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Exhibit 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
made
by and between Solutia Inc., a Delaware corporation (the
"Company"), and
Rosemary L. Klein (the "Executive"), effective as of the 11th day
of April, 2007
(the "Effective Date").
WHEREAS,
the Company and the Executive are currently parties to an
Agreement dated April 21, 2005; and
WHEREAS,
the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
stakeholders
to assure that the Company will have the continued dedication of
the Executive
until and for a period of time following the Emergence Date (as
defined below).
To induce the Executive to continue to serve the Company through
and beyond the
Emergence Date, the Company will provide the Executive with, among
other things,
an emergence bonus. It is the Board's judgment that such an
emergence bonus
arrangement is in the best interest of the Company and its
stakeholders, and is
consistent with the desire of the Board to maximize the value of
the Company.
Therefore, in order to accomplish these objectives, the Board has
caused the
Company to enter into this Agreement.
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.
Emergence Bonus Payments.
At such time, if ever (the "Emergence Date"), at which the
United
States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy
Court") shall have confirmed a plan of reorganization of the
Company under
Chapter 11 of the United States Bankruptcy Code (the "Chapter 11
case") and such
plan shall have become effective, then Executive shall be entitled
to receive
from the Company an emergence bonus of $500,000 ("Emergence Bonus")
as
originally set forth and previously agreed to in Executive's
Agreement dated
April 21, 2005. The Emergence Bonus shall be paid in two equal
installments, the
first installment to be paid within 10 days of the Emergence Date
and the second
installment to be paid on the six-month anniversary of the
Emergence Date.
2.
Employment Period. The Company hereby agrees to continue the
Executive
in its employ, and the Executive hereby agrees to remain in the
employ of the
Company subject to the terms and conditions of this Agreement, for
the period
commencing on the Effective Date and ending on the date that is the
six month
anniversary of the Emergence Date (the "Initial Term") and shall
thereafter
automatically renew for an additional three (3) year period (the
"Initial
Renewal Term"), unless sooner terminated during the Initial Term or
Initial
Renewal Term in accordance with this Agreement or written notice is
given by one
party to the other at least 90 days prior to the expiration of the
Initial Term
or the Initial Renewal Term, as applicable. Upon completion of the
Initial
Renewal Term, this Agreement shall thereafter automatically renew
for additional
12 month periods (each, a "Subsequent Renewal Term"), unless sooner
terminated
in accordance with this Agreement or written notice is given by one
party to the
other at least 90 days prior to the expiration of the Initial
Renewal Term or
any Subsequent Renewal Term, as applicable. The Initial Term,
Initial Renewal
Term and any Subsequent Renewal Term are herein collectively
referred to as the
"Employment Period."
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Where the context permits, all references to the Company shall
include an affiliate of the Company by which the Executive is
employed. As used
in this Agreement, the term "affiliate" or "affiliated companies"
shall include
any company controlled by, controlling or under common control with
the Company.
The obligations of the Company and the Executive under this
Agreement including,
without limitation, the obligations under Sections 1, 5, 6 and 7,
shall survive
the termination of the Employment Period to the extent necessary to
accomplish
the purposes thereof.
3. Terms
of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive shall
continue
to serve as Senior Vice President, General Counsel and
Corporate
Secretary
reporting directly to the Company's Chief Executive Officer,
with
authority, duties and responsibilities consistent with such
position
and as may
be reasonably assigned to her from time to time by the
Company's
Chief Executive Officer and (B) the Executive's services shall
be
performed at the location where the Executive was employed
immediately
preceding
the Effective Date or at any office or location of the Company
not more
than 50 miles from the Company's headquarters in St. Louis,
Missouri.
(ii) During the Employment Period, the Executive shall serve
the
Company faithfully, diligently and to the best of her ability,
and
shall
devote substantially all of her time and efforts during normal
business
hours to the business and affairs of the Company. During the
Employment
Period it shall not be a violation of this Agreement for the
Executive
to (A) deliver lectures, fulfill speaking engagements or teach
at
educational institutions, and (B) manage personal investments, so
long
as such
activities described in clauses A and B do not interfere with
the
performance of the Executive's responsibilities as an employee of
the
Company in
accordance with this Agreement, and (C) with the advance
approval
of the Board, serve on corporate, civic or charitable boards or
committees.
(b)
Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall
receive an annual base salary ("Annual Base Salary") of not
less
than
$300,000, and shall be paid in accordance with the Company's
normal
payroll
practices.
(ii) Annual Bonuses. In addition to Annual Base Salary, the
Executive shall
participate in the Company's Annual Incentive Program, or
any
successor annual bonus plan(s), with a target annual bonus
opportunity
of not
less than 75% of her Annual Base Salary. In addition, during
the
Employment
Period, the Executive shall be entitled to participate in all
long-term
and other incentive plans, practices, policies and programs
generally
applicable to senior executive officers of the Company and its
affiliated
companies.
(iii)
Equity Compensation. During the Employment Period, the
Executive
shall have the right to participate in an equity compensation
arrangement to be
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established by the Board or the ECDC of the Board and subject to
such
terms and
conditions as will be determined by the Board in its sole
discretion.
(iv) Savings and Retirement Plans. During the Employment
Period,
the Executive shall be entitled to participate in all savings
and
retirement
plans, practices, policies and programs generally applicable to
senior
executive officers of the Company and its affiliated companies,
subject to
the Board's authority to modify or terminate any such plans,
practices,
policies or programs on a Company-wide basis at any time.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive
and/or the Executive's family, as the case may be, shall be
eligible
for participation in and shall receive all benefits under
welfare
benefit
plans, practices, policies and programs provided by the Company
and its
affiliated companies (including, without limitation, medical,
prescription drug, dental, disability, salary continuance, employee
life,
group
life, accidental death and travel accident insurance plans and
programs)
to the extent generally applicable to senior executive officers
of the
Company and its affiliated companies, subject to the Board's
authority
to modify or terminate any such plans, practices, policies or
programs
on a Company-wide basis at any time.
(vi) Expenses. During the Employment Period, the Executive
shall be
entitled to receive prompt reimbursement, in accordance with
Company
policy, for all reasonable expenses incurred by the Executive
in
performing
her duties hereunder.
(vii) Vacation. During the Employment Period, the Executive
shall be
entitled to paid vacation in accordance with the plans,
policies,
programs
and practices of the Company and its affiliated companies as in
effect
from time to time.
4.
Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate
automatically upon the Executive's death during the Employment
Period. If the
Company determines in good faith that the Disability of the
Executive has
occurred during the Employment Period (pursuant to the definition
of Disability
set forth below), it may give to the Executive written notice in
accordance with
Section 9(b) of this Agreement of its intention to terminate the
Executive's
employment. In such event, the Executive's employment with the
Company shall
terminate effective on the 30th day after receipt of such notice by
the
Executive (the "Disability Effective Date"), provided that, within
the 30 days
after such receipt, the Executive shall not have returned to
full-time
performance of the Executive's duties. For purposes of this
Agreement,
"Disability" shall mean the Executive's long-term disability for
purposes of any
reasonable occupation as determined under the Company's disability
plan that is
applicable to the Executive.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to
perform
substantially the Executive's duties with the Company or one of
its
affiliates (other than any such failure resulting from incapacity
due
to
physical or mental illness), after a
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written
demand for substantial performance is delivered to the
Executive
by the
Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief
Executive
Officer
believes that the Executive has not substantially performed the
Executive's duties;
(ii) the willful engaging by the Executive in illegal conduct
or gross
misconduct which is materially and demonstrably injurious to
the
Company;
(iii) the Executive's conviction of, or plea of guilty or no
contest
to, a felony or any other crime involving moral turpitude,
fraud,
theft,
embezzlement or dishonesty; or
(iv) the Executive's habitual drug or alcohol abuse.
For purposes of this provision, no act or failure to act, on the
part of the
Executive, shall be considered "willful" unless it is done, or
omitted to be
done, by the Executive in bad faith or without reasonable belief
that the
Executive's action or omission was in the best interests of the
Company. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer or
a senior officer of the Company or based upon the advice of counsel
for the
Company shall be conclusively presumed to be done, or omitted to be
done, by the
Executive in good faith and in the best interests of the Company.
The cessation
of employment of the Executive shall not be deemed to be for Cause
unless and
until there shall have been delivered to the Executive a copy of a
resolution
duly adopted by the affirmative vote of not less than a majority of
the entire
membership of the Board at a meeting of the Board called and held
for such
purpose (after reasonable notice is provided to the Executive and
the Executive
is given an opportunity, together with counsel, in the case of
conduct described
in subparagraph (i) or (ii) above, to be heard before the Board),
finding that,
in the good faith opinion of the Board, the Executive is guilty of
the conduct
described in subparagraph (i), (ii), (iii) or (iv) above, and
specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by
the
Executive for Good Reason. For purposes of this Agreement, "Good
Reason" shall
mean:
(i) a material failure by the Company to comply with any of
the
provisions of Section 3(b) of this Agreement relating to
compensation,
other than
an isolated, insubstantial and inadvertent failure not
occurring
in bad faith and which is remedied by the Company promptly
after
receipt of
notice thereof given by the Executive;
(ii) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position as Senior
Vice
President,
General Counsel and Corporate Secretary of the Company
reporting
to the Company's Chief Executive Officer and the authority,
duties and
responsibilities contemplated by Section 3(a) of this
Agreement,
or any other action by the Company, including a fundamental
change to
the nature and scope of the Company's business, which results
in
a material
diminution in such position, title, authority, duties or
responsibilities,
excluding for this purpose an
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isolated,
insubstantial and inadvertent action not taken in bad faith and
which is
remedied by the Company promptly after receipt of notice
thereof
given by
the Executive;
(iii) the Company's requiring the Executive to be based at any
office or
location other than as provided in Section 3(a)(i)(B) hereof or
the
Company's requiring the Executive to travel on Company business to
a
substantially greater extent than required prior to the Effective
Date; or
(iv) Executive's receipt of the Company's written notice not
to renew
the Agreement or the failure of the Company and the Executive
to
enter into
a new employment agreement by no later than the last day of the
Employment
Period.
If the executive terminates her employment for Good Reason pursuant
to
subparagraph (ii) above, as a result of a sale by the Company of
substantially
all of its assets, then the Executive shall make herself available
to the
Company as a paid independent consultant for such fee, at such
times, over such
period of time and for such number of hours as the parties shall
reasonably
agree, taking account of any new employment that the Executive may
undertake.
(d) Notice of Termination. Any termination by the Company for
Cause,
or by the Executive for Good Reason, shall be communicated by
Notice of
Termination to the other party hereto given in accordance with
Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of
Termination" means
a written notice which (i) indicates the specific termination
provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable
detail the facts and circumstances claimed to provide a basis for
termination of
the Executive's employment under the provision so indicated and
(iii) if the
Date of Termination (as defined below) is other than the date of
receipt of such
notice, specifies the termination date (which date shall be not
more than thirty
days after the giving of such notice). The failure by the Executive
or the
Company to set forth in the Notice of Termination any fact or
circumstance which
contributes to a showing of Good Reason or Cause shall not waive
any right of
the Executive or the Company, respectively, hereunder or preclude
the Executive
or the Company, respectively, from asserting such fact or
circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or
by the
Executive for Good Reason, the date of receipt of the Notice of
Termination or
any later date specified therein, as the case may be, (ii) if the
Executive's
employment is terminated by the Company other than for Cause or
Disability, the
Date of Termination shall be the date on which the Company notifies
the
Executive of such termination and (iii) if the Executive's
employment is
terminated by reason of death or Disability, the Date of
Termination shall be
the date of death of the Executive or the Disability Effective
Date, as the case
may be.
5.
Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause. Except as provided in
Section
5(b) below, if, during or after the expiration of the Employment
Period, the
Company shall terminate
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the Executive's employment other than for Cause or the Executive
shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash
within ten days of the Date of Termination (or solely with respect
to
any
payment to be made pursuant to Section 5(a)(i)(D) below, such
other
time as
specified in Section 1 herein), the aggregate of the following
amounts:
A. the sum of (1) the Executive's accrued Annual Base
Salary through the Date of Termination, (2) any unpaid annual
bonus
earned by the Executive with respect to the previous year, and
(3)
any accrued vacation pay, in each case to the extent not
theretofore
paid (the sum of the amounts described in clauses (1), (2), and
(3)
shall be hereinafter referred to as the "Accrued Obligations");
and
B. an amount equal to the payment the Executive would
have received under the Company's Annual Incentive Program for
the
fiscal year of such termination in accordance with Section
3(b)(ii),
multiplied by the number of days that have transpired during
that
fiscal year immediately prior to the Date of Termination, divided
by
365; and
C. an amount equal to 200% of the sum of (i) the
Executive's Annual Base Salary immediately prior to the Date of
Termination and (ii) the average annualized payment the
Executive
received for the 3 years (or such shorter period during which
the
Executive has served as Senior Vice President, General Counsel
and
Corporate Secretary) immediately preceding the Date of
Termination
under the Company's Annual Incentive Program (the "Severance
Payment"); and
D. any unpaid portion of the Emergence Bonus, if any, to
be paid in the amount and in the manner defined in Section 1
herein.
(ii) subject to the provisions of Sections (9)(f) hereof, to
the extent
not theretofore paid or provided, the Company shall timely pay
or provide
to the Executive any other amounts or benefits, excluding any
severance
or separation pay or benefits, required to be paid or provided
or which
the Executive is eligible to receive under any plan, program,
policy,
practice, contract or agreement of the Company and its
affiliated
companies,
including, without limitation, the vested benefit, if any, of
the
Executive under any qualified defined benefit or defined
contribution
retirement
plan of the Company and its affiliated companies in which the
Executive
participates, in accordance with the terms of such plan (such
other
amounts and benefits shall be hereinafter referred to as the
"Other
Benefits");
(iii) the Company shall continue to provide at its expense (on
the same
basis as at the Executive's Date of Termination) for the
continued
participation of the Executive and, to the extent applicable,
her
family, in the Company's medical, dental,
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vision and
life insurance plans and programs, for a period of four months
commencing
with the Date of Termination; and
(iv) the Company shall provide the Executive with outplacement
services
during the twelve month period commencing on the Date of
Termination up to an aggregate c
