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Exhibit 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") by
and
between Solutia Inc., a Delaware corporation (the "Company"), and
James M.
Sullivan (the "Executive"), effective as of the 11th day of April,
2007 (the
"Effective Date").
WHEREAS,
the Company and the Executve are currently parties to an
Agreement originally dated as of the 19th day of July, 2004, and
amended and
restated as of the 21st day of April, 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,
a special emergence bonus. It is the Board's judgment that such a
special
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. Special
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, the Executive shall be entitled
to receive
from the Company a special emergence bonus equal to 20% of the
bonus pool as
determined pursuant to and in accordance with the terms of the
Solutia Inc.
Emergence Incentive Bonus Program as originally set forth and
previously agreed
to in Executive's Agreement originally dated July 19, 2004, and
amended and
restated as of April 21, 2005. The Emergence Bonus Program is
attached hereto as
Attachment I.
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
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applicable. The Initial Term, Initial Renewal Term and any
Subsequent Renewal
Term are herein collectively referred to as the "Employment
Period."
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 and Chief Financial Officer
of
the
Company, with such authority, duties, responsibilities and
reporting
requirements as may be reasonably assigned to him 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 his ability,
and
shall
devote substantially all of his 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
$412,500, which 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 his 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.
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(iii) Equity Compensation. During the Employment Period, the
Executive
shall have the right to participate in an equity compensation
arrangement to be 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
his 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:
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(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 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
and Chief Financial Officer of the Company and the authority,
duties and
responsibilities contemplated by Section 3(a) of this
Agreement,
or any other action by the Company, including a fundamental
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change to
the nature and scope of the Company's business, which results
in
a material
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an 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 immediately 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 his 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 himself 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.
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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 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 therein), 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");
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 and Chief
Financial
Officer) 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 herein in
Attachment
I.
(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
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Executive
and, to the extent applicable, his family, in the Company's
medical,
dental, vision and life insurance plans and programs, for a
period of
four months commencing with the Date of Termination; and
(iv) upon request of the Executive, the Company shall provide
outplacement services to the Executive for up to twelve months and
up to
an
aggregate cost of $25,000.
(b) Change in Control. If the Company shall terminate the
Executive's employment other than for Cause or the Executive shall
terminate
employment for Good Reason upon a Change in Control (pursuant to
the definition
of Change in Control set forth below) or at any time within 24
months after the
Change in Control, then the Executive shall be entitled to receive
(1) all
amounts as provided for in Section 5(a) hereof, provided, however,
that the
Severance Payment under this Section 5(b) will be an amount equal
to 250% 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 most recent years under the Company's Annual Incentive
Program (or such
shorter period during which the Executive has served as Senior Vice
President
and Chief Financial Officer), and (2) immediate vesting of all
outstanding
equity awards granted pursuant to the Company's equity compensation
plan as may
be in effect from time to time.
(i) For purposes of this Agreement, "Change in Control" shall
be deemed
to have occurred if:
A. Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes a "beneficial
owner"
(as defined in
Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than
50%
of the voting power of the then outstanding securities of the
Company, and such person owns more aggregate voting power of
the
Company's then outstanding securities entitled to vote generally
in
the election of directors than any other person;
B. The shareholders of the Company approve (or, if
shareholder approval is not required, the Board approves) an
agreement providing for (x) the merger or consolidation of the
Company with another corporation where the shareholders of the
Company, immediately prior to the merger or consolidation, will
not
beneficially own, immediately after the merger or
consolidation,
shares entitling such shareholders to 50% or more of all votes
to
which all shareholders of the surviving corporation would be
entitled in the election of directors (without consideration of
the
rights of any class of stock to elect directors by a separate
class
vote), (y) the sale or other disposition of 50% or more of the
Company's assets that it owns as of the Effective Date of this
Agreement, or (z) a liquidation or dissolution of the Company;
provided, however, the effectiveness of a plan of
reorganization
pursuant to which a majority of the common stock of the
reorganized
Company is distributed (i) to Persons who are (a) holders of
claims
against the Company; (b) holders of equity interests in the
Company;
and/or (c) designated in the Company's plan of
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reorganization proposal dated December 8, 2006, to receive
common
stock of the reorganize
