pledgee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, or any other Credit Document to which the Pledgor is party; SUBSIDIARIES means an entity of which a Person has direct or indirect control or owns directly or indirectly more than 50% of the voting capital or similar right of ownership and CONTROL for this purpose means the power to direct the management and the policies of the entity whether through the ownership of voting capital, by contract or otherwise; TRADE RECEIVABLES means the trade receivables referred to in Clause 3.1(d) of this Agreement. Unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. In this Agreement, each reference to a document will be deemed to be a reference to such document as amended and/or supplemented by the parties to such document from time to time. 4 Execution copy 1.2 SUCCESSORS AND ASSIGNS The expressions PLEDGEE, NOTEHOLDERS and PLEDGOR include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be appointed Collateral Agent for the Noteholders and, in the case of the Noteholders, their respective transferees and assignees to whom any Note or any Secured Obligation shall have been transferred. 1.3 HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. PLEDGE The Pledgor hereby pledges, as a first ranking pledge (pand in eerste rang/gage en premier rang), the Receivables, owed to it to the Pledgee as security for the due performance of the Secured Obligations in accordance with the Law of 5 May 1872 on commercial pledges (the PLEDGE). 3. RECEIVABLES 3.1 SCOPE The Receivables are comprised of all claims (schuldvorderingen/creances), present or future, actual or contingent, owing to the Pledgor in connection with any of the following: (a) Intra-group receivables. All sums owing to the Pledgor by other members of the Group on any account and of any nature whatsoever. (b) Lawyers, bailiffs and claim collection agencies. All sums owing to the Pledgor from its lawyers, bailiffs or claim collection agencies in respect of any bad debt collection through such lawyers, bailiffs or claim collection agencies. (c) Loans and guarantees. All sums owing to the Pledgor from any Person, and in particular from any affiliated company or associated company, on account of loans, advances (whether in current account or not) or other financial credits made or granted by the Pledgor, or on account of any recourse (whether by way of subrogation or otherwise) against any Person by reason of a guarantee or security given by such Pledgor for such Person's liabilities. (d) Trade receivables. All sums owing to the Pledgor from its present or future customers in respect of goods and services supplied or to be supplied. (e) Bank accounts. The balance from time to time, and as the case may be, the final closing balance of the bank accounts listed in Schedule 1-B, and any other account (whether a current account or a deposit account, or any other type of account) held by the Pledgor in any currency with any Person in Belgium or abroad. (f) Insurance receivables. All sums owning to the Pledgor from any insurance company on account of any insurance policy (other than any life, health, group insurance or similar insurance policy), whether as insurance indemnities, refunds of premium or otherwise; provided that this Clause 3.1(f) shall not include any insurance receivable outstanding as of the date hereof the pledge of which would violate the insurance contract between Pledgor and the relevant insurance company. 5 Execution copy 3.2 INFORMATION (a) The Pledgor represents and warrants to the Pledgee that Schedule 1 to this Agreement, is, as of the date hereof, the accurate and complete list of all debtors and counter-parties against whom it has claims contemplated in Clause 3.1. (b) The Pledgor undertakes to promptly (but in any event within 10 Business Days) deliver to the Pledgee after the occurrence of an Event of Default (or at such other time as the Pledgee may request) an up-to-date, accurate and complete list of all debtors and counter-parties against whom it has claims contemplated in Clause 3.1. Such list shall include the name of the debtor or counter-party, its registered office or (if different) the address of its place of business with which the relevant claims are connected, and the nature of the claims concerned, and shall be delivered in a standard computer readable format. (c) The Pledgor shall from time to time promptly upon request (but in any event within 10 Business Days) provide the Pledgee with the following data in a standard computer readable format: (i) a copy of all relevant contractual documentation in respect of any Receivable, provided that, unless an Event of Default has occurred and is continuing, such documentation is not subject to a confidentiality undertaking to which the Pledgor is bound; (ii) all relevant details of the amounts currently owing under any Receivable, provided that, unless an Event of Default has occurred and is continuing, such information is not subject to a confidentiality undertaking to which the Pledgor is bound; (iii) the amounts collected under any Receivable over the last twelve months; and (iv) such other data and information in relation to the Receivables as from time to time may be requested by the Pledgee, provided that, unless an Event of Default has occurred and is continuing, such data and information are not subject to a confidentiality undertaking to which the Pledgor is bound. 4. COLLECTION OF RECEIVABLES AND NOTIFICATION 4.1 RECEIVABLES (a) As long as no Event of Default shall have occurred and is continuing, the Pledgor shall be free to collect all amounts due under the Receivables as it sees fit provided that the Pledgor shall not be entitled to collect any amount under any Insurance Receivable in excess of EUR 1,000,000. (b) The Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date hereof, the debtors and counterparties listed on Schedule 1-A against whom it currently holds Intra-Group Receivables of the fact that such Intra-Group Receivables owing or to be owed from them have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. With respect to each Intra-Group Receivable arising from debtors other than those listed in Schedule 1-A to this Agreement (as said Schedule 1-A may be supplemented from time to time pursuant to Clause 5.2 (e)) that the Pledgor acquires after the date hereof, the Pledgor shall notify, without delay and in any event no later than five (5) 6 Execution copy Business Days following the date of such acquisition, the debtors and counterparties against whom it holds such Intra-Group Receivables of the fact that such Intra-Group Receivables owing from them have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date of such acquisition. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. For the avoidance of doubt, the Pledgee shall not have any obligation to obtain the debtors' and counterparties' signed acknowledgements itself. (c) Upon the occurrence of an Event of Default that is continuing, the Pledgor shall immediately notify the debtors and counter parties against whom it holds Trade Receivables of the fact that the Trade Receivables owing from them have been pledged to the Pledgee pursuant to this Agreement, and that such Receivables may only be discharged by payment to the Pledgee. Such notification shall be substantially in the form of Schedule 3 to this Agreement. (d) As long as no Event of Default shall have occurred and is continuing, the Pledgor shall be free to operate the Bank Accounts and to collect any amounts due to it with respect to the Bank Accounts. The Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date hereof, the Persons listed on Schedule 1-B at which it currently maintains Bank Accounts of the fact that such Bank Accounts have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof which shall include a waiver of set-off or pledge and the benefit of any 'unicity of account' or similar provision, except with respect to the payment of its customary fees and commissions in connection with ordinary course banking services. Each such notification shall be substantially in the form of Schedule 4 to this Agreement. With respect to each Person other than as listed in Schedule 1-B (as said Schedule 1-B may be supplemented from time to time pursuant to Clause 5.2 (e)) at which the Pledgor maintains any other Bank Account after the date hereof, the Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date it opens such Bank Account, such Persons of the fact that such Bank Accounts have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date such Bank Accounts are opened which shall include a waiver of set-off or pledge and the benefit of any 'unicity of account' or similar provision, except with respect to the payment of its customary fees and commissions in connection with ordinary course banking services. Each such notification shall be substantially in the form of Schedule 4 to this Agreement. For the avoidance of doubt, the Pledgee shall not have any obligation to obtain the signed acknowledgement (including a waiver of set-off or pledge) and the benefit of any "unicity of account" or similar provision itself. (e) The Pledgor shall notify, without delay and in any event no later than ten (10) Business Days following the date hereof, the counterparties to the insurance contracts listed on Schedule 1-C of the fact that any Insurance Receivable owed or to be owed under such insurance contracts has been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such counterparties' signed acknowledgements thereto no later than twenty (20) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. With respect to any Insurance Receivables owed or to be owed under insurance contracts other than those listed in Schedule 1-C to this Agreement (as said Schedule 1-C may be supplemented from time to time pursuant to Clause 5.2 (e)) that the Pledgor enters into after the date hereof that are subject to Clause 3.1(f), the Pledgor shall notify, without delay and in any event no later than ten (10) Business Days following the date of such entering into such insurance contracts, the 7 Execution copy counterparties to such insurance contracts of the fact that such Insurance Receivables owing or to be owed from them have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such counterparties' signed acknowledgements thereto no later than twenty (20) Business Days following the date of such entering into such insurance contracts. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. For the avoidance of doubt, the Pledgee shall not have any obligation to obtain the counterparties' signed acknowledgements itself. (f) The Pledgor shall provide the Pledgee without delay with a copy of any notification given pursuant to this Clause 4.1, together with the adequate evidence of such notification having been sent and received. For the avoidance of doubt, the Pledgee shall not have any obligations to investigate or verify whether the Pledgor has complied with any of its notification obligations. (g) The Pledgee may give any notice required to be given pursuant to this Clause 4.1 if the Pledgor has not given such notice within five (5) or ten (10) Business Days as the case may be after the Pledgor is required or at any time following the occurrence and during the continuance of an Event of Default. For this purpose, the Pledgor will deliver to the Pledgee simultaneously with the execution of this Agreement, notifications in the form of Schedules 2, 3, 4 and 5 to this Agreement, duly printed on its letterhead and duly executed the Pledgor. Each notification made by the Pledgee in accordance with this Clause 4.1 may be accompanied by a photocopy of such notification. The Pledgee shall not be obligated to give any notice in accordance with this clause, except upon instructions of the Requisite Noteholders. 4.2 RESPONSIBILITY OF THE PLEDGEE The Pledgee shall have no responsibility in connection with the perfection measures contemplated in this Clause 4 except for its gross negligence (grove fout/faute grave) or wilful misconduct. 5. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 5.1 REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the other Credit Documents to which the Pledgor is party, the Pledgor represents and warrants to the Pledgee and undertakes during the subsistence of this Agreement as follows: (a) it is a corporation duly incorporated and validly existing under the laws of Belgium and is not in liquidation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder and that all corporate and other actions required to authorise the execution and performance of this Agreement have been duly taken; (b) it owns the Receivables free and clear of any Liens, except for Permitted Liens; (c) as of the date hereof, none of the Receivables is subject to any seizure or enforcement measure; (d) all Receivables are capable of being pledged hereunder without the consent of their respective debtors or counter-parties; (e) the Pledgor has satisfied itself that it is in its own interest to grant this Pledge for the due performance of the Secured Obligations; 8 Execution copy (f) this Agreement does not violate any law or regulation applicable to it as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it, that would prevent it from pledging the Receivables; (g) Schedule 1-A, as said Schedule 1-A may be supplemented from time to time pursuant to the provisions of Clause 5.2(e), contains a true, accurate and complete list of the names and addresses of all the debtors and counterparties against whom it currently holds Intra-Group Receivables and Trade Receivables; Schedule 1-B, as said Schedule 1-B may be supplemented from time to time pursuant to the provisions of Clause 5.2(e), contains a true, accurate and complete list of the names and addresses of all Persons at which the Pledgor currently maintains Bank Accounts; and all information provided pursuant to Clause 3.2 of this Agreement is or will be accurate and complete; (h) the Pledge creates a valid and first ranking pledge of the Receivables subject to no prior Lien created by Pledgor, except for the pledge on the business created pursuant to the Floating Charge Agreement and Permitted Liens imposed by mandatory operation of law; and (i) no floating charge (gage sur fonds de commerce/pand op handelszaak) or similar foreign law security exists on its business, nor any mandate with a view to the creation hereof, except for the floating charge created pursuant to Floating Charge Agreement. 5.2 UNDERTAKINGS (a) The Pledgor shall procure that no executory seizure (saisie execution/uitvoerend beslag) is made on the Receivables, and that any conservatory seizure (saisie conservatoire/bewarend beslag) thereon is lifted within 60 days of it first being made. (b) The Pledgor shall co-operate with the Pledgee and the Noteholders and sign or cause to be signed all such further documents and take all such further action as the Pledgee may from time to time reasonably request to perfect and protect the pledge of the Receivables, under Belgian law, and to carry out the provisions and purposes of this Agreement. The Pledgee shall not be obligated to request any action under this Clause (b) except upon written instructions from the Requisite Noteholders. (c) The Pledgor shall not (i) dispose of the Receivables, except for their collection in the ordinary course of business and for the purpose of enforcement in accordance with the provisions of this Agreement, (ii) create any other Lien in respect of the Receivables (irrespective of whether ranking behind the pledge created hereby), nor (iii) permit the existence or the subsistence of any such Lien, except Permitted Liens. (d) The Pledgor shall not take any steps, including without limitation to the exercise of any right it has under any agreement under which the Receivables arise, which may jeopardise or material adversely affect the security interest constituted in this Agreement. (e) Without delay and in any event no later than five (5) Business Days following the date of acquisition of an Intra-Group Receivable arising from a debtor or counterparty that is not listed on Schedule 1-A (as supplemented from time to time), the Pledgor shall deliver a written notice to the Pledgee, setting forth the name and address of such additional debtor or counterparty (it being understood that such written notice shall be deemed to supplement Schedule 1-A annexed hereto for all purposes of this Agreement); without delay and in any event no later than five (5) Business Days following the date that the Pledgor opens any Bank Account at a Person that is not listed on Schedule 1-B (as supplemented from time to time), the Pledgor shall deliver a written notice to the Pledgee, setting forth the name and address of such Person and the account number of such Bank Account (it being understood that such 9 Execution copy written notice shall be deemed to supplement Schedule 1-B annexed hereto for all purposes of this Agreement); and without delay and in any event no later than five (5) Business Days following the date that the Pledgor enters into an insurance contract with a Person that is not listed on Schedule 1-C (as supplemented from time to time) and that is subject to Clause 3.1(f), the Pledgor shall deliver a written notice to the Pledgee, setting forth the name and address of such Person and the contract number of such insurance contract (it being understood that such written notice shall be deemed to supplement Schedule 1-C annexed hereto for all purposes of this Agreement). 6. CONTINUING SECURITY AND OTHER MATTERS 6.1 CONTINUING SECURITY (a) This Pledge shall be a continuing security for the due performance of the Secured Obligations, and shall remain in force until expressly released in accordance with Clause 9 of this Agreement. (b) This pledge shall not be discharged by the entry of any Secured Obligations into any current account, in which case this Pledge shall secure any provisional or final balance of such current account up to the amount in which the Secured Obligations were entered therein. (c) This Pledge shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. (d) The Pledgee or, as the case may be, Requisite Noteholders may be, may at any time without discharging or in any way affecting this Pledge (a) grant the Pledgor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, and (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 6.2 RIGHTS ADDITIONAL All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 6.3 PRESERVATION OF SECURITY IN THE EVENT OF NOVATION In accordance with article 1278 of the Belgian Civil Code and without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of novation of all or any part of the Secured Obligations or the change or replacement of the Pledgee or the Pledgor, this Pledge will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as novated and in favour of the Pledgee or a new pledgee. 10 Execution copy 7. ENFORCEMENT 7.1 Following the occurrence of an Event of Default that is continuing, the Pledgee shall in particular have the right, subject to the Collateral Agency Agreement and the Terms and Conditions of Notes, to: (i) enforce the Pledge in respect of any or all of the Receivables, in accordance with applicable legal provisions; and (ii) apply any payments which may be received or receivable by the Pledgee in respect of the Receivables to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (iii) exercise all rights and remedies it possesses, and to act generally in relation to the Receivables in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 7.2 The Pledgee shall give the Pledgor not less than five (5) Business Days notice prior to the time that it first initiates legal action to enforce its remedies under this Agreement; provided that the Pledgee shall not be required to give notice pursuant to this sentence on more than one occasion subject to mandatory law requirements. 7.3 The Pledgee shall have no responsibility in connection with the enforcement measures of the Pledge under this Agreement, except in case of its gross negligence (grove fout/faute grave) or wilful misconduct. 8. APPLICATION OF PROCEEDS 8.1 All monies received by the Pledgee after the Pledge has become enforceable shall be applied towards satisfaction of the Secured Obligations, including any costs and expenses of the Pledgee in accordance with Clause 4.1 of the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 8.2 Should the proceeds of the enforcement of the Pledge be greater than the outstanding amount of the Secured Obligations, the Pledgee shall pay to the Pledgor any such excess. 9. DISCHARGE OF THE PLEDGE 9.1 This Pledge shall be discharged by, and only by, the express release thereof granted by the Pledgee. 9.2 The Pledgee shall in accordance with the Collateral Agency Agreement, grant an express release of this Pledge without delay upon demand of the Pledgor, as soon as all Secured Obligations shall have been fully and finally discharged. 9.3 Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or 11 Execution copy (c) proves not to have been effectively received by the Pledgee; and the Pledgee shall be entitled to enforce the pledge as if such release or discharge had not occurred. 10. DUTIES OF THE PLEDGEE The Pledgee shall not be liable for any acts or omissions with respect to the Receivables pledged hereunder or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Receivables against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 11. RESPONSIBILITY OF THE PLEDGEE The Pledgee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in this Agreement; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with this Agreement; or (iii) the legality, validity, effectiveness, adequacy or enforceability of this Agreement. 12. EXPENSES All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realisation upon, any of the Receivables, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by them, and the same shall be part of the Secured Obligations. 13. NOTICES 13.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter. 13.2 ADDRESSES The address(es) and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with its name below or any 12 Execution copy other substitute address(es), fax number or department or officer as any party may notify to the other parties by not less than five Business Days' notice. THE PLEDGOR: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Fax: +32 10 48 12 24 Attention: Legal Department THE PLEDGEE: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Fax: +32 2 429 4920 Attention: Mr. Dirk De Bleser 13.3 DELIVERY Any communication or document made or delivered by one Person to another under or in connection with this Agreement will only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address(es) with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 13.2 (Addresses), if addressed to that department or officer. 13.4 ENGLISH LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice given under or in connection with this Agreement must be in English. 14. GENERAL 14.1 NO WAIVER No failure or delay by the Pledgee in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Agreement are cumulative and are not exclusive of any remedies provided by law. 13 Execution copy 14.2 SEVERABILITY Each of the provisions of this Agreement is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Agreement and which in its economic effect comes as close as practicable to the provision being replaced. 14.3 DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. 14.4 BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor and the Pledgee and their respective successors and assigns. 14.5 ASSIGNMENT The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 14.6 EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 14.7 GOVERNING LAW This Agreement shall be governed by and interpreted in accordance with Belgian law. 14.8 JURISDICTION All disputes arising in connection with this Agreement shall be settled by the courts of Brussels, without prejudice to the rights of the Pledgee to take legal action before any other court of competent jurisdiction. 14 Execution copy SIGNATORIES Made in 3 originals, of which one will be held by the Pledgor, one will be held by counsel to the ad hoc committee of Noteholders and one will be held by the Pledgee, on 11 February 2004. SOLUTIA EUROPE SA/NV AS PLEDGOR /s/ Kristel DeRoover - -------------------- Name: Kristel DeRoover Title: Attorney KBC BANK NV AS PLEDGEE /s/ Dirk De Bleser - -------------------- Name: Dirk De Bleser Title: Head Operations & Accounting 15 EX-99.10 12B1 PLAN 12 exh99p10.txt Exhibit 99.10 Execution copy INSTRUCTIONS TO THE NOTARY MORTGAGE AGREEMENT (HYPOTHEEK OVEREENKOMST) DATED 11 FEBRUARY 2004 BETWEEN SOLUTIA EUROPE SA/NV AS MORTGAGOR AND KBC BANK NV AS MORTGAGEE [NOTE: FOR TRANSLATION PURPOSES ONLY - DEFINITIVE MORTGAGE AGREEMENT TO BE IN DUTCH] Execution copy TABLE OF CONTENTS 1. Definitions...................................................4 2. Mortgage......................................................4 3. Representations, warranties and undertakings..................6 4. Continuing security and other matters.........................7 5. Enforcement...................................................8 6. Application of proceeds.......................................8 7. Indemnity.....................................................8 8. Discharge of the mortgage.....................................9 9. Liability of Mortgagee........................................9 10. Expenses......................................................9 11. Responsibility of the Mortgagee..............................10 12. Notices......................................................10 13. General......................................................11 2 Execution copy MORTGAGE AGREEMENT BETWEEN: (1) SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the MORTGAGOR); AND: (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises, under enterprise number 0462.920.226 and acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the MORTGAGEE). WHEREAS: (A) The Mortgagor and the Noteholders have agreed to amend and restate the Mortgagor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,00 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Mortgagor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Mortgagor will enter into the Fiscal Agency Agreement dated 11 February 2004 among the Mortgagor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Mortgagor grant this Mortgage (as defined hereunder) to the Mortgagee to secure its obligations to the Mortgagee as provided herein and undertake the obligations contemplated by this Mortgage Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Mortgagee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Mortgagor towards each of the Noteholders under the Notes and the Other Credit Documents to which the Mortgagor is party, and accordingly the Mortgagee will have its own independent right to demand performance by the Mortgagor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Mortgagee with regard to the sums owed under the Notes and the other Credit Documents. (D) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Mortgagor agrees to grant this Mortgage (as defined hereunder) to the Mortgagee under the following terms (the MORTGAGE AGREEMENT). 3 Execution copy IT HAS BEEN AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 DEFINITIONS In this Mortgage Agreement, unless the context otherwise requires: COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated 11 February 2004 among the Mortgagor, the Subsidiary Guarantors, the Mortgagee and the Noteholders party thereto, as amended, modified or supplemented from time to time; MORTGAGE means the mortgage (hypotheek) of the Property created or arising pursuant to this Mortgage Agreement; MORTGAGE MANDATE means the mortgage mandate (hypothecaire volmacht) dated on or about the date of this Mortgage Agreement granted by the Mortgagor to the Mortgagee, as amended, modified or supplemented from time to time; PROPERTY means the property described in Clause 2 of this Mortgage Agreement; SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Mortgagor to the Mortgagee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, or any other Credit Document to which the Mortgagor is party. Unless defined in this Mortgage Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Mortgage Agreement. In this Mortgage Agreement, each reference to a document will be deemed to be a reference to such document as amended and/or supplemented by the parties to such document from time to time. 1.2 SUCCESSORS AND ASSIGNS The expressions MORTGAGEE, NOTEHOLDERS and MORTGAGOR include their respective successors, and, in the case of the Mortgagee, its nominee or such other Person as may from time to time be appointed Collateral Agent for the Noteholders and, in the case of the Noteholders, their respective transferees and assignees to whom any Note or any Secured Obligation shall have been transferred. 1.3 HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Mortgage Agreement. 2. MORTGAGE 2.1 ENCUMBERED IMMOVABLE PROPERTY The Mortgagor hereby irrevocable grants to the Mortgagee, acting in its capacity of joint creditor, a mortgage (hypotheek/hypotheque) (in each case, a MORTGAGE, and collectively, the MORTGAGES), as security for the Secured Obligations, on all existing immovable property and rights described hereafter that are owned by the Mortgagor as described hereafter and as will be further specified in the mortgage deed (the PROPERTY). 4 Execution copy o Ghent site: ----------- - an industrial complex situated at Ottergemsesteenweg, 707; - a long term lease on a parking lot situated at Ottergemsesteenweg; o Louvain-la-Neuve site: --------------------- - buildings located at Laid Burniatstraat, 3, located on the industrial site named "FLEMING"; and - a long term lease on a parcel of land located at the above mentioned industrial site. The Mortgage shall not include a mortgage of the Mortgagee's immovable property and rights in Ghent to the extent that such Mortgage would violate the express and enforceable provisions of the Master Operating Agreement effective as of 1 September 1997 between Monsanto Company and the Parent including its appendixes between Monsanto Europe SA and the beneficiary thereunder, binding on the Mortgagee under applicable law. The Mortgage also includes all actual and future accessories regarded as immovable, and all actual and future improvements, including, amongst others, all erected or to be erected buildings. 2.2 AMOUNT This Mortgage is granted up to the following amounts: (i) in respect of principal EUR 40,000,000 (ii) three years of interest calculated at the rate of 18%, or such other rate as may be agreed between the parties, in accordance with article 87 of the Mortgage Law pro memorie/memoire (iii) for accessories such as retaining fees, reinvestment and broken funding, costs for subrogation and inscription, expenses and fees concerning collection of debt, costs and fees concerning the perfection, foreclosure, release and preservation of the security, estimate and file costs as well as all amounts exceeding the above mentioned principal, because of accounting matured interests, retaining fees or unpaid negotiable instruments. EUR 4,000,000 This Mortgage Agreement and the Mortgages which may result therefrom are joined to and shall not impair the other personal or collateral security the Mortgagee now has or in the future will have as security for the Secured Obligations. The Mortgagee is entitled to release, reduce, amend or enforce other security created or permitted pursuant to the Terms and Conditions of Notes without notice to the Mortgagor in its capacity as mortgagor and this will not reduce the obligations of the Mortgagor in any way. 2.3 RANKING Without prejudice to the security interests created or permitted pursuant to the Terms and Conditions of Notes and without limitations to the exceptions provided therein, the Mortgagor confirms that the Property to be encumbered by the mortgages granted pursuant to this Mortgage Agreement are and will remain free and clear of any Liens, including any seizure, inscription, contractual liens 5 Execution copy (voorrechten), transcriptions (kantmeldingen), with the exception of Permitted Liens and all existing rights of way, easements and the like granted to companies formerly affiliated with the Mortgagor in relation to the property in Ghent. 3. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 3.1 REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Mortgagor under the other Credit Documents to which the Mortgagor is party, the Mortgagor represents and warrants to the Mortgagee and undertakes during the subsistence of this Mortgage Agreement as follows: (a) it is a naamloze vennootschap/societe anonyme duly established under the laws of Belgium, validly existing and not in liquidation, with power to enter into this Mortgage Agreement and to exercise its rights and perform its obligations hereunder and all corporate and other action required to authorise its execution and performance of this Mortgage Agreement has been duly taken; (b) it owns the Property free and clear of any Liens save for Permitted Liens; (c) as of the date hereof, neither the Property nor any part thereof is subject to any seizure or other enforcement measure for more than an aggregate amount of EUR 100,000; (d) it maintains adequate insurance cover against risks normally insured against by companies carrying on a similar business, and in particular maintains all insurance required by statute; (e) this Mortgage Agreement does not violate any material contractual or other obligation binding upon the Mortgagor; and (f) this Mortgage Agreement and the deed of this Mortgage Agreement creates a valid first ranking contractual mortgage. 3.2 UNDERTAKINGS The Mortgagor undertakes as follows: (a) except as permitted under the Terms and Conditions of Notes and as long as all Secured Obligations have not been unconditionally and irrevocably discharged, it (i) shall not dispose in any way of the Property other than in accordance with the provisions of this Agreement, (ii) save for any Lien created pursuant to the Mortgage Mandate, shall not create any other Lien (or mandate anyone to do so) in respect of the Property and shall, save for Permitted Liens, not permit the existence of any such Lien, and (iii) in general shall not take any action that could intentionally negatively influence the value of the Mortgage; (b) it shall procure that no executory seizure (saisie executoire/uitvoerend beslag) is made on the Property or any part thereof and that any conservatory seizure (saisie conservatoire/bewarend beslag) thereon is lifted within 60 days of its first being made; and (c) it shall co-operate with the Mortgagee and sign or cause to be signed all such further documents and take all such further action as the Mortgagee may from time to time reasonably request to perfect and protect the Mortgage and to carry out the provisions and purposes of this Mortgage Agreement. The Mortgagee shall not be obligated to request any action under this Clause (c) except upon written instructions from the Requisite Noteholders. 6 Execution copy 4. CONTINUING SECURITY AND OTHER MATTERS 4.1 CONTINUING SECURITY The security created by this Mortgage Agreement: (a) shall be a continuing security for the Secured Obligations; (b) shall be in addition to and shall not prejudice or affect, and may be enforced by the Mortgagee without prior recourse to, any other security interest or remedy; (c) shall not be satisfied by any intermediate payment or satisfaction of any part of the Secured Obligations or by any settlement of accounts; (d) shall not be discharged by the entry of any Secured Obligations into any current account, in which case this pledge shall secure any provisional or final balance of such current account up to the amount in which the Secured Obligations were entered therein; (e) shall not in any way be prejudiced or affected by any time or waiver granted to, or composition with, the Mortgagor or any other Person, by any amendment (however fundamental) or supplement to the Terms and Conditions of Notes or any other document, by the taking, variation, compromise, exchange, renewal or release of or refusal or neglect to perfect or enforce any right, remedy or security over the Property or by anything done or omitted which but for this provision might operate to exonerate the Mortgagor; (f) shall not in any way be prejudiced or affected by any change in the constitution or status of the Mortgagor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Mortgagor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Mortgagor or any other Person; and (g) the Mortgagee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Mortgage (a) grant the Mortgagor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, and (f) apply any payment received from the Mortgagor or for its account towards the Secured Obligations or any other obligations of the Mortgagor at the Mortgagee's choice. 4.2 RIGHTS ADDITIONAL All the rights of the Mortgagee hereunder shall be in addition to any other right vested in the Mortgagee and all such rights may be exercised from time to time and as often as the Mortgagee may deem expedient. The Mortgagor waives any right it may have of first requiring the Mortgagee (or any agent on its behalf) to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Mortgage. 4.3 NO SUBROGATION Until all Secured Obligations have been unconditionally and irrevocably discharged, the Mortgagor shall not by virtue of any payment made, security realised or monies received hereunder for or on the account of the liability of any other party: 7 Execution copy (a) be subrogated to any rights, security or monies held, received or receivable by the Mortgagee or be entitled to any right of contribution or indemnity; or (b) claim, rank, prove or vote as a creditor of any party or its estate in competition with the Mortgagee; or (c) receive, claim or have the benefit of all payment, distribution or security from or on account of any party, or exercise any right of set-off as against such other party, other than as expressly permitted by the Terms and Conditions of Notes. 4.4 PRESERVATION OF SECURITY IN THE EVENT OF NOVATION In accordance with article 1278 of the Belgian Civil Code and without prejudice to the scope of the Secured Obligations, the Mortgagor and the Mortgagee agree that in the event of novation of all or any part of the Secured Obligations or the change or replacement of the Mortgagee or the Mortgagor, this Mortgage will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as novated and in favour of the Mortgagee or the new mortgagees. 4.5 SETTLEMENTS CONDITIONAL Any release, discharge or settlement between the Mortgagor and the Mortgagee shall be conditional upon no security disposition or payment to the Mortgagee being void or set aside or ordered to be refunded and if such condition shall not be fulfilled, the Mortgagee shall be entitled to enforce the security created by this Mortgage Agreement as if such release, settlement or discharge had not occurred and any such payment had not been made. 5. ENFORCEMENT (a) Following the occurrence of an Event of Default that is continuing, the Mortgagee shall be entitled to enforce the security created by this Mortgage Agreement, and to exercise all rights and remedies, to the fullest extent permitted by law and the Collateral Agency Agreement. (b) All enforcement costs will be considered as accessories to the main obligation and will be borne by the Mortgagor. 6. APPLICATION OF PROCEEDS (a) Subject to the rights of any creditor with prior security or preferential claims, the proceeds of the enforcement of the security created by this Agreement shall be applied towards satisfaction of the Secured Obligations in accordance with the Collateral Agency Agreement. (b) Should the proceeds of the enforcement of the Mortgage be greater than the outstanding amount of the Secured Obligations, the Mortgagee shall pay to the Mortgagor any such excess. 7. INDEMNITY The Mortgagor shall fully indemnify and pay on demand to the Mortgagee in respect of all liabilities and justified costs and expenses reasonably incurred by the Mortgagee or any attorney, manager, agent or other Person appointed by the Mortgagee, in the execution of any rights, powers or discretions vested in it pursuant hereto, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Mortgagee. 8 Execution copy 8. DISCHARGE OF THE MORTGAGE (a) This Mortgage shall be discharged by, and only by, the express release thereof granted by the Mortgagee. (b) Without delay when all Secured Obligations have been unconditionally and irrevocably discharged, the Mortgagee shall grant in accordance with the Collateral Agency Agreement, an express release of this Mortgage in such form as will permit de-registration thereof. (c) Any release or discharge of the Mortgage shall be null and void and without effect if any payment received by the Mortgagee and applied towards satisfaction of all or part of the Secured Obligations (i) is avoided or declared invalid as against the creditors of the maker of such payment; or (ii) becomes repayable by the Mortgagee to a third party; or (iii) proves not to have been effectively received by the Mortgagee; and the Mortgagee shall be entitled to enforce the Mortgage as if such release or discharge had not occurred. 9. LIABILITY OF MORTGAGEE (a) The Mortgagee shall not be liable for any acts or omissions with respect to the Property mortgaged hereunder or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Mortgagee. (b) The Mortgagee shall not be under any obligation to the Mortgagor to take any steps necessary to preserve any rights in the Property against any other parties but may do so at its option, and all reasonable expenses incurred in connection therewith shall be for the account of the Mortgagor and shall be part of the Secured Obligations. (c) If any such expenses are borne by the Mortgagee, the Mortgagor shall on first demand reimburse the Mortgagee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 10. EXPENSES All expenses that the Mortgagee may incur in connection with (i) the administration of this Mortgage Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realisation upon, any of the Property, (iii) the exercise or enforcement of any of the rights of the Mortgagee hereunder, or (iv) the failure by the Mortgagor to perform or observe any of the provisions hereof, shall be borne by the Mortgagor. All other expenses and duties reasonably incurred in connection with this Mortgage Agreement, in particular with regard to the establishment and perfection of the Mortgage, its enforcement and the granting of any release, shall be borne by the Mortgagor. The Mortgagor shall on first demand reimburse the Mortgagee for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. 9 Execution copy 11. RESPONSIBILITY OF THE MORTGAGEE The Mortgagee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in this Mortgage Agreement; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with this Mortgage Agreement; or (iii) the legality, validity, effectiveness, adequacy or enforceability of this Mortgage Agreement. 12. NOTICES 12.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Mortgage Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter. 12.2 ADDRESSES The address(es) and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Mortgage Agreement is that identified with its name below or any other substitute address, fax number or department or officer as any party may notify to the other parties by not less than five Business Days' notice. THE MORTGAGOR: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Attention: Legal Department Fax: +32 10 48 12 24 THE MORTGAGEE: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Attention: Mr. Dirk De Bleser Fax: +32 2 429 4920 12.3 DELIVERY Any communication or document made or delivered by one Person to another under or in connection with this Mortgage Agreement will only be effective: 10 Execution copy (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 12.2 (Addresses), if addressed to that department or officer. 12.4 ENGLISH LANGUAGE Without prejudice to any other procedural rule applicable to any dispute, any notice given under or in connection with this Mortgage Agreement must be in English. 13. GENERAL 13.1 ELECTION OF DOMICILE For the purpose of the inscription of this Mortgage at the mortgage registry and for no other purposes, the Mortgagee hereby elects domicile in the judicial district of [TO BE COMPLETED] at [TO BE COMPLETED]. 13.2 NO WAIVER No failure or delay by the Mortgagee in exercising any right, power or remedy under this Mortgage Agreement shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Mortgage Agreement are cumulative and are not exclusive of any remedies provided by law. 13.3 SEVERABILITY (a) Each of the provisions of this Mortgage Agreement is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. (b) In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Mortgage Agreement and which in its economic effect comes as close as practicable to the provision being replaced. 13.4 DELEGATION OF POWERS The Mortgagee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Mortgage Agreement in such manner, upon such terms and to such Person as the Mortgagee in its absolute discretion may think fit. 13.5 BENEFIT OF THIS MORTGAGE AGREEMENT This Mortgage Agreement shall be binding on, and inure for the benefit of, the Mortgagor and the Mortgagee and their respective successors and assigns. 11 Execution copy 13.6 ASSIGNMENT The Mortgagor may not assign or transfer any of its rights or obligations under this Mortgage Agreement, save prior agreement in writing of the Mortgagee. 13.7 EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE MORTGAGOR A certificate by the Mortgagee as to the amount and the terms and conditions of the Secured Obligations owing to the Mortgagee from the Mortgagor is, prima facie evidence of the matters to which it relates. 13.8 FURTHER ACTION The parties undertake to execute a notarial deed substantially in the form of this Mortgage Agreement before notary Marcelis on 13 February 2004 at the latest. 13.9 GOVERNING LAW This Mortgage Agreement shall be governed by and interpreted in accordance with Belgian law. 13.10 JURISDICTION All disputes arising in connection with this Mortgage Agreement shall be settled by the courts of Brussels, without prejudice to the rights of the Mortgagee to take legal action before any other court of competent jurisdiction. 13.11 FINAL PROVISIONS The usual provisions in respect of a declaration relating to VAT shall apply. 12 Execution copy Made in 3 originals, of which one will be held by the Mortgagor, one will be held by the Mortgagee and one will be held by counsel to the ad hoc committee of Noteholders, on 11 February 2004. SOLUTIA EUROPE SA/NV AS MORTGAGOR /s/ Kristel DeRoover - ---------------------- Name: Kristel DeRoover Title: Attorney KBC BANK NV AS MORTGAGEE /s/ Dirk De Bleser - ---------------------- Name: Dirk De Bleser Title: Head Operations & Accounting 13 EX-99.11 OPIN COUNSL 13 exh99p11.txt Exhibit 99.11 Execution copy INSTRUCTIONS TO THE NOTARY MORTGAGE MANDATE HYPOTHECAIR MANDAAT DATED 11 FEBRUARY 2004 GRANTED BY SOLUTIA EUROPE SA/NV [NOTE: FOR TRANSLATION PURPOSES ONLY - DEFINITIVE MORTGAGE MANDATE TO BE IN DUTCH] 1 Execution copy TABLE OF CONTENTS 1. Definitions......................................................4 2. Appointments.....................................................5 3. Representations, warranties and undertakings.....................7 4. Continuing security and other matters............................8 5. Enforcement......................................................9 6. Application of proceeds..........................................9 7. Indemnity.......................................................10 8. Discharge of the pledge.........................................10 9. Liability of Attorneys and Beneficiaries........................10 10. Responsibility of the Beneficiary...............................10 11. Expenses........................................................11 12. Notices.........................................................11 13. General.........................................................12 2 Execution copy MORTGAGE MANDATE BY: (1) SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the GRANTOR); TO: (2) KBC LEASE NV, with registered office at Kosterstraat 209, B-1831 Diegem, Belgium; (3) CARINE BODDAERT, residing at Europalaan 122, B-3600 Genk, Belgium; (4) DIRK DE BLESER, residing at Oude Tramweg 18, B-3540 Herk-De-Stad, Belgium; (5) ANDRE FOSTIE, residing at Marktweg 67, B-9500 Geraardsbergen, Belgium; (6) EDWIN HUYGHE, residing at Mechelsesteenweg 194, B-3020 Herent, Belgium; (7) ISABELLE VEN, residing at Hendrik Meyslaan 21, B-2100 Deurne, Belgium; (8) VEERLE VERCAIGNE, residing at Kruisboommolenstraat 29, B-8800 Roeselare, Belgium; and (9) DIRK WITTERS, residing at Lindenlaan 207, B-9120 Beveren, Belgium, (the ATTORNEYS); FOR THE PURPOSE OF GRANTING MORTGAGE(S) TO: (10) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises, under enterprise number 0462.920.226 and acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the BENEFICIARY). WHEREAS: (A) The Grantor and the Noteholders have agreed to amend and restate the Grantor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Grantor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Grantor will enter into the Fiscal Agency Agreement dated 11 February 2004 among the Grantor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The 3 Execution copy Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Grantor grant this mortgage mandate to the Attorneys to secure its obligations to the Beneficiary as provided herein and undertake the obligations contemplated by this Mandate. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Beneficiary shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Grantor towards each of the Noteholders under the Notes and the other Credit Documents to which the Grantor is party, and accordingly the Beneficiary will have its own independent right to demand performance by the Grantor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Beneficiary with regard to the sums owed under the Notes and the other Credit Documents. (D) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Grantor agrees to grant this mortgage mandate to the Attorneys under the following terms (the MANDATE). IT HAS BEEN AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires: COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated 11 February 2004 among the Grantor, the Subsidiary Guarantors, the Beneficiary and the Noteholders party thereto, as amended, modified or supplemented from time to time; MORTGAGE AGREEMENT means the mortgage agreement (hypotheek overeenkomst) dated on or about the date of this Agreement between the Grantor and the Beneficiary, as amended, modified or supplemented from time to time; PROPERTY means the property described in Clause 3 of this Agreement; SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Grantor to the Collateral Agent which may arise under, out of, or in connection with the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, or any other Credit Document to which the Grantor is party. Unless defined in this Mandate, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Mandate. In this Mandate, each reference to a document will be deemed to be a reference to such document as amended and/or supplemented by the parties to such document from time to time. 1.2 SUCCESSORS AND ASSIGNS The expressions BENEFICIARY, ATTORNEYS, NOTEHOLDERS and GRANTOR include their respective successors, and, in the case of the Beneficiary, its nominee or such other Person as may from time to time be appointed Collateral Agent for the Noteholders and, in the case of the Noteholders, their 4 Execution copy respective transferees and assignees to whom any Note or any Secured Obligation shall have been transferred. 1.3 HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. APPOINTMENTS 2.1 SECURITY The Grantor hereby irrevocably appoints each Attorney to be its agent with the power to grant on its behalf one or more mortgages (hypotheken/hypotheques) as security for all Secured Obligations, on all existing immovable property and rights, that are owned by the Grantor as described hereafter and as will be further specified in the mortgage deed (the PROPERTY): o Ghent site: ---------- - an industrial complex situated at Ottergemsesteenweg, 707; - a long term lease on a parking lot situated at Ottergemsesteenweg; o Louvain-la-Neuve site: --------------------- - buildings located at Laid Burniatstraat, 3, located on the industrial site named "FLEMING"; - a long term lease on a parcel of land located at above mentioned industrial site; o Antwerp site: ------------ - a building located at Scheldelaan 460 (the ANTWERP PROPERTY), provided that this Mandate shall only become effective for the Antwerp Property after the Gemeentelijk Havenbedrijf Antwerp has given its express consent to this Mandate and the Mortgages resulting from the exercise of this Mandate in relation to the Antwerp Property. This Mandate and the Mortgage created pursuant to this Mandate and in accordance with Clause 13.8(b) of this Mandate shall not include a mortgage of the Grantor's immovable property and rights in Ghent and Antwerp to the extent that such Mandate or Mortgage would violate the express and enforceable provisions of the Master Operating Agreement effective as of 1 September 1997 between Monsanto Company and the Parent including its appendixes between Monsanto Europe SA and the beneficiary thereunder, binding on the Grantor under applicable law. The mortgages to be granted pursuant to this Mandate also include all present and future accessories regarded as immovable, and all present and future improvements, including, amongst others, all erected or to be erected buildings. 2.2 AMOUNT The mortgages (hypotheken/hypotheques) may be granted up to the following maximum aggregate amounts: (i) in respect of principal EUR 20,000,000 5 Execution copy (ii) three years of interest calculated at the rate of 18%, or such other rate as may be agreed between the parties, in accordance with article 87 of the Mortgage Law pro memorie/memoire (iii) for accessories such as retaining fees, reinvestment and broken funding, costs for subrogation and inscription, expenses and fees concerning collection of debt, costs and fees concerning the perfection, foreclosure, release and preservation of the security, estimate and file costs as well as all amounts exceeding the above mentioned principal, because of accounting matured interests, retaining fees or unpaid negotiable instruments. EUR 2,000,000 This Mandate and the mortgages which may result therefrom are joined to and shall not impair the other personal or collateral security the Beneficiary now has or will have in the future as security for the Secured Obligations. The Beneficiary is entitled to release, reduce, amend or enforce other security granted or permitted pursuant to the Terms and Conditions of Notes in accordance with the terms and conditions of the agreements relating thereto, without notice to Grantor in its capacity as grantor of the Mandate hereunder and this will not reduce the obligations of Grantor in any way. 2.3 RANKING Without prejudice to the security interests created or permitted pursuant to the Terms and Conditions of Notes and without limitations to the exceptions provided therein, the Grantor confirms that the Property to be encumbered by the mortgages granted pursuant to this Mandate are and will remain free and clear of any Liens, including any seizure, inscription, contractual liens (voorrechten), transcriptions (kantmeldingen), with the exception of Permitted Liens and all existing rights of way, easements and the like granted to companies formerly affiliated with the Grantor. 2.4 BENEFICIARIES The mortgages resulting from the exercise of this Mandate from time to time, are to be granted and inscribed in favour of the Beneficiary. 2.5 IRREVOCABLE MANDATE This Mandate is granted in the interest of the Beneficiary in its capacity of joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement, and may not be revoked or terminated other than in accordance with Clause 4. In particular, this Mandate shall not lapse by reason of the dissolution, transformation, merger, absorption, split-up or contribution of a branch of activity or a universality of the Grantor, nor by reason of the death, dissolution, transformation, merger, absorption, split-up or contribution of a branch of activity or a universality of one or more Attorneys. 2.6 POWERS Each Attorney has the power to act alone and to appoint substitute attorneys, who will be regarded as an Attorney for all purposes hereof. Each Attorney has the power to do whatever is necessary in connection herewith. 2.7 ACCEPTANCE Dirk De Bleser, by the execution of this Mandate, agrees to the terms hereof in his own name and for the account of all other Attorneys whose consents he shall procure (zich sterk maakt/se porte fort). 6 Execution copy 3. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 3.1 REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Grantor under the other Credit Documents to which the Grantor is party, the Grantor represents and warrants to the Beneficiary and undertakes during the subsistence of this Mandate as follows: (a) it is a naamloze vennootschap/societe anonyme duly established under the laws of Belgium, validly existing and not in liquidation, with power to enter into this Mandate and to exercise its rights and perform its obligations hereunder and all corporate and other action required to authorise its execution and performance of this Mandate has been duly taken; (b) it owns the Property free and clear of any Liens save for Permitted Liens; (c) as of the date hereof, neither the Property nor any part thereof is subject to any seizure or other enforcement measure for more than an aggregate amount of EUR 100,000; (d) it maintains adequate insurance cover against risks normally insured against by companies carrying on a similar business, and in particular maintains all insurance required by statute; (e) this Mandate does not violate any material contractual or other obligation binding upon the Grantor; and (f) this Mandate creates a valid agreement binding on the Grantor. 3.2 UNDERTAKINGS The Grantor undertakes as follows: (a) as long as all Secured Obligations have not been unconditionally and irrevocably discharged, it (i) except as permitted under the Credit Documents shall not dispose in any way of the Property other than in accordance with the provisions of this Agreement, (ii) save for the Liens created pursuant to the Mortgage Agreement and this Mandate, shall not create any other Lien (or mandate anyone to do so) in respect of the Property and shall, save for Permitted Liens, not permit the existence of any such Lien, and (iii) in general shall not take any action that could intentionally negatively influence the value of the Mortgages resulting from this Mandate; (b) it shall procure that no executory seizure (saisie executoire/uitvoerend beslag) is made on the Property or any part thereof and that any conservatory seizure (saisie conservatoire/bewarend beslag) thereon is lifted within 60 days of its first being made; and (c) it shall co-operate with the Beneficiary and sign or cause to be signed all such further documents and take all such further action as the Beneficiary may from time to time reasonably request to perfect and protect the mortgage of the Property and to carry out the provisions and purposes of this Mandate. The Beneficiary shall not be obligated to request any action under this Clause (c) except upon written instructions from the Requisite Noteholders. 7 Execution copy 4. CONTINUING SECURITY AND OTHER MATTERS 4.1 CONTINUING SECURITY The mortgage created pursuant to this Mandate: (a) shall be a continuing security for the Secured Obligations; (b) shall be in addition to and shall not prejudice or affect, and may be enforced by the Beneficiary without prior recourse to, any other security interest or remedy; (c) shall not be satisfied by any intermediate payment or satisfaction of any part of the Secured Obligations or by any settlement of accounts; (d) shall not be discharged by the entry of any Secured Obligations into any current account, in which case the mortgage created pursuant to this Mandate shall secure any provisional or final balance of such current account up to the amount in which the Secured Obligations were entered therein; (e) shall not in any way be prejudiced or affected by any time or waiver granted to, or composition with, the Grantor or any other Person, by any amendment (however fundamental) or supplement to the Terms and Conditions of Notes or any other document, by the taking, variation, compromise, exchange, renewal or release of or refusal or neglect to perfect or enforce any right, remedy or security over the Property or by anything done or omitted which but for this provision might operate to exonerate the Grantor; (f) shall not in any way be prejudiced or affected by any change in the constitution or status of the Grantor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Grantor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Grantor or any other Person; and (g) the Beneficiary or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting the mortgage (a) grant the Grantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse and (f) apply any payment received from the Grantor or for its account towards the Secured Obligations or any other obligations of the Grantor at the Beneficiary's choice. 4.2 RIGHTS ADDITIONAL All the rights of the Beneficiary pursuant to this Mandate shall be in addition to any other right vested in the Beneficiary and all such rights may be exercised from time to time and as often as the Beneficiary may deem expedient. The Grantor waives any right it may have of first requiring the Beneficiary (or any agent on its behalf) to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the mortgage on the Property arising from this Mandate. 8 Execution copy 4.3 NO SUBROGATION Until all Secured Obligations have been unconditionally and irrevocably discharged, the Grantor shall not by virtue of any payment made, security realised or monies received pursuant to this Mandate for or on the account of the liability of any other party: (a) be subrogated to any rights, security or monies held, received or receivable by the Beneficiary or be entitled to any right of contribution or indemnity; or (b) claim, rank, prove or vote as a creditor of any party or its estate in competition with the Beneficiary; or (c) receive, claim or have the benefit of all payment, distribution or security from or on account of any party, or exercise any right of set-off as against such other party, other than as expressly permitted by the Terms and Conditions of Notes. 4.4 PRESERVATION OF SECURITY IN THE EVENT OF NOVATION In accordance with article 1278 of the Belgian Civil Code and without prejudice to the scope of the Secured Obligations, the Grantor and the Beneficiary agree that in the event of novation of all or any part of the Secured Obligations or the change or replacement of the Beneficiary or Grantor, this Mandate and the mortgages created pursuant to this Mandate will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as novated and in favour of the Beneficiary or the new beneficiaries. 4.5 SETTLEMENTS CONDITIONAL Any release, discharge or settlement between the Grantor and the Beneficiary shall be conditional upon no security disposition or payment to the Beneficiary being void or set aside or ordered to be refunded and if such condition shall not be fulfilled, the Beneficiary shall be entitled to enforce the security created by this Mandate as if such release, settlement or discharge had not occurred and any such payment had not been made. 5. ENFORCEMENT (a) Following the occurrence of an Event of Default that is continuing, the Beneficiary shall be entitled to enforce the security created by this Mandate, and to exercise all rights and remedies, to the fullest extent permitted by law and the Collateral Agency Agreement. (b) All enforcement costs will be considered as accessories to the main obligation and will be borne by the Grantor. 6. APPLICATION OF PROCEEDS (a) Subject to the rights of any creditor with prior security or preferential claims, the proceeds of the enforcement of the security created by this Mandate shall be applied towards satisfaction of the Secured Obligations in accordance with the Collateral Agency Agreement. (b) Should the proceeds of the enforcement of the mortgage inscribed pursuant to this Mandate be greater than the outstanding amount of the Secured Obligations, the Beneficiary shall pay to the Grantor any such excess. 9 Execution copy 7. INDEMNITY The Grantor shall fully indemnify each Attorney and the organisation to which it belongs against all liabilities and justified costs and expenses reasonably incurred by the Attorney, in the execution of any rights, powers or discretions vested in it pursuant hereto, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Attorney. 8. DISCHARGE OF THE PLEDGE (a) This Mandate and the mortgages inscribed pursuant to this Mandate shall be discharged by, and only by, the express release thereof granted by the Beneficiary. (b) Without delay when all Secured Obligations have been unconditionally and irrevocably discharged, the Beneficiary shall grant in accordance with the Collateral Agency Agreement, an express release of this Mandate and the mortgages inscribed pursuant to this Mandate in such form as will permit de-registration thereof. (c) Any release or discharge of the Mandate and the mortgages inscribed pursuant to this Mandate shall be null and void and without effect if any payment received by the Beneficiary and applied towards satisfaction of all or part of the Secured Obligations (i) is avoided or declared invalid as against the creditors of the maker of such payment; or (ii) becomes repayable by the Beneficiary to a third party; or (iii) proves not to have been effectively received by the Beneficiary; and the Beneficiary shall be entitled to enforce this Mandate and the mortgages inscribed pursuant to this Mandate as if such release or discharge had not occurred. 9. LIABILITY OF ATTORNEYS AND BENEFICIARIES The Beneficiary, Attorneys and the organisations to which they belong shall not be liable for any acts or omissions with respect to this Mandate or the enforcement or the losses arising in connection with the exercise of any of its rights and powers hereunder, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Beneficiary or the Attorney involved. 10. RESPONSIBILITY OF THE BENEFICIARY The Beneficiary shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in this Mandate; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with this Mandate; or (iii) the legality, validity, effectiveness, adequacy or enforceability of this Mandate. 10 Execution copy 11. EXPENSES All expenses that the Beneficiary may incur in connection with (i) the administration of this Mandate as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realisation upon, any of the Property, (iii) the exercise or enforcement of any of the rights of the Beneficiary hereunder, or (iv) the failure by the Grantor to perform or observe any of the provisions hereof, shall be borne by the Grantor. All other expenses and duties reasonably incurred in connection with this Mandate, in particular with regard to the establishment and perfection of the mortgage of the Property inscribed pursuant to the execution of this Mandate, its enforcement and the granting of any release, shall be borne by the Grantor. The Grantor shall on first demand reimburse the Beneficiary for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. 12. NOTICES 12.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Mandate shall be made in writing and, unless otherwise stated, may be made by fax or letter. 12.2 ADDRESSES The address(es) and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Mandate is that identified with its name below or any other substitute address, fax number or department or officer as any party may notify to the other parties by not less than five Business Days' notice. THE GRANTOR: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Attention: Legal Department Fax: +32 10 48 12 24 THE BENEFICIARY: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Attention: Mr. Dirk De Bleser Fax: +32 2 429 4920 All communications to be made under or in connection with this Mandate to an Attorney must be made to the Beneficiary. 11 Execution copy 12.3 DELIVERY Any communication or document made or delivered by one Person to another under or in connection with this Mandate will only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 12.2 (Addresses), if addressed to that department or officer. 12.4 ENGLISH LANGUAGE Without prejudice to any other procedural rule applicable to any dispute, any notice given under or in connection with this Mandate must be in English. 13. GENERAL 13.1 ELECTION OF DOMICILE For the purpose of the registration of the mortgages of the Property pursuant to this Mandate at the Mortgage Registry and for no other purposes, the Beneficiary hereby elects domicile in the judicial district of [TO BE COMPLETED] at [TO BE COMPLETED]. 13.2 NO WAIVER No failure or delay by an Attorney in exercising any right, power or remedy under this Mandate shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Mandate are cumulative and are not exclusive of any remedies provided by law. 13.3 SEVERABILITY (a) Each of the provisions of this Mandate is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. (b) In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Mandate and which in its economic effect comes as close as practicable to the provision being replaced. 13.4 DELEGATION OF POWERS Notwithstanding Clause 2.6, the Beneficiary shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Mandate in such manner, upon such terms and to such Person as the Beneficiary in its absolute discretion may think fit. 12 Execution copy 13.5 BENEFIT OF THIS MANDATE This Mandate shall be binding on, and inure for the benefit of, the Grantor and the Beneficiary and their respective successors and assigns. 13.6 ASSIGNMENT The Grantor may not assign or transfer any of its rights or obligations under this Mandate, save prior agreement in writing of the Beneficiary. 13.7 EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE GRANTOR A certificate by the Beneficiary as to the amount and the terms and conditions of the Secured Obligations owing to the Beneficiary from the Grantor is, prima facie evidence of the matters to which it relates. 13.8 FURTHER ACTION (a) The parties undertake to execute a notarial deed substantially in the form of this Mandate (but excluding the Antwerp Property from the description of the Property) before notary Marcelis on 13 February 2004 at the latest. For the avoidance of doubt, this notarial deed shall also include all specific provisions as required under the framework agreement between the Beneficiary and Gemeentelijk Havenbedrijf Antwerp. (b) The Grantor will use its best efforts to obtain the consent of the Gemeentelijk Havenbedrijf Antwerp to this Mandate and to the granting of a mortgage in relation to the Antwerp Property on 1 May 2004 at the latest. The Grantor and the Beneficiary shall take the necessary steps to grant and register a mortgage on the Antwerp Property for an amount of EUR 40,000,000 in principal and EUR 4,000,000 in accessories within 10 Business Days after having obtained such consent. 13.9 GOVERNING LAW This Mandate shall be governed by and interpreted in accordance with Belgian law. 13.10 JURISDICTION All disputes arising in connection with this Mandate shall be settled by the courts of Brussels, without prejudice to the rights of the Beneficiary to take legal action before any other court of competent jurisdiction. 13.11 FINAL PROVISIONS The usual provisions in respect of a declaration relating to VAT shall apply. 13 Execution copy Made in 3 originals, of which one will be held by the Grantor, one will be held by the Beneficiary and one will be held by counsel to the ad hoc committee of Noteholders, on 11 February 2004. SOLUTIA EUROPE SA/NV AS GRANTOR /s/ Kristel DeRoover - -------------------- Name: Kristel DeRoover Title: Attorney KBC BANK NV AS BENEFICIARY /s/ Dirk De Bleser - ------------------- Name: Dirk De Bleser Title: Attorney DIRK DE BLESER AS ATTORNEY - ------------------- 14 EX-99.12 TAX OPINION 14 exh99p12.txt Exhibit 99.12 Execution copy INSTRUCTIONS TO THE NOTARY FLOATING CHARGE AGREEMENT DATED 11 FEBRUARY 2004 BETWEEN SOLUTIA EUROPE SA/NV AS PLEDGOR AND KBC BANK NV AS PLEDGEE [NOTE: FOR TRANSLATION PURPOSES ONLY - DEFINITIVE FLOATING CHARGE AGREEMENT TO BE IN DUTCH] 1 Execution copy TABLE OF CONTENTS 1. Definitions........................................................4 2. Pledge.............................................................4 3. The Business.......................................................5 4. Representations, warranties and undertakings.......................6 5. Continuing security and other matters..............................7 6. Enforcement........................................................9 7. Application of proceeds............................................9 8. Indemnity..........................................................9 9. Discharge of the pledge............................................9 10. Liability of Pledgee..............................................10 11. Responsibility of the Pledgee.....................................10 12. Expenses..........................................................10 13. Notices...........................................................11 14. General...........................................................12 2 Execution copy FLOATING CHARGE AGREEMENT BETWEEN: (1) SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the PLEDGOR); AND: (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises, under enterprise number 0462.920.226 and acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE). WHEREAS: (A) The Pledgor and the Noteholders have agreed to amend and restate the Pledgor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Pledgor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Pledgor will enter into the Fiscal Agency Agreement dated 11 February 2004 among the Pledgor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor grant a floating charge to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor towards each of the Noteholders under the Notes and the other Credit Documents to which the Pledgor is party, and accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Notes and the other Credit Documents. (D) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the Business (as defined below) in favour of the Pledgee under the following terms (the AGREEMENT). 3 Execution copy IT HAS BEEN AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires: BUSINESS means the business described in Clause 3 of this Agreement; COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated 11 February 2004 among the Pledgor, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from to time to time; PLEDGE means the pledge of the Business created or arising pursuant to this Agreement; RECEIVABLES PLEDGE AGREEMENT means the receivables pledge agreement dated the date hereof between the Pledgor and the Pledgee, as amended, modified or supplemented from time to time; SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Pledgor to the Pledgee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, or any other Credit Document to which the Pledgor is party. Unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. In this Agreement, each reference to a document will be deemed to be a reference to such document as amended and/or supplemented by the parties to such document from time to time. 1.2 SUCCESSORS AND ASSIGNS The expressions PLEDGEE, NOTEHOLDERS and PLEDGOR include their respective successors, and, in the case of the Pledgee, its nominee or such other person as may from time to time be appointed Collateral Agent for the Noteholders and, in the case of the Noteholders, their respective transferees and assignees to whom any Note or any Secured Obligations shall have been transferred. 1.3 HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. PLEDGE (a) The Pledgor hereby pledges its Business (fonds de commerce/handelszaak) to the Pledgee in first rank, as security for the Secured Obligations in accordance with the law of 25 October 1919. (b) This pledge is granted up to the following amounts: (i) in respect of principal EUR 200,000,000 4 Execution copy (ii) three years of interest calculated at the rate of 18%, or such other rate as may be agreed between the parties, in accordance with article 87 of the Mortgage Law pro memorie/memoire (iii) for accessories such as retaining fees, reinvestment and broken funding, costs for subrogation and inscription, expenses and fees concerning collection of debt, costs and fees concerning the perfection, foreclosure, release and preservation of the security, estimate and file costs as well as all amounts exceeding the above mentioned principal, because of accounting matured interests, retaining fees or unpaid negotiable instruments. EUR 20,000,000 With a view to the limitation of inscription costs, the Pledgee may apply in certain judicial districts for this Pledge to be recorded in lower amounts. The Pledgee shall have no obligation whatsoever to do so, and in so doing shall not be prevented from subsequently applying in such districts for the Pledge to be recorded in its full amount. In the event that Pledgor operates its Business in any judicial district in Belgium other than the four judicial districts in which the Pledge will be recorded on or about the date hereof (any such district, an ADDITIONAL JUDICIAL DISTRICT), the Pledgor shall, as required by Article 4.2 (c), notify the Pledgee in writing and this Pledge shall be recorded in such Additional Judicial District as set out in Article 3, second paragraph below, and the Pledgor shall pay all inscription and other costs and expenses in connection therewith as required by Article 12. On the date of this Agreement, the parties have agreed to register this Pledge in the following judicial districts for the following amounts: - - Nivelles: EUR 200,000,000; in principal and EUR 20,000,000 in accessories; - - Bruxelles: EUR 25,000 in principal and accessories; - - Ghent: EUR 200,000,000 in principal and EUR 20,000,000 in accessories; and - - Antwerp: EUR 100,000,000; in principal and EUR 10,000,000 in accessories. The pledge made in this Clause 2 and Clause 3 shall not include a pledge of Pledgor's rights under the Master Operating Agreement effective as of 1 September 1997 between Monsanto Company and the Parent including its appendixes between Monsanto Europe SA and the Pledgor relating to Pledgor's use thereunder of facilities located in Antwerp and Ghent to the extent that such pledge would violate the express and enforceable provisions of such Master Operating Agreement binding on the Pledgor under applicable law. 3. THE BUSINESS The Business being pledged hereunder is the business which consists of (i) all acts, whether alone or with the participation of third parties, in connection with the production, exploitation, distribution, creation of profitability in and the sale of chemical, plastic products, synthetic fibres and of similar products, (ii) the building of, the fabrication, the sale and purchase and the exploitation of appliances, machines and installations that serve the fabrication and utilisation of these products (described in (i) above), (iii) the improvement, the exploitation by way of licenses, the study, the investigation, the acquisition, the improvement of all patents, inventions and fabrication procedures in relation to these products (described in (i) above), and of any other activities that the Pledgor may from time to time carry out, operated by the Pledgor at Brussels, Gent, Antwerp, Louvain-la-Neuve, and/or at any other 5 Execution copy place where the Pledgor may now or in the future operate such business, registered at the Crossroads Bank for Enterprises with the enterprise number 0440.474.440. The parties declare that they regard such Business, irrespective of the number of places in which it may now or in the future be operated, as constituting one single handelszaak/fonds de commerce. The Pledgee shall nevertheless be authorised, for the sake of certainty, to proceed with the registration of this Pledge in the judicial districts as referred to in Clause 4.1 (f) and in all judicial districts where it is or will be operated, and such multiple registrations shall not affect the nature of the Business as a single handelszaak/fonds de commerce. The Business is comprised of all constitutive parts thereof, including without limitation (i) the administrative licences and authorisations connected with the operation of the Business; (ii) goodwill, the commercial names and signs, the commercial organisation; (iii) trade and service marks, patents and all other intellectual property rights; (iv) know-how whether the subject of exclusive rights or not; (v) all rights under leases, licences and other contracts; (vi) all on-going contracts (including insurance contracts); (vii) all records, materials, machines, equipment, computers and vehicles; (viii) all items of stock (subject as the case may be to limitations provided by law), in each case whether located on the premises of the Pledgor or in the hands of third parties; (ix) all shareholdings and participations; (x) all cash, receivables, negotiable instruments and securities; (xi) all assets on accounts with financial institutions; (xii) all items of movable property deemed immovable by destination; (xiii) all additions, replacements and improvements; and (xiv) all such items as may lawfully form part of a handelszaak/fonds de commerce for the purposes of the law of 25 October 1919 as amended from time to time. For the avoidance of doubt, the receivables including but not limited to the trade receivables, that are subject to the Receivables Pledge Agreement are also included in the Business being pledged hereunder. For the avoidance of doubt, the Pledgee recognises that the machinery and equipment situated on the Ghent site as listed in Annex 4 (as said Annex may be supplemented, amended or updated from time to time to include only machinery and equipment owned by Monsanto), are owned by Monsanto SA and consequently are not part of the Business. 4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 4.1 REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the other Credit Documents to which the Pledgor is party, the Pledgor represents and warrants to the Pledgee and undertakes during the subsistence of this Agreement as follows: (a) it is a naamloze vennootschap/societe anonyme duly established under the laws of Belgium, validly existing and not in liquidation, with power to enter into this Agreement and to exercise its rights and perform its obligations hereunder and all corporate and other action required to authorise its execution and performance of this Agreement has been duly taken; (b) it does not conduct any business, has no place of business and is not registered in any register of commerce, in Belgium or abroad, other than as specifically mentioned in Clause 3 above and as listed in Annex 1; (c) it owns the Business free and clear of any Liens save for Permitted Liens and except for the lien granted to the City of Ghent pursuant to article 20 of the Belgian Mortgage Law under the long term lease agreement (erfpacht) between the City of Ghent and NV Monsanto Europe, to the extent valid and enforceable; 6 Execution copy (d) as of the date hereof, neither the Business nor any part thereof is subject to any seizure or other enforcement measure for more than an aggregate amount of EUR 100,000; (e) it maintains adequate insurance cover against risks normally insured against by companies carrying on a similar business, and in particular maintains all insurance required by statute; (f) the properties as described in Annex 2, in which part of the Business is operated are owned by the Pledgor free and clear of any Liens save for Permitted Liens; the properties as described in Annex 3, in which part of the Business is operated, and any other properties in which part of the Business is currently operated, are held on lease (or as otherwise specified in Annex 3) by the Pledgor; (g) this Agreement does not violate any material contractual or other obligation binding upon the Pledgor; and (h) this Agreement creates a valid first ranking pledge of the Business. 4.2 UNDERTAKINGS The Pledgor undertakes as follows: (a) except as permitted under the Credit Documents and as long as all Secured Obligations have not been unconditionally and irrevocably discharged, it (i) shall not dispose in any way of the Business, (ii) save for the Lien pursuant to the Floating Charge Mandate, shall not create any other Lien (or mandate anyone to do so) in respect of the Business and shall, save for Permitted Liens, not permit the existence of any such Lien, and (iii) in general shall not take any action that could intentionally negatively influence the value of the Pledge; (b) it shall procure that no executory seizure (saisie executoire/ uitvoerend beslag) is made on the Business or any part thereof and that any conservatory seizure (saisie conservatoire/bewarend beslag) thereon is lifted within 60 days of its first being made; (c) it shall notify the Pledgee in advance of any transfer, opening or closure of any place in which it operates its Business. For the avoidance of doubt the Pledgor is entitled to put consigned stock and certain equipment at a customer in the ordinary course of business without having to notify the Pledgee thereof, prior to the occurrence and continuance of an Event of Default; (d) it shall procure that it is and remains at all times duly registered in the appropriate register of commerce in Belgium or abroad for each of the places in which it operates its Business from time to time, and shall forthwith upon making any new registration supply the Pledgee with evidence of such registration, to the extent that this evidence is available; and (e) it shall co-operate with the Pledgee and sign or cause to be signed all such further documents and take all such further action as the Pledgee may from time to time reasonably request to perfect and protect the Pledge under Belgian law and to carry out the provisions and purposes of this Agreement. The Pledgee shall not be obligated to request any action under this Clause (e) except upon written instructions from the Requisite Noteholders. 5. CONTINUING SECURITY AND OTHER MATTERS 5.1 CONTINUING SECURITY The security created by this Agreement: 7 Execution copy (a) shall be a continuing security for the Secured Obligations; (b) shall be in addition to and shall not prejudice or affect, and may be enforced by the Pledgee and the Noteholders without prior recourse to, any other security interest or remedy; (c) shall not be satisfied by any intermediate payment or satisfaction of any part of the Secured Obligations or by any settlement of accounts; (d) shall not be discharged by the entry of any Secured Obligations into any current account, in which case this Pledge shall secure any provisional or final balance of such current account up to the amount in which the Secured Obligations were entered therein; (e) shall not in any way be prejudiced or affected by any time or waiver granted to, or composition with, the Pledgor or any other Person, by any amendment (however fundamental) or supplement to any Credit Document or any other document, by the taking, variation, compromise, exchange, renewal or release of or refusal or neglect to perfect or enforce any right, remedy or security over the Business or by anything done or omitted which but for this provision might operate to exonerate the Pledgor; (f) shall not in any way be prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person; and (g) the Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Pledge (a) grant the Pledgor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, and (f) apply any payment received from the Pledgor or for its account towards Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 5.2 RIGHTS ADDITIONAL All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee (or any agent on its behalf) to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 5.3 NO SUBROGATION Until all Secured Obligations have been unconditionally and irrevocably discharged, the Pledgor shall not by virtue of any payment made, security realised or monies received hereunder for or on the account of the liability of any other party: (a) be subrogated to any rights, security or monies held, received or receivable by the Pledgee or be entitled to any right of contribution or indemnity; or (b) claim, rank, prove or vote as a creditor of any party or its estate in competition with the Pledgee; or 8 Execution copy (c) receive, claim or have the benefit of all payment, distribution or security from or on account of any party, or exercise any right of set-off as against such other party, other than as expressly permitted by the Credit Documents. 5.4 PRESERVATION OF SECURITY IN THE EVENT OF NOVATION In accordance with article 1278 of the Belgian Civil Code and without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of novation of all or any part of the Secured Obligations or the change or replacement of the Pledgee or the Pledgor, this Pledge will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as novated and in favour of the Pledgee or the new pledgees. 5.5 SETTLEMENTS CONDITIONAL Any release, discharge or settlement between the Pledgor and the Pledgee shall be conditional upon no security disposition or payment to the Pledgee being void or set aside or ordered to be refunded and if such condition shall not be fulfilled, the Pledgee shall be entitled to enforce the security created by this Agreement as if such release, settlement or discharge had not occurred and any such payment had not been made. 6. ENFORCEMENT (a) Following the occurrence of an Event of Default that is continuing, the Pledgee shall be entitled to enforce the security created by this Agreement, and to exercise all rights and remedies, to the fullest extent permitted by law and the Collateral Agency Agreement and the Terms and Conditions of Notes. (b) All enforcement costs will be considered as accessories to the main obligation and will be borne by the Pledgor. 7. APPLICATION OF PROCEEDS (a) Subject to the rights of any creditor with prior security or preferential claims, the proceeds of the enforcement of the security created by this Agreement shall be paid to the Pledgee. Any such proceeds and all other amounts paid to the Pledgee under this Agreement shall be applied in accordance with the Collateral Agency Agreement. (b) Should the proceeds of the enforcement of the Pledge be greater than the outstanding amount of the Secured Obligations, the Pledgee shall pay to the Pledgor any such excess. 8. INDEMNITY The Pledgor shall fully indemnify and pay on demand to the Pledgee in respect of all liabilities and justified costs and expenses reasonably incurred by the Pledgee or any attorney, manager, agent or other Person appointed by the Pledgee, in the execution of any rights, powers or discretions vested in it pursuant hereto, save for liabilities and expenses arising from the gross negligence (faute grave/ grove fout) or wilful misconduct of the Pledgee. 9. DISCHARGE OF THE PLEDGE (a) This Pledge shall be discharged by, and only by, the express release thereof granted by the Pledgee. 9 Execution copy (b) Without delay when all Secured Obligations have been unconditionally and irrevocably discharged, the Pledgee shall grant, in accordance with the Collateral Agency Agreement, an express release of this Pledge in such form as will permit de-registration thereof at the Pledgor's expense. (c) Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (i) is avoided or declared invalid as against the creditors of the maker of such payment; or (ii) becomes repayable by the Pledgee to a third party; or (iii) proves not to have been effectively received by the Pledgee; and the Pledgee shall be entitled to enforce the pledge as if such release or discharge had not occurred. 10. LIABILITY OF PLEDGEE (a) The Pledgee shall not be liable for any acts or omissions with respect to the Business pledged hereunder or the enforcement or the losses arising in connection with the exercise of any of its rights and powers hereunder, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Pledgee. (b) The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Business against any other parties but may do so at its option, and all reasonable expenses incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. (c) If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 11. RESPONSIBILITY OF THE PLEDGEE The Pledgee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in this Agreement; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with this Agreement; or (iii) the legality, validity, effectiveness, adequacy or enforceability of this Agreement. 12. EXPENSES All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realisation upon, any of the Business, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably 10 Execution copy incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by them, and the same shall be part of the Secured Obligations. 13. NOTICES 13.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter. 13.2 ADDRESSES The address(es) and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with its name below or any other substitute address(es), fax number or department or officer as any party may notify to the other parties by not less than five Business Days' notice. THE PLEDGOR: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Fax: +32 10 48 12 24 Attention: Legal Department THE PLEDGEE: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Fax: +32 2 429 4920 Attention: Mr. Dirk De Bleser 13.3 DELIVERY Any communication or document made or delivered by one Person to another under or in connection with this Agreement will only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address(es) with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 13.2 (Addresses), if addressed to that department or officer. 11 Execution copy 13.4 ENGLISH LANGUAGE Without prejudice to any other procedural rule applicable to any dispute, any notice given under or in connection with this Agreement must be in English. 14. GENERAL 14.1 ELECTION OF DOMICILE For the purpose of the inscription of this Pledge at the mortgage registry and for no other purposes, the Pledgee hereby elects domicile in the judicial district of [TO BE COMPLETED FOR EVERY JUDICIAL DISTRICT] at [TO BE COMPLETED]. 14.2 NO WAIVER No failure or delay by the Pledgee in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Agreement are cumulative and are not exclusive of any remedies provided by law. 14.3 SEVERABILITY (a) Each of the provisions of this Agreement is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. (b) In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Agreement and which in its economic effect comes as close as practicable to the provision being replaced. 14.4 DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such person as the Pledgee in its absolute discretion may think fit. 14.5 BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor and the Pledgee and their respective successors and assigns. 14.6 ASSIGNMENT The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 14.7 EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 12 Execution copy 14.8 FURTHER ACTION The parties undertake to execute a notarial deed substantially in the form of this Agreement before notary Marcelis on 13 February 2004 at the latest. 14.9 GOVERNING LAW This Agreement shall be governed by and interpreted in accordance with Belgian law. 14.10 JURISDICTION All disputes arising in connection with this Agreement shall be settled by the courts of Brussels, without prejudice to the rights of the Pledgee to take legal action before any other court of competent jurisdiction. 14.11 FINAL PROVISIONS The usual provisions in respect of a declaration relating to VAT shall apply. 13 Execution copy Made in 3 originals, of which one will be held by the Pledgor, one will be held by the Pledgee and one will be held by counsel to the ad hoc committee of Noteholders, on 11 February 2004. SOLUTIA EUROPE SA/NV AS PLEDGOR /s/ Kristel DeRoover - -------------------------- Name: Kristel DeRoover Title: Attorney KBC BANK NV AS PLEDGEE /s/ Dirk De Bleser - -------------------------- Name: Dirk De Bleser Title: Head Operations & Accounting 14 EX-99.13 OTH CONTRCT 15 exh99p13.txt Exhibit 99.13 Execution version SHARE PLEDGE AGREEMENT between SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, 1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the PLEDGOR) and KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises under enterprise number 0462.92.0.226, acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE) Execution version - 2 - - ---------------------------------------------------------------------------- WHEREAS (A) The Pledgor and the Noteholders have agreed to amend and restate the Pledgor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Pledgor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Pledgor will enter into a Fiscal Agency Agreement dated on or about the date of this Agreement among the Pledgor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor pledge its shares in the Company (as defined below) to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor towards each of the Noteholders under the Notes and the other Credit Documents to which the Pledgor is party, and accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Notes and the other Credit Documents. (D) The Pledgor is the legal and beneficial owner of the entire share capital of Amcis AG (AMCIS or COMPANY), a stock corporation (Aktiengesellschaft) organised under the laws of Switzerland, having its corporate seat at Hauptstrasse 159, CH-4416 Bubendorf, Switzerland, which is registered in the Commercial Register (Handelsregister) of the Canton of Basel-Landschaft, under registration number Execution version - 3 - - ---------------------------------------------------------------------------- CH-280.3.916.120-1. The entire share capital of the Company consists of 100 registered shares with a nominal value of CHF 500.00 each (the EXISTING SHARES and together with any shares of the Company owned by the Pledgor in the future, the SHARES). (E) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the pledged assets described herein in favor of the Pledgee under the following terms (the AGREEMENT). NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Parties hereto agree as follows: 1. INTERPRETATION In this Agreement the following terms have the following meanings: AGREEMENT has the meaning given to it in the Preamble. CHF means the lawful currency of Switzerland. COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated on or about the date of this Agreement among the Pledgor, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time. PLEDGE means the pledge of the Shares created or arising pursuant to this Agreement. SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations and liabilities of the Pledgor to the Pledgee which may arise under, out of, or in connection with, the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, any other Credit Document to which the Pledgor is party. SHARE CERTIFICATES means the share certificates evidencing the Shares as set out in the Schedule 1 to this Agreement. Execution version - 4 - - ---------------------------------------------------------------------------- Unless otherwise defined herein, defined terms shall bear the same meanings ascribed to them in the Terms and Conditions of Notes, and if not defined therein, the meaning ascribed to them under Swiss law. Where the context so admits, the singular includes the plural and vice versa. The headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. Any reference in this Agreement to a defined document is a reference to that defined document as amended, supplemented, substituted or novated from time to time, in accordance with its terms. 2. PLEDGE 2.1. As security for the Secured Obligations, the Pledgor hereby pledges, as a first ranking pledge, in accordance with article 899 et seq. of the Swiss Civil Code and the provisions set out below to the Pledgee, acting in its capacity of joint and several creditor with the Noteholders pursuant to Clause 2.1 of the Collateral Agency Agreement: (a) the Shares; and (b) all additional shares in Amcis from time to time acquired or subscribed for by the Pledgor in any manner (including by way of capital increases) and all aforesaid claims relating thereto (all such additional shares hereinafter included when referring to the Shares); and (c) all present (whether or not due) and future rights attributable to the Shares, including but not limited to all purchase and subscription rights relating to the Shares, all claims for repayment of share capital, payment of compensation for redemption of shares, credit balances from settlements and liquidation proceeds including the right to the liquidation quota, as well as to any other rights and benefits attributable to the Shares (all such rights hereinafter included when referring to the Shares). 2.2. This Pledge shall not in any way be affected by any regrouping or splitting of the Shares, and, as the case may be, the Future Shares, or by any similar operation, and the securities resulting from any such operation shall be part of the Shares, and, as the case may be, the Future Shares. Execution version - 5 - - ---------------------------------------------------------------------------- 3. PERFECTION OF THE PLEDGE 3.1. The Pledge of the Shares shall be completed at the offices of Schellenberg Wittmer, Lowenstrasse 19, 8001 Zurich, simultaneously with the signing of this Agreement, whereby the Pledgor or the Pledgor's duly authorized representative shall deliver to the Pledgee the following documents: (a) the Share Certificates, duly endorsed in blank, to the Pledgee or the Pledgee's duly authorised representative; (b) a certified true copy of the resolution of the board of directors of Amcis acknowledging the pledging of the Shares in favor of the Pledgee; (c) a certified and true copy of the public deed containing the resolution of an extraordinary shareholders' meeting of the Company resolving on the deletion of all transfer restrictions relating to the Shares in the Company's articles of incorporation, with an attached copy of the amended articles of incorporation as they are registered with the Commercial register of the Canton of Basel-Landschaft; and (d) a copy of the share register of the Company evidencing the existence of the pledge in favor of the Pledgee. 4. REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the other Credit Documents to which the Pledgor is party, the Pledgor represents and warrants to the Pledgee as of the date hereof and undertakes during the subsistence of this Agreement as follows: 4.1. it is the sole legal and beneficial owner of the Shares, free and clear from any Lien except for Permitted Liens imposed by mandatory operation of law; the Shares are validly issued and fully paid up; 4.2. it has full power, authority and legal right to pledge all of its rights, title and interest in the Shares pursuant to this Agreement and to perform its obligations hereunder; as a consequence, this Agreement has been duly and validly executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor, enforceable against it in accordance with its terms; Execution version - 6 - - ---------------------------------------------------------------------------- 4.3. the Shares are free and clear of all Liens, except for Permitted Liens imposed by mandatory operation of law; there is no cause for suspension of the voting rights attached to the Shares; as of the date hereof, none of the Shares is subject to any seizure or enforcement measure; 4.4. no other certificates have been issued for the Shares than the Share Certificates listed in Schedule 1; 4.5. the Shares are free and clear of all transfer restrictions under the Company's Articles of Association, and are free and clear of options, purchase or similar rights or claims or any other similar interests in favor of any third party, except for Permitted Liens imposed by mandatory operation of law. As a consequence, the entering into, execution, delivery and performance by the Pledgor of this Agreement does not require any consent of the Company or any other Person (except for those consents which have been obtained); 4.6. there are no silent partnership agreements or similar arrangements by which a person is entitled to a participation in the profits or revenue of the Company; 4.7. this Agreement creates a valid and enforceable Pledge over the Shares in favour of the Pledgee under the laws of Switzerland which pledge shall not be subject to any prior Lien (other than Permitted Liens imposed by mandatory operation of law); 4.8. the entering into, execution, delivery and performance by the Pledgor of this Pledge Agreement and the consummation by the Pledgor of the transactions hereby contemplated will not conflict with any law of Belgium as of the date hereof, or result in a breach or default of the articles of association, by-laws, regulations or other similar charter documents of the Pledgor, or a breach of or default under any material agreement or other instrument to which the Pledgor is a party or by which the Pledgor may be bound. 4.9. the Pledgor is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation and is not in liquidation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder and that all corporate and other actions required to authorise the execution and performance of this Agreement have been duly taken; 4.10. the Company is duly incorporated and validly existing as a stock corporation (Aktiengesellschaft) under the laws of Switzerland, has the power to own its assets Execution version - 7 - - ---------------------------------------------------------------------------- and conduct its business as currently conducted, and has a share capital of CHF 50,000, divided into 100 registered shares with a nominal value of CHF 500 each, (all of which have been validly issued and) are fully paid-in, and none of which is subject to any seizure or enforcement measure as of the date hereof; and 4.11. Neither the Pledgor nor the Company is insolvent, nor subject to any insolvency proceedings or in any other similar situation of conflicting claims of creditors in a way, which could give these creditors reasonable grounds for a claim against the Company or the Pledgor. No resolutions have been taken, nor has any petition been filed, to dissolve or liquidate any of the Pledgor or the Company, nor has the Pledgor or the Company been declared bankrupt nor has a suspension of payments been granted to either of the Pledgor or the Company. 5. UNDERTAKINGS 5.1. The Pledgor undertakes to the Pledgee to the extent not already effectuated by virtue of Clause 2.1(b) hereof, to pledge hereunder, immediately upon its acquisition or subscription thereof, any and all additional shares of stock or other securities of Amcis. 5.2. The Pledgor undertakes to the Pledgee that at any time and from time to time it will promptly take all action or execute all such documents (including assignments, transfers, charges, notices and instructions) that the Pledgee may reasonably request upon the written instructions of the Requisite Noteholders, in order to perfect the security interest granted or purported to be granted hereby or for the exercise of all rights, powers and remedies of the Pledgee provided by or pursuant to this Agreement or by law and/or to facilitate the realization of the Shares. 5.3. If so reasonably requested by the Pledgee upon the written instructions of the Requisite Noteholders the Pledgor shall take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection or maintenance of any security conferred or intended to be conferred on the Pledgee by or pursuant to this Agreement. 5.4. The Pledgor shall not: (a) create or permit to arise any Lien on the Shares or any interest in or part of the Shares (irrespective of whether ranking behind the pledge created hereby), except for Permitted Liens imposed by mandatory operation of law; Execution version - 8 - - ---------------------------------------------------------------------------- (b) permit or resolve on the re-introduction of any transfer restrictions relating to the Shares in the articles of incorporation of the Company; (c) not take any steps, including, without limitation, the exercise of any right it has under any agreement pertaining to or in relation with the Shares, which may jeopardise or adversely affect the security interest constituted in this Agreement, except as permitted in the Terms and Conditions of Notes; or (d) sell or attempt to sell or otherwise dispose of the Shares or any interest in or part of the Shares except in accordance with the provisions of this Agreement and the Terms and Conditions of Notes. 6. VOTING RIGHTS AND SUBSCRIPTION RIGHTS 6.1. So long as no Event of Default has occurred and is continuing, the Pledgor shall be entitled to exercise any and all membership rights pertaining to the Shares, including, without limitation, the right to vote in the general meeting of Amcis in a manner (i) which does not adversely affect the validity or enforceability of this Pledge, and (ii) which does not cause an Event of Default to occur. In particular, and unless agreed otherwise by the Requisite Noteholders, the Pledgor shall cast its votes against any proposal for the liquidation, merger or split-up of the Company, or against any proposal which is liable to result in a dilution of the rights attaching to the Shares. 6.2. Upon the occurrence of an Event of Default which is continuing, in addition to all the rights and remedies of a secured party on default under applicable law and subject to the Collateral Agency Agreement and the Terms and Conditions of Notes, the Pledgor shall exercise the membership rights conferred by the Shares, including, without limitation, the right to vote in the general meeting of Amcis in accordance with the instructions received from the Pledgee, which instructions the Pledgee shall seek in due time. 6.3. The Pledgor shall forthwith give the Pledgee a copy of any convening notice or agenda of general shareholders meetings of the Company and inform the Pledgee about the exercise of the membership rights pertaining to the Shares. 6.4 Unless agreed otherwise by the Pledgee and subject to the Terms and Conditions of Notes, the Pledgor shall exercise all subscription rights to which it may be entitled. The Pledgor shall cause shares resulting form the exercise of any such right to be Execution version - 9 - - ---------------------------------------------------------------------------- pledged to the Pledgee as collateral for the Secured Obligations, and these shares shall be part of the Shares for the purpose of this Agreement, and shall be delivered immediately to the Pledgee, endorsed in blank, together with a copy of the updated share register of the Company evidencing the existence of the pledge of those new Shares in favor of the Pledgee. 7. DIVIDENDS 7.1. Subject at all times to the restrictions set forth in the Terms and Conditions of Notes, any payment of dividends or other payments by Amcis relating to the Shares and claims pledged under this Agreement shall be made to the Pledgor, provided no Event of Default has occurred which is continuing. 7.2. Upon the occurrence of an Event of Default which is continuing, any payment of dividends or other payments by Amcis relating to the Shares and claims pledged under this Agreement shall be made to the Pledgee which shall apply the same towards the Secured Obligations as provided under, and subject to the terms of, the Collateral Agency Agreement. 7.3. Similarly, upon occurrence of an Event of Default that is continuing, any and all: (a) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, the Shares; (b) dividends and other distributions paid or payable in cash in respect of the Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus; and (c) cash paid, payable or otherwise distributed in respect of principal (nominal value/stated capital) of, or in redemption of, or in exchange for, the Shares; shall be exclusively made and/or paid to the Pledgee which shall apply the same towards the Secured Obligations as provided under, and subject to the terms of, the Collateral Agency Agreement. Execution version - 10 - - ---------------------------------------------------------------------------- 8. CONTINUING SECURITY AND OTHER MATTERS 8.1. Continuing Security (a) This Pledge shall be a continuing security for the due performance of the Secured Obligations, and shall remain in force until expressly released in accordance with Clause 10 of this Agreement. (b) This Pledge shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. (c) The Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Pledge (a) grant the Pledgor or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 8.2. Rights Additional All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 8.3. Preservation of Security in Case of Transfer Without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of transfer of all or any part of the Secured Obligations by way of assignment or novation in accordance with the Credit Documents or in the event of a change or replacement of the Pledgee or the Pledgor in accordance with the Credit Documents, this Pledge will be maintained, Execution version - 11 - - ---------------------------------------------------------------------------- automatically and without any further formality or consent, to secure the Secured Obligations as assigned or novated in favour of the Pledgee (or the new Pledgee, if any). To the extent that any such further formality or consent on the part of Pledgor or of the Company will, nevertheless, be required, Pledgor hereby undertakes to perform, and to have the Company perform, any such formality or consent without delay upon the Pledgee's request. 9. ENFORCEMENT 9.1. At any time after the occurrence of an Event of Default which is continuing, the pledge created hereunder shall become immediately enforceable and the Pledgee shall in particular have the right, subject to the Collateral Agency Agreement and to the Terms and Conditions of Notes, to: (a) enforce the Pledge in respect of any or all of the Shares, in accordance with applicable legal provisions and as set forth in this Agreement; and (b) apply any payments which may be received or receivable by the Pledgee in respect of the Shares to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (c) exercise all rights and remedies it possesses, and to act generally in relation to the Shares in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 9.2. When exercising its right to enforce the Pledge after the occurrence of an Event of Default which is continuing, the Pledgee shall be entitled, at its discretion, (a) to sell all or part of the Shares either through public auction (offentliche Versteigerung) or in a private sale (Selbstverkaufsrecht), without regard to the procedures and formalities provided for in the Swiss Federal Act Debt Collection and Bankruptcy of 1889, as amended, and without any notice thereof to the Pledgor other than a notice intending to inform the Pledgor that a sale of the Shares will take place, this notice being sent in accordance with Clause 14.6 of this Agreement to the Pledgor no later than 10 (ten) Business Days prior to such sale; or (b) notwithstanding the foregoing and the provisions of Art. 41 of the Swiss Federal Law on the Recovery of Debts and Bankruptcy or any other applicable law, to institute and pursue the ordinary procedure for recovery of Execution version - 12 - - ---------------------------------------------------------------------------- debt without having first to dispose of the Shares or to institute statutory proceedings for the realization thereof. 9.3. The Pledgee has the right to acquire for itself all or any part of the Shares in any such public auction or private sale (Selbsteintrittsrecht). In case of an acquisition of the Shares by the Pledgee in a private sale, such sale has to be at arm's length, i.e. at the real value (the REAL VALUE (wirklicher Wert)) of the acquired Shares. If the Pledgor and the Pledgee do not reach an agreement on the Real Value within 30 calendar days following the Pledgee's corresponding offer, the Real Value shall be determined by an independent expert to be mutually appointed by the Parties. The expert's determination of the Real Value shall be final (Schiedsgutachten). If the parties cannot, within 60 days following the Pledgee's offer, agree on the expert to be appointed, the independent expert shall be appointed by the president of the "Treuhand-Kammer", Zurich, Switzerland. 9.4. In view of a realization of the Pledge in accordance with the terms and conditions set forth above, the Pledgor, being the sole owner and holder of the Shares, hereby expressly declares its approval of the assignment and transfer of the Shares being subject to such realization to the acquirer of such Shares. The Pledgor further agrees that the respective acquirer will hold the Shares following their assignment and transfer and Pledgor will see for it that such acquirer will without any delay be entered in the Company's share register as the owner of the Shares. 9.5. The proceeds from the realization of the Pledge shall be applied to towards the Secured Obligations, including any costs and expenses of the Pledgee, in accordance with the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 10. DURATION AND RELEASE 10.1. This Agreement shall remain in full force and effect until the earlier of (a) the date upon which all Secured Obligations have been irrevocably paid and discharged in full; and (b) the date notified by the Pledgee to the Pledgor. The Pledge shall not cease to exist if any payments made in satisfaction of the Secured Obligations have only temporarily discharged the Secured Obligations. 10.2. This Pledge is in addition to any existing or future collateral, guarantee or other security held by the Pledgee. Execution version - 13 - - ---------------------------------------------------------------------------- 10.3. This Pledge shall be discharged by, and only by, the express release thereof granted by the Pledgee. 10.4. The Pledgee shall, in accordance with the Collateral Agency Agreement, grant an express release of this Pledge without delay upon demand of the Pledgor, as soon as all Secured Obligations shall have been fully and finally discharged. 10.5. Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or (c) proves not to have been effectively received by the Pledgee; and the Pledgee shall be entitled to enforce the Pledge as if such release or discharge had not occurred. 11. DUTIES OF THE PLEDGEE The Pledgee shall not be liable for any acts or omissions with respect to the Shares or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence or willful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Shares against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 12. EXPENSES AND COSTS All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Shares, (iii) the exercise or enforcement of any of the rights of the Execution version - 14 - - ---------------------------------------------------------------------------- Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge, its enforcement and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. 13. TAXES The Pledgor shall pay, promptly on demand of the Pledgee all stamp, registration, notarial and other similar Taxes or fees paid or payable by the Pledgee in connection with any action taken or contemplated by or on behalf of the Pledgee for perfecting, enforcing, releasing, canceling, reassigning or resolving any doubt concerning, or for any other purpose in relation to this Agreement, any amendment thereto, any transfer and/or assignment of the rights and/or obligations under the same or the Security created or intended to be created in respect of the Share and shall, from time to time, indemnify the Pledgee promptly on demand against any liabilities, costs, claims and expenses resulting from any failure to pay by the Pledgor or any delay by Pledgor in paying any such Taxes or fees. 14. MISCELLANEOUS 14.1. During the continuation of this Agreement, so long as no Event of Default has occurred and is continuing, the Pledgee will not declare itself to be the beneficial owner of the Shares or any additional pledged shares and the Pledgee may disclose and deliver a copy of the present Agreement to any tax or other authority, if asked to do so. 14.2. If any of the provisions of this Agreement should be or become invalid, unenforceable or impractical in whole or in part, the validity of the other provisions hereof shall not be affected. In that case the invalid, unenforceable or impractical provision is deemed to be replaced by such valid and enforceable provision or arrangement, which corresponds as closely as possible to the invalid, unenforceable or impractical provision and to the parties' economic aims pursued by and reflected in this Agreement. The same applies in the event that this Agreement does not contain a provision which it needs to contain in order to achieve the economic purpose as expressed herein (Regelungslucke). Execution version - 15 - - ---------------------------------------------------------------------------- 14.3. Notwithstanding any provision to the contrary contained herein, the parties hereto agree that this Agreement is subject in all respects to the terms of the Collateral Agency Agreement and for the avoidance of doubt, in the event of any inconsistency, the provisions of the Collateral Agency Agreement shall prevail. 14.4. No modification or amendment of this Agreement shall be binding upon any party hereto unless such modification or amendment shall be in writing and signed a duly authorized officer of the Pledgee and the Pledgor. 14.5. No failure or delay by a party hereto in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 14.6. All communications to be made hereunder shall be made in writing to the following addresses: If made to the Pledgor: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Att.: For the Attention of Legal Department Fax: +32 (0)1 048 1224 If made to the Pledgee: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Att.: Mr Dirk De Bleser Fax: +32 (0)2 429 4920 Execution version - 16 - - ---------------------------------------------------------------------------- 14.7. Any communication or document made or delivered by one Person to another under or in connection with this Agreement shall only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 14.6, if addressed to that department or officer. 14.8. This Agreement shall become effective on 11 February 2004. 15. GOVERNING LAW This Agreement shall be governed by, and construed in accordance with, the domestic substantive laws of Switzerland. 16. JURISDICTION Any and all disputes arising out of or in connection with this Agreement including but not limited to matters of validity, conclusion, binding effect, interpretation, construction, performance or non-performance and remedies shall be subject to the non-exclusive jurisdiction of the Commercial Court (Handelsgericht) of the Canton of Zurich, Switzerland, venue being Zurich 1. If there is no ordinary place of foreclosure in Switzerland according to the Federal Statute on Debt Collection and Bankruptcy (SchKG), the place of foreclosure (Betreibungsort) shall be Zurich 1, which shall be the place of performance for obligations arising under this Agreement. 17. DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. Execution version - 17 - - ---------------------------------------------------------------------------- 18. BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor, the Pledgee and their respective successors and assigns. The expressions Pledgee and Pledgor include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be appointed Collateral Agent. 19. ASSIGNMENT The Pledgee shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to third parties. The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 20. EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 21. ENGLISH LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail except that where a German translation of a legal term appears in such text, the German translation shall prevail. 22. RESPONSIBILITY OF THE PLEDGEE 22.1. The Pledgee shall not be responsible to any Noteholder for: (a) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; Execution version - 18 - - ---------------------------------------------------------------------------- (b) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or (c) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Pledgee). 22.2. Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 11 February 2004 Executed by: SOLUTIA EUROPE SA/NV, AS PLEDGOR /s/ Kristel Deroover - -------------------- Attorney ................................. KBC BANK NV, AS PLEDGEE /s/ Dirk De Bleser - ------------------ Head Operations and Accounting ................................. EX-99.14 OTH CONSENT 16 exh99p14.txt Exhibit 99.14 Execution version SHARE PLEDGE AGREEMENT between SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, 1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the PLEDGOR) and KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises under enterprise number 0462.92.0.226, acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE) Execution version - 2 - - ---------------------------------------------------------------------------- WHEREAS (A) The Pledgor and the Noteholders have agreed to amend and restate the Pledgor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Pledgor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Pledgor will enter into a Fiscal Agency Agreement dated on or about the date of this Agreement among the Pledgor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor pledge its shares in the Company (as defined below) to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor towards each of the Noteholders under the Notes and the other Credit Documents to which the Pledgor is party, and accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Notes and the other Credit Documents. (D) The Pledgor is the legal and beneficial owner of the entire share capital of CarboGen AG (CARBOGEN or COMPANY), a stock corporation (Aktiengesellschaft) organised under the laws of Switzerland, having its corporate seat at c/o Carbogen Laboratories AG, Schachenallee 29, CH-5000 Aarau, Switzerland, which is registered in the Commercial Register (Handelsregister) of the Canton of Aargau, Execution version - 3 - - ---------------------------------------------------------------------------- under registration number CH-400.3.020.068-6. The entire share capital of the Company consists of 14,000 registered shares with a nominal value of CHF 100.00 each (the EXISTING SHARES and together with any shares of the Company owned by the Pledgor in the future, the SHARES). (E) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the pledged assets described herein in favor of the Pledgee under the following terms (the AGREEMENT). NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Parties hereto agree as follows: 1. INTERPRETATION In this Agreement the following terms have the following meanings: AGREEMENT has the meaning given to it in the Preamble. CHF means the lawful currency of Switzerland. COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated on or about the date of this Agreement among the Pledgor, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time. PLEDGE means the pledge of the Shares created or arising pursuant to this Agreement. SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations and liabilities of the Pledgor to the Pledgee which may arise under, out of, or in connection with, the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, any other Credit Document to which the Pledgor is party. SHARE CERTIFICATES means the share certificates evidencing the Shares as set out in the Schedule 1 to this Agreement. Execution version - 4 - - ---------------------------------------------------------------------------- Unless otherwise defined herein, defined terms shall bear the same meanings ascribed to them in the Terms and Conditions of Notes, and if not defined therein, the meaning ascribed to them under Swiss law. Where the context so admits, the singular includes the plural and vice versa. The headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. Any reference in this Agreement to a defined document is a reference to that defined document as amended, supplemented, substituted or novated from time to time, in accordance with its terms. 2. PLEDGE 2.1. As security for the Secured Obligations, the Pledgor hereby pledges, as a first ranking pledge, in accordance with article 899 et seq. of the Swiss Civil Code and the provisions set out below to the Pledgee, acting in its capacity of joint and several creditor with the Noteholders pursuant to Clause 2.1 of the Collateral Agency Agreement: (a) the Shares; and (b) all additional shares in CarboGen from time to time acquired or subscribed for by the Pledgor in any manner (including by way of capital increases) and all aforesaid claims relating thereto (all such additional shares hereinafter included when referring to the Shares); and (c) all present (whether or not due) and future rights attributable to the Shares, including but not limited to all purchase and subscription rights relating to the Shares, all claims for repayment of share capital, payment of compensation for redemption of shares, credit balances from settlements and liquidation proceeds including the right to the liquidation quota, as well as to any other rights and benefits attributable to the Shares (all such rights hereinafter included when referring to the Shares). 2.2. This Pledge shall not in any way be affected by any regrouping or splitting of the Shares, and, as the case may be, the Future Shares, or by any similar operation, and the securities resulting from any such operation shall be part of the Shares, and, as the case may be, the Future Shares. Execution version - 5 - - ---------------------------------------------------------------------------- 3. PERFECTION OF THE PLEDGE 3.1. The Pledge of the Shares shall be completed at the offices of Schellenberg Wittmer, Lowenstrasse 19, 8001 Zurich, simultaneously with the signing of this Agreement, whereby the Pledgor or the Pledgor's duly authorized representative shall deliver to the Pledgee the following documents: (a) the Share Certificates, duly endorsed in blank, to the Pledgee or the Pledgee's duly authorised representative; (b) a certified true copy of the resolution of the board of directors of CarboGen acknowledging the pledging of the Shares in favor of the Pledgee; (c) a certified and true copy of the articles of incorporation as they are registered with the Commercial register of the Canton of Aargau; and (d) a copy of the share register of the Company evidencing the existence of the pledge in favor of the Pledgee. 4. REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the other Credit Documents to which the Pledgor is party, the Pledgor represents and warrants to the Pledgee as of the date hereof and undertakes during the subsistence of this Agreement as follows: 4.1. it is the sole legal and beneficial owner of the Shares, free and clear from any Lien except for Permitted Liens imposed by mandatory operation of law; the Shares are validly issued and fully paid up; 4.2. it has full power, authority and legal right to pledge all of its rights, title and interest in the Shares pursuant to this Agreement and to perform its obligations hereunder; as a consequence, this Agreement has been duly and validly executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor, enforceable against it in accordance with its terms; 4.3. the Shares are free and clear of all Liens, except for Permitted Liens imposed by mandatory operation of law; there is no cause for suspension of the voting rights attached to the Shares; as of the date hereof, none of the Shares is subject to any seizure or enforcement measure; Execution version - 6 - - ---------------------------------------------------------------------------- 4.4. no other certificates have been issued for the Shares than the Share Certificates listed in Schedule 1; 4.5. the Shares are free and clear of all transfer restrictions under the Company's Articles of Association, and are free and clear of options, purchase or similar rights or claims or any other similar interests in favor of any third party, except for Permitted Liens imposed by mandatory operation of law. As a consequence, the entering into, execution, delivery and performance by the Pledgor of this Agreement does not require any consent of the Company or any other Person (except for those consents which have been obtained); 4.6. there are no silent partnership agreements or similar arrangements by which a person is entitled to a participation in the profits or revenue of the Company; 4.7. this Agreement creates a valid and enforceable Pledge over the Shares in favour of the Pledgee under the laws of Switzerland which pledge shall not be subject to any prior Lien (other than Permitted Liens imposed by mandatory operation of law); 4.8. the entering into, execution, delivery and performance by the Pledgor of this Pledge Agreement and the consummation by the Pledgor of the transactions hereby contemplated will not conflict with any law of Belgium as of the date hereof, or result in a breach or default of the articles of association, by-laws, regulations or other similar charter documents of the Pledgor, or a breach of or default under any material agreement or other instrument to which the Pledgor is a party or by which the Pledgor may be bound. 4.9. the Pledgor is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation and is not in liquidation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder and that all corporate and other actions required to authorise the execution and performance of this Agreement have been duly taken; 4.10. the Company is duly incorporated and validly existing as a stock corporation (Aktiengesellschaft) under the laws of Switzerland, has the power to own its assets and conduct its business as currently conducted, and has a share capital of CHF 1,400,000, divided into 14,000 registered shares with a nominal value of CHF 100 each, (all of which have been validly issued and) are fully paid-in, and none of which is subject to any seizure or enforcement measure as of the date hereof; and Execution version - 7 - - ---------------------------------------------------------------------------- 4.11. Neither the Pledgor nor the Company is insolvent, nor subject to any insolvency proceedings or in any other similar situation of conflicting claims of creditors in a way, which could give these creditors reasonable grounds for a claim against the Company or the Pledgor. No resolutions have been taken, nor has any petition been filed, to dissolve or liquidate any of the Pledgor or the Company, nor has the Pledgor or the Company been declared bankrupt nor has a suspension of payments been granted to either of the Pledgor or the Company. 5. UNDERTAKINGS 5.1. The Pledgor undertakes to the Pledgee to the extent not already effectuated by virtue of Clause 2.1(b) hereof, to pledge hereunder, immediately upon its acquisition or subscription thereof, any and all additional shares of stock or other securities of CarboGen. 5.2. The Pledgor undertakes to the Pledgee that at any time and from time to time it will promptly take all action or execute all such documents (including assignments, transfers, charges, notices and instructions) that the Pledgee may reasonably request upon written instructions of the Requisite Noteholders, in order to perfect the security interest granted or purported to be granted hereby or for the exercise of all rights, powers and remedies of the Pledgee provided by or pursuant to this Agreement or by law and/or to facilitate the realization of the Shares. 5.3. If so reasonably requested by the Pledgee upon written instructions of the Requisite Noteholders the Pledgor shall take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection or maintenance of any security conferred or intended to be conferred on the Pledgee by or pursuant to this Agreement. 5.4. The Pledgor shall not: (a) create or permit to arise any Lien on the Shares or any interest in or part of the Shares (irrespective of whether ranking behind the pledge created hereby), except for Permitted Liens imposed by mandatory operation of law; (b) permit or resolve on the re-introduction of any transfer restrictions relating to the Shares in the articles of incorporation of the Company; (c) not take any steps, including, without limitation, the exercise of any right it has under any agreement pertaining to or in relation with the Shares, which Execution version - 8 - - ---------------------------------------------------------------------------- may jeopardise or adversely affect the security interest constituted in this Agreement, except as permitted in the Terms and Conditions of Notes; or (d) sell or attempt to sell or otherwise dispose of the Shares or any interest in or part of the Shares except in accordance with the provisions of this Agreement and the Terms and Conditions of Notes. 6. VOTING RIGHTS AND SUBSCRIPTION RIGHTS 6.1. So long as no Event of Default has occurred and is continuing, the Pledgor shall be entitled to exercise any and all membership rights pertaining to the Shares, including, without limitation, the right to vote in the general meeting of CarboGen in a manner (i) which does not adversely affect the validity or enforceability of this Pledge, and (ii) which does not cause an Event of Default to occur. In particular, and unless agreed otherwise by the Requisite Noteholders or as permitted under the Credit Documents, the Pledgor shall cast its votes against any proposal for the liquidation, merger or split-up of the Company, or against any proposal which is liable to result in a dilution of the rights attaching to the Shares. 6.2. Upon the occurrence of an Event of Default which is continuing, in addition to all the rights and remedies of a secured party on default under applicable law and subject to the Collateral Agency Agreement and the Terms and Conditions of Notes, the Pledgor shall exercise the membership rights conferred by the Shares, including, without limitation, the right to vote in the general meeting of CarboGen in accordance with the instructions received from the Pledgee, which instructions the Pledgee shall seek in due time. 6.3. The Pledgor shall forthwith give the Pledgee a copy of any convening notice or agenda of general shareholders meetings of the Company and inform the Pledgee about the exercise of the membership rights pertaining to the Shares. 6.4 Unless agreed otherwise by the Pledgee and subject to the Terms and Conditions of Notes, the Pledgor shall exercise all subscription rights to which it may be entitled. The Pledgor shall cause shares resulting form the exercise of any such right to be pledged to the Pledgee as collateral for the Secured Obligations, and these shares shall be part of the Shares for the purpose of this Agreement, and shall be delivered immediately to the Pledgee, endorsed in blank, together with a copy of the updated share register of the Company evidencing the existence of the pledge of those new Shares in favor of the Pledgee. Execution version - 9 - - ---------------------------------------------------------------------------- 7. DIVIDENDS 7.1. Subject at all times to the restrictions set forth in the Terms and Conditions of Notes, any payment of dividends or other payments by CarboGen relating to the Shares and claims pledged under this Agreement shall be made to the Pledgor, provided no Event of Default has occurred which is continuing. 7.2. Upon the occurrence of an Event of Default which is continuing, any payment of dividends or other payments by CarboGen relating to the Shares and claims pledged under this Agreement shall be made to the Pledgee which shall apply the same towards the Secured Obligations as provided under, and subject to the terms of, the Collateral Agency Agreement. 7.3. Similarly, upon occurrence of an Event of Default that is continuing, any and all: (a) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, the Shares; (b) dividends and other distributions paid or payable in cash in respect of the Shares in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus; and (c) cash paid, payable or otherwise distributed in respect of principal (nominal value/stated capital) of, or in redemption of, or in exchange for, the Shares; shall be exclusively made and/or paid to the Pledgee which shall apply the same towards the Secured Obligations as provided under, and subject to the terms of, the Collateral Agency Agreement. 8. CONTINUING SECURITY AND OTHER MATTERS 8.1. Continuing Security (a) This Pledge shall be a continuing security for the due performance of the Secured Obligations, and shall remain in force until expressly released in accordance with Clause 10 of this Agreement. (b) This Pledge shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor Execution version - 10 - - ---------------------------------------------------------------------------- or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. (c) The Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Pledge (a) grant the Pledgor or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 8.2. Rights Additional All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 8.3. Preservation of Security in Case of Transfer Without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of transfer of all or any part of the Secured Obligations by way of assignment or novation in accordance with the Credit Documents or in the event of a change or replacement of the Pledgee or the Pledgor in accordance with the Credit Documents, this Pledge will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as assigned or novated in favour of the Pledgee (or the new Pledgee, if any). To the extent that any such further formality or consent on the part of Pledgor or of the Company will, nevertheless, be required, Pledgor hereby undertakes to perform, and to have the Company perform, any such formality or consent without delay upon the Pledgee's request. Execution version - 11 - - ---------------------------------------------------------------------------- 9. ENFORCEMENT 9.1. At any time after the occurrence of an Event of Default which is continuing, the pledge created hereunder shall become immediately enforceable and the Pledgee shall in particular have the right, subject to the Collateral Agency Agreement and to the Terms and Conditions of Notes, to: (a) enforce the Pledge in respect of any or all of the Shares, in accordance with applicable legal provisions and as set forth in this Agreement; and (b) apply any payments which may be received or receivable by the Pledgee in respect of the Shares to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (c) exercise all rights and remedies it possesses, and to act generally in relation to the Shares in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 9.2. When exercising its right to enforce the Pledge after the occurrence of an Event of Default which is continuing, the Pledgee shall be entitled, at its discretion, (a) to sell all or part of the Shares either through public auction (offentliche Versteigerung) or in a private sale (Selbstverkaufsrecht), without regard to the procedures and formalities provided for in the Swiss Federal Act Debt Collection and Bankruptcy of 1889, as amended, and without any notice thereof to the Pledgor other than a notice intending to inform the Pledgor that a sale of the Shares will take place, this notice being sent in accordance with Clause 14.6 of this Agreement to the Pledgor no later than 10 (ten) Business Days prior to such sale; or (b) notwithstanding the foregoing and the provisions of Art. 41 of the Swiss Federal Law on the Recovery of Debts and Bankruptcy or any other applicable law, to institute and pursue the ordinary procedure for recovery of debt without having first to dispose of the Shares or to institute statutory proceedings for the realization thereof. 9.3. The Pledgee has the right to acquire for itself all or any part of the Shares in any such public auction or private sale (Selbsteintrittsrecht). In case of an acquisition of the Shares by the Pledgee in a private sale, such sale has to be at arm's length, i.e. at the real value (the REAL VALUE (wirklicher Wert)) of the acquired Shares. If the Execution version - 12 - - ---------------------------------------------------------------------------- Pledgor and the Pledgee do not reach an agreement on the Real Value within 30 calendar days following the Pledgee's corresponding offer, the Real Value shall be determined by an independent expert to be mutually appointed by the Parties. The expert's determination of the Real Value shall be final (Schiedsgutachten). If the parties cannot, within 60 days following the Pledgee's offer, agree on the expert to be appointed, the independent expert shall be appointed by the president of the "Treuhand-Kammer", Zurich, Switzerland. 9.4. In view of a realization of the Pledge in accordance with the terms and conditions set forth above, the Pledgor, being the sole owner and holder of the Shares, hereby expressly declares its approval of the assignment and transfer of the Shares being subject to such realization to the acquirer of such Shares. The Pledgor further agrees that the respective acquirer will hold the Shares following their assignment and transfer and Pledgor will see for it that such acquirer will without any delay be entered in the Company's share register as the owner of the Shares. 9.5. The proceeds from the realization of the Pledge shall be applied to towards the Secured Obligations, including any costs and expenses of the Pledgee, in accordance with the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 10. DURATION AND RELEASE 10.1. This Agreement shall remain in full force and effect until the earlier of (a) the date upon which all Secured Obligations have been irrevocably paid and discharged in full; and (b) the date notified by the Pledgee to the Pledgor. The Pledge shall not cease to exist if any payments made in satisfaction of the Secured Obligations have only temporarily discharged the Secured Obligations. 10.2. This Pledge is in addition to any existing or future collateral, guarantee or other security held by the Pledgee. 10.3. This Pledge shall be discharged by, and only by, the express release thereof granted by the Pledgee. 10.4. The Pledgee shall, in accordance with the Collateral Agency Agreement, grant an express release of this Pledge without delay upon demand of the Pledgor, as soon as all Secured Obligations shall have been fully and finally discharged. Execution version - 13 - - ---------------------------------------------------------------------------- 10.5. Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or (c) proves not to have been effectively received by the Pledgee; and the Pledgee shall be entitled to enforce the Pledge as if such release or discharge had not occurred. 11. DUTIES OF THE PLEDGEE The Pledgee shall not be liable for any acts or omissions with respect to the Shares or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence or willful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Shares against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 12. EXPENSES AND COSTS All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Shares, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge, its enforcement and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. Execution version - 14 - - ---------------------------------------------------------------------------- 13. TAXES The Pledgor shall pay, promptly on demand of the Pledgee all stamp, registration, notarial and other similar Taxes or fees paid or payable by the Pledgee in connection with any action taken or contemplated by or on behalf of the Pledgee for perfecting, enforcing, releasing, canceling, reassigning or resolving any doubt concerning, or for any other purpose in relation to this Agreement, any amendment thereto, any transfer and/or assignment of the rights and/or obligations under the same or the Security created or intended to be created in respect of the Share and shall, from time to time, indemnify the Pledgee promptly on demand against any liabilities, costs, claims and expenses resulting from any failure to pay by the Pledgor or any delay by Pledgor in paying any such Taxes or fees. 14. MISCELLANEOUS 14.1. During the continuation of this Agreement, so long as no Event of Default has occurred and is continuing, the Pledgee will not declare itself to be the beneficial owner of the Shares or any additional pledged shares and the Pledgee may disclose and deliver a copy of the present Agreement to any tax or other authority, if asked to do so. 14.2. If any of the provisions of this Agreement should be or become invalid, unenforceable or impractical in whole or in part, the validity of the other provisions hereof shall not be affected. In that case the invalid, unenforceable or impractical provision is deemed to be replaced by such valid and enforceable provision or arrangement, which corresponds as closely as possible to the invalid, unenforceable or impractical provision and to the parties' economic aims pursued by and reflected in this Agreement. The same applies in the event that this Agreement does not contain a provision which it needs to contain in order to achieve the economic purpose as expressed herein (Regelungslucke). 14.3. Notwithstanding any provision to the contrary contained herein, the parties hereto agree that this Agreement is subject in all respects to the terms of the Collateral Agency Agreement and for the avoidance of doubt, in the event of any inconsistency, the provisions of the Collateral Agency Agreement shall prevail. 14.4. No modification or amendment of this Agreement shall be binding upon any party hereto unless such modification or amendment shall be in writing and signed a duly authorized officer of the Pledgee and the Pledgor. Execution version - 15 - - ---------------------------------------------------------------------------- 14.5. No failure or delay by a party hereto in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 14.6. All communications to be made hereunder shall be made in writing to the following addresses: If made to the Pledgor: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Att.: For the Attention of Legal Department Fax: +32 (0)1 048 1224 If made to the Pledgee: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Att.: Mr Dirk De Bleser Fax: +32 (0)2 429 4920 14.7. Any communication or document made or delivered by one Person to another under or in connection with this Agreement shall only be effective: (a) by way of fax, when received in legible form; Execution version - 16 - - ---------------------------------------------------------------------------- (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 14.6, if addressed to that department or officer. 14.8. This Agreement shall become effective on 11 February 2004. 15. GOVERNING LAW This Agreement shall be governed by, and construed in accordance with, the domestic substantive laws of Switzerland. 16. JURISDICTION Any and all disputes arising out of or in connection with this Agreement including but not limited to matters of validity, conclusion, binding effect, interpretation, construction, performance or non-performance and remedies shall be subject to the non-exclusive jurisdiction of the Commercial Court (Handelsgericht) of the Canton of Zurich, Switzerland, venue being Zurich 1. If there is no ordinary place of foreclosure in Switzerland according to the Federal Statute on Debt Collection and Bankruptcy (SchKG), the place of foreclosure (Betreibungsort) shall be Zurich 1, which shall be the place of performance for obligations arising under this Agreement. 17. DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. 18. BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor, the Pledgee and their respective successors and assigns. The expressions Pledgee and Pledgor include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be appointed Collateral Agent. Execution version - 17 - - ---------------------------------------------------------------------------- 19. ASSIGNMENT The Pledgee shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to third parties. The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 20. EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 21. ENGLISH LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail except that where a German translation of a legal term appears in such text, the German translation shall prevail. 22. RESPONSIBILITY OF THE PLEDGEE 22.1. The Pledgee shall not be responsible to any Noteholder for: (a) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; (b) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or (c) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op Execution version - 18 - - ---------------------------------------------------------------------------- handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Pledgee). 22.2. Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 11 February 2004 Executed by: SOLUTIA EUROPE SA/NV, AS PLEDGOR /s/ Kristel DeRoover - -------------------------------- Attorney ................................. KBC BANK NV, AS PLEDGEE /s/ Dirk De Blesser - -------------------------------- Head Operations and Accounting ................................. EX-99.15 OTH FIN ST 17 exh99p15.txt Exhibit 99.15 Execution version COMMERCIAL SHARE PLEDGE AGREEMENT IN RESPECT OF SHARES IN SOLUTIA SERVICES INTERNATIONAL COMM.VA/SCA DATED 17 FEBRUARY 2004 BETWEEN SOLUTIA EUROPE SA/NV AS PLEDGOR AND KBC BANK NV AS PLEDGEE Execution version TABLE OF CONTENTS 1. DEFINITIONS.......................................................4 2. PLEDGE............................................................5 3. THE SHARES........................................................5 4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS......................6 5. RIGHTS ATTACHING TO THE SHARES....................................8 6. CONTINUING SECURITY AND OTHER MATTERS.............................9 7. ENFORCEMENT.......................................................9 8. APPLICATION OF PROCEEDS..........................................10 9. DISCHARGE OF THE PLEDGE..........................................10 10. DUTIES OF THE PLEDGEE............................................11 11. RESPONSIBILITY OF THE PLEDGEE....................................11 12. EXPENSES.........................................................11 13. NOTICES..........................................................11 14. GENERAL..........................................................12 SIGNATORIES...............................................................14 Execution version COMMERCIAL SHARE PLEDGE AGREEMENT BETWEEN: (1) SOLUTIA EUROPE SA/NV, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440, (the PLEDGOR); AND: (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises, under enterprise number 0462.920.226 and acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE). WHEREAS: (A) The Pledgor and the Noteholders have agreed to amend and restate the Pledgor's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Pledgor and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Pledgor will enter into the Fiscal Agency Agreement dated 11 February 2004 among the Pledgor, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor pledge its shares in the Company (as defined below) to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor towards each of the Noteholders under the Notes and the other Credit Documents to which the Pledgor is party, and accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Notes and the other Credit Documents. (D) The Pledgor currently owns 1,022,645 shares in Solutia Services International Comm. VA/SCA, a Belgian "commanditaire vennootschap op aandelen/societe en commandite par actions", with its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and 3 Execution version registered at the Crossroads Bank for Enterprises, under enterprise number 0460.483.546 (the COMPANY). (E) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the Pledged Assets (as defined below) in favour of the Pledgee under the following terms (the AGREEMENT). THE PARTIES HAVE AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires: CAPITAL DECREASE means the reduction of the Company's Capital Stock in an amount of up to (euro)200,000,000, which reduction shall be effected partially by the recharacterization of the Company's loan receivable from the Pledgor in an amount of approximately (euro)178,800,000 and partially by reversing past payments of interest related to such loan; COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated 11 February 2004 among the Pledgor, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time; FLOATING CHARGE AGREEMENT means the floating charge agreement (overeenkomst pand handelszaak) dated 11 February 2004 between the Pledgor and the Pledgee, as amended, modified or supplemented from time to time; FUTURE SHARES has the meaning set out in Clause 2; PLEDGE means the pledge of the Pledged Assets created or arising pursuant to this Agreement; PLEDGED ASSETS means the Shares and, as the case may be, the Future Shares; SECURED OBLIGATIONS means all present and future, actual and contingent indebtedness, obligations, and liabilities of the Pledgor to the Pledgee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Fiscal Agency Agreement, the Notes, or any other Credit Document to which the Pledgor is party; SHARES means the 1,022,645 registered shares that the Pledgor currently owns in the Company. Unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. In this Agreement, each reference to a document will be deemed to be a reference to such document as amended and/or supplemented by the parties to such document from time to time. 1.2 SUCCESSORS AND ASSIGNS The expressions Pledgee, Noteholders and Pledgor include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be 4 Execution version appointed Collateral Agent for the Noteholders and, in the case of the Noteholders, their respective transferees and assignees to whom any Note or any Secured Obligation shall have been transferred. 1.3 HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. PLEDGE The Pledgor hereby pledges, as a first ranking pledge (pand in eerste rang/gage en premier rang), the Shares to the Pledgee as security for the due performance of the Secured Obligations in accordance with the Law of 5 May 1872 on commercial pledges. The Pledgor undertakes to pledge any other shares in the Company to which it may subscribe or which it may acquire in the future (the FUTURE SHARES). The Pledgor shall execute without delay all such documents and take all such other action as may be reasonably necessary, or appropriate to effect and perfect such first ranking pledge. 3. THE SHARES 3.1 The Shares are in registered form. The Pledgor shall not, without the Pledgee's prior written consent, permit the conversion of the Shares into bearer shares. 3.2 The Pledgor shall arrange for the following notice to be recorded and dated in the shareholders' register of the Company and signed therein on behalf of the Pledgor and the Pledgee simultaneously with the execution hereof, and the Pledgor shall procure that a registered share certificate in respect of the Shares, bearing the same notice and accompanied with a photocopy of the relevant pages of the shareholders' register, shall be duly issued and delivered to the Pledgee: "1.022.645 aandelen op naam zijn in eerste rang in pand gegeven ten gunste van KBC Bank NV als Pledgee, overeenkomstig en zoals gedefinieerd in een Share Pledge Agreement van 17 februari 2004. Ingeschreven op [DATUM]." "1.022.645 actions nominatives ont ete donnees en gage en premier rang au profit de KBC Bank NV en sa qualite de Pledgee, conformement a et en vertu d' un contrat de gage sur actions (Share Pledge Agreement) en date du 17 fevrier 2004. Inscrit le [DATE]." "1,022,645 registered shares are pledged in a first rank pledge for the benefit of KBC Bank NV as Pledgee, pursuant to and as defined in a Share Pledge Agreement dated 17 February 2004. Inscribed on [DATE]." Simultaneously with the execution hereof, unless the above notice in the share register shall immediately be made, dated and signed, the Pledgor shall execute and deliver to the Pledgee for the purpose of recording such notice a power of attorney in the form of Schedule 1 hereto. 5 Execution version 4. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 4.1 REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the other Credit Documents to which the Pledgor is party, the Pledgor represents and warrants to the Pledgee and undertakes during the subsistence of this Agreement as follows: (a) the Pledgor is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder and that all corporate and other actions required to authorise the execution and performance of this Agreement have been duly taken; (b) the Pledgor is not in liquidation and has not been dissolved nor has such resolution been approved nor has a petition been filed to dissolve it, and there is no request for its liquidation. It has not been declared bankrupt nor has a suspension of payments been granted nor have any petitions thereto been filed and it is not in a situation of insolvency or any other similar situation of conflicting claims of creditors; (c) the Company is a societe en commandite par actions/commanditaire vennootschap op aandelen duly incorporated under the laws of Belgium, validly existing, and has the power to own its assets and conduct its business as currently conducted; (d) the Company is not in liquidation and has not been dissolved, and there is no request for its liquidation. It has not entered into or requested for a composition or a scheme of arrangement with its creditors. It has not been declared bankrupt and did not obtain a concordat judiciaire/gerechtelijk akkoord. No administrator or receiver has been appointed, and there is no request for such appointment. There is no cessation de paiement/staking van betalingen or perte de credit/verlies van krediet, and the conditions are not fulfilled for the application of the articles 633 and 634 of the Belgian Company Code. The copy of the co-ordinated articles of association of the Company dated 3 December 2003 is complete, up-to-date and correct as of the date hereof; (e) the capital of the Company is represented by 1,022,646 identical registered shares, of which the Pledgor owns 1,022,645 registered shares. There are no profit shares or other shares which do not represent the capital of the Company in existence, nor any warrant, convertible bond or other right whatsoever to acquire or subscribe shares in the Company; (f) the Pledgor owns the Shares free and clear of any Liens, except for Permitted Liens imposed by mandatory operation of law. There is no cause for suspension of the voting rights attached to the Shares; (g) as of the date hereof, none of the Shares is subject to any seizure or enforcement measure; (h) all Shares are capable of being pledged hereunder without the consent of the Company, the other shareholder of the Company or any third party; (i) the Shares are validly issued and fully paid up. The Company has not declared any dividends in respect of the Shares that are still unpaid on the date hereof; 6 Execution version (j) the Pledgor has satisfied itself that it is in its own interest to grant this Pledge for the due performance of the Secured Obligations; (k) this Agreement does not violate any laws or regulations applicable to it as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it or upon the Company; (l) the pledge of the Shares pursuant to this Agreement creates a valid and first rank pledge of the Shares subject to no prior Lien, except for Permitted Liens imposed by mandatory operation of law; (m) no floating charge (pand op handelszaak/gage sur fonds de commerce) or similar foreign law security exists over the business of the Company or the Pledgor, nor any mandate with a view to the creation thereof, except for the floating charge created pursuant to the Floating Charge Agreement and those security interests created or permitted pursuant to the Terms and Conditions of Notes; (n) this Agreement constitutes legally binding obligations for the Pledgor, enforceable in accordance with its terms, and creates those encumbrances it purports to create. 4.2 UNDERTAKINGS (a) The Pledgor shall procure that the Company shall forthwith upon the execution hereof provide the Pledgee with a certificate in the form of Schedule 2. (b) The Pledgor shall procure that no executory seizure (saisie execution/uitvoerend beslag) is made on the Shares or any other Pledged Assets, and that any conservatory seizure (saisie conservatoire/bewarend beslag) thereon is lifted within 60 days of it first being made. (c) The Pledgor shall co-operate with the Pledgee and sign or cause to be signed all such further documents and take all such further action as the Pledgee may from time to time reasonably request to perfect and protect the pledge of the Pledged Assets under Belgian law and to carry out the provisions and purposes of this Agreement. The Pledgee shall not be obligated to request any action under this paragraph (c) except upon written instructions from the Requisite Noteholders. (d) The Pledgor shall not (i) dispose of the Shares or any other Pledged Assets except in accordance with the provisions of this Agreement or the Terms and Conditions of Notes, (ii) create any other Lien in respect of the Pledged Assets (irrespective of whether ranking behind the pledge created hereby), nor (iii) permit the existence or the subsistence of any such Lien, except Permitted Liens imposed by mandatory operation of law. (e) The Pledgor shall not take any steps, including without limitation to the exercise of any right it has under any agreement pertaining to or in relation with the Pledged Assets, which may jeopardise or adversely affect the security interest constituted in this Agreement, except as permitted in the Terms and Conditions of Notes. (f) The Pledgor shall use its best efforts to ensure that (i) an extraordinary general meeting of partners of the Company will be held in order to amend article 9 of the articles of association of the Company in such a way that the right of first refusal (voorkeurrecht/droit de preference) and the required approval by the board of directors (goedkeuringsclausule/clause d'agrement) as presently set forth in said article 9 of the articles of association do not apply to an enforcement of the pledge under this Agreement and that (ii) this extraordinary general meeting of partners shall be held as soon as practically possible after Solutia Inc has given its 7 Execution version consent to the above mentioned amendment or after the date at which this consent is no longer required in view of the above mentioned amendment. 5. RIGHTS ATTACHING TO THE SHARES 5.1 VOTING RIGHTS (a) Subject to paragraphs (b) and (c) below, the Pledgor shall be entitled to exercise its voting rights in respect of the Shares, and as the case may be the Future Shares, in a manner (i) which does not adversely affect the validity or enforceability of this Pledge and (ii) which does not cause an Event of Default to occur. In particular, and unless agreed otherwise by the Requisite Noteholders, the Pledgor shall cast its votes against any proposal for the liquidation, merger or split-up of the Company, or against any proposal which is liable to result in a dilution of the rights attaching to the Pledged Assets. (b) In the event that there occurs any Event of Default which is continuing, the Pledgor shall cast the votes attaching to the Shares, and as the case may be, the Future Shares, in accordance with the Pledgee's instructions, which instructions the Pledgor shall seek in due time. (c) The Pledgor shall forthwith give the Pledgee a copy of any convening notice or agenda of all general shareholders meetings of the Company. (d) For the avoidance of doubt, the Pledgor shall be entitled to vote in favour of the Capital Decrease. 5.2 SUBSCRIPTION RIGHTS Unless agreed otherwise by the Pledgee and subject to the Terms and Conditions of Notes, the Pledgor shall exercise all subscription rights to which the Pledged Assets may be entitled. The Pledgor shall cause shares resulting from the exercise of any such right to be pledged to the Pledgee as collateral for the Secured Obligations, and these shares shall be part of the Pledged Assets for the purposes of this Agreement, and shall be delivered without delay to the Pledgee or shall as the case may be give rise to the recording in the share register of the Company of a notice as provided in Clause 3 hereof. 5.3 CONTRIBUTION CALLS Subject to the Terms and Conditions of Notes, the Pledgor shall forthwith pay up any contribution duly called in respect of the Shares and Future Shares. 5.4 CASH RETURNS ON THE SHARES AND THE FUTURE SHARES (a) Subject to the Terms and Conditions of Notes and as long as no Event of Default has occurred which is continuing in connection with the Secured Obligations, any cash return on the Shares, and, as the case may be, the Future Shares, irrespective of whether in the form of dividends, repayment of capital, scripts or otherwise shall be paid to the Pledgor. (b) Upon the occurrence of an Event of Default which is continuing and subject to the Terms and Conditions of Notes, any cash return on the Shares, and, as the case may be, the Future Shares, irrespective of whether in the form of dividends, repayment of capital, scripts or otherwise shall be paid to the Pledgee which shall apply the same towards the Secured Obligations in accordance with the Collateral Agency Agreement. 8 Execution version (c) This pledge shall not in any way be affected by any regrouping or splitting of the Shares, and, as the case may be, the Future Shares, or by any similar operation, and the securities resulting from any such operation shall be part of the Shares, and, as the case may be, the Future Shares. 6. CONTINUING SECURITY AND OTHER MATTERS 6.1 CONTINUING SECURITY (a) This Pledge shall be a continuing security for the due performance of the Secured Obligations, and shall remain in force until expressly released in accordance with Clause 9 of this Agreement. (b) This pledge shall not be discharged by the entry of any Secured Obligations into any current account, in which case this Pledge shall secure any provisional or final balance of such current account up to the amount in which the Secured Obligations were entered therein. (c) This Pledge shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. (d) The Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Pledge (a) grant the Pledgor or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 6.2 RIGHTS ADDITIONAL All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 6.3 PRESERVATION OF SECURITY IN THE EVENT OF NOVATION In accordance with article 1278 of the Belgian Civil Code and without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of novation of all or any part of the Secured Obligations or the change or replacement of the Pledgee or the Pledgor, this Pledge will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as novated and in favour of the Pledgee or a new pledgee. 7. ENFORCEMENT 7.1 Following the occurrence of an Event of Default that is continuing, the Pledgee shall in particular have the right, subject to the Collateral Agency Agreement and to the Terms and Conditions of Notes, to: 9 Execution version (i) enforce the Pledge in respect of any or all of the Pledged Assets, in accordance with applicable legal provisions; and (ii) apply any payments which may be received or receivable by the Pledgee in respect of the Pledged Assets to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (iii) exercise all rights and remedies it possesses, and to act generally in relation to the Pledged Assets in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 7.2 The Pledgee shall give the Pledgor not less than five (5) Business Days notice prior to the time that it first initiates legal action to enforce its remedies under this Agreement; provided that the Pledgee shall not required to give notice pursuant to this sentence on more than one occasion subject to mandatory law requirements. 7.3 The Pledgee shall have no responsibility in connection with the enforcement measures of the Pledge under this Agreement, except in case of its gross negligence (grove fout/faute grave) or wilful misconduct. 8. APPLICATION OF PROCEEDS 8.1 All monies received by the Pledgee after the Pledge has become enforceable shall be applied towards satisfaction of the Secured Obligations, including any costs and expenses of the Pledgee in accordance with Clause 4.1 of the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 8.2 Should the proceeds of the enforcement of the Pledge be greater than the outstanding amount of the Secured Obligations, the Pledgee shall pay to the Pledgor any such excess. 9. DISCHARGE OF THE PLEDGE 9.1 This Pledge shall be discharged by, and only by, the express release thereof granted by the Pledgee. 9.2 The Pledgee shall in accordance with the Collateral Agency Agreement, grant an express release of this Pledge without delay upon demand of the Pledgor, as soon as all Secured Obligations shall have been fully and finally discharged and there is no possibility of any further Secured Obligation coming into existence. 9.3 Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or (c) proves not to have been effectively received by the Pledgee; and the Pledgee shall be entitled to enforce the Pledge as if such release or discharge had not occurred. 10 Execution version 10. DUTIES OF THE PLEDGEE The Pledgee shall not be liable for any acts or omissions with respect to the Pledged Assets or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence (grove fout/faute grave) or wilful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Pledged Assets against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 11. RESPONSIBILITY OF THE PLEDGEE The Pledgee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in this Agreement; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with this Agreement; or (iii) the legality, validity, effectiveness, adequacy or enforceability of this Agreement. 12. EXPENSES All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Assets, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge, its enforcement and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. 13. NOTICES 13.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter. 13.2 ADDRESSES The address(es) and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with its name below or any other substitute address, fax number or department or officer as any party may notify to the other parties by not less than five Business Days notice. 11 Execution version THE PLEDGOR: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Fax: +32 10 48 12 24 Attention: Legal Department THE PLEDGEE: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Fax: +32 2 429 4920 Attention: Mr. Dirk De Bleser 13.3 DELIVERY Any communication or document made or delivered by one Person to another under or in connection with this Agreement will only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 13.2 (Addresses), if addressed to that department or officer. 13.4 ENGLISH LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice given under or in connection with this Agreement must be in English. 14. GENERAL 14.1 NO WAIVER No failure or delay by the Pledgee in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Agreement are cumulative and are not exclusive of any remedies provided by law. 12 Execution version 14.2 SEVERABILITY Each of the provisions of this Agreement is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Agreement and which in its economic effect comes as close as practicable to the provision being replaced. 14.3 DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. 14.4 BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor and the Pledgee and their respective successors and assigns. 14.5 ASSIGNMENT The Pledgor may not assign or transfer any of their rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 14.6 EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 14.7 GOVERNING LAW This Agreement shall be governed by and interpreted in accordance with Belgian law. 14.8 JURISDICTION All disputes arising in connection with this Agreement shall be settled by the courts of Brussels, without prejudice to the rights of the Pledgee to take legal action before any other court of competent jurisdiction. 13 Execution version SIGNATORIES Made in 3 originals, of which one will be held by the Pledgor, one will be held by the Pledgee and one will be held by counsel to the ad hoc committee of Noteholders, on 17 February 2004. SOLUTIA EUROPE SA/NV AS PLEDGOR /s/ Kristel DeRoover - -------------------- Name: Kristel DeRoover Title: Attorney - -------------------- Name: Title: KBC BANK NV AS PLEDGEE /s/ Dirk De Blesser - -------------------- Name: Dirk De Blesser Title: Head Operations & Accounting - -------------------- Name: Title: 14 EX-99.16 PWR OF ATTY 18 exh99p16.txt Exhibit 99.16 EXECUTION VERSION TRADEMARK PLEDGE AGREEMENT between AMCIS AG, Hauptstrasse 159, CH-4416 Bubendorf, Switzerland (the PLEDGOR) and KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises under enterprise number 0462.92.0.226, acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE) EXECUTION VERSION - ---------------------------------------------------------------------------- WHEREAS A. Solutia Europe SA/NV (the ISSUER) and the Noteholders have agreed to amend and restate the Issuer's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Issuer and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Issuer will enter into a Fiscal Agency Agreement dated on or about the date of this Agreement among the Issuer, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as defined herein) (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. B. It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor guaranty the prompt payment and performance when due of all obligations of the Issuer under the Credit Documents and grant a pledge of its trademark "Amcis" (as defined below) to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. C. Pursuant to Clause 2.1 of the Collateral Agency Agreement, the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor, as guarantor, towards each of the Noteholders under the Pledgor Subsidiary Guaranty and the other Credit Documents to which it is a party, and accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Pledgor Subsidiary Guaranty and the other Credit Documents. 2 EXECUTION VERSION - ---------------------------------------------------------------------------- D. The Pledgor is the legal and beneficial owner of the trademark "Amcis" (the TRADEMARK, as hereinafter defined). E. In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the Trademark in favour of the Pledgee under the following terms (the AGREEMENT). NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Parties agree as follows: 1. INTERPRETATION 1.1. In this Agreement the following terms have the following meanings: AGREEMENT has the meaning given to it in the Preamble. COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated on or about the date of this Agreement among the Issuer, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time. PARTY means a party to this Agreement. PAYMENT DEFAULT means the default of the Pledgor to pay to the Pledgee any amounts when due owed by the Pledgor under the Pledgor Subsidiary Guaranty, the Collateral Agency Agreement and any other Credit Document to which it is party. PLEDGE means the pledge of the Trademark created or arising pursuant to this Agreement. PLEDGOR SUBSIDIARY GUARANTY means the Subsidiary Guaranty made by the Pledgor in favour of the Pledgee on or about the date of this Agreement. SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Pledgor to the Pledgee, which may arise under, out of, or in connection with the Collateral Agency Agreement, the Pledgor Subsidiary Guaranty or any other Credit Document to which the Pledgor is party. 3 EXECUTION VERSION - ---------------------------------------------------------------------------- TRADEMARK means any and all trademarks registered and pending applications owned by Pledgor in any countries or registration systems which consist of or contain the element "Amcis", including without limitation the trademarks listed in Schedule 1. ---------- Unless the context otherwise requires or unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. 1.2. Where the context so admits, the singular includes the plural and vice versa. 1.3. The headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. 1.4. Any reference in this Agreement to a defined document is a reference to that defined document as amended, supplemented or novated from time to time in accordance with its terms. 2. PLEDGE 2.1. As security for the Secured Obligations, the Pledgor hereby pledges the Trademark to the Pledgee as a first and first priority pledge. 2.2. Within 5 (five) Business Days of the date hereof, the Pledgor shall deliver to the Pledgee a letter substantially in the form as set forth in Schedule 2 for the registration of the Pledge with the ---------- Swiss Federal Intellectual Property Institute, duly signed by the Pledgor. 2.3. The Pledgor authorizes the Pledgee to register the Pledge in other countries or registration systems and undertakes to do all acts and things necessary or useful, and to procure that any and all such acts and things be done to properly effect such further registrations. The costs of such registrations shall be borne by the Pledgor. 2.4. The Pledgor shall when applying for new trademarks containing or consisting of the element "Amcis" in any country or registration system simultaneously register at its own cost the Pledge thereupon. The Pledgor shall without delay inform the Pledgee of any such new applications for trademarks and provide the Pledgee with copies thereof. 4 EXECUTION VERSION - ---------------------------------------------------------------------------- 3. CONTINUING SECURITY 3.1. This Agreement shall create a continuing security and no change or amendment or increase whatsoever to the Notes or in any document or agreement related thereto nor any release of Security shall affect the validity or the scope of this Agreement. This Agreement shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. The Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Agreement (a) grant the Issuer or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) abstain from taking or perfecting any other security and discharge any other security, (d) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, (e) amend the terms and conditions of the Secured Obligations in accordance with the Terms and Conditions of Notes and applicable law, and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 3.2. Without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of a transfer of all or any part of the Secured Obligations by way of assignment or novation in accordance with the Credit Documents or in the event of a change or replacement of the Pledgee or the Pledgor in accordance with the Credit Documents, the Assignments will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as assigned or novated in favour of the Pledgee (or the new Pledgee, if any). To the extent that any such further formality or consent on the part of Pledgor will, nevertheless, be required, the Pledgor hereby undertakes to perform any such formality or consent without delay upon request of the Pledgee, who shall itself act upon the written instructions of the Requisite Noteholders. 4. REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the Pledgor Subsidiary Guaranty and the other Credit Documents to 5 EXECUTION VERSION - ---------------------------------------------------------------------------- which the Pledgor is party, the Pledgor represents and warrants to the Pledgee as of the date hereof and undertakes during the subsistence of this Agreement as follows: 4.1. the Trademark is duly registered in the countries and registration systems listed in Schedule 1 and Pledgor does not own any other ---------- Trademarks than those listed in Schedule 1; ---------- 4.2. in the past the Pledgor had pledged the Trademark to Citibank N.A., New York, in its capacity as administrative agent, and such pledge is today released. However, it is possible that such released pledge is still registered in certain countries and registration systems; the Pledgor is the sole legal and beneficial owner of the Trademark and subject to any remaining registrations of such released pledge, the Trademark is free and clear of any Liens, except for Permitted Liens imposed by mandatory operation of law; this Agreement creates a valid and enforceable pledge over the Trademark in favour of Pledgee under the laws of Switzerland; 4.3. the Pledgor has not assigned, transferred or otherwise disposed of the benefit of the Trademark; 4.4. there are no agreements between the Pledgor and any third party relating to the Pledge that could negatively affect the obligations of the Pledgor or the rights of the Pledgee under this Agreement or the enforcement of the Pledge or the proceeds of the enforcement of the Pledge; 4.5. no third party has made, or to the Pledgor's knowledge threatened to make, any claim against the Pledgor based on the alleged infringement of its intellectual property right in connection with the use of the Trademark in the ordinary course of the Pledgor's business; 4.6. no third party has challenged, or to the Pledgor's knowledge threatened to challenge, the validity of any of the Trademark in any invalidity lawsuit or similar proceedings before competent authorities; 4.7. the Pledgor is not aware of any infringement of the Trademark by third parties; 4.8. the Pledgor is a corporation duly incorporated and validly existing under the laws of Switzerland and is not in liquidation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder; all corporate and other actions required to authorise the execution and performance of this 6 EXECUTION VERSION - ---------------------------------------------------------------------------- Agreement have been duly taken; no consent of any Person is required for the execution, delivery and performance of this Agreement, other than those that have been obtained; 4.9. the Pledgor is not insolvent, nor subject to any insolvency proceedings or in any other similar situation of conflicting claims of creditors in a way, which could give these creditors reasonable grounds for a claim against the Pledgor. No resolutions have been taken, nor has any petition been filed, to dissolve or liquidate the Pledgor, nor has the Pledgor been declared bankrupt nor has a suspension of payments been granted to the Pledgor; 4.10. this Agreement does not violate any law or regulation applicable to the Pledgor as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it, that would prevent it from pledging the Trademark. 5. UNDERTAKINGS The Pledgor hereby undertakes: (a) with the exception of the Pledge or Permitted Liens by mandatory operation of law, not to grant, create or permit any Lien, or otherwise transfer the Trademark or take any other action with respect to the Trademark that could reasonably be expected to jeopardize any rights of the Pledgee under this Agreement, or could reasonably be expected to jeopardize the enforcement or the value of the Pledge; (b) to promptly inform the Pledgee of any fact or event which could reasonably be expected to at any time to jeopardize or affect the Plegdee's right over the Trademark or the Pledgee's ability to enforce the Pledge; (c) to promptly execute and deliver all instruments and documents, and take all action that the Pledgee may reasonably request upon the written instructions of the Requisite Noteholders in order to register, perfect and protect the Pledge or to enable the Pledgee to exercise and enforce its rights and remedies under this Agreement in any country or registration system; (d) to promptly inform the Pledgee of all infringements of the Trademark by third parties, of all third party challenges to the validity of the Trademark and of all third party claims based on the alleged infringement of their intellectual 7 EXECUTION VERSION - ---------------------------------------------------------------------------- property rights in connection with the use of the Trademark in the ordinary course of the Pledgor's business; (e) to do all acts and things necessary to maintain the legal validity and prevent any deterioration of the legal standing of the Trademark, in particular to defend the Trademark against each and every nullity claim by third parties and to take at its own costs legal steps against each and every infringement of the Trademark to the extent such acts, things or steps are reasonable in view of the value of the relevant Trademark. (f) to have the released pledge of the Trademark in favour of Citibank N.A., New York, in its capacity as administrative agent, removed without delay from all registration systems in all countries in which the Trademark is registered. 6. DURATION AND RELEASE 6.1. This Agreement shall remain in full force and effect until the earlier of (a) the date upon which all Secured Obligations have been irrevocably paid and discharged in full; and (b) the date notified by the Pledgee to the Issuer. This Agreement shall not cease to exist if any payments made in satisfaction of the Secured Obligations have only temporarily discharged the Secured Obligations. After the full and complete satisfaction of all Secured Obligations or if so required by Swiss mandatory law, the Pledgee shall release and cancel the security constituted by this Agreement and procure the reassignment to the Pledgor of the property and assets assigned to the Pledgee pursuant to this Agreement. Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or (c) proves not to have been effectively received by the Pledgee; 8 EXECUTION VERSION - ---------------------------------------------------------------------------- and the Pledgee shall be entitled to enforce the Pledge as if such release or discharge had not occurred. 6.2. This security is in addition to any existing or future collateral, guarantee or other security held by the Pledgee. 7. ENFORCEMENT 7.1. At any time after the occurrence of a Payment Default that is continuing, the Pledge shall become immediately enforceable and the Pledgee shall in particular have the right, in addition to all the rights and remedies of a secured party on default under applicable law and subject to the Collateral Agency Agreement and to the Terms and Conditions of Notes, to: (a) enforce the Pledge in respect of the Trademark, in accordance with applicable legal provisions and as set forth in this Agreement; and (b) apply any payments which may be received or receivable by the Pledgee in respect of the Trademark to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (c) exercise all rights and remedies it possesses, and to act generally in relation to the Trademark in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 7.2. When exercising its right to enforce the Pledge after the occurrence of a Payment Default that is continuing, the Pledgee shall be entitled, at its discretion, (a) to sell the Trademark either through public auction (offentliche Versteigerung) or by way of private sale (Selbstverkaufsrecht), without regard to the procedures and formalities provided for in the Swiss Federal Act Debt Collection and Bankruptcy of 1889, as amended, and without any notice thereof to the Pledgor other than a notice intending to inform the Pledgor that a sale of the Trademark will take place, this notice being sent in accordance with Clause 10.8 of this Agreement to the Pledgor no later than 10 (ten) Business Days prior to such sale; or (b) notwithstanding the foregoing and the provisions of Art. 41 of the Swiss Federal Law on the Recovery of Debts and Bankruptcy or any other 9 EXECUTION VERSION - ---------------------------------------------------------------------------- applicable law, to institute and pursue the ordinary procedure for recovery of debt without having first to dispose of the Trademark or to institute statutory proceedings for the realization thereof. 7.3. The Pledgee has the right to acquire the Trademark for itself in any such public auction or private sale. In case of an acquisition of the Trademark by the Pledgee in a private sale, such sale has to be at arm's length, i.e. at the real value (the REAL VALUE (wirklicher Wert)) of the acquired Trademark. If the Pledgor and the Pledgee do not reach an agreement on the Real Value within 30 calendar days following the Pledgee's corresponding offer, the Real Value shall be determined by an independent expert to be mutually appointed by the Parties. The expert's determination of the Real Value shall be final (Schiedsgutachten). If the parties hereto cannot, within 60 days following the Pledgee's offer, agree on the expert to be appointed, the independent expert shall be appointed by the president of the "Treuhand-Kammer", Zurich, Switzerland. 7.4. In view of a realization of the Pledge in accordance with the terms and conditions set forth above, the Pledgor, being the sole owner and holder of the Trademark, hereby expressly declares its approval of the assignment and transfer of the Trademark being subject to such realization to the acquirer of such Trademark. The Pledgor further agrees that the respective acquirer will hold the Trademark following their assignment and transfer and Pledgor will see for it that such acquirer will without any delay be registered as the owner of the Trademark with the Swiss Federal Intellectual Property Institute and/or any other relevant country and registration system listed in Schedule 1. ---------- 7.5. The proceeds from the realization of the Pledge shall be applied to towards the Secured Obligations, including any costs and expenses of the Pledgee, in accordance with the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 8. EXPENSES AND COSTS; DUTIES OF THE PLEDGEE All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Trademark, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of 10 EXECUTION VERSION - ---------------------------------------------------------------------------- the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge, its enforcement and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. The Pledgee shall not be liable for any acts or omissions with respect to the Trademark or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence or willful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Trademark against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 9. TAXES The Pledgor shall pay, promptly on demand of the Pledgee all stamp, registration, notarial and other similar Taxes or fees paid or payable by the Pledgee in connection with any action taken or contemplated by or on behalf of the Pledgee for perfecting, enforcing, releasing, canceling, reassigning or resolving any doubt concerning, or for any other purpose in relation to this Agreement, any amendment thereto, any transfer and/or assignment of the rights and/or obligations under the same or the security created or intended to be created in respect of the Trademark and shall, from time to time, indemnify the Pledgee promptly on demand against any liabilities, costs, claims and expenses resulting from any failure to pay by the Pledgor or any delay by any Pledgor in paying any such Taxes or fees. 10. MISCELLANEOUS 10.1. The Pledgee may disclose and deliver a copy of the present Agreement to any tax or other authority, if asked to do so. 11 EXECUTION VERSION - ---------------------------------------------------------------------------- 10.2. Changes to and amendments of this Agreement including this Clause 10.2 must be made in writing. No oral supplements to this Agreement have been or will be made. 10.3. The rights of each Party under this Agreement: (a) may be exercised as often as necessary; (b) are cumulative and not exclusive of its rights or remedies provided by law; (c) may be waived only in writing and specifically. No failure or delay of a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing this Pledge. 10.4. If any of the provisions of this Agreement should be or become invalid, unenforceable or impractical in whole or in part, the validity of the other provisions hereof shall not be affected. In that case the invalid, unenforceable or impractical provision is deemed to be replaced by such valid and enforceable provision or arrangement, which corresponds as closely as possible to the invalid, unenforceable or impractical provision and to the Parties' economic aims pursued by and reflected in this Agreement. The same applies in the event that this Agreement does not contain a provision which it needs to contain in order to achieve the economic purpose as expressed herein (Regelungslucke). 10.5. Notwithstanding any provision to the contrary contained herein, the parties hereto agree that this Agreement is subject in all respects to the Collateral Agency Agreement and for the avoidance of doubt, in the event of any inconsistency, the provisions of the Collateral Agency Agreement shall prevail. 12 EXECUTION VERSION - ---------------------------------------------------------------------------- 10.6. No modification or amendment of this Agreement shall be binding upon any party hereto unless such modification or amendment shall be in writing and signed a duly authorized officer of the Pledgee and the Pledgor. 10.7. No failure or delay by a party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 10.8. All communications to be made hereunder shall be made in writing to the following addresses: If made to the Pledgor: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming rue Laid Bumiat 3 B-1348 Louvain-la-Neuve Belgium Att.: For the Attention of Legal Department Fax: +32 (0)1 048 1224 If made to the Pledgee: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Att.: Mr Dirk De Bleser Fax: +32 (0)2 429 4920 13 EXECUTION VERSION - ---------------------------------------------------------------------------- 10.9. Any communication or document made or delivered by one Person to another under or in connection with this Agreement shall only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 10.8, if addressed to that department or officer. 10.10. This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail except that where a German translation of a legal term appears in such text, the German translation shall prevail. 10.11. This Agreement shall become effective on 11 February 2004. 11. GOVERNING LAW This Agreement shall be governed by, and construed in accordance with, the substantive laws of Switzerland. 12. JURISDICTION Any and all disputes arising out of or in connection with this Agreement including but not limited to matters of validity, conclusion, binding effect, interpretation, construction, performance or non-performance and remedies shall be subject to the non-exclusive jurisdiction of the Commercial Court (Handelsgericht) of the Canton of Zurich, Switzerland, venue being Zurich 1, subject to review as provided for by law. If there is no ordinary place of foreclosure in Switzerland according to the Federal Statute on Debt Collection and Bankruptcy (SchKG), the place of foreclosure (Betreibungsort) shall be Zurich 1, which shall be the place of performance for obligations arising under this Agreement. 14 EXECUTION VERSION - ---------------------------------------------------------------------------- 13. DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. 14. BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor and the Pledgee and their respective successors and assigns. The expressions Pledgee and Pledgor include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be appointed Collateral Agent. 15. ASSIGNMENT The Pledgee shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to third parties. The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 16. EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 17. RESPONSIBILITY OF THE PLEDGEE 17.1. The Pledgee shall not be responsible to any Noteholder for: (a) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; (b) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or 15 EXECUTION VERSION - ---------------------------------------------------------------------------- (c) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Pledgee). 17.2. Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 11 February 2004 Executed by: AMCIS AG, AS PLEDGOR /s/ Kristel Deroover - ------------------------------ Attorney ............................... KBC BANK NV, AS PLEDGEE /s/ Dirk De Bleser - ------------------------------ Head Operations & Accounting ............................... 16 EX-99.17 (AS APPROP) 19 exh99p17.txt Exhibit 99.17 EXECUTION VERSION TRADEMARK PLEDGE AGREEMENT between CARBOGEN AG, c/o Carbogen Laboratories AG, Schachenallee 29, CH-5000 Aarau, Switzerland (the PLEDGOR) and KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises under enterprise number 0462.92.0.226, acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE) EXECUTION VERSION - ---------------------------------------------------------------------------- WHEREAS A. Solutia Europe SA/NV (the ISSUER) and the Noteholders have agreed to amend and restate the Issuer's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Issuer and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Issuer will enter into a Fiscal Agency Agreement dated on or about the date of this Agreement among the Issuer, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as defined herein) (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. B. It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor guaranty the prompt payment and performance when due of all obligations of the Issuer under the Credit Documents and grant a pledge of its trademark "CarboGen" (as defined below) to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. C. Pursuant to Clause 2.1 of the Collateral Agency Agreement, the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor, as guarantor, towards each of the Noteholders under the Pledgor Subsidiary Guaranty and the other Credit Documents to which it is a party, and accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Pledgor Subsidiary Guaranty and the other Credit Documents. 2 EXECUTION VERSION - ---------------------------------------------------------------------------- D. The Pledgor is the legal and beneficial owner of the trademark "CarboGen" (the TRADEMARK, as hereinafter defined). E. In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the Trademark in favour of the Pledgee under the following terms (the AGREEMENT). NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Parties agree as follows: 1. INTERPRETATION 1.1. In this Agreement the following terms have the following meanings: AGREEMENT has the meaning given to it in the Preamble. COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated on or about the date of this Agreement among the Issuer, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time. PARTY means a party to this Agreement. PAYMENT DEFAULT means the default of the Pledgor to pay to the Pledgee any amounts when due owed by the Pledgor under the Pledgor Subsidiary Guaranty, the Collateral Agency Agreement and any other Credit Document to which it is party. PLEDGE means the pledge of the Trademark created or arising pursuant to this Agreement. PLEDGOR SUBSIDIARY GUARANTY means the Subsidiary Guaranty made by the Pledgor in favour of the Pledgee on or about the date of this Agreement. SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Pledgor to the Pledgee, which may arise under, out of, or in connection with the Collateral Agency Agreement, the Pledgor Subsidiary Guaranty or any other Credit Document to which the Pledgor is party. 3 EXECUTION VERSION - ---------------------------------------------------------------------------- TRADEMARK means any and all trademarks registered and pending applications owned by Pledgor in any countries or registration systems which consist of or contain the element "CarboGen", including without limitation the trademarks listed in Schedule 1. ---------- Unless the context otherwise requires or unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. 1.2. Where the context so admits, the singular includes the plural and vice versa. 1.3. The headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. 1.4. Any reference in this Agreement to a defined document is a reference to that defined document as amended, supplemented or novated from time to time in accordance with its terms. 2. PLEDGE 2.1. As security for the Secured Obligations, the Pledgor hereby pledges the Trademark to the Pledgee as a first and first priority pledge. 2.2. Within 5 (five) Business Days of the date hereof, the Pledgor shall deliver to the Pledgee a letter substantially in the form as set forth in Schedule 2 for the registration of the Pledge with the ---------- Swiss Federal Intellectual Property Institute, duly signed by the Pledgor. 2.3. The Pledgor authorizes the Pledgee to register the Pledge in other countries or registration systems and undertakes to do all acts and things necessary or useful, and to procure that any and all such acts and things be done to properly effect such further registrations. The costs of such registrations shall be borne by the Pledgor. 2.4. The Pledgor shall when applying for new trademarks containing or consisting of the element "CarboGen" in any country or registration system simultaneously register at its own cost the Pledge thereupon. The Pledgor shall without delay inform the Pledgee of any such new applications for trademarks and provide the Pledgee with copies thereof. 4 EXECUTION VERSION - ---------------------------------------------------------------------------- 3. CONTINUING SECURITY 3.1. This Agreement shall create a continuing security and no change or amendment or increase whatsoever to the Notes or in any document or agreement related thereto nor any release of Security shall affect the validity or the scope of this Agreement. This Agreement shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. The Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Agreement (a) grant the Issuer or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) abstain from taking or perfecting any other security and discharge any other security, (d) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, (e) amend the terms and conditions of the Secured Obligations in accordance with the Terms and Conditions of Notes and applicable law, and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 3.2. Without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of a transfer of all or any part of the Secured Obligations by way of assignment or novation in accordance with the Credit Documents or in the event of a change or replacement of the Pledgee or the Pledgor in accordance with the Credit Documents, the Assignments will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as assigned or novated in favour of the Pledgee (or the new Pledgee, if any). To the extent that any such further formality or consent on the part of Pledgor will, nevertheless, be required, the Pledgor hereby undertakes to perform any such formality or consent without delay upon request of the Pledgee, who shall itself act upon the written instructions of the Requisite Noteholders. 4. REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the Pledgor Subsidiary Guaranty and the other Credit Documents to 5 EXECUTION VERSION - ---------------------------------------------------------------------------- which the Pledgor is party, the Pledgor represents and warrants to the Pledgee as of the date hereof and undertakes during the subsistence of this Agreement as follows: 4.1. the Trademark is duly registered in the countries and registration systems listed in Schedule 1 and Pledgor does not own any other ---------- Trademarks than those listed in Schedule 1; ---------- 4.2. in the past the Pledgor had pledged the Trademark to Citibank N.A., New York, in its capacity as administrative agent, and such pledge is today released. However, it is possible that such released pledge is still registered in certain countries and registration systems; the Pledgor is the sole legal and beneficial owner of the Trademark and subject to any remaining registrations of such released pledge, the Trademark is free and clear of any Liens, except for Permitted Liens imposed by mandatory operation of law; this Agreement creates a valid and enforceable pledge over the Trademark in favour of Pledgee under the laws of Switzerland; 4.3. the Pledgor has not assigned, transferred or otherwise disposed of the benefit of the Trademark; 4.4. there are no agreements between the Pledgor and any third party relating to the Pledge that could negatively affect the obligations of the Pledgor or the rights of the Pledgee under this Agreement or the enforcement of the Pledge or the proceeds of the enforcement of the Pledge; 4.5. no third party has made, or to the Pledgor's knowledge threatened to make, any claim against the Pledgor based on the alleged infringement of its intellectual property right in connection with the use of the Trademark in the ordinary course of the Pledgor's business; 4.6. no third party has challenged, or to the Pledgor's knowledge threatened to challenge, the validity of any of the Trademark in any invalidity lawsuit or similar proceedings before competent authorities; 4.7. the Pledgor is not aware of any infringement of the Trademark by third parties; 4.8. the Pledgor is a corporation duly incorporated and validly existing under the laws of Switzerland and is not in liquidation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder; all corporate and other actions required to authorise the execution and performance of this 6 EXECUTION VERSION - ---------------------------------------------------------------------------- Agreement have been duly taken; no consent of any Person is required for the execution, delivery and performance of this Agreement, other than those that have been obtained; 4.9. the Pledgor is not insolvent, nor subject to any insolvency proceedings or in any other similar situation of conflicting claims of creditors in a way, which could give these creditors reasonable grounds for a claim against the Pledgor. No resolutions have been taken, nor has any petition been filed, to dissolve or liquidate the Pledgor, nor has the Pledgor been declared bankrupt nor has a suspension of payments been granted to the Pledgor; 4.10. this Agreement does not violate any law or regulation applicable to the Pledgor as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it, that would prevent it from pledging the Trademark. 5. UNDERTAKINGS The Pledgor hereby undertakes: (a) with the exception of the Pledge or Permitted Liens by mandatory operation of law, not to grant, create or permit any Lien, or otherwise transfer the Trademark or take any other action with respect to the Trademark that could reasonably be expected to jeopardize any rights of the Pledgee under this Agreement, or could reasonably be expected to jeopardize the enforcement or the value of the Pledge; (b) to promptly inform the Pledgee of any fact or event which could reasonably be expected to at any time to jeopardize or affect the Plegdee's right over the Trademark or the Pledgee's ability to enforce the Pledge; (c) to promptly execute and deliver all instruments and documents, and take all action that the Pledgee may reasonably request upon the written instructions of the Requisite Noteholders in order to register, perfect and protect the Pledge or to enable the Pledgee to exercise and enforce its rights and remedies under this Agreement in any country or registration system; (d) to promptly inform the Pledgee of all infringements of the Trademark by third parties, of all third party challenges to the validity of the Trademark and of all third party claims based on the alleged infringement of their intellectual 7 EXECUTION VERSION - ---------------------------------------------------------------------------- property rights in connection with the use of the Trademark in the ordinary course of the Pledgor's business; (e) to do all acts and things necessary to maintain the legal validity and prevent any deterioration of the legal standing of the Trademark, in particular to defend the Trademark against each and every nullity claim by third parties and to take at its own costs legal steps against each and every infringement of the Trademark to the extent such acts, things or steps are reasonable in view of the value of the relevant Trademark. (f) to have the released pledge of the Trademark in favour of Citibank N.A., New York, in its capacity as administrative agent, removed without delay from all registration systems in all countries in which the Trademark is registered. 6. DURATION AND RELEASE 6.1. This Agreement shall remain in full force and effect until the earlier of (a) the date upon which all Secured Obligations have been irrevocably paid and discharged in full; and (b) the date notified by the Pledgee to the Issuer. This Agreement shall not cease to exist if any payments made in satisfaction of the Secured Obligations have only temporarily discharged the Secured Obligations. After the full and complete satisfaction of all Secured Obligations or if so required by Swiss mandatory law, the Pledgee shall release and cancel the security constituted by this Agreement and procure the reassignment to the Pledgor of the property and assets assigned to the Pledgee pursuant to this Agreement. Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or (c) proves not to have been effectively received by the Pledgee; 8 EXECUTION VERSION - ---------------------------------------------------------------------------- and the Pledgee shall be entitled to enforce the Pledge as if such release or discharge had not occurred. 6.2. This security is in addition to any existing or future collateral, guarantee or other security held by the Pledgee. 7. ENFORCEMENT 7.1. At any time after the occurrence of a Payment Default that is continuing, the Pledge shall become immediately enforceable and the Pledgee shall in particular have the right, in addition to all the rights and remedies of a secured party on default under applicable law and subject to the Collateral Agency Agreement and to the Terms and Conditions of Notes, to: (a) enforce the Pledge in respect of the Trademark, in accordance with applicable legal provisions and as set forth in this Agreement; and (b) apply any payments which may be received or receivable by the Pledgee in respect of the Trademark to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (c) exercise all rights and remedies it possesses, and to act generally in relation to the Trademark in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 7.2. When exercising its right to enforce the Pledge after the occurrence of a Payment Default that is continuing, the Pledgee shall be entitled, at its discretion, (a) to sell the Trademark either through public auction (offentliche Versteigerung) or by way of private sale (Selbstverkaufsrecht), without regard to the procedures and formalities provided for in the Swiss Federal Act Debt Collection and Bankruptcy of 1889, as amended, and without any notice thereof to the Pledgor other than a notice intending to inform the Pledgor that a sale of the Trademark will take place, this notice being sent in accordance with Clause 10.8 of this Agreement to the Pledgor no later than 10 (ten) Business Days prior to such sale; or (b) notwithstanding the foregoing and the provisions of Art. 41 of the Swiss Federal Law on the Recovery of Debts and Bankruptcy or any other 9 EXECUTION VERSION - ---------------------------------------------------------------------------- applicable law, to institute and pursue the ordinary procedure for recovery of debt without having first to dispose of the Trademark or to institute statutory proceedings for the realization thereof. 7.3. The Pledgee has the right to acquire the Trademark for itself in any such public auction or private sale. In case of an acquisition of the Trademark by the Pledgee in a private sale, such sale has to be at arm's length, i.e. at the real value (the REAL VALUE (wirklicher Wert)) of the acquired Trademark. If the Pledgor and the Pledgee do not reach an agreement on the Real Value within 30 calendar days following the Pledgee's corresponding offer, the Real Value shall be determined by an independent expert to be mutually appointed by the Parties. The expert's determination of the Real Value shall be final (Schiedsgutachten). If the parties hereto cannot, within 60 days following the Pledgee's offer, agree on the expert to be appointed, the independent expert shall be appointed by the president of the "Treuhand-Kammer", Zurich, Switzerland. 7.4. In view of a realization of the Pledge in accordance with the terms and conditions set forth above, the Pledgor, being the sole owner and holder of the Trademark, hereby expressly declares its approval of the assignment and transfer of the Trademark being subject to such realization to the acquirer of such Trademark. The Pledgor further agrees that the respective acquirer will hold the Trademark following their assignment and transfer and Pledgor will see for it that such acquirer will without any delay be registered as the owner of the Trademark with the Swiss Federal Intellectual Property Institute and/or any other relevant country and registration system listed in Schedule 1. ---------- 7.5. The proceeds from the realization of the Pledge shall be applied to towards the Secured Obligations, including any costs and expenses of the Pledgee, in accordance with the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 8. EXPENSES AND COSTS; DUTIES OF THE PLEDGEE All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Trademark, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of 10 EXECUTION VERSION - ---------------------------------------------------------------------------- the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge, its enforcement and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by it, and the same shall be part of the Secured Obligations. The Pledgee shall not be liable for any acts or omissions with respect to the Trademark or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence or willful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Trademark against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 9. TAXES The Pledgor shall pay, promptly on demand of the Pledgee all stamp, registration, notarial and other similar Taxes or fees paid or payable by the Pledgee in connection with any action taken or contemplated by or on behalf of the Pledgee for perfecting, enforcing, releasing, canceling, reassigning or resolving any doubt concerning, or for any other purpose in relation to this Agreement, any amendment thereto, any transfer and/or assignment of the rights and/or obligations under the same or the security created or intended to be created in respect of the Trademark and shall, from time to time, indemnify the Pledgee promptly on demand against any liabilities, costs, claims and expenses resulting from any failure to pay by the Pledgor or any delay by any Pledgor in paying any such Taxes or fees. 10. MISCELLANEOUS 10.1. The Pledgee may disclose and deliver a copy of the present Agreement to any tax or other authority, if asked to do so. 11 EXECUTION VERSION - ---------------------------------------------------------------------------- 10.2. Changes to and amendments of this Agreement including this Clause 10.2 must be made in writing. No oral supplements to this Agreement have been or will be made. 10.3. The rights of each Party under this Agreement: (a) may be exercised as often as necessary; (b) are cumulative and not exclusive of its rights or remedies provided by law; (c) may be waived only in writing and specifically. No failure or delay of a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing this Pledge. 10.4. If any of the provisions of this Agreement should be or become invalid, unenforceable or impractical in whole or in part, the validity of the other provisions hereof shall not be affected. In that case the invalid, unenforceable or impractical provision is deemed to be replaced by such valid and enforceable provision or arrangement, which corresponds as closely as possible to the invalid, unenforceable or impractical provision and to the Parties' economic aims pursued by and reflected in this Agreement. The same applies in the event that this Agreement does not contain a provision which it needs to contain in order to achieve the economic purpose as expressed herein (Regelungslucke). 10.5. Notwithstanding any provision to the contrary contained herein, the parties hereto agree that this Agreement is subject in all respects to the Collateral Agency Agreement and for the avoidance of doubt, in the event of any inconsistency, the provisions of the Collateral Agency Agreement shall prevail. 12 EXECUTION VERSION - ---------------------------------------------------------------------------- 10.6. No modification or amendment of this Agreement shall be binding upon any party hereto unless such modification or amendment shall be in writing and signed a duly authorized officer of the Pledgee and the Pledgor. 10.7. No failure or delay by a party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 10.8. All communications to be made hereunder shall be made in writing to the following addresses: If made to the Pledgor: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming rue Laid Bumiat 3 B-1348 Louvain-la-Neuve Belgium Att.: For the Attention of Legal Department Fax: +32 (0)1 048 1224 If made to the Pledgee: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Att.: Mr Dirk De Bleser Fax: +32 (0)2 429 4920 13 EXECUTION VERSION - ---------------------------------------------------------------------------- 10.9. Any communication or document made or delivered by one Person to another under or in connection with this Agreement shall only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under Clause 10.8, if addressed to that department or officer. 10.10. This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail except that where a German translation of a legal term appears in such text, the German translation shall prevail. 10.11. This Agreement shall become effective on 11 February 2004. 11. GOVERNING LAW This Agreement shall be governed by, and construed in accordance with, the substantive laws of Switzerland. 12. JURISDICTION Any and all disputes arising out of or in connection with this Agreement including but not limited to matters of validity, conclusion, binding effect, interpretation, construction, performance or non-performance and remedies shall be subject to the non-exclusive jurisdiction of the Commercial Court (Handelsgericht) of the Canton of Zurich, Switzerland, venue being Zurich 1, subject to review as provided for by law. If there is no ordinary place of foreclosure in Switzerland according to the Federal Statute on Debt Collection and Bankruptcy (SchKG), the place of foreclosure (Betreibungsort) shall be Zurich 1, which shall be the place of performance for obligations arising under this Agreement. 14 EXECUTION VERSION - ---------------------------------------------------------------------------- 13. DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. 14. BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor and the Pledgee and their respective successors and assigns. The expressions Pledgee and Pledgor include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be appointed Collateral Agent. 15. ASSIGNMENT The Pledgee shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to third parties. The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 16. EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 17. RESPONSIBILITY OF THE PLEDGEE 17.1. The Pledgee shall not be responsible to any Noteholder for: (a) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; (b) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or 15 EXECUTION VERSION - ---------------------------------------------------------------------------- (c) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Pledgee). 17.2. Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 11 February 2004 Executed by: CARBOGEN AG, AS PLEDGOR /s/ Kristel Deroover - ------------------------------ Attorney .............................................. KBC BANK NV, AS PLEDGEE /s/ Dirk De Bleser - ------------------------------ Head Operations & Accounting .............................................. 16 EX-99.18 20 exh99p18.txt Exhibit 99.18 EXECUTION VERSION ASSIGNMENT AGREEMENT DATED 11 FEBRUARY 2004 BETWEEN AMCIS AG AS ASSIGNOR AND KBC BANK NV AS ASSIGNEE EXECUTION VERSION THIS ASSIGNMENT AGREEMENT (the AGREEMENT) is made on 11 February 2004 BETWEEN: (1) AMCIS AG, a stock corporation (Aktiengesellschaft) organised under the laws of Switzerland, having its corporate seat at Hauptstrasse 159, CH-4416 Bubendorf, Switzerland, which is registered in the Commercial Register (Handelsregister) under registration number CH-280.3.916.120-1, (the ASSIGNOR); and (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises under enterprise number 0462.92.0.226, acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the ASSIGNEE). WHEREAS: (A) Solutia Europe SA/NV (the ISSUER) and the Noteholders have agreed to amend and restate the Issuer's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Issuer and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Issuer will enter into a Fiscal Agency Agreement dated on or about the date of this Agreement among the Issuer, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Assignor guaranty the prompt payment and performance when due of all obligations of the Issuer under the Credit Documents and grant a receivables assignment to the Assignee to secure its obligations to the Assignee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Assignee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Assignor, as guarantor, towards each of the Noteholders under the Assignor Subsidiary Guaranty (as defined below) and the other Credit Documents to which the Assignor is a party, and accordingly the Assignee will have its own independent right to demand performance by the Assignor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Assignee with regard to the sums owed under the Assignor Subsidiary Guaranty (as defined below) and the other Credit Documents. 1 (D) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Assignor agrees to create a security assignment in respect of the Claims (as defined below) in favour of the Assignee under the following terms (the AGREEMENT). NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. INTERPRETATION 1.1 DEFINITIONS In this Agreement: ACCOUNT BALANCES means all present and future assets, such as moneys standing to the credit of the Bank Accounts (as defined below), and all entitlement to interest accruing to any such moneys together with any other assets or rights on deposit on the Bank Accounts. ASSIGNMENT means the assignment of Claims (as defined below) created or arising pursuant to this Agreement. ASSIGNOR SUBSIDIARY GUARANTY means the Subsidiary Guaranty made by the Assignor in favour of the Assignee on or about the date of this Agreement. BANKS means the banks with whom one or several Bank Accounts (as defined below) have been or will be opened. BANK ACCOUNT means any existing account opened in the name of the Assignor including (without limitation) those listed in Schedule 1-B hereto and any update thereof, or any new such ------------ account to be opened in the future in the name of the Assignor. BANK ACCOUNT CLAIMS means all sums owing to the Assignor from the balance from time to time, and as the case may be, the final closing balance of any existing account opened in the name of the Assignor including (without limitation) the Bank Accounts listed in Schedule 1-B and any update thereof, and any other account (whether a current account or a deposit account, or any other type of account) held by the Assignor in any currency with any Person in Switzerland or abroad, or any new such account to be opened in the future in the name of the Assignor. CHF means the lawful currency of Switzerland. CLAIMS means all claims, present or future, actual or contingent, owing to the Assignor, including but not limited to claims in connection with any of the following: Intra-Group Receivables, Loans and Guarantees, Insurance Claims, Trade Receivables, Bank Account Claims. To the extent that such Claims are in existence or outstanding at the time this Agreement comes into force, such Claims are referred to as the EXISTING CLAIMS, and if such Claims will only come into existence in the future they are referred to as the FUTURE CLAIMS. A list of the Existing Claims is attached hereto as Schedules 1-A ------------- to 1-C. The assignment of the assigned Claims also includes the ------ assignment of all claims for unjust enrichment or claims in tort which relate to any intended, concluded, invalid or rescinded agreement. 2 EXECUTION VERSION CO means the Swiss Federal Code of Obligations, as amended. COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated on or about the date of this Agreement among the Issuer, the Subsidiary Guarantors, the Assignee and the Noteholders party thereto, as amended, modified or supplemented from time to time. DEBTOR means each debtor of or counterparty to a Claim. EURO, euro, EUR or (euro) means the lawful currency of the Participating Member States. GROUP means Solutia, Inc. and its Subsidiaries and all Affiliates owned by Solutia, Inc. and its Subsidiaries. INSURANCE CLAIMS means all sums owing to the Assignor from any insurance company on account of any insurance policy (other than any life, health, group insurance or similar insurance policy), whether as insurance indemnities, refunds of premium or otherwise; provided that Insurance Claims shall not include any insurance outstanding as of the date hereof the assignment of which would violate the insurance contract between the Assignor and the relevant insurance company. INTRA-GROUP RECEIVABLE means all sums owing to the Assignor by other members of the Group on any account and of any nature whatsoever. ISSUER means Solutia Europe NV/SA, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, 1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440. LOANS AND GUARANTEES means all sums owing to the Assignor from any Person, and in particular from any affiliated company or associated company, on account of loans, advances (whether in current account or not) or other financial credits made or granted by the Assignor, or on account of any recourse (whether by way of subrogation or otherwise) against any Person by reason of a guarantee or security given by such Assignor for such Person's liabilities. NOTES has the meaning given to such term under (A) of the Preamble. PARTY means a party to this Agreement. PAYMENT DEFAULT means the default of the Assignor to pay to the Assignee any amounts when due owed by the Assignor under the Assignor Subsidiary Guaranty, the Collateral Agency Agreement and any other Credit Document to which it is party. SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Assignor to the Assignee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Assignor Subsidiary Guaranty or any other Credit Document to which the Assignor is party. SECURITY means any and all security granted by any Credit Party to the Assignee with a view to securing the Secured Obligations. SUBSIDIARY means an entity of which a person has direct or indirect control or owns directly or indirectly more than 50% of the voting capital or similar right of ownership and CONTROL for 3 EXECUTION VERSION this purpose means the power to direct the management and the policies of the entity whether through the ownership of voting capital, by contract or otherwise. TRADE RECEIVABLES means all present and future monetary receivables and claims held by the Assignor against clients, purchasers or suppliers of any of them whether resulting from its present or future business or from any other cause at law. Unless the context otherwise requires or unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. 1.2 Where the context so admits, the singular includes the plural and vice versa. 1.3 The headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. 1.4 Any reference in this Agreement to a defined document is a reference to that defined document as amended, supplemented or novated from time to time in accordance with its terms. 2. ASSIGNMENT (a) The Assignor hereby assigns all of the Claims to the Assignee (the ASSIGNMENTS). (b) The Existing Claims shall pass over to the Assignee on execution of this Agreement, and any Future Claims shall pass over to the Assignee on the date such Future Claims arise. (c) Together with the Claims all security interest, collateral and any other rights pertaining thereto, as well as all rights resulting from the underlying agreements including the Assignor's rights to demand repossession against the direct possessor are transferred and assigned to the Assignee. (d) Notwithstanding the provisions of (b) - (c) above, the security interest granted hereunder shall become effective at the time of the execution of this Agreement. (e) Insofar as additional declarations or actions are necessary for the perfection of the security interest to be granted hereunder or its enforcement, the Assignor shall, at the Assignee's request, make such declarations or undertake such actions. (f) The Assignee accepts the before mentioned Assignment. 3. SECURITY PURPOSE The Claims shall serve as collateral in order to secure the prompt and complete payment and discharge of any and all Secured Obligations. 4. LIST OF CLAIMS (a) The Assignor shall provide the Assignee following the occurrence of a Payment Default (or if so requested by the Assignee), in order to permit the safeguarding of its legitimate interests, with a list of those Claims which were still outstanding at the end of the preceding month. Unless otherwise agreed, the list shall show the names, addresses and telephone numbers of the Debtors as well as the outstanding amounts, the invoice dates and the due dates. If one or 4 EXECUTION VERSION several Claims cannot be asserted, the Assignor shall indicate which Claims are affected and for which reasons such Claims cannot be asserted. (b) In order to protect its legitimate interests, the Assignee is entitled to request upon the written instructions of the Requisite Noteholders additional information or documents from the Assignor in order to protect its legitimate interests, and the Assignor shall promptly upon request (but in any event within ten (10) Business Days) provide the Assignee with such information or documents; provided that, unless a Payment Default has occurred and is continuing, the Assignor may retain such information and documents that are subject to a confidentiality undertaking to which the Assignor is bound. (c) For the avoidance of doubt, the Assignee shall also be entitled to any and all Claims if for any reason whatsoever such Claims are not, or are incompletely contained in the list presented to the Assignee. (d) The Assignor shall have the right to deliver the list of Claims on a readable hard disk compatible with usual business software. The Assignee will contact the Assignor from time to time with a view to agreeing the necessary details. (e) If the Assignor employs a third party for its bookkeeping and/or data-processing, the Assignor hereby authorises the Assignee to obtain the lists of Claims directly from such third party at the Assignor's expense and hereby instruct the third party to provide the Assignee with the list in accordance with the terms and conditions of this Agreement. 5. THE ASSIGNOR RIGHTS (a) The Assignor shall have the right to collect and recover the Claims and to take all measures and enter into all agreements with the respective Debtors in the ordinary course of business provided that the Assignor shall not be entitled to collect any amount under any Insurance Claim in excess of EUR 1,000,000. The Assignor may in particular grant reasonable discounts or indulgence to Debtors and/or enter into settlement agreements. The Assignor shall in doing so act with the care of an orderly acting merchant (Sorgfalt eines ordentlichen Kaufmannes). (b) The Assignee may revoke the right mentioned in Clause 5(a) at any time after the occurrence and continuance of a Payment Default. 6. DISCLOSURE AND NOTIFICATION TO BANKS (a) The Assignor shall notify, without delay and in any event within 5 (five) Business Days following the date hereof, the Persons listed on Schedule 1-B at which it currently maintains Bank Accounts of the fact that such Bank Accounts have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. With ---------- respect to each Person other than listed in Schedule 1-B (as said Schedule is supplemented or amended in accordance with Clause 11(j) and paragraph (b) below) at which the Assignor maintains any other Bank Account after the date hereof, the Assignor shall notify, without delay and in any event no later than five (5) Business Days following the date it opens such Bank Account, such Persons of the fact that such Bank Accounts have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date thereof. Each such notification 5 EXECUTION VERSION shall be substantially in the form of Schedule 2 to this Agreement. ---------- For the avoidance of doubt, the Assignee shall not have any obligation to obtain the signed acknowledgements itself. (b) Subject to and in accordance with the terms and conditions of the Credit Documents and of this Agreement, the Assignee hereby authorises the Assignor to use any Account Balances in the ordinary course of business or where such a disposal is required by law until such authorisation is revoked in accordance with Clause 8.(a). (c) The Assignor hereby acknowledges that following the Assignment, the Assignee is authorised to obtain at any time from the Bank all required information regarding the Bank Accounts, and, upon the occurrence and continuance of a Payment Default, to dispose of any Account Balance without the consent of the Assignor within the limits of this Agreement. 7. DISCLOSURE AND NOTIFICATION TO OTHER DEBTORS (a) As long as no Payment Default shall have occurred and is continuing, the Assignor shall be free to collect all amounts due under the Claims as it sees fit. The Assignor shall notify, without delay and in any event no later than five (5) Business Days following the date hereof, the debtors and counterparties listed on Schedule 1-A against whom it currently holds Intra-Group Receivables of the fact that such Intra-Group Receivables owing from them have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 3 to this Agreement. With ---------- respect to each Intra-Group Receivable arising from debtors other than those listed in Schedule 1-A to this Agreement (as said Schedule 1-A is supplemented or amended pursuant to Clause 11(a)) that the Assignor acquires after the date hereof, the Assignor shall notify, without delay and in any event no later than five (5) Business Days following the date of such acquisition, the debtors and counterparties against whom it holds such Intra-Group Receivables of the fact that such Intra-Group Receivables owing from them have been pledged to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date of such acquisition. Each such notification shall be substantially in the form of Schedule 3 to this Agreement. ---------- For the avoidance of doubt, the Assignee shall not have any obligation to obtain the debtors' and counterparties' signed acknowledgements itself. (b) Upon the occurrence of a Payment Default that is continuing, the Assignor shall immediately notify the debtors and counter parties against whom it holds Trade Receivables of the fact that the Trade Receivables owing from them have been pledged to the Assignee pursuant to this Agreement, and that such Claims may only be discharged by payment to the Assignee. Such notification shall be substantially in the form of Schedule 4 to this Agreement. ---------- (c) The Assignor shall notify, without delay and in any event no later than ten (10) Business Days following the date hereof, the counterparties to the insurance contracts listed on Schedule 1-C of the fact that any insurance owed or to be owed under such insurance contracts have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such counterparties' signed acknowledgements thereto no later than twenty (20) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. With respect to any Insurance ---------- Claims owed or to be owed under insurance contracts other than those listed in Schedule 1-C to this Agreement (as said Schedule 1-C is supplemented or amended pursuant to 6 EXECUTION VERSION Clause 11(a)) that the Assignor enters into after the date hereof, the Assignor shall notify, without delay and in any event no later than ten (10) Business Days following the date of such entering into such insurance contracts, the counterparties to such insurance contracts of the fact that such Insurance Claims owing or to be owed from them have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such counterparties' signed acknowledgements no later than twenty (20) Business Days following the date of entering into such insurance contracts. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. For the ---------- avoidance of doubt, the Assignee shall not have any obligation to obtain the counterparties' signed acknowledgements itself. (d) The Assignor shall provide the Assignee without delay with a copy of any notification given pursuant to this Clause 7, together with the adequate evidence of such notification having been sent and received. For the avoidance of doubt, the Assignee shall not have any obligations to investigate or verify whether the Assignor has complied with any of its notification obligations. (e) The Assignee may give any notice required to be given pursuant to this Clause 7 if the Assignor has not given such notice within five (5) Business Days after the Assignor is required or at any time following the occurrence and during the continuance of a Payment Default. For this purpose, the Assignor will deliver to the Assignee simultaneously with the execution of this Agreement, notifications in the form of Schedules 2, 3, 4 and 5 to this Agreement, duly printed on its letterhead and duly executed by the Assignor. Each notification made by the Assignee in accordance with Clause 6 or this Clause 7 may be accompanied by a photocopy of such notification. The Assignee shall only give any notice in accordance with this Clause, upon instructions of the Requisite Noteholders. (f) The Assignee shall have no responsibility in connection with the perfection measures contemplated in Clause 6 and this Clause 7 except for its gross negligence or wilful misconduct. 8. ENFORCEMENT AND COLLECTION (a) If a Payment Default occurs and is continuing, the Assignee is entitled, without regard to the procedures and formalities provided for in the Swiss Federal Act Debt Collection and Bankruptcy of 1889, as amended: (i) to immediately realise any and all of the Claims to the extent necessary to satisfy any outstanding Secured Obligations by collecting all or part of the Claims; (ii) to revoke, with immediate effect, the Assignor's authorisation to dispose of the Account Balances vis-a-vis the Banks; and (iii) to realize, at its discretion, all or part of the Account Balances (including, for the avoidance of doubt, any new payments of Trade Receivables made to the Bank Accounts subsequent to the revocation mentioned above). (b) To the extent the Assignee is entitled to collect the Claims, it may request upon the written instructions of the Requisite Noteholders that all documents relating to the Claims be handed over to the Assignee and the Assignor hereby agrees to comply promptly with any such request. If a Payment Default is not continuing, the Assignee's right to collect the Claims shall cease and the Assignee shall pay over to the Assignor all moneys received in connection with such collection and retained by it during the continuance of the Payment Default (such 7 EXECUTION VERSION payments being inclusive of daily interest) save to the extent any such moneys have been applied in payment of any of the Secured Obligations. (c) If and to the extent the Assignee collects any Claims pursuant to this Clause 8 (Enforcement and Collection) hereof, it may take all measures and enter into all agreements with such Debtors which it considers to be expedient. In particular, the Assignee may grant discounts or indulgence to Debtors and/or enter into settlement agreements. 9. RIGHT OF INSPECTION The Assignor shall allow the Assignee to inspect at any time during normal business hours its records, or to have them inspected by a duly authorised representative, for the purpose of evaluating and enforcing the Claims. However, as long as no right of realisation exists a right of inspection for the purpose of inspecting and checking the Claims only shall only be upon reasonable advance notification and during normal business hours. 10. BOOKKEEPING AND DATA-PROCESSING (a) If the Claims have been stored in an electronic data-processing system, the Assignor shall allow the Assignee access to the computer, including the peripheral equipment and all data concerning the Claims. Moreover, software operators shall be made available insofar as required, and any assistance required shall be provided to the Assignee. If a third party handles the electronic processing of data, the Assignor hereby authorises the Assignee to obtain these services, and instructs such third party to handle the processing of data for the Assignee upon its instructions as it did for the Assignor. (b) If, and to the extent, documents required for the inspecting, checking, evaluation or realisation of the assigned Claims have been delivered by the Assignor to a third party (especially to an accountant or tax advisor) the Assignor hereby assigns to the Assignee its claims against such third party for providing information and for delivering such documents and hereby instructs the third party to provide the Assignee with such information and documents required to inspect, check, evaluate and realise the assigned Claims. In so far as an electronic data processing is executed by third parties the Assignor hereby assigns to the Assignee all its claims for performance and instructs these third parties to execute the electronic data processing on behalf of the Assignee in the same manner as they were obliged towards the Assignor, provided that the Assignee requests them to do so. The Assignee hereby accepts the aforementioned assignments. 11. UNDERTAKINGS The Assignor undertakes: (a) not to take any steps, including without limitation to the exercise of any right it has under any agreement under which the Claims arise, which may jeopardise or materially adversely affect the security interest constituted in this Agreement. (b) to provide the Assignee promptly at its reasonable request all information and documents which are necessary to asserting the Claims. (c) to procure, to the extent possible under Swiss law, that no executory seizure is made on the Claims, and that any conservatory seizure thereon is lifted within sixty (60) days of it first being made; and to inform the Assignee promptly of any attachments (Pfandungen, Arrest) regarding any and all of the Claims or any other measures 8 EXECUTION VERSION which may impair or jeopardise the Assignee's rights relating to the Claims. In the event of an attachment, the Assignor undertakes to forward to the Assignee without undue delay a copy of the attachment order (Pfandungsurkunde, Arrestbefehl) and all other documents necessary for a defence against the attachment or its realisation. The Assignor shall inform the attaching creditor promptly about the Assignee's security interests; (d) to notify the Assignee promptly of any event or circumstance which might materially adversely affect the validity or enforceability of this Agreement; (e) to promptly execute such further instruments and documents and do such other acts as are necessary in order to fully effect the purposes of this Agreement as the Assignee may from time to time reasonably request upon written instructions from the Requisite Noteholders; (f) not to assign or sell any of the Claims to any third party without the Assignee's prior written consent, except as permitted under the Credit Documents; (g) not to enter into any kind of arrangement that would provide for the non-assignability of any assigned Claims or subject the assignability to the consent of a party other than the Assignee, without the prior written consent of the Assignee; (h) not to dispose of the amounts standing to the credit of any Bank Account other than in the ordinary course of business or where such a disposal is required by law or approved by the Assignee in advance in writing; and (i) in relation to the conduct of its business, to exclusively use the Bank Accounts, and, in particular, (i) to generally use its best endeavours to ensure that all Debtors and other persons make payments in relation to Claims to the Bank Accounts, and (ii) promptly forward any Trade Receivables that have been paid otherwise than into the Bank Accounts to the Bank Accounts. (j) Without delay and in any event no later than five (5) Business Days following the date of acquisition of an Intra-Group Receivable arising from a debtor or counterparty that is not listed on Schedule 1-A (as supplemented from time to time), the Assignor shall deliver a written notice to the Assignee, setting forth the name and address of such additional debtor or counterparty (it being understood that such written notice shall be deemed to supplement Schedule 1-A annexed hereto for all purposes of this Agreement); and without delay and in any event no later than five (5) Business Days following the date that the Assignor opens any Bank Account at a Person that is not listed on Schedule 1-B (as supplemented from time to time), the Assignor shall deliver a written notice to the Assignee, setting forth the name and address of such Person and the account number of such Bank Account (it being understood that such written notice shall be deemed to supplement Schedule 1-B annexed hereto for all purposes of this Agreement); and without delay and in any event no later than five (5) Business Days following the date that the Assignor enters into an insurance contract with a Person that is not listed on Schedule 1-C (as supplemented from time to time), the Assignor shall deliver a written notice to the Assignee, setting forth the name and address of such Person and the contract number of such insurance contract (it being understood that such written notice shall be deemed to supplement Schedule 1-C annexed hereto for all purposes of this Agreement). 9 EXECUTION VERSION 12. REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Assignor under the Collateral Agency Agreement, Subsidiary Guaranty and the other Credit Documents to which the Assignor is a party, the Assignor represents and warrants to the Assignee as of the date hereof and undertakes during the subsistence of this Agreement as follows: (a) it is validly existing and neither insolvent, nor subject to any insolvency proceedings or in any other similar situation of conflicting claims of creditors in a way, which could give these creditors reasonable grounds for a claim against the Assignor. No resolutions have been taken, nor has any petition been filed, to dissolve or liquidate the Assignor, nor has the Assignor been declared bankrupt nor has a suspension of payments been granted to the Assignor; (b) it has all requisite power and authority to execute, deliver and perform this Agreement and this Agreement has been duly authorized, executed and delivered and constitutes the legally valid and binding obligations of the Assignor, enforceable against it in accordance with its terms; (c) it is the holder (Forderungsinhaber) of the Existing Claims and the rights assigned hereunder, and such Existing Claims are free of Liens other than Permitted Liens imposed by mandatory operation of law; (d) it is the unrestricted creditor and beneficiary of the Bank Accounts, free from any Lien (save for Permitted Liens imposed by mandatory operation of law) and that none of the Bank Accounts have been assigned to any Person other than the Assignee; (e) all Claims can be transferred and assigned under the laws and agreements by which they are governed; (f) Schedule 1-A, as said Schedule 1-A may be supplemented from ------------ ------------ time to time pursuant to the provisions of Clause 11(j), contains a true, accurate and complete list of the names and addresses of all the debtors and counterparties against whom it currently holds Intra-Group Receivables and Trade Receivables; Schedule 1-B, as said Schedule 1-B may be ------------ ------------ supplemented from time to time pursuant to the provisions of Clause 11(j), contains a true, accurate and complete list of the names and addresses of all Persons at which the Assignor currently maintains Bank Accounts; Schedule 1-C, as said ------------ Schedule 1-C may be supplemented from time to time pursuant to ------------ the provisions of Clause 11(j), contains a true, accurate and complete list of the names and addresses of all the Persons with which the Assignor currently holds insurance contracts; (g) it has the right to freely dispose (verfugen) of the Existing Claims and rights and such disposition does not violate the rights of any third party or any regulatory orders; (h) This Agreement does not violate any law or regulation applicable to the Assignor as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it, that would prevent it from assigning the Claims. 10 EXECUTION VERSION 13. INDEMNITY 13.1 LIABILITY FOR DAMAGES The Assignee shall not be liable for any loss or damage suffered by the Assignor save in respect of such loss or damage which is suffered as a result of the gross negligence or wilful misconduct of the Assignee. The Assignee shall not be under any obligation to the Assignor to take any steps necessary to preserve any rights in the Claims against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Assignor and shall be part of the Secured Obligations. If any such expenses are borne by the Assignee, the Assignor shall on first demand reimburse the Assignee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 13.2 INDEMNIFICATION The Assignor will indemnify the Assignee and keep the Assignee and any attorney, manager, agent or other Person appointed by the Assignee under this Agreement in accordance with and to the extent required under the Notes indemnified against any losses, actions, claims, expenses, demands and liabilities which may be reasonably incurred by or made against the Assignee for anything done or omitted in the exercise or purported exercise of the powers contained herein and caused by any breach of the Assignor of any of its obligations or undertakings contained herein other than to the extent that such losses, actions, claims, expenses, demands and liabilities are incurred or made against the Assignee as a result of the gross negligence or wilful misconduct of any Assignee. 14. DURATION AND INDEPENDENCE 14.1 DURATION This Agreement shall remain in full force and effect until the earlier of (a) the date upon which all Secured Obligations have been irrevocably paid and discharged in full; and (b) the date notified by the Assignee to the Issuer. This Agreement shall not cease to exist if any payments made in satisfaction of the Secured Obligations have only temporarily discharged the Secured Obligations. 14.2 CONTINUING SECURITY (a) This Agreement shall create a continuing security and no change or amendment or increase whatsoever to the Notes or in any document or agreement related thereto nor shall any release of Security affect the validity or the scope of this Agreement. This Agreement shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Assignor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Assignor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Assignor or any other Person. The Assignee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Agreement (a) grant the Issuer or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) abstain from taking or perfecting any other security and discharge any other security, (d) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, (e) amend the terms and conditions of the Secured Obligations in accordance with the Terms and Conditions of Notes and applicable law, and (f) apply any payment received from the Assignor or for its account towards the Secured Obligations or any other obligations of the Assignor of the Assignee's choice. 11 EXECUTION VERSION (b) Without prejudice to the scope of the Secured Obligations, the Assignor and the Assignee agree that in the event of a transfer of all or any part of the Secured Obligations by way of assignment or novation in accordance with the Credit Documents or in the event of a change or replacement of the Assignee or the Assignor in accordance with the Credit Documents, the Assignments will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as assigned or novated in favour of the Assignee (or a new assignee, if any). To the extent that any such further formality or consent on the part of Assignor will, nevertheless, be required, the Assignor hereby undertakes to perform any such formality or consent without delay upon the Assignee request. 14.3 INDEPENDENCE This Agreement is independent from any other Security. No other such Security shall prejudice, be prejudiced by, or be merged in any way with, this Agreement. If there is a conflict between this Agreement and the Terms and Conditions of Notes then (to the extent permitted by law) the Terms and Conditions of Notes shall take priority over the provisions of this Agreement. 15. COSTS AND EXPENSES The Assignor will pay to the Assignee the amount of all costs, charges, fees and expenses (including fees for legal advisers) reasonably incurred by the Assignee in connection with the preparation, execution, performance, enforcement and amendment of this Agreement, or any waiver in relation thereto, together in each case with any applicable value added tax or other taxes. 16. MISCELLANEOUS 16.1 AMENDMENTS Changes to and amendments of this Agreement including this Clause 16.1 (Amendments) must be made in writing. No oral supplements to this Agreement have been or will be made. 16.2 WAIVERS AND REMEDIES CUMULATIVE The rights of each Party under this Agreement: (a) may be exercised as often as necessary; (b) are cumulative and not exclusive of its rights or remedies provided by law; (c) may be waived only in writing and specifically. No failure or delay by a party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Assignee hereunder shall be in addition to any other right vested in the Assignee and all such rights may be exercised from time to time and as often as the Assignee may deem expedient. The Assignor waives any right it may have of first requiring the Assignee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Assignment. 12 EXECUTION VERSION 17. SEVERABILITY If any of the provisions of this Agreement should be or become invalid, unenforceable or impractical in whole or in part, the validity of the other provisions hereof shall not be affected. In that case the invalid, unenforceable or impractical provision is deemed to be replaced by such valid and enforceable provision or arrangement, which corresponds as closely as possible to the invalid, unenforceable or impractical provision and to the Parties' economic aims pursued by and reflected in this Agreement. The same applies in the event that this Agreement does not contain a provision which it needs to contain in order to achieve the economic purpose as expressed herein (Regelungslucke). 18. RELEASE OF SECURITY After the full and complete satisfaction of all Secured Obligations or if so required by Swiss mandatory law, the Assignee shall reassign to the Assignor the Claims and surrender the excess proceeds, if any, resulting from any realisation of the Claims. The Assignee will, however, transfer any claims to a third party to the extent it is obliged to do so. Any release or discharge shall be null and void and without effect if any payment received by the Assignee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Assignee to a third party; or (c) proves not to have been effectively received by the Assignee; and the Assignee shall be entitled to enforce this Agreement as if such release or discharge had not occurred. 19. NOTICES AND THEIR LANGUAGE 19.1 NOTICES All communications to be made hereunder shall be made in writing to the following addresses: If made to the Assignor: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming rue Laid Bumiat 3 B-1348 Louvain-la-Neuve Belgium Att.: For the Attention of Legal Department Fax: +32 (0)1 048 1224 13 EXECUTION VERSION If made to the Assignee: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Att.: Mr Dirk De Bleser Fax: +32 (0)2 429 4920 Any communication or document made or delivered by one Person to another under or in connection with this Agreement shall only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address(es) with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under this Clause 19.1, if addressed to that department or officer. 19.2 LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail except that where a German translation of a legal term appears in such text, the German translation shall prevail. 20. GOVERNING LAW This Agreement shall be governed by the substantive laws of Switzerland. 21. JURISDICTION Any and all disputes arising out of or in connection with this Agreement including but not limited to matters of validity, conclusion, binding effect, interpretation, construction, performance or non-performance and remedies shall be subject to the non-exclusive jurisdiction of the Commercial Court (Handelsgericht) of the Canton of Zurich, Switzerland, venue being Zurich 1, subject to review as provided for by law. If there is no ordinary place of foreclosure in Switzerland according to the Federal Statute on Debt Collection and Bankruptcy (SchKG), the place of foreclosure (Betreibungsort) shall be Zurich 1, which shall be the place of performance for obligations arising under this Agreement. 22. DELEGATION OF POWERS The Assignee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Assignee in its absolute discretion may think fit. 14 EXECUTION VERSION 23. BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Assignor and the Assignee and their respective successors and assigns. The expressions Assignee and Assignor include their respective successors, and, in the case of the Assignee, its nominee or such other Person as may from time to time be appointed Collateral Agent. 24. ASSIGNMENT This Agreement shall be binding upon the parties hereto and their respective successors in law. The Assignee shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to third parties. The Assignor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Assignee. 25. EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE ASSIGNOR A certificate by the Assignee as to the amount and the terms and conditions of the Secured Obligations owing to the Assignee from the Assignor is, prima facie evidence of the matters to which it relates. 26. RESPONSIBILITY OF THE ASSIGNEE (a) The Assignee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or (iii) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Collateral Agent). (b) Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 15 EXECUTION VERSION SIGNATORIES Made in three (3) originals, of which one will be held by the Assignor, one will be held by the Assignee and one will be held by counsel to the ad hoc committee of Noteholders, on 11 February 2004. AMCIS AG, AS ASSIGNOR /s/ Kristel Deroover - ----------------------------------- Name: Kristel Deroover Title: Attorney - ----------------------------------- Name: Title: KBC BANK NV, AS ASSIGNEE /s/ Dirk De Bleser - ----------------------------------- Name: Dirk De Bleser Title: Head Operations & Accounting - ----------------------------------- Name: Title: 16 EX-99.19 21 exh99p19.txt Exhibit 99.19 EXECUTION VERSION ASSIGNMENT AGREEMENT DATED 11 FEBRUARY 2004 BETWEEN CARBOGEN AG AS ASSIGNOR AND KBC BANK NV AS ASSIGNEE EXECUTION VERSION THIS ASSIGNMENT AGREEMENT (the AGREEMENT) is made on 11 February 2004 BETWEEN: (1) CARBOGEN AG, a stock corporation (Aktiengesellschaft) organised under the laws of Switzerland, having its corporate seat at c/o Carbogen Laboratories AG, Schachenallee 29, CH-5000 Aarau, Switzerland, which is registered in the Commercial Register (Handelsregister) under registration number CH-400.3.020.068-6, (the ASSIGNOR); and (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises under enterprise number 0462.92.0.226, acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the ASSIGNEE). WHEREAS: (A) Solutia Europe SA/NV (the ISSUER) and the Noteholders have agreed to amend and restate the Issuer's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Issuer and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Issuer will enter into a Fiscal Agency Agreement dated on or about the date of this Agreement among the Issuer, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Assignor guaranty the prompt payment and performance when due of all obligations of the Issuer under the Credit Documents and grant a receivables assignment to the Assignee to secure its obligations to the Assignee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Assignee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Assignor, as guarantor, towards each of the Noteholders under the Assignor Subsidiary Guaranty (as defined below) and the other Credit Documents to which the Assignor is a party, and accordingly the Assignee will have its own independent right to demand performance by the Assignor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Assignee with regard to the sums owed under the Assignor Subsidiary Guaranty (as defined below) and the other Credit Documents. 1 EXECUTION VERSION (D) In consideration of the agreements set forth herein and in the Terms and Conditions of Notes, the Agreement of Understanding and the other Credit Documents, the Assignor agrees to create a security assignment in respect of the Claims (as defined below) in favour of the Assignee under the following terms (the AGREEMENT). NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. INTERPRETATION 1.1 DEFINITIONS In this Agreement: ACCOUNT BALANCES means all present and future assets, such as moneys standing to the credit of the Bank Accounts (as defined below), and all entitlement to interest accruing to any such moneys together with any other assets or rights on deposit on the Bank Accounts. ASSIGNMENT means the assignment of Claims (as defined below) created or arising pursuant to this Agreement. ASSIGNOR SUBSIDIARY GUARANTY means the Subsidiary Guaranty made by the Assignor in favour of the Assignee on or about the date of this Agreement. BANKS means the banks with whom one or several Bank Accounts (as defined below) have been or will be opened. BANK ACCOUNT means any existing account opened in the name of the Assignor including (without limitation) those listed in Schedule 1-B hereto and any update thereof, or any new such ------------ account to be opened in the future in the name of the Assignor. BANK ACCOUNT CLAIMS means all sums owing to the Assignor from the balance from time to time, and as the case may be, the final closing balance of any existing account opened in the name of the Assignor including (without limitation) the Bank Accounts listed in Schedule 1-B and any update thereof, and any other account (whether a current account or a deposit account, or any other type of account) held by the Assignor in any currency with any Person in Switzerland or abroad, or any new such account to be opened in the future in the name of the Assignor. CHF means the lawful currency of Switzerland. CLAIMS means all claims, present or future, actual or contingent, owing to the Assignor, including but not limited to claims in connection with any of the following: Intra-Group Receivables, Loans and Guarantees, Insurance Claims, Trade Receivables, Bank Account Claims. To the extent that such Claims are in existence or outstanding at the time this Agreement comes into force, such Claims are referred to as the EXISTING CLAIMS, and if such Claims will only come into existence in the future they are referred to as the FUTURE CLAIMS. A list of the Existing Claims is attached hereto as Schedules 1-A ------------- to 1-C. The assignment of the assigned Claims also includes the ------ assignment of all claims for unjust enrichment or claims in tort which relate to any intended, concluded, invalid or rescinded agreement. CO means the Swiss Federal Code of Obligations, as amended. 2 EXECUTION VERSION COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated among the Issuer, the Subsidiary Guarantors, the Assignee and the Noteholders party thereto, as amended, modified or supplemented from time to time. DEBTOR means each debtor of or counterparty to a Claim. EURO, euro, EUR or (euro) means the lawful currency of the Participating Member States. GROUP means Solutia, Inc. and its Subsidiaries and all Affiliates owned by Solutia, Inc. and its Subsidiaries. INSURANCE CLAIMS means all sums owing to the Assignor from any insurance company on account of any insurance policy (other than any life, health, group insurance or similar insurance policy), whether as insurance indemnities, refunds of premium or otherwise; provided that Insurance Claims shall not include any insurance outstanding as of the date hereof the assignment of which would violate the insurance contract between the Assignor and the relevant insurance company. INTRA-GROUP RECEIVABLE means all sums owing to the Assignor by other members of the Group on any account and of any nature whatsoever. ISSUER means Solutia Europe NV/SA, a Belgian company limited by shares, having its registered office at Boondaelse Steenweg 6, 1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.474.440. LOANS AND GUARANTEES means all sums owing to the Assignor from any Person, and in particular from any affiliated company or associated company, on account of loans, advances (whether in current account or not) or other financial credits made or granted by the Assignor, or on account of any recourse (whether by way of subrogation or otherwise) against any Person by reason of a guarantee or security given by such Assignor for such Person's liabilities. NOTES has the meaning given to such term under (A) of the Preamble. PARTY means a party to this Agreement. PAYMENT DEFAULT means the default of the Assignor to pay to the Assignee any amounts when due owed by the Assignor under the Assignor Subsidiary Guaranty, the Collateral Agency Agreement and any other Credit Document to which it is party. SECURED OBLIGATIONS means all present and future actual and contingent indebtedness, obligations, and liabilities of the Assignor to the Assignee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Assignor Subsidiary Guaranty or any other Credit Document to which the Assignor is party. SECURITY means any and all security granted by any Credit Party to the Assignee with a view to securing the Secured Obligations. SUBSIDIARY means an entity of which a person has direct or indirect control or owns directly or indirectly more than 50% of the voting capital or similar right of ownership and CONTROL for this purpose means the power to direct the management and the policies of the entity whether through the ownership of voting capital, by contract or otherwise. 3 EXECUTION VERSION TRADE RECEIVABLES means all present and future monetary receivables and claims held by the Assignor against clients, purchasers or suppliers of any of them whether resulting from its present or future business or from any other cause at law. Unless the context otherwise requires or unless otherwise defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. 1.2 Where the context so admits, the singular includes the plural and vice versa. 1.3 The headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. 1.4 Any reference in this Agreement to a defined document is a reference to that defined document as amended, supplemented or novated from time to time in accordance with its terms. 2. ASSIGNMENT (a) The Assignor hereby assigns all of the Claims to the Assignee (the ASSIGNMENTS). (b) The Existing Claims shall pass over to the Assignee on execution of this Agreement, and any Future Claims shall pass over to the Assignee on the date such Future Claims arise. (c) Together with the Claims all security interest, collateral and any other rights pertaining thereto, as well as all rights resulting from the underlying agreements including the Assignor's rights to demand repossession against the direct possessor are transferred and assigned to the Assignee. (d) Notwithstanding the provisions of (b) - (c) above, the security interest granted hereunder shall become effective at the time of the execution of this Agreement. (e) Insofar as additional declarations or actions are necessary for the perfection of the security interest to be granted hereunder or its enforcement, the Assignor shall, at the Assignee's request, make such declarations or undertake such actions. (f) The Assignee accepts the before mentioned Assignment. 3. SECURITY PURPOSE The Claims shall serve as collateral in order to secure the prompt and complete payment and discharge of any and all Secured Obligations. 4. LIST OF CLAIMS (a) The Assignor shall provide the Assignee following the occurrence of a Payment Default (or if so requested by the Assignee), in order to permit the safeguarding of its legitimate interests, with a list of those Claims which were still outstanding at the end of the preceding month. Unless otherwise agreed, the list shall show the names, addresses and telephone numbers of the Debtors as well as the outstanding amounts, the invoice dates and the due dates. If one or several Claims cannot be asserted, the Assignor shall indicate which Claims are affected and for which reasons such Claims cannot be asserted. 4 EXECUTION VERSION (b) In order to protect its legitimate interests, the Assignee is entitled to request upon the written instructions of the Requisite Noteholders additional information or documents from the Assignor in order to protect its legitimate interests, and the Assignor shall promptly upon request (but in any event within ten (10) Business Days) provide the Assignee with such information or documents; provided that, unless a Payment Default has occurred and is continuing, the Assignor may retain such information and documents that are subject to a confidentiality undertaking to which the Assignor is bound. (c) For the avoidance of doubt, the Assignee shall also be entitled to any and all Claims if for any reason whatsoever such Claims are not, or are incompletely contained in the list presented to the Assignee. (d) The Assignor shall have the right to deliver the list of Claims on a readable hard disk compatible with usual business software. The Assignee will contact the Assignor from time to time with a view to agreeing the necessary details. (e) If the Assignor employs a third party for its bookkeeping and/or data-processing, the Assignor hereby authorises the Assignee to obtain the lists of Claims directly from such third party at the Assignor's expense and hereby instruct the third party to provide the Assignee with the list in accordance with the terms and conditions of this Agreement. 5. THE ASSIGNOR RIGHTS (a) The Assignor shall have the right to collect and recover the Claims and to take all measures and enter into all agreements with the respective Debtors in the ordinary course of business provided that the Assignor shall not be entitled to collect any amount under any Insurance Claim in excess of EUR 1,000,000. The Assignor may in particular grant reasonable discounts or indulgence to Debtors and/or enter into settlement agreements. The Assignor shall in doing so act with the care of an orderly acting merchant (Sorgfalt eines ordentlichen Kaufmannes). (b) The Assignee may revoke the right mentioned in Clause 5(a) at any time after the occurrence and continuance of a Payment Default. 6. DISCLOSURE AND NOTIFICATION TO BANKS (a) The Assignor shall notify, without delay and in any event within 5 (five) Business Days following the date hereof, the Persons listed on Schedule 1-B at which it currently maintains Bank Accounts of the fact that such Bank Accounts have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. With ---------- respect to each Person other than listed in Schedule 1-B (as said Schedule is supplemented or amended in accordance with Clause 11(j) and paragraph (b) below) at which the Assignor maintains any other Bank Account after the date hereof, the Assignor shall notify, without delay and in any event no later than five (5) Business Days following the date it opens such Bank Account, such Persons of the fact that such Bank Accounts have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date thereof. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. For the ---------- avoidance of doubt, the Assignee shall not have any obligation to obtain the signed acknowledgements itself. 5 EXECUTION VERSION (b) Subject to and in accordance with the terms and conditions of the Credit Documents and of this Agreement, the Assignee hereby authorises the Assignor to use any Account Balances in the ordinary course of business or where such a disposal is required by law until such authorisation is revoked in accordance with Clause 8.(a). (c) The Assignor hereby acknowledges that following the Assignment, the Assignee is authorised to obtain at any time from the Bank all required information regarding the Bank Accounts, and, upon the occurrence and continuance of a Payment Default, to dispose of any Account Balance without the consent of the Assignor within the limits of this Agreement. 7. DISCLOSURE AND NOTIFICATION TO OTHER DEBTORS (a) As long as no Payment Default shall have occurred and is continuing, the Assignor shall be free to collect all amounts due under the Claims as it sees fit. The Assignor shall notify, without delay and in any event no later than five (5) Business Days following the date hereof, the debtors and counterparties listed on Schedule 1-A against whom it currently holds Intra-Group Receivables of the fact that such Intra-Group Receivables owing from them have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 3 to this Agreement. With ---------- respect to each Intra-Group Receivable arising from debtors other than those listed in Schedule 1-A to this Agreement (as said Schedule 1-A is supplemented or amended pursuant to Clause 11(a)) that the Assignor acquires after the date hereof, the Assignor shall notify, without delay and in any event no later than five (5) Business Days following the date of such acquisition, the debtors and counterparties against whom it holds such Intra-Group Receivables of the fact that such Intra-Group Receivables owing from them have been pledged to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date of such acquisition. Each such notification shall be substantially in the form of Schedule 3 to this Agreement. ---------- For the avoidance of doubt, the Assignee shall not have any obligation to obtain the debtors' and counterparties' signed acknowledgements itself. (b) Upon the occurrence of a Payment Default that is continuing, the Assignor shall immediately notify the debtors and counter parties against whom it holds Trade Receivables of the fact that the Trade Receivables owing from them have been pledged to the Assignee pursuant to this Agreement, and that such Claims may only be discharged by payment to the Assignee. Such notification shall be substantially in the form of Schedule 4 to this Agreement. ---------- (c) The Assignor shall notify, without delay and in any event no later than ten (10) Business Days following the date hereof, the counterparties to the insurance contracts listed on Schedule 1-C of the fact that any insurance owed or to be owed under such insurance contracts have been assigned to the Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such counterparties' signed acknowledgements thereto no later than twenty (20) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. With respect to any Insurance ---------- Claims owed or to be owed under insurance contracts other than those listed in Schedule 1-C to this Agreement (as said Schedule 1-C is supplemented or amended pursuant to Clause 11(a)) that the Assignor enters into after the date hereof, the Assignor shall notify, without delay and in any event no later than ten (10) Business Days following the date of such entering into such insurance contracts, the counterparties to such insurance contracts of the fact that such Insurance Claims owing or to be owed from them have been assigned to the 6 EXECUTION VERSION Assignee pursuant to this Agreement, and the Assignor shall use its best efforts to deliver to the Assignee such counterparties' signed acknowledgements no later than twenty (20) Business Days following the date of entering into such insurance contracts. Each such notification shall be substantially in the form of Schedule 5 to ---------- this Agreement. For the avoidance of doubt, the Assignee shall not have any obligation to obtain the counterparties' signed acknowledgements itself. (d) The Assignor shall provide the Assignee without delay with a copy of any notification given pursuant to this Clause 7, together with the adequate evidence of such notification having been sent and received. For the avoidance of doubt, the Assignee shall not have any obligations to investigate or verify whether the Assignor has complied with any of its notification obligations. (e) The Assignee may give any notice required to be given pursuant to this Clause 7 if the Assignor has not given such notice within five (5) Business Days after the Assignor is required or at any time following the occurrence and during the continuance of a Payment Default. For this purpose, the Assignor will deliver to the Assignee simultaneously with the execution of this Agreement, notifications in the form of Schedules 2, 3, 4 and 5 to this Agreement, duly printed on its letterhead and duly executed by the Assignor. Each notification made by the Assignee in accordance with Clause 6 or this Clause 7 may be accompanied by a photocopy of such notification. The Assignee shall only give any notice in accordance with this Clause, upon instructions of the Requisite Noteholders. (f) The Assignee shall have no responsibility in connection with the perfection measures contemplated in Clause 6 and this Clause 7 except for its gross negligence or wilful misconduct. 8. ENFORCEMENT AND COLLECTION (a) If a Payment Default occurs and is continuing, the Assignee is entitled, without regard to the procedures and formalities provided for in the Swiss Federal Act Debt Collection and Bankruptcy of 1889, as amended: (i) to immediately realise any and all of the Claims to the extent necessary to satisfy any outstanding Secured Obligations by collecting all or part of the Claims; (ii) to revoke, with immediate effect, the Assignor's authorisation to dispose of the Account Balances vis-a-vis the Banks; and (iii) to realize, at its discretion, all or part of the Account Balances (including, for the avoidance of doubt, any new payments of Trade Receivables made to the Bank Accounts subsequent to the revocation mentioned above). (b) To the extent the Assignee is entitled to collect the Claims, it may request upon the written instructions of the Requisite Noteholders that all documents relating to the Claims be handed over to the Assignee and the Assignor hereby agrees to comply promptly with any such request. If a Payment Default is not continuing, the Assignee's right to collect the Claims shall cease and the Assignee shall pay over to the Assignor all moneys received in connection with such collection and retained by it during the continuance of the Payment Default (such payments being inclusive of daily interest) save to the extent any such moneys have been applied in payment of any of the Secured Obligations. (c) If and to the extent the Assignee collects any Claims pursuant to this Clause 8 (Enforcement and Collection) hereof, it may take all measures and enter into all agreements with such 7 EXECUTION VERSION Debtors which it considers to be expedient. In particular, the Assignee may grant discounts or indulgence to Debtors and/or enter into settlement agreements. 9. RIGHT OF INSPECTION The Assignor shall allow the Assignee to inspect at any time during normal business hours its records, or to have them inspected by a duly authorised representative, for the purpose of evaluating and enforcing the Claims. However, as long as no right of realisation exists a right of inspection for the purpose of inspecting and checking the Claims only shall only be upon reasonable advance notification and during normal business hours. 10. BOOKKEEPING AND DATA-PROCESSING (a) If the Claims have been stored in an electronic data-processing system, the Assignor shall allow the Assignee access to the computer, including the peripheral equipment and all data concerning the Claims. Moreover, software operators shall be made available insofar as required, and any assistance required shall be provided to the Assignee. If a third party handles the electronic processing of data, the Assignor hereby authorises the Assignee to obtain these services, and instructs such third party to handle the processing of data for the Assignee upon its instructions as it did for the Assignor. (b) If, and to the extent, documents required for the inspecting, checking, evaluation or realisation of the assigned Claims have been delivered by the Assignor to a third party (especially to an accountant or tax advisor) the Assignor hereby assigns to the Assignee its claims against such third party for providing information and for delivering such documents and hereby instructs the third party to provide the Assignee with such information and documents required to inspect, check, evaluate and realise the assigned Claims. In so far as an electronic data processing is executed by third parties the Assignor hereby assigns to the Assignee all its claims for performance and instructs these third parties to execute the electronic data processing on behalf of the Assignee in the same manner as they were obliged towards the Assignor, provided that the Assignee requests them to do so. The Assignee hereby accepts the aforementioned assignments. 11. UNDERTAKINGS The Assignor undertakes: (a) not to take any steps, including without limitation to the exercise of any right it has under any agreement under which the Claims arise, which may jeopardise or materially adversely affect the security interest constituted in this Agreement. (b) to provide the Assignee promptly at its reasonable request all information and documents which are necessary to asserting the Claims. (c) to procure, to the extent possible under Swiss law, that no executory seizure is made on the Claims, and that any conservatory seizure thereon is lifted within sixty (60) days of it first being made; and to inform the Assignee promptly of any attachments (Pfandungen, Arrest) regarding any and all of the Claims or any other measures which may impair or jeopardise the Assignee's rights relating to the Claims. In the event of an attachment, the Assignor undertakes to forward to the Assignee without undue delay a copy of the attachment order (Pfandungsurkunde, Arrestbefehl) and all other documents necessary for a defence against the attachment or its realisation. The Assignor shall inform the attaching creditor promptly about the Assignee's security interests; 8 EXECUTION VERSION (d) to notify the Assignee promptly of any event or circumstance which might materially adversely affect the validity or enforceability of this Agreement; (e) to promptly execute such further instruments and documents and do such other acts as are necessary in order to fully effect the purposes of this Agreement as the Assignee may from time to time reasonably request upon written instructions from the Requisite Noteholders; (f) not to assign or sell any of the Claims to any third party without the Assignee's prior written consent, except as permitted under the Credit Documents; (g) not to enter into any kind of arrangement that would provide for the non-assignability of any assigned Claims or subject the assignability to the consent of a party other than the Assignee, without the prior written consent of the Assignee; (h) not to dispose of the amounts standing to the credit of any Bank Account other than in the ordinary course of business or where such a disposal is required by law or approved by the Assignee in advance in writing; and (i) in relation to the conduct of its business, to exclusively use the Bank Accounts, and, in particular, (i) to generally use its best endeavours to ensure that all Debtors and other persons make payments in relation to Claims to the Bank Accounts, and (ii) promptly forward any Trade Receivables that have been paid otherwise than into the Bank Accounts to the Bank Accounts. (j) Without delay and in any event no later than five (5) Business Days following the date of acquisition of an Intra-Group Receivable arising from a debtor or counterparty that is not listed on Schedule 1-A (as supplemented from time to time), the Assignor shall deliver a written notice to the Assignee, setting forth the name and address of such additional debtor or counterparty (it being understood that such written notice shall be deemed to supplement Schedule 1-A annexed hereto for all purposes of this Agreement); and without delay and in any event no later than five (5) Business Days following the date that the Assignor opens any Bank Account at a Person that is not listed on Schedule 1-B (as supplemented from time to time), the Assignor shall deliver a written notice to the Assignee, setting forth the name and address of such Person and the account number of such Bank Account (it being understood that such written notice shall be deemed to supplement Schedule 1-B annexed hereto for all purposes of this Agreement); and without delay and in any event no later than five (5) Business Days following the date that the Assignor enters into an insurance contract with a Person that is not listed on Schedule 1-C (as supplemented from time to time), the Assignor shall deliver a written notice to the Assignee, setting forth the name and address of such Person and the contract number of such insurance contract (it being understood that such written notice shall be deemed to supplement Schedule 1-C annexed hereto for all purposes of this Agreement). (k) If not done so before, to notify without delay and in any event no later than five (5) Business Days following the date hereof the Persons listed on Schedule 1-B at which currently Bank Accounts are maintained in the name of "CarboGen Laboratories (Aarau) AG", "CarboGen Laboratories (Neuland) AG" and/or "CarboGen Laboratories (Marly) AG"of the fact that in 2003 the Assignor took over by way of a merger all assets and liabilities of the companies "CarboGen Laboratories (Aarau) AG", "CarboGen Laboratories (Neuland) AG" and "CarboGen Laboratories (Marly) AG" including such companies' Bank Accounts; 9 EXECUTION VERSION (l) to do all acts necessary and/or practical, and use best efforts, in order to effectuate that without delay and in any event no later than twenty (20) Business Days following the date hereof the Bank Accounts listed on Schedule 1-B which currently still are maintained in the name of "CarboGen Laboratories (Aarau) AG", "CarboGen Laboratories (Neuland) AG" and/or "CarboGen Laboratories (Marly) AG" will be changed to list the Assignor as account holder. 12. REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Assignor under the Collateral Agency Agreement, Subsidiary Guaranty and the other Credit Documents to which the Assignor is a party, the Assignor represents and warrants to the Assignee as of the date hereof and undertakes during the subsistence of this Agreement as follows: (a) it is validly existing and neither insolvent, nor subject to any insolvency proceedings or in any other similar situation of conflicting claims of creditors in a way, which could give these creditors reasonable grounds for a claim against the Assignor. No resolutions have been taken, nor has any petition been filed, to dissolve or liquidate the Assignor, nor has the Assignor been declared bankrupt nor has a suspension of payments been granted to the Assignor; (b) it has all requisite power and authority to execute, deliver and perform this Agreement and this Agreement has been duly authorized, executed and delivered and constitutes the legally valid and binding obligations of the Assignor, enforceable against it in accordance with its terms; (c) it is the holder (Forderungsinhaber) of the Existing Claims and the rights assigned hereunder, and such Existing Claims are free of Liens other than Permitted Liens imposed by mandatory operation of law; (d) it is the unrestricted creditor and beneficiary of the Bank Accounts, free from any Lien (save for Permitted Liens imposed by mandatory operation of law) and that none of the Bank Accounts have been assigned to any Person other than the Assignee; (e) all Claims can be transferred and assigned under the laws and agreements by which they are governed; (f) Schedule 1-A, as said Schedule 1-A may be supplemented from ------------ ------------ time to time pursuant to the provisions of Clause 11(j), contains a true, accurate and complete list of the names and addresses of all the debtors and counterparties against whom it currently holds Intra-Group Receivables and Trade Receivables; Schedule 1-B, as said Schedule 1-B may be ------------ ------------ supplemented from time to time pursuant to the provisions of Clause 11(j), contains a true, accurate and complete list of the names and addresses of all Persons at which the Assignor currently maintains Bank Accounts; Schedule 1-C, as said ------------ Schedule 1-C may be supplemented from time to time pursuant ------------ to the provisions of Clause 11(j), contains a true, accurate and complete list of the names and addresses of all the Persons with which the Assignor currently holds insurance contracts; (g) it has the right to freely dispose (verfugen) of the Existing Claims and rights and such disposition does not violate the rights of any third party or any regulatory orders; 10 EXECUTION VERSION (h) This Agreement does not violate any law or regulation applicable to the Assignor as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it, that would prevent it from assigning the Claims. 13. INDEMNITY 13.1 LIABILITY FOR DAMAGES The Assignee shall not be liable for any loss or damage suffered by the Assignor save in respect of such loss or damage which is suffered as a result of the gross negligence or wilful misconduct of the Assignee. The Assignee shall not be under any obligation to the Assignor to take any steps necessary to preserve any rights in the Claims against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Assignor and shall be part of the Secured Obligations. If any such expenses are borne by the Assignee, the Assignor shall on first demand reimburse the Assignee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 13.2 INDEMNIFICATION The Assignor will indemnify the Assignee and keep the Assignee and any attorney, manager, agent or other Person appointed by the Assignee under this Agreement in accordance with and to the extent required under the Notes indemnified against any losses, actions, claims, expenses, demands and liabilities which may be reasonably incurred by or made against the Assignee for anything done or omitted in the exercise or purported exercise of the powers contained herein and caused by any breach of the Assignor of any of its obligations or undertakings contained herein other than to the extent that such losses, actions, claims, expenses, demands and liabilities are incurred or made against the Assignee as a result of the gross negligence or wilful misconduct of any Assignee. 14. DURATION AND INDEPENDENCE 14.1 DURATION This Agreement shall remain in full force and effect until the earlier of (a) the date upon which all Secured Obligations have been irrevocably paid and discharged in full; and (b) the date notified by the Assignee to the Issuer. This Agreement shall not cease to exist if any payments made in satisfaction of the Secured Obligations have only temporarily discharged the Secured Obligations. 14.2 CONTINUING SECURITY (a) This Agreement shall create a continuing security and no change or amendment or increase whatsoever to the Notes or in any document or agreement related thereto nor shall any release of Security affect the validity or the scope of this Agreement. This Agreement shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Assignor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Assignor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Assignor or any other Person. The Assignee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Agreement (a) grant the Issuer or any Subsidiary Guarantor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) abstain from taking or perfecting any other security and discharge any other security, (d) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, (e) amend the terms and conditions of the Secured Obligations in accordance with the Terms 11 EXECUTION VERSION and Conditions of Notes and applicable law, and (f) apply any payment received from the Assignor or for its account towards the Secured Obligations or any other obligations of the Assignor of the Assignee's choice. (b) Without prejudice to the scope of the Secured Obligations, the Assignor and the Assignee agree that in the event of a transfer of all or any part of the Secured Obligations by way of assignment or novation in accordance with the Credit Documents or in the event of a change or replacement of the Assignee or the Assignor in accordance with the Credit Documents, the Assignments will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as assigned or novated in favour of the Assignee (or a new assignee, if any). To the extent that any such further formality or consent on the part of Assignor will, nevertheless, be required, the Assignor hereby undertakes to perform any such formality or consent without delay upon the Assignee request. 14.3 INDEPENDENCE This Agreement is independent from any other Security. No other such Security shall prejudice, be prejudiced by, or be merged in any way with, this Agreement. If there is a conflict between this Agreement and the Terms and Conditions of Notes then (to the extent permitted by law) the Terms and Conditions of Notes shall take priority over the provisions of this Agreement. 15. COSTS AND EXPENSES The Assignor will pay to the Assignee the amount of all costs, charges, fees and expenses (including fees for legal advisers) reasonably incurred by the Assignee in connection with the preparation, execution, performance, enforcement and amendment of this Agreement, or any waiver in relation thereto, together in each case with any applicable value added tax or other taxes. 16. MISCELLANEOUS 16.1 AMENDMENTS Changes to and amendments of this Agreement including this Clause 16.1 (Amendments) must be made in writing. No oral supplements to this Agreement have been or will be made. 16.2 WAIVERS AND REMEDIES CUMULATIVE The rights of each Party under this Agreement: (a) may be exercised as often as necessary; (b) are cumulative and not exclusive of its rights or remedies provided by law; (c) may be waived only in writing and specifically. No failure or delay by a party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. All the rights of the Assignee hereunder shall be in addition to any other right vested in the Assignee and all such rights may be exercised from time to time and as often as the Assignee 12 EXECUTION VERSION may deem expedient. The Assignor waives any right it may have of first requiring the Assignee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Assignment. 17. SEVERABILITY If any of the provisions of this Agreement should be or become invalid, unenforceable or impractical in whole or in part, the validity of the other provisions hereof shall not be affected. In that case the invalid, unenforceable or impractical provision is deemed to be replaced by such valid and enforceable provision or arrangement, which corresponds as closely as possible to the invalid, unenforceable or impractical provision and to the Parties' economic aims pursued by and reflected in this Agreement. The same applies in the event that this Agreement does not contain a provision which it needs to contain in order to achieve the economic purpose as expressed herein (Regelungslucke). 18. RELEASE OF SECURITY After the full and complete satisfaction of all Secured Obligations or if so required by Swiss mandatory law, the Assignee shall reassign to the Assignor the Claims and surrender the excess proceeds, if any, resulting from any realisation of the Claims. The Assignee will, however, transfer any claims to a third party to the extent it is obliged to do so. Any release or discharge shall be null and void and without effect if any payment received by the Assignee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Assignee to a third party; or (c) proves not to have been effectively received by the Assignee; and the Assignee shall be entitled to enforce this Agreement as if such release or discharge had not occurred. 19. NOTICES AND THEIR LANGUAGE 19.1 NOTICES All communications to be made hereunder shall be made in writing to the following addresses: If made to the Assignor: Solutia Europe SA/NV Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique-Fleming rue Laid Bumiat 3 B-1348 Louvain-la-Neuve Belgium Att.: For the Attention of Legal Department Fax: +32 (0)1 048 1224 13 EXECUTION VERSION If made to the Assignee: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Att.: Mr Dirk De Bleser Fax: +32 (0)2 429 4920 Any communication or document made or delivered by one Person to another under or in connection with this Agreement shall only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address(es) with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; (c) and, if a particular department or officer is specified as part of its address details provided under this Clause 19.1, if addressed to that department or officer. 19.2 LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail except that where a German translation of a legal term appears in such text, the German translation shall prevail. 20. GOVERNING LAW This Agreement shall be governed by the substantive laws of Switzerland. 21. JURISDICTION Any and all disputes arising out of or in connection with this Agreement including but not limited to matters of validity, conclusion, binding effect, interpretation, construction, performance or non-performance and remedies shall be subject to the non-exclusive jurisdiction of the Commercial Court (Handelsgericht) of the Canton of Zurich, Switzerland, venue being Zurich 1, subject to review as provided for by law. If there is no ordinary place of foreclosure in Switzerland according to the Federal Statute on Debt Collection and Bankruptcy (SchKG), the place of foreclosure (Betreibungsort) shall be Zurich 1, which shall be the place of performance for obligations arising under this Agreement. 14 EXECUTION VERSION 22. DELEGATION OF POWERS The Assignee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Assignee in its absolute discretion may think fit. 23. BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Assignor and the Assignee and their respective successors and assigns. The expressions Assignee and Assignor include their respective successors, and, in the case of the Assignee, its nominee or such other Person as may from time to time be appointed Collateral Agent. 24. ASSIGNMENT This Agreement shall be binding upon the parties hereto and their respective successors in law. The Assignee shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to third parties. The Assignor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Assignee. 25. EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE ASSIGNOR A certificate by the Assignee as to the amount and the terms and conditions of the Secured Obligations owing to the Assignee from the Assignor is, prima facie evidence of the matters to which it relates. 26. RESPONSIBILITY OF THE ASSIGNEE (a) The Assignee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in any Subsidiary Guaranty or Collateral Document; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with any Subsidiary Guaranty or Collateral Document; or (iii) the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document (including but not limited to validity of the Floating Charge Agreement (overeenkomst pand op handelszaak/contrat de gage sur fonds de commerce) between the Issuer and the Collateral Agent). (b) Each Noteholder is responsible to make, and to continue to make, its own independent appraisal of all risks arising under or in connection with the Notes, the Subsidiary Guaranties and the Collateral Documents (including but not limited to the financial condition and affairs of the Issuer and the Subsidiary Guarantors, the nature and extent of any recourse against any party or its assets or the legality, validity, effectiveness, adequacy or enforceability of any Subsidiary Guaranty or Collateral Document). 15 EXECUTION VERSION SIGNATORIES Made in three (3) originals, of which one will be held by the Assignor, one will be held by the Assignee and one will be held by counsel to the ad hoc committee of Noteholders, on 11 February 2004. CARBOGEN AG, AS ASSIGNOR /s/ Kristel Deroover - ----------------------------------- Name: Kristel Deroover Title: Attorney - ----------------------------------- Name: Title: KBC BANK NV, AS ASSIGNEE /s/ Dirk De Bleser - ----------------------------------- Name: Dirk De Bleser Title: Head Operations & Accounting - ----------------------------------- Name: Title: 16 EX-99.20 22 exh99p20.txt Exhibit 99.20 Execution version COMMERCIAL RECEIVABLES PLEDGE AGREEMENT DATED 17 FEBRUARY 2004 BETWEEN SOLUTIA SERVICES INTERNATIONAL SCA/COMM.VA AS PLEDGOR AND KBC BANK NV AS PLEDGEE Execution version TABLE OF CONTENTS 1. DEFINITIONS.........................................................4 2. PLEDGE..............................................................5 3. RECEIVABLES.........................................................5 4. COLLECTION OF RECEIVABLES AND NOTIFICATION..........................7 5. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS........................9 6. CONTINUING SECURITY AND OTHER MATTERS..............................10 7. ENFORCEMENT........................................................11 8. APPLICATION OF PROCEEDS............................................11 9. DISCHARGE OF THE PLEDGE............................................12 10. DUTIES OF THE PLEDGEE..............................................12 11. RESPONSIBILITY OF THE PLEDGEE......................................12 12. EXPENSES...........................................................12 13. NOTICES............................................................13 14. GENERAL............................................................14 SIGNATORIES.............................................................16 2 Execution version COMMERCIAL RECEIVABLES PLEDGE AGREEMENT BETWEEN: (1) SOLUTIA SERVICES INTERNATIONAL SCA/COMM.VA, a Belgian "commanditaire vennootschap op aandelen/societe en commandite par actions", having its registered office at Boondaelse Steenweg 6, B-1050 Brussels, Belgium and registered at the Crossroads Bank for Enterprises, under enterprise number 0460.483.546, (the PLEDGOR); AND: (2) KBC BANK NV, a Belgian bank, with registered office at Havenlaan 2, B-1080 Brussels, Belgium, registered at the Crossroads Bank for Enterprises, under enterprise number 0462.920.226 and acting for itself and as joint creditor pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), (the PLEDGEE). WHEREAS: (A) Solutia Europe SA/NV (the ISSUER) and the Noteholders have agreed to amend and restate the Issuer's euro 200,000,000 6.25 percent Notes due 2005, as amended and restated, the euro 200,000,000 10.00 percent Senior Secured Notes due 2008 (together with the Terms and Conditions of Notes annexed thereto, as amended, modified or supplemented from time to time, the NOTES and such Terms and Conditions of Notes, as amended, modified or supplemented from time to time, the TERMS AND CONDITIONS OF NOTES) pursuant to an Agreement of Understanding and Restructuring dated 30 January 2004 among the Issuer and the Noteholders party thereto (as amended, modified or supplemented from time to time, the AGREEMENT OF UNDERSTANDING). In connection with the Notes, the Issuer will enter into the Fiscal Agency Agreement dated 11 February 2004 among the Issuer, Kredietbank S.A. Luxembourgeoise as fiscal agent and paying agent, and KBC Bank NV as principal paying agent (as amended, modified or supplemented from time to time, the FISCAL AGENCY AGREEMENT). The Noteholders and the Couponholders are entitled to the benefit of, are bound by and are deemed to have notice of all of the provisions of the Fiscal Agency Agreement. (B) It is a requirement of the Agreement of Understanding and the Terms and Conditions of Notes that the Pledgor guaranty the prompt payment and performance when due of all obligations of the Issuer under the Credit Documents and grant a receivables pledge to the Pledgee to secure its obligations to the Pledgee as provided herein and undertake the obligations contemplated by this Agreement. (C) Pursuant to Clause 2.1 of the Collateral Agency Agreement (as defined below), the Pledgee shall be the joint creditor (together with the relevant Noteholder) of each and every obligation of the Pledgor, as guarantor, towards each of the Noteholders under the Notes and the other Credit Documents to which the Pledgor is party, and that accordingly the Pledgee will have its own independent right to demand performance by the Pledgor of those obligations. There is as a result a joint creditorship under New York law between the Noteholders and the Pledgee with regard to the sums owed under the Notes and the other Credit Documents. 3 Execution version (D) In consideration of the agreements set forth herein and in the Terms and Conditions of the Notes, the Agreement of Understanding and the other Credit Documents, the Pledgor agrees to create a first ranking pledge in respect of the Receivables (as defined below) in favour of the Pledgee under the following terms (the AGREEMENT). THE PARTIES HAVE AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires: BANK ACCOUNTS means the bank and other accounts referred to in Clause 3.1(e) of this Agreement; COLLATERAL AGENCY AGREEMENT means the collateral agency agreement dated 11 February 2004 among the Issuer, the Subsidiary Guarantors, the Pledgee and the Noteholders party thereto, as amended, modified or supplemented from time to time; GROUP means Solutia, Inc. and its Subsidiaries and all Affiliates owned by Solutia and its Subsidiaries; INSURANCE RECEIVABLES means the insurance receivables referred to in Clause 3.1 of this Agreement; INTRA-GROUP RECEIVABLES means the intra-group receivables referred to in Clause 3.1 of this Agreement and all sums owing to the Pledgor by other members of the Group referred to in Clause 3.1 of this Agreement; NETTING ACCOUNTS means certain deposit accounts that may be opened by SSI, acting as agent for itself and certain of its Affiliates, for the purpose of facilitating the monthly settlement and payment, in a manner consistent with past practice, of intercompany accounts receivable and payable related to the provision of raw materials, work in progress, finished goods and other business-related property and allocated overhead items such as corporate buildings and employee services, all in the ordinary course of business (the NETTING), which accounts shall not hold any funds of SSI or any other Credit Party that are unrelated to the Netting and have been identified to the Collateral Agent as Netting Accounts. PLEDGE means the pledge of the Receivables created or arising pursuant to this Agreement; PLEDGOR SUBSIDIARY GUARANTY means the Subsidiary Guaranty made by the Pledgor in favour of the Pledgee on or about the date of this Agreement; RECEIVABLES means the receivables referred to in Clause 3.1 of this Agreement and all sums owing to the Pledgor referred to in Clause 3.1 of this Agreement; SECURED OBLIGATIONS means all present and future, actual and contingent indebtedness, obligations, and liabilities of the Pledgor to the Pledgee which may arise under, out of, or in connection with the Collateral Agency Agreement, the Pledgor Subsidiary Guaranty or any other Credit Document to which the Pledgor is party; SUBSIDIARIES means an entity of which a Person has direct or indirect control or owns directly or indirectly more than 50% of the voting capital or similar right of ownership and CONTROL for 4 Execution version this purpose means the power to direct the management and the policies of the entity whether through the ownership of voting capital, by contract or otherwise; TRADE RECEIVABLES means the trade receivables referred to in Clause 3.1(d) of this Agreement. Unless defined in this Agreement, words and expressions defined in the Terms and Conditions of Notes shall have the same meaning when used in this Agreement. In this Agreement, each reference to a document will be deemed to be a reference to such document as amended and/or supplemented by the parties to such document from time to time. 1.2 SUCCESSORS AND ASSIGNS The expressions PLEDGEE, NOTEHOLDERS and PLEDGOR include their respective successors, and, in the case of the Pledgee, its nominee or such other Person as may from time to time be appointed Collateral Agent for the Noteholders and, in the case of the Noteholders, their respective transferees and assignees to whom any Note or any Secured Obligation shall have been transferred. 1.3 HEADINGS Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement. 2. PLEDGE The Pledgor hereby pledges, as a first ranking pledge (pand in eerste rang/gage en premier rang), the Receivables, owed to it to the Pledgee as security for the due performance of the Secured Obligations in accordance with the Law of 5 May 1872 on commercial pledges (the PLEDGE). 3. RECEIVABLES 3.1 SCOPE The Receivables are comprised of all claims (schuldvorderingen/creances), present or future, actual or contingent, owing to the Pledgor in connection with any of the following: (a) Intra-group receivables. All sums owing to the Pledgor by other members of the Group on any account and of any nature whatsoever, including but not limited to all sums owing to the Pledgor under the Solutia UK Note. (b) Lawyers, bailiffs and claim collection agencies. All sums owing to the Pledgor from its lawyers, bailiffs or claim collection agencies in respect of any bad debt collection through such lawyers, bailiffs or claim collection agencies. (c) Loans and guarantees. All sums owing to the Pledgor from any Person, and in particular from any affiliated company or associated company, on account of loans, advances (whether in current account or not) or other financial credits made or granted by the Pledgor, or on account of any recourse (whether by way of subrogation or otherwise) against any Person by reason of a guarantee or security given by such Pledgor for such Person's liabilities. (d) Trade receivables. All sums owing to the Pledgor from its present or future customers in respect of goods and services supplied or to be supplied. 5 Execution version (e) Bank accounts. The balance from time to time, and as the case may be, the final closing balance of the bank accounts listed in Schedule 1-B, and any other account (whether a current account or a deposit account, or any other type of account) held by the Pledgor in any currency with any Person in Belgium or abroad, except for Netting Accounts. (f) Insurance receivables. All sums owing to the Pledgor from any insurance company on account of any insurance policy (other than any life, health, group insurance or similar insurance policy), whether as insurance indemnities, refunds of premium or otherwise; provided that this Clause 3.1(f) shall not include any insurance receivable outstanding as of the date hereof the pledge of which would violate the insurance contract between Pledgor and the relevant insurance company. 3.2 INFORMATION (a) The Pledgor represents and warrants to the Pledgee that Schedule 1 to this Agreement, is, as of the date hereof, the accurate and complete list of all debtors and counter-parties against whom it has claims contemplated in Clause 3.1. (b) The Pledgor undertakes to promptly (but in any event within 10 Business Days) deliver to the Pledgee after the occurrence of an Event of Default (or at such other time as the Pledgee may request) an up-to-date, accurate and complete list of all debtors and counter-parties against whom it has claims contemplated in Clause 3.1. Such list shall include the name of the debtor or counter-party, its registered office or (if different) the address of its place of business with which the relevant claims are connected, and the nature of the claims concerned, and shall be delivered in a standard computer readable format. (c) The Pledgor shall from time to time promptly upon request (but in any event within 10 Business Days) provide the Pledgee with the following data in a standard computer readable format: (i) a copy of all relevant contractual documentation in respect of any Receivable, provided that, unless an Event of Default has occurred and is continuing, such documentation is not subject to a confidentiality undertaking to which the Pledgor is bound; (ii) all relevant details of the amounts currently owing under any Receivable, provided that, unless an Event of Default has occurred and is continuing, such information is not subject to a confidentiality undertaking to which the Pledgor is bound; (iii) the amounts collected under any Receivable over the last twelve months; and (iv) such other data and information in relation to the Receivables as from time to time may be requested by the Pledgee, provided that, unless an Event of Default has occurred and is continuing, such data and information are not subject to a confidentiality undertaking to which the Pledgor is bound. (d) Schedule 1-D lists all Netting Accounts in existence on the date hereof. The Pledgor will promptly (but in any event within 10 Business Days) notify the Pledgee in the event that it establishes a Netting Account after the date hereof and identify such Netting Account in such Notice. 6 Execution version 4. COLLECTION OF RECEIVABLES AND NOTIFICATION 4.1 RECEIVABLES (a) As long as no Event of Default shall have occurred and is continuing, the Pledgor shall be free to collect all amounts due under the Receivables as it sees fit provided that the Pledgor shall not be entitled to collect any amount under any Insurance Receivable in excess of EUR 1,000,000. (b) The Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date hereof, the debtors and counterparties listed on Schedule 1-A against whom it currently holds Intra-Group Receivables of the fact that such Intra-Group Receivables owing or to be owed from them have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. With respect to each Intra-Group Receivable arising from debtors other than those listed in Schedule 1-A to this Agreement (as said Schedule 1-A may be supplemented from time to time pursuant to Clause 5.2 (e)) that the Pledgor acquires after the date hereof, the Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date of such acquisition, the debtors and counterparties against whom it holds such Intra-Group Receivables of the fact that such Intra-Group Receivables owing from them have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such debtors' and counterparties' signed acknowledgements thereto no later than ten (10) Business Days following the date of such acquisition. Each such notification shall be substantially in the form of Schedule 2 to this Agreement. For the avoidance of doubt, the Pledgee shall not have any obligation to obtain the debtors' and counterparties' signed acknowledgement itself. (c) Upon the occurrence of an Event of Default that is continuing, the Pledgor shall immediately notify the debtors and counter parties against whom it holds Trade Receivables of the fact that the Trade Receivables owing from them have been pledged to the Pledgee pursuant to this Agreement, and that such Receivables may only be discharged by payment to the Pledgee. Such notification shall be substantially in the form of Schedule 3 to this Agreement. (d) As long as no Event of Default shall have occurred and is continuing, the Pledgor shall be free to operate the Bank Accounts and to collect any amounts due to it with respect to the Bank Accounts. The Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date hereof, the Persons listed on Schedule 1-B at which it currently maintains Bank Accounts of the fact that such Bank Accounts have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date hereof which shall include a waiver of set-off or pledge and the benefit of any 'unicity of account' or similar provision, except with respect to the payment of its customary fees and commissions in connection with ordinary course banking services. Each such notification shall be substantially in the form of Schedule 4 to this Agreement. With respect to each Person other than as listed in Schedule 1-B (as said Schedule 1-B may be supplemented from time to time pursuant to Clause 5.2 (e)) at which the Pledgor maintains any other Bank Account after the date hereof, the Pledgor shall notify, without delay and in any event no later than five (5) Business Days following the date it opens such Bank Account, such Persons of the fact that such Bank Accounts have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such Persons' signed acknowledgements thereto no later than ten (10) Business Days following the date such Bank Accounts are opened which shall include a waiver of set-off or pledge and the 7 Execution version benefit of any 'unicity of account' or similar provision, except with respect to the payment of its customary fees and commissions in connection with ordinary course banking services. Each such notification shall be substantially in the form of Schedule 4 to this Agreement. For the avoidance of doubt, the Pledgee shall not have any obligation to obtain the signed acknowledgement (including a waiver of set-off or pledge) and the benefit of any "unicity of account" or similar provision itself. (e) The Pledgor shall notify, without delay and in any event no later than ten (10) Business Days following the date hereof, the counterparties to the insurance contracts listed on Schedule 1-C of the fact that any Insurance Receivable owed or to be owed under such insurance contracts have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such counterparties' signed acknowledgements thereto no later than twenty (20) Business Days following the date hereof. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. With respect to any Insurance Receivables owed or to be owed under insurance contracts other than those listed in Schedule 1-C to this Agreement (as said Schedule 1-C may be supplemented from time to time pursuant to Clause 5.2 (e)) that the Pledgor enters into after the date hereof that are subject to Clause 3.1(f), the Pledgor shall notify, without delay and in any event no later than ten (10) Business Days following the date of such entering into such insurance contracts, the counterparties to such insurance contracts of the fact that such Insurance Receivables owing or to be owed from them have been pledged to the Pledgee pursuant to this Agreement, and the Pledgor shall use its best efforts to deliver to the Pledgee such counterparties' signed acknowledgements thereto no later than twenty (20) Business Days following the date of such entering into such insurance contracts. Each such notification shall be substantially in the form of Schedule 5 to this Agreement. For the avoidance of doubt, the Pledgee shall not have any obligation to obtain the counterparties' signed acknowledgement itself. (f) The Pledgor shall provide the Pledgee without delay with a copy of any notification given pursuant to this Clause 4.1, together with the adequate evidence of such notification having been sent and received. For the avoidance of doubt, the Pledgee shall not have any obligation to investigate or verify whether the Pledgor has complied with any of its notification obligations. (g) The Pledgee may give any notice required to be given pursuant to this Clause 4.1 if the Pledgor has not given such notice within five (5) or ten (10) Business Days as the case may be after the Pledgor is required or at any time following the occurrence and during the continuance of an Event of Default. For this purpose, the Pledgor will deliver to the Pledgee simultaneously with the execution of this Agreement, notifications in the form of Schedules 2, 3, 4 and 5 to this Agreement, duly printed on its letterhead and duly executed by the Pledgor. Each notification made by the Pledgee in accordance with this Clause 4.1 may be accompanied by a photocopy of such notification. The Pledgee shall not be obligated to give any notice in accordance with this Clause, except upon instructions of the Requisite Noteholders. 4.2 RESPONSIBILITY OF THE PLEDGEE The Pledgee shall have no responsibility in connection with the perfection measures contemplated in this Clause 4 except for its gross negligence (grove fout/faute grave) or wilful misconduct. 8 Execution version 5. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS 5.1 REPRESENTATIONS AND WARRANTIES Without prejudice and in addition to the representations and warranties of the Pledgor under the Subsidiary Guaranty to which the Pledgor is party and the other Credit Documents to which the Pledgor is party, the Pledgor represents and warrants to the Pledgee and undertakes during the subsistence of this Agreement as follows: (a) it is a corporation duly incorporated and validly existing under the laws of Belgium and is not in liquidation, with the power to enter into this Agreement and to exercise its rights and perform its obligations hereunder and that all corporate and other actions required to authorise the execution and performance of this Agreement have been duly taken; (b) it owns the Receivables free and clear of any Liens, except for Permitted Liens; (c) as of the date hereof, none of the Receivables is subject to any seizure or enforcement measure; (d) all Receivables are capable of being pledged hereunder without the consent of their respective debtors or counter-parties; (e) the Pledgor has satisfied itself that it is in its own interest to grant this Pledge for the due performance of the Secured Obligations; (f) this Agreement does not violate any law or regulation applicable to it as of the date hereof, its constitutional documents or any material contractual or other obligation binding upon it, that would prevent it from pledging the Receivables; (g) Schedule 1-A, as said Schedule 1-A may be supplemented from time to time pursuant to the provisions of Clause 5.2(e), contains a true, accurate and complete list of the names and addresses of all the debtors and counterparties against whom it currently holds Intra-Group Receivables and Trade Receivables; Schedule 1-B, as said Schedule 1-B may be supplemented from time to time pursuant to the provisions of Clause 5.2(e), contains a true, accurate and complete list of the names and addresses of all Persons at which the Pledgor currently maintains Bank Accounts; and all information provided pursuant to Clause 3.2 of this Agreement is or will be accurate and complete; (h) the Pledge creates a valid and first ranking pledge of the Receivables subject to no prior Lien created by Pledgor, except for the pledge on the business created pursuant to the Floating Charge Agreement and Permitted Liens imposed by mandatory operation of law; and (i) no floating charge (gage sur fonds de commerce/pand op handelszaak) or similar foreign law security exists on its business, nor any mandate with a view to the creation hereof except for the pledge on the business created pursuant to the Floating Charge Agreement. 5.2 UNDERTAKINGS (a) The Pledgor shall procure that no executory seizure (saisie execution/uitvoerend beslag) is made on the Receivables, and that any conservatory seizure (saisie conservatoire/bewarend beslag) thereon is lifted within 60 days of it first being made. (b) The Pledgor shall co-operate with the Pledgee and the Noteholders and sign or cause to be signed all such further documents and take all such further action as the Pledgee may from 9 Execution version time to time reasonably request to perfect and protect the pledge of the Receivables under Belgian law and to carry out the provisions and purposes of this Agreement. The Pledgee shall not be obligated to request any action under this Clause (b) except upon written instructions from the Requisite Noteholders. (c) The Pledgor shall not (i) dispose of the Receivables, except for their collection in the ordinary course of business and for the purpose of enforcement in accordance with the provisions of this Agreement, (ii) create any other Lien in respect of the Receivables (irrespective of whether ranking behind the pledge created hereby), nor (iii) permit the existence or the subsistence of any such Lien, except Permitted Liens. (d) The Pledgor shall not take any steps, including without limitation to the exercise of any right it has under any agreement under which the Receivables arise, which may jeopardise or material adversely affect the security interest constituted in this Agreement. (e) Without delay and in any event no later than five (5) Business Days following the date of acquisition of an Intra-Group Receivable arising from a debtor or counterparty that is not listed on Schedule 1-A (as supplemented from time to time), the Pledgor shall deliver a written notice to the Pledgee, setting forth the name and address of such additional debtor or counterparty (it being understood that such written notice shall be deemed to supplement Schedule 1-A annexed hereto for all purposes of this Agreement); without delay and in any event no later than five (5) Business Days following the date that the Pledgor opens any Bank Account at a Person that is not listed on Schedule 1-B (as supplemented from time to time), the Pledgor shall deliver a written notice to the Pledgee, setting forth the name and address of such Person and the account number of such Bank Account (it being understood that such written notice shall be deemed to supplement Schedule 1-B annexed hereto for all purposes of this Agreement); and without delay and in any event no later than five (5) Business Days following the date that the Pledgor enters into an insurance contract with a Person that is not listed on Schedule 1-C (as supplemented from time to time) and that is subject to Clause 3.1(f), the Pledgor shall deliver a written notice to the Pledgee, setting forth the name and address of such Person and the contract number of such insurance contract (it being understood that such written notice shall be deemed to supplement Schedule 1-C annexed hereto for all purposes of this Agreement). 6. CONTINUING SECURITY AND OTHER MATTERS 6.1 CONTINUING SECURITY (a) This Pledge shall be a continuing security for the due performance of the Secured Obligations, and shall remain in force until expressly released in accordance with Clause 9 of this Agreement. (b) This pledge shall not be discharged by the entry of any Secured Obligations into any current account, in which case this Pledge shall secure any provisional or final balance of such current account up to the amount in which the Secured Obligations were entered therein. (c) This Pledge shall not be discharged or in any way prejudiced or affected by any change in the constitution or status of the Pledgor or any other Person or by any legal limitation, disability, incapacity or other circumstances relating to the Pledgor or any other Person, by any invalidity, illegality or unenforceability of the obligations of the Pledgor or any other Person. (d) The Pledgee or, as the case may be, Requisite Noteholders may at any time without discharging or in any way affecting this Pledge (a) grant the Pledgor any time or indulgence, (b) concur in any moratorium of the Secured Obligations, (c) amend the terms and conditions 10 Execution version of the Secured Obligations in accordance with the provisions of the Terms and Conditions of Notes and the applicable laws, (d) abstain from taking or perfecting any other security and discharge any other security, and (e) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse, and (f) apply any payment received from the Pledgor or for its account towards the Secured Obligations or any other obligations of the Pledgor of the Pledgee's choice. 6.2 RIGHTS ADDITIONAL All the rights of the Pledgee hereunder shall be in addition to any other right vested in the Pledgee and all such rights may be exercised from time to time and as often as the Pledgee may deem expedient. The Pledgor waives any right it may have of first requiring the Pledgee to proceed against or claim payment from any other party, or enforce any guarantee or security before enforcing the Pledge. 6.3 PRESERVATION OF SECURITY IN THE EVENT OF NOVATION In accordance with article 1278 of the Belgian Civil Code and without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of novation of all or any part of the Secured Obligations or the change or replacement of the Pledgee or the Pledgor, this Pledge will be maintained, automatically and without any further formality or consent, to secure the Secured Obligations as novated and in favour of the Pledgee or a new pledgee. 7. ENFORCEMENT 7.1 Following the occurrence of an Event of Default that is continuing, the Pledgee shall in particular have the right, subject to the Collateral Agency Agreement and the Terms and Conditions of Notes, to: (i) enforce the Pledge in respect of any or all of the Receivables, in accordance with applicable legal provisions; and (ii) apply any payments which may be received or receivable by the Pledgee in respect of the Receivables to satisfaction of the Secured Obligations and as provided in the Collateral Agency Agreement; and (iii) exercise all rights and remedies it possesses, and to act generally in relation to the Receivables in such manner as it shall determine within the limit of the applicable law and its rights under this Agreement. 7.2 The Pledgee shall give the Pledgor not less than five (5) Business Days notice prior to the time that it first initiates legal action to enforce its remedies under this Agreement; provided that the Pledgee shall not be required to give notice pursuant to this sentence on more than one occasion subject to mandatory law requirements. 7.3 The Pledgee shall have no responsibility in connection with the enforcement measures of the Pledge under this Agreement, except in case of its gross negligence (grove fout/faute grave) or wilful misconduct. 8. APPLICATION OF PROCEEDS 8.1 All monies received by the Pledgee after the Pledge has become enforceable shall be applied towards satisfaction of the Secured Obligations, including any costs and expenses of the Pledgee in accordance with Clause 4.1 of the Collateral Agency Agreement, but without prejudice to the rights of the Pledgee to recover any shortfall from the Pledgor. 11 Execution version 8.2 Should the proceeds of the enforcement of the Pledge be greater than the outstanding amount of the Secured Obligations, the Pledgee shall pay to the Pledgor any such excess. 9. DISCHARGE OF THE PLEDGE 9.1 This Pledge shall be discharged by, and only by, the express release thereof granted by the Pledgee. 9.2 The Pledgee shall in accordance with the Collateral Agency Agreement, grant an express release of this Pledge without delay upon demand of the Pledgor, as soon as all Secured Obligations shall have been fully and finally discharged. 9.3 Any release or discharge of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (a) is avoided or declared invalid as against the creditors of the maker of such payment; or (b) becomes repayable by the Pledgee to a third party; or (c) proves not to have been effectively received by the Pledgee; and the Pledgee shall be entitled to enforce the pledge as if such release or discharge had not occurred. 10. DUTIES OF THE PLEDGEE The Pledgee shall not be liable for any acts or omissions with respect to the Receivables pledged hereunder or the enforcement or the losses arising in connection with the exercise of any of its rights, powers and discretions hereunder, save for liabilities and expenses arising from the gross negligence (faute grave/grove fout) or wilful misconduct of the Pledgee. The Pledgee shall not be under any obligation to the Pledgor to take any steps necessary to preserve any rights in the Receivables against any other parties but may do so at its option, and all expenses reasonably incurred in connection therewith shall be for the account of the Pledgor and shall be part of the Secured Obligations. If any such expenses are borne by the Pledgee, the Pledgor shall on first demand reimburse the Pledgee therefor, and its reimbursement obligation shall be part of the Secured Obligations. 11. RESPONSIBILITY OF THE PLEDGEE The Pledgee shall not be responsible to any Noteholder for: (i) the adequacy, accuracy or completeness of any recitals, statements, representations or warranties contained in this Agreement; (ii) the adequacy, accuracy or completeness of any statement or information (whether written or oral) made in or supplied in connection with this Agreement; or (iii) the legality, validity, effectiveness, adequacy or enforceability of this Agreement. 12. EXPENSES All expenses that the Pledgee may incur in connection with (i) the administration of this Agreement as further provided in the Collateral Agency Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realisation upon, any of the Receivables, (iii) the exercise or enforcement 12 Execution version of any of the rights of the Pledgee hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof, shall be borne by the Pledgor. All other expenses and duties reasonably incurred in connection with this Agreement, in particular with regard to the establishment and perfection of the Pledge and the granting of any release, shall be borne by the Pledgor. The Pledgor shall on first demand reimburse the Pledgee for any such expenses or duties paid by them, and the same shall be part of the Secured Obligations. 13. NOTICES 13.1 COMMUNICATION IN WRITING Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter. 13.2 ADDRESSES The address(es) and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party for any communication or document to be made or delivered under or in connection with this Agreement is that identified with its name below or any other substitute address(es), fax number or department or officer as any party may notify to the other parties by not less than five Business Days' notice. THE PLEDGOR: Solutia Services International SCA/Comm.VA Boondaelse Steenweg 6 B-1050 Brussels Belgium Parc Scientifique Fleming Rue Laid Burniat 3 B-1348 Louvain-la-Neuve Belgium Fax: +32 10 48 12 24 Attention: Legal Department THE PLEDGEE: KBC Bank NV Havenlaan 12 B-1080 Brussels Belgium Fax: +32 2 429 4920 Attention: Mr. Dirk De Bleser 13.3 DELIVERY Any communication or document made or delivered by one Person to another under or in connection with this Agreement will only be effective: (a) by way of fax, when received in legible form; (b) if by way of letter, when it has been left at the relevant address with acknowledgement of receipt or when it has been delivered to the addressee by registered mail; 13 Execution version (c) and, if a particular department or officer is specified as part of its address details provided under Clause 13.2 (Addresses), if addressed to that department or officer. 13.4 ENGLISH LANGUAGE This Agreement is executed in English only, and no translation thereof shall be binding on the parties hereto or consulted in order to interpret this Agreement. Without prejudice to any other procedural rule applicable to any dispute, any notice given under or in connection with this Agreement must be in English. 14. GENERAL 14.1 NO WAIVER No failure or delay by the Pledgee in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right, power or remedy. The remedies provided in this Agreement are cumulative and are not exclusive of any remedies provided by law. 14.2 SEVERABILITY Each of the provisions of this Agreement is several and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. In case of any such illegality, invalidity or unenforceability, the parties shall negotiate in good faith with a view to agree on the replacement of such provision by a provision which is legal, valid and enforceable and which is to the extent practicable in accordance with the intents and purposes of this Agreement and which in its economic effect comes as close as practicable to the provision being replaced. 14.3 DELEGATION OF POWERS The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretion vested in it by, this Agreement in such manner, upon such terms and to such Person as the Pledgee in its absolute discretion may think fit. 14.4 BENEFIT OF THIS AGREEMENT This Agreement shall be binding on, and inure for the benefit of, the Pledgor and the Pledgee and their respective successors and assigns. 14.5 ASSIGNMENT The Pledgor may not assign or transfer any of its rights or obligations under this Agreement, save prior agreement in writing of the Pledgee. 14.6 EVIDENCE OF THE SECURED OBLIGATIONS OWING BY THE PLEDGOR A certificate by the Pledgee as to the amount and the terms and conditions of the Secured Obligations owing to the Pledgee from the Pledgor is, prima facie evidence of the matters to which it relates. 14.7 GOVERNING LAW This Agreement shall be governed by and interpreted in accordance with Belgian law. 14 Execution version 14.8 JURISDICTION All disputes arising in connection with this Agreement shall be settled by the courts of Brussels, without prejudice to the rights of the Pledgee to take legal action before any other court of competent jurisdiction. 15 Execution version SIGNATORIES Made in 3 originals, of which one will be held by the Pledgor, one will be held by counsel to the ad hoc committee of Noteholders and one will be held by the Pledgee, on 17 February 2004. SOLUTIA SERVICES INTERNATIONAL SCA/COMM.VA AS PLEDGOR /s/ Kristel Deroover - ----------------------------------- Name: Kristel Deroover Title: Attorney - ----------------------------------- Name: Title: KBC BANK NV AS PLEDGEE /s/ Dirk De Bleser - ----------------------------------- Name: Dirk De Bleser Title: Head Operations & Accounting - ----------------------------------- Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----