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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13255
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SOLUTIA INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-1781797
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI 63166-6760
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 674-1000
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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$.01 PAR VALUE COMMON STOCK NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR
FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE
SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS
FOR THE PAST 90 DAYS. [X] YES [ ] NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS
PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND
WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN
DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE
IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING
COMMON EQUITY HELD BY NON-AFFILIATES OF THE REGISTRANT: APPROXIMATELY
$1.4 BILLION AS OF THE CLOSE OF BUSINESS ON FEBRUARY 28, 2000.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE
REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE
DATE: 109,459,778 SHARES OF COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AS OF THE CLOSE OF BUSINESS ON FEBRUARY 28, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
1. PORTIONS OF SOLUTIA INC.'S ANNUAL REPORT TO SECURITY HOLDERS FOR
THE YEAR ENDED DECEMBER 31, 1999 (PART I, PART II AND PART IV OF
FORM 10-K).
2. PORTIONS OF SOLUTIA INC.'S NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT DATED MARCH 9, 2000 (PART III OF
FORM 10-K).
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We make statements in this Annual Report on Form 10-K and the
documents incorporated by reference that are considered
forward-looking statements under the federal securities laws. We
consider all statements about the following to be forward-looking
statements:
* Our expected future financial position, results of operations,
and cash flows;
* dividends;
* financing plans;
* business strategy;
* budgets;
* projected costs and capital expenditures;
* competitive positions;
* growth opportunities for existing products;
* benefits from new technology;
* price increases;
* share repurchases;
* plans and objectives of management for future operations; and
* effect of changes in accounting due to recently issued accounting
standards.
These statements are not guarantees of our future performance.
They represent our estimates and assumptions only on the date they
were made. There are risks, uncertainties and other important
factors that could cause our actual performance or achievements to
be materially different from those we may project. These risks,
uncertainties and factors include:
* Customer acceptance of new products;
* efficacy of new technology and facilities;
* general economic, business and market conditions that affect us
because some of our customers are in cyclical businesses;
* competitive position;
* changes in foreign laws and regulations;
* shortages or pricing of raw materials and energy;
* lower prices for our products or a decline in our market share
due to competition or price pressure by customers; and
* integration of acquired companies into our business.
PART I
ITEM 1. BUSINESS.
Solutia Inc. and its subsidiaries produce and market a variety
of high performance chemical-based materials. Solutia's strategic
focus is built on key strengths, including:
* complex manufacturing capabilities;
* process engineering expertise;
* polymer chemistry;
* fiber technology;
* technical service; and
* customer problem solving.
These world-class skills are applied to create solutions and
products for customers in the consumer, household, automotive and
industrial products industries. Solutia's products include:
* SAFLEX(R) plastic interlayer; adhesives; and window and
industrial films;
* Liquid, powder and waterborne resins; and
* VYDYNE(R) and ASCEND(TM) nylon polymers; chemical
intermediates; and nylon fibers.
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Solutia was incorporated in Delaware in April 1997 as a
wholly-owned subsidiary of Monsanto Company, and by
September 1, 1997, most of Monsanto's chemical businesses were
transferred to Solutia. On September 1, 1997, the "Distribution
Date," Monsanto distributed all of the outstanding shares of Solutia
common stock as a dividend to Monsanto's stockholders, and Solutia
became an independent publicly-held company listed on the New York
Stock Exchange. This event is called the "Spinoff." Monsanto and
Solutia entered into a number of agreements regarding the separation
of the companies and to provide mechanisms for an orderly transition
following the separation. Solutia has completed the transition to
services independent of Monsanto, although operating agreements for
Solutia's manufacturing facilities located at Monsanto plant sites
and Monsanto manufacturing facilities located at a Solutia plant
site continue for longer terms.
RECENT DEVELOPMENTS
On April 30, 1999, Solutia announced an agreement with FMC
Corporation to form a joint venture to manufacture and market
phosphorus chemicals. Solutia will contribute its phosphorus-based
chemicals business to the joint venture and will hold a 50%
ownership share. The formation of the joint venture, to be named
Astaris LLC, is being reviewed by the Federal Trade Commission under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
On December 22, 1999, Solutia acquired Vianova Resins from
Morgan Grenfell Private Equity Ltd., a private equity syndicate, and
minority holders for a total of approximately DM 1.2 billion (about
$640 million). Vianova Resins is a leading European producer of
resins and additives for coatings and technical applications.
SEGMENTS; PRINCIPAL PRODUCTS
For 1999, Solutia reported its business under three segments:
* Performance Films;
* Specialty Products; and
* Integrated Nylon.
This is a change from past years, for which Solutia reported its
businesses under the Chemicals, Fibers, and Polymers and Resins
segments. This change corresponds with Solutia's refinement of its
management structure in December 1999 to align with its growth
strategy. Solutia's management is now organized around four
strategic business platforms: Performance Films, Resins and
Additives, Specialties, and Integrated Nylon. Resins and Additives
and Specialties have been aggregated into the Specialty Products
segment because of their similar economic characteristics, as well
as their similar products and services, production processes, types
of customers, and methods of distribution. The following tables
categorize our principal products by major end-use markets within
the segments for 1999.
The tabular and narrative information contained in Note 19 of
"Notes to Consolidated Financial Statements" appearing on pages 45
through 47 of the 1999 Annual Report is incorporated herein by
reference.
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PERFORMANCE FILMS
<CAPTION>
Major End-Use
Major End-Use Products & Major Raw
Markets Major Products Applications Major Competitors Materials Major Plants
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<S> <C> <C> <C> <C> <C>
CONSTRUCTION AND HOME Polyvinyl butyral Products to DuPont; Material Butyraldehyde; Ghent, Belgium;
FURNISHINGS for KEEPSAFE(R), increase the safety Science Corp. ethanol; polyvinyl Springfield, MA;
SAFLEX INSIDE(TM), and security of (MSC); Lintec; 3M alcohol; vinyl Trenton, MI;
and KEEPSAFE MAXI- architectural glass acetate monomer; Martinsville, VA;
MUM(TM) laminated for residential and polyester film Bridgeport, NJ
window glass; SAN- commercial
TICIZER(R) plasti- structures;
cizers; LLUMAR(R) resilient sheet and
and VISTA(R) pro- tile flooring;
fessional window after-market films
films and GILA(R) for solar con-
retail window films trol, security and
safety
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VEHICLES SAFLEX(R) plastic Automotive glass; DuPont; MSC; Butyraldehyde; Ghent, Belgium;
interlayer; solar control Lintec; Madico ethanol; polyvinyl Springfield, MA;
LLUMAR(R), FORMULA alcohol; vinyl Trenton, MI;
ONE(R) and GILA(R) acetate monomer; Martinsville, VA
retail window films polyester film
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INDUSTRIAL GELVA(R) pressure Packaging; medical DuPont; Akzo Nobel; Ethanol; formalde- Ghent, Belgium;
APPLICATIONS sensitive adhesives; devices; tapes and Bayer; Lintec; MSC; hyde; maleic anhy- Springfield, MA;
industrial films; graphic arts 3M; Southwall; dride; melamine; Trenton, MI;
release liners and Rexam; IST; polyester film; Martinsville, VA
deep-dyed films National Starch butanol; chlorine
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ELECTRONICS Performance films; Computer touch 3M; Lintec; MSC; Ethanol; formalde- Martinsville, VA;
conductive and anti- screens; elec- Southwall; Sheldahl hyde; maleic anhy- Canoga Park, CA
reflective coated troluminescent dis- dride; melamine;
films plays and watches; polyester film
cathode ray tube
monitors
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<CAPTION>
SPECIALTY PRODUCTS
Major End-Use
Major End-Use Products & Major Raw
Markets Major Products Applications Major Competitors Materials Major Plants
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<S> <C> <C> <C> <C> <C>
CAPITAL EQUIPMENT THERMINOL(R) heat Heat transfer Dow Chemical Co.; Benzene; phenol; Alvin, TX;
transfer fluids; fluids; water Nippon Steel phosphorus Anniston, AL;
DEQUEST(R) water treatment; oil Chemical Co.; trichloride Newport, Wales (UK)
treatment chemicals field chemicals Albright & Wilson
plc; Bayer A.G.
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INDUSTRIAL MODAFLOW(R) flow and Coatings and Cytec Industries; Acrylate esters; Springfield, MA;
APPLICATIONS leveling agents; adhesives; caulks Neste butanol; Fechenheim,
RESIMENE(R) and sealants; formaldehyde; Germany; Rayong,
crosslinkers; paints; coated melamine; Thailand; Romano d'
MAPRENAL(R)and fabric; wire and Ezzelino, Italy
MADURIT resins cable; liquid
coating systems;
fiberboard;
technical
laminates; paper
coatings
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AVIATION/ SKYDROL(R) aviation Hydraulic fluids ExxonMobil Phosphorus St. Louis, MO
TRANSPORTATION hydraulic fluids; for commercial oxychloride;
SKYKLEEN(R) aviation aircraft; methanol
solvents environmentally-
friendly cleaning
fluids for aviation
maintenance
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CHEMICALS Industrial Oil additives; Albright & Wilson Elemental Augusta, GA;
phosphates; pesticides; mining plc; FMC Corp.; phosphorus St. Louis, MO;
phosphoric acid; chemicals; chemical Rhodia Sauget, IL;
phosphorus intermediates; fire Trenton, MI
pentasulfide; retardants
phosphorus
trichloride;
PHOS-CHEK(R) fire-
fighting agents
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PERSONAL PRODUCTS Oral care Dentifrices; water Albright & Wilson Elemental Augusta, GA;
phosphates; conditioners; plc; FMC Corp.; phosphorus Newport, Wales
industrial dishwasher Rhodia (UK); St. Louis,
phosphates detergents MO; Sao Jose dos
Compos, Brazil;
Trenton, MI
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FOOD AND BEVERAGE LEVN-LITE(R), Leavening agents FMC Corp.; Rhodia Elemental St. Louis, MO;
PAN-O-LITE(R), and for bakery goods; phosphorus Sao Jose dos
LEVERAGE(R) agents used in Compos, Brazil;
phosphate; curing and Trenton, MI
NUTRIFOS(R) STP; processing meats
KATCH(R) seafood and poultry; agents
phosphate; for extending shelf
phosphoric acid life of meats,
poultry and fish;
soft drink
additives
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VEHICLES MODAFLOW(R) flow and Coatings and Cytec Industries; Acrylate esters; Springfield, MA;
leveling agents; adhesives; caulks DSM; Cray butanol; Fechenheim, Hamburg
RESIMENE(R) and sealants; Valley/Total formaldehyde; and Wiesbaden,
crosslinkers; paints; coated melamine Germany; Rayong,
VIACRYL(R), fabric; wire and Thailand; Romano d'
MACRYNAL(R) cable; industrial Ezzelino, Italy
VIALKYD(R), DUROXIN, and decorative
VIAKTIN(R), VIAMIN coatings;
and HOSTAFLEX environmentally-
resins; RESYDROL(R) friendly solvents
waterborne resins;
ALFTALAT(R),
SYNTHACRYL(R)
and VIAKTIN(R)
solid resins
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<CAPTION>
INTEGRATED NYLON SEGMENT
Major End-Use
Major End-Use Products & Major Raw
Markets Major Products Applications Major Competitors Materials Major Plants
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<S> <C> <C> <C> <C> <C>
CONSTRUCTION AND HOME Nylon carpet staple; WEAR-DATED(R) DuPont; Honeywell; Acrylonitrile; Pensacola, FL;
FURNISHINGS nylon bulk residential and BASF ammonia; Greenwood, SC;
continuous filament; ULTRON VIP(R) cyclohexane; Decatur and
ACRILAN(R) acrylic commercial carpet; propylene Foley, AL
fiber; ASCEND(TM) area rugs; bath
nylon polymer mats; WEAR-DATED(R)
upholstery fabrics;
blankets; non-woven
reinforcement and
linings
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PERSONAL PRODUCTS ACRILAN(R) acrylic Sweaters; knit Sterling Chemicals; Acrylonitrile; Pensacola, FL;
fiber; ASCEND(TM) apparel; half-hose; Acordis; DuPont, ammonia; Decatur, AL;
nylon polymer active wear; craft Radici cyclohexane; Greenwood, SC
yarns; hand-knit propylene
yarns; apparel;
dental floss;
intimate apparel;
bedding; shoes
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VEHICLES Nylon filament; Tires; air bags; DuPont; Acordis; Acrylonitrile; Pensacola, FL;
VYDYNE(R) nylon brakes; convertible Rhodia; Asahi ammonia; Decatur, AL;
molding resins; tops; automotive Chemical cyclohexane; Greenwood, SC
ASCEND(TM) nylon interior, exterior propylene
polymer; ACRILAN(R) and under-the-hood
acrylic fiber molded parts;
carpet; non-woven
reinforcement and
linings
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INDUSTRIAL ACRILAN(R) acrylic Sewing thread; Acordis; DuPont; Acrylonitrile; Pensacola, FL;
APPLICATIONS fiber; ASCEND(TM) conveyer belts; Honeywell; BASF ammonia; Decatur, AL;
nylon polymer; awnings and tents; cyclohexane; Greenwood, SC
industrial nylon nylon film cooking propylene
fiber bags; specialized
food packaging
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INTERMEDIATE Nylon salt; adipic Nylon and acrylic DuPont; Rhodia; Natural gas; Anniston and
CHEMICALS acid; hexamethylene fiber; nylon BASF; Asahi propylene; benzene; Decatur, AL; Alvin,
diamine; plastics; Chemical chlorine; TX; Greenwood, SC;
adiponitrile; herbicides; feed cyclohexane Sauget, IL;
acrylonitrile; supplements Pensacola, FL
chlorobenzenes
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</TABLE>
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PRINCIPAL EQUITY AFFILIATES
Solutia participates in a number of joint ventures in which it
shares management control with other companies. Solutia's equity
earnings from affiliates were $36 million, $25 million and
$31 million in 1999, 1998 and 1997, respectively. Principal joint
ventures include Flexsys, L.P., Advanced Elastomer Systems, L.P.,
and the P4 joint venture.
The Flexsys joint venture, headquartered in Belgium, is a
leading supplier of process chemicals to the rubber industry. Its
product line includes a number of branded accelerators
(SANTOCURE(R), THIOFIDE(R) and THIOTAX(R)), pre-vulcanization
inhibitors (SANTOGARD(R)), antidegradants and antioxidants
(FLECTOL(R) and SANTOWHITE(R)) and insoluble sulphur (CRYSTEX(R)).
Flexsys is a 50/50 joint venture between Solutia and Akzo Nobel.
Advanced Elastomer Systems, headquartered in the United States,
produces and sells thermoplastic elastomers--materials that combine
the processability of thermoplastics and the functional performance
of thermoset rubber products. The joint venture's product lines
include SANTOPRENE(R) thermoplastic rubber and VISTAFLEX(R)
thermoplastic elastomer. Advanced Elastomer Systems is a 50/50 joint
venture between Solutia and ExxonMobil.
The P4 joint venture, principally located at Soda Springs,
Idaho, mines phosphate rock and produces elemental phosphorus. This
joint venture was formed during the Spinoff, with Solutia obtaining
a 40% interest and Monsanto retaining the remaining 60%. Solutia
operates the joint venture under an operating agreement. The
elemental phosphorus produced by the P4 joint venture is sold to
both Monsanto and Solutia generally at cost with certain adjustments
to reflect ownership. Monsanto has priority for a certain percentage
of the production volume. Solutia uses the elemental phosphorus as a
raw material in the manufacture of phosphorus derivatives, which
Solutia then sells, and it sells elemental phosphorus to other
users. In the event of a change of control of Solutia or the sale of
the phosphorus derivative business (including Solutia's interest in
the P4 joint venture), Monsanto has an option to acquire Solutia's
interest in the P4 joint venture at the then book value. Monsanto is
paying Solutia an annual fee for this option. By letter agreement
dated April 1, 1999, Solutia has the right to require Monsanto to
acquire Solutia's interest in the P4 joint venture at the then book
value. This right expires April 1, 2000.
SALE OF PRODUCTS
Solutia's products are sold directly to end users in various
industries, principally by Solutia's own sales force, and, to a
lesser extent, by distributors. Under a marketing alliance between
Solutia and Dow Plastics, a business unit of The Dow Chemical
Company, Dow markets Solutia's VYDYNE(R) nylon 6,6 molding resins
for injection molding applications worldwide. Solutia's marketing
and distribution practices do not result in unusual working capital
requirements on a consolidated basis. Inventories of finished goods,
goods in process and raw materials are maintained to meet customer
requirements and Solutia's scheduled production. In general, Solutia
does not manufacture its products against a backlog of firm orders;
production is scheduled to meet the level of incoming orders and the
projections of future demand. Solutia generally is not dependent
upon one or a group of customers, and it has no material contracts
with the government of the United States, or any state or local, or
foreign government. In general, Solutia's sales are not subject to
seasonality. While no single customer or customer group accounts for
ten percent or more of Solutia's net sales, sales to the carpet mill
industry and the European auto glass industry each represent a
significant portion of Solutia's net sales.
COMPETITION
Solutia encounters substantial competition in each of its
product lines. This competition, from other manufacturers of the
same products and from manufacturers of different products designed
for the same uses, is expected to continue in both U.S. and ex-U.S.
markets. Depending on the product involved, various types of
competition are encountered, including price, delivery, service,
performance, product innovation, product recognition and quality.
Overall, Solutia regards its principal product groups as competitive
with many other products of other producers and believes that it is
an important producer of many of these product groups. For
information regarding competition in specific markets, see
"Segments; Principal Products."
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RAW MATERIALS AND ENERGY RESOURCES
Solutia is a significant purchaser of basic, commodity raw
materials, including propylene, cyclohexane, benzene and natural
gas. Major requirements for key raw materials and energy are
typically purchased pursuant to long-term contracts. Solutia is not
dependent on any one supplier for a material amount of its raw
materials or energy requirements, but certain important raw
materials are obtained from a few major suppliers. In general, where
Solutia has limited sources of raw materials, it has developed
contingency plans to minimize the effect of any interruption or
reduction in supply. Information regarding specific raw materials is
provided in the chart under "Segments; Principal Products."
While temporary shortages of raw materials and energy may
occasionally occur, these items are generally sufficiently available
to cover current and projected requirements. However, their
continuing availability and price are subject to unscheduled plant
interruptions occurring during periods of high demand, or due to
domestic and world market and political conditions, as well as to
the direct or indirect effect of U.S. and other countries'
government regulations. The impact of any future raw material and
energy shortages on Solutia's business as a whole or in specific
world areas cannot be accurately predicted.
PATENTS AND TRADEMARKS
Solutia owns a large number of patents which relate to a wide
variety of products and processes, has pending a substantial number
of patent applications and is licensed under a small number of
patents owned by others. Solutia owns a considerable number of
established trademarks in many countries under which it markets its
products. These patents and trademarks in the aggregate are of
material importance in the operations of Solutia and to its
Performance Films, Specialty Products, and Integrated Nylon
segments.
RESEARCH AND DEVELOPMENT
Research and development constitute an important part of
Solutia's activities. In recent years, Solutia's research and
development expenses amounted to approximately $80 million in 1999,
$83 million in 1998 and $87 million in 1997, or about 3% of sales on
average. Solutia focuses its research and development expenditures
on process improvements and select product development.
Products launched recently as a result of internal development
include an enhanced surface topography plastic interlayer, SAFLEX
SV, a new adhesive for under-the-hood automotive applications, an
adhesive for low surface-energy surfaces, an adhesive containing a
built-in latent crosslinking agent, and a new defoamer for lubricant
oils where efficient and stable high temperature performance is
required. Solutia is developing environmentally-benign biodegradable
adhesives that will allow the U.S. Postal Service to improve the
paper recycling process. In addition, Solutia has introduced new
nylon 6,6 grades to support Solutia's marketing alliance with Dow
Plastics and higher performance extrusion grades of Ascend(TM) nylon
polymer.
Solutia also actively pursues technologies which can lead to new
products or processes. Products resulting from nylon industrial
spinning technology licensed from Toray in Japan became fully
commercialized in tire reinforcement, automotive air bags, and high
strength belts.
ENVIRONMENTAL MATTERS
The narrative information appearing under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters" on pages 27 and 28 of the 1999
Annual Report is incorporated by reference.
EMPLOYEE RELATIONS
On December 31, 1999, Solutia had approximately 10,600 employees
worldwide. Satisfactory relations have prevailed between Solutia and
its employees. Solutia uses self-directed work teams, incentive
programs and other initiatives to keep employees actively involved
in the success of the business. Approximately 20% of Solutia's
workforce is represented by various labor unions.
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INTERNATIONAL OPERATIONS
Solutia and its subsidiaries are engaged in manufacturing, sales
and research and development in areas outside the United States,
including Europe, Canada, Latin America and Asia. Nearly 30% of
Solutia's overall 1999 sales were made into markets outside the
United States. With the acquisition of the Vianova Resins business,
Solutia expects the percentage of ex-U.S. sales to increase
significantly. Operations outside the United States are potentially
subject to a number of risks and limitations which are not present
in domestic operations, including fluctuations in currency values,
trade restrictions, investment regulations, governmental instability
and other potentially detrimental governmental practices or policies
affecting companies doing business abroad. Solutia's Performance
Films and Specialty Products segments are particularly dependent
upon their international operations. Approximately two-thirds and
one-third of their 1999 sales, respectively, were made into markets
outside the United States.
ITEM 2. PROPERTIES.
Solutia's general offices are located in a leased facility in
St. Louis County, Missouri. Solutia's European headquarters are
located in Louvain La Neuve, Belgium, in premises leased from the
University of Louvain. Solutia also has research laboratories,
research centers and manufacturing locations worldwide. Information
about Solutia's major manufacturing locations worldwide and segments
that used these locations on January 1, 2000, appears under
"Segments; Principal Products" in Item 1 of this Report and is
incorporated herein by reference.
Solutia's principal plants are suitable and adequate for their
use. Utilization of these facilities may vary with seasonal,
economic and other business conditions, but none of the principal
plants is substantially idle. The facilities generally have
sufficient capacity for existing needs and expected near-term
growth. Solutia has plans in place to expand facilities that are
anticipated to reach capacity in 2001. Solutia owns most of its
principal plants. However, at Antwerp, Belgium and Sao Jose dos
Campos, Brazil, both of which are Monsanto sites, Solutia owns
certain buildings and production equipment and leases the underlying
land. In addition, Solutia leases the land for its Vianova Resins
facilities at Suzano, Brazil and Fechenheim, Germany from Clariant
or a subsidiary of Clariant and the land for its facilities at
Wiesbaden, Germany from Hoechst with site services provided by a
subsidiary of Hoechst.
Monsanto and Solutia have entered into certain operating
agreements with respect to each of the two Monsanto facilities
listed above and Solutia's Chocolate Bayou facility in Alvin, Texas.
Under these operating agreements, Solutia is the guest and Monsanto
is the operator at the facilities except the Chocolate Bayou
facility, at which Monsanto is the guest and Solutia is the
operator. The initial term of each of the operating agreements is 20
years. After the initial term, the operating agreements continue
indefinitely unless and until terminated by either party upon at
least 24 months' prior written notice. Each of the operating
agreements also provides that, under certain circumstances, either
the operator or the guest may terminate the operating agreement
prior to the expiration of its initial term.
Solutia operates several facilities for third parties in
addition to Monsanto, principally within the Chocolate Bayou;
Sauget, Illinois; Pensacola, Florida; and Newport, Wales (U.K.)
sites, under long-term lease and operating agreements.
Solutia expects to complete construction of a world-scale
acrylonitrile production facility at Chocolate Bayou in the third
quarter of 2000. The facility will employ Solutia's proprietary
catalyst system and is expected to be capable of producing
approximately 500 million pounds annually. Solutia has product sale
agreements with three customers, Bayer, Novus International Inc. and
Asahi, who made advance payments in connection with this project. In
addition, Solutia plans to undertake two other construction projects
during 2000 and 2001. These include a phenol processing facility at
the Pensacola, Florida site to produce intermediates in the nylon
manufacturing process and an expansion of the adiponitrile
production facility at the Decatur, Alabama site.
Solutia is an active participant in the safety and health
Voluntary Protection Program ("VPP") administered by the
Occupational Safety and Health Administration for sites in the U.S.,
and implemented by Solutia for sites outside the U.S. Currently, 13
Solutia sites in the U.S. qualify for the OSHA VPP
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"Star" designation, a rating designating full compliance. Three
other Solutia sites, two in Europe and one in Canada, have achieved
the Solutia "Star" designation, which is an internal equivalent to
the OSHA designation.
ITEM 3. LEGAL PROCEEDINGS.
At the time of the Spinoff, Solutia assumed from Monsanto, under
an agreement known as the Distribution Agreement, liabilities
related to specified legal proceedings. As a result, although
Monsanto remains the named defendant, Solutia is required to manage
the litigation and indemnify Monsanto for costs, expenses and
judgments arising from the litigation. Most of these proceedings
have arisen in the ordinary course of business and involve claims
for money damages. While the results of litigation cannot be
predicted with certainty, Solutia does not believe these matters or
their ultimate disposition will have a material adverse effect on
Solutia's consolidated financial position, profitability or
liquidity in any one year. The following paragraphs describe several
proceedings to which Solutia is a party or to which Monsanto is a
party and for which Solutia assumed any liabilities.
On April 12, 1985, Monsanto was named as a defendant in Alanis,
et al. v. Farm & Home Savings, et al., filed in the District Court
in Harris County, Texas, the first of a number of lawsuits in which
plaintiffs claim injuries resulting from alleged exposure to
substances present at or emanating from the Brio Superfund site near
Houston, Texas. Monsanto is one of a number of companies that sold
materials to the chemical reprocessor at that site. Currently
pending are the following matters: (1) Monsanto is one of a number
of defendants in three cases brought in Harris County District Court
or in U.S. District Court for the Southern District of Texas on
behalf of 116 plaintiffs who owned homes or lived in subdivisions
near the Brio site, attended school near the site or used nearby
recreational baseball fields. Plaintiffs claim to have suffered
various personal injuries and fear future disease; they assert the
need for medical monitoring, and, in the case of the homeowners,
claim property damage. Plaintiffs seek compensatory and punitive
damages in an unspecified amount. (2) Monsanto is one of a number of
defendants in one additional action brought in Harris County
District Court on behalf of 412 plaintiffs who are former employees
of the owners/operators of the Brio site or members of the
employees' families. Plaintiffs claim physical and emotional injury
and seek compensatory and punitive damages in an unspecified amount.
Solutia believes that there are meritorious defenses to all of these
lawsuits including lack of proximate cause, lack of negligent or
improper conduct on the part of Monsanto or Solutia and negligence
of plaintiffs (or their parents) and/or of the builders and
developers of the Southbend subdivisions. These actions are being
vigorously defended.
On November 15, 1993, Monsanto was named as a defendant in Dyer,
et al. v. Monsanto Company, et al., filed in the Circuit Court in
St. Clair County, Alabama, the first of a number of lawsuits in
which plaintiffs claim to have sustained personal injuries or
property damage as a result of the alleged release of
polychlorinated biphenyls ("PCBs") and other materials from its
Anniston, Alabama, plant site. The following matters are currently
pending: (1) Monsanto is a defendant in two cases pending in Circuit
Court in St. Clair County, Alabama which have been consolidated and
certified as a class action on behalf of all property owners in a
specified area along waterways near the plant. In April 1999 Solutia
reached an agreement in principle, subject to Court approval, to
settle these matters for a cash payment to members of the class of
$23 million and a guarantee that Solutia will spend at least
$18 million over a period of approximately 6 years, in addition to
$3 million already expended, on remediation activities directed to the
waterways at issue. On July 30, 1999, the Alabama Supreme Court
stayed all proceedings in these cases after a small group of class
members opposed to the settlement filed a petition for a writ of
mandamus. The settlement opponents claim that the amount of cash to
be paid to class members is inadequate and that the proposed
agreement does not assure that Solutia will clean up the waterways
involved. Solutia has argued to the Alabama Supreme Court that the
settlement is fair and adequate and that Solutia will diligently
perform the remedial activities agreed upon with the Alabama
Department of Environmental Management after appropriate studies are
completed. The parties are awaiting the court's decision. (2) Monsanto
is a defendant in an additional action brought in Circuit
Court in Shelby County, Alabama on behalf of a purported class of
property owners farther downstream along waterways near the plant.
Plaintiffs seek compensatory and punitive damages in an unspecified
amount for an
9
<PAGE>
<PAGE>
alleged increased risk of physical injury or illness, emotional
distress caused by fear of future injury or illness, medical
monitoring and diminishment in the value of their properties and
their riparian rights. On October 5, 1999, the trial court granted
Solutia's motion for summary judgment, holding that plaintiffs had,
in an action not involving Monsanto or Solutia, recovered for the
damages they claim in this action. In addition the court found that
plaintiffs' claims were barred by the statute of limitations.
Plaintiffs' motion for reconsideration of the trial court's order
was denied on January 6, 2000, and plaintiffs have appealed to the
Alabama Supreme Court. (3) Monsanto is a defendant in an additional
12 cases brought in Circuit Court in Calhoun County, Circuit Court
in St. Clair County, Circuit Court in Talladega County or in U.S.
District Court for the Northern District of Alabama on behalf of
5,528 plaintiffs who own or rent homes, own or operate businesses,
attend churches or who have otherwise resided or visited in
neighborhoods near the plant or who own or operate businesses along
waterways near the plant. Plaintiffs claim to have suffered various
personal injuries and fear future disease; they assert the need for
medical monitoring and claim to have suffered loss in the value of
their properties or commercial injury. They seek compensatory and
punitive damages of $3 million or in unspecified amounts for each
plaintiff. On March 8, 1999, the Alabama Supreme Court stayed all
proceedings in several consolidated cases pending in Circuit Court
in Calhoun County brought on behalf of 2,712 plaintiffs after
Solutia filed a petition for a writ of mandamus. Solutia sought the
intervention of the Alabama Supreme Court on a number of grounds,
including the failure of the trial court to rule on Solutia's
motions for change of venue, for exclusion of certain evidence that
lacks a valid scientific basis, for specification of procedures to
govern trial of plaintiffs' claims, including procedures governing
jury selection, and other relief. The parties are awaiting the
court's decision. On February 11, 2000, Solutia arrived at an
agreement in principle to settle one of the cases brought in U.S.
District Court on behalf of the owners of a business located near
the plant. (4) Monsanto is a defendant in one additional case brought
in Circuit Court in Calhoun County on behalf of a purported class of all
Alabama residents who have been exposed to PCBs or other materials
allegedly released from the Anniston plant. Plaintiffs claim to suffer
from unspecified personal injuries and seek compensatory and punitive
damages in an unspecified amount. Solutia believes that there are
meritorious defenses to all these matters, including lack of any physical
injury or property damage to plaintiffs, lack of any imminent or substantial
endangerment to health or the environment and lack of negligence or
improper conduct on the part of Solutia or Monsanto. These actions
are being vigorously defended.
Monsanto is one of several defendants added on February 7, 1997,
to Pennsylvania Department of General Services, et al. v. United States
Mineral Products Company, et al., a case then pending in the Commonwealth
Court of Pennsylvania. This action was originally filed against United
States Mineral Products Company in 1990 by the Commonwealth of Pennsylvania,
seeking damages caused by the presence of asbestos fireproofing in the
Transportation and Safety Building ("T&S Building"), which was part of the
Commonwealth's Capital Complex in Harrisburg, Pennsylvania. In June 1994 a
fire broke out in the T&S Building. Testing following the fire revealed the
presence of low levels of PCBs at various locations in the building, which
the Commonwealth alleges necessitated its demolition. The Commonwealth seeks
recovery of costs it allegedly incurred in testing, monitoring, cleanup,
demolition and relocation caused by the alleged contamination. In addition,
the Commonwealth seeks the cost of constructing a new building on the site of
the T&S Building. Trial of this action began with the selection of a jury in
April 1999, and is continuing. Solutia believes that there are meritorious
defenses to this action, including lack of any hazard or danger to occupants
or visitors caused by the presence of PCBs in the building; a determination by
the Pennsylvania Department of Health that the building was safe for use and
occupancy; the failure of the Commonwealth to act prudently following the fire
to mitigate its alleged damages; the impropriety of using replacement cost as
a measure of damages; and the fact that most of plaintiff's damages would have
been incurred during the removal of asbestos fireproofing and the installation
of fire sprinklers required to comply with applicable fire safety codes. This
action is being vigorously defended.
On December 4, 1998, the U.S. Environmental Protection Agency
("EPA") issued a notice of violation to Solutia, Monsanto and P4
Production, L.L.C., alleging violations of the Wyoming Environmental
Quality Act, the Wyoming Air Quality Standards & Regulations and a
permit issued in 1994 by the Wyoming Department of Environmental
Quality to Sweetwater Resources, Inc., a former subsidiary of
10
<PAGE>
<PAGE>
Monsanto, for a coal coking facility in Rock Springs, Wyoming. This
facility is currently owned by P4 Production, a joint venture formed
in conjunction with the spinoff of Solutia by Monsanto on
September 1, 1997. P4 Production is owned 40 percent by Solutia and
60 percent by Monsanto and is operated by Solutia under an operating
agreement with P4 Production. The alleged violations arise out of
the same facts that formed the basis of a consent order with
Monsanto issued by the Wyoming Environmental Quality Council on
March 6, 1997 (the "1997 Consent Order"). At that time neither the
EPA nor the Wyoming Department of Environmental Quality sought to
impose a penalty. As a result of the December 4, 1998 notice of
violation, Solutia, Monsanto, and P4 Production began discussions
with the EPA and the Wyoming Department of Environmental Quality.
These discussions culminated in the negotiation of a judicial
settlement with the Wyoming Department of Environmental Quality that
incorporated the terms and conditions of the 1997 Consent Order and
assessed a penalty in the amount of $200,000. A consent decree was
entered with the First Judicial District Court of Laramie County,
Wyoming on June 25, 1999. On November 22, 1999, the United States,
on behalf of the EPA, demanded $2,500,000 from P4 Production,
Solutia, and Monsanto and injunctive relief ensuring compliance with
permit requirements by P4 Production's Rock Springs, Wyoming coal
coking facility. The issues are the same matters that were resolved
by the June 25, 1999 consent decree between the three companies and
the State of Wyoming. On January 18, 2000, P4 Production, Solutia
and Monsanto filed a complaint for declaratory relief in the United
States District Court for the District of Wyoming against the EPA.
The companies are seeking a determination that the action the EPA is
threatening against them is precluded by the doctrine of res
judicata, among other things.
RISK MANAGEMENT
Solutia has evaluated risk retention and insurance levels for
product liability, property damage and other potential areas of
risk. Solutia will continue to devote significant effort to
maintaining and improving safety and internal control programs,
which reduce its exposure to certain risks. Management decides the
amount of insurance coverage to purchase from unaffiliated companies
and the appropriate amount of risk to retain based on the cost and
availability of insurance and the likelihood of a loss. Management
believes that the levels of risk which it has retained are
consistent with those of other companies in the chemical industry.
There can be no assurance that Solutia will not incur losses beyond
the limits, or outside the coverage, of its insurance. Solutia's
consolidated financial position, profitability and liquidity are not
expected to be affected materially by the levels of risk retention
that it accepts.
Under the Distribution Agreement that Solutia and Monsanto
entered into at the time of the Spinoff, Solutia is entitled to the
benefit of liability insurance coverage under certain Monsanto
policies, to the extent coverage existed and coverage limits are not
exhausted, for claims for which Solutia assumed responsibility. That
insurance coverage generally is shared with Monsanto for other
liabilities existing prior to the Distribution Date which Monsanto
has retained, on an as available basis, without allocation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Solutia did not submit any matters to the security holders
during the fourth quarter of 1999.
11
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The narrative and tabular information regarding the market for
Solutia's common equity and related stockholder matters appearing
under "Quarterly Data--Unaudited" on page 47 and "Financial Summary"
on page 20 of the 1999 Annual Report is incorporated by reference.
The declaration and payment of dividends is made at the
discretion of Solutia's Board of Directors. The Board's current
policy is to pay cash dividends on an annual basis in December. The
Board anticipates that the current 4 cent annual dividend will
remain unchanged for the foreseeable future.
Solutia's stock is traded principally on the New York Stock
Exchange under the symbol "SOI."
ITEM 6. SELECTED FINANCIAL DATA.
The tabular information under "Financial Summary" appearing on
page 20 of the 1999 Annual Report, is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The information appearing under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages
21 through 29 of the 1999 Annual Report is incorporated by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information appearing under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--
Derivative Financial Instruments" on pages 28 and 29 of
the 1999 Annual Report is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Solutia's consolidated financial statements appearing on pages
30 through 47 and the Report of Independent Auditors appearing on
page 19 of the 1999 Annual Report are incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
12
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information about directors and executive officers appearing
under "Election of Directors" on pages 4 through 6 of Solutia's
Notice of Annual Meeting and Proxy Statement dated March 9, 2000, is
incorporated by reference. The following information about Solutia's
executive officers on March 1, 2000, is included pursuant to
Instruction 3 of Item 401(b) of Regulation S-K:
<TABLE>
<CAPTION>
Year First
Became an
Executive
Name-Age Present Position with Registrant Officer Other Business Experience since January 1, 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John C. Hunter III, 53 Chairman, President, Chief 1997 President and Chief Operating Officer, 1997-1999.
Executive Officer and Director President, Fibers Business Unit, Monsanto,
1995-1997. Vice President and General Manager,
Fibers Division and Asia-Pacific, The Chemical
Group of Monsanto, 1993-1995.
Karl R. Barnickol, 58 Senior Vice President, General 1997 Associate General Counsel and Assistant Secretary
Counsel and Secretary of Monsanto, 1985-1997.
Rodney L. Bishop, 59 Vice President and Treasurer 1997 General Auditor of Monsanto, 1993-1997.
A. Hameed Bhombal, 54 Vice President, Technology and 1999 Vice President and General Manager, Nylon
Chief Technical Officer Industrial Fibers, 1997-1999. Director,
Technology, Fibers Business Unit, Monsanto,
1993-1997.
Dennis L. Cavner, 45 Vice President, Operations 1997 Director, Manufacturing, SAFLEX(R) Plastic
Excellence and Environment, Interlayer, Monsanto, 1996-1997. Director,
Safety and Health Manufacturing, Phosphorus and Derivatives, Monsanto,
1995-1996. Plant Manager of Monsanto's Muscatine,
Iowa facility, 1992-1995.
Robert A. Clausen, 55 Senior Vice President and Chief 1997 President, Monsanto Business Services, 1994-1997.
Financial Officer; Advisory
Director
Sheila B. Feldman, 45 Vice President, Human Resources 1997 Director, Human Resources, Monsanto Business
and Communications Services and Stewardship, 1995-1997. Director,
Human Resources, The Chemical Group of Monsanto,
1993-1995.
John J. Ferguson, 47 Senior Vice President, 1998 Senior Vice President, Shared Services and Supply
Integrated Nylon Chain, 1998-1999. Vice President and General
Manager, SAFLEX(R) Plastic Interlayer, 1997-1998.
President, SAFLEX(R) Plastic Interlayer, Monsanto,
1994-1997.
13
<PAGE>
<PAGE>
<CAPTION>
Year First
Became an
Executive
Name-Age Present Position with Registrant Officer Other Business Experience since January 1, 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Victoria M. Holt, 42 Vice President and General 1999 Vice President and General Manager, Acrilan
Manager, Saflex Business Unit, 1997-1998. Business Director,
Acrilan Business Unit, Monsanto, 1996-1997.
Assistant to Monsanto's Chief Executive Officer,
1995-1996. Commercial Manager, Plastics Division,
The Chemical Group of Monsanto, 1994-1995.
Michael E. Miller, 58 Vice Chairman, Chief Operating 1997 Vice Chairman and Advisory Director, 1998-1999;
Officer, and Director Senior Vice President, Chief Administrative
Officer, and Advisory Director, 1997-1998.
President, Specialty Products Business Unit,
Monsanto, 1995-1997. Group Vice President,
Industrial Products, Monsanto, 1993-1995. Senior
Vice President, Operations, The Chemical Group of
Monsanto, 1993-1995.
Robert B. Toth, 39 Vice President and General 1999 Vice President and General Manager, Polymer
Manager, Resins and Additives Modifiers and Resins, 1998-1999. Vice President
and General Manager, Polymer Modifiers, 1997-1998.
Director, Global Strategy for Crop Business Unit of
Monsanto, 1996-1997. Director, Protiva Business Unit
and Chemical Business Unit of Monsanto Canada,
1994-1995.
</TABLE>
The above listed individuals are elected to the offices set
opposite their names to hold office until their successors are duly
elected and have qualified, or until their earlier death,
resignation or removal.
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Compensation of Directors" on page
8 and under "Summary Compensation Table," "Option Grants in 1999,"
"Aggregated Option Exercises in 1999 and Year-End Option Values,"
"Pension Plans," and "Change-of-Control Agreements" on pages 14
through 18 of Solutia's 2000 Proxy Statement is incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information appearing under "Ownership of Company Common Stock"
on pages 9 and 10 of Solutia's 2000 Proxy Statement is incorporated
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under "Relationships and Transactions" on
page 19 of Solutia's 2000 Proxy Statement is incorporated by
reference.
14
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Documents filed as part of this Report:
1. The financial statements set forth at pages 30 through 47
and the Report of Independent Auditors on page 19 of the
1999 Annual Report (See Exhibit 13 under Paragraph (a)3
of this Item 14)
2. Financial Statement Schedules
The following supplemental schedule for the years
ended December 31, 1999, 1998 and 1997:
II--Valuation and Qualifying Accounts
All other supplemental schedules are omitted because
of the absence of the conditions under which they are
required.
3. Exhibits--See the Exhibit Index beginning at page 20 of
this Report. For a listing of all management contracts and
compensatory plans or arrangements required to be filed as
Exhibits to this Form 10-K, see the Exhibits listed under
Exhibit Nos. 10(a), 10(b), 10(d), 10(e), 10(f), 10(h),
10(i), 10(j), 10(k) and 10(l) on pages 20 and 21 of the
Exhibit Index. The following Exhibits listed in the
Exhibit Index are filed with this Report:
10(g) U.S. $800,000,000 Amended and Restated Five Year Credit
Agreement, dated as of November 23, 1999, among Solutia,
the initial lenders named therein, Bank of America N.A.,
as Syndication Agent and Citibank, N.A., as
Administrative Agent
10(m) U.S. $300,000,000 364-Day Multicurrency Credit
Agreement, dated as of November 23, 1999, among Solutia,
the lenders named therein, Bank of America, N.A., as
Syndication Agent and Citibank N.A., as Administrative
Agent
13 Solutia's 1999 Annual Report to Stockholders
21 Subsidiaries of the Registrant (see page 22)
23 Consent of Independent Auditors (see page 23)
24(a) Powers of Attorney submitted by John C. Hunter III,
Robert A. Clausen, James M. Sullivan, Michael E. Miller,
Robert T. Blakely, Joan T. Bok, Paul H. Hatfield,
Robert H. Jenkins, Howard M. Love, Frank A. Metz, Jr.,
J. Patrick Mulcahy, Robert G. Potter, William D.
Ruckelshaus and John B. Slaughter
24(b) Certified copy of Board resolution authorizing Form 10-K
filing utilizing powers of attorney
27 Financial Data Schedule (part of electronic submission
only)
(b) Reports on Form 8-K during the quarter ended
December 31, 1999:
Solutia filed a Report on Form 8-K on November 12, 1999,
announcing its agreement to acquire Morgan Grenfell Private
Equity Ltd.'s ownership of Vianova Resins.
15
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Solutia Inc.:
We have audited the statements of consolidated financial
position of Solutia Inc. and Subsidiaries as of December 31, 1999
and 1998, and the related statements of consolidated income,
comprehensive income, cash flow and shareholders' equity (deficit)
for each of the three years in the period ended December 31, 1999
and have issued our opinion thereon dated February 23, 2000 (which
includes an explanatory paragraph as to a change in method of
accounting in 1997); such financial statements and opinion are
included in your 1999 Annual Report to shareholders and are
incorporated herein by reference. Our audits also comprehended the
schedule of Solutia Inc. and Subsidiaries, listed in Item 14(a)2.
This schedule is the responsibility of Solutia's management. Our
responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Saint Louis, Missouri
February 23, 2000
16
<PAGE>
<PAGE>
<TABLE>
SCHEDULE II
SOLUTIA INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Millions)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions
----------------------
(1) (2)
Balance at Charged to Charged Balance at
beginning costs and to other end
Description of year expenses accounts Deductions of period
----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Valuation accounts for
doubtful receivables $ 8 $-- $ 7 $ 3 $ 12
Restructuring reserves 55 28 -- 63 20
YEAR ENDED DECEMBER 31, 1998
Valuation accounts for
doubtful receivables $ 7 $ 2 $-- $ 1 $ 8
Restructuring reserves 104 -- -- 49 55
YEAR ENDED DECEMBER 31, 1997
Valuation accounts for
doubtful receivables $ 9 $ 1 $-- $ 3 $ 7
Restructuring reserves 201 -- -- 97 104
</TABLE>
17
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ JAMES M. SULLIVAN
--------------------------------
James M. Sullivan
Vice President and Controller
(Principal Accounting Officer)
Date: March 9, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
<F*> Chairman, President, Chief Executive Officer March 9, 2000
- --------------------------------------------- and Director (Principal Executive Officer)
John C. Hunter III
<F*> Senior Vice President and March 9, 2000
- --------------------------------------------- Chief Financial Officer
Robert A. Clausen (Principal Financial Officer)
/s/ JAMES M. SULLIVAN Vice President and Controller March 9, 2000
- --------------------------------------------- (Principal Accounting Officer)
James M. Sullivan
<F*> Vice Chairman, Chief Operating March 9, 2000
- --------------------------------------------- Officer and Director
Michael E. Miller
<F*> Director March 9, 2000
- ---------------------------------------------
Robert T. Blakely
<F*> Director March 9, 2000
- ---------------------------------------------
Joan T. Bok
<F*> Director March 9, 2000
- ---------------------------------------------
Paul H. Hatfield
18
<PAGE>
<PAGE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
<F*> Director March 9, 2000
------------------------------------
Robert H. Jenkins
Director March , 2000
------------------------------------
Howard M. Love
<F*> Director March 9, 2000
------------------------------------
Frank A. Metz, Jr.
<F*> Director March 9, 2000
------------------------------------
J. Patrick Mulcahy
<F*> Director March 9, 2000
------------------------------------
Robert G. Potter
<F*> Director March 9, 2000
------------------------------------
William D. Ruckelshaus
<F*> Director March 9, 2000
------------------------------------
John B. Slaughter
<FN>
<F*>Karl R. Barnickol, by signing his name hereto, does sign this document on
behalf of the above noted individuals, pursuant to powers of attorney duly
executed by such individuals which have been filed as an Exhibit to this Form
10-K.
</TABLE>
/s/ KARL R. BARNICKOL
--------------------------------
Karl R. Barnickol
Attorney-in-Fact
19
<PAGE>
<PAGE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table
of Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2 Distribution Agreement (incorporated by reference to Exhibit
2 of Solutia's Registration Statement on Form S-1 (333-36355)
filed September 25, 1997)
3(a) Restated Certificate of Incorporation of Solutia (incorporated
by reference to Exhibit 3(a) of Solutia's Registration Statement
on Form S-1 (333-36355) filed September 25, 1997)
3(b) By-Laws of Solutia Inc., as amended April 28, 1999 (incorporated
by reference to Exhibit 3(ii) of Solutia's Form 10-Q for the
quarter ended March 31, 1999)
4(a) Rights Agreement (incorporated by reference to Exhibit 4 of
Solutia's Registration Statement on Form 10 filed on August 7, 1997)
4(b) Indenture dated as of October 1, 1997, between Solutia Inc.
and The Chase Manhattan Bank, as Trustee (incorporated by
reference to Exhibit 4.1 of Solutia's Form 10-Q for the
quarter ended September 30, 1997)
4(c) 6.5% Notes due 2002 in the principal amount of $150,000,000
(incorporated by reference to Exhibit 4.2 of Solutia's Form
10-Q for the quarter ended September 30, 1997)
4(d) 7.375% Debentures due 2027 in the principal amount of
$200,000,000 (incorporated by reference to Exhibit 4.3 of
Solutia's Form 10-Q for the quarter ended September 30, 1997)
4(e) 7.375% Debentures due 2027 in the principal amount of
$100,000,000 (incorporated by reference to Exhibit 4.4 of
Solutia's Form 10-Q for the quarter ended September 30, 1997)
4(f) 6.72% Debentures due 2037 in the principal amount of
$150,000,000 (incorporated by reference to Exhibit 4.5 of
Solutia's Form 10-Q for the quarter ended September 30, 1997)
4(g) Registrant agrees to furnish to the Securities and Exchange
Commission upon request copies of instruments defining the
rights of holders of certain unregistered long-term debt of
the registrant and its consolidated subsidiaries.
9 Omitted--Inapplicable
10(a) Financial Planning and Tax Preparation Services Program for
the Executive Leadership Team (incorporated by reference to
Exhibit 10(a) of Solutia's Form 10-K for the year ended
December 31, 1997)
10(b) Employee Benefits Allocation Agreement (incorporated by
reference to Exhibit 10(a) of Solutia's Registration
Statement on Form S-1 (333-36355) filed September 25, 1997)
10(c) Tax Sharing and Indemnification Agreement (incorporated by
reference to Exhibit 10(b) of Solutia's Registration
Statement on Form S-1 (333-36355) filed September 25, 1997)
10(d) Solutia Inc. Management Incentive Replacement Plan as
amended on April 28, 1999 (incorporated by reference to
Exhibit 10(2) of Solutia's Form 10-Q for the quarter ended
June 30, 1999)
10(e) Solutia Inc. 1997 Stock-Based Incentive Plan as amended on
April 28, 1999 (incorporated by reference to Exhibit 10(1)
of Solutia's Form 10-Q for the quarter ended June 30, 1999)
10(f) Solutia Inc. Non-Employee Director Compensation Plan, as
amended February 24, 1999 (incorporated by reference to
Exhibit 10 of Solutia's Form 10-Q for the quarter ended
March 31, 1999)
10(g) U.S. $800,000,000 Amended and Restated Five Year Credit
Agreement, dated as of November 23, 1999, among Solutia, the
initial lenders named therein, Bank of America N.A., as
Syndication Agent and Citibank, N.A., as Administrative
Agent
20
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT INDEX (CONT'D)
Exhibit No. Description
- ----------- -----------
<S> <C>
10(h) Form of Employment Agreement with Named Executive Officers
(incorporated by reference to Exhibit 10(1) of Solutia's
Form 10-Q for the quarter ended March 31, 1998)
10(i) Form of Employment Agreement with other executive officers
(incorporated by reference to Exhibit 10(2) of Solutia's
Form 10-Q for the quarter ended March 31, 1998)
10(j) Solutia Inc. Annual Incentive Plan (incorporated by
reference to Appendix A of the Solutia Inc. Notice of Annual
Meeting and Proxy Statement dated March 11, 1998)
10(k) Solutia Inc. 1998-1999 Long-Term Incentive Plan
(incorporated by reference to Appendix B of the Solutia Inc.
Notice of Annual Meeting and Proxy Statement dated
March 11, 1998)
10(l) Solutia Inc. Deferred Compensation Plan (incorporated by
reference to Exhibit 10 of Solutia's Form 10-Q for the
quarter ended September 30, 1998)
10(m) U.S. $300,000,000 364-Day Multicurrency Credit Agreement,
dated as of November 23, 1999, among Solutia, the lenders
named therein, Bank of America, N.A., as Syndication Agent
and Citibank N.A., as Administrative Agent.
10(n) Agreement, dated 10th November, 1999, for the sale and
purchase of class A shares, preference shares and loan stock
and the cancellation of warrants in Viking Resins Group
Holdings B.V. between (a) Solutia Inc., as purchaser, (b)
the holders of the A shares, preference shares and loan
stock as sellers, and (c) the warrantholders, plus
identification of contents of omitted schedules and
agreement to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon
request (incorporated by reference to Exhibit 2.1 of
Solutia's Form 8-K filed on January 4, 2000)
11 Omitted--Inapplicable; see "Statement of Consolidated
Income" on page 30 of the 1999 Annual Report
12 Omitted--Inapplicable
13 Solutia's 1999 Annual Report to shareholders. (The
electronic submission includes only the financial report
section of the Annual Report, consisting of pages 18 through
47 of that Report.) Only those portions expressly
incorporated by reference into this Form 10-K are deemed
"filed"; other portions are furnished only for the
information of the Commission.
16 Omitted--Inapplicable
18 Preferability Letter from Deloitte & Touche LLP, dated
February 25, 1998 (incorporated by reference to Exhibit 18
of Solutia's Form 10-K for the year ended December 31, 1997).
21 Subsidiaries of the Registrant (see page 22)
22 Omitted--Inapplicable
23 Consent of Independent Auditors (see page 23)
24(a) Powers of Attorney submitted by John C. Hunter III,
Robert A. Clausen, James M. Sullivan, Michael E. Miller,
Robert T. Blakely, Joan T. Bok, Paul H. Hatfield, Robert H.
Jenkins, Howard M. Love, Frank A. Metz, Jr., J. Patrick
Mulcahy, Robert G. Potter, William D. Ruckelshaus and
John B. Slaughter
24(b) Certified copy of Board resolution authorizing Form 10-K
filing utilizing powers of attorney
27 Financial Data Schedule (part of electronic submission only)
<FN>
- -------
Only Exhibits Nos. 21 and 23 have been included in the printed copy of this
Report.
</TABLE>
21
<PAGE>
CONFORMED COPY
=======================================================================
U.S. $800,000,000
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
Dated as of November 23, 1999,
Among
SOLUTIA INC.,
as Borrower
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders
BANK OF AMERICA, N.A.
as Syndication Agent
and
CITIBANK, N.A.,
as Administrative Agent
=======================================================================
<PAGE>
<PAGE>
<TABLE>
T A B L E O F C O N T E N T S
- - - - - - - - - - - - - - -
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms 1
SECTION 1.02. Computation of Time Periods 15
SECTION 1.03. Accounting Terms and Determinations 15
SECTION 1.04. Currencies; Currency Equivalents 15
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances 15
SECTION 2.02. Making the A Advances 16
SECTION 2.03. The B Advances 17
SECTION 2.04. Fees 20
SECTION 2.05. Termination, Reduction, Extension and Increase of Commitments 21
SECTION 2.06. Repayment of Advances; Evidence of Debt 24
SECTION 2.07. Interest on A Advances 25
SECTION 2.08. Interest Rate Determination; Changes in Rating Systems 25
SECTION 2.09. Optional Conversion of A Advances 26
SECTION 2.10. Prepayments, Etc. 27
SECTION 2.11. Increased Costs 28
SECTION 2.12. Illegality 29
SECTION 2.13. Payments and Computations 30
SECTION 2.14. Notations on the A Notes 31
SECTION 2.15. Taxes 32
SECTION 2.16. Sharing of Payments, Etc 34
SECTION 2.17. Borrowings by Designated Borrowers 34
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Amendment and Restatement 35
SECTION 3.02. Conditions Precedent to Each A Borrowing 36
SECTION 3.03. Conditions Precedent to Each B Borrowing 36
SECTION 3.04. Determinations Under Section 3.01 36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company 37
SECTION 4.02. Representation and Warranty of the Lenders 39
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants 39
SECTION 5.02. Negative Covenants 42
SECTION 5.03. Financial Covenants 44
-i-
<PAGE>
<PAGE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default 44
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action 46
SECTION 7.02. Administrative Agent's Reliance, Etc. 46
SECTION 7.03. Citibank and Affiliates 47
SECTION 7.04. Lender Credit Decision 47
SECTION 7.05. Indemnification 47
SECTION 7.06. Successor Administrative Agent 47
SECTION 7.07. The Syndication Agent 48
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. 48
SECTION 8.02. Notices, Etc. 49
SECTION 8.03. No Waiver, Remedies 49
SECTION 8.04. Costs and Expenses 50
SECTION 8.05. Right of Set-off 50
SECTION 8.06. Binding Effect 51
SECTION 8.07. Assignments and Participations, Register 51
SECTION 8.08. Governing Law 54
SECTION 8.09. Execution in Counterparts 54
SECTION 8.10. Jurisdiction, Etc. 54
SECTION 8.11. Judgment Currency 55
ARTICLE IX
GUARANTEE
SECTION 9.01. The Guarantee 55
SECTION 9.02. Obligations Unconditional 55
SECTION 9.03. Reinstatement 56
SECTION 9.04. Subrogation 56
SECTION 9.05. Remedies 56
SECTION 9.06. Instrument for the Payment of Money 57
SECTION 9.07. Continuing Guarantee 57
-ii-
<PAGE>
<PAGE>
<CAPTION>
SCHEDULES
---------
<S> <C>
Schedule 1 - Certain Existing Liens
Schedule 2A - Pricing Grid
Schedule 2B - Summary Version of Pricing Grid
EXHIBITS
--------
Exhibit A-1 - Form of A Note
Exhibit A-2 - Form of B Note
Exhibit B-1 - Form of Notice of A Borrowing
Exhibit B-2 - Form of Notice of B Borrowing
Exhibit C-1 - Form of Assignment and Acceptance
Exhibit C-2 - Form of Assumption and Acceptance
Exhibit D - Form of Opinion of General Counsel for the Company
Exhibit E - Form of Opinion of Special New York Counsel to the Administrative Agent
Exhibit F-1 - Form of Designation Letter
Exhibit F-2 - Form of Termination Letter
</TABLE>
-iii-
<PAGE>
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of November
23, 1999 among SOLUTIA INC., a Delaware corporation (the "Company"),
-------
the banks (each an "Initial Lender" and, collectively, the "Initial
-------------- -------
Lenders") listed on the signature pages hereof, BANK OF AMERICA, N.A.,
- -------
as Syndication Agent (in such capacity, together with its successors in
such capacity, the "Syndication Agent") and CITIBANK, N.A.
-----------------
("Citibank"), as administrative agent (in such capacity, together with
--------
its successors in such capacity, the "Administrative Agent") as herein
--------------------
provided.
PRELIMINARY STATEMENTS
Capitalized terms used in these Preliminary Statements and
not otherwise defined have the meanings assigned to them in Section
1.01.
(a) The Company, the Initial Lenders, the Syndication Agent
and the Administrative Agent are parties to a Credit Agreement dated as
of August 14, 1997 (as amended to and in effect on the Restatement Date,
the "Existing Credit Agreement") providing, subject to the terms and
-------------------------
conditions thereof, for the making of advances in an aggregate principal
amount not exceeding $800,000,000 at any one time outstanding.
(b) The Company has also requested that the Initial Lenders
amend the Existing Credit Agreement, among other things to permit
Designated Borrowers to borrow hereunder, to permit borrowings
denominated in Euros, to modify certain covenants and to make certain
other changes to the Existing Credit Agreement, all on the terms and
conditions set forth herein, it being the intention of the parties
hereto that the Advances outstanding under the Existing Credit Agreement
on the Restatement Date shall continue and remain outstanding and not be
repaid on the Restatement Date.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto
hereby agree that the Existing Credit Agreement shall (subject to the
satisfaction of the conditions precedent specified in Section 3.01) be
amended and restated to read as set forth herein.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms
of the terms defined):
"A Advance" means an advance by a Lender to a Borrower as
---------
part of an A Borrowing and refers to a Base Rate Advance or a
Eurocurrency Rate Advance, each of which shall be a "Type" of A
----
Advance.
"A Borrowing" means a borrowing consisting of simultaneous A
-----------
Advances of the same Type made by each of the Lenders pursuant to
Section 2.01.
"A Note" means a promissory note of a Borrower payable to
------
the order of any Lender, in substantially the form of Exhibit A-1
hereto, evidencing the aggregate indebtedness of such Borrower to
such Lender resulting from the A Advances made by such Lender to
such Borrower.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-2-
"Acceptance" means an Assignment and Acceptance and/or an
----------
Assumption and Acceptance.
"Adjusted EBITDA" means, for any period, the sum, for the
---------------
Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
of the following: (a) net income (calculated before taxes,
Interest Expense, extraordinary and unusual items and income or
loss attributable to equity in Affiliates (other than Affiliates
that are Specified Joint Ventures or Consolidated Subsidiaries))
for such period plus (b) depreciation and amortization (to the
extent deducted in determining net income) for such period;
provided that charges taken (including cash charges in an
aggregate amount not exceeding $44,000,000) and reserves
established by the Company and its Consolidated Subsidiaries in
connection with (x) the Astaris LLC phosphate joint venture that
Solutia is in the process of establishing with FMC Corporation,
(y) acquisitions and (z) restructuring of existing operations (all
on or prior to December 31, 2000) in an aggregate amount not
exceeding $60,000,000 shall be added back to net income for such
period (to the extent such charges and reserves were deducted in
determining net income for such period).
"Administrative Agent" has the meaning specified in the
--------------------
recital of parties to this Agreement.
"Administrative Agent's Account" means, for each Currency,
------------------------------
an account in respect of such Currency designated by the
Administrative Agent in a notice to the Company and the Lenders.
"Administrative Questionnaire" means an administrative
----------------------------
questionnaire in a form supplied by the Administrative Agent.
"Advance" means an A Advance or a B Advance.
-------
"Affected Lender" has the meaning specified in Section 2.12.
---------------
"Affiliate" means, as to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under
common control with such Person or is a director or officer of
such Person. For purposes of this definition, the term "control"
(including the terms "controlling", "controlled by" and "under
common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the Voting Stock of
such Person or to direct or cause the direction of the management
and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Applicable Lending Office" means, with respect to each
-------------------------
Lender, such Lender's Domestic Lending Office in the case of a
Base Rate Advance and such Lender's Eurocurrency Lending Office in
the case of a Eurocurrency Rate Advance and, in the case of a B
Advance, the office of such Lender notified by such Lender to the
Administrative Agent as its Applicable Lending Office with respect
to such B Advance.
"Applicable Margin" has the meaning assigned to such term in
-----------------
Schedule 2A.
"Assignment and Acceptance" means an assignment and
-------------------------
acceptance entered into by a Lender and an Eligible Assignee, and
accepted by the Administrative Agent, in substantially the form of
Exhibit C-1 hereto.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-3-
"Assuming Lender" means, at any time, an Eligible Assignee
---------------
not previously a Lender which becomes a Lender hereunder pursuant
to Section 2.05(c).
"Assumption and Acceptance" means an assumption and
-------------------------
acceptance entered into by an Eligible Assignee, and accepted by
the Administrative Agent, in substantially the form of Exhibit C-2
hereto.
"B Advance" means an advance by a Lender to a Borrower as
---------
part of a B Borrowing resulting from the auction bidding procedure
described in Section 2.03.
"B Borrowing" means a borrowing consisting of simultaneous B
-----------
Advances from each of the Lenders whose offer to make one or more
B Advances as part of such borrowing has been accepted by the
Company under the auction bidding procedure described in Section
2.03.
"B Note" means a promissory note of a Borrower payable to
------
the order of any Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of such Borrower to such
Lender resulting from a B Advance made by such Lender to such
Borrower.
"B Reduction" has the meaning specified in Section 2.01.
-----------
"Bank of America" means Bank of America, N.A.
---------------
"Base Rate" means a fluctuating interest rate per annum in
---------
effect from time to time, which rate per annum shall at all times
be equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/16 of 1% or,
if there is no nearest 1/16 of 1%, to the next higher 1/16
of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate
obtained by dividing (A) the latest three-week moving
average of secondary market morning offering rates in the
United States for three-month certificates of deposit of
major United States money market banks, such three-week
moving average (adjusted to the basis of a year of 360 days)
being determined weekly on each Monday (or, if such day is
not a Business Day, on the next succeeding Business Day) for
the three-week period ending on the previous Friday by
Citibank on the basis of such rates reported by certificate
of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by Citibank,
by (B) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by
the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement
(including, but not limited to, any emergency, supplemental
or other marginal reserve requirement) for Citibank with
respect to liabilities consisting of or including (among
other liabilities) three-month U.S. dollar non-personal time
deposits in the United States, plus (iii) the average during
such three-week period of the annual assessment rates
estimated by Citibank for determining the then current
annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S.
dollar deposits of Citibank in the United States; and
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-4-
(c) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means an A Advance that bears interest
-----------------
as provided in Section 2.07(a)(i).
"Borrowers" means, at any time, collectively, the Company
---------
(both as a Borrower and as guarantor under Article IX of Advances
made to the Designated Borrowers) and each Designated Borrower.
"Borrowing" means an A Borrowing or a B Borrowing.
---------
"Business Combination" means any reorganization, merger or
--------------------
consolidation or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of assets or
stock of another corporation.
"Business Day" means a day of the year on which banks are
------------
not required or authorized by law to close in New York City and,
if the applicable Business Day relates to any Eurocurrency Rate
Advances denominated in any Currency, on which dealings are
carried on in the London interbank market for such Currency.
"Capitalized Lease Obligation" means, with respect to any
----------------------------
Person for any period, an obligation of such Person to pay rent or
other amounts under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP; and the
amount of such obligation shall be the capitalized amount shown on
the balance sheet of such Person as determined in accordance with
GAAP.
"Change of Control" means the occurrence of any of the
-----------------
following events:
(a) the acquisition by any individual, entity or group
(within the meanings of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person or Group") of beneficial ownership
---------------
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
--------------------------
Stock") or (ii) the combined voting power of the then outstanding
-----
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
--------------------------
Securities"); provided that, for purposes of this paragraph (a),
----------
the following acquisitions shall not constitute a Change of
Control: (i) any acquisitions directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of paragraph (c) below;
or
(b) individuals who, as of the date hereof, constitute the
Board of Directors of the Company (the "Incumbent Board") cease
---------------
for any reason to constitute at least a majority of the Board of
Directors of the Company; provided that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-5-
(c) consummation by the Company of a Business Combination,
in each case unless following such Business Combination: (i) all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the
case may be, (ii) no Person or Group (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board
of Directors, providing for such Business Combination; or
(d) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
"Citibank" has the meaning specified in the recital of
--------
parties to this Agreement.
"Commitment" means, as to each Lender, the obligation of
----------
such Lender to make A Advances in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount set
opposite the name of such Lender on the signature pages hereof
under the caption "Commitment" or, in the case of a Person that
becomes a Lender pursuant to an assignment permitted under Section
8.07, or pursuant to an assumption of obligations under Section
2.05, as specified in the Register (as such Commitment may be
reduced from time to time pursuant hereto). The original
aggregate principal amount of the Commitments is $800,000,000.
"Commitment Increase" has the meaning specified in Section
-------------------
2.05(c).
"Commitment Increase Date" has the meaning specified in
------------------------
Section 2.05(c).
"Commitment Termination Date" means August 13, 2002 or, in
---------------------------
the case of any Lender whose Commitment is extended pursuant to
Section 2.05(b), the date to which such Commitment is extended;
provided in each case that if any such date is not a Business Day,
the relevant Commitment Termination Date of such Lender shall be
the immediately preceding Business Day. When the term "Commitment
Termination Date" is used herein without reference to any
particular Lender, such term shall, in such instance, be deemed to
be a reference to the latest Commitment Termination Date of any of
the Lenders then in effect hereunder.
"Consolidated" refers to the consolidation of the accounts
------------
of the Company and its Subsidiaries in accordance with generally
accepted accounting principles, including principles of
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-6-
consolidation, consistent with those applied in the preparation of
the financial statements referred to in Section 4.01(e)(i).
"Consolidated Net Tangible Assets" means, at any time, for
--------------------------------
the Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
Consolidated Tangible Assets at such time after deducting
therefrom all current liabilities, other than current liabilities
in respect of (a) notes and loans payable, (b) current maturities
of long-term debt and (c) current maturities of the principal
component of Capitalized Lease Obligations.
"Consolidated Net Worth" means, at any time, the sum for the
----------------------
Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
the amount of capital stock plus the amount of surplus and
retained earnings (or, in the case of a surplus or retained
earnings deficit, minus the amount of such deficit).
"Consolidated Subsidiary" means a Subsidiary of the Company,
-----------------------
the accounts of which in accordance with generally accepted
accounting principles are consolidated with those of the Company.
"Consolidated Tangible Assets" means, at any time, for the
----------------------------
Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
the aggregate amount of all assets (less applicable reserves and
other properly deductible items) after deducting therefrom all
goodwill, trade names, trademarks, patents, unamortized debt
discount and expenses (to the extent included in said aggregate
amount of assets) and other like intangibles.
"Convert", "Conversion" and "Converted" each refers to a
------- ---------- ---------
conversion of A Advances of one Type denominated in Dollars into A
Advances of the other Type denominated in Dollars pursuant to
Section 2.08 or 2.09.
"Currency" means Dollars or Euros.
--------
"Debt" of any Person means, without duplication:
----
(a) indebtedness of such Person for borrowed money,
(b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person
to pay the deferred purchase price of property or services (other
than trade accounts payable arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade
accounts payable are payable on customary trade terms or on other
trade terms that are more advantageous to the Company),
(d) Capitalized Lease Obligations of such Person and
(e) obligations of such Person under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others
of the kinds referred to in clauses (a) through (d) above.
"Debt to Adjusted EBITDA Ratio" means, at any date, the
-----------------------------
ratio of:
(a) Debt of the Company and its Consolidated
Subsidiaries on a Consolidated basis as of such date to
--
(b) Adjusted EBITDA for the Rolling Period ending on
or most recently ended prior to such date.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-7-
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice
be given or time elapse or both.
"Designated Borrower" means any wholly owned Subsidiary of
-------------------
the Company as to which a Designation Letter has been delivered to
the Administrative Agent and as to which a Termination Letter has
not been delivered to the Administrative Agent in accordance with
Section 2.17.
"Designation Letter" has the meaning specified in
------------------
Section 2.17(a).
"Dollar Equivalent" means with respect to any Borrowing
-----------------
denominated in Euros, the amount of Dollars that would be required
to purchase the amount of Euros of such Borrowing on the date two
Business Days prior to the date of such Borrowing (or, in the case
of any determination made under Section 2.10(c) or redenomination
under Section 2.13(e), on the date of determination or
redenomination therein referred to), based upon the spot selling
rate at which the Administrative Agent offers to sell Euros for
Dollars in the London foreign exchange market at approximately
11:00 a.m., London time, for delivery two Business Days later.
"Dollars" or "$" refers to lawful money of the United States
------- -
of America.
"Domestic Lending Office" means, with respect to any Lender,
-----------------------
the office of such Lender specified as its "Domestic Lending
Office" in the Administrative Questionnaire of such Lender or in
the Acceptance pursuant to which it became a Lender, or such other
office of such Lender as such Lender may from time to time specify
to the Company and the Administrative Agent.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of
-----------------
a Lender; (iii) a commercial bank organized under the laws of the
United States, or any State thereof, and having total assets in
excess of $5,000,000,000; (iv) a savings and loan association or
savings bank organized under the laws of the United States, or any
State thereof, and having total assets in excess of
$3,000,000,000; (v) a commercial bank organized under the laws of
any other country that is a member of the Organization for
Economic Cooperation and Development or has concluded special
lending arrangements with the International Monetary Fund
associated with its General Arrangements to Borrow or of the
Cayman Islands, or a political subdivision of any such country,
and having total assets in excess of $5,000,000,000, so long as
such bank is acting through a branch or agency located in the
country in which it is organized or another country that is
described in this clause (v); (vi) a finance company, insurance
company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged
in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and having total assets in
excess of $3,000,000,000; and (vii) any other Person approved by
the Administrative Agent and the Company, such approval not to be
unreasonably withheld or delayed; provided that neither the
Company nor an Affiliate of the Company shall qualify as an
Eligible Assignee.
"Environmental Laws" means any and all applicable laws and
------------------
regulations relating to the protection of the environment,
including laws relating to emissions, discharges, releases, spills
and disposal of material into the environment (e.g., air, surface
water, groundwater and the land).
"Environmental Permit" means any permit, license or other
--------------------
governmental approval required under any Environmental Laws.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-8-
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of
---------------
Title IV of ERISA is a member of the Company's controlled group,
or under common control with the Company, within the meaning of
Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) the occurrence of a reportable
-----------
event, within the meaning of Section 4043 of ERISA, that would
have a Material Adverse Effect with respect to any Plan unless the
30-day notice requirement with respect to such event has been
waived by the PBGC; (b) the application for a minimum funding
waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such
Plan pursuant to Section 4041(c) of ERISA; (d) the cessation of
operations at a facility of the Company or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of
ERISA; (e) the failure by the Company or any of its ERISA
Affiliates to make a payment to a Plan if the conditions for the
imposition of a lien under Section 302(f)(1) of ERISA are
satisfied; (f) the adoption of an amendment to a Plan requiring
the provision of security to such Plan, pursuant to Section 307 of
ERISA; or (g) the institution by the PBGC of proceedings to
terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of
ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, a Plan.
"Euro Equivalent" means with respect to any amount in
---------------
Dollars, the amount of Euros that could be purchased with such
amount of Dollars using the reciprocal of the foreign exchange
rate(s) specified in the definition of "Dollar Equivalent", as
determined by the Administrative Agent.
"Eurocurrency Lending Office" means, with respect to any
---------------------------
Lender, the office of such Lender specified as its "Eurocurrency
Lending Office" in the Administrative Questionnaire of such Lender
or in the Acceptance pursuant to which it became a Lender (or, if
no such office is specified, its Domestic Lending Office), or such
other office of such Lender as such Lender may from time to time
specify to the Company and the Administrative Agent.
"Eurocurrency Liabilities" has the meaning assigned to that
------------------------
term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Eurocurrency Rate" means:
-----------------
(a) For any Interest Period for each Eurocurrency Rate
Advance comprising part of the same Borrowing denominated in
Dollars, an interest rate per annum equal to the rate per annum
obtained by dividing (i) the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is
not such a multiple) of the rate per annum at which deposits in
U.S. dollars are offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount
substantially equal to such Reference Bank's Eurocurrency Rate
Advance comprising part of such Borrowing to be outstanding during
such Interest Period and for a period equal to such Interest
Period by (ii) a percentage equal to 100% minus the Eurocurrency
Rate Reserve Percentage for such Interest Period. The
Eurocurrency Rate for any Interest Period for each Eurocurrency
Rate Advance comprising part of the same Borrowing denominated in
Dollars shall be determined by the Administrative Agent on the
basis of applicable rates furnished to and received by the
Administrative Agent from the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-9-
Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section
2.08;
(b) For any Interest Period for each Eurocurrency Rate
Advance comprising part of the same Borrowing denominated in
Euros, an interest rate per annum equal to the rate per annum
obtained by dividing (i) the rate appearing on the Screen at
approximately 11:00 a.m., London time, two Business Days before
the first day of such Interest Period, as the Eurocurrency Rate
for deposits denominated in Euros with a maturity compatible to
such Interest Period, by (ii) a percentage equal to 100% minus the
Eurocurrency Rate Reserve Percentage for such Interest Period. In
the event that such rate is not available on the Screen at such
time for any reason, then the Eurocurrency Rate for such Interest
Period shall be the rate at which deposits in Euros in the amount
of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two
Business Days before the first day of such Interest Period.
"Eurocurrency Rate Advance" means an A Advance that bears
-------------------------
interest as provided in Section 2.07(a)(ii).
"Eurocurrency Rate Reserve Percentage" for any Interest
------------------------------------
Period for all Eurocurrency Rate Advances comprising part of the
same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for
a member bank of the Federal Reserve System in New York City with
respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the
interest rate on Eurocurrency Rate Advances is determined) having
a term equal to such Interest Period.
"Euros" means the single currency of participating member
-----
states of the European Union.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Excluded Representations" means the representations and
------------------------
warranties set forth in Section 4.01(e)(ii), Section 4.01(f)
(excluding clause (ii) thereof) and the second sentence of Section
4.01(c).
"Existing Credit Agreement" has the meaning specified in the
-------------------------
Preliminary Statements to this Agreement.
"Facility Fee" has the meaning specified in Section 2.04(a).
------------
"Facility Fee Rate" has the meaning assigned to such term in
-----------------
Schedule 2A.
"Federal Funds Rate" means, for any period, a fluctuating
------------------
interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-10-
published for such day (or, if such day is not a Business Day, for
the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day that is
a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Fixed Rate Advances" has the meaning specified in Section
-------------------
2.03(a)(i).
"Floating Rate Advances" has the meaning specified in
----------------------
Section 2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
----
"Guaranteed Obligations" has the meaning specified in
----------------------
Section 9.01.
"Increasing Lender" has the meaning assigned to such term in
-----------------
Section 2.05(c).
"Indemnified Party" has the meaning specified in Section 8.04(b).
-----------------
"Information" has the meaning specified in Section 4.01(j)(i).
-----------
"Interest Coverage Ratio" means, at any date, the ratio of
-----------------------
(a) Adjusted EBITDA for the Rolling Period ending on or most
recently ended prior to such date to (b) Interest Expense for such
Rolling Period.
"Interest Expense" means, for any period, the sum, for the
----------------
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of all interest in respect of Debt (including, without limitation,
the interest component of any payments in respect of Capitalized
Lease Obligations) accrued or capitalized during such period
(whether or not actually paid during such period).
"Interest Period" means, for each Eurocurrency Rate Advance
---------------
comprising part of the same A Borrowing, the period commencing on
the date of such Eurocurrency Rate Advance or the date of the
Conversion of any Base Rate Advance into such Eurocurrency Rate
Advance and ending on the last day of the period selected by the
Company pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period
selected by the Company pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or
six months (or, with respect to such portion of any Eurocurrency
Advance denominated in Euros that is scheduled to be repaid on the
Commitment Termination Date, a period of less than one month's
duration) commencing on the date of such Advance and ending on the
Commitment Termination Date, as the Company (on its own behalf and
on behalf of all other Borrowers) may, upon notice received by the
Administrative Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such
Interest Period, select; provided that:
(i) the Company may not select any Interest Period
that ends after the Commitment Termination Date;
(ii) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same A
Borrowing shall be of the same duration;
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-11-
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day,
the last day of such Interest Period shall be extended to
occur on the next succeeding Business Day, provided that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next
preceding Business Day; and
(iv) whenever the first day of any Interest Period,
other than an Interest Period pertaining to a Eurocurrency
Borrowing denominated in Euros that ends on the Commitment
Termination Date that is permitted to be of less than one
month's duration as provided in this definition, occurs on a
day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
---------------------
1986, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Lenders" means the Initial Lenders listed on the signature
-------
pages hereof and each institution that shall become a party hereto
pursuant to Section 2.05 or Section 8.07(a), (b) or (d).
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property.
"Majority Lenders" means at any time Lenders owed at least
----------------
66-2/3% of the then aggregate unpaid principal amount of the A
Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having at least 66-2/3% of the Commitments.
"Margin Stock" has the meaning specified in Regulation U of
------------
the Board of Governors of the Federal Reserve System.
"Material Adverse Effect" means a material adverse effect on
-----------------------
(a) the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole or (b) the
legality, validity or enforceability of this Agreement or any
Note.
"Material Contract" means any contractual, legal or other
-----------------
obligation binding upon the Company or a Material Subsidiary under
which a default in payment by the Company or such Material
Subsidiary would have a Material Adverse Effect.
"Material Subsidiary" means, at any time, any Consolidated
-------------------
Subsidiary that, on a consolidated basis with its Subsidiaries,
has:
(a) at least 5% (in the case of Solutia UK Ltd. and
Solutia Europe S.A./N.V.) or 10% (in the case of each other
Consolidated Subsidiary) of the total Consolidated assets of
the Company and its Consolidated Subsidiaries (determined as
of the last day of the most recent fiscal quarter of the
Company); or
(b) at least 5% (in the case of Solutia UK Ltd. and
Solutia Europe S.A./N.V.) or 10% (in the case of each other
Consolidated Subsidiary) of the Consolidated net sales of
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-12-
the Company and its Consolidated Subsidiaries for the
twelve-month period ending on the last day of the most
recent fiscal quarter of the Company.
"Moody's" means Moody's Investors Service, Inc. and its
-------
successors.
"Multiemployer Plan" means a multiemployer plan, as defined
------------------
in Section 4001(a)(3) of ERISA, to which the Company or any of its
ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
----------------------
defined in Section 4001(a)(15) of ERISA, that (a) is maintained
for employees of the Company (or its predecessor's chemicals
business) or any of its ERISA Affiliates and at least one Person
other than the Company (or its predecessor's chemicals business)
and its ERISA Affiliates or (b) was so maintained and in respect
of which the Company (or its predecessor's chemicals business) or
any of its ERISA Affiliates could have liability under Section
4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Note" means an A Note or a B Note.
----
"Notice of A Borrowing" has the meaning specified in Section
---------------------
2.02(a).
"Notice of B Borrowing" has the meaning specified in Section
---------------------
2.03(a)(i).
"Ownership Interest" in (or of) any corporation,
------------------
partnership, joint venture, limited liability company, trust or
estate means (a) issued and outstanding capital stock having
ordinary voting power in the election of the Board of Directors of
such corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency),
(b) an interest in the capital or profits of such partnership,
joint venture or limited liability company or (c) a beneficial
interest in such trust or estate.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Person" means an individual, partnership, corporation
------
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability
company or other entity, or a government or any political
subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
----
Plan.
"Post-Restatement Date Information" has the meaning
---------------------------------
specified in Section 4.01(j)(iv).
"Principal Property" means any building, structure or other
------------------
facility, together with the land upon which it is erected and
fixtures comprising a part thereof, used primarily for
manufacturing, the gross book value of which on the date as of
which such determination is being made exceeds 1% of the gross
property, plant and equipment of the Company as shown in its
Consolidated financial statements, provided that any property
which, in the opinion of the Company, is not of material
importance to the business of the Company and its Consolidated
Subsidiaries, taken as a whole, shall not be deemed to be a
Principal Property.
"Rated Securities" means, at any time, the long-term senior
----------------
unsecured, unguaranteed debt securities of the Company outstanding
at such time.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-13-
"Rating Level" means Rating Level 1, Rating Level 2, Rating
------------
Level 3, Rating Level 4, Rating Level 5 or Rating Level 6. For
purposes hereof, Rating Level 1 shall be deemed to be the highest
Rating Level and Rating Level 6 shall be deemed to be the lowest
Rating Level.
"Rating Level 1" means a rating of the Rated Securities
--------------
better than or equal to A2 by Moody's or better than or equal to A
by S&P.
"Rating Level 2" means a rating of the Rated Securities
--------------
equal to A3 by Moody's or A- by S&P.
"Rating Level 3" means a rating of the Rated Securities
--------------
equal to Baa1 by Moody's or BBB+ by S&P.
"Rating Level 4" means a rating of the Rated Securities
--------------
equal to Baa2 by Moody's or BBB by S&P.
"Rating Level 5" means a rating of the Rated Securities
--------------
equal to Baa3 by Moody's or BBB- by S&P.
"Rating Level 6" means a rating of the Rated Securities less
--------------
than Baa3 by Moody's and less than BBB- by S&P. If Moody's or S&P
shall not have in effect a rating for the Rated Securities at any
time, then the Rated Securities shall be deemed to be rated by
Moody's or S&P, as the case may be, in Rating Level 6.
"Rating Level Change" means a change in the rating of the
-------------------
Rated Securities by either or both of Moody's and S&P (other than
as a result of a change in the rating system of such rating
agency) that results in the change from one Rating Level to
another, which Rating Level Change shall be effective on the date
on which the relevant change in the rating of the Rated Securities
is first announced by Moody's or S&P, as the case may be.
"Reference Banks" means Citibank, Bank of America and
---------------
Societe Generale; provided that the Company (on its own behalf and
on behalf of the other Borrowers) may at any time substitute
another Lender as one of the Reference Banks, but such
substitution shall terminate after 30 days if within such period
the Majority Lenders shall have notified the Administrative Agent
of their objection to such substitution.
"Register" has the meaning specified in Section 8.07(c).
--------
"Restatement Date" has the meaning assigned to such term in
----------------
Section 3.01.
"Rolling Period" means the period of four consecutive
--------------
calendar quarters ending on or most recently ended prior to such
date.
"S&P" means Standard & Poor's Ratings Services, presently a
---
division of The McGraw-Hill Companies, Inc., and its successors.
"Screen" means Telerate Page 3750 (or such other page as may
------
replace such Telerate Page 3750 for purposes of displaying the
Eurocurrency Rate for Euros); provided that, if the Administrative
Agent determines that there is no such relevant display page on
the Telerate Service for the Eurocurrency Rate for Euros, "Screen"
shall mean the relevant display page for the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-14-
Eurocurrency Rate for Euros (as determined by the Administrative
Agent) on the Reuter Monitor Money Rates Service.
"Single Employer Plan" means a single employer plan, as
--------------------
defined in Section 4001(a)(15) of ERISA, that (a) is maintained
for employees of the Company (or its predecessor's chemicals
business) or any of its ERISA Affiliates and no Person other than
the Company (or its predecessor's chemicals business) and its
ERISA Affiliates or (b) was so maintained and in respect of which
the Company (or its predecessor's chemicals business) or any of
its ERISA Affiliates could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Solvent" means, with respect to any Person on a particular
-------
date, that on such date (a) the present fair salable value of the
assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts
as they become absolute and matured, (b) such Person does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (c) such Person is not engaged in business
or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would be
unreasonably small in relation to such business or such
transaction.
"Specified Joint Venture" means a joint venture or other
-----------------------
Person (other than a Consolidated Subsidiary of the Company) of
which (or in which) at least 50% of the Ownership Interests
thereof is at the time directly or indirectly owned by the
Company, by the Company and one or more of its Consolidated
Subsidiaries or by one or more of the Company's Consolidated
Subsidiaries, provided that the Company's joint venture partners
in such joint venture or other Person do not, in the aggregate,
control (or possess the ability to control) such joint venture or
other Person. For purposes of this definition, a "joint venture
partner" means a Person that owns any Ownership Interests in the
related joint venture or other Person and that is not the Company
or one of its Consolidated Subsidiaries.
"Subsidiary" of any Person means any corporation,
----------
partnership, joint venture, limited liability company, trust or
estate of which (or in which) more than 50% of the Ownership
Interests thereof is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its
other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Syndication Agent" has the meaning specified in the recital
-----------------
of parties to this Agreement.
"Taxes" has the meaning specified in Section 2.15(a).
-----
"Threshold Amount" means, at any time: (a) if the Company's
----------------
Consolidated Net Worth at such time is greater than zero,
$50,000,000; and (b) at any other time, $25,000,000.
"Voting Stock" means capital stock issued by a corporation,
------------
or equivalent interests in any other Person, the holders of which
are ordinarily, in the absence of contingencies, entitled to vote
for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I
--------------------
of Subtitle E of Title IV of ERISA.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-15-
SECTION 1.02. Computation of Time Periods. In this
---------------------------
Agreement in the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including" and
the words "to" and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms and Determinations. All
-----------------------------------
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements referred to
in Section 4.01(e)(i) ("GAAP"). All determinations of Adjusted
----
EBITDA, Consolidated Net Tangible Assets, Consolidated Net Worth,
Consolidated Tangible Assets and Interest Expense shall be made on the
basis of the financial statements most recently delivered pursuant to
Section 4.01(e)(i) and Sections 5.01(i)(i) and (ii). In the event that,
after the date of this Agreement, there are any changes in GAAP, the
Lenders will consider a request by the Company to amend this Agreement
to take account of such changes.
SECTION 1.04. Currencies; Currency Equivalents. At any
--------------------------------
time, any reference in the definition of the term "Euros" or in any
other provision of this Agreement to the currency of the participating
member states of the European Union means the lawful currency of such
participating member states at such time whether the name of such
currency is the same as it was on the date hereof. Except as provided
in Section 2.10(c) and Section 2.13(e), for purposes of determining
(i) whether the amount of any Borrowing, together with all other
Borrowings then outstanding or to be borrowed at the same time as such
Borrowing, would exceed the aggregate amount of the Commitments,
(ii) the aggregate unutilized amount of the Commitments and (iii) the
outstanding aggregate principal amount of Borrowings, the outstanding
principal amount of any Borrowing that is denominated in Euros shall be
deemed to be the Dollar Equivalent of the amount of Euros of such
Borrowing determined as of the date of such Borrowing. Wherever in this
Agreement in connection with a Borrowing or Advance an amount, such as a
required minimum or multiple amount, is expressed in Dollars, but such
Borrowing or Advance is denominated in Euros, such amount shall be the
relevant Euro Equivalent of such Dollar amount (rounded to the nearest
1,000 units of Euros).
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances.
--------------
(a) Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make A Advances to the Company and
any Designated Borrower (in Dollars or in Euros, at the election of the
Company on its own behalf or on behalf of the applicable Borrower) from
time to time on any Business Day during the period from the Restatement
Date to and including the Commitment Termination Date in an aggregate
amount not to exceed at any time outstanding the amount of such Lender's
Commitment; provided that the aggregate amount of the Commitments of the
Lenders shall be deemed used from time to time to the extent of the
Dollar Equivalent of the aggregate amount of the B Advances then
outstanding and such deemed use of the aggregate amount of the
Commitments shall be allocated among the Lenders ratably according to
their respective Commitments (such deemed use of the aggregate amount of
the Commitments being a "B Reduction").
-----------
On the Restatement Date all outstanding A Advances of each
Lender shall automatically, without any action on the part of any
Person, be deemed to be A Advances of the Company hereunder.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-16-
(b) Each A Borrowing shall be in an aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof, or
the aggregate amount of the unused portion of the Lenders' Commitments;
provided that any A Borrowing in an aggregate amount less than
$10,000,000 shall consist solely of Base Rate Advances. In addition,
each A Borrowing shall consist of A Advances of the same Type and
Currency and having the same Interest Period made on the same day by the
Lenders ratably according to their respective Commitments. Within the
limits of each Lender's Commitment, the Borrowers may borrow under this
Section 2.01, prepay pursuant to Section 2.10 and, on or prior to the
Commitment Termination Date, reborrow under this Section 2.01.
SECTION 2.02. Making the A Advances.
---------------------
(a) Each A Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed A Borrowing (in the case of an A
Borrowing to consist of Eurocurrency Rate Advances), or by 11:00 A.M.
(New York City time) on the day of the proposed A Borrowing (in the case
of an A Borrowing to consist of Base Rate Advances), by the Company (on
its own behalf and on behalf of the other Borrowers) to the
Administrative Agent, which shall give to each Lender prompt notice
thereof by telecopier or by telex. Each such notice of an A Borrowing
(a "Notice of A Borrowing") shall be by telecopier or by telex,
---------------------
confirmed immediately in writing, in substantially the form of Exhibit
B-1 hereto, specifying therein (i) the date of such A Borrowing, (ii)
the Type of A Advances comprising such A Borrowing, (iii) the aggregate
amount of such A Borrowing and the Currency thereof (except that Base
Rate Advances must be denominated in Dollars), (iv) in the case of an A
Borrowing consisting of Eurocurrency Rate Advances, the initial Interest
Period for each such A Advance and (v) the name of the Borrower of such
A Advance (which shall be the Company or a Designated Borrower). Each
Lender shall on the date of such A Borrowing, before 11:00 A.M. (New
York City time), in the case of an A Borrowing to consist of
Eurocurrency Rate Advances, and before 1:00 P.M. (New York City time),
in the case of an A Borrowing to consist of Base Rate Advances, make
available for the account of its Applicable Lending Office to the
Administrative Agent at its address referred to in Section 8.02, in the
relevant Currency and in same day funds, such Lender's ratable portion
of such A Borrowing. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent will make such funds available to
the Company at the Administrative Agent's aforesaid address (or, in the
case of an A Borrowing by a Designated Borrower, the Administrative
Agent will make such funds available to the relevant Borrower in such
manner as the Administrative Agent and the Company may agree).
(b) Anything in subsection (a) above to the contrary
notwithstanding (1) no Borrower may select Eurocurrency Rate Advances
for any A Borrowing if the obligation of the Lenders to make
Eurocurrency Rate Advances shall then be suspended pursuant to
Section 2.08 or 2.12 (except as otherwise provided in Section
2.12(b)(ii)) and (2) Base Rate Advances shall be denominated solely in
Dollars.
(c) Each Notice of A Borrowing shall be binding on the
Company and each Designated Borrower. In the case of any A Borrowing
that the related Notice of A Borrowing specifies is to consist of
Eurocurrency Rate Advances, the Company (and, if a Designated Borrower
is the borrower of the related A Advances, such Designated Borrower)
shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any revocation of such Notice of A
Borrowing by the Company (or such Designated Borrower) or any failure to
fulfill on or before the date specified in such Notice of A Borrowing
for such A Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the A Advance to be made by such Lender
as part of such A Borrowing when such A Advance, as a result of such
revocation or failure, is not made on such date.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-17-
(d) Unless the Administrative Agent shall have received
notice from a Lender prior to the date of any A Borrowing (in the case
of an A Borrowing to consist of Eurocurrency Rate Advances) and not
later than 12:00 Noon (New York City time) on the Business Day of the
proposed A Borrowing (in the case of an A Borrowing to consist of Base
Rate Advances) that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of such A Borrowing,
the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such A
Borrowing in accordance with subsection (a) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make
available to the relevant Borrower on such date a corresponding amount;
provided that nothing in this subsection (d) shall be construed to
relieve any Lender from any obligation hereunder to make available to
the Administrative Agent its ratable portion of such A Borrowing in
accordance with subsection (a) of this Section 2.02. If and to the
extent that such Lender shall not have so made such ratable portion
available to the Administrative Agent, such Lender and the relevant
Borrower severally agree to repay to the Administrative Agent forthwith
on demand such corresponding amount together with interest thereon, for
each day from the date such amount is made available to the relevant
Borrower until the date such amount is repaid to the Administrative
Agent, at (i) in the case of such Borrower, the interest rate applicable
at such time to the A Advances comprising such A Borrowing and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Lender's A Advance as part of such A
Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the A Advance to be
made by it as part of any A Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder to make its A Advance on the date
of such A Borrowing, but no Lender shall be responsible for the failure
of any other Lender to make the A Advance to be made by such other
Lender on the date of any A Borrowing.
SECTION 2.03. The B Advances.
--------------
(a) Each Lender severally agrees, on the terms and
conditions hereinafter set forth, that the Company and any Designated
Borrower may make B Borrowings in Dollars or in Euros (at the election
of the Company on its own behalf or on behalf of the applicable
Borrower) under this Section 2.03 from time to time on any Business Day
during the period from the Restatement Date until the date occurring
seven days prior to the Commitment Termination Date in the manner set
forth below; provided that, following the making of each B Borrowing,
(X) the Dollar Equivalent of the aggregate amount of the B Advances of
all Lenders then outstanding shall not exceed the aggregate amount of
the Commitments of the Lenders, and (Y) the Dollar Equivalent of the
aggregate amount of all Advances then outstanding shall not exceed the
aggregate amount of the Commitments of the Lenders.
On the Restatement Date all outstanding B Advances of each
Lender shall automatically, without any action on the part of any
Person, be deemed to be B Advances of the Company hereunder.
(i) The Company (on its own behalf and on behalf of the
other Borrowers) may request a B Borrowing under this Section 2.03
by delivering to the Administrative Agent, by telecopier or telex,
confirmed immediately in writing, a notice of a B Borrowing (a
"Notice of B Borrowing"), in substantially the form of Exhibit
---------------------
B-2 hereto, specifying therein:
(1) the date of such proposed B Borrowing;
(2) the aggregate amount of such proposed B Borrowing
and the Currency thereof;
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-18-
(3) the maturity date for repayment of each B Advance
to be made as part of such B Borrowing (which maturity date
may not be earlier than the date occurring thirty days after
the date of such B Borrowing or later than the Commitment
Termination Date);
(4) the interest payment date or dates relating
thereto;
(5) whether such B Borrowing is to consist of Fixed
Rate Advances or Floating Rate Advances;
(6) the name of the applicable Borrower (which shall
be the Company or a Designated Borrower); and
(7) any other terms to be applicable to such B
Borrowing,
not later than 10:00 A.M. (New York City time) in the case of B
Advances to be denominated in Dollars, and not later than 10:00
A.M. (London time) in the case of B Advances to be denominated in
Euros, (A) at least one Business Day prior to the date of the
proposed B Borrowing, if the Company shall specify in the Notice
of B Borrowing that the rates of interest to be offered by the
Lenders shall be fixed rates per annum (the B Advances comprising
any such B Borrowing being referred to herein as "Fixed Rate
----------
Advances") and (B) at least four Business Days (in the case of B
--------
Advances to be denominated in Dollars), or five Business Days (in
the case of B Advances to be denominated in Euros) prior to the
date of the proposed B Borrowing, if the Company shall instead
specify in the Notice of B Borrowing the basis to be used by the
Lenders in determining the rates of interest to be offered by them
(the B Advances comprising such B Borrowing being referred to
herein as "Floating Rate Advances"). The Administrative Agent
----------------------
shall in turn promptly notify each Lender of each request for a B
Borrowing received by it from the Company by sending such Lender a
copy of the related Notice of B Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects
to do so, irrevocably offer to make one or more B Advances to the
applicable Borrower as part of such proposed B Borrowing at a rate
or rates of interest specified by such Lender in its sole
discretion, by notifying the Administrative Agent (which shall
give prompt notice thereof to the Company), before 10:00 A.M. (New
York City time) in the case of B Advances to be denominated in
Dollars, and not later than 10:00 A.M. (London time) in the case
of B Advances to be denominated in Euros, on the date of such
proposed B Borrowing, in the case of a B Borrowing consisting of
Fixed Rate Advances and three Business Days before the date of
such proposed B Borrowing, in the case of a B Borrowing consisting
of Floating Rate Advances, of the minimum amount and maximum
amount of each B Advance which such Lender would be willing to
make as part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of this Section
2.03(a), exceed such Lender's Commitment, if any), the rate or
rates of interest therefor and such Lender's Applicable Lending
Office with respect to such B Advance; provided that if the
Administrative Agent in its capacity as a Lender shall, in its
sole discretion, elect to make any such offer, it shall notify the
Company of such offer before 9:00 A.M. (New York City time or
London time, as applicable) on the date on which notice of such
election is to be given to the Administrative Agent by the other
Lenders. If any Lender shall elect not to make such an offer,
such Lender shall so notify the Administrative Agent, before 10:00
A.M. (New York City time or London time, as applicable) on the
date on which notice of such election is to be given to the
Administrative Agent by the other Lenders, and such Lender shall
not be obligated to, and shall not, make any B Advance as part of
such B Borrowing; provided that the failure by any Lender to give
such notice shall not cause such Lender to be obligated to make
any B Advance as part of such proposed B Borrowing.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-19-
(iii) The Company (on its own behalf and on behalf of the
other Borrowers) shall, in turn, before 12:00 Noon (New York City
time) in the case of B Advances consisting of Fixed Rate Advances
to be denominated in Dollars, and not later than 12:00 Noon
(London time) in the case of B Advances consisting of Fixed Rate
Advances to be denominated in Euros, on the date of such proposed
B Borrowing, and before 1:00 P.M. (New York City time) in the case
of B Advances consisting of Floating Rate Advances to be
denominated in Dollars, and not later than 1:00 P.M. (London time)
in the case of B Advances consisting of Floating Rate Advances to
be denominated in Euros, three Business Days before the date of
such proposed B Borrowing, either:
(x) cancel such B Borrowing by giving the
Administrative Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in order
of the lowest to highest rates of interest or margins (or,
if two or more Lenders bid at the same rate of interest, and
the amount of accepted offers is less than the aggregate
amount of such offers, the amount to be borrowed from such
Lenders as part of such B Borrowing shall be allocated among
such Lenders pro rata on the basis of the maximum amount
offered by such Lenders at such rates or margin in
connection with such B Borrowing), by giving notice to the
Administrative Agent of the amount of each B Advance (which
amount shall be equal to or greater than the minimum amount,
and equal to or less than the maximum amount, notified to
the Company by the Administrative Agent on behalf of such
Lender for such B Advance pursuant to paragraph (ii) above)
to be made by each Lender as part of such B Borrowing, and
reject any remaining offers made by Lenders pursuant to
paragraph (ii) above by giving the Administrative Agent
notice to that effect.
(iv) If the Company notifies the Administrative Agent that
such B Borrowing is canceled pursuant to paragraph (iii)(x) above,
the Administrative Agent shall give prompt notice thereof to the
Lenders and such B Borrowing shall not be made.
(v) If the Company (on its own behalf or on behalf of
another Borrower) accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the
Administrative Agent shall in turn promptly notify (A) each Lender
that has made an offer as described in paragraph (ii) above, of
the date and aggregate amount of such B Borrowing and whether or
not any offer or offers made by such Lender pursuant to paragraph
(ii) above have been so accepted by the Company, (B) each Lender
that is to make a B Advance as part of such B Borrowing, of the
amount of each B Advance to be made by such Lender as part of such
B Borrowing, and (C) each Lender that is to make a B Advance as
part of such B Borrowing, upon receipt, that the Administrative
Agent has received forms of documents appearing to fulfill the
applicable conditions set forth in Article III. Each Lender that
is to make a B Advance as part of such B Borrowing shall, before
1:00 P.M. (New York City time) in the case of B Advances to be
denominated in Dollars, and not later than 1:00 P.M. (London time)
in the case of B Advances to be denominated in Euros, on the date
of such B Borrowing specified in the notice received from the
Administrative Agent pursuant to clause (A) of the preceding
sentence or any later time when such Lender shall have received
notice from the Administrative Agent pursuant to clause (C) of the
preceding sentence, make available for the account of its
Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in the relevant Currency and in
same day funds, such Lender's portion of such B Borrowing. Upon
fulfillment of the applicable conditions set forth in Article III
and after receipt by the Administrative Agent of such funds, the
Administrative Agent will make such funds available to the Company
at the Administrative Agent's address referred to in Section 8.02
(or, in the case of a B Borrowing by a Designated Borrower, the
Administrative Agent will make such funds available to the
relevant Borrower in such manner as the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-20-
Administrative Agent and the Company may agree). Promptly after
each B Borrowing the Administrative Agent will notify each Lender
of the amount of the B Borrowing, the consequent B Reduction and
the dates upon which such B Reduction commenced and will
terminate.
(b) Each B Borrowing shall be in an aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof, or
the aggregate amount of the unused portion of the Lenders' Commitments
and, following the making of each B Borrowing, the Company shall be in
compliance with the limitations set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in
this Section 2.03, the Company may from time to time borrow under this
Section 2.03, repay pursuant to subsection (d) below, and reborrow under
this Section 2.03; provided that a B Borrowing shall not be made within
three Business Days of the date of any other B Borrowing.
(d) Each Borrower shall repay to the Administrative Agent
for the account of each Lender that has made a B Advance to such
Borrower, on the maturity date of each B Advance made to such Borrower
(such maturity date being that specified by the Company for repayment of
such B Advance in the related Notice of B Borrowing delivered pursuant
to subsection (a)(i) above and provided in the B Note evidencing such B
Advance), the then unpaid principal amount of such B Advance. No
Borrower shall have the right to prepay any B Advance.
(e) Each Borrower shall pay interest on the unpaid
principal amount of each B Advance made to such Borrower from the date
of such B Advance to the date the principal amount of such B Advance is
paid in full, in the applicable Currency and at the rate of interest for
such B Advance specified by the Lender making such B Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii)
above, payable (i) on the interest payment date or dates specified by
the Company for such B Advance in the related Notice of B Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the B Note
evidencing such B Advance, and (ii) on the date such B Advance shall be
paid in full. Upon the occurrence and during the continuance of any
Event of Default, each Borrower shall pay interest on the amount of
unpaid principal of each B Advance made to such Borrower owing to a
Lender, payable in arrears on the date or dates interest is payable
thereon, at a rate per annum equal at all times to 2% per annum above
the rate per annum required to be paid on such B Advance under the terms
of the B Note evidencing such B Advance unless otherwise agreed in such
B Note.
(f) If requested by a Lender making a B Advance, the
indebtedness of each Borrower resulting from each B Advance made to such
Borrower as part of a B Borrowing shall be evidenced by a separate B
Note of such Borrower payable to the order of the Lender making such B
Advance.
(g) The Company (on its own behalf and on behalf of the
other Borrowers) shall pay to the Administrative Agent for its own
account the Competitive Bid Administration Fee described in
Section 2.04(b) with each request for a B Borrowing whether or not any B
Borrowing is in fact made.
SECTION 2.04. Fees.
----
(a) Facility Fee. The Company agrees to pay to the
------------
Administrative Agent for the account of each Lender a facility fee (the
"Facility Fee") in Dollars on the aggregate amount (whether used or
------------
unused) of such Lender's Commitment from the date hereof (in the case of
each Initial Lender) and from the Restatement Date (or from the
effective date specified in the Acceptance pursuant to which it became a
Lender (in the case of each other Lender)) until the Commitment
Termination Date of such Lender at a rate per annum equal to the
Facility Fee Rate in effect from time to time. The Facility Fee shall
be payable quarterly in arrears on the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-21-
last Business Day of each March, June, September and December and, for
each Lender, on the Commitment Termination Date of such Lender.
(b) Competitive Bid Administration Fee. The Company
----------------------------------
shall pay to the Administrative Agent for its own account a fee in
Dollars an amount heretofore agreed between the Company and the
Administrative Agent with each request for a B Borrowing whether or not
any B Borrowing is in fact made.
SECTION 2.05. Termination, Reduction, Extension and
-------------------------------------
Increase of Commitments.
- -----------------------
(a) Commitment Reductions. The Commitment of each Lender
---------------------
shall be automatically reduced to zero on the Commitment Termination
Date of such Lender. In addition, the Company (on its own behalf and on
behalf of the other Borrowers) shall have the right, upon at least three
Business Days' notice to the Administrative Agent, to terminate in whole
or reduce ratably in part the unused portions of the respective
Commitments of the Lenders, provided that (i) the aggregate amount of
the Commitments of the Lenders shall not be reduced to an amount which
is less than the aggregate principal amount of the Advances then
outstanding; and (ii) each partial reduction shall be in an aggregate
amount of $10,000,000 or an integral multiple of $1,000,000 in excess
thereof. Once terminated, a Commitment cannot be reinstated.
(b) Commitment Extensions.
---------------------
(i) The Company (on its own behalf and on behalf of the
other Borrowers) may, by notice to the Administrative Agent (which
shall promptly notify the Lenders) not more than 60 days and not
less than 40 days prior to the Commitment Termination Date then in
effect hereunder (the "Existing Commitment Termination Date"),
------------------------------------
request that each Lender extend such Lender's Commitment
Termination Date to the date (the "New Commitment Termination
Date) that is one year after the then Commitment Termination Date.
(ii) Each Lender, acting in its sole and individual
discretion, shall, by notice to the Administrative Agent given not
more than 30 days immediately prior to the Anniversary Date but in
any event no later than the date (the "Notice Date") that is 20
-----------
days immediately prior to the Anniversary Date, advise the
Administrative Agent whether or not such Lender agrees to such
extension (and each Lender that determines not to so extend its
Commitment Termination Date (a "Non-Extending Lender") shall
--------------------
notify the Administrative Agent (which shall notify the other
Lenders) of such fact promptly after such determination (but in
any event no later than the Notice Date) and any Lender that does
not so advise the Administrative Agent on or before the Notice
Date shall be deemed to be a Non-Extending Lender. The election
of any Lender to agree to such extension shall not obligate any
other Lender to so agree.
(iii) The Administrative Agent shall notify the Company of
each Lender's determination under this Section 2.05(b) no later
than the date 15 days prior to the Anniversary Date (or, if such
date is not a Business Day, on the next preceding Business Day).
(iv) The Company (on its own behalf and on behalf of the
other Borrowers) shall have the right on or before the Anniversary
Date to replace each Non-Extending Lender with, and add as
"Lenders" under this Agreement in place thereof, one or more
Eligible Assignees (each, an "Additional Commitment Lender")
----------------------------
with the approval of the Administrative Agent and the Syndication
Agent (which approvals shall not be unreasonably withheld), each
of which Additional Commitment Lenders shall have entered into an
Assumption and Acceptance pursuant to which such Additional
Commitment Lender shall, effective as of the Anniversary Date,
undertake a
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-22-
Commitment (and, if any such Additional Commitment Lender is
already a Lender, its Commitment shall be in addition to such
Lender's Commitment hereunder on such date).
(v) If (and only if) the total of the Commitments of the
Lenders that have agreed so to extend their Commitment Termination
Date and the additional Commitments of the Additional Commitment
Lenders shall be equal to 100% of the aggregate amount of the
Commitments in effect on the Anniversary Date, then, effective as
of the Anniversary Date: (x) the Commitment Termination Date of
each Extending Lender and of each Additional Commitment Lender
shall be extended to the New Commitment Termination Date and each
Additional Commitment Lender shall thereupon become a "Lender" for
all purposes of this Agreement; and (y) the Commitment Termination
Date of each Non-Extending Lender shall be changed to such
Anniversary Date. Notwithstanding anything in this Agreement to
the contrary, no Non-Extending Lender shall participate in any
Eurocurrency Rate Advances or B Advances made after the related
Notice Date.
(vi) Notwithstanding the foregoing, the extension of the
Commitment Termination Date pursuant to this Section 2.05(b) shall
not be effective with respect to any Lender unless:
(x) no Default shall have occurred and be continuing
on either of the date of the notice requesting such
extension or the Anniversary Date; and
(y) each Non-Extending Lender shall have been paid in
full by the Company or any Designated Borrower all amounts
owing to such Lender hereunder on or before the Anniversary
Date.
(c) Commitment Increase.
-------------------
(i) The Company (on its own behalf or on behalf of the
other Borrowers) may at any time, by notice to the Administrative
Agent, propose that the aggregate amount of the Commitments be
increased (a "Commitment Increase"), effective as of a date
-------------------
(such date or such other date as agreed to by the Administrative
Agent and the Company being the "Commitment Increase Date") that
------------------------
shall be (A) prior to the Commitment Termination Date and (B) at
least 15 Business Days after the date of such notice; provided
that:
(1) the Company may not propose more than one
Commitment Increase during any period of 12 consecutive
months;
(2) the minimum proposed Commitment Increase for each
Commitment Increase Date shall be $100,000,000;
(3) in no event shall the aggregate amount of the
Commitments at any time exceed $1,000,000,000; and
(4) no Default or Event of Default has occurred and
is continuing on such Commitment Increase Date.
The Administrative Agent shall notify the Lenders promptly upon
its receipt of any such notice. It shall be in each Lender's sole
discretion whether to increase its Commitment hereunder in
connection with a proposed Commitment Increase. No later than 10
Business Days after its receipt of the Company's notice, each
Lender that is willing to increase its Commitment hereunder (an
"Increasing Lender") shall deliver to the Administrative Agent a
-----------------
notice, in which such Lender shall set forth the maximum increase
in its Commitment to which such Lender is willing to agree, and
the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-23-
Administrative Agent shall promptly provide to the Company a copy
of such Increasing Lender's notice. The Administrative Agent
shall cooperate with the Company in discussions with the Lenders
and Eligible Assignees with a view to arranging the proposed
Commitment Increase through the increase of the Commitments of one
or more of the Lenders and/or the addition as Assuming Lenders of
one or more Eligible Assignees acceptable to the Company, the
Syndication Agent and the Administrative Agent and as parties to
this Agreement, provided that (X) the minimum Commitment of each
such Assuming Lender that becomes a party to this Agreement
pursuant to this Section 2.05(c) shall be $25,000,000 and (Y) any
allocations of Commitments shall be determined by the Company
(provided that allocations of increases in Commitments among
Increasing Lenders shall be based on the ratio of each existing
Lender's proposed increased Commitment, if any, to the aggregate
of all of the existing Lenders' proposed increased Commitments).
If agreement is reached prior to the Commitment Increase Date with
the Increasing Lenders and Assuming Lenders, if any, as to a
Commitment Increase (the amount of which may be less than that
specified in the applicable notice from the Company), the Company
shall deliver, no later than one day prior to the Commitment
Increase Date, a notice to the Administrative Agent (and the
Administrative Agent shall give notice thereof to the Lenders
(including any Assuming Lenders)).
On the Commitment Increase Date, the Assuming Lenders, if
any, shall become Lenders hereunder as of the Commitment Increase
Date and the Commitments of such Increasing Lenders and such
Assuming Lenders shall become or be, as the case may be, as of the
Commitment Increase Date the amounts specified in the notice
delivered by the Company to the Administrative Agent; provided
that:
(x) the Administrative Agent shall have received on
or prior to 9:00 A.M. (New York City time) on the Commitment
Increase Date (A) a duly executed A Note for each Assuming
Lender and each Increasing Lender that has requested such A
Notes in accordance with Section 2.06(c), in each case in an
amount equal to the Commitment of each such Assuming Lender
and each such Increasing Lender after giving effect to such
Commitment Increase and (B) an opinion of counsel for the
Company in substantially the form of Exhibit D hereto
(except for the opinion in paragraph 6 thereof), dated such
Commitment Increase Date, together with a copy, certified on
the Commitment Increase Date by the Secretary, an Assistant
Secretary or a comparable official of the Company, of the
resolutions adopted by the Board of Directors of the
Company, authorizing such Commitment Increase (with copies
for each Lender, including each Assuming Lender);
(y) with respect to each Assuming Lender, the
Administrative Agent shall have received, on or prior to
9:00 A.M. (New York City time) on the Commitment Increase
Date, an appropriate Assumption and Acceptance, duly
executed by such Assuming Lender, the Company (on its own
behalf or on the behalf of the other Borrowers) and the
Administrative Agent; and
(z) each Increasing Lender that proposes to increase
its Commitment in connection with such Commitment Increase
shall have delivered, on or prior to 9:00 A.M. (New York
City time) on the Commitment Increase Date, confirmation in
writing satisfactory to the Administrative Agent as to its
increased Commitment and a copy of such confirmation to the
Company.
(ii) Upon its receipt of notice from a Lender that it is
increasing its Commitment hereunder, together with the appropriate
A Notes (if applicable) and opinions referred to in clause (x)
above, the Administrative Agent shall (I) record the information
contained therein in the Register and (II) give prompt notice
thereof to the Company. Upon its receipt of an Assumption and
Acceptance executed
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-24-
by an Assuming Lender representing that it is an Eligible
Assignee, together with the appropriate A Notes (if applicable)
and opinions referred to in clause (x) above, the Administrative
Agent shall, if such Assumption and Acceptance has been completed,
(i) accept such Assumption and Acceptance, (ii) record the
information contained therein in the Register and (iii) give
prompt notice thereof to the Company.
(iii) In the event that the Administrative Agent shall not
have received notice from the Company as to such agreement on or
prior to the Commitment Increase Date or the Company shall, by
notice to the Administrative Agent prior to the Commitment
Increase Date, withdraw such proposal or any of the actions
provided for in clauses (x) through (z) above shall not have
occurred by the Commitment Increase Date, such proposal by the
Company shall be deemed not to have been made. In such event, the
actions theretofore taken under clauses (x) through (z) above
shall be deemed to be of no effect, and all the rights and
obligations of the parties shall continue as if no such proposal
had been made.
(iv) In the event that the Administrative Agent shall have
received notice from the Company as to such agreement on or prior
to the Commitment Increase Date and the action provided for in
clauses (x) through (z) above shall have occurred by 9:00 A.M.
(New York City time) on the Commitment Increase Date, the
Administrative Agent shall notify the Lenders (including the
Assuming Lenders) of the occurrence of the Commitment Increase
Date promptly and in any event by 10:00 A.M. (New York City time)
on such date by telecopier, telex or cable. Each Increasing
Lender and each Assuming Lender shall, before 11:00 A.M. (New York
City time) on the Commitment Increase Date, make available for the
account of its Applicable Lending Office to the Administrative
Agent at its address referred to in Section 8.02, in same day
funds, an amount equal to such Increasing Lender's or Assuming
Lender's ratable portion of the A Borrowings of each Borrower then
outstanding (calculated based on its Commitment as a percentage of
the aggregate Commitments outstanding after giving effect to the
relevant Commitment Increase). After the Administrative Agent's
receipt of such funds, the Administrative Agent will promptly
thereafter cause to be distributed like funds to the Lenders for
the account of their respective Applicable Lending Offices in an
amount to each Lender such that the aggregate amount of the
outstanding A Advances of each Borrower owing to each Lender after
giving effect to such distribution equals such Lender's ratable
portion of the A Borrowings of each Borrower then outstanding
(calculated based on its Commitment as a percentage of the
aggregate Commitments outstanding after giving effect to the
relevant Commitment Increase). If the Commitment Increase Date
shall occur on a date that is not the last day of the Interest
Period for all Eurocurrency Rate Advances then outstanding, (a)
the Company (on its own behalf or on behalf of the other
Borrowers) shall pay any amounts owing pursuant to Section 8.04(c)
as a result of the distributions to Lenders under this Section
2.05(c)(iv) and (b) for each A Borrowing comprised of Eurocurrency
Rate Advances, the respective Advances made by the Increasing
Lenders and the Assuming Lenders pursuant to this Section
2.05(c)(iv) shall be Base Rate Advances until the last day of the
then existing Interest Period for such A Borrowing.
SECTION 2.06. Repayment of Advances; Evidence of Debt.
---------------------------------------
(a) A Advances. Each Borrower shall repay the principal
----------
amount of each A Advance made by each Lender to such Borrower, in the
Currency of such A Advance, and each A Advance made by such Lender shall
mature, on the Commitment Termination Date of such Lender.
(b) B Advances. Each Borrower shall repay the principal
----------
amount of each B Advance made by each Lender to such Borrower as
provided in Section 2.03(e).
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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(c) Note Option. Any Lender may request that the A
-----------
Advances made or to be made by it to a Borrower to be evidenced by an A
Note payable by such Borrower. In such event, the Company (on its own
behalf and on behalf of the other Borrowers) shall prepare, have
executed by the relevant Borrower and deliver to such Lender an A Note
payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns). If a Lender whose A Advances
are so evidenced by an A Note thereafter assigns such A Advances, such A
Advances will be evidenced by an A Note only if the assignee so requests
in accordance with this Section 2.06(c) and Section 8.07
SECTION 2.07. Interest on A Advances.
----------------------
(a) Scheduled Interest. Each Borrower shall pay interest
------------------
on the unpaid principal amount of each A Advance owing by such Borrower
to each Lender, in the Currency in which such A Advance is denominated,
from the date of such A Advance until such principal amount shall be
paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such A
------------------
Advance is a Base Rate Advance, a rate per annum equal at all
times to the Base Rate in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September
and December during such periods and on the date such Base Rate
Advance shall be Converted or paid in full.
(ii) Eurocurrency Rate Advances. During such periods as
--------------------------
such A Advance is a Eurocurrency Rate Advance, a rate per annum
equal at all times during each Interest Period for such A Advance
to the sum of (x) the Eurocurrency Rate for such Interest Period
for such Advance plus (y) the Applicable Margin in effect from
time to time, payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than
three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and
on the date such Eurocurrency Rate Advance shall be Converted or
paid in full.
(b) Default Interest. Upon the occurrence and during the
----------------
continuance of any Event of Default, each Borrower shall pay interest on
the unpaid principal amount of each A Advance owing by such Borrower to
each Lender, in the Currency in which such A Advance is denominated,
payable in arrears on the dates referred to in clause (a)(i) or (a)(ii)
above, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid on such A Advance pursuant to clause
(a)(i) or (a)(ii) above.
SECTION 2.08. Interest Rate Determination; Changes in
---------------------------------------
Rating Systems.
- --------------
(a) Each Reference Bank agrees to furnish to the
Administrative Agent timely information for the purpose of determining
the Eurocurrency Rate for Advances denominated in Dollars. If any one
or more of the Reference Banks shall not furnish such timely information
to the Administrative Agent for the purpose of determining any such
interest rate, the Administrative Agent shall determine such interest
rate on the basis of timely information furnished by the remaining
Reference Banks. The Administrative Agent shall give prompt notice to
the Company and the Lenders of the applicable interest rate determined
by the Administrative Agent for purposes of Section 2.07(a)(i) or (ii),
and the rate, if any, furnished by each Reference Bank for the purpose
of determining the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurocurrency Rate Advances
denominated in any Currency, the Majority Lenders notify the
Administrative Agent that the Eurocurrency Rate for any Interest Period
for such Advances in such Currency will not adequately reflect the cost
to such Majority Lenders of making, funding or maintaining their
respective Eurocurrency Rate Advances in such Currency for such Interest
Period, the Administrative Agent shall forthwith so notify the Company
and the Lenders, whereupon (i) if such Currency is Euros, the related
Notice of Borrowing shall be ineffective, (ii) if such Currency is
Dollars, such
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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Eurocurrency Rate Advance will automatically, on the last day of the
then existing Interest Period therefor, Convert into a Base Rate
Advance, and (iii) regardless of Currency, the obligation of the Lenders
to make, or (in the case of Dollars) to Convert A Advances into,
Eurocurrency Rate Advances shall be suspended until the Administrative
Agent shall notify the Company and the Lenders that the circumstances
causing such suspension no longer exist.
(c) If the Company shall fail to select the duration of any
Interest Period for any Eurocurrency Rate Advances in accordance with
the provisions contained in the definition of "Interest Period" in
Section 1.01, the Administrative Agent will forthwith so notify the
Company and the Lenders and such Advances will automatically, on the
last day of the then existing Interest Period therefor, Convert into
Base Rate Advances.
(d) On the date on which the aggregate unpaid principal
amount of Eurocurrency Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than
$10,000,000, such Advances shall automatically Convert into Base Rate
Advances and on and after such date the right of the Borrowers to
Convert such A Advances shall terminate.
(e) Upon the occurrence and during the continuance of any
Event of Default, (i) each Eurocurrency Rate Advance denominated in
Dollars will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Lenders to make, or to Convert A Advances denominated
in Dollars into, Eurocurrency Rate Advances shall be suspended.
(f) If fewer than two Reference Banks furnish timely
information to the Administrative Agent for determining the Eurocurrency
Rate for any Eurocurrency Rate Advances denominated in Dollars,
(i) the Administrative Agent shall forthwith notify the
Company and the Lenders that the interest rate cannot be
determined for such Eurocurrency Rate Advances,
(ii) each such A Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a
Base Rate Advance (or if such Advance is then a Base Rate Advance,
will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert
A Advances into, Eurocurrency Rate Advances shall be suspended
until the Administrative Agent shall notify the Company and the
Lenders that the circumstances causing such suspension no longer
exist.
(g) If the rating system of either Moody's or S&P shall
change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Company (on its own
behalf and on behalf of the other Borrowers) and the Administrative
Agent (on behalf of the Lenders) shall negotiate in good faith to amend
the references to specific ratings in this Agreement to reflect such
changed rating system or the non-availability of ratings from such
rating agency (provided that any such amendment to such specific ratings
shall in no event be effective without the approval of the Majority
Lenders).
SECTION 2.09. Optional Conversion of A Advances. The Company
---------------------------------
(on its own behalf and on behalf of the other Borrowers) may on any
Business Day, upon notice given to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions
of Sections 2.08 and 2.12, Convert all Dollar-denominated A Advances
of one Type comprising the same Borrowing by a Borrower into Dollar-
denominated A Advances owing by such Borrower of the other Type;
provided that any Conversion of Dollar-denominated Eurocurrency Rate
Advances into Base Rate Advances shall be made only on the last day of
an Interest Period for such Eurocurrency Rate Advances. Each such
notice of a Conversion shall, within the restrictions
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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specified above, specify (i) the date of such Conversion, (ii) the A
Advances to be Converted, and (iii) if such Conversion is into
Eurocurrency Rate Advances, the duration of the initial Interest Period
for each such A Advance. Each notice of Conversion shall be irrevocable
and binding on the Company and each other Borrower.
SECTION 2.10. Prepayments, Etc.
-----------------
(a) Optional Payments of A Advances. Each Borrower may,
-------------------------------
upon notice by the Company to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment, given to
the Administrative Agent not later than 11:00 A.M. (New York City time)
on the proposed date in the case of Base Rate Advances and at least two
Business Days prior to the proposed date in the case of Eurocurrency
Rate Advances, and if such notice is given by the Company the applicable
Borrower shall, prepay the outstanding principal amount of the A
Advances owing by such Borrower in whole or ratably in part, together
with accrued interest to the date of such prepayment on the principal
amount prepaid; provided that (x) each partial prepayment shall be in an
aggregate principal amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment
of a Eurocurrency Rate Advance, the applicable Borrower and the Company
shall be jointly and severally obligated to reimburse the Lenders in
respect thereof pursuant to Section 8.04(c).
(b) Change of Control. If any Change of Control shall
-----------------
occur, then, upon notice to the Company by the Administrative Agent
(acting at the request, or with the consent, of the Majority Lenders) to
such effect and stating that the same is a "Change of Control Prepayment
Notice", the Commitments shall be automatically reduced to zero and each
Borrower shall prepay the Advances made to such Borrower in full.
(c) Changes in Dollar/Euro Exchange Rate.
------------------------------------
(i) Determination of Amount Outstanding. On the last
-----------------------------------
Business Day of each March, June, September and December and
promptly upon the receipt by the Administrative Agent of a
Currency Valuation Notice (as defined below), the Administrative
Agent shall determine the aggregate outstanding principal amount
of the Advances. For the purpose of this determination, the
outstanding principal amount of any Advance that is denominated in
Euros shall be deemed to be the Dollar Equivalent of the amount in
Euros of such Advance, determined as of such date or, in the case
of a Currency Valuation Notice received by the Administrative
Agent prior to 11:00 a.m., New York City time, on a Business Day,
on such Business Day or, in the case of a Currency Valuation
Notice otherwise received, on the first Business Day after such
Currency Valuation Notice is received. Upon making such
determination, the Administrative Agent shall promptly notify the
Lenders and the Company thereof.
(ii) Prepayment. If, on the date of such determination the
----------
aggregate outstanding principal amount of the Advances exceeds
105% of the aggregate amount of the Commitments as then in effect,
the Company shall, if requested by the Majority Lenders (through
the Administrative Agent), cause the Borrowers to prepay the
Advances in such amount as shall be necessary so that after giving
effect thereto the aggregate outstanding principal amount of the
Advances does not exceed the Commitments.
For purposes hereof, "Currency Valuation Notice" means a notice given
-------------------------
by the Majority Lenders to the Administrative Agent stating that such
notice is a "Currency Valuation Notice" and requesting that the
Administrative Agent determine the aggregate outstanding principal
amount of the Advances. The Administrative Agent shall not be required
to make more than one valuation determination pursuant to Currency
Valuation Notices within any rolling three month period.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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-28-
(d) If (i) the obligations of the Company under Article IX
with respect to any outstanding Guaranteed Obligations owing by any
Designated Borrower (herein, the "Affected Borrower") shall for any
-----------------
reason (x) be terminated, (y) cease to be in full force and effect or
(z) not be the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, and (ii)
such condition continues unremedied for 15 days after written notice
thereof shall have been given to the Company by the Administrative Agent
or any Lender, then the Affected Borrower shall, no later than the 15th
day after the date of such notice, prepay (and the Company shall cause
to be prepaid) the full principal of and interest on the Advances owing
by, and the Notes payable by, such Affected Borrower and all other
amounts whatsoever payable hereunder by such Affected Borrower
(including, without limitation, all amounts payable under
Section 8.04(c) as a result of such prepayment).
SECTION 2.11. Increased Costs.
---------------
(a) If due to either (i) the introduction of or any change
in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), in each
case, after the date hereof, there shall be any increase in the cost to
any Lender of agreeing to make or making, funding or maintaining
Eurocurrency Rate Advances or Floating Rate Advances, then such Lender
may from time to time give notice of such circumstances to the Company
(with a copy to the Administrative Agent); provided that each Lender
agrees, before giving any such notice, to use its best efforts
(consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the
making of such a designation would avoid the need for, or reduce the
amount of, such increased costs and would not be disadvantageous to such
Lender. The amount sufficient to compensate such Lender in light of
such increase in costs to such Lender or any corporation controlling
such Lender shall be determined by such Lender in good faith on a basis
that allocates the amounts sufficient to compensate such Lender in light
of such increase ratably among all applicable Advances. A certificate
specifying the event referred to in this Section 2.11(a), the amount
sufficient to compensate such Lender and the basis of its computation
(which shall be reasonable), submitted in good faith to the Company and
the Administrative Agent by such Lender, shall be conclusive and binding
for all purposes absent manifest error. Each Lender agrees to provide
reasonably prompt notice to the Company of the occurrence of any event
referred to in the first sentence of this Section 2.11(a).
(b) If any Lender determines that compliance with any law
or regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) after
the date hereof affects or would affect the amount of capital required
or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased
by or based upon the existence of such Lender's commitment to lend
hereunder and other commitments of this type, then, such Lender may from
time to time give notice of such circumstances to the Company (with a
copy to the Administrative Agent); provided that each Lender agrees,
before giving any such notice, to use its best efforts (consistent with
its internal policy and legal and regulatory restrictions) to designate
a different Applicable Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of, the cost
to the Lender of such increase in the amount of capital maintained by
such Lender and would not be disadvantageous to such Lender. The amount
sufficient to compensate such Lender in light of such increase in the
amount of capital maintained by such Lender or any corporation
controlling such Lender shall be determined by such Lender in good faith
to the extent that such Lender reasonably determines such increase in
capital to be allocable to the existence of such Lender's commitment to
lend hereunder. A certificate specifying the event referred to in this
Section 2.11(b), the amount sufficient to compensate such Lender and the
basis of its computation (which shall be reasonable), submitted in good
faith to the Company and the Administrative Agent by such Lender, shall
be conclusive and binding for all purposes absent manifest error. Each
Lender agrees to provide reasonably prompt notice to the Company of the
occurrence of any event referred to in the first sentence of this
Section 2.11(b).
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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(c) The Company shall, within five days of receiving a
notice from any Lender pursuant to clause (a) or (b) of this Section
2.11, elect (and shall notify such Lender and the Administrative Agent
of such election) to:
(i) pay to the Administrative Agent in Dollars for the
account of such Lender, from time to time commencing on the date
of notice by such Lender and as specified by such Lender, (A) the
amount such Lender has set forth in the certificate which such
Lender has delivered to the Company pursuant to clause (a) of this
Section 2.11 or (B) the amount such Lender has set forth in the
certificate which such Lender has delivered to the Company
pursuant to clause (b) of this Section 2.11; or
(ii) if no Default shall have occurred and be continuing,
require that such Lender assign to the Company's designated
assignee or assignees, in accordance with the terms of Section
8.07, all Advances then owing to such Lender and all rights and
obligations of such Lender hereunder; provided that (A) each such
assignment shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an
assignment of a portion of such rights and obligations made
concurrently with another such assignment or assignments which
together cover all of the rights and obligations of the assigning
Lender under this Agreement, (B) no Lender shall be obligated to
make any such assignment as a result of a demand by the Company
pursuant to this Section 2.11(c) unless and until such Lender
shall have received one or more payments from either the Company
or one or more assignees in an aggregate amount at least equal to
the aggregate outstanding principal amount of the A Advances owing
to such Lender, together with accrued interest thereon to the date
of payment of such principal amount, all Facility Fees and other
fees payable to such Lender and all other amounts payable to such
Lender under this Agreement (including, but not limited to, any
increased costs or other additional amounts (computed in
accordance with this Section 2.11), and any Taxes, incurred by
such Lender prior to the effective date of such assignment and
amounts payable under Section 8.04(a)) and (C) each such
assignment shall be made pursuant to an Assignment and Acceptance;
provided that such assignment shall not be effective if, after
giving effect to such assignment, the aggregate amount of the
Commitments so assigned or terminated under this Section 2.11,
Section 2.12(b) and Section 2.15(g) during the term of this
Agreement would exceed 25% of the aggregate amount of the
Commitments as of the Restatement Date. Upon such payments and
prepayments, the obligations of such Lender hereunder, by the
provisions hereof, shall be released and discharged; provided that
such Lender's rights under Sections 2.11, 2.15 and 8.04(b), and
its obligations under Section 7.05, shall survive such release and
discharge as to matters occurring prior to the date of termination
of such Lender's Commitment.
SECTION 2.12. Illegality.
----------
(a) Notwithstanding any other provision of this Agreement,
if any Lender (any such Lender being referred to herein as an "Affected
--------
Lender") shall notify the Administrative Agent that the introduction of
- ------
or any change in or in the interpretation of any law or regulation makes
it unlawful, or any central bank or other governmental authority asserts
that it is unlawful, for any Lender or its Eurocurrency Lending Office
to perform its obligations hereunder to make Eurocurrency Rate Advances
or Floating Rate Advances in any Currency or to fund or maintain
Eurocurrency Rate Advances or Floating Rate Advances in any Currency
hereunder, the obligation of the Lenders to make, or to Convert A
Advances into, Eurocurrency Rate Advances in such Currency shall be
suspended until the Administrative Agent shall notify the Company and
the Lenders that the circumstances causing such suspension no longer
exist; provided that such suspension shall not become effective in the
event the Company requires the assignment of the Affected Lender's
Advances owing to it and its other rights and obligations hereunder
pursuant to clause (b)(ii) below. The Company's right to require an
assignment in accordance with clause (b)(ii) below shall not be
effective to the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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-30-
extent that Lenders representing a majority of the Commitments then
outstanding shall be "Affected Lenders".
(b) The Company shall, within five days of receiving a
notice from any Affected Lender pursuant to clause (a) of this Section
2.12, elect (and shall notify such Affected Lender and the
Administrative Agent of such election) to:
(i) prepay in full all Eurocurrency Rate Advances or
Floating Rate Advances in such Currency then outstanding, together
with interest thereon, unless the Company, within five Business
Days of notice from the Administrative Agent Converts all
Eurocurrency Rate Advances or Floating Rate Advances of all
Lenders then outstanding into Base Rate Advances in accordance
with Section 2.09; or
(ii) if no Default shall have occurred and be continuing,
require that such Affected Lender assign to the Company's
designated assignee or assignees, in accordance with the terms of
Section 8.07, all Advances then owing to such Affected Lender and
all rights and obligations of such Affected Lender hereunder;
provided that (A) each such assignment shall be either an
assignment of all of the rights and obligations of the assigning
Affected Lender under this Agreement or an assignment of a portion
of such rights and obligations made concurrently with another such
assignment or assignments which together cover all of the rights
and obligations of the assigning Affected Lender under this
Agreement, (B) no Affected Lender shall be obligated to make any
such assignment as a result of a demand by the Company pursuant to
this Section 2.12(b) unless and until such Affected Lender shall
have received one or more payments from either the Borrowers or
one or more assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the A Advances owing to
such Affected Lender, together with accrued interest thereon to
the date of payment of such principal amount, all Facility Fees
and other fees payable to such Affected Lender and all other
amounts payable to such Affected Lender under this Agreement
(including, but not limited to, any increased costs or other
additional amounts (computed in accordance with Section 2.11), and
any Taxes, incurred by such Affected Lender prior to the effective
date of such assignment and amounts payable under Section 8.04(a))
and (C) each such assignment shall be made pursuant to an
Assignment and Acceptance; provided that such assignment shall not
be effective if, after giving effect to such assignment, the
aggregate amount of the Commitments so assigned or terminated
under this Section 2.12(b), Section 2.11 and Section 2.15(g)
during the term of this Agreement would exceed 25% of the
aggregate amount of the Commitments as of the Restatement Date.
Upon such payments and prepayments, the obligations of such
Affected Lender hereunder, by the provisions hereof, shall be
released and discharged; provided that such Affected Lender's
rights under Sections 2.11, 2.15 and 8.04(b), and its obligations
under Section 7.05, shall survive such release and discharge as to
matters occurring prior to the date of termination of such
Affected Lender's Commitment.
SECTION 2.13. Payments and Computations.
-------------------------
(a) The Borrowers shall make each payment hereunder and
under the Notes not later than 12:00 noon (New York City time) on the
day when due in the relevant Currency to the Administrative Agent at the
Administrative Agent's Account for such Currency in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed
like funds relating to the payment of principal or interest or Facility
Fees ratably (other than amounts payable pursuant to Sections 2.03,
2.04(b), 2.05(b), 2.05(c), 2.11, 2.12, 2.15 or 8.04(c)) to the Lenders
for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to any Lender
to such Lender for the account of its Applicable Lending Office, in each
case to be applied in accordance with the terms of this Agreement. Upon
its acceptance of an Assignment and Acceptance and recording of the
information contained therein in the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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Register pursuant to Section 8.07(c) from and after the effective date
specified in such Assignment and Acceptance, the Administrative Agent
shall make all payments hereunder and under the Notes in respect of the
interest assigned thereby to the Lender assignee thereunder, and the
parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date
directly between themselves.
(b) All computations of interest based on the Base Rate
shall be made by the Administrative Agent on the basis of a year of 365
or 366 days, as the case may be, and all computations of interest based
on the Eurocurrency Rate or the Federal Funds Rate and of Facility Fees
shall be made by the Administrative Agent on the basis of a year of 360
days, in each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such
interest or Facility Fees are payable. Each determination by the
Administrative Agent of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of
interest or Facility Fee, as the case may be; provided that, if such
extension would cause payment of interest on or principal of
Eurocurrency Rate Advances or Floating Rate Advances to be made in the
next following calendar month, such payment shall be made on the next
preceding Business Day.
(d) Unless the Administrative Agent shall have received
notice from the Company prior to the date on which any payment is due to
the Lenders hereunder that a Borrower will not make such payment in
full, the Administrative Agent may assume that each Borrower has made
such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent a Borrower shall not
have so made such payment in full to the Administrative Agent, each
Lender shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for
each day from the date such amount is distributed to such Lender until
the date such Lender repays such amount to the Administrative Agent, at
the Federal Funds Rate.
(e) All amounts owing under this Agreement (including
payments required under Section 2.11, and payments required under
Section 8.04(c) relating to any Advance denominated in Dollars, but not
including principal of, and interest on, any Advance denominated in
Euros or payments relating to any such Advance required under
Section 8.04(c), which are payable in Euros) are payable in Dollars.
Notwithstanding the foregoing, if a Borrower shall fail to pay any
principal of any Advance when due (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise), the unpaid portion
of such Advance shall, if such Advance is not denominated in Dollars,
automatically be redenominated in Dollars on the due date thereof (or,
if such due date is a day other than the last day of the Interest Period
therefor, on the last day of such Interest Period) in an amount equal to
the Dollar Equivalent thereof on the date of such redenomination and
such principal shall be payable on demand; and if a Borrower shall fail
to pay any interest on any Advance that is not denominated in Dollars,
such interest shall automatically be redenominated in Dollars on the due
date therefor (or, if such due date is a day other than the last day of
the Interest Period therefor, on the last day of such Interest Period)
in an amount equal to the Dollar Equivalent thereof on the date of such
redenomination and such interest shall be payable on demand.
SECTION 2.14. Notations on the A Notes. Each Borrower and each
------------------------
Lender whose A Advances are evidenced by an A Note agree that (a) all A
Advances made by such Lender to such Borrower pursuant to this Agreement
and all payments made on account of principal thereof shall be recorded
by such Lender and, prior to any assignment by such Lender of the A Note
issued to it, all unpaid A Advances shall
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be endorsed on the grid attached to such A Note; provided that the
failure of such Lender to make any such notations shall not limit or
otherwise affect such Borrower's obligations to such Lender with respect
to such A Advances and (b) upon the payment in full of any Lender's A
Advances then outstanding and the termination in full of such Lender's
Commitment, such Lender shall cancel and return such Lender's A Note to
the Company (on its own behalf and on behalf of the other Borrowers) and
be fully responsible for any claims or liabilities arising in connection
with or resulting from any sale of participations therein.
SECTION 2.15. Taxes.
-----
(a) Any and all payments by the Borrowers hereunder or
under the Notes shall be made, in accordance with Section 2.13, free and
clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender
and the Administrative Agent, taxes imposed on its income, and franchise
taxes imposed on it in lieu of income taxes, by the jurisdiction under
the laws of which such Lender or the Administrative Agent (as the case
may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its income, and franchise taxes
imposed on it in lieu of income taxes, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If any Borrower shall be required by law to deduct any
-----
Taxes from or in respect of any sum payable hereunder or under any Note
to any Lender or the Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 2.15) such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Borrower shall make such
deductions and (iii) such Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Company (on its own behalf and on
behalf of the other Borrowers) agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the
Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as
"Other Taxes").
-----------
(c) The Borrowers will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.15) paid by such
Lender or the Administrative Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom
or with respect thereto. This indemnification shall be made within 30
days from the date such Lender or the Administrative Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes,
the Company (on its own behalf and on behalf of the other Borrowers)
will furnish to the Administrative Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing
payment thereof. In the case of any payment hereunder or under the
Notes by or on behalf of a Borrower through an account or branch outside
the United States or on behalf of a Borrower by a payor that is not a
United States person, if the Company determines that no Taxes are
payable in respect thereof, the Company shall furnish, or shall cause
such payor to furnish, to the Administrative Agent, at such address, an
opinion of counsel acceptable to the Administrative Agent stating that
such payment is exempt from Taxes. For purposes of this subsection (d)
and subsection (e), the terms "United States" and "United States
------------- -------------
person" shall have the meanings specified in Section 7701 of the
- ------
Internal Revenue Code.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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-33-
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement (in the case of each Initial Lender) and on
the date of the Acceptance pursuant to which it becomes a Lender (in the
case of each other Lender), and from time to time thereafter if
requested in writing by the Company (but only so long as such Lender
remains lawfully able to do so), shall provide the Company with Internal
Revenue Service form 1001 or 4224, as appropriate, or any successor or
other form prescribed by the Internal Revenue Service, certifying that
such Lender is exempt from or entitled to a reduced rate of United
States withholding tax on payments of interest pursuant to this
Agreement or the Notes. If the form provided by a Lender at the time
such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from "Taxes" as defined in
Section 2.15(a). If any form or document referred to in this subsection
(e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required by the
versions of Internal Revenue Service Form 1001 or 4224 in effect on the
date hereof, that the Lender reasonably considers to be confidential,
the Lender shall give notice thereof to the Company and shall not be
obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Lender has
failed to provide the Company with the appropriate form described in
Section 2.15(e) (other than if such failure is due to a change in law
occurring subsequent to the date on which a form originally was required
to be provided, or if such form otherwise is not required under the
first sentence of subsection (e) above), such Lender shall not be
entitled to indemnification under Section 2.15(a) with respect to Taxes
imposed by the United States; provided that should a Lender become
subject to Taxes because of its failure to deliver a form required
hereunder, the Company shall take such steps as the Lender shall
reasonably request to assist the Lender to recover such Taxes.
(g) So long as no Default shall have occurred and be
continuing, if a Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any Note to any
Lender or shall be required to indemnify any Lender for any Taxes under
Section 2.15(c) (each such Lender, a "Specified Lender"), the Company
----------------
may, within five days of receiving a notice from any Specified Lender
pursuant to clause (a) of this Section 2.15, elect (and shall notify
such Specified Lender and the Administrative Agent of such election) to
require that such Specified Lender assign to the Company's designated
assignee or assignees, in accordance with the terms of Section 8.07, all
Advances then owing to such Specified Lender and all rights and
obligations of such Specified Lender hereunder; provided that (A) each
such assignment shall be either an assignment of all of the rights and
obligations of the assigning Specified Lender under this Agreement or an
assignment of a portion of such rights and obligations made concurrently
with another such assignment or assignments which together cover all of
the rights and obligations of the assigning Specified Lender under this
Agreement, (B) no Specified Lender shall be obligated to make any such
assignment as a result of a demand by the Company pursuant to this
Section 2.15(g) unless and until such Specified Lender shall have
received one or more payments from either the Borrowers or one or more
assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the A Advances owing to such Specified
Lender, together with accrued interest thereon to the date of payment of
such principal amount, all Facility Fees and other fees payable to such
Specified Lender and all other amounts payable to such Specified Lender
under this Agreement (including, but not limited to, any increased costs
or other additional amounts (computed in accordance with Section 2.11),
and any Taxes, incurred by such Specified Lender prior to the effective
date of such assignment and amounts payable under Section 8.04(a)) and
(C) each such assignment shall be made pursuant to an Assignment and
Acceptance; provided that such assignment shall not be effective if,
after giving effect to such assignment, the aggregate amount of the
Commitments so assigned or terminated under this Section 2.15(g),
Section 2.11 and Section 2.12 during the term of this Agreement would
exceed 25% of the aggregate amount of the Commitments as of the
Restatement Date. Upon such payments and prepayments, the obligations
of such Specified Lender hereunder, by the provisions hereof, shall be
released and discharged; provided that such
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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<PAGE>
-34-
Specified Lender's rights under Sections 2.11, 2.12, 2.15 and 8.04(b),
and its obligations under Section 7.05, shall survive such release and
discharge as to matters occurring prior to the date of termination of
such Specified Lender's Commitment.
SECTION 2.16. Sharing of Payments, Etc. If any Lender
-------------------------
shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of the A
Advances owing to it (other than pursuant to Sections 2.05(b), 2.05(c),
2.11, 2.12, 2.15 or 8.04(c)) in excess of its ratable share of payments
on account of the A Advances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participation in
the A Advances owing to them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and each such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with
an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. Each Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to
this Section 2.16 may, to the fullest extent permitted by law, exercise
all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.17. Borrowings by Designated Borrowers.
----------------------------------
(a) The Company may, at any time or from time to time,
designate one or more wholly owned Subsidiaries of the Company as
"Borrowers" hereunder by furnishing to the Administrative Agent a
letter (a "Designation Letter") in duplicate, in substantially
------------------
the form of Exhibit F-1, duly completed and executed by the
Company and such Subsidiary. Upon any such designation of a
Subsidiary, such Subsidiary shall be a Designated Borrower and a
Designated Borrower entitled to borrow A Advances and B Advances
on and subject to the terms and conditions of this Agreement.
(b) So long as all principal of and interest on all
Advances made to any Designated Borrower have been paid in full,
the Company may terminate the status of such Designated Borrower
as a Designated Borrower hereunder by furnishing to the
Administrative Agent a letter (a "Termination Letter") in
------------------
substantially the form of Exhibit F-2, duly completed and executed
by the Company. Any Termination Letter furnished hereunder shall
be effective upon receipt by the Administrative Agent, which shall
promptly notify the Lenders, whereupon the Lenders shall promptly
deliver to the Company (through the Administrative Agent) the
Notes, if any, of such former Designated Borrower. Notwithstanding
the foregoing, the delivery of a Termination Letter with respect to
any Designated Borrower shall not terminate (i) any obligation of
such Designated Borrower that remains unpaid at the time of such
delivery (including without limitation any obligation arising
thereafter in respect of such Designated Borrower under Section 2.15
or 2.11) or (ii) the obligations of the Company under Article IX
with respect to any such unpaid obligations.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-35-
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Amendment and
-------------------------------------
Restatement. The Existing Credit Agreement shall be amended and
- -----------
restated to read in full as set forth herein on the date (the
"Restatement Date") on which the Administrative Agent shall have
----------------
received the following, each (unless otherwise specified below) dated
the Restatement Date, in form and substance satisfactory to the
Administrative Agent (and, to the extent specified below, each Lender)
and (except for the Notes) in sufficient copies for each Lender:
(a) Charter Documents, Etc.
-----------------------
(1) Certified copies of (x) the charter and by-laws
of the Company, (y) the resolutions of the Board of
Directors of the Company authorizing and approving this
Agreement and the Notes, and (z) all documents evidencing
other necessary corporate action and governmental approvals,
if any, with respect to this Agreement and the Notes.
(2) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign
this Agreement and the Notes and the other documents to be
delivered hereunder.
(3) A certificate from the Secretary of State of the
State of Delaware dated a date reasonably close to the
Restatement Date as to the good standing of and charter
documents filed by the Company.
(b) Opinions.
--------
(1) A favorable opinion of the General Counsel of the
Company, substantially in the form of Exhibit D.
(2) A favorable opinion of Milbank, Tweed, Hadley &
McCloy LLP, special New York counsel for the Administrative
Agent, substantially in the form of Exhibit E.
(c) Solvency. A certificate of a senior financial officer
--------
of the Company to the effect that the Company (both individually
and collectively with its Consolidated Subsidiaries) is Solvent.
(d) Representations, Etc. A certificate signed by a duly
---------------------
authorized officer of the Company stating that:
(1) the representations and warranties contained in
Section 4.01 are correct on and as of the Restatement
Date, and
(2) no event has occurred and is continuing that
constitutes a Default.
(e) Other. Such other approvals, opinions and documents
-----
relating to material ERISA and, environmental matters as the
Administrative Agent or any Lender may, through the Administrative
Agent, reasonably request.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
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SECTION 3.02. Conditions Precedent to Each A Borrowing.
----------------------------------------
The obligation of each Lender to make an A Advance on the occasion of
each A Borrowing shall be subject to the conditions precedent that the
Restatement Date shall have occurred and on the date of such A
Borrowing:
(a) the following statements shall be true (and each of the
giving of the applicable Notice of A Borrowing and the acceptance
by the relevant Borrower of the proceeds of such A Borrowing shall
constitute a representation and warranty by the Company that on
the date of such A Borrowing such statements are true):
(i) the representations and warranties contained in
Section 4.01 (except the Excluded Representations) are
correct on and as of the date of such A Borrowing, before
and after giving effect to such A Borrowing and to the
application of the proceeds therefrom, as though made on and
as of such date; and
(ii) no event has occurred and is continuing, or
would result from such A Borrowing or from the application
of the proceeds therefrom, that constitutes a Default;
(b) the Administrative Agent shall have received such other
approvals, opinions or documents as any Lender through the
Administrative Agent may reasonably request; and
(c) in the case of the first Borrowing by a Designated
Borrower, such Borrower shall have furnished to the Administrative
Agent such corporate documents, resolutions and legal opinions
relating to such Designated Borrower as the Administrative Agent
may reasonably require.
SECTION 3.03. Conditions Precedent to Each B Borrowing.
----------------------------------------
The obligation of each Lender that is to make a B Advance on the
occasion of each B Borrowing to make such B Advance as part of such B
Borrowing is subject to the conditions precedent that the Restatement
Date shall have occurred and (a) the Administrative Agent shall have
received the Notice of B Borrowing with respect thereto, (b) if (and
only if) requested by such Lender, on or before the date of such B
Borrowing, but prior to such B Borrowing, the Administrative Agent shall
have received a B Note payable to the order of such Lender for each of
the one or more B Advances to be made by such Lender as part of such B
Borrowing, in a principal amount equal to the principal amount of the B
Advance to be evidenced thereby and otherwise on such terms as were
agreed to for such B Advance in accordance with Section 2.03, and (c) on
the date of such B Borrowing the following statements shall be true (and
each of the giving of the applicable Notice of B Borrowing and the
acceptance by the relevant Borrower of the proceeds of such B Borrowing
shall constitute a representation and warranty by the Company that on
the date of such B Borrowing such statements are true):
(i) the representations and warranties contained in Section
4.01 (except the Excluded Representations) are correct on and as
of the date of such B Borrowing, before and after giving effect to
such B Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would
result from such B Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
SECTION 3.04. Determinations Under Section 3.01. For
---------------------------------
purposes of determining compliance with the conditions specified in
Section 3.01, each Lender shall be deemed to have consented to, approved
or accepted or to be satisfied with each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lenders unless an officer of the Administrative
Agent responsible for the transactions contemplated by this Agreement
shall have received
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-37-
notice from such Lender prior to the Restatement Date (as notified by
the Company or the Administrative Agent to the Lenders) specifying its
objection thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
-------------------------------------
Company. The Company represents and warrants as follows:
- -------
(a) Incorporation; Good Standing. The Company is a
----------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) Corporate Authority; No Breach. The execution,
------------------------------
delivery and performance by the Company of this Agreement and the
Notes, and the other transactions contemplated hereby, are within
the Company's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the
Company's charter or bylaws or (ii) law or any contractual
restriction binding on or affecting the Company.
(c) No Consents or Approvals. No authorization or approval
------------------------
or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party
is required for the due execution, delivery and performance by the
Company of this Agreement or the Notes, other than those
authorizations, approvals, notices, filings and actions that have
been obtained, filed or taken on or before the Restatement Date by
the Company. No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body or any other third party is required for the
transactions contemplated thereby, except for the authorizations,
approvals, actions, notices and filings (i) the failure to obtain
would not have a Material Adverse Effect or (ii) which have been
(or, prior to the Restatement Date, will be) duly obtained, taken,
given or made and are in full force and effect.
(d) Enforceable Obligations, Etc. This Agreement has been
-----------------------------
and each of the Notes when delivered hereunder will have been,
duly executed and delivered by the Company. This Agreement is,
and each of the Notes when delivered hereunder will be, the legal,
valid and binding obligation of the Company enforceable against
the Company in accordance with their respective terms.
(e) Financial Statements, Etc.
--------------------------
(i) The statement of financial position of the Company as
at December 31, 1998 and the related statements of income and cash
flows of the Company for the twelve months then ended, accompanied
by an opinion of Deloitte & Touche LLP, independent public
accountants, and the balance sheet of the Company as at June 30,
1999 and the related statements of income and cash flows of the
Company for the six months then ended, copies of which have been
made available to each Lender, present fairly, in all material
respects (subject, in the case of said balance sheet as at June
30, 1999, and said statements of income and cash flows for the six
months then ended, to year-end audit adjustments) the financial
condition of the Company as at such dates and the results of the
operations of the Company for the periods ended on such dates, all
in accordance with generally accepted accounting principles
applied on a consistent basis.
(ii) Since December 31, 1998, there has been no material
adverse change in the financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-38-
(f) No Litigation, Etc. Except as described in the
-------------------
Company's Report on Form 10-K for the fiscal year ended December
31, 1998 or in the Company's Report on Form 10-Q for the fiscal
quarter ended September 30, 1999, there is no pending or, to the
best of the Company's knowledge, threatened action or proceeding
affecting the Company or any of its Consolidated Subsidiaries
before any court, or governmental agency or arbitrator which (i)
would have a Material Adverse Effect or (ii) purports to affect,
or would affect, the legality, validity or enforceability of this
Agreement or any Note.
(g) ERISA. No ERISA Event that would have a Material
-----
Adverse Effect has occurred or is reasonably expected to occur
with respect to any Plan. As of the Restatement Date, neither the
Company nor any ERISA Affiliate participates in any Multiple
Employer Plan or in any Multiemployer Plan with respect to which
the Company or any ERISA Affiliate has any Withdrawal Liability or
other liability (other than the ordinary liability of a sponsor
for contributions to or benefits under such Plan) that, in either
case, would have a Material Adverse Effect.
(h) Environmental Laws. The Company (i) is in substantial
------------------
compliance with any and all applicable Environmental Laws, (ii)
has (to the best of its knowledge) received, applied for or been
assigned all required Environmental Permits and (iii) is in
substantial compliance with all terms and conditions of any such
Environmental Permits, except where any such noncompliance with
Environmental Laws, failure to receive, apply for or be assigned
an Environmental Permit, or failure to comply with the terms and
conditions of an Environmental Permit, would not have a Material
Adverse Effect.
(i) Investment Company; Public Utility. Neither the
----------------------------------
Company nor any of its Material Subsidiaries is an "investment
company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as
amended. Neither the Company nor any of its Material Subsidiaries
is a "holding company", or an "affiliate" of a "holding company"
or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
(j) Accuracy of Information.
-----------------------
(i) All written information, reports, financial statements,
exhibits and schedules (except as to assumptions, statements,
estimates and projections with respect to anticipated future
performance or events) concerning the operations, business,
financial condition, properties and prospects of the Company and
its Subsidiaries ("Information") furnished by or on behalf of
-----------
the Company to the Administrative Agent, the Syndication Agent or
any Lender on or prior to the Restatement Date in connection with
the negotiation, preparation or delivery of this Agreement or
included herein or delivered pursuant to Article III, when taken
as a whole, as of the date of such Information, does not contain
any untrue statement of material fact or, to the best of the
Company's knowledge, omit to state any material fact necessary to
make the statements therein, in light of the circumstances in
which they were made, not misleading.
(ii) All Post-Restatement Date Information furnished by or
on behalf of the Company to the Administrative Agent or any Lender
after the Restatement Date, when taken as a whole, as of the date
of such Post-Restatement Date Information, will not contain any
untrue statement of material fact or, to the best of the Company's
knowledge, omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading.
(iii) Financial projections and pro forma adjustments
contained in the Information may be based on estimates and
assumptions about circumstances and events that have not taken
place at the
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-39-
time of delivery thereof; although such information reflects the
Company's good faith projections and estimates as of the date
thereof, based upon methods and data the Company believes to be
reasonable and accurate, actual results during the period covered
by such projections and pro forma adjustments may differ
materially from the projections and pro forma adjustments.
(iv) For purposes of this Section 4.01(j), "Post-
-----
Restatement Date Information" means:
----------------------------
(x) all Information furnished by the Company and its
Subsidiaries after the date hereof under Sections 5.01(i)(i)
through (vii), inclusive; and
(y) all Information furnished by the Company and its
Subsidiaries after the date hereof under Section 5.01(i)(viii),
provided that the request for such information is made in
writing and delivered to the Company, at the address specified
in Section 8.02, to the attention of the Company's Treasurer
and stating that such request is being made in connection
with this Agreement.
(k) Margin Stock. The Company is not principally engaged
------------
in the business of extending credit for the purpose of purchasing
or carrying Margin Stock, and no proceeds of any Advance will be
used for any purpose which violates the provisions of the
regulations of the Board of Governors of the Federal Reserve
System. After applying the proceeds of each Advance, not more
than 25% of the value of the assets of the Company and the
Company's Subsidiaries (as determined in good faith by the
Company) that are subject to Section 5.02(a) will consist of or be
represented by Margin Stock. If requested by any Lender or the
Administrative Agent, the Company will furnish to the
Administrative Agent and each Lender a statement in conformity
with the requirements of Federal Reserve Form U-1 referred to in
Regulation U, the statements made in which shall be such, in the
opinion of each Lender, as to permit the transactions contemplated
hereby in accordance with Regulation U.
SECTION 4.02. Representation and Warranty of the Lenders.
------------------------------------------
Each Lender represents and warrants that in good faith it has not
relied, and will not rely, upon any Margin Stock as collateral in the
making and maintaining of its Advances hereunder.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. So long as any
---------------------
Advance shall remain unpaid or any Lender shall have any Commitment
hereunder, the Company will:
(a) Preservation of Corporate Existence, Etc. Do or cause
-----------------------------------------
to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights (charter and statutory)
and franchises, provided that the Company shall not be required to
preserve any such right or franchise if it shall determine that
the preservation thereof is no longer desirable in the conduct of
its business. Cause each Material Subsidiary of the Company to do
or cause to be done all things necessary to preserve and keep in
full force and effect the corporate existence, rights (charter and
statutory) and franchises of such Material Subsidiary, except in
each case if the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
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(b) Compliance with Laws, Etc. Comply, and cause each of
--------------------------
its Consolidated Subsidiaries to comply, in all material respects,
with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, compliance with ERISA
and all applicable Environmental Laws, except such noncompliance
as would not have a Material Adverse Effect.
(c) Payment of Taxes. Duly pay and discharge, and cause
----------------
each of its Consolidated Subsidiaries to pay and discharge, all
taxes, assessments and governmental charges whatsoever and by
whomsoever imposed upon it or against its properties prior to the
date on which penalties are attached thereto, unless and to the
extent only that the same (i) shall be contested in good faith and
by appropriate proceedings by the Company or (ii) are not of
material importance to the business, financial condition or
operating results of the Company and its Consolidated
Subsidiaries.
(d) Payment of Material Obligations, Etc. Pay, and cause
-------------------------------------
each of its Material Subsidiaries to pay, all obligations under
Material Contracts. Perform, and cause each of its Material
Subsidiaries to perform, each other obligation (other than
obligations that the Company determines, in good faith and upon
the advice of its counsel, not to be binding on it) of the Company
or such Material Subsidiary, as the case may be, under the
Material Contracts except where the failure to do so would not
(either individually or in the aggregate) have a Material Adverse
Effect.
(e) Visitation. Permit, and cause each of its Material
----------
Subsidiaries to permit, the Administrative Agent or any of the
Lenders or any agents or representatives thereof (at any
reasonable time and as may be reasonably requested from time to
time and, so long as no Default shall have occurred and is
continuing, upon reasonable advance notice):
(i) to visit the properties of the Company and any of
its Material Subsidiaries in the presence of an appropriate
officer or representative of the Company;
(ii) if any Default shall have occurred and then be
continuing, to examine and make copies of and abstracts from
the records and books of account of the Company and any of
its Material Subsidiaries (other than trade secrets and
information and materials subject to confidentiality
agreements with third parties) in the presence of an
appropriate officer or representative of the Company); and
(iii) to discuss the affairs, finances and accounts
of the Company and any of its Material Subsidiaries with any
of their officers or directors and with their independent
certified public accountants.
(f) Keeping of Books. Keep, and cause each of its
----------------
Consolidated Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Company
and each such Consolidated Subsidiary in accordance with generally
accepted accounting standards in effect from time to time.
(g) Properties. Cause all Principal Properties to be
----------
maintained and kept in good condition, repair and working order,
and cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto, in each case
as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times, provided that nothing in
this paragraph (g) shall prevent the Company or any of its
Subsidiaries from discontinuing the operation and maintenance of
any such Principal Properties or from omitting to make any
repairs, renewals, replacements, betterments or improvements if
such discontinuance or omission is, in the judgment of the
Company, desirable in the conduct of the business of the Company
and its Subsidiaries taken as a whole.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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(h) Maintenance of Insurance. From and after the
------------------------
Restatement Date, maintain insurance, and cause each of its
Consolidated Subsidiaries to maintain insurance, with financially
sound and reputable insurers, with respect to such of its
properties, against such risks, casualties and contingencies and
in such types and amounts as are consistent with sound business
practice, it being understood that this paragraph (h) shall not
prevent the use of deductible or excess loss insurance and shall
not prevent (i) the Company or any of its Subsidiaries from acting
as a self-insurer or maintaining insurance with another Subsidiary
or Subsidiaries of the Company so long as such action is
consistent with sound business practice or (ii) the Company from
obtaining and owning insurance policies covering activities of its
Consolidated Subsidiaries.
(i) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of
each fiscal year of the Company, Consolidated balance sheets
of the Company and its Subsidiaries as of the end of such
quarter and Consolidated statements of income and cash flows
of the Company and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to
year-end audit adjustments) by the Controller, Assistant
Controller or other authorized financial officer of the
Company as having been prepared in accordance with GAAP,
together with (A) a certificate of said officer stating that
no Default has occurred and is continuing or, if a Default
has occurred and is continuing, a statement as to the nature
thereof, and (B) a schedule in form and substance
satisfactory to the Administrative Agent of the computations
used by the Company in determining compliance with the
covenants contained in Section 5.03;
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a
copy of the annual audit report for such year for the
Company and its Subsidiaries, containing Consolidated
balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year and Consolidated statements of
income, shareowners' equity and cash flows of the Company
and its Subsidiaries for such fiscal year, in each case
accompanied by an opinion acceptable to the Majority Lenders
by Deloitte & Touche LLP or other independent public
accountants of recognized national standing, together with
(a) a certificate of the Controller, Assistant Controller or
other authorized financial officer of the Company stating
that no Default has occurred and is continuing or, if a
Default has occurred and is continuing, a statement as to
the nature thereof, and (B) a schedule in form and substance
satisfactory to the Administrative Agent of the computations
used by the Company in determining compliance with the
covenants contained in Section 5.03;
(iii) as soon as possible and in any event within
five Business Days after the determination by the Company
that a Default has occurred and is continuing on the date of
such statement, a statement of either the Chief Financial
Officer, Treasurer, Controller, Assistant Controller or
other authorized financial officer of the Company setting
forth details of such Default and the action that the
Company has taken and proposes to take with respect thereto;
(iv) promptly and in any event within 30 days after
the Company knows or has reason to know that any ERISA Event
that would have a Material Adverse Effect has occurred, a
statement of an authorized financial officer of the Company
describing such
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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ERISA Event and the action, if any, that the Company or
such ERISA Affiliate has taken and proposes to take with
respect thereto;
(v) promptly and in any event within ten Business
Days after receipt thereof by the Company or any of its
ERISA Affiliates, copies of each notice from the PBGC
stating its intention to terminate any Plan or to have a
trustee appointed to administer any such Plan;
(vi) promptly and in any event within 45 days after
the receipt thereof by the Company or any of its ERISA
Affiliates, a copy of the latest annual actuarial report for
each Plan if the ratio of the fair market value of the
assets of such Plan to its current liability (as defined in
Section 412 of the Internal Revenue Code) is less than 80%;
(vii) as soon as possible and in any event within
five days after the determination by the Company that a
Change of Control has occurred, the Company shall deliver to
the Administrative Agent (which shall forward a copy thereof
to each Lender promptly) notice thereof, together with such
other information as the Administrative Agent or any Lender
(through the Administrative Agent) may reasonably request;
and
(viii) such other information (excluding trade
secrets) respecting the financial condition and operations
of the Company and its Subsidiaries as the Administrative
Agent or any Lender may from time to time reasonably request
(which information shall constitute "Post-Restatement Date
Information" only to the extent provided in Section
4.01(j)).
(j) Use of Proceeds. Use the proceeds of the Advances
---------------
hereunder solely to finance the working capital needs and other
general corporate purposes of the Borrowers (including to support
the commercial paper programs of the respective Borrowers, to
finance acquisitions, treasury stock purchases and capital
investments), in each case in compliance with all applicable legal
and regulatory requirements; provided that neither the
Administrative Agent nor any Lender shall have any responsibility
as to the use of any such proceeds.
SECTION 5.02. Negative Covenants. So long as any Advance
------------------
shall remain unpaid or any Lender shall have any Commitment hereunder,
the Company will not:
(a) Liens, Etc. Create or suffer to exist, or permit any
-----------
of its Consolidated Subsidiaries to create or suffer to exist, any Lien
on or with respect to any of its properties (other than, in the case of
the Company, the Company's treasury stock), whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income in order to secure Debt, other than:
(i) (A) Liens for taxes, assessments, governmental charges
or levies or other amounts owed to governmental entities other
than for borrowed money; (B) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's
Liens and other similar Liens arising in the ordinary course of
business securing obligations that are not overdue for a period of
more than 30 days or that are being contested in good faith;
(C) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations; (D) easements, rights of way and other
encumbrances on title to real property that do not render title to
the property encumbered thereby unmarketable or materially
adversely affect the use of such property for its present
purposes; and (E) Liens in favor of a landlord arising in the
ordinary course of business,
(ii) purchase money Liens upon or in any property, assets
or stock acquired or held by the Company or any Subsidiary in the
ordinary course of business to secure the purchase price or
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
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-43-
construction cost of such property or to secure Debt incurred
solely for the purpose of financing the acquisition or
construction of such property whether incurred prior or subsequent
to such acquisition or construction, or Liens existing on such
property at the time of its acquisition (other than any such Lien
created in contemplation of such acquisition) or extensions,
renewals or replacements of any of the foregoing for the same or a
lesser amount, provided that no such Lien shall extend to or cover
any property other than the property being acquired, and no such
extension, renewal or replacement shall extend to or cover any
property not theretofore subject to the Lien being extended,
renewed or replaced,
(iii) Liens securing Debt, judgments and ERISA claims
existing on the date hereof and identified on Schedule 1, and
other Liens existing on the date hereof,
(iv) other Liens or assignments in an aggregate principal
amount at any time outstanding not to exceed 10% of Consolidated
Net Tangible Assets,
(v) the replacement, extension or renewal of any Lien
permitted by clauses (ii) and (iii) above upon or in the same
property theretofore subject thereto or the replacement, extension
or renewal (without increase in the amount or change in any direct
or contingent obligor) of the amount secured thereby, and
(vi) intercompany Liens.
(b) Mergers, Etc. Merge or consolidate with or into (or
-------------
permit any of its Material Subsidiaries to merge or consolidate with or
into), or convey, transfer, lease or otherwise dispose of (or permit any
of its Material Subsidiaries to convey, transfer, lease or otherwise
dispose of), whether in one transaction or in a series of related
transactions, all or substantially all of the assets (whether now owned
or hereafter acquired) of the Company or such Material Subsidiary to,
any Person, except that:
(i) any Material Subsidiary of the Company may merge or
consolidate with or into (or convey, transfer, lease or otherwise
dispose of any or all the assets of such Material Subsidiary to)
the Company or any wholly owned Material Subsidiary of the
Company; provided that the Company or a wholly owned Material
Subsidiary is the survivor of any such merger or consolidation;
and
(ii) the Company may merge or consolidate with or into any
other Person so long as (x) immediately after giving effect to
such transaction, no Default would exist and (y) the Company is
the surviving corporation.
(c) Accounting Changes. Make or permit, or permit any of
------------------
its Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally
accepted accounting principles.
(d) Change in Nature of Business. Change the nature of
----------------------------
the business of the Company and its Subsidiaries, taken as a whole, such
that such business differs materially from the lines of business engaged
in on the Restatement Date and lines of business related thereto;
provided that the foregoing shall not prohibit the Company and its
Subsidiaries from engaging in other lines of business (or investing in
joint ventures engaged in other lines of business) so long as the
aggregate book value of assets of the Company and its Subsidiaries
directly relating to such other lines of business does not exceed 20% of
the aggregate book value of the Consolidated assets of the Company and
its Consolidated Subsidiaries as at the last day of the fiscal quarter
most recently ended prior to the date of determination.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
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(e) Margin Stock. Permit more than 25%, after the making
------------
of each Advance and giving effect to the use of the proceeds thereof, of
the value of the assets of the Company and its Subsidiaries (as
determined in good faith by the Company) that are subject to
Section 5.02(a) to consist of or be represented by Margin Stock.
(f) Transactions with Affiliates. Other than the
----------------------------
transactions with Specified Joint Ventures, enter into, or permit any of
its Subsidiaries to enter into, any transaction with an Affiliate of the
Company (other than the Company's Subsidiaries) that would be material
in relation to the Company and its Subsidiaries, taken as a whole, even
if otherwise permitted under this Agreement, except on terms determined
by the Company to be fair and reasonable to the Company and its
Subsidiaries and in the best interests of the Company (considered as a
whole in conjunction with all other existing arrangements and
relationships with such Affiliate).
SECTION 5.03. Financial Covenants. So long as any
-------------------
Advance shall remain unpaid or any Lender shall have any Commitment
hereunder, the Company shall not:
(a) Debt to Adjusted EBITDA. Permit the Debt to Adjusted
-----------------------
EBITDA Ratio at any time to exceed 3.50 to 1.00.
(b) Interest Coverage Ratio. Permit the Interest Coverage
-----------------------
Ratio at any time to be less than 4.50 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
-----------------
events ("Events of Default") shall occur and be continuing:
-----------------
(a) Any Borrower shall fail to pay any principal of any
Advance owing by such Borrower when the same becomes due and
payable; or any Borrower shall fail to pay any interest on any
Advance owing by such Borrower or make any other payment under
this Agreement or any Note within five Business Days after the
same becomes due and payable; or
(b) Any representation or warranty made or deemed to have
been made by the Company herein or in connection with this
Agreement shall prove to have been incorrect in any material
respect when made; or
(c) (i) The Company shall fail to perform or observe any
term, covenant or agreement contained in Sections 5.01(a),
5.01(i)(iii), 5.01(j), 5.02 or 5.03; or (ii) the Company shall
fail to perform or observe any other term, covenant or agreement
contained in this Agreement on its part to be performed or
observed if such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to the Company by the
Administrative Agent or any Lender (other than any failure by the
Company to comply with the terms of Section 5.01(i)(iv), (v) or
(vi)); or
(d) the Company or any of its Material Subsidiaries shall
fail to pay any principal of, premium or interest on or any other
amount payable in respect of any Debt that is outstanding in a
principal or notional amount of at least the Threshold Amount (or
such lower amount as provided for in the proviso to this clause
(d)) in the aggregate (but excluding Debt outstanding hereunder)
of the Company or such Material Subsidiary (as the case may be),
when the same becomes due and payable
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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<PAGE>
-45-
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the applicable
agreement; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration
of, the maturity of such Debt or otherwise to cause, or to permit
the holder or holders (or an agent or trustee on its or their
behalf) thereof to cause, such Debt to mature; or any such Debt
shall be declared to be due and payable or required to be prepaid
or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Debt shall be required to
be made, in each case prior to the stated maturity thereof;
provided that if the Company in any agreement or instrument
relating to any such Debt, shall have agreed to, or shall agree
to, a lesser threshold of the kind specified this clause (d) with
respect to itself or any of its Material Subsidiaries, then, in
such event, the amount provided for above shall be reduced to such
lesser amount(s) with respect to such entity; or
(e) Any judgment or order for the payment of money in
excess of the Threshold Amount shall be rendered against the
Company or any of its Material Subsidiaries and not timely
satisfied or discharged, and either (i) proceedings to attach or
levy upon any assets of the Company or such Material Subsidiary
shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
or
(f) The Company or any of its Material Subsidiaries shall
generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Company or
any of its Material Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a
period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its
property) shall occur; or the Company or any of its Material
Subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this subsection (e);
(g) Any ERISA Event that would result in a Lien in an
amount in excess of $30,000,000 on the properties or assets of the
Company or any of its Subsidiaries shall have occurred and shall
not have been remedied within 90 days;
then, and in any such event, the Administrative Agent (i) shall at the
request, or may with the consent, of the Majority Lenders, by notice to
the Company (on its own behalf and on behalf of the other Borrowers),
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the
request, or may with the consent, of the Majority Lenders, by notice to
the Company, declare the Advances, the Notes, all interest thereon and
all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Advances, the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company and the other Borrowers;
provided that in the event of an actual or deemed entry of an order for
relief with respect to the Company under the Federal Bankruptcy Code,
(A) the obligation of each Lender to make Advances shall
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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-46-
automatically be terminated and (B) the Advances, the Notes, all such
interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Company and the other
Borrowers.
Notwithstanding anything to the contrary set forth in this
Agreement, in the event of an entry of an order for relief with respect
to a Designated Borrower under the Federal Bankruptcy Code (or under any
analogous law applicable to such Designated Borrower, if such Designated
Borrower is not organized under the laws of the United States or any
state thereof), (A) the obligation of each Lender to make Advances to
such Designated Borrower shall automatically be terminated, (B) on the
date that is three Business Days after the Company becomes aware of the
entry of such order for relief, the Advances, the Notes, all interest
and all other amounts owing by such Designated Borrower shall
automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company and such Designated Borrower and (C)
such Designated Borrower shall cease to be a Designated Borrower
hereunder.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Each Lender
------------------------
hereby appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Administrative Agent by the
terms hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection
of the Notes), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act
or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders and all holders
of Notes; provided that the Administrative Agent shall not be required
to take any action that exposes the Administrative Agent to personal
liability or that is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Lender prompt notice of each
notice given to it by the Company pursuant to the terms of this
Agreement.
SECTION 7.02. Administrative Agent's Reliance, Etc.
-------------------------------------
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the
Administrative Agent: (i) may treat the payee of any Note as the holder
thereof until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee
of such Note, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 8.07; (ii) may consult with legal counsel (including
counsel for the Company), independent public accountants and other
experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender
for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (iv) shall not have
any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement on the
part of the Borrowers or to inspect the property (including the books
and records) of the Borrowers; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of
any lien or security interest created or purported to be created under
or in connection with, this Agreement or any other instrument or
document furnished pursuant hereto; and (vi) shall incur no liability
under or in respect of this Agreement by acting upon any notice,
consent,
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
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-47-
certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to
-----------------------
its Commitment, the Advances made by it and the Notes issued to it,
Citibank shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though it were not the
Administrative Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include Citibank in its individual
capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the
Company, any of its Subsidiaries and any Person who may do business with
or own securities of the Company or any such Subsidiary, all as if
Citibank were not the Administrative Agent and without any duty to
account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
----------------------
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. The Lenders agree to
---------------
indemnify the Administrative Agent and the Syndication Agent (each, an
"Agent") (in each case to the extent not reimbursed by the Company),
-----
ratably according to the respective principal amounts of the Notes then
held by each of them (or if no Notes are at the time outstanding or if
any Notes are held by Persons that are not Lenders, ratably according to
the respective amounts of their Commitments), from and against any and
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against such
Agent in any way relating to or arising out of this Agreement or any
action taken or omitted by such Agent under this Agreement, provided
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross
negligence or willful misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Administrative Agent promptly upon
demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the
Administrative Agent is not reimbursed for such expenses by the Company.
SECTION 7.06. Successor Administrative Agent. The
------------------------------
Administrative Agent may resign at any time by giving five Business
Days' written notice thereof to the Lenders and the Company and may be
removed at any time with or without cause (i) by the Majority Lenders
with the Company's approval, which approval shall not unreasonably be
withheld, or (ii) by the Company, subject to the approval of the
Majority Lenders, which approval shall not unreasonably be withheld.
Upon any such resignation or removal, the Company shall have the right
to appoint a successor Administrative Agent, subject to the Majority
Lenders' approval, which approval shall not be unreasonably withheld;
provided that upon and during the continuance of an Event of Default,
the Majority Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's
giving of notice of resignation or the Majority Lenders' removal of the
retiring Administrative Agent, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank organized or licensed under the laws of
the United States of America or of any State
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this
Agreement. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 7.07. The Syndication Agent. Except as expressly
---------------------
provided herein, the Syndication Agent shall not have any right, power,
obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the
foregoing, the Syndication Agent shall not have or be deemed to have any
fiduciary relationship with any other Lender in connection herewith.
Each Lender acknowledges that it has not relied, and will not rely, on
the Syndication Agent in deciding to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver
----------------
of any provision of this Agreement or the Notes, nor consent to any
departure by the Company therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Majority Lenders,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided that:
(a) no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following:
(1) waive any of the conditions specified in Section
3.01 or 3.02;
(2) increase the Commitments of the Lenders or
subject the Lenders to any additional obligations (other
than as permitted by Sections 2.05(b) and 2.05(c) to the
extent any Lender consents thereunder);
(3) reduce the principal of, or interest on, the A
Notes or any fees or other amounts payable hereunder;
(4) postpone any date fixed for any payment of
principal of, or interest on, the A Notes or any fees or
other amounts payable hereunder (excluding any amounts
payable in connection with the B Notes);
(5) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the A Notes, or the
number of Lenders, that shall be required for the Lenders or
any of them to take any action hereunder;
(6) amend this Section 8.01; or
(7) release the Company from any of its obligations
under Article IX;
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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(b) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the
Lenders required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement or any
Note;
(c) no amendment, waiver or consent shall, unless in
writing and signed by the Syndication Agent in addition to the
Lenders required above to take such action, affect the rights or
duties of the Syndication Agent under this Agreement or any Note;
and
(d) this Section 8.01 shall not apply to changes in
Commitments pursuant to Section 2.05, 2.11 or any other Section of
this Agreement.
SECTION 8.02. Notices, Etc. All notices and other
-------------
communications provided for hereunder shall be in writing (including
telecopier) and mailed, telecopied or delivered by hand:
(a) If to the Company or any other Borrower:
Solutia Inc.
575 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: Treasurer
Telephone No.: (314) 674-8250
Telecopier No.: (314) 674-6755
(b) If to the Administrative Agent:
Citibank, N.A.
2 Penns Way
New Castle Delaware, 19720
Attention: Anne Hieronimus
Telephone No.: (302) 894-6034
Telecopier No.: (302) 894-6120
(c) If to any Lender, at the Domestic Lending Office
specified in the Administrative Questionnaire of such Lender,
or, as to the Company (or any other Borrower) or the Administrative
Agent, at such other address as shall be designated by such party in a
written notice to the other parties and, as to each other party, at such
other address as shall be designated by such party in a written notice
to the Company and the Administrative Agent. All such notices and
communications shall be deemed to have been duly given or made (i) in
the case of hand deliveries, when delivered by hand, (ii) in the case of
mailed notices, when received, and (iii) in the case of telecopier
notice, when transmitted and confirmed during normal business hours (or,
if delivered after the close of normal business hours, at the beginning
of business hours on the next Business Day), except that notices and
communications to the Administrative Agent pursuant to Article II or VII
shall not be effective until received by the Administrative Agent.
SECTION 8.03. No Waiver, Remedies. No failure on the
-------------------
part of any Lender or the Administrative Agent to exercise, and no delay
in exercising, any right hereunder or under any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any such
right preclude any other or
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further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.04. Costs and Expenses.
------------------
(a) The Company agrees to pay on demand all out-of-pocket
costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent with respect thereto and with
respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement. The Company further agrees to
pay on demand all costs and expenses of the Administrative Agent and the
Lenders, if any (including, without limitation, reasonable counsel fees
and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the
Notes and the other documents to be delivered hereunder, including,
without limitation, reasonable fees and expenses of counsel for the
Administrative Agent and each Lender in connection with the enforcement
of rights under this Section 8.04(a).
(b) The Company agrees to indemnify and hold harmless the
Administrative Agent, the Syndication Agent and each Lender and each of
their Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all
-----------------
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in
each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation,
litigation or proceeding arising out of, related to or in connection
with the actual or proposed use of the proceeds of the Advances, in each
case whether or not such investigation, litigation or proceeding is
brought by the Company, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent such claim,
damage, loss, liability or expense is found by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct.
(c) If any payment of principal of, or Conversion of, any
Eurocurrency Rate Advance is made by any Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such
Advance, as a result of a Commitment Increase pursuant to Section
2.05(c), or if any payment of principal of any B Advance consisting of a
Fixed Rate Advance is made by any Borrower to or for the account of a
Lender other than on the maturity date of such Advance, as a result of a
prepayment or Conversion pursuant to Sections 2.05(b), 2.08(d) or (e),
2.10 or 2.12, acceleration of the maturity of the Notes pursuant to
Section 6.01 or for any other reason, the Company and such Borrower
jointly and severally agree, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), to pay to the Administrative
Agent for the account of such Lender any amounts required to compensate
such Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion, including,
without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such
Advance.
(d) Without prejudice to the survival of any other
agreement of the Company or the other Borrowers hereunder, the
agreements and obligations of the Company and the other Borrowers
contained in Sections 2.11, 2.15 and 8.04 shall survive the payment in
full of principal, interest and all other amounts payable hereunder and
under the Notes.
SECTION 8.05. Right of Set-off. Nothing herein shall
----------------
derogate any Lender's right, if any, if and to the extent payment owed
to such Lender is not made when due hereunder or under any A Note or B
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Note held by such Lender, to set off from time to time against any or
all of the Company's or the relevant Borrowers' respective deposit
(general or special, time or demand, provisional or final) accounts with
such Lender any amount so due. Each Lender agrees promptly to notify
the Company (on its own behalf and on behalf of the relevant Borrower,
if applicable) after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of each Lender
under this Section 8.05 are in addition to other rights and remedies
which such Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall
--------------
become effective when it shall have been executed by the Company and the
Administrative Agent and when the Administrative Agent shall have been
notified by each Initial Lender that such Initial Lender has executed it
and thereafter shall be binding upon and inure to the benefit of the
Company, the Administrative Agent and each Lender and their respective
successors and assigns, except that no Borrower shall have the right to
assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
SECTION 8.07. Assignments and Participations, Register.
----------------------------------------
(a) Each Lender may (and shall if requested to do so by the
Company pursuant to Section 2.11, Section 2.12 or 2.15) assign to one or
more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitment, the A Advances owing to it and the A Note held by it, but
excluding the B Advances owing to it and the B Note or B Notes held by
it (other than with respect to an assignment pursuant to Section 2.11,
2.12 or 2.15)); provided that:
(i) other than in the case of an assignment to an Affiliate
of such Lender or assignments of the type described in subsection
(g) below, such Lender shall have obtained the prior written
consent of the Company, the Syndication Agent and the
Administrative Agent, no such consent to be unreasonably withheld;
(ii) each such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations under this
Agreement;
(iii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender, or an
assignment by a Lender to an Affiliate of such Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender
being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof;
(iv) each such assignment shall be to an Eligible Assignee; and
(v) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together
with any A Note subject to such assignment and a processing and
recordation fee of $3,500.
Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution
and delivery thereof to the Administrative Agent, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement
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(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the other Borrowers or the performance or
observance by the Company or the other Borrowers of any of their
respective obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon the Administrative Agent, such assigning Lender or any other Lender
and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such assignee confirms that it
is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
By executing and delivering an Assumption and Acceptance,
the Person assuming a Commitment hereunder confirms to and agrees with
the parties hereto as follows: (i) neither the Administrative Agent,
the Syndication Agent nor any other Lender makes any representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the other Borrowers or the performance or
observance by the Company or the other Borrowers of any of its
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Person confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assumption and Acceptance; (iii) such
Person will, independently and without reliance upon the Administrative
Agent or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (iv) such
Person confirms that it is an Eligible Assignee; (v) such assignee
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Administrative Agent by the terms
hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vi) such Person agrees that it will perform in
accordance with their terms all of the obligations that by the terms of
this Agreement are required to be performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Acceptance delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of
the A Advances owing to each such Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and
--------
binding for all purposes, absent manifest error, and each Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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(d) Upon the Administrative Agent's receipt of an
Acceptance (executed, in the case of an Assignment and Acceptance, by an
assigning Lender and an assignee representing that it is an Eligible
Assignee and accompanied by any A Note subject to such assignment, and
executed, in the case of an Assumption and Acceptance, by the Person
assuming a Commitment hereunder), the Administrative Agent shall, if
such Acceptance has been completed and is in substantially the form of
Exhibit C-1 or C-2, as applicable, (i) accept such Acceptance,
(ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company.
Within five Business Days after its receipt of such notice,
each Borrower, at its own expense, shall execute and deliver to the
Administrative Agent:
(x) In the case of an assignment where (1) A Advances of
the assigning Lender are evidenced by an A Note and (2) the
assigning Lender has retained a Commitment hereunder, in exchange
for the surrendered A Note a new A Note payable to the order of
the assigning Lender in an amount equal to the Commitment retained
by it hereunder;
(y) In the case of an assignment to an Eligible Assignee
where such Eligible Assignee has requested that its A Advances be
evidenced by an A Note in accordance with Section 2.06(c), an A
Note payable to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it pursuant to such Acceptance.
(z) In the case of an assumption of a Commitment hereunder,
where the Person assuming the relevant Commitment hereunder has
requested that its A Advances be evidenced by an A Note in
accordance with Section 2.06(c), a new A Note payable to the order
of such Person in an amount equal to the Commitment assumed by it
pursuant to such Acceptance.
The new A Notes to be executed and delivered by a Borrower
under clauses (x) and (y) above shall be in an aggregate principal
amount equal to the aggregate principal amount of the A Note
surrendered in connection with the related assignment, shall be
dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit A-1
hereto. The new A Note to be executed and delivered under clause
(z) above shall be dated the effective date of such Acceptance and
shall otherwise be in substantially the form of Exhibit A-1
hereto.
(e) Each Lender may sell participations to one or more
banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or
a portion of its Commitment, the Advances owing to it and/or the Note or
Notes held by it); provided that (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Company, each other Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement, and (v) no participant under any
such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to
any departure by the Company or any other Borrower therefrom, except to
the extent that such amendment, waiver or consent would reduce the
principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation.
Upon the sale of a participation pursuant to this Section 8.07(e), such
Lender shall promptly provide notice to the Company of the sale of a
participation (other than a
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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-54-
sale of a participation pursuant to Section 2.16); provided that the
failure by such Lender to provide such notice shall not invalidate the
sale of such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 8.07, disclose to the assignee or participant or proposed
assignee or participant, any information relating to the Company or any
other Borrower furnished to such Lender by or on behalf of the Company
or such Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree
to preserve the confidentiality of any confidential information relating
to the Company and the other Borrowers received by it from such Lender;
provided further that the Company (on its own behalf and on behalf of
the other Borrowers) shall have consented in advance to the disclosure
of any non-public information.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all
or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and the Notes held by it) in favor
of any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System.
(h) Each Lender agrees that it will not assign any Note or
Notes or sell any participation in any manner or under any circumstances
that would require registration, qualification or filings under the
securities laws of the United States of America, of any state or of any
country.
SECTION 8.08. Governing Law. This Agreement and the
-------------
Notes shall be governed by, and construed in accordance with, the laws
of the State of New York.
SECTION 8.09. Execution in Counterparts. This Agreement
-------------------------
may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 8.10. Jurisdiction, Etc.
------------------
(a) Each of the parties hereto (and each Designated
Borrower, by its acceptance of the proceeds of Advances made to it)
hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court
or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the Notes, or
for recognition or enforcement of any judgment, and each of the parties
hereto and each Designated Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State or, to
the extent permitted by law, in such federal court. Each of the parties
hereto and each Designated Borrower agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
any party may otherwise have to bring any action or proceeding relating
to this Agreement or the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto and each Designated Borrower
irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby and each
Designated Borrower irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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SECTION 8.11. Judgment Currency. This is an
-----------------
international loan transaction in which the specification of Dollars or
Euros, as the case may be (the "Specified Currency"), and payment in
------------------
New York City or the country of the Specified Currency, as the case may
be (the "Specified Place"), is of the essence, and the Specified
---------------
Currency shall be the currency of account in all events relating to
Advances denominated in the Specified Currency. The payment obligations
of the Company and the other Borrowers under this Agreement shall not be
discharged or satisfied by an amount paid in another currency or in
another place, whether pursuant to a judgment or otherwise, to the
extent that the amount so paid on conversion to the Specified Currency
and transfer to the Specified Place under normal banking procedures does
not yield the amount of the Specified Currency at the Specified Place
due hereunder. If for the purpose of obtaining judgment in any court it
is necessary to convert a sum due hereunder in the Specified Currency
into another currency (the "Second Currency"), the rate of exchange
---------------
that shall be applied shall be the rate at which in accordance with
normal banking procedures the Administrative Agent could purchase the
Specified Currency with the Second Currency on the Business Day next
preceding the day on which such judgment is rendered. The obligation of
the Company and the other Borrowers in respect of any such sum due from
it to the Administrative Agent or any Lender hereunder (in this Section
called an "Entitled Person") shall, notwithstanding the rate of
---------------
exchange actually applied in rendering such judgment, be discharged only
to the extent that on the Business Day following receipt by such
Entitled Person of any sum adjudged to be due hereunder in the Second
Currency such Entitled Person may in accordance with normal banking
procedures purchase and transfer to the Specified Place the Specified
Currency with the amount of the Second Currency so adjudged to be due;
and the Company and the applicable Borrower hereby, as a separate
obligation and notwithstanding any such judgment, jointly and severally
agree to indemnify such Entitled Person against, and to pay such
Entitled Person on demand, in the Specified Currency, the amount (if
any) by which the sum originally due to such Entitled Person in the
Specified Currency hereunder exceeds the amount of the Specified
Currency so purchased and transferred.
ARTICLE IX
GUARANTEE
SECTION 9.01. The Guarantee. The Company hereby
-------------
guarantees to each Lender and the Administrative Agent and their
respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on the Advances made by the Lenders to each
Designated Borrower and all other amounts from time to time owing to the
Lenders or the Administrative Agent by any Designated Borrower under
this Agreement and by the Company under any of the other Notes, in each
case strictly in accordance with the terms thereof (such obligations
being herein collectively called the "Guaranteed Obligations"). The
----------------------
Company hereby further agrees that if any Designated Borrower shall fail
to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations owing by such Designated
Borrower, the Company will promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will
be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such
extension or renewal.
SECTION 9.02. Obligations Unconditional. The obligations
-------------------------
of the Company under Section 9.01 are irrevocable, absolute and
unconditional irrespective of the value, genuineness, validity,
regularity or enforceability of the obligations of any of the Designated
Borrowers under this Agreement or any other agreement or instrument
referred to herein, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations,
and, to the fullest extent permitted
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
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by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, it being the intent of this Article IX
that the obligations of the Company hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one
or more of the following shall not alter or impair the liability of the
Company hereunder, which shall remain absolute and unconditional as
described above:
(i) at any time or from time to time, without notice to the
Company, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance
or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or any other agreement or instrument referred to
herein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall
be modified, supplemented or amended in any respect, or any right
under this Agreement or any other agreement or instrument referred
to herein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released
or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Administrative Agent or any Lender or Lenders as security
for any of the Guaranteed Obligations shall fail to be perfected.
The Company hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that
the Administrative Agent or any Lender exhaust any right, power or
remedy or proceed against any of the Designated Borrowers under this
Agreement or any other agreement or instrument referred to herein, or
against any other Person under any other guarantee of, or security for,
any of the Guaranteed Obligations.
SECTION 9.03. Reinstatement. The obligations of the
-------------
Company under this Article IX shall be automatically reinstated if and
to the extent that for any reason any payment by or on behalf of any of
the Designated Borrowers in respect of the Guaranteed Obligations is
rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Company agrees that
it will indemnify the Administrative Agent and each Lender on demand for
all reasonable costs and expenses (including fees of counsel) incurred
by the Administrative Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
SECTION 9.04. Subrogation. The Company hereby agrees
-----------
that until the payment and satisfaction in full of all Guaranteed
Obligations and the expiration and termination of the Commitments of the
Lenders under this Agreement it shall not exercise any right or remedy
arising by reason of any performance by it of its guarantee in
Section 9.01, whether by subrogation or otherwise, against any
Designated Borrower or any other guarantor of any of the Guaranteed
Obligations or any security for any of the Guaranteed Obligations.
SECTION 9.05. Remedies. The Company agrees that, as
--------
between the Company and the Lenders, the obligations of the Designated
Borrowers under this Agreement may be declared to be forthwith due and
payable as provided in Article VI (and shall be deemed to have become
automatically due and payable in the circumstances provided in
Article VI) for purposes of Section 9.01
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notwithstanding any stay, injunction or other prohibition preventing
such declaration (or such obligations from becoming automatically due
and payable) as against any of the Designated Borrowers and that, in the
event of such declaration (or such obligations being deemed to have
become automatically due and payable), such obligations (whether or not
due and payable by such Designated Borrower) shall forthwith become due
and payable by the Company for purposes of Section 9.01.
SECTION 9.06. Instrument for the Payment of Money. The
-----------------------------------
Company hereby acknowledges that the guarantee in this Article IX
constitutes an instrument for the payment of money, and consents and
agrees that any Lender or the Administrative Agent, at its sole option,
in the event of a dispute by the Company in the payment of any moneys
due hereunder, shall have the right to bring motion-action under New
York CPLR Section 3213.
SECTION 9.07. Continuing Guarantee. The guarantee in
--------------------
this Article IX is a continuing guarantee of payment (and not of
collection), and shall apply to all Guaranteed Obligations whenever
arising.
[remainder of page intentionally blank]
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-58-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
SOLUTIA INC.
By /s/ R.L. Bishop
-------------------------------
Name: R.L. Bishop
Title: Vice President & Treasurer
CITIBANK, N.A.,
as Administrative Agent
By /s/ Eileen G. Ogimachi
-------------------------------
Name: Eileen G. Ogimachi
Title: Attorney-in-Fact
BANK OF AMERICA, N.A.,
as Syndication Agent
By /s/ David Noda
-------------------------------
Name: David Noda
Title: Managing Director
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-59-
Commitment INITIAL LENDERS
- ---------- ---------------
$78,333,333.31 CITIBANK, N.A.
By /s/ Eileen G. Ogimachi
---------------------------------
Name: Eileen G. Ogimachi
Title: Attorney-in-Fact
$125,000,000.00 BANK OF AMERICA, N.A.
By /s/ David Noda
---------------------------------
Name: David Noda
Title: Managing Director
$46,666,666.67 THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Hisashi Miyashiro
---------------------------------
Name: Hisashi Miyashiro
Title: Deputy General Manager
$46,666,666.67 THE CHASE MANHATTAN BANK
By /s/ Lawrence Palumbo, Jr.
---------------------------------
Name: Lawrence Palumbo, Jr.
Title: Vice President
$46,666,666.67 KBC BANK N.V.
By /s/ Robert Snauffer
---------------------------------
Name: Robert Snauffer
Title: First Vice President
By /s/ Raymond F. Murray
---------------------------------
Name: Raymond F. Murray
Title: First Vice President
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-60-
$46,666,666.67 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Dennis Wilczek
---------------------------
Name: Dennis Wilczek
Title: Associate
$46,666,666.67 THE NORTHERN TRUST COMPANY
By /s/ Lisa M. Taylor
---------------------------
Name: Lisa M. Taylor
Title: Second Vice President
$46,666,666.67 ROYAL BANK OF CANADA
By /s/ D. S. Bryson
---------------------------
Name: D. S. Bryson
Title: Senior Manager
$46,666,666.67 WACHOVIA BANK, N.A.
By /s/ Walter R. Gilikin
---------------------------
Name: Walter R. Gilikin
Title: Senior Vice President
$30,000,000.00 BANKBOSTON, N.A.
By /s/ Esteban Arrondo
---------------------------
Name: Esteban Arrondo
Title: Vice President
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-61-
$30,000,000.00 BANK ONE, N.A.
By /s/ William J. Oleferchik
-------------------------------
Name: William J. Oleferchik
Title: Vice President
$30,000,000.00 COMMERZBANK AKTIENGESELLSCHAST
NEW YORK AND GRAND CAYMAN BRANCH
By /s/ Mark Monson
-------------------------------
Name: Mark Monson
Title: Vice President
By /s/ Albert Morrow
-------------------------------
Name: Albert Morrow
Title: Assistant Treasurer
$30,000,000.00 CREDIT AGRICOLE INDOSUEZ
By /s/ Paul A. Dytrych
-------------------------------
Name: Paul A. Dytrych
Title: Vice President - Senior
Relationship Manager
By /s/ Larry Materi
-------------------------------
Name: Larry Materi
Title: Vice President
$30,000,000.00 HSBC BANK USA
By /s/ Christopher M. Samms
-------------------------------
Name: Christopher M. Samms
Title: Vice President - Officer
#9426
$30,000,000.00 MELLON BANK, N.A.
By /s/ Jeffrey R. Dickson
-------------------------------
Name: Jeffrey R. Dickson
Title: Vice President
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
-62-
$30,000,000.00 MERCANTILE BANK NATIONAL ASSOCIATION
By /s/ Gregory L. Dryden
----------------------------------
Name: Gregory L. Dryden
Title: Vice President
$30,000,000.00 SOCIETE GENERALE
By /s/ Steven R. Fercho
----------------------------------
Name: Steven R. Fercho
Title: Director
$30,000,000.00 THE SUMITOMO BANK, LIMITED
By /s/ John H. Kemper
----------------------------------
Name: John. H. Kemper
Title: Senior Vice President
$800,000,000.00 Total of Commitments
===============
AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT
<PAGE>
<PAGE>
SCHEDULE 1
Existing Liens
--------------
By a Deed of Trust and Security Agreement dated as of
August 26, 1999 and a Funding, Mortgage and Lease Agreement of the same
date, made by Solutia Inc., Solutia granted a lien upon and security
interest in Solutia rights as lessee in and against an office building
(which is Solutia's new headquarters) consisting of approximately
270,000 square feet and other fixtures and improvements located on the
site at 575 Maryville Centre, St. Louis County, Missouri. This is a
synthetic lease with State Street Bank and Trust of Missouri NA as
lessor and Solutia as Lessee.
<PAGE>
<PAGE>
SCHEDULE 2A
Pricing Grid
------------
"Applicable Margin" means, for any A Advance (whether
-----------------
denominated in Dollars or Euros) that is a Eurocurrency Rate Advance for
any period during which the Rated Securities are within any Rating Level
set forth below, the rate set forth below opposite the reference to such
Rating Level:
Rating Level Applicable Margin (p.a.)
------------ ------------------------
Rating Level 1 0.135%
Rating Level 2 0.150%
Rating Level 3 0.165%
Rating Level 4 0.220%
Rating Level 5 0.225%
Rating Level 6 0.225%;
provided that, if the ratings of the Rated Securities established by S&P
and Moody's shall fall within different Rating Levels, the Applicable
Margin shall be determined by reference to the higher of the two Rating
Levels (except that, if the lower such Rating Level is more than one
Rating Level below the higher such Rating Level, the Applicable Margin
shall be determined by reference to the Rating Level that is one Rating
Level higher than the lower such Rating Level). Each change in the
Applicable Margin resulting from a Rating Level Change shall be
effective on the effective date of such Rating Level Change.
"Facility Fee Rate" means, for any period during which the
-----------------
Rated Securities are within any Rating Level set forth below, the rate
set forth below opposite the reference to such Rating Level:
Rating Level Facility Fee Rate (p.a.)
------------ ------------------------
Rating Level 1 0.065%
Rating Level 2 0.075%
Rating Level 3 0.085%
Rating Level 4 0.105%
Rating Level 5 0.125%
Rating Level 6 0.175%;
provided that, if the ratings of the Rated Securities established by S&P
and Moody's shall fall within different Rating Levels, the Facility Fee
Rate shall be determined by reference to the higher of the two Rating
Levels (except that, if the lower such Rating Level is more than one
Rating Level below the higher such Rating Level, the Facility Fee Rate
shall be determined by reference to the Rating Level that is one Rating
Level higher than the lower such Rating Level). Each change in the
Facility Fee Rate resulting from a Rating Level Change shall be
effective on the effective date of such Rating Level Change.
<PAGE>
<PAGE>
SCHEDULE 2B
<TABLE>
SOLUTIA INC.<F1>
$800MM 5 YEAR REVOLVING CREDIT FACILITY
PRICING GRID
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 LEVEL 6
<S> <C> <C> <C> <C> <C> <C>
BASIS FOR Long Term Senior Long Term Senior Long Term Senior Long Term Senior Long Term Senior Long Term Senior
PRICING<F2> Unsecured Debt Unsecured Debt Unsecured Debt Unsecured Debt Unsecured Debt Unsecured Debt
Rated At Least A Rated Less Than Rated Less Than Rated Less Than Rated Less Than Rated Lower Than
By Standard & Level 1 But At Level 2 But At Level 3 But At Level 4 But At Level 5 Or Not
Poor's or A2 Least A- By Least BBB+ By Least BBB By Least BBB- By Rated.
--
By Moody's Standard & Poor's Standard & Poor's Standard & Poor's Standard & Poor's
or A3 By or Baa1 By or Baa2 By or Baa3 By
-- -- -- --
Moody's Moody's Moody's Moody's
- -----------------------------------------------------------------------------------------------------------------------------------
FACILITY FEE 6.5 bps 7.5 bps 8.5 bps 10.5 bps 12.5 bps 17.5 bps
- -----------------------------------------------------------------------------------------------------------------------------------
APPLICABLE 13.5 bps 15.0 bps 16.5 bps 22.0 bps 22.5 bps 22.5 bps
MARGIN
- -----------------------------------------------------------------------------------------------------------------------------------
DRAWN COST<F3> LIBOR + 20.0 bps LIBOR + 22.5 bps LIBOR + 25.0 bps LIBOR + 32.5 bps LIBOR + 35.0 bps LIBOR + 40.0 bps
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> This pricing grid is intended to be a summary of the Applicable Margin, Facility Fee Rate and Rating Level definitions in the
Credit Agreement. In the event of any inconsistency between this pricing grid and the actual terms of the Credit Agreement
(including the definitions set forth on Schedule 2A), the terms of the Credit Agreement shall control and govern.
<F2> If Solutia Inc. is split-rated and the ratings fall in different Rating Levels, the higher of the two Rating Levels will apply
(except that, if the lower such Rating Level is more than one Rating Level below the higher such Rating Level, the Rating
Level that is one Rating Level higher than the lower such Rating Level will apply).
<F3> Facility Fee plus Applicable Margin.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-1
[Form of A Note]
U.S. $___________ Dated: __________
FOR VALUE RECEIVED, the undersigned, [insert name of
Borrower], a [insert type of entity] organized under the laws of [insert
jurisdiction]<F1> (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of __________ (the "Lender") for the account of its Applicable
------
Lending Office the principal sum of [INSERT DOLLARS AND CENTS IN WORDS]
(or, to the extent of any A Advances that are denominated in Euros, the
aggregate principal amount thereof in such Currency) or such lesser
amount as shall equal the aggregate unpaid principal amount of the A
Advances made by the Lender to the Borrower under the Credit Agreement,
in immediately available funds, on the dates, in such Currency and in
the principal amounts provided in the Credit Agreement referred to
below. Terms used in this Note and not otherwise defined have the
meanings assigned to them in the Credit Agreement referred to below.
The Borrower promises to pay interest on the unpaid
principal amount of each A Advance made to the Borrower from the date of
such A Advance until such principal amount is paid in full, at such
interest rates, in such Currency, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest of each A Advance are payable in
the Currency in which such A Advance is denominated to Citibank, N.A.
("Citibank"), as Administrative Agent, at the Administrative Agent's
--------
Account, in same day funds. Each A Advance made by the Lender to the
Borrower pursuant to the Credit Agreement, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note; provided that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the A Notes referred to in, and is
entitled to the benefits of, the Amended and Restated Five Year Credit
Agreement dated as of November 23, 1999 (as from time to time amended,
the "Credit Agreement") among Solutia Inc. (the "Company"), the
---------------- -------
Lender and certain other lenders parties thereto, Bank of America, N.A.,
as Syndication Agent, and Citibank, as Administrative Agent for the
Lender and such other lenders. The Credit Agreement, among other
things, (i) provides for the making of advances (the "A Advances") by
----------
the Lender to the Borrower from time to time in Dollars and Euros in an
aggregate amount not to exceed at any time outstanding the U.S. dollar
amount (or Dollar Equivalent) first above mentioned, the indebtedness of
the Borrower resulting from each such A Advance being evidenced by this
Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof
upon the terms and conditions therein specified.
[Pursuant to Article IX of the Credit Agreement, this Note
is absolutely and unconditionally guaranteed by the Company.]<F2>
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising,
any rights hereunder on the part of the holder hereof shall operate as a
waiver of such rights.
[FN]
- ------------------------
<F1> For A Notes for the Company as Borrower, insert "SOLUTIA INC., a
corporation organized under the laws of the State of Delaware". For A
Notes for a Designated Borrower as Borrower, insert analogous
information.
<F2> Include in Notes of Designated Borrowers.
<PAGE>
<PAGE>
-2-
This Note shall be governed by, and construed in accordance
with, the law of the State of New York, United States.
[NAME OF BORROWER]
By
--------------------------------
Name:
Title:
<PAGE>
<PAGE>
<TABLE>
ADVANCES AND PAYMENTS OF PRINCIPAL
=============================================================================================================================
<CAPTION>
AMOUNT OF
PRINCIPAL UNPAID
AMOUNT OF CURRENCY OF MATURITY OF PAID OR PRINCIPAL NOTATION
DATE A ADVANCE A ADVANCE A ADVANCE PREPAID BALANCE MADE BY
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-2
[Form of B Note]
[U.S.$] [EUROS] Dated:
----------- ----------
FOR VALUE RECEIVED, the undersigned, [insert name of
Borrower], a [insert type of entity] organized under the laws of [insert
jurisdiction]<F3> (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of (the "Lender") for the account of its Applicable
---------- ------
Lending Office the principal sum of [INSERT DOLLARS AND CENTS (OR EUROS)
IN WORDS] on [ , ]. Terms used in this Note and not
-------- -- ----
otherwise defined have the meanings assigned to them in the Credit
Agreement referred to below.
The Borrower promises to pay interest on the unpaid
principal amount hereof from the date hereof until such principal amount
is paid in full, in the Currency, at the interest rate and payable on
the interest payment date or dates provided below:
Currency: [Dollars][Euros]
Interest Rate: % per annum (calculated
-----
on the basis of a year of
days for the actual
-----
number of days elapsed).
Interest Payment Date or Dates:
----------------------------------
Both principal and interest are payable in [Dollars] [Euros]
to Citibank, N.A. ("Citibank"), as Administrative Agent, at the
--------
Administrative Agent's Account, in same day funds, free and clear of and
without any deduction, with respect to the payee named above, for any
and all present and future taxes, deductions, charges or withholdings,
and all liabilities with respect thereto, as set forth in the Credit
Agreement.
This Note is one of the B Notes referred to in, and is
entitled to the benefits of, the Amended and Restated Five Year Credit
Agreement dated as of November 23, 1999 (as from time to time amended,
the "Credit Agreement") among Solutia Inc. (the "Company"), the
---------------- -------
Lender and certain other lenders parties thereto, Bank of America, N.A.,
as Syndication Agent, and Citibank, as Administrative Agent for the
Lender and such other lenders. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events.
[Pursuant to Article IX of the Credit Agreement, this Note
is absolutely and unconditionally guaranteed by the Company.]<F4>
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising,
any rights hereunder on the part of the holder hereof shall operate as a
waiver of such rights.
[FN]
- ------------------------
<F3> For A Notes for the Company as Borrower, insert "SOLUTIA
INC., a corporation organized under the laws of the State of
Delaware". For A Notes for a Designated Borrower as Borrower,
insert analogous information.
<F4> Include in Notes of Designated Borrowers.
<PAGE>
<PAGE>
-2-
This Note shall be governed by, and construed in accordance
with, the law of the State of New York, United States.
[NAME OF BORROWER]
By
---------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT B-1
[Form of Notice of A Borrowing]
[Date]
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
The undersigned, Solutia Inc., refers to the Amended and
Restated Five Year Credit Agreement dated as of November 23, 1999 (as
amended from time to time, the "Credit Agreement", the terms defined
----------------
therein being used herein as therein defined), among the undersigned,
certain Lenders parties thereto, Bank of America, N.A., as Syndication
Agent, and Citibank, N.A., as Administrative Agent for said Lenders, and
hereby gives you notice, irrevocably, pursuant to Section 2.02 of the
Credit Agreement that the undersigned hereby requests an A Borrowing
(the "Proposed A Borrowing") under the Credit Agreement, and in that
--------------------
connection sets forth below the information relating to the Proposed A
Borrowing as required by Section 2.02(a) of the Credit Agreement:
(1) The Business Day of the Proposed A Borrowing is
, .
-------- ----
(2) The Type of Advances comprising the Proposed A
Borrowing is [Base Rate Advances] [Eurocurrency Rate
Advances].
(3) The Currency of the Proposed A Borrowing is
[Dollars][Euros].
(4) The aggregate amount of the Proposed A Borrowing is
[U.S. $] [Euros] .
----------
(5) The initial Interest Period for each Eurocurrency Rate
Advance made as part of the Proposed A Borrowing is
[ ] month[s].<F5>
--
(6) the Borrower of the A Advances to be made as part of
the Proposed A Borrowing is [the Company][the
following Designated Borrower: ].
------------------
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of
the Proposed A Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement (except the Excluded Representations)
are correct, before and after giving effect to the Proposed A
Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; and
[FN]
- ------------------------
<F5> Include in borrowing notices relating to Eurocurrency Rate
Advances.
<PAGE>
<PAGE>
-2-
(B) no event has occurred and is continuing, or would
result from such Proposed A Borrowing or from the application of
the proceeds therefrom, that constitutes a Default.
Very truly yours,
SOLUTIA INC. [on behalf of the Designated
Borrower referred to above]<F6>
By
--------------------------------
Name:
Title:
[FN]
- ------------------------
<F6> Insert if applicable.
<PAGE>
<PAGE>
EXHIBIT B-2
[Form of Notice of B Borrowing]
[Date]
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
The undersigned, Solutia Inc., refers to the Amended and
Restated Five Year Credit Agreement dated as of November 23, 1999 (as
amended from time to time, the "Credit Agreement", the terms defined
----------------
therein being used herein as therein defined), among the undersigned,
certain Lenders parties thereto, Bank of America, N.A., as Syndication
Agent, and Citibank, N.A., as Administrative Agent for said Lenders, and
hereby gives you notice, irrevocably pursuant to Section 2.03 of the
Credit Agreement that the undersigned hereby requests a B Borrowing (the
"Proposed B Borrowing") under the Credit Agreement, and in that
--------------------
connection sets forth the terms on which the Proposed B Borrowing is
requested to be made:
(1) Date of B Borrowing:
-----------------------
(2) Amount of B Borrowing:
-----------------------
(3) Currency of B Borrowing: [Dollars][Euros]
(4) Maturity Date of B Borrowing: <F7>
-----------------------
(5) Interest Rate Basis:
-----------------------
(6) Interest Payment Date(s)
-----------------------
(7) Type of B Borrowing: [Fixed Rate Advance][Floating
Rate Advance]
(8) Name of Borrower: [the Company][The following
Designated Borrower:
]
-------------
(9) Other Terms:
-----------------------------
-----------------------------
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of
the Proposed B Borrowing:
[FN]
- ------------------------
<F7> Maturity date may not be earlier than the date occurring thirty
days after the date of the Proposed B Borrowing or later than the
Commitment Termination Date.
<PAGE>
<PAGE>
-2-
(a) the representations and warranties contained in
Section 4.01 of the Credit Agreement (except the Excluded
Representations) are correct, before and after giving effect to
the Proposed B Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would
result from the Proposed B Borrowing or from the application of
the proceeds therefrom, that constitutes a Default; and
(c) in compliance with Section 2.03(a) of the Credit
Agreement, the aggregate amount of the Proposed B Borrowing in
Dollars or in Euros and all other Borrowings to be made on the
same day under the Credit Agreement is within the aggregate amount
of the unused Commitments of the Lenders.
The undersigned hereby confirms that the Proposed B
Borrowing is to be made available to it in accordance with Section
2.03(a)(v) of the Credit Agreement.
Very truly yours,
SOLUTIA INC. [on behalf of the Designated
Borrower referred to above]<F8>
By
--------------------------------
Name:
Title:
[FN]
- ------------------------
<F8> Insert if applicable.
<PAGE>
<PAGE>
EXHIBIT C-1
[Form of Assignment and Acceptance]
Reference is made to the Amended and Restated Five Year
Credit Agreement dated as of November 23, 1999 (as amended from time to
time, the "Credit Agreement") among Solutia Inc., a Delaware
----------------
corporation (the "Company"), the Lenders (as defined in the Credit
-------
Agreement), Bank of America, N.A., as Syndication Agent, and Citibank,
N.A., as administrative agent for the Lenders (the "Administrative
--------------
Agent"). Terms defined in the Credit Agreement are used herein with
- -----
the same meaning unless otherwise defined herein.
The "Assignor" and the "Assignee" referred to on Schedule 1
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under
the Credit Agreement as of the date hereof (other than in respect
of B Advances and B Notes) equal to the percentage interest
specified on Schedule 1 hereto of all outstanding rights and
obligations of the Assignor under the Credit Agreement (other than
in respect of B Advances and B Notes) including, without
limitation, such interest in the Assignor's Commitment, the A
Advances owing to the Assignor and any A Notes held by the
Assignor. After giving effect to such sale and assignment, the
Assignee's Commitment and the amount of the A Advances owing to
the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse
claim; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Company (or any other
Borrower) or the performance or observance by the Company (or any
other Borrower) of any of its obligations under the Credit
Agreement or any other instrument or document furnished pursuant
thereto; [and] (iv) represents and warrants that the assignment
being made hereby shall not require registration, qualification or
any filings to be made under the securities laws of the United
States of America, of any state or of any country; [and (v)
attaches the A Note of each Borrower held by the Assignor and
requests that the Administrative Agent exchange such A Notes for
new A Notes payable by the respective Borrowers to the order of
the Assignor in an amount equal to the Commitment retained by the
Assignor under the Credit Agreement, as specified on Schedule 1
hereto].<F9>
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial
statements referred to in Section 4.01 thereof and such other
documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Syndication Agent, the
Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible
Assignee; (iv) appoints and authorizes the
[FN]
- ------------------------
<F9> Include bracketed text if the Assignor is retaining a Commitment
under the Credit Agreement and holds A Notes executed pursuant to
a request made by such Assignor under Section 2.06(c) of the
Credit Agreement.
<PAGE>
<PAGE>
-2-
Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under the Credit
Agreement as are delegated to the Administrative Agent by the
terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations that by the
terms of the Credit Agreement are required to be performed by it
as a Lender; [and] (vi) attaches any U.S. Internal Revenue Service
forms required under Section 2.15 of the Credit Agreement; [and
(vi) requests, in accordance with Section 2.06(c) of the Credit
Agreement, that its A Advances to each Borrower be evidenced by an
A Note payable by such Borrower to the order of the Assignee in an
amount equal to the Commitment assumed by it, as specified on
Schedule 1 hereto]<F10>.
4. Following the execution of this Assignment and
Acceptance, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent. The
effective date for this Assignment and Acceptance (the "Effective
---------
Date") shall be the date of acceptance hereof by the
----
Administrative Agent, unless otherwise specified on Schedule 1
hereto.
5. Upon such acceptance and recording by the Administrative
Agent, as of the Effective Date, (i) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative
Agent, from and after the Effective Date, the Administrative Agent
shall make all payments under the Credit Agreement and the A Notes
in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and Facility Fees
with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the
Credit Agreement and the A Notes for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the law of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of
Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have
caused Schedule 1 to this Assignment and Acceptance to be executed by
their officers thereunto duly authorized as of the date specified
thereon.
[FN]
- ------------------------
<F10> Include bracketed text if the Assignee requests that its A
Advances be evidenced by promissory notes in accordance with
Section 2.06(c) of the Credit Agreement.
<PAGE>
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: %
-------
Assignee's Commitment: $
------------
Aggregate outstanding principal
amount of A Advances assigned: $
------------
and Euros
------------
Principal amount of A Note of each
Borrower payable to Assignee: $
------------
Principal amount of A Note of each
Borrower payable to Assignor: $
------------
Effective Date<F*> (if other than date of
acceptance by the Administrative Agent): ,
------------ ----
Dated: , [NAME OF ASSIGNOR], as Assignor
------------- ----
By
------------------------------
Name:
Title:
Dated: ,
--------------- ----
[NAME OF ASSIGNEE], as Assignee
By
------------------------------
Name:
Title:
Domestic Lending Office: [Address]
Eurocurrency Lending Office: [Address]
[FN]
- ------------------------
<F*> This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Administrative
Agent.
<PAGE>
<PAGE>
-2-
Accepted <F**>[and consented to] this
day of , 19
- -- ------ --
CITIBANK, N.A., as Administrative Agent
By
-----------------------------------------
Name:
Title
<F**>[Consented to:
BANK OF AMERICA, N.A., as Syndication Agent
By
-----------------------------------------
Name:
Title:]
<F**>[Consented to this day
--
of ,
---------- ----
SOLUTIA INC., on its own behalf and on
behalf of each of the Designated Borrowers
By
-----------------------------------------
Name:
Title:]
[FN]
- ------
<F**> Required if the assignment is other than to an Affiliate of the
Assignor or pursuant to the terms of Section 8.07(g) of the Credit
Agreement.
<PAGE>
<PAGE>
EXHIBIT C-2
[Form of Assumption and Acceptance]
Dated ,
-------------- ----
Solutia Inc.
Citibank, N.A., as
Administrative Agent for
the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
Reference is made to the Amended and Restated Five Year
Credit Agreement dated as of November 23, 1999 (as amended from time to
time, the "Credit Agreement") among Solutia Inc., a Delaware
----------------
corporation (the "Company"), the Lenders (as defined in the Credit
-------
Agreement), Bank of America, N.A., as Syndication Agent, and Citibank,
N.A., as administrative agent for the Lenders (the "Administrative
--------------
Agent"). Terms defined in the Credit Agreement are used herein with
- -----
the same meaning unless otherwise defined herein.
1. [INSERT NAME OF ADDITIONAL COMMITMENT LENDER OR ASSUMING
LENDER] (the "[Additional Commitment]/[Assuming] Lender") agrees
----------------------------------------
to become a party to the Credit Agreement and to have the rights
and perform the obligations of a Lender under the Credit
Agreement, and to be bound in all respects by the terms of the
Credit Agreement.
2. The [Additional Commitment]/[Assuming] Lender hereby
agrees to a Commitment of [INSERT AMOUNT OF PROPOSED COMMITMENT]
(the "Proposed Commitment").
-------------------
3. The [Additional Commitment]/[Assuming] Lender (i) agrees
that no Lender has made any representation or warranty, or assumes
any responsibility with respect to, (x) any statements, warranties
or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any
other instrument or document furnished pursuant thereto or (y) the
financial condition of the Company (or any other Borrower) or the
performance or observance by the Company (or any other Borrower)
of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; (ii) confirms
that it has received a copy of the Credit Agreement, together with
copies of the financial statements referred to in Section 4.01
thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into this Assumption and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Administrative Agent,
the Syndication Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under the Credit Agreement; (iv) confirms that it is
an Eligible Assignee; (v) appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise
such powers and
<PAGE>
<PAGE>
-2-
discretion under the Credit Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such
powers and discretion as are reasonably incidental thereto; (vi)
agrees that it will perform in accordance with their terms all of
the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (vii) attaches any
U.S. Internal Revenue Service forms required under Section 2.15 of
the Credit Agreement.
4. The effective date for this Acceptance shall be
[ , ] (the "Assumption Date"); provided that
-------------- ---- ---------------
this Acceptance has been fully executed and delivered to the
Administrative Agent for acceptance and recording by the
Administrative Agent on or prior to such Assumption Date.
5. Upon such execution, delivery, acceptance and recording
and as of the Assumption Date, the [Additional Commitment]/[Assuming]
Lender shall be a party to the Credit Agreement with a Commitment
equal to the Proposed Commitment and, to the extent provided in this
Acceptance, have the rights and obligations of a Lender thereunder.
6. Upon such acceptance and recording, from and after the
Assumption Date, the Administrative Agent shall make all payments
under the Credit Agreement in respect of the Proposed Commitment
provided for in this Acceptance (including, without limitation,
all payments of principal, interest and Facility Fees with respect
thereto) to the [Additional Commitment]/[Assuming] Lender.
7. This Acceptance shall be governed by and construed in
accordance with the law of the State of New York.
8. This Acceptance may be signed in any number of counterparts,
each of which shall be an original, with the same as if the signatures
were upon the same instrument.
[remainder of page intentionally blank]
<PAGE>
<PAGE>
-3-
IN WITNESS WHEREOF, the Additional Commitment Lender has
caused Acceptance to be executed by its officers thereunto duly
authorized as of the date specified above.
[NAME OF ADDITIONAL COMMITMENT OR ASSUMING
LENDER]
By
--------------------------------------
Name:
Title:
Domestic Lending Office: [Address]
Eurocurrency Lending Office: [Address]
This Assumption and Acceptance is
hereby acknowledged and agreed on
as of the date set forth above.
SOLUTIA INC.
By
-----------------------------------------
Name:
Title:
CITIBANK, N.A., as Administrative Agent
By
-----------------------------------------
Name:
Title:
BANK OF AMERICA, N.A., as Syndication Agent
By
-----------------------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT D
[Form of Opinion of Counsel for the Company]
November 23, 1999
To the Lenders party to the
Credit Agreement referred to
below
Citibank, N.A., as Administrative
Agent
399 Park Avenue
New York, New York 10043
Ladies and Gentlemen:
This opinion is furnished to you pursuant to
Section 3.01(b)(1) of the Amended and Restated Five Year Credit
Agreement dated as of November 23, 1999 (the "Credit Agreement"),
----------------
among Solutia Inc., a Delaware corporation (the "Company"), the
-------
Lenders parties thereto, Bank of America, N.A., as Syndication Agent,
and Citibank, N.A., as Administrative Agent for said Lenders. Terms
defined in the Credit Agreement are used herein as therein defined.
I am General Counsel of the Company and am familiar with the
preparation, execution and delivery of the Credit Agreement.
In that connection, I or persons under my supervision have
examined or are familiar with: (1) the Credit Agreement, the A Notes
and the form of the B Note; (2) the documents furnished by the Company
pursuant to Article III of the Credit Agreement; (3) the certificate of
incorporation of the Company and all amendments thereto (the
"Charter"); (4) the by-laws of the Company and all amendments thereto
-------
(the "By-laws"); and (5) a certificate of the Secretary of State of
-------
Delaware, dated November 23, 1999, certifying as to the continued
corporate existence and good standing of the Company in that State.
In addition, I or persons under my supervision have examined
or are familiar with the originals, or copies certified to my
satisfaction, of such other corporate records of the Company,
certificates of public officials and of officers of the Company, and
agreements, instruments and other documents, and made such other
investigations and review of relevant documents as I have deemed
necessary as a basis of the opinions expressed below. I have assumed
the due execution and delivery, pursuant to due authorization, of the
Credit Agreement by the Lenders and the Administrative Agent.
I am qualified to practice law in the State of Missouri. My
opinions expressed below are limited to the law of the State of
Missouri, the General Corporation Law of the State of Delaware and the
Federal law of the United States.
Based upon the foregoing and upon such investigation as I
have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
2. The execution, delivery and performance by the Company
of the Credit Agreement and the Notes, and the other transactions
contemplated by the Credit Agreement, are within the Company's
corporate powers, have been duly authorized by all necessary
corporate action, and do
<PAGE>
<PAGE>
-2-
not contravene (i) the Charter or the By-laws, (ii) any law, rule
or regulation applicable to the Company (including, without
limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or (iii) to the best of my knowledge, any
contractual or legal restriction contained in any indenture or
other agreement or instrument to which the Company or any of its
Consolidated Subsidiaries is a party or is bound. The Credit
Agreement, and the Notes delivered today, have been duly executed
and delivered on behalf of the Company.
3. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body or any other third party is required for the due execution,
delivery and performance by the Company of the Credit Agreement
and the Notes.
4. The Credit Agreement is, and each Note of the Company
when delivered under the Credit Agreement will be, legal, valid
and binding obligations of the Company enforceable against the
Company in accordance with their respective terms.
5. In any action or proceeding arising out of or relating
to the Credit Agreement or the Notes in any court of the State of
Missouri or in any Federal court sitting in the State of Missouri,
such court would recognize and give effect to the provisions of
Section 8.08 of the Credit Agreement wherein the parties thereto
agree that the Credit Agreement and the Notes shall be governed
by, and construed in accordance with, the law of the State of New
York. Without limiting the generality of the foregoing, a court
of the State of Missouri or a Federal court sitting in the State
of Missouri would apply the usury law of the State of New York to
the Credit Agreement and the Notes. However, if a court were to
hold that the Credit Agreement and the Notes are governed by, and
to be construed in accordance with, the law of the State of
Missouri, the Credit Agreement and the Notes of the Company would
be, under the laws of the State of Missouri, legal, valid and
binding obligations of the Company enforceable against the Company
in accordance with their respective terms.
6. Except as described in the Company's Report on Form 10-K
for the fiscal year ended December 31, 1998 or in the Company's
Report on Form 10-Q for the fiscal quarter ended September 30,
1999, there is no pending or overtly threatened action or
proceeding affecting the Company or any of its Consolidated
Subsidiaries before any court, governmental agency or arbitrator
which (i) would have a Material Adverse Effect or (ii) purports to
affect, or would affect, the legality, validity or enforceability
of the Credit Agreement or any Note.
7. Neither the Company nor any of its Material Subsidiaries
is an "investment company", or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act
of 1940, as amended. Neither the Company nor any of its Material
Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
References herein to the Credit Agreement include the
guarantee by the Company of obligations of Designated Borrowers set
forth in Article IX of the Credit Agreement.
The foregoing opinions are subject to the following comments
and qualifications:
(A) The enforceability of Section 8.04(b) of the Credit
Agreement (and any other similar provisions therein) may be
limited by laws limiting the enforceability of provisions
exculpating or exempting a party from, or requiring indemnification
of a party for, its own action or inaction, to the extent such
action or inaction involves gross negligence, recklessness or willful
or unlawful conduct.
<PAGE>
<PAGE>
-3-
(B) Clause (iii) of the second sentence of Section 9.02 of
the Credit Agreement may not be enforceable to the extent that the
Guaranteed Obligations are materially modified.
(C) The enforceability of provisions in the Credit
Agreement and the Notes to the effect that terms may not be waived
or modified except in writing may be limited under certain
circumstances.
(D) I express no opinion as to (i) the effect of the laws
of any jurisdiction in which any Lender is located (other than the
State of Missouri) that limit the interest, fees or other charges
such Lender may impose, (ii) the second sentence of Section 2.16
of the Credit Agreement, (iii) the first sentence of Section
8.10(a) of the Credit Agreement, insofar as such sentence relates
to the subject matter jurisdiction of any federal court sitting in
New York City to adjudicate any controversy related to the Credit
Agreement and the Notes, (iv) the second sentence of Section
8.10(a), (v) the waiver of inconvenient forum set forth in Section
8.10(b) of the Credit Agreement with respect to proceedings in any
federal court sitting in New York City, (vi) Section 8.11 of the
Credit agreement and (vii) Section 9.06 of the Credit Agreement.
(E) My opinion in paragraph 4 above as to the enforceability
of the Credit Agreement and the Notes is subject to the effect of
(a) any applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfer or preferential
transfers), reorganization, moratorium or similar law affecting
creditors' rights generally and (b) general principles of equity,
including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether considered in a
proceeding in equity or at law).
Very truly yours,
<PAGE>
<PAGE>
EXHIBIT E
[Form of Opinion of Special New York Counsel
to the Administrative Agent]
November 23, 1999
To the Lenders party to the
Credit Agreement referred to
below
Citibank, N.A., as Administrative
Agent
399 Park Avenue
New York, New York 10043
Ladies and Gentlemen:
We have acted as special New York counsel to the
Administrative Agent in connection with the Amended and Restated Five
Year Credit Agreement dated as of November 23, 1999 (the "Credit
------
Agreement") among Solutia Inc. (the "Company"), the Lenders parties
- --------- -------
thereto, Bank of America, N.A., as Syndication Agent, and Citibank,
N.A., as Administrative Agent, providing for loans to be made by said
Lenders to the Company and the Designated Borrowers in an aggregate
principal amount not exceeding $800,000,000. Terms defined in the
Credit Agreement are used herein as defined therein. This opinion is
being delivered pursuant to Section 3.01(b)(2) of the Credit Agreement.
In rendering the opinions expressed below, we have examined
the Credit Agreement and the Notes being executed and delivered on the
date hereof (the "Notes" and collectively with the Credit Agreement,
-----
the "Loan Documents").
--------------
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals and the conformity with authentic original documents of all
documents submitted to us as copies.
In rendering the opinions expressed below, we have assumed,
with respect to the Loan Documents, that:
(i) the Loan Documents have been duly authorized by, have
been duly executed and delivered by, and (except to the extent set
forth in the opinions below as to the Company) constitute legal,
valid, binding and enforceable obligations of, all of the parties
thereto;
(ii) all signatories to the Loan Documents have been duly
authorized; and
(iii) all of the parties to the Loan Documents are duly
organized and validly existing and have the power and authority
(corporate or other) to execute, deliver and perform the Loan
Documents.
Based upon and subject to the foregoing and subject also to
the comments and qualifications set forth below, and having considered
such questions of law as we have deemed necessary as a basis for the
opinions expressed below, we are of the opinion that each Loan Document
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium,
<PAGE>
<PAGE>
-2-
fraudulent conveyance or transfer or other similar laws relating to or
affecting the rights of creditors generally and except as the
enforceability of such Loan Document is subject to the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation, (a) the
possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (b) concepts of materiality,
reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following comments
and qualifications:
(A) The enforceability of Section 8.04(b) of the Credit
Agreement (and any other similar provisions therein) may be
limited by laws limiting the enforceability of provisions
exculpating or exempting a party from, or requiring
indemnification of a party for, its own action or inaction, to the
extent such action or inaction involves gross negligence,
recklessness or willful or unlawful conduct.
(B) Clause (iii) of the second sentence of Section 9.02 of
the Credit Agreement may not be enforceable to the extent that the
Guaranteed Obligations are materially modified.
(C) The enforceability of provisions in the Loan Documents
to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(D) We express no opinion as to (i) the effect of the laws
of any jurisdiction in which any Lender is located (other than the
State of New York) that limit the interest, fees or other charges
such Lender may impose, (ii) the second sentence of Section 2.16
of the Credit Agreement, (iii) the first sentence of
Section 8.10(a) of the Credit Agreement, insofar as such sentence
relates to the subject matter jurisdiction of any federal court
sitting in New York City to adjudicate any controversy related to
the Loan Documents, (iv) the second sentence of Section 8.10(a),
(v) the waiver of inconvenient forum set forth in Section 8.10(b)
of the Credit Agreement with respect to proceedings in any federal
court sitting in New York City, (vi) Section 8.11 of the Credit
Agreement and (vii) Section 9.06 of the Credit Agreement.
(E) We point out with reference to obligations stated to be
payable in a currency other than Dollars that (i) a New York
statute provides that a judgment rendered by a court of the State
of New York in respect of an obligation denominated in any such
other currency would be rendered in such other currency and would
be converted into Dollars at the rate of exchange prevailing on
the date of entry of the judgment and (ii) a judgment rendered by
a Federal court sitting in the State of New York in respect of an
obligation denominated in any such other currency may be expressed
in Dollars, but we express no opinion as to the rate of exchange
such Federal court would apply.
The foregoing opinions are limited to matters involving the
Federal laws of the United States and the law of the State of New York,
and we do not express any opinion as to the laws of any other
jurisdiction.
This opinion letter is, pursuant to Section 3.01(b)(2) of
the Credit Agreement, provided to you by us in our capacity as special
New York counsel to the Administrative Agent and may not be relied upon
by any Person for any purpose other than in connection with the
transactions contemplated by the Credit Agreement without, in each
instance, our prior written consent.
Very truly yours,
EKM/RJW
<PAGE>
<PAGE>
EXHIBIT F-1
FORM OF DESIGNATION LETTER
,
------------ -- ----
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
We refer to the Amended and Restated Five Year Credit
Agreement (as amended, supplemented and otherwise modified and in effect
from time to time, the "Credit Agreement") dated as of November 23,
----------------
1999 among Solutia Inc. (the "Company"), the Lenders party thereto,
-------
Bank of America, N.A., as Syndication Agent, and Citibank, as
Administrative Agent for the Lenders. Terms defined in the Credit
Agreement are used herein as defined therein.
The Company hereby designates [____________] (the
"Designated Borrower"), a wholly owned Subsidiary of the Company and a
-------------------
[corporation duly incorporated under the laws of [_____________]], as a
Borrower in accordance with Section 2.17 of the Credit Agreement until
such designation is terminated in accordance with said Section 2.17.
The Designated Borrower hereby accepts the above designation
and hereby expressly and unconditionally accepts the obligations of a
Borrower under the Credit Agreement, adheres to the Credit Agreement and
agrees and confirms that, upon your execution and return to the Company
of the enclosed copy of this letter, it shall be a Borrower for purposes
of the Credit Agreement and agrees to be bound by and perform and comply
with the terms and provisions of the Credit Agreement applicable to it
as if it had originally executed the Credit Agreement as a Borrower.
The Designated Borrower hereby authorizes and empowers the Company to
act as its representative and attorney-in-fact for the purposes of
signing documents and giving and receiving notices (including notices of
Borrowing under the Credit Agreement) and other communications in
connection with the Credit Agreement and the transactions contemplated
thereby and for the purposes of modifying or amending any provision of
the Credit Agreement and further agrees that the Administrative Agent,
the Syndication Agent and each Lender may conclusively rely on the
foregoing authorization.
The Company hereby represents and warrants to the
Administrative Agent and each Lender that, before and after giving
effect to this Designation Letter, (i) the representations and
warranties set forth in Section 4.01 of the Credit Agreement (except the
Excluded Representations) are true and correct on the date hereof as if
made on and as of the date hereof and (ii) no Default has occurred and
is continuing. The Designated Borrower represents and warrants that
each of the representations and warranties set forth in Section 4.01
(a), (b), (c) and (d) of the Credit Agreement are true as if each
reference therein to the Company were a reference to the Designated
Borrower and as if each reference therein to the Credit Agreement and
the Notes were a reference to this Designation Letter and the Notes
executed by the Designated Borrower in connection herewith.
<PAGE>
<PAGE>
-2-
The Designated Borrower hereby agrees that this Designation
Letter, the Credit Agreement and the Notes shall be governed by, and
construed in accordance with, the law of the State of New York. The
Designated Borrower hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York
and of any New York state court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this
Designation Letter, the Credit Agreement or the transactions
contemplated thereby. The Designated Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. The Designated
Borrower further agrees that service of process in any such action or
proceeding brought in New York may be made upon it by service upon the
Company at the "Address for Notices" specified below its name on the
signature pages to the Credit Agreement.
THE DESIGNATED BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS DESIGNATION LETTER, THE
CREDIT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Very truly yours,
SOLUTIA INC.
By
-----------------------------------
Name:
Title:
[NAME OF DESIGNATED BORROWER]
By
-----------------------------------
Name:
Title:
ACCEPTED:
CITIBANK, N.A.,
as Administrative Agent
By
-----------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT F-2
FORM OF TERMINATION LETTER
,
---------- -- ----
To Citibank, N.A.,
as Administrative Agent
Attention: Anne Hieronimus
Ladies and Gentlemen:
We refer to the Amended and Restated Five Year Credit
Agreement (as amended, supplemented and otherwise modified and in effect
from time to time, the "Credit Agreement") dated as of November 23,
----------------
1999 among Solutia Inc., the Lenders party thereto, Bank of America,
N.A., as Syndication Agent, and Citibank, N.A., as Administrative Agent.
Terms defined in the Credit Agreement are used herein as defined
therein.
The Company hereby terminates the status as a Designated
Borrower of [_________________], a [corporation incorporated under the
laws of [_______________]], in accordance with Section 2.17 of the
Credit Agreement, effective as of the date of receipt of this notice by
the Administrative Agent. The undersigned hereby represent and warrant
that all principal of and interest on all Advances of the above-
referenced Designated Borrower and all other amounts payable by such
Designated Borrower pursuant to the Credit Agreement have been paid in
full on or prior to the date hereof. Notwithstanding the foregoing,
this Termination Letter shall not affect any obligation which by the
terms of the Credit Agreement survives termination thereof.
Very truly yours,
SOLUTIA INC.
By
------------------------------------
Name:
Title:
<PAGE>
CONFORMED COPY
======================================================================
U.S. $300,000,000
364-DAY MULTICURRENCY CREDIT AGREEMENT
Dated as of November 23, 1999,
Among
SOLUTIA INC.,
as Borrower
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders
BANK OF AMERICA, N.A.
as Syndication Agent
and
CITIBANK, N.A.,
as Administrative Agent
======================================================================
<PAGE>
<PAGE>
T A B L E O F C O N T E N T S
- - - - - - - - - - - - - - -
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.........................................1
SECTION 1.02. Computation of Time Periods................................. 14
SECTION 1.03. Accounting Terms and Determinations......................... 14
SECTION 1.04. Currencies; Currency Equivalents............................ 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances.............................................. 15
SECTION 2.02. Making the A Advances....................................... 15
SECTION 2.03. The B Advances.............................................. 16
SECTION 2.04. Fees........................................................ 20
SECTION 2.05. Termination, Reduction and Extension of Commitments......... 20
SECTION 2.06. Repayment of Advances; Evidence of Debt..................... 21
SECTION 2.07. Interest on A Advances...................................... 22
SECTION 2.08. Interest Rate Determination; Changes in Rating Systems...... 22
SECTION 2.09. Optional Conversion of A Advances........................... 23
SECTION 2.10. Prepayments, Etc............................................ 24
SECTION 2.11. Increased Costs............................................. 25
SECTION 2.12. Illegality.................................................. 26
SECTION 2.13. Payments and Computations................................... 27
SECTION 2.14. Notations on the A Notes.................................... 28
SECTION 2.15. Taxes....................................................... 29
SECTION 2.16. Sharing of Payments, Etc.................................... 31
SECTION 2.17. Borrowings by Designated Borrowers.......................... 31
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Initial Borrowing................... 31
SECTION 3.02. Conditions Precedent to Each A Borrowing.................... 32
SECTION 3.03. Conditions Precedent to Each B Borrowing.................... 33
SECTION 3.04. Determinations Under Section 3.01........................... 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company............... 34
SECTION 4.02. Representation and Warranty of the Lenders.................. 36
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants....................................... 36
SECTION 5.02. Negative Covenants.......................................... 39
SECTION 5.03. Financial Covenants......................................... 41
-i-
<PAGE>
<PAGE>
Page
----
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default........................................... 41
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action.................................... 43
SECTION 7.02. Administrative Agent's Reliance, Etc........................ 43
SECTION 7.03. Citibank and Affiliates..................................... 44
SECTION 7.04. Lender Credit Decision...................................... 44
SECTION 7.05. Indemnification............................................. 44
SECTION 7.06. Successor Administrative Agent.............................. 44
SECTION 7.07. The Syndication Agent....................................... 45
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc............................................. 45
SECTION 8.02. Notices, Etc................................................ 46
SECTION 8.03. No Waiver, Remedies......................................... 46
SECTION 8.04. Costs and Expenses.......................................... 47
SECTION 8.05. Right of Set-off............................................ 47
SECTION 8.06. Binding Effect.............................................. 48
SECTION 8.07. Assignments and Participations, Register.................... 48
SECTION 8.08. Governing Law............................................... 51
SECTION 8.09. Execution in Counterparts................................... 51
SECTION 8.10. Jurisdiction, Etc........................................... 51
SECTION 8.11. Judgment Currency........................................... 52
ARTICLE IX
GUARANTEE
SECTION 9.01. The Guarantee............................................... 52
SECTION 9.02. Obligations Unconditional................................... 52
SECTION 9.03. Reinstatement............................................... 53
SECTION 9.04. Subrogation................................................. 53
SECTION 9.05. Remedies.................................................... 53
SECTION 9.06. Instrument for the Payment of Money......................... 54
SECTION 9.07. Continuing Guarantee........................................ 54
-ii-
<PAGE>
<PAGE>
<TABLE>
SCHEDULES
---------
<S> <C>
Schedule 1 - Certain Existing Liens
Schedule 2A - Pricing Grid
Schedule 2B - Copy of Pricing Grid from Bank Book
EXHIBITS
--------
Exhibit A-1 - Form of A Note
Exhibit A-2 - Form of B Note
Exhibit B-1 - Form of Notice of A Borrowing
Exhibit B-2 - Form of Notice of B Borrowing
Exhibit C-1 - Form of Assignment and Acceptance
Exhibit C-2 - Form of Assumption and Acceptance
Exhibit D - Form of Opinion of General Counsel for the Company
Exhibit E - Form of Opinion of Special New York Counsel to the Administrative Agent
Exhibit F-1 - Form of Designation Letter
Exhibit F-2 - Form of Termination Letter
</TABLE>
-iii-
<PAGE>
<PAGE>
364-DAY MULTICURRENCY CREDIT AGREEMENT dated as of November
23, 1999 among SOLUTIA INC., a Delaware corporation (the "Company"),
-------
the banks (each an "Initial Lender" and, collectively, the "Initial
-------------- -------
Lenders") listed on the signature pages hereof, BANK OF AMERICA, N.A.,
- -------
as Syndication Agent (in such capacity, together with its successors in
such capacity, the "Syndication Agent") and CITIBANK, N.A.
-----------------
("Citibank"), as administrative agent (in such capacity, together with
--------
its successors in such capacity, the "Administrative Agent") as herein
--------------------
provided.
The Company has requested that the Lenders make loans to the
Borrowers in an aggregate principal amount not exceeding $300,000,000 at
any one time outstanding solely to finance the working capital needs and
other general corporate purposes of the Borrowers, including to support
the Borrowers' respective commercial paper programs, and the Lenders are
prepared to make such loans upon the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms
of the terms defined):
"A Advance" means an advance by a Lender to a Borrower as
---------
part of an A Borrowing and refers to a Base Rate Advance or a
Eurocurrency Rate Advance, each of which shall be a "Type" of A
----
Advance.
"A Borrowing" means a borrowing consisting of simultaneous
-----------
A Advances of the same Type made by each of the Lenders pursuant to
Section 2.01.
"A Note" means a promissory note of a Borrower payable to
------
the order of any Lender, in substantially the form of Exhibit A-1
hereto, evidencing the aggregate indebtedness of such Borrower to
such Lender resulting from the A Advances made by such Lender to
such Borrower.
"Acceptance" means an Assignment and Acceptance and/or an
----------
Assumption and Acceptance.
"Adjusted EBITDA" means, for any period, the sum, for the
---------------
Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
of the following: (a) net income (calculated before taxes,
Interest Expense, extraordinary and unusual items and income or
loss attributable to equity in Affiliates (other than Affiliates
that are Specified Joint Ventures or Consolidated Subsidiaries))
for such period plus (b) depreciation and amortization (to the
extent deducted in determining net income) for such period;
provided that charges taken (including cash charges in an
aggregate amount not exceeding $44,000,000) and reserves
established by the Company and its Consolidated Subsidiaries in
connection with (x) the Astaris LLC phosphate joint venture that
Solutia is in the process of establishing with FMC Corporation,
(y) acquisitions and (z) restructuring of existing operations (all
on or prior to December 31, 2000) in an aggregate amount not
exceeding $60,000,000 shall be added back to net income for such
period (to the extent such charges and reserves were deducted in
determining net income for such period).
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-2-
"Administrative Agent" has the meaning specified in the
--------------------
recital of parties to this Agreement.
"Administrative Agent's Account" means, for each Currency,
------------------------------
an account in respect of such Currency designated by the
Administrative Agent in a notice to the Company and the Lenders.
"Administrative Questionnaire" means an administrative
----------------------------
questionnaire in a form supplied by the Administrative Agent.
"Advance" means an A Advance or a B Advance.
-------
"Affected Lender" has the meaning specified in Section 2.12.
---------------
"Affiliate" means, as to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under
common control with such Person or is a director or officer of
such Person. For purposes of this definition, the term "control"
(including the terms "controlling", "controlled by" and "under
common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the Voting Stock of
such Person or to direct or cause the direction of the management
and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Applicable Lending Office" means, with respect to each
-------------------------
Lender, such Lender's Domestic Lending Office in the case of a
Base Rate Advance and such Lender's Eurocurrency Lending Office in
the case of a Eurocurrency Rate Advance and, in the case of a B
Advance, the office of such Lender notified by such Lender to the
Administrative Agent as its Applicable Lending Office with respect
to such B Advance.
"Applicable Margin" has the meaning assigned to such term in
-----------------
Schedule 2A.
"Assignment and Acceptance" means an assignment and
-------------------------
acceptance entered into by a Lender and an Eligible Assignee, and
accepted by the Administrative Agent, in substantially the form of
Exhibit C-1 hereto.
"Assumption and Acceptance" means an assumption and
-------------------------
acceptance entered into by an Eligible Assignee, and accepted by
the Administrative Agent, in substantially the form of Exhibit C-2
hereto.
"B Advance" means an advance by a Lender to a Borrower as
---------
part of a B Borrowing resulting from the auction bidding procedure
described in Section 2.03.
"B Borrowing" means a borrowing consisting of simultaneous B
-----------
Advances from each of the Lenders whose offer to make one or more
B Advances as part of such borrowing has been accepted by the
Company under the auction bidding procedure described in Section
2.03.
"B Note" means a promissory note of a Borrower payable to
------
the order of any Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of such Borrower to such
Lender resulting from a B Advance made by such Lender to such
Borrower.
"B Reduction" has the meaning specified in Section 2.01.
-----------
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-3-
"Bank of America" means Bank of America, N.A.
---------------
"Base Rate" means a fluctuating interest rate per annum in
---------
effect from time to time, which rate per annum shall at all times
be equal to the highest of:
(a) the rate of interest announced publicly by Citibank in
New York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/16 of 1% or,
if there is no nearest 1/16 of 1%, to the next higher 1/16
of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate
obtained by dividing (A) the latest three-week moving
average of secondary market morning offering rates in the
United States for three-month certificates of deposit of
major United States money market banks, such three-week
moving average (adjusted to the basis of a year of 360 days)
being determined weekly on each Monday (or, if such day is
not a Business Day, on the next succeeding Business Day) for
the three-week period ending on the previous Friday by
Citibank on the basis of such rates reported by certificate
of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by Citibank,
by (B) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by
the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement
(including, but not limited to, any emergency, supplemental
or other marginal reserve requirement) for Citibank with
respect to liabilities consisting of or including (among
other liabilities) three-month U.S. dollar non-personal time
deposits in the United States, plus (iii) the average during
such three-week period of the annual assessment rates
estimated by Citibank for determining the then current
annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S.
dollar deposits of Citibank in the United States; and
(c) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means an A Advance that bears interest
-----------------
as provided in Section 2.07(a)(i).
"Borrowers" means, at any time, collectively, the Company
---------
(both as a Borrower and as guarantor under Article IX of Advances
made to the Designated Borrowers) and each Designated Borrower.
"Borrowing" means an A Borrowing or a B Borrowing.
---------
"Business Combination" means any reorganization, merger or
--------------------
consolidation or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of assets or
stock of another corporation.
"Business Day" means a day of the year on which banks are
------------
not required or authorized by law to close in New York City and,
if the applicable Business Day relates to any Eurocurrency Rate
Advances denominated in any Currency, on which dealings are
carried on in the London interbank market for such Currency.
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-4-
"Capitalized Lease Obligation" means, with respect to any
----------------------------
Person for any period, an obligation of such Person to pay rent or
other amounts under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP; and the
amount of such obligation shall be the capitalized amount shown on
the balance sheet of such Person as determined in accordance with
GAAP.
"Change of Control" means the occurrence of any of the
-----------------
following events:
(a) the acquisition by any individual, entity or group
(within the meanings of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person or Group") of beneficial ownership
---------------
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 30% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
--------------------------
Stock") or (ii) the combined voting power of the then outstanding
-----
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
--------------------------
Securities"); provided that, for purposes of this paragraph (a),
----------
the following acquisitions shall not constitute a Change of
Control: (i) any acquisitions directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of paragraph (c) below; or
(b) individuals who, as of the date hereof, constitute the
Board of Directors of the Company (the "Incumbent Board") cease
---------------
for any reason to constitute at least a majority of the Board of
Directors of the Company; provided that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
(c) consummation by the Company of a Business Combination,
in each case unless following such Business Combination: (i) all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more Subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the
case may be, (ii) no Person or Group (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 30% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-5-
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board of Directors, providing for such Business
Combination; or
(d) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
"Citibank" has the meaning specified in the recital of
--------
parties to this Agreement.
"Closing Date" means the earliest date as of which the
------------
conditions precedent to effectiveness set forth in Section 3.01
shall have been satisfied or waived.
"Commitment" means, as to each Lender, the obligation of
----------
such Lender to make A Advances in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount set
opposite the name of such Lender on the signature pages hereof
under the caption "Commitment" or, in the case of a Person that
becomes a Lender pursuant to an assignment permitted under Section
8.07, or pursuant to an assumption of obligations under Section
2.05, as specified in the Register (as such Commitment may be
reduced from time to time pursuant hereto). The original
aggregate principal amount of the Commitments is $300,000,000.
"Commitment Termination Date" means November 21, 2000 or, in
---------------------------
the case of any Lender whose Commitment is extended pursuant to
Section 2.05(b), the date to which such Commitment is extended;
provided in each case that if any such date is not a Business Day,
the relevant Commitment Termination Date of such Lender shall be
the immediately preceding Business Day. When the term "Commitment
Termination Date" is used herein without reference to any
particular Lender, such term shall, in such instance, be deemed to
be a reference to the latest Commitment Termination Date of any of
the Lenders then in effect hereunder.
"Consolidated" refers to the consolidation of the accounts
------------
of the Company and its Subsidiaries in accordance with generally
accepted accounting principles, including principles of
consolidation, consistent with those applied in the preparation of
the financial statements referred to in Section 4.01(e)(i).
"Consolidated Net Tangible Assets" means, at any time, for
--------------------------------
the Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
Consolidated Tangible Assets at such time after deducting
therefrom all current liabilities, other than current liabilities
in respect of (a) notes and loans payable, (b) current maturities
of long-term debt and (c) current maturities of the principal
component of Capitalized Lease Obligations.
"Consolidated Net Worth" means, at any time, the sum for the
----------------------
Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance with GAAP),
the amount of capital stock plus the amount of surplus and
retained earnings (or, in the case of a surplus or retained
earnings deficit, minus the amount of such deficit).
"Consolidated Subsidiary" means a Subsidiary of the Company,
-----------------------
the accounts of which in accordance with generally accepted
accounting principles are consolidated with those of the Company.
"Consolidated Tangible Assets" means, at any time, for the
----------------------------
Company and its Consolidated Subsidiaries (determined on a
Consolidated basis without duplication in accordance
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-6-
with GAAP), the aggregate amount of all assets (less applicable
reserves and other properly deductible items) after deducting
therefrom all goodwill, trade names, trademarks, patents,
unamortized debt discount and expenses (to the extent included in
said aggregate amount of assets) and other like intangibles.
"Convert", "Conversion" and "Converted" each refers to a
------- ---------- ---------
conversion of A Advances of one Type denominated in Dollars into A
Advances of the other Type denominated in Dollars pursuant to
Section 2.08 or 2.09.
"Currency" means Dollars or Euros.
--------
"Debt" of any Person means, without duplication: (a) indebtedness
----
of such Person for borrowed money, (b) obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments,
(c) obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable arising, and
accrued expenses incurred, in the ordinary course of business so long
as such trade accounts payable are payable on customary trade terms or
on other trade terms that are more advantageous to the Company),
(d) Capitalized Lease Obligations of such Person and (e) obligations
of such Person under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (d) above.
"Debt to Adjusted EBITDA Ratio" means, at any date, the ratio of:
-----------------------------
(a) Debt of the Company and its Consolidated Subsidiaries
on a Consolidated basis as of such date to
--
(b) Adjusted EBITDA for the Rolling Period ending on or
most recently ended prior to such date.
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice
be given or time elapse or both.
"Designated Borrower" means any wholly owned Subsidiary of
-------------------
the Company as to which a Designation Letter has been delivered to
the Administrative Agent and as to which a Termination Letter has
not been delivered to the Administrative Agent in accordance with
Section 2.17.
"Designation Letter" has the meaning specified in
------------------
Section 2.17(a).
"Dollar Equivalent" means with respect to any Borrowing
-----------------
denominated in Euros, the amount of Dollars that would be required
to purchase the amount of Euros of such Borrowing on the date two
Business Days prior to the date of such Borrowing (or, in the case
of any determination made under Section 2.10(c) or redenomination
under Section 2.13(e), on the date of determination or
redenomination therein referred to), based upon the spot selling
rate at which the Administrative Agent offers to sell Euros for
Dollars in the London foreign exchange market at approximately
11:00 a.m., London time, for delivery two Business Days later.
"Dollars" or "$" refers to lawful money of the United
------- -
States of America.
364-DAY CREDIT AGREEMENT
<PAGE>
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"Domestic Lending Office" means, with respect to any Lender,
-----------------------
the office of such Lender specified as its "Domestic Lending
Office" in the Administrative Questionnaire of such Lender or in
the Acceptance pursuant to which it became a Lender, or such other
office of such Lender as such Lender may from time to time specify
to the Company and the Administrative Agent.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of
-----------------
a Lender; (iii) a commercial bank organized under the laws of the
United States, or any State thereof, and having total assets in
excess of $5,000,000,000; (iv) a savings and loan association or
savings bank organized under the laws of the United States, or any
State thereof, and having total assets in excess of
$3,000,000,000; (v) a commercial bank organized under the laws of
any other country that is a member of the Organization for
Economic Cooperation and Development or has concluded special
lending arrangements with the International Monetary Fund
associated with its General Arrangements to Borrow or of the
Cayman Islands, or a political subdivision of any such country,
and having total assets in excess of $5,000,000,000, so long as
such bank is acting through a branch or agency located in the
country in which it is organized or another country that is
described in this clause (v); (vi) a finance company, insurance
company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged
in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and having total assets in
excess of $3,000,000,000; and (vii) any other Person approved by
the Administrative Agent and the Company, such approval not to be
unreasonably withheld or delayed; provided that neither the
Company nor an Affiliate of the Company shall qualify as an
Eligible Assignee.
"Environmental Laws" means any and all applicable laws and
------------------
regulations relating to the protection of the environment,
including laws relating to emissions, discharges, releases, spills
and disposal of material into the environment (e.g., air, surface
water, groundwater and the land).
"Environmental Permit" means any permit, license or other
--------------------
governmental approval required under any Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of
---------------
Title IV of ERISA is a member of the Company's controlled group,
or under common control with the Company, within the meaning of
Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) the occurrence of a reportable
-----------
event, within the meaning of Section 4043 of ERISA, that would
have a Material Adverse Effect with respect to any Plan unless the
30-day notice requirement with respect to such event has been
waived by the PBGC; (b) the application for a minimum funding
waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such
Plan pursuant to Section 4041(c) of ERISA; (d) the cessation of
operations at a facility of the Company or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of
ERISA; (e) the failure by the Company or any of its ERISA
Affiliates to make a payment to a Plan if the conditions for the
imposition of a lien under Section 302(f)(1) of ERISA are
satisfied; (f) the adoption of an amendment to a Plan requiring
the provision of security to such Plan, pursuant to Section 307 of
ERISA; or (g) the institution by the PBGC of proceedings to
terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of
ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, a Plan.
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-8-
"Euro Equivalent" means with respect to any amount in
---------------
Dollars, the amount of Euros that could be purchased with such
amount of Dollars using the reciprocal of the foreign exchange
rate(s) specified in the definition of "Dollar Equivalent", as
determined by the Administrative Agent.
"Eurocurrency Lending Office" means, with respect to any
---------------------------
Lender, the office of such Lender specified as its "Eurocurrency
Lending Office" in the Administrative Questionnaire of such Lender
or in the Acceptance pursuant to which it became a Lender (or, if
no such office is specified, its Domestic Lending Office), or such
other office of such Lender as such Lender may from time to time
specify to the Company and the Administrative Agent.
"Eurocurrency Liabilities" has the meaning assigned to that
------------------------
term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Eurocurrency Rate" means:
-----------------
(a) For any Interest Period for each Eurocurrency Rate
Advance comprising part of the same Borrowing denominated in
Dollars, an interest rate per annum equal to the rate per annum
obtained by dividing (i) the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is
not such a multiple) of the rate per annum at which deposits in
U.S. dollars are offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount
substantially equal to such Reference Bank's Eurocurrency Rate
Advance comprising part of such Borrowing to be outstanding during
such Interest Period and for a period equal to such Interest
Period by (ii) a percentage equal to 100% minus the Eurocurrency
Rate Reserve Percentage for such Interest Period. The
Eurocurrency Rate for any Interest Period for each Eurocurrency
Rate Advance comprising part of the same Borrowing denominated in
Dollars shall be determined by the Administrative Agent on the
basis of applicable rates furnished to and received by the
Administrative Agent from the Reference Banks two Business Days
before the first day of such Interest Period, subject, however, to
the provisions of Section 2.08;
(b) For any Interest Period for each Eurocurrency Rate
Advance comprising part of the same Borrowing denominated in
Euros, an interest rate per annum equal to the rate per annum
obtained by dividing (i) the rate appearing on the Screen at
approximately 11:00 a.m., London time, two Business Days before
the first day of such Interest Period, as the Eurocurrency Rate
for deposits denominated in Euros with a maturity compatible to
such Interest Period, by (ii) a percentage equal to 100% minus the
Eurocurrency Rate Reserve Percentage for such Interest Period. In
the event that such rate is not available on the Screen at such
time for any reason, then the Eurocurrency Rate for such Interest
Period shall be the rate at which deposits in Euros in the amount
of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two
Business Days before the first day of such Interest Period.
"Eurocurrency Rate Advance" means an A Advance that bears
-------------------------
interest as provided in Section 2.07(a)(ii).
"Eurocurrency Rate Reserve Percentage" for any Interest
------------------------------------
Period for all Eurocurrency Rate Advances comprising part of the
same Borrowing means the reserve percentage applicable
364-DAY CREDIT AGREEMENT
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<PAGE>
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two Business Days before the first day of such Interest Period
under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities (or with respect to any
other category of liabilities that includes deposits by reference
to which the interest rate on Eurocurrency Rate Advances is
determined) having a term equal to such Interest Period.
"Euros" means the single currency of participating member
-----
states of the European Union.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Excluded Representations" means the representations and
------------------------
warranties set forth in Section 4.01(e)(ii), Section 4.01(f)
(excluding clause (ii) thereof) and the second sentence of Section
4.01(c).
"Facility Fee" has the meaning specified in Section 2.04(a).
------------
"Facility Fee Rate" has the meaning assigned to such term in
-----------------
Schedule 2A.
"Federal Funds Rate" means, for any period, a fluctuating
------------------
interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Rate Advances" has the meaning specified in Section
-------------------
2.03(a)(i).
"Floating Rate Advances" has the meaning specified in
----------------------
Section 2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
----
"Guaranteed Obligations" has the meaning specified in
----------------------
Section 9.01.
"Indemnified Party" has the meaning specified in Section
-----------------
8.04(b).
"Information" has the meaning specified in Section
-----------
4.01(j)(i).
"Interest Coverage Ratio" means, at any date, the ratio of
-----------------------
(a) Adjusted EBITDA for the Rolling Period ending on or most
recently ended prior to such date to (b) Interest Expense for such
Rolling Period.
"Interest Expense" means, for any period, the sum, for the
----------------
Company and its Consolidated Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP),
of all interest in respect of Debt (including, without limitation,
the interest component of any
364-DAY CREDIT AGREEMENT
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<PAGE>
-10-
payments in respect of Capitalized Lease Obligations) accrued or
capitalized during such period (whether or not actually paid
during such period).
"Interest Period" means, for each Eurocurrency Rate Advance
---------------
comprising part of the same A Borrowing, the period commencing on
the date of such Eurocurrency Rate Advance or the date of the
Conversion of any Base Rate Advance into such Eurocurrency Rate
Advance and ending on the last day of the period selected by the
Company pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period
selected by the Company pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or
six months (or, with respect to such portion of any Eurocurrency
Advance denominated in Euros that is scheduled to be repaid on the
Commitment Termination Date, a period of less than one month's
duration) commencing on the date of such Advance and ending on the
Commitment Termination Date, as the Company (on its own behalf and
on behalf of all other Borrowers) may, upon notice received by the
Administrative Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such
Interest Period, select; provided that:
(i) the Company may not select any Interest Period
that ends after the Commitment Termination Date;
(ii) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same A
Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day,
the last day of such Interest Period shall be extended to
occur on the next succeeding Business Day, provided that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next
preceding Business Day; and
(iv) whenever the first day of any Interest Period,
other than an Interest Period pertaining to a Eurocurrency
Borrowing denominated in Euros that ends on the Commitment
Termination Date that is permitted to be of less than one
month's duration as provided in this definition, occurs on a
day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
---------------------
1986, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Lenders" means the Initial Lenders listed on the signature
-------
pages hereof and each institution that shall become a party hereto
pursuant to Section 2.05 or Section 8.07(a), (b) or (d).
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, or any other type of preferential
arrangement, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property.
364-DAY CREDIT AGREEMENT
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"Majority Lenders" means at any time Lenders owed at least
----------------
66-2/3% of the then aggregate unpaid principal amount of the A
Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having at least 66-2/3% of the Commitments.
"Margin Stock" has the meaning specified in Regulation U of
------------
the Board of Governors of the Federal Reserve System.
"Material Adverse Effect" means a material adverse effect on
-----------------------
(a) the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole or (b) the
legality, validity or enforceability of this Agreement or any Note.
"Material Contract" means any contractual, legal or other
-----------------
obligation binding upon the Company or a Material Subsidiary under
which a default in payment by the Company or such Material
Subsidiary would have a Material Adverse Effect.
"Material Subsidiary" means, at any time, any Consolidated
-------------------
Subsidiary that, on a consolidated basis with its Subsidiaries, has:
(a) at least 5% (in the case of Solutia UK Ltd. and
Solutia Europe S.A./N.V.) or 10% (in the case of each other
Consolidated Subsidiary) of the total Consolidated assets of
the Company and its Consolidated Subsidiaries (determined as
of the last day of the most recent fiscal quarter of the
Company); or
(b) at least 5% (in the case of Solutia UK Ltd. and
Solutia Europe S.A./N.V.) or 10% (in the case of each other
Consolidated Subsidiary) of the Consolidated net sales of
the Company and its Consolidated Subsidiaries for the
twelve-month period ending on the last day of the most
recent fiscal quarter of the Company.
"Moody's" means Moody's Investors Service, Inc. and its
-------
successors.
"Multiemployer Plan" means a multiemployer plan, as defined
------------------
in Section 4001(a)(3) of ERISA, to which the Company or any of its
ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
----------------------
defined in Section 4001(a)(15) of ERISA, that (a) is maintained
for employees of the Company (or its predecessor's chemicals
business) or any of its ERISA Affiliates and at least one Person
other than the Company (or its predecessor's chemicals business)
and its ERISA Affiliates or (b) was so maintained and in respect
of which the Company (or its predecessor's chemicals business) or
any of its ERISA Affiliates could have liability under Section
4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Note" means an A Note or a B Note.
----
"Notice of A Borrowing" has the meaning specified in Section
---------------------
2.02(a).
"Notice of B Borrowing" has the meaning specified in Section
---------------------
2.03(a)(i).
"Ownership Interest" in (or of) any corporation, partnership,
------------------
joint venture, limited liability company, trust or estate means
(a) issued and outstanding capital stock having ordinary voting power
364-DAY CREDIT AGREEMENT
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<PAGE>
-12-
in the election of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency), (b) an interest in
the capital or profits of such partnership, joint venture or
limited liability company or (c) a beneficial interest in such
trust or estate.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Person" means an individual, partnership, corporation
------
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability
company or other entity, or a government or any political
subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Post-Closing Date Information" has the meaning specified in
-----------------------------
Section 4.01(j)(iv).
"Principal Property" means any building, structure or other
------------------
facility, together with the land upon which it is erected and
fixtures comprising a part thereof, used primarily for
manufacturing, the gross book value of which on the date as of
which such determination is being made exceeds 1% of the gross
property, plant and equipment of the Company as shown in its
Consolidated financial statements, provided that any property
which, in the opinion of the Company, is not of material
importance to the business of the Company and its Consolidated
Subsidiaries, taken as a whole, shall not be deemed to be a
Principal Property.
"Rated Securities" means, at any time, the long-term senior
----------------
unsecured, unguaranteed debt securities of the Company outstanding
at such time.
"Rating Level" means Rating Level 1, Rating Level 2, Rating
------------
Level 3, Rating Level 4, Rating Level 5 or Rating Level 6. For
purposes hereof, Rating Level 1 shall be deemed to be the highest
Rating Level and Rating Level 6 shall be deemed to be the lowest
Rating Level.
"Rating Level 1" means a rating of the Rated Securities better
--------------
than or equal to A2 by Moody's or better than or equal to A by S&P.
"Rating Level 2" means a rating of the Rated Securities equal
--------------
to A3 by Moody's or A- by S&P.
"Rating Level 3" means a rating of the Rated Securities
--------------
equal to Baa1 by Moody's or BBB+ by S&P.
"Rating Level 4" means a rating of the Rated Securities
--------------
equal to Baa2 by Moody's or BBB by S&P.
"Rating Level 5" means a rating of the Rated Securities
--------------
equal to Baa3 by Moody's or BBB- by S&P.
"Rating Level 6" means a rating of the Rated Securities less
--------------
than Baa3 by Moody's and less than BBB- by S&P. If Moody's or S&P
shall not have in effect a rating for the Rated Securities at any
time, then the Rated Securities shall be deemed to be rated by
Moody's or S&P, as the case may be, in Rating Level 6.
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-13-
"Rating Level Change" means a change in the rating of the
-------------------
Rated Securities by either or both of Moody's and S&P (other than
as a result of a change in the rating system of such rating
agency) that results in the change from one Rating Level to
another, which Rating Level Change shall be effective on the date
on which the relevant change in the rating of the Rated Securities
is first announced by Moody's or S&P, as the case may be.
"Reference Banks" means Citibank, Bank of America and
---------------
Societe Generale; provided that the Company (on its own behalf and
on behalf of the other Borrowers) may at any time substitute
another Lender as one of the Reference Banks, but such substitution
shall terminate after 30 days if within such period the Majority
Lenders shall have notified the Administrative Agent of their
objection to such substitution.
"Register" has the meaning specified in Section 8.07(c).
--------
"Rolling Period" means the period of four consecutive calendar
--------------
quarters ending on or most recently ended prior to such date.
"S&P" means Standard & Poor's Ratings Services, presently a
---
division of The McGraw-Hill Companies, Inc., and its successors.
"Screen" means Telerate Page 3750 (or such other page as may
------
replace such Telerate Page 3750 for purposes of displaying the
Eurocurrency Rate for Euros); provided that, if the Administrative
Agent determines that there is no such relevant display page on
the Telerate Service for the Eurocurrency Rate for Euros, "Screen"
shall mean the relevant display page for the Eurocurrency Rate for
Euros (as determined by the Administrative Agent) on the Reuter
Monitor Money Rates Service.
"Single Employer Plan" means a single employer plan, as
--------------------
defined in Section 4001(a)(15) of ERISA, that (a) is maintained
for employees of the Company (or its predecessor's chemicals
business) or any of its ERISA Affiliates and no Person other than
the Company (or its predecessor's chemicals business) and its
ERISA Affiliates or (b) was so maintained and in respect of which
the Company (or its predecessor's chemicals business) or any of
its ERISA Affiliates could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Solvent" means, with respect to any Person on a particular
-------
date, that on such date (a) the present fair salable value of the
assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts
as they become absolute and matured, (b) such Person does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (c) such Person is not engaged in business
or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would be unreasonably
small in relation to such business or such transaction.
"Specified Joint Venture" means a joint venture or other
-----------------------
Person (other than a Consolidated Subsidiary of the Company) of
which (or in which) at least 50% of the Ownership Interests
thereof is at the time directly or indirectly owned by the
Company, by the Company and one or more of its Consolidated
Subsidiaries or by one or more of the Company's Consolidated
Subsidiaries, provided that the Company's joint venture partners
in such joint venture or other Person do not, in the aggregate,
control (or possess the ability to control) such joint venture or
other Person. For purposes of this definition, a "joint venture
partner" means a Person that owns any Ownership Interests in the
related joint venture or other Person and that is not the Company
or one of its Consolidated Subsidiaries.
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-14-
"Subsidiary" of any Person means any corporation, partnership,
----------
joint venture, limited liability company, trust or estate of which
(or in which) more than 50% of the Ownership Interests thereof is at
the time directly or indirectly owned or controlled by such Person,
by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries.
"Syndication Agent" has the meaning specified in the
-----------------
recital of parties to this Agreement.
"Taxes" has the meaning specified in Section 2.15(a).
-----
"Threshold Amount" means, at any time: (a) if the
----------------
Company's Consolidated Net Worth at such time is greater than zero,
$50,000,000; and (b) at any other time, $25,000,000.
"Utilization Fee" has the meaning specified in Section 2.04(c).
---------------
"Utilization Fee Rate" has the meaning assigned to such term
--------------------
in Schedule 2A.
"Voting Stock" means capital stock issued by a corporation,
------------
or equivalent interests in any other Person, the holders of which
are ordinarily, in the absence of contingencies, entitled to vote
for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I
--------------------
of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement
---------------------------
in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms and Determinations. All
-----------------------------------
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements referred to
in Section 4.01(e)(i) ("GAAP"). All determinations of Adjusted EBITDA,
----
Consolidated Net Tangible Assets, Consolidated Net Worth, Consolidated
Tangible Assets and Interest Expense shall be made on the basis of the
financial statements most recently delivered pursuant to Section 4.01(e)(i)
and Sections 5.01(i)(i) and (ii). In the event that, after the date of this
Agreement, there are any changes in GAAP, the Lenders will consider a
request by the Company to amend this Agreement to take account of such
changes.
SECTION 1.04. Currencies; Currency Equivalents. At any time,
--------------------------------
any reference in the definition of the term "Euros" or in any other
provision of this Agreement to the currency of the participating member
states of the European Union means the lawful currency of such
participating member states at such time whether the name of such
currency is the same as it was on the date hereof. Except as provided
in Section 2.10(c) and Section 2.13(e), for purposes of determining
(i) whether the amount of any Borrowing, together with all other
Borrowings then outstanding or to be borrowed at the same time as such
Borrowing, would exceed the aggregate amount of the Commitments,
(ii) the aggregate unutilized amount of the Commitments and (iii) the
outstanding aggregate principal amount of Borrowings, the outstanding
principal amount of any Borrowing that is denominated in Euros shall be
deemed to be the Dollar Equivalent of the amount of Euros of such
Borrowing determined as of the date of such Borrowing. Wherever in this
Agreement in connection with a Borrowing or Advance an amount, such as a
required minimum or multiple amount, is expressed in Dollars, but such
Borrowing or Advance
364-DAY CREDIT AGREEMENT
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<PAGE>
-15-
is denominated in Euros, such amount shall be the relevant Euro
Equivalent of such Dollar amount (rounded to the nearest 1,000 units of
Euros).
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The A Advances. Each Lender severally agrees,
--------------
on the terms and conditions hereinafter set forth, to make A Advances
to the Company and any Designated Borrower (in Dollars or in Euros, at
the election of the Company on its own behalf or on behalf of the
applicable Borrower) from time to time on any Business Day during
the period from the Closing Date to and including the Commitment
Termination Date in an aggregate amount not to exceed at any time
outstanding the amount of such Lender's Commitment; provided that the
aggregate amount of the Commitments of the Lenders shall be deemed used
from time to time to the extent of the Dollar Equivalent of the
aggregate amount of the B Advances then outstanding and such deemed use
of the aggregate amount of the Commitments shall be allocated among the
Lenders ratably according to their respective Commitments (such deemed
use of the aggregate amount of the Commitments being a "B Reduction").
-----------
Each A Borrowing shall be in an aggregate amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, or the aggregate
amount of the unused portion of the Lenders' Commitments; provided that
any A Borrowing in an aggregate amount less than $10,000,000 shall
consist solely of Base Rate Advances. In addition, each A Borrowing
shall consist of A Advances of the same Type and Currency and having the
same Interest Period made on the same day by the Lenders ratably
according to their respective Commitments. Within the limits of each
Lender's Commitment, the Borrowers may borrow under this Section 2.01,
prepay pursuant to Section 2.10 and, on or prior to the Commitment
Termination Date, reborrow under this Section 2.01.
SECTION 2.02. Making the A Advances.
---------------------
(a) Each A Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed A Borrowing (in the case of an A
Borrowing to consist of Eurocurrency Rate Advances), or by 11:00 A.M.
(New York City time) on the day of the proposed A Borrowing (in the case
of an A Borrowing to consist of Base Rate Advances), by the Company (on
its own behalf and on behalf of the other Borrowers) to the
Administrative Agent, which shall give to each Lender prompt notice
thereof by telecopier or by telex. Each such notice of an A Borrowing
(a "Notice of A Borrowing") shall be by telecopier or by telex,
---------------------
confirmed immediately in writing, in substantially the form of Exhibit
B-1 hereto, specifying therein (i) the date of such A Borrowing, (ii)
the Type of A Advances comprising such A Borrowing, (iii) the aggregate
amount of such A Borrowing and the Currency thereof (except that Base
Rate Advances must be denominated in Dollars), (iv) in the case of an A
Borrowing consisting of Eurocurrency Rate Advances, the initial Interest
Period for each such A Advance and (v) the name of the Borrower of such
A Advance (which shall be the Company or a Designated Borrower). Each
Lender shall on the date of such A Borrowing, before 11:00 A.M. (New
York City time), in the case of an A Borrowing to consist of
Eurocurrency Rate Advances, and before 1:00 P.M. (New York City time),
in the case of an A Borrowing to consist of Base Rate Advances, make
available for the account of its Applicable Lending Office to the
Administrative Agent at its address referred to in Section 8.02, in the
relevant Currency and in same day funds, such Lender's ratable portion
of such A Borrowing. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent will make such funds available to
the Company at the Administrative Agent's aforesaid address (or, in the
case of an A Borrowing by a Designated Borrower, the Administrative
Agent will make such funds available to the relevant Borrower in such
manner as the Administrative Agent and the Company may agree).
364-DAY CREDIT AGREEMENT
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(b) Anything in subsection (a) above to the contrary
notwithstanding (1) no Borrower may select Eurocurrency Rate Advances
for any A Borrowing if the obligation of the Lenders to make
Eurocurrency Rate Advances shall then be suspended pursuant to
Section 2.08 or 2.12 (except as otherwise provided in Section
2.12(b)(ii)) and (2) Base Rate Advances shall be denominated solely in
Dollars.
(c) Each Notice of A Borrowing shall be binding on the
Company and each Designated Borrower. In the case of any A Borrowing
that the related Notice of A Borrowing specifies is to consist of
Eurocurrency Rate Advances, the Company (and, if a Designated Borrower
is the borrower of the related A Advances, such Designated Borrower)
shall indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any revocation of such Notice of A
Borrowing by the Company (or such Designated Borrower) or any failure to
fulfill on or before the date specified in such Notice of A Borrowing
for such A Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the A Advance to be made by such Lender
as part of such A Borrowing when such A Advance, as a result of such
revocation or failure, is not made on such date.
(d) Unless the Administrative Agent shall have received
notice from a Lender prior to the date of any A Borrowing (in the case
of an A Borrowing to consist of Eurocurrency Rate Advances) and not
later than 12:00 Noon (New York City time) on the Business Day of the
proposed A Borrowing (in the case of an A Borrowing to consist of Base
Rate Advances) that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of such A Borrowing,
the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such A
Borrowing in accordance with subsection (a) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make
available to the relevant Borrower on such date a corresponding amount;
provided that nothing in this subsection (d) shall be construed to
relieve any Lender from any obligation hereunder to make available to
the Administrative Agent its ratable portion of such A Borrowing in
accordance with subsection (a) of this Section 2.02. If and to the
extent that such Lender shall not have so made such ratable portion
available to the Administrative Agent, such Lender and the relevant
Borrower severally agree to repay to the Administrative Agent forthwith
on demand such corresponding amount together with interest thereon, for
each day from the date such amount is made available to the relevant
Borrower until the date such amount is repaid to the Administrative
Agent, at (i) in the case of such Borrower, the interest rate applicable
at such time to the A Advances comprising such A Borrowing and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Lender's A Advance as part of such A
Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the A Advance to be
made by it as part of any A Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder to make its A Advance on the date
of such A Borrowing, but no Lender shall be responsible for the failure
of any other Lender to make the A Advance to be made by such other
Lender on the date of any A Borrowing.
SECTION 2.03. The B Advances.
--------------
(a) Each Lender severally agrees that the Borrowers may
make B Borrowings in Dollars or in Euros under this Section 2.03 from
time to time on any Business Day during the period from the Closing Date
until the date occurring seven days prior to the Commitment Termination
Date in the manner set forth below; provided that, following the making
of each B Borrowing, (X) the Dollar Equivalent of the aggregate amount
of the B Advances of all Lenders then outstanding shall not exceed the
aggregate amount of the Commitments of the Lenders, and (Y) the Dollar
Equivalent of the aggregate amount of all Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders.
364-DAY CREDIT AGREEMENT
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(i) The Company (on its own behalf and on behalf of
the other Borrowers) may request a B Borrowing under this
Section 2.03 by delivering to the Administrative Agent, by
telecopier or telex, confirmed immediately in writing, a notice of
a B Borrowing (a "Notice of B Borrowing"), in substantially the
---------------------
form of Exhibit B-2 hereto, specifying therein:
(1) the date of such proposed B Borrowing;
(2) the aggregate amount of such proposed B Borrowing
and the Currency thereof;
(3) the maturity date for repayment of each B Advance
to be made as part of such B Borrowing (which maturity date
may not be earlier than the date occurring thirty days after
the date of such B Borrowing or later than the Commitment
Termination Date);
(4) the interest payment date or dates relating thereto;
(5) whether such B Borrowing is to consist of Fixed
Rate Advances or Floating Rate Advances;
(6) the name of the applicable Borrower (which shall
be the Company or a Designated Borrower); and
(7) any other terms to be applicable to such B Borrowing,
not later than 10:00 A.M. (New York City time) in the case of B
Advances to be denominated in Dollars, and not later than 10:00
A.M. (London time) in the case of B Advances to be denominated in
Euros, (A) at least one Business Day prior to the date of the
proposed B Borrowing, if the Company shall specify in the Notice
of B Borrowing that the rates of interest to be offered by the
Lenders shall be fixed rates per annum (the B Advances comprising
any such B Borrowing being referred to herein as "Fixed Rate
----------
Advances") and (B) at least four Business Days (in the case of B
--------
Advances to be denominated in Dollars), or five Business Days (in
the case of B Advances to be denominated in Euros) prior to the
date of the proposed B Borrowing, if the Company shall instead
specify in the Notice of B Borrowing the basis to be used by the
Lenders in determining the rates of interest to be offered by them
(the B Advances comprising such B Borrowing being referred to
herein as "Floating Rate Advances"). The Administrative Agent
----------------------
shall in turn promptly notify each Lender of each request for a B
Borrowing received by it from the Company by sending such Lender a
copy of the related Notice of B Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects
to do so, irrevocably offer to make one or more B Advances to the
applicable Borrower as part of such proposed B Borrowing at
a rate or rates of interest specified by such Lender in its sole
discretion, by notifying the Administrative Agent (which shall
give prompt notice thereof to the Company), before 10:00 A.M. (New
York City time) in the case of B Advances to be denominated in
Dollars, and not later than 10:00 A.M. (London time) in the case
of B Advances to be denominated in Euros, on the date of such
proposed B Borrowing, in the case of a B Borrowing consisting of
Fixed Rate Advances and three Business Days before the date of
such proposed B Borrowing, in the case of a B Borrowing consisting
of Floating Rate Advances, of the minimum amount and maximum
amount of each B Advance which such Lender would be willing to
make as part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of this Section
2.03(a), exceed such Lender's Commitment, if any), the rate or
rates of interest therefor and such Lender's Applicable Lending
Office with respect to such B Advance; provided that if the
Administrative Agent in its capacity as a Lender shall, in its
sole discretion, elect to make any such offer, it shall notify the
Company of such offer before 9:00
364-DAY CREDIT AGREEMENT
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<PAGE>
-18-
A.M. (New York City time or London time, as applicable) on the
date on which notice of such election is to be given to the
Administrative Agent by the other Lenders. If any Lender shall
elect not to make such an offer, such Lender shall so notify the
Administrative Agent, before 10:00 A.M. (New York City time or
London time, as applicable) on the date on which notice of such
election is to be given to the Administrative Agent by the other
Lenders, and such Lender shall not be obligated to, and shall not,
make any B Advance as part of such B Borrowing; provided that the
failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any B Advance as part of such
proposed B Borrowing.
(iii) The Company (on its own behalf and on behalf of
the other Borrowers) shall, in turn, before 12:00 Noon (New York
City time) in the case of B Advances consisting of Fixed Rate
Advances to be denominated in Dollars, and not later than 12:00
Noon (London time) in the case of B Advances consisting of Fixed
Rate Advances to be denominated in Euros, on the date of such
proposed B Borrowing, and before 1:00 P.M. (New York City time) in
the case of B Advances consisting of Floating Rate Advances to be
denominated in Dollars, and not later than 1:00 P.M. (London time)
in the case of B Advances consisting of Floating Rate Advances to
be denominated in Euros, three Business Days before the date of
such proposed B Borrowing, either:
(x) cancel such B Borrowing by giving the Administrative
Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender
or Lenders pursuant to paragraph (ii) above, in order of the
lowest to highest rates of interest or margins (or, if two or
more Lenders bid at the same rate of interest, and the amount
of accepted offers is less than the aggregate amount of such
offers, the amount to be borrowed from such Lenders as part
of such B Borrowing shall be allocated among such Lenders pro
rata on the basis of the maximum amount offered by such Lenders
at such rates or margin in connection with such B Borrowing),
by giving notice to the Administrative Agent of the amount of
each B Advance (which amount shall be equal to or greater than
the minimum amount, and equal to or less than the maximum
amount, notified to the Company by the Administrative Agent
on behalf of such Lender for such B Advance pursuant to
paragraph (ii) above) to be made by each Lender as part of
such B Borrowing, and reject any remaining offers made by
Lenders pursuant to paragraph (ii) above by giving the
Administrative Agent notice to that effect.
(iv) If the Company notifies the Administrative Agent that
such B Borrowing is canceled pursuant to paragraph (iii)(x) above,
the Administrative Agent shall give prompt notice thereof to the
Lenders and such B Borrowing shall not be made.
(v) If the Company (on its own behalf or on behalf of
another Borrower) accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the
Administrative Agent shall in turn promptly notify (A) each Lender
that has made an offer as described in paragraph (ii) above, of
the date and aggregate amount of such B Borrowing and whether or
not any offer or offers made by such Lender pursuant to paragraph
(ii) above have been so accepted by the Company, (B) each Lender
that is to make a B Advance as part of such B Borrowing, of the
amount of each B Advance to be made by such Lender as part of such
B Borrowing, and (C) each Lender that is to make a B Advance as
part of such B Borrowing, upon receipt, that the Administrative
Agent has received forms of documents appearing to fulfill the
applicable conditions set forth in Article III. Each Lender that
is to make a B Advance as part of such B Borrowing shall, before
1:00 P.M. (New York City time) in the case of B Advances to be
denominated in Dollars, and not later than 1:00 P.M. (London time)
in the case of B Advances to be denominated in Euros, on the date
of such B Borrowing specified in the notice received from the
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-19-
Administrative Agent pursuant to clause (A) of the preceding
sentence or any later time when such Lender shall have received
notice from the Administrative Agent pursuant to clause (C) of the
preceding sentence, make available for the account of its
Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in the relevant Currency and in
same day funds, such Lender's portion of such B Borrowing. Upon
fulfillment of the applicable conditions set forth in Article III
and after receipt by the Administrative Agent of such funds, the
Administrative Agent will make such funds available to the Company
at the Administrative Agent's address referred to in Section 8.02
(or, in the case of a B Borrowing by a Designated Borrower, the
Administrative Agent will make such funds available to the
relevant Borrower in such manner as the Administrative Agent and
the Company may agree). Promptly after each B Borrowing the
Administrative Agent will notify each Lender of the amount of the
B Borrowing, the consequent B Reduction and the dates upon which
such B Reduction commenced and will terminate.
(b) Each B Borrowing shall be in an aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof, or
the aggregate amount of the unused portion of the Lenders' Commitments
and, following the making of each B Borrowing, the Company shall be in
compliance with the limitations set forth in the proviso to the first
sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in
this Section 2.03, the Company may from time to time borrow under this
Section 2.03, repay pursuant to subsection (d) below, and reborrow under
this Section 2.03; provided that a B Borrowing shall not be made within
three Business Days of the date of any other B Borrowing.
(d) Each Borrower shall repay to the Administrative Agent
for the account of each Lender that has made a B Advance to such
Borrower, on the maturity date of each B Advance made to such Borrower
(such maturity date being that specified by the Company for repayment of
such B Advance in the related Notice of B Borrowing delivered pursuant
to subsection (a)(i) above and provided in the B Note evidencing such B
Advance), the then unpaid principal amount of such B Advance. No
Borrower shall have the right to prepay any B Advance.
(e) Each Borrower shall pay interest on the unpaid principal
amount of each B Advance made to such Borrower from the date of such
B Advance to the date the principal amount of such B Advance is paid in
full, in the applicable Currency and at the rate of interest for such
B Advance specified by the Lender making such B Advance in its notice
with respect thereto delivered pursuant to subsection (a)(ii) above,
payable (i) on the interest payment date or dates specified by the Company
for such B Advance in the related Notice of B Borrowing delivered pursuant
to subsection (a)(i) above, as provided in the B Note evidencing such
B Advance, and (ii) on the date such B Advance shall be paid in full.
Upon the occurrence and during the continuance of any Event of Default,
each Borrower shall pay interest on the amount of unpaid principal of each
B Advance made to such Borrower owing to a Lender, payable in arrears on
the date or dates interest is payable thereon, at a rate per annum equal at
all times to 2% per annum above the rate per annum required to be paid on
such B Advance under the terms of the B Note evidencing such B Advance
unless otherwise agreed in such B Note.
(f) If requested by a Lender making a B Advance, the indebtedness
of each Borrower resulting from each B Advance made to such Borrower as
part of a B Borrowing shall be evidenced by a separate B Note of such
Borrower payable to the order of the Lender making such B Advance.
(g) The Company (on its own behalf and on behalf of the
other Borrowers) shall pay to the Administrative Agent for its own account
the Competitive Bid Administration Fee described in Section 2.04(b) with
each request for a B Borrowing whether or not any B Borrowing is in fact made.
364-DAY CREDIT AGREEMENT
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SECTION 2.04. Fees.
----
(a) Facility Fee. The Company agrees to pay to the
------------
Administrative Agent for the account of each Lender a facility fee (the
"Facility Fee") in Dollars on the aggregate amount (whether used or
------------
unused) of such Lender's Commitment from the date hereof (in the case of
each Initial Lender) and from the effective date specified in the
Acceptance pursuant to which it became a Lender (in the case of each
other Lender) until the Commitment Termination Date of such Lender at a
rate per annum equal to the Facility Fee Rate in effect from time to
time. The Facility Fee shall be payable quarterly in arrears on the
last Business Day of each March, June, September and December and, for
each Lender, on the Commitment Termination Date of such Lender.
(b) Competitive Bid Administration Fee. The Company
----------------------------------
shall pay to the Administrative Agent for its own account a fee in
Dollars an amount heretofore agreed between the Company and the
Administrative Agent with each request for a B Borrowing whether or not
any B Borrowing is in fact made.
(c) Utilization Fee. The Company agrees to pay a utilization
---------------
fee (the "Utilization Fee") in Dollars to the Administrative Agent for
---------------
account of each Lender, which shall accrue at the Utilization Fee Rate
on the daily aggregate outstanding principal amount of the Advances of
such Lender for each day on which the aggregate outstanding principal
amount of the Advances (including all B Advances) equals or exceeds an
amount equal to 33% of the Commitments. The Utilization Fee shall be
payable monthly in arrears on the last Business Day of month and, for
each Lender, on the Commitment Termination Date of such Lender.
SECTION 2.05. Termination, Reduction and Extension of
---------------------------------------
Commitments.
- -----------
(a) Commitment Reductions. The Commitment of each Lender
---------------------
shall be automatically reduced to zero on the Commitment Termination
Date of such Lender. In addition, the Company (on its own behalf and on
behalf of the other Borrowers) shall have the right, upon at least three
Business Days' notice to the Administrative Agent, to terminate in whole
or reduce ratably in part the unused portions of the respective
Commitments of the Lenders, provided that (i) the aggregate amount of
the Commitments of the Lenders shall not be reduced to an amount which
is less than the aggregate principal amount of the Advances then
outstanding; and (ii) each partial reduction shall be in an aggregate
amount of $10,000,000 or an integral multiple of $1,000,000 in excess
thereof. Once terminated, a Commitment cannot be reinstated.
(b) Commitment Extensions.
---------------------
(i) The Company (on its own behalf and on behalf of the
other Borrowers) may, by notice to the Administrative Agent (which
shall promptly notify the Lenders) not more than 60 days and not
less than 40 days prior to the Commitment Termination Date then in
effect hereunder (the "Existing Commitment Termination Date"),
------------------------------------
request that each Lender extend such Lender's Commitment
Termination Date for an additional 364 days from the Existing
Commitment Termination Date.
(ii) Each Lender, acting in its sole and individual discretion,
shall, by notice to the Administrative Agent given not more than 30
days immediately prior to the Existing Commitment Termination Date
but in any event no later than the date (the "Notice Date") that is
-----------
20 days prior to the Existing Commitment Termination Date, advise the
Administrative Agent whether or not such Lender agrees to such
extension (and each Lender that determines not to so extend its
Commitment Termination Date (a "Non-Extending Lender") shall notify
--------------------
the Administrative Agent(which shall notify the other Lenders) of
such fact promptly after such determination (but in any event no later
than the Notice Date) and any Lender that does not so advise the
Administrative Agent on or before
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<PAGE>
<PAGE>
-21-
the Notice Date shall be deemed to be a Non-Extending Lender. The
election of any Lender to agree to such extension shall not
obligate any other Lender to so agree.
(iii) The Administrative Agent shall notify the Company of
each Lender's determination under this Section 2.05(b) no later
than the date 15 days prior to the Existing Commitment Termination
Date (or, if such date is not a Business Day, on the next
preceding Business Day).
(iv) The Company (on its own behalf and on behalf of the
other Borrowers) shall have the right on or before the Existing
Commitment Termination Date to replace each Non-Extending Lender
with, and add as "Lenders" under this Agreement in place thereof,
one or more Eligible Assignees (each, an "Additional Commitment
---------------------
Lender") with the approval of the Administrative Agent and the
------
Syndication Agent (which approvals shall not be unreasonably
withheld), each of which Additional Commitment Lenders shall have
entered into an Assumption and Acceptance pursuant to which such
Additional Commitment Lender shall, effective as of the Existing
Commitment Termination Date, undertake a Commitment (and, if any
such Additional Commitment Lender is already a Lender, its
Commitment shall be in addition to such Lender's Commitment
hereunder on such date).
(v) If (and only if) the total of the Commitments of the
Lenders that have agreed so to extend their Commitment Termination
Date and the additional Commitments of the Additional Commitment
Lenders shall be more than 51% of the aggregate amount of the
Commitments in effect immediately prior to the Existing Commitment
Termination Date, then, effective as of the Existing Commitment
Termination Date, the Commitment Termination Date of each Extending
Lender and of each Additional Commitment Lender shall be extended
to the date falling 364 days after the Existing Commitment
Termination Date (except that, if such date is not a Business Day,
such Commitment Date as so extended shall be the next preceding
Business Day) and each Additional Commitment Lender shall thereupon
become a "Lender" for all purposes of this Agreement.
(vi) Notwithstanding the foregoing, the extension of the
Commitment Termination Date pursuant to this Section 2.05(b) shall
not be effective with respect to any Lender unless:
(x) no Default shall have occurred and be continuing on
either of the date of the notice requesting such extension or
the Existing Commitment Termination Date; and
(y) on or before the Commitment Termination Date of
each Non-Extending Lender, (1) each Borrower shall have paid
in full the principal of and interest on all of the Advances
made by such Non-Extending Lender to such Borrower
hereunder; and (2) the Company shall have paid in full all
other amounts owing to such Lender hereunder.
SECTION 2.06. Repayment of Advances; Evidence of Debt.
---------------------------------------
(a) A Advances. Each Borrower shall repay the principal amount
----------
of each A Advance made by each Lender to such Borrower, in the Currency
of such A Advance, and each A Advance made by such Lender shall mature,
on the Commitment Termination Date of such Lender.
(b) B Advances. Each Borrower shall repay the principal
----------
amount of each B Advance made by each Lender to such Borrower as
provided in Section 2.03(e).
(c) Note Option. Any Lender may request that the A Advances
-----------
made or to be made by it to a Borrower to be evidenced by an A Note
payable by such Borrower. In such event, the Company (on its own behalf
and on behalf of the other Borrowers) shall prepare, have executed by
the relevant Borrower and
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<PAGE>
<PAGE>
-22-
deliver to such Lender an A Note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered
assigns). If a Lender whose A Advances are so evidenced by an A Note
thereafter assigns such A Advances, such A Advances will be evidenced by
an A Note only if the assignee so requests in accordance with this
Section 2.06(c) and Section 8.07
SECTION 2.07. Interest on A Advances.
----------------------
(a) Scheduled Interest. Each Borrower shall pay interest
------------------
on the unpaid principal amount of each A Advance owing by such Borrower
to each Lender, in the Currency in which such A Advance is denominated,
from the date of such A Advance until such principal amount shall be
paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such A
------------------
Advance is a Base Rate Advance, a rate per annum equal at all
times to the Base Rate in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September
and December during such periods and on the date such Base Rate
Advance shall be Converted or paid in full.
(ii) Eurocurrency Rate Advances. During such periods as
--------------------------
such A Advance is a Eurocurrency Rate Advance, a rate per annum
equal at all times during each Interest Period for such A Advance
to the sum of (x) the Eurocurrency Rate for such Interest Period
for such Advance plus (y) the Applicable Margin in effect from
time to time, payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than
three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and
on the date such Eurocurrency Rate Advance shall be Converted or
paid in full.
(b) Default Interest. Upon the occurrence and during the
----------------
continuance of any Event of Default, each Borrower shall pay interest on
the unpaid principal amount of each A Advance owing by such Borrower to
each Lender, in the Currency in which such A Advance is denominated,
payable in arrears on the dates referred to in clause (a)(i) or (a)(ii)
above, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid on such A Advance pursuant to clause
(a)(i) or (a)(ii) above.
SECTION 2.08. Interest Rate Determination; Changes in
---------------------------------------
Rating Systems.
- --------------
(a) Each Reference Bank agrees to furnish to the Administrative
Agent timely information for the purpose of determining the Eurocurrency
Rate for Advances denominated in Dollars. If any one or more of the
Reference Banks shall not furnish such timely information to the
Administrative Agent for the purpose of determining any such interest
rate, the Administrative Agent shall determine such interest rate on the
basis of timely information furnished by the remaining Reference Banks.
The Administrative Agent shall give prompt notice to the Company and the
Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.07(a)(i) or (ii), and the rate, if any,
furnished by each Reference Bank for the purpose of determining the
interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurocurrency Rate Advances
denominated in any Currency, the Majority Lenders notify the
Administrative Agent that the Eurocurrency Rate for any Interest Period
for such Advances in such Currency will not adequately reflect the cost
to such Majority Lenders of making, funding or maintaining their
respective Eurocurrency Rate Advances in such Currency for such Interest
Period, the Administrative Agent shall forthwith so notify the Company
and the Lenders, whereupon (i) if such Currency is Euros, the related
Notice of Borrowing shall be ineffective, (ii) if such Currency is
Dollars, such Eurocurrency Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base
Rate Advance, and (iii) regardless of Currency, the obligation of the
Lenders to make, or (in the case of Dollars) to Convert A Advances into,
Eurocurrency Rate Advances shall be suspended until
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-23-
the Administrative Agent shall notify the Company and the Lenders that
the circumstances causing such suspension no longer exist.
(c) If the Company shall fail to select the duration of any
Interest Period for any Eurocurrency Rate Advances in accordance with
the provisions contained in the definition of "Interest Period" in
Section 1.01, the Administrative Agent will forthwith so notify the
Company and the Lenders and such Advances will automatically, on the
last day of the then existing Interest Period therefor, Convert into
Base Rate Advances.
(d) On the date on which the aggregate unpaid principal
amount of Eurocurrency Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than
$10,000,000, such Advances shall automatically Convert into Base Rate
Advances and on and after such date the right of the Borrowers to
Convert such A Advances shall terminate.
(e) Upon the occurrence and during the continuance of any
Event of Default, (i) each Eurocurrency Rate Advance denominated in
Dollars will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Lenders to make, or to Convert A Advances denominated
in Dollars into, Eurocurrency Rate Advances shall be suspended.
(f) If fewer than two Reference Banks furnish timely
information to the Administrative Agent for determining the Eurocurrency
Rate for any Eurocurrency Rate Advances denominated in Dollars,
(i) the Administrative Agent shall forthwith notify the
Company and the Lenders that the interest rate cannot be determined
for such Eurocurrency Rate Advances,
(ii) each such A Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate
Advance (or if such Advance is then a Base Rate Advance, will continue
as a Base Rate Advance), and
(iii) the obligation of the Lenders to make, or to Convert
A Advances into, Eurocurrency Rate Advances shall be suspended until
the Administrative Agent shall notify the Company and the Lenders that
the circumstances causing such suspension no longer exist.
(g) If the rating system of either Moody's or S&P shall change,
or if either such rating agency shall cease to be in the business of
rating corporate debt obligations, the Company (on its own behalf and on
behalf of the other Borrowers) and the Administrative Agent (on behalf of
the Lenders) shall negotiate in good faith to amend the references to
specific ratings in this Agreement to reflect such changed rating system
or the non-availability of ratings from such rating agency (provided that
any such amendment to such specific ratings shall in no event be effective
without the approval of the Majority Lenders).
SECTION 2.09. Optional Conversion of A Advances. The Company
---------------------------------
(on its own behalf and on behalf of the other Borrowers) may on any
Business Day, upon notice given to the Administrative Agent not
later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Conversion and subject to the
provisions of Sections 2.08 and 2.12, Convert all Dollar-denominated
A Advances of one Type comprising the same Borrowing by a Borrower into
Dollar-denominated A Advances owing by such Borrower of the other Type;
provided that any Conversion of Dollar-denominated Eurocurrency Rate
Advances into Base Rate Advances shall be made only on the last day of
an Interest Period for such Eurocurrency Rate Advances. Each such notice
of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the A Advances to be Converted,
and (iii) if such Conversion is into Eurocurrency Rate Advances, the
duration of the initial Interest Period for each such A
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-24-
Advance. Each notice of Conversion shall be irrevocable and binding on
the Company and each other Borrower.
SECTION 2.10. Prepayments, Etc.
-----------------
(a) Optional Payments of A Advances. Each Borrower may,
-------------------------------
upon notice by the Company to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment, given to
the Administrative Agent not later than 11:00 A.M. (New York City time)
on the proposed date in the case of Base Rate Advances and at least two
Business Days prior to the proposed date in the case of Eurocurrency
Rate Advances, and if such notice is given by the Company the applicable
Borrower shall, prepay the outstanding principal amount of the A
Advances owing by such Borrower in whole or ratably in part, together
with accrued interest to the date of such prepayment on the principal
amount prepaid; provided that (x) each partial prepayment shall be in an
aggregate principal amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment
of a Eurocurrency Rate Advance, the applicable Borrower and the Company
shall be jointly and severally obligated to reimburse the Lenders in
respect thereof pursuant to Section 8.04(c).
(b) Change of Control. If any Change of Control shall
-----------------
occur, then, upon notice to the Company by the Administrative Agent
(acting at the request, or with the consent, of the Majority Lenders) to
such effect and stating that the same is a "Change of Control Prepayment
Notice", the Commitments shall be automatically reduced to zero and each
Borrower shall prepay the Advances made to such Borrower in full.
(c) Changes in Dollar/Euro Exchange Rate.
------------------------------------
(i) Determination of Amount Outstanding. On the last
-----------------------------------
Business Day of each March, June, September and December and
promptly upon the receipt by the Administrative Agent of a
Currency Valuation Notice (as defined below), the Administrative
Agent shall determine the aggregate outstanding principal amount
of the Advances. For the purpose of this determination, the
outstanding principal amount of any Advance that is denominated in
Euros shall be deemed to be the Dollar Equivalent of the amount in
Euros of such Advance, determined as of such date or, in the case
of a Currency Valuation Notice received by the Administrative
Agent prior to 11:00 a.m., New York City time, on a Business Day,
on such Business Day or, in the case of a Currency Valuation
Notice otherwise received, on the first Business Day after such
Currency Valuation Notice is received. Upon making such
determination, the Administrative Agent shall promptly notify the
Lenders and the Company thereof.
(ii) Prepayment. If, on the date of such determination the
----------
aggregate outstanding principal amount of the Advances exceeds
105% of the aggregate amount of the Commitments as then in effect,
the Company shall, if requested by the Majority Lenders (through
the Administrative Agent), cause the Borrowers to prepay the
Advances in such amount as shall be necessary so that after giving
effect thereto the aggregate outstanding principal amount of the
Advances does not exceed the Commitments.
For purposes hereof, "Currency Valuation Notice" means a notice given
-------------------------
by the Majority Lenders to the Administrative Agent stating that such
notice is a "Currency Valuation Notice" and requesting that the
Administrative Agent determine the aggregate outstanding principal
amount of the Advances. The Administrative Agent shall not be required
to make more than one valuation determination pursuant to Currency
Valuation Notices within any rolling three month period.
(d) If (i) the obligations of the Company under Article IX
with respect to any outstanding Guaranteed Obligations owing by any
Designated Borrower (herein, the "Affected Borrower") shall for
-----------------
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
-25-
any reason (x) be terminated, (y) cease to be in full force and effect
or (z) not be the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, and (ii)
such condition continues unremedied for 15 days after written notice
thereof shall have been given to the Company by the Administrative Agent
or any Lender, then the Affected Borrower shall, no later than the 15th
day after the date of such notice, prepay (and the Company shall cause
to be prepaid) the full principal of and interest on the Advances owing
by, and the Notes payable by, such Affected Borrower and all other
amounts whatsoever payable hereunder by such Affected Borrower
(including, without limitation, all amounts payable under
Section 8.04(c) as a result of such prepayment).
SECTION 2.11. Increased Costs.
---------------
(a) If due to either (i) the introduction of or any change
in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), in each
case, after the date hereof, there shall be any increase in the cost to
any Lender of agreeing to make or making, funding or maintaining
Eurocurrency Rate Advances or Floating Rate Advances, then such Lender
may from time to time give notice of such circumstances to the Company
(with a copy to the Administrative Agent); provided that each Lender
agrees, before giving any such notice, to use its best efforts
(consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the
making of such a designation would avoid the need for, or reduce the
amount of, such increased costs and would not be disadvantageous to such
Lender. The amount sufficient to compensate such Lender in light of
such increase in costs to such Lender or any corporation controlling
such Lender shall be determined by such Lender in good faith on a basis
that allocates the amounts sufficient to compensate such Lender in light
of such increase ratably among all applicable Advances. A certificate
specifying the event referred to in this Section 2.11(a), the amount
sufficient to compensate such Lender and the basis of its computation
(which shall be reasonable), submitted in good faith to the Company and
the Administrative Agent by such Lender, shall be conclusive and binding
for all purposes absent manifest error. Each Lender agrees to provide
reasonably prompt notice to the Company of the occurrence of any event
referred to in the first sentence of this Section 2.11(a).
(b) If any Lender determines that compliance with any law
or regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) after
the date hereof affects or would affect the amount of capital required
or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased
by or based upon the existence of such Lender's commitment to lend
hereunder and other commitments of this type, then, such Lender may from
time to time give notice of such circumstances to the Company (with a
copy to the Administrative Agent); provided that each Lender agrees,
before giving any such notice, to use its best efforts (consistent with
its internal policy and legal and regulatory restrictions) to designate
a different Applicable Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of, the cost
to the Lender of such increase in the amount of capital maintained by
such Lender and would not be disadvantageous to such Lender. The amount
sufficient to compensate such Lender in light of such increase in the
amount of capital maintained by such Lender or any corporation
controlling such Lender shall be determined by such Lender in good faith
to the extent that such Lender reasonably determines such increase in
capital to be allocable to the existence of such Lender's commitment to
lend hereunder. A certificate specifying the event referred to in this
Section 2.11(b), the amount sufficient to compensate such Lender and the
basis of its computation (which shall be reasonable), submitted in good
faith to the Company and the Administrative Agent by such Lender, shall
be conclusive and binding for all purposes absent manifest error. Each
Lender agrees to provide reasonably prompt notice to the Company of the
occurrence of any event referred to in the first sentence of this
Section 2.11(b).
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(c) The Company shall, within five days of receiving a
notice from any Lender pursuant to clause (a) or (b) of this Section
2.11, elect (and shall notify such Lender and the Administrative Agent
of such election) to:
(i) pay to the Administrative Agent in Dollars for the
account of such Lender, from time to time commencing on the date
of notice by such Lender and as specified by such Lender, (A) the
amount such Lender has set forth in the certificate which such
Lender has delivered to the Company pursuant to clause (a) of this
Section 2.11 or (B) the amount such Lender has set forth in the
certificate which such Lender has delivered to the Company
pursuant to clause (b) of this Section 2.11; or
(ii) if no Default shall have occurred and be continuing,
require that such Lender assign to the Company's designated
assignee or assignees, in accordance with the terms of Section
8.07, all Advances then owing to such Lender and all rights and
obligations of such Lender hereunder; provided that (A) each such
assignment shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an
assignment of a portion of such rights and obligations made
concurrently with another such assignment or assignments which
together cover all of the rights and obligations of the assigning
Lender under this Agreement, (B) no Lender shall be obligated to
make any such assignment as a result of a demand by the Company
pursuant to this Section 2.11(c) unless and until such Lender
shall have received one or more payments from either the Company
or one or more assignees in an aggregate amount at least equal to
the aggregate outstanding principal amount of the A Advances owing
to such Lender, together with accrued interest thereon to the date
of payment of such principal amount, all Facility Fees,
Utilization Fees and other fees payable to such Lender and all
other amounts payable to such Lender under this Agreement
(including, but not limited to, any increased costs or other
additional amounts (computed in accordance with this Section
2.11), and any Taxes, incurred by such Lender prior to the
effective date of such assignment and amounts payable under
Section 8.04(a)) and (C) each such assignment shall be made
pursuant to an Assignment and Acceptance; provided that such
assignment shall not be effective if, after giving effect to such
assignment, the aggregate amount of the Commitments so assigned or
terminated under this Section 2.11, Section 2.12(b) and Section
2.15(g) during the term of this Agreement would exceed 25% of the
aggregate amount of the Commitments as of the Closing Date. Upon
such payments and prepayments, the obligations of such Lender
hereunder, by the provisions hereof, shall be released and
discharged; provided that such Lender's rights under Sections
2.11, 2.15 and 8.04(b), and its obligations under Section 7.05,
shall survive such release and discharge as to matters occurring
prior to the date of termination of such Lender's Commitment.
SECTION 2.12. Illegality.
----------
(a) Notwithstanding any other provision of this Agreement,
if any Lender (any such Lender being referred to herein as an "Affected
--------
Lender") shall notify the Administrative Agent that the introduction of
- ------
or any change in or in the interpretation of any law or regulation makes
it unlawful, or any central bank or other governmental authority asserts
that it is unlawful, for any Lender or its Eurocurrency Lending Office
to perform its obligations hereunder to make Eurocurrency Rate Advances
or Floating Rate Advances in any Currency or to fund or maintain
Eurocurrency Rate Advances or Floating Rate Advances in any Currency
hereunder, the obligation of the Lenders to make, or to Convert A
Advances into, Eurocurrency Rate Advances in such Currency shall be
suspended until the Administrative Agent shall notify the Company and
the Lenders that the circumstances causing such suspension no longer
exist; provided that such suspension shall not become effective in the
event the Company requires the assignment of the Affected Lender's
Advances owing to it and its other rights and obligations hereunder
pursuant to clause (b)(ii) below. The Company's right to require an
assignment in accordance with clause (b)(ii) below shall not be
effective to the
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extent that Lenders representing a majority of the Commitments then
outstanding shall be "Affected Lenders".
(b) The Company shall, within five days of receiving a
notice from any Affected Lender pursuant to clause (a) of this Section
2.12, elect (and shall notify such Affected Lender and the
Administrative Agent of such election) to:
(i) prepay in full all Eurocurrency Rate Advances or
Floating Rate Advances in such Currency then outstanding, together
with interest thereon, unless the Company, within five Business
Days of notice from the Administrative Agent Converts all
Eurocurrency Rate Advances or Floating Rate Advances of all
Lenders then outstanding into Base Rate Advances in accordance
with Section 2.09; or
(ii) if no Default shall have occurred and be continuing,
require that such Affected Lender assign to the Company's
designated assignee or assignees, in accordance with the terms of
Section 8.07, all Advances then owing to such Affected Lender and
all rights and obligations of such Affected Lender hereunder;
provided that (A) each such assignment shall be either an
assignment of all of the rights and obligations of the assigning
Affected Lender under this Agreement or an assignment of a portion
of such rights and obligations made concurrently with another such
assignment or assignments which together cover all of the rights
and obligations of the assigning Affected Lender under this
Agreement, (B) no Affected Lender shall be obligated to make any
such assignment as a result of a demand by the Company pursuant to
this Section 2.12(b) unless and until such Affected Lender shall
have received one or more payments from either the Borrowers or
one or more assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the A Advances owing to
such Affected Lender, together with accrued interest thereon to
the date of payment of such principal amount, all Facility Fees,
Utilization Fees and other fees payable to such Affected Lender
and all other amounts payable to such Affected Lender under this
Agreement (including, but not limited to, any increased costs or
other additional amounts (computed in accordance with Section
2.11), and any Taxes, incurred by such Affected Lender prior to
the effective date of such assignment and amounts payable under
Section 8.04(a)) and (C) each such assignment shall be made
pursuant to an Assignment and Acceptance; provided that such
assignment shall not be effective if, after giving effect to such
assignment, the aggregate amount of the Commitments so assigned or
terminated under this Section 2.12(b), Section 2.11 and Section
2.15(g) during the term of this Agreement would exceed 25% of the
aggregate amount of the Commitments as of the Closing Date. Upon
such payments and prepayments, the obligations of such Affected
Lender hereunder, by the provisions hereof, shall be released and
discharged; provided that such Affected Lender's rights under
Sections 2.11, 2.15 and 8.04(b), and its obligations under Section
7.05, shall survive such release and discharge as to matters
occurring prior to the date of termination of such Affected
Lender's Commitment.
SECTION 2.13. Payments and Computations.
-------------------------
(a) The Borrowers shall make each payment hereunder and
under the Notes not later than 12:00 noon (New York City time) on the
day when due in the relevant Currency to the Administrative Agent at the
Administrative Agent's Account for such Currency in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed
like funds relating to the payment of principal or interest, Facility
Fees or Utilization Fees ratably (other than amounts payable pursuant to
Sections 2.03, 2.04(b), 2.05(b), 2.11, 2.12, 2.15 or 8.04(c)) to the
Lenders for the account of their respective Applicable Lending Offices,
and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the
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Register pursuant to Section 8.07(c) from and after the effective date
specified in such Assignment and Acceptance, the Administrative Agent
shall make all payments hereunder and under the Notes in respect of the
interest assigned thereby to the Lender assignee thereunder, and the
parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date
directly between themselves.
(b) All computations of interest based on the Base Rate
shall be made by the Administrative Agent on the basis of a year of 365
or 366 days, as the case may be, and all computations of interest based
on the Eurocurrency Rate or the Federal Funds Rate and of Facility Fees
and Utilization Fees shall be made by the Administrative Agent on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the
period for which such interest or Facility Fees or Utilization Fees are
payable. Each determination by the Administrative Agent of an interest
rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(c) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of
interest, Facility Fee or Utilization Fee, as the case may be; provided
that, if such extension would cause payment of interest on or principal
of Eurocurrency Rate Advances or Floating Rate Advances to be made in
the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Administrative Agent shall have received
notice from the Company prior to the date on which any payment is due to
the Lenders hereunder that a Borrower will not make such payment in
full, the Administrative Agent may assume that each Borrower has made
such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent a Borrower shall not
have so made such payment in full to the Administrative Agent, each
Lender shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for
each day from the date such amount is distributed to such Lender until
the date such Lender repays such amount to the Administrative Agent, at
the Federal Funds Rate.
(e) All amounts owing under this Agreement (including
payments required under Section 2.11, and payments required under
Section 8.04(c) relating to any Advance denominated in Dollars, but not
including principal of, and interest on, any Advance denominated in
Euros or payments relating to any such Advance required under
Section 8.04(c), which are payable in Euros) are payable in Dollars.
Notwithstanding the foregoing, if a Borrower shall fail to pay any
principal of any Advance when due (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise), the unpaid portion
of such Advance shall, if such Advance is not denominated in Dollars,
automatically be redenominated in Dollars on the due date thereof (or,
if such due date is a day other than the last day of the Interest Period
therefor, on the last day of such Interest Period) in an amount equal to
the Dollar Equivalent thereof on the date of such redenomination and
such principal shall be payable on demand; and if a Borrower shall fail
to pay any interest on any Advance that is not denominated in Dollars,
such interest shall automatically be redenominated in Dollars on the due
date therefor (or, if such due date is a day other than the last day of
the Interest Period therefor, on the last day of such Interest Period)
in an amount equal to the Dollar Equivalent thereof on the date of such
redenomination and such interest shall be payable on demand.
SECTION 2.14. Notations on the A Notes. Each Borrower and each
------------------------
Lender whose A Advances are evidenced by an A Note agree that (a) all
A Advances made by such Lender to such Borrower pursuant to this Agreement
and all payments made on account of principal thereof shall be recorded
by such Lender and, prior to any assignment by such Lender of the A Note
issued to it, all unpaid A Advances shall
364-DAY CREDIT AGREEMENT
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be endorsed on the grid attached to such A Note; provided that the
failure of such Lender to make any such notations shall not limit or
otherwise affect such Borrower's obligations to such Lender with respect
to such A Advances and (b) upon the payment in full of any Lender's A
Advances then outstanding and the termination in full of such Lender's
Commitment, such Lender shall cancel and return such Lender's A Note to
the Company (on its own behalf and on behalf of the other Borrowers) and
be fully responsible for any claims or liabilities arising in connection
with or resulting from any sale of participations therein.
SECTION 2.15. Taxes.
-----
(a) Any and all payments by the Borrowers hereunder or
under the Notes shall be made, in accordance with Section 2.13, free and
clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender
and the Administrative Agent, taxes imposed on its income, and franchise
taxes imposed on it in lieu of income taxes, by the jurisdiction under
the laws of which such Lender or the Administrative Agent (as the case
may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its income, and franchise taxes
imposed on it in lieu of income taxes, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If any Borrower shall be required by law to deduct any
-----
Taxes from or in respect of any sum payable hereunder or under any Note
to any Lender or the Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 2.15) such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) such Borrower shall make such
deductions and (iii) such Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, the Company (on its own behalf and on
behalf of the other Borrowers) agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the
Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as
"Other Taxes").
-----------
(c) The Borrowers will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.15) paid by such
Lender or the Administrative Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom
or with respect thereto. This indemnification shall be made within 30
days from the date such Lender or the Administrative Agent (as the case
may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes,
the Company (on its own behalf and on behalf of the other Borrowers)
will furnish to the Administrative Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing
payment thereof. In the case of any payment hereunder or under the
Notes by or on behalf of a Borrower through an account or branch outside
the United States or on behalf of a Borrower by a payor that is not a
United States person, if the Company determines that no Taxes are
payable in respect thereof, the Company shall furnish, or shall cause
such payor to furnish, to the Administrative Agent, at such address, an
opinion of counsel acceptable to the Administrative Agent stating that
such payment is exempt from Taxes. For purposes of this subsection (d)
and subsection (e), the terms "United States" and "United States
------------- --------------
person" shall have the meanings specified in Section 7701 of the
- ------
Internal Revenue Code.
364-DAY CREDIT AGREEMENT
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(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement (in the case of each Initial Lender) and on
the date of the Acceptance pursuant to which it becomes a Lender (in the
case of each other Lender), and from time to time thereafter if
requested in writing by the Company (but only so long as such Lender
remains lawfully able to do so), shall provide the Company with Internal
Revenue Service form 1001 or 4224, as appropriate, or any successor or
other form prescribed by the Internal Revenue Service, certifying that
such Lender is exempt from or entitled to a reduced rate of United
States withholding tax on payments of interest pursuant to this
Agreement or the Notes. If the form provided by a Lender at the time
such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from "Taxes" as defined in
Section 2.15(a). If any form or document referred to in this subsection
(e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required by the
versions of Internal Revenue Service Form 1001 or 4224 in effect on the
date hereof, that the Lender reasonably considers to be confidential,
the Lender shall give notice thereof to the Company and shall not be
obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Lender has
failed to provide the Company with the appropriate form described in
Section 2.15(e) (other than if such failure is due to a change in law
occurring subsequent to the date on which a form originally was required
to be provided, or if such form otherwise is not required under the
first sentence of subsection (e) above), such Lender shall not be
entitled to indemnification under Section 2.15(a) with respect to Taxes
imposed by the United States; provided that should a Lender become
subject to Taxes because of its failure to deliver a form required
hereunder, the Company shall take such steps as the Lender shall
reasonably request to assist the Lender to recover such Taxes.
(g) So long as no Default shall have occurred and be
continuing, if a Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any Note to any
Lender or shall be required to indemnify any Lender for any Taxes under
Section 2.15(c) (each such Lender, a "Specified Lender"), the Company
----------------
may, within five days of receiving a notice from any Specified Lender
pursuant to clause (a) of this Section 2.15, elect (and shall notify
such Specified Lender and the Administrative Agent of such election) to
require that such Specified Lender assign to the Company's designated
assignee or assignees, in accordance with the terms of Section 8.07, all
Advances then owing to such Specified Lender and all rights and
obligations of such Specified Lender hereunder; provided that (A) each
such assignment shall be either an assignment of all of the rights and
obligations of the assigning Specified Lender under this Agreement or an
assignment of a portion of such rights and obligations made concurrently
with another such assignment or assignments which together cover all of
the rights and obligations of the assigning Specified Lender under this
Agreement, (B) no Specified Lender shall be obligated to make any such
assignment as a result of a demand by the Company pursuant to this
Section 2.15(g) unless and until such Specified Lender shall have
received one or more payments from either the Borrowers or one or more
assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the A Advances owing to such Specified
Lender, together with accrued interest thereon to the date of payment of
such principal amount, all Facility Fees, Utilization Fees and other
fees payable to such Specified Lender and all other amounts payable to
such Specified Lender under this Agreement (including, but not limited
to, any increased costs or other additional amounts (computed in
accordance with Section 2.11), and any Taxes, incurred by such Specified
Lender prior to the effective date of such assignment and amounts
payable under Section 8.04(a)) and (C) each such assignment shall be
made pursuant to an Assignment and Acceptance; provided that such
assignment shall not be effective if, after giving effect to such
assignment, the aggregate amount of the Commitments so assigned or
terminated under this Section 2.15(g), Section 2.11 and Section 2.12
during the term of this Agreement would exceed 25% of the aggregate
amount of the Commitments as of the Closing Date. Upon such payments
and prepayments, the obligations of such Specified Lender hereunder, by
the provisions hereof, shall be released and
364-DAY CREDIT AGREEMENT
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discharged; provided that such Specified Lender's rights under Sections
2.11, 2.12, 2.15 and 8.04(b), and its obligations under Section 7.05,
shall survive such release and discharge as to matters occurring prior
to the date of termination of such Specified Lender's Commitment.
SECTION 2.16. Sharing of Payments, Etc. If any Lender
-------------------------
shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of the A
Advances owing to it (other than pursuant to Sections 2.05(b), 2.11,
2.12, 2.15 or 8.04(c)) in excess of its ratable share of payments on
account of the A Advances obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participation in the A
Advances owing to them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided
that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and each such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with
an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. Each Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to
this Section 2.16 may, to the fullest extent permitted by law, exercise
all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct
creditor of such Borrower in the amount of such participation.
SECTION 2.17. Borrowings by Designated Borrowers.
----------------------------------
(a) The Company may, at any time or from time to time,
designate one or more wholly owned Subsidiaries of the Company as
"Borrowers" hereunder by furnishing to the Administrative Agent a
letter (a "Designation Letter") in duplicate, in substantially
------------------
the form of Exhibit F-1, duly completed and executed by the
Company and such Subsidiary. Upon any such designation of a
Subsidiary, such Subsidiary shall be a Designated Borrower and a
Designated Borrower entitled to borrow A Advances and B Advances
on and subject to the terms and conditions of this Agreement.
(b) So long as all principal of and interest on all
Advances made to any Designated Borrower have been paid in full,
the Company may terminate the status of such Designated Borrower
as a Designated Borrower hereunder by furnishing to the
Administrative Agent a letter (a "Termination Letter") in
------------------
substantially the form of Exhibit F-2, duly completed and executed
by the Company. Any Termination Letter furnished hereunder shall
be effective upon receipt by the Administrative Agent, which shall
promptly notify the Lenders, whereupon the Lenders shall promptly
deliver to the Company (through the Administrative Agent) the Notes,
if any, of such former Designated Borrower. Notwithstanding the
foregoing, the delivery of a Termination Letter with respect to any
Designated Borrower shall not terminate (i) any obligation of such
Designated Borrower that remains unpaid at the time of such delivery
(including without limitation any obligation arising thereafter in
respect of such Designated Borrower under Section 2.15 or 2.11) or
(ii) the obligations of the Company under Article IX with respect
to any such unpaid obligations.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Initial Borrowing.
-----------------------------------------
The obligation of each Lender to make an Advance on the occasion of the
initial Borrowing is subject to the condition precedent that
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the Administrative Agent shall have received the following, each (unless
otherwise specified below) dated the Closing Date, in form and substance
satisfactory to the Administrative Agent (and, to the extent specified
below, each Lender) and (except for the Notes) in sufficient copies for
each Lender:
(a) Charter Documents, Etc.
-----------------------
(1) Certified copies of (x) the charter and by-laws
of the Company, (y) the resolutions of the Board of Directors
of the Company authorizing and approving this Agreement and
the Notes, and (z) all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to this Agreement and the Notes.
(2) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign
this Agreement and the Notes and the other documents to be
delivered hereunder.
(3) A certificate from the Secretary of State of the
State of Delaware dated a date reasonably close to the
Closing Date as to the good standing of and charter documents
filed by the Company.
(b) Opinions.
--------
(1) A favorable opinion of the General Counsel of the
Company, substantially in the form of Exhibit D.
(2) A favorable opinion of Milbank, Tweed, Hadley &
McCloy LLP, special New York counsel for the Administrative
Agent, substantially in the form of Exhibit E.
(c) Solvency. A certificate of a senior financial officer
--------
of the Company to the effect that the Company (both individually
and collectively with its Consolidated Subsidiaries) is Solvent.
(d) Representations, Etc. A certificate signed by a duly
---------------------
authorized officer of the Company stating that:
(1) the representations and warranties contained in
Section 4.01 are correct on and as of the Closing Date, and
(2) no event has occurred and is continuing that
constitutes a Default.
(e) Other. Such other approvals, opinions and documents
-----
relating to material ERISA and, environmental matters as the
Administrative Agent or any Lender may, through the Administrative
Agent, reasonably request.
SECTION 3.02. Conditions Precedent to Each A Borrowing.
----------------------------------------
The obligation of each Lender to make an A Advance on the occasion of
each A Borrowing shall be subject to the conditions precedent that the
Closing Date shall have occurred and on the date of such A Borrowing:
(a) the following statements shall be true (and each of the
giving of the applicable Notice of A Borrowing and the acceptance
by the relevant Borrower of the proceeds of such A Borrowing shall
constitute a representation and warranty by the Company that on
the date of such A Borrowing such statements are true):
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(i) the representations and warranties contained in
Section 4.01 (except the Excluded Representations) are
correct on and as of the date of such A Borrowing, before
and after giving effect to such A Borrowing and to the
application of the proceeds therefrom, as though made on and
as of such date; and
(ii) no event has occurred and is continuing, or
would result from such A Borrowing or from the application
of the proceeds therefrom, that constitutes a Default;
(b) the Administrative Agent shall have received such other
approvals, opinions or documents as any Lender through the
Administrative Agent may reasonably request; and
(c) in the case of the first Borrowing by a Designated
Borrower, such Borrower shall have furnished to the Administrative
Agent such corporate documents, resolutions and legal opinions
relating to such Designated Borrower as the Administrative Agent
may reasonably require.
SECTION 3.03. Conditions Precedent to Each B Borrowing.
----------------------------------------
The obligation of each Lender that is to make a B Advance on the
occasion of each B Borrowing to make such B Advance as part of such B
Borrowing is subject to the conditions precedent that the Closing Date
shall have occurred and (a) the Administrative Agent shall have received
the Notice of B Borrowing with respect thereto, (b) if (and only if)
requested by such Lender, on or before the date of such B Borrowing, but
prior to such B Borrowing, the Administrative Agent shall have received
a B Note payable to the order of such Lender for each of the one or more
B Advances to be made by such Lender as part of such B Borrowing, in a
principal amount equal to the principal amount of the B Advance to be
evidenced thereby and otherwise on such terms as were agreed to for such
B Advance in accordance with Section 2.03, and (c) on the date of such B
Borrowing the following statements shall be true (and each of the giving
of the applicable Notice of B Borrowing and the acceptance by the
relevant Borrower of the proceeds of such B Borrowing shall constitute a
representation and warranty by the Company that on the date of such B
Borrowing such statements are true):
(i) the representations and warranties contained in Section
4.01 (except the Excluded Representations) are correct on and as
of the date of such B Borrowing, before and after giving effect to
such B Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result
from such B Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
SECTION 3.04. Determinations Under Section 3.01. For purposes
---------------------------------
of determining compliance with the conditions specified in Section 3.01,
each Lender shall be deemed to have consented to, approved or accepted
or to be satisfied with each document or other matter required thereunder
to be consented to or approved by or acceptable or satisfactory to the
Lenders unless an officer of the Administrative Agent responsible for the
transactions contemplated by this Agreement shall have received notice
from such Lender prior to the proposed Closing Date (as notified by the
Company or the Administrative Agent to the Lenders) specifying its
objection thereto. The Administrative Agent shall promptly notify the
Lenders of the occurrence of the Closing Date.
364-DAY CREDIT AGREEMENT
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
-------------------------------------
Company. The Company represents and warrants as follows:
- -------
(a) Incorporation; Good Standing. The Company is a
----------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) Corporate Authority; No Breach. The execution,
------------------------------
delivery and performance by the Company of this Agreement and the
Notes, and the other transactions contemplated hereby, are within
the Company's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the
Company's charter or bylaws or (ii) law or any contractual
restriction binding on or affecting the Company.
(c) No Consents or Approvals. No authorization or approval
------------------------
or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party
is required for the due execution, delivery and performance by the
Company of this Agreement or the Notes, other than those
authorizations, approvals, notices, filings and actions that have
been obtained, filed or taken on or before the Closing Date by the
Company. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body or any other third party is required for the transactions
contemplated thereby, except for the authorizations, approvals,
actions, notices and filings (i) the failure to obtain would not
have a Material Adverse Effect or (ii) which have been (or, prior
to the Closing Date, will be) duly obtained, taken, given or made
and are in full force and effect.
(d) Enforceable Obligations, Etc. This Agreement has been,
-----------------------------
and each of the Notes when delivered hereunder will have been,
duly executed and delivered by the Company. This Agreement is,
and each of the Notes when delivered hereunder will be, the legal,
valid and binding obligation of the Company enforceable against
the Company in accordance with their respective terms.
(e) Financial Statements, Etc.
--------------------------
(i) The statement of financial position of the Company as
at December 31, 1998 and the related statements of income and cash
flows of the Company for the twelve months then ended, accompanied
by an opinion of Deloitte & Touche LLP, independent public
accountants, and the balance sheet of the Company as at June 30,
1999 and the related statements of income and cash flows of the
Company for the six months then ended, copies of which have been
made available to each Lender, present fairly, in all material
respects (subject, in the case of said balance sheet as at June
30, 1999, and said statements of income and cash flows for the six
months then ended, to year-end audit adjustments) the financial
condition of the Company as at such dates and the results of the
operations of the Company for the periods ended on such dates, all
in accordance with generally accepted accounting principles
applied on a consistent basis.
(ii) Since December 31, 1998, there has been no material
adverse change in the financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole.
(f) No Litigation, Etc. Except as described in the
-------------------
Company's Report on Form 10-K for the fiscal year ended December
31, 1998 or in the Company's Report on Form 10-Q for the fiscal
quarter
364-DAY CREDIT AGREEMENT
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ended September 30, 1999, there is no pending or, to the best of
the Company's knowledge, threatened action or proceeding affecting
the Company or any of its Consolidated Subsidiaries before any
court, or governmental agency or arbitrator which (i) would have a
Material Adverse Effect or (ii) purports to affect, or would
affect, the legality, validity or enforceability of this Agreement
or any Note.
(g) ERISA. No ERISA Event that would have a Material
-----
Adverse Effect has occurred or is reasonably expected to occur
with respect to any Plan. As of the Closing Date, neither the
Company nor any ERISA Affiliate participates in any Multiple
Employer Plan or in any Multiemployer Plan with respect to which
the Company or any ERISA Affiliate has any Withdrawal Liability or
other liability (other than the ordinary liability of a sponsor
for contributions to or benefits under such Plan) that, in either
case, would have a Material Adverse Effect.
(h) Environmental Laws. The Company (i) is in substantial
------------------
compliance with any and all applicable Environmental Laws, (ii)
has (to the best of its knowledge) received, applied for or been
assigned all required Environmental Permits and (iii) is in
substantial compliance with all terms and conditions of any such
Environmental Permits, except where any such noncompliance with
Environmental Laws, failure to receive, apply for or be assigned
an Environmental Permit, or failure to comply with the terms and
conditions of an Environmental Permit, would not have a Material
Adverse Effect.
(i) Investment Company; Public Utility. Neither the
----------------------------------
Company nor any of its Material Subsidiaries is an "investment
company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as
amended. Neither the Company nor any of its Material Subsidiaries
is a "holding company", or an "affiliate" of a "holding company"
or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
(j) Accuracy of Information.
-----------------------
(i) All written information, reports, financial statements,
exhibits and schedules (except as to assumptions, statements,
estimates and projections with respect to anticipated future
performance or events) concerning the operations, business,
financial condition, properties and prospects of the Company and
its Subsidiaries ("Information") furnished by or on behalf of the
-----------
Company to the Administrative Agent, the Syndication Agent or any
Lender on or prior to the Closing Date in connection with the
negotiation, preparation or delivery of this Agreement or included
herein or delivered pursuant to Article III, when taken as a
whole, as of the date of such Information, does not contain any
untrue statement of material fact or, to the best of the Company's
knowledge, omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading.
(ii) All Post-Closing Date Information furnished by or on
behalf of the Company to the Administrative Agent or any Lender
after the Closing Date, when taken as a whole, as of the date of
such Post-Closing Date Information, will not contain any untrue
statement of material fact or, to the best of the Company's
knowledge, omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading.
(iii) Financial projections and pro forma adjustments
contained in the Information may be based on estimates and
assumptions about circumstances and events that have not taken
place at the time of delivery thereof; although such information
reflects the Company's good faith projections and estimates as of
the date thereof, based upon methods and data the Company believes
to be reasonable
364-DAY CREDIT AGREEMENT
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<PAGE>
- 36 -
and accurate, actual results during the period covered by such
projections and pro forma adjustments may differ materially from
the projections and pro forma adjustments.
(iv) For purposes of this Section 4.01(j), "Post-Closing
------------
Date Information" means:
----------------
(x) all Information furnished by the Company and its
Subsidiaries after the date hereof under Sections 5.01(i)(i)
through (vii), inclusive; and
(y) all Information furnished by the Company and its
Subsidiaries after the date hereof under Section 5.01(i)(viii),
provided that the request for such information is made in
writing and delivered to the Company, at the address specified
in Section 8.02, to the attention of the Company's Treasurer
and stating that such request is being made in connection with
this Agreement.
(k) Margin Stock. The Company is not principally engaged
------------
in the business of extending credit for the purpose of purchasing
or carrying Margin Stock, and no proceeds of any Advance will be
used for any purpose which violates the provisions of the
regulations of the Board of Governors of the Federal Reserve
System. After applying the proceeds of each Advance, not more
than 25% of the value of the assets of the Company and the
Company's Subsidiaries (as determined in good faith by the
Company) that are subject to Section 5.02(a) will consist of or be
represented by Margin Stock. If requested by any Lender or the
Administrative Agent, the Company will furnish to the
Administrative Agent and each Lender a statement in conformity
with the requirements of Federal Reserve Form U-1 referred to in
Regulation U, the statements made in which shall be such, in the
opinion of each Lender, as to permit the transactions contemplated
hereby in accordance with Regulation U.
SECTION 4.02. Representation and Warranty of the Lenders.
------------------------------------------
Each Lender represents and warrants that in good faith it has not
relied, and will not rely, upon any Margin Stock as collateral in the
making and maintaining of its Advances hereunder.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. So long as any
---------------------
Advance shall remain unpaid or any Lender shall have any Commitment
hereunder, the Company will:
(a) Preservation of Corporate Existence, Etc. Do or cause
-----------------------------------------
to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights (charter and statutory)
and franchises, provided that the Company shall not be required to
preserve any such right or franchise if it shall determine that
the preservation thereof is no longer desirable in the conduct of
its business. Cause each Material Subsidiary of the Company to do
or cause to be done all things necessary to preserve and keep in
full force and effect the corporate existence, rights (charter and
statutory) and franchises of such Material Subsidiary, except in
each case if the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole.
(b) Compliance with Laws, Etc. Comply, and cause each of
--------------------------
its Consolidated Subsidiaries to comply, in all material respects,
with all applicable laws, rules, regulations and orders, such
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
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compliance to include, without limitation, compliance with ERISA and all
applicable Environmental Laws, except such noncompliance as would not
have a Material Adverse Effect.
(c) Payment of Taxes. Duly pay and discharge, and cause
----------------
each of its Consolidated Subsidiaries to pay and discharge, all
taxes, assessments and governmental charges whatsoever and by
whomsoever imposed upon it or against its properties prior to the
date on which penalties are attached thereto, unless and to the
extent only that the same (i) shall be contested in good faith and
by appropriate proceedings by the Company or (ii) are not of
material importance to the business, financial condition or
operating results of the Company and its Consolidated
Subsidiaries.
(d) Payment of Material Obligations, Etc. Pay, and cause
-------------------------------------
each of its Material Subsidiaries to pay, all obligations under
Material Contracts. Perform, and cause each of its Material
Subsidiaries to perform, each other obligation (other than
obligations that the Company determines, in good faith and upon
the advice of its counsel, not to be binding on it) of the Company
or such Material Subsidiary, as the case may be, under the
Material Contracts except where the failure to do so would not
(either individually or in the aggregate) have a Material Adverse
Effect.
(e) Visitation. Permit, and cause each of its Material
----------
Subsidiaries to permit, the Administrative Agent or any of the
Lenders or any agents or representatives thereof (at any
reasonable time and as may be reasonably requested from time to
time and, so long as no Default shall have occurred and is
continuing, upon reasonable advance notice):
(i) to visit the properties of the Company and any of
its Material Subsidiaries in the presence of an appropriate
officer or representative of the Company;
(ii) if any Default shall have occurred and then be
continuing, to examine and make copies of and abstracts from
the records and books of account of the Company and any of
its Material Subsidiaries (other than trade secrets and
information and materials subject to confidentiality
agreements with third parties) in the presence of an
appropriate officer or representative of the Company); and
(iii) to discuss the affairs, finances and accounts
of the Company and any of its Material Subsidiaries with any
of their officers or directors and with their independent
certified public accountants.
(f) Keeping of Books. Keep, and cause each of its
----------------
Consolidated Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Company
and each such Consolidated Subsidiary in accordance with generally
accepted accounting standards in effect from time to time.
(g) Properties. Cause all Principal Properties to be
----------
maintained and kept in good condition, repair and working order,
and cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto, in each case
as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times, provided that nothing in
this paragraph (g) shall prevent the Company or any of its
Subsidiaries from discontinuing the operation and maintenance of
any such Principal Properties or from omitting to make any
repairs, renewals, replacements, betterments or improvements if
such discontinuance or omission is, in the judgment of the
Company, desirable in the conduct of the business of the Company
and its Subsidiaries taken as a whole.
364-DAY CREDIT AGREEMENT
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<PAGE>
- 38 -
(h) Maintenance of Insurance. From and after the Closing
------------------------
Date, maintain insurance, and cause each of its Consolidated
Subsidiaries to maintain insurance, with financially sound and
reputable insurers, with respect to such of its properties,
against such risks, casualties and contingencies and in such types
and amounts as are consistent with sound business practice, it
being understood that this paragraph (h) shall not prevent the use
of deductible or excess loss insurance and shall not prevent (i)
the Company or any of its Subsidiaries from acting as a self-
insurer or maintaining insurance with another Subsidiary or
Subsidiaries of the Company so long as such action is consistent
with sound business practice or (ii) the Company from obtaining
and owning insurance policies covering activities of its
Consolidated Subsidiaries.
(i) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as available and in any event within 60
days after the end of each of the first three quarters of
each fiscal year of the Company, Consolidated balance sheets
of the Company and its Subsidiaries as of the end of such
quarter and Consolidated statements of income and cash flows
of the Company and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to
year-end audit adjustments) by the Controller, Assistant
Controller or other authorized financial officer of the
Company as having been prepared in accordance with GAAP,
together with (A) a certificate of said officer stating that
no Default has occurred and is continuing or, if a Default
has occurred and is continuing, a statement as to the nature
thereof, and (B) a schedule in form and substance
satisfactory to the Administrative Agent of the computations
used by the Company in determining compliance with the
covenants contained in Section 5.03;
(ii) as soon as available and in any event within 120
days after the end of each fiscal year of the Company, a
copy of the annual audit report for such year for the
Company and its Subsidiaries, containing Consolidated
balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year and Consolidated statements of
income, shareowners' equity and cash flows of the Company
and its Subsidiaries for such fiscal year, in each case
accompanied by an opinion acceptable to the Majority Lenders
by Deloitte & Touche LLP or other independent public
accountants of recognized national standing, together with
(a) a certificate of the Controller, Assistant Controller or
other authorized financial officer of the Company stating
that no Default has occurred and is continuing or, if a
Default has occurred and is continuing, a statement as to
the nature thereof, and (B) a schedule in form and substance
satisfactory to the Administrative Agent of the computations
used by the Company in determining compliance with the
covenants contained in Section 5.03;
(iii) as soon as possible and in any event within
five Business Days after the determination by the Company
that a Default has occurred and is continuing on the date of
such statement, a statement of either the Chief Financial
Officer, Treasurer, Controller, Assistant Controller or
other authorized financial officer of the Company setting
forth details of such Default and the action that the
Company has taken and proposes to take with respect thereto;
(iv) promptly and in any event within 30 days after
the Company knows or has reason to know that any ERISA Event
that would have a Material Adverse Effect has occurred, a
statement of an authorized financial officer of the Company
describing such ERISA Event and the action, if any, that the
Company or such ERISA Affiliate has taken and proposes to
take with respect thereto;
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 39 -
(v) promptly and in any event within ten Business
Days after receipt thereof by the Company or any of its
ERISA Affiliates, copies of each notice from the PBGC
stating its intention to terminate any Plan or to have a
trustee appointed to administer any such Plan;
(vi) promptly and in any event within 45 days after
the receipt thereof by the Company or any of its ERISA
Affiliates, a copy of the latest annual actuarial report for
each Plan if the ratio of the fair market value of the
assets of such Plan to its current liability (as defined in
Section 412 of the Internal Revenue Code) is less than 80%;
(vii) as soon as possible and in any event within
five days after the determination by the Company that a
Change of Control has occurred, the Company shall deliver to
the Administrative Agent (which shall forward a copy thereof
to each Lender promptly) notice thereof, together with such
other information as the Administrative Agent or any Lender
(through the Administrative Agent) may reasonably request;
and
(viii) such other information (excluding trade
secrets) respecting the financial condition and operations
of the Company and its Subsidiaries as the Administrative
Agent or any Lender may from time to time reasonably request
(which information shall constitute "Post-Closing Date
Information" only to the extent provided in Section
4.01(j)).
(j) Use of Proceeds. Use the proceeds of the Advances
---------------
hereunder solely to finance the working capital needs and other
general corporate purposes of the Borrowers (including to support
the commercial paper programs of the respective Borrowers, to
finance acquisitions, treasury stock purchases and capital
investments), in each case in compliance with all applicable legal
and regulatory requirements; provided that neither the
Administrative Agent nor any Lender shall have any responsibility
as to the use of any such proceeds.
SECTION 5.02. Negative Covenants. So long as any Advance
------------------
shall remain unpaid or any Lender shall have any Commitment hereunder,
the Company will not:
(a) Liens, Etc. Create or suffer to exist, or permit any
-----------
of its Consolidated Subsidiaries to create or suffer to exist, any Lien
on or with respect to any of its properties (other than, in the case of
the Company, the Company's treasury stock), whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income in order to secure Debt, other than:
(i) (A) Liens for taxes, assessments, governmental charges
or levies or other amounts owed to governmental entities other
than for borrowed money; (B) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's
Liens and other similar Liens arising in the ordinary course of
business securing obligations that are not overdue for a period of
more than 30 days or that are being contested in good faith;
(C) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations; (D) easements, rights of way and other
encumbrances on title to real property that do not render title to
the property encumbered thereby unmarketable or materially
adversely affect the use of such property for its present
purposes; and (E) Liens in favor of a landlord arising in the
ordinary course of business,
(ii) purchase money Liens upon or in any property, assets
or stock acquired or held by the Company or any Subsidiary in the
ordinary course of business to secure the purchase price or
construction cost of such property or to secure Debt incurred
solely for the purpose of financing the acquisition
364-DAY CREDIT AGREEMENT
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<PAGE>
- 40 -
or construction of such property whether incurred prior or
subsequent to such acquisition or construction, or Liens existing
on such property at the time of its acquisition (other than any
such Lien created in contemplation of such acquisition) or
extensions, renewals or replacements of any of the foregoing for
the same or a lesser amount, provided that no such Lien shall
extend to or cover any property other than the property being
acquired, and no such extension, renewal or replacement shall
extend to or cover any property not theretofore subject to the
Lien being extended, renewed or replaced,
(iii) Liens securing Debt, judgments and ERISA claims
existing on the date hereof and identified on Schedule 1, and
other Liens existing on the date hereof,
(iv) other Liens or assignments in an aggregate principal
amount at any time outstanding not to exceed 10% of Consolidated
Net Tangible Assets,
(v) the replacement, extension or renewal of any Lien
permitted by clauses (ii) and (iii) above upon or in the same
property theretofore subject thereto or the replacement, extension
or renewal (without increase in the amount or change in any direct
or contingent obligor) of the amount secured thereby, and
(vi) intercompany Liens.
(b) Mergers, Etc. Merge or consolidate with or into (or
-------------
permit any of its Material Subsidiaries to merge or consolidate with or
into), or convey, transfer, lease or otherwise dispose of (or permit any
of its Material Subsidiaries to convey, transfer, lease or otherwise
dispose of), whether in one transaction or in a series of related
transactions, all or substantially all of the assets (whether now owned
or hereafter acquired) of the Company or such Material Subsidiary to,
any Person, except that:
(i) any Material Subsidiary of the Company may merge or
consolidate with or into (or convey, transfer, lease or otherwise
dispose of any or all the assets of such Material Subsidiary to)
the Company or any wholly owned Material Subsidiary of the
Company; provided that the Company or a wholly owned Material
Subsidiary is the survivor of any such merger or consolidation;
and
(ii) the Company may merge or consolidate with or into any
other Person so long as (x) immediately after giving effect to
such transaction, no Default would exist and (y) the Company is
the surviving corporation.
(c) Accounting Changes. Make or permit, or permit any of
------------------
its Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally
accepted accounting principles.
(d) Change in Nature of Business. Change the nature of the
----------------------------
business of the Company and its Subsidiaries, taken as a whole, such
that such business differs materially from the lines of business engaged
in on the Closing Date and lines of business related thereto; provided
that the foregoing shall not prohibit the Company and its Subsidiaries
from engaging in other lines of business (or investing in joint ventures
engaged in other lines of business) so long as the aggregate book value
of assets of the Company and its Subsidiaries directly relating to such
other lines of business does not exceed 20% of the aggregate book value
of the Consolidated assets of the Company and its Consolidated
Subsidiaries as at the last day of the fiscal quarter most recently
ended prior to the date of determination.
(e) Margin Stock. Permit more than 25%, after the making
------------
of each Advance and giving effect to the use of the proceeds thereof, of
the value of the assets of the Company and its Subsidiaries (as
364-DAY CREDIT AGREEMENT
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determined in good faith by the Company) that are subject to
Section 5.02(a) to consist of or be represented by Margin Stock.
(f) Transactions with Affiliates. Other than transactions
----------------------------
with Specified Joint Ventures, enter into, or permit any of its
Subsidiaries to enter into, any transaction with an Affiliate of the
Company (other than the Company's Subsidiaries) that would be material
in relation to the Company and its Subsidiaries, taken as a whole, even
if otherwise permitted under this Agreement, except on terms determined
by the Company to be fair and reasonable to the Company and its
Subsidiaries and in the best interests of the Company (considered as a
whole in conjunction with all other existing arrangements and
relationships with such Affiliate).
SECTION 5.03. Financial Covenants. So long as any Advance
-------------------
shall remain unpaid or any Lender shall have any Commitment hereunder,
the Company shall not:
(a) Debt to Adjusted EBITDA. Permit the Debt to Adjusted
-----------------------
EBITDA Ratio at any time to exceed 3.50 to 1.00.
(b) Interest Coverage Ratio. Permit the Interest Coverage
-----------------------
Ratio at any time to be less than 4.50 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
-----------------
events ("Events of Default") shall occur and be continuing:
-----------------
(a) Any Borrower shall fail to pay any principal of any
Advance owing by such Borrower when the same becomes due and
payable; or any Borrower shall fail to pay any interest on any
Advance owing by such Borrower or make any other payment under
this Agreement or any Note within five Business Days after the
same becomes due and payable; or
(b) Any representation or warranty made or deemed to have
been made by the Company herein or in connection with this
Agreement shall prove to have been incorrect in any material
respect when made; or
(c) (i) The Company shall fail to perform or observe any
term, covenant or agreement contained in Sections 5.01(a),
5.01(i)(iii), 5.01(j), 5.02 or 5.03; or (ii) the Company shall
fail to perform or observe any other term, covenant or agreement
contained in this Agreement on its part to be performed or
observed if such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to the Company by the
Administrative Agent or any Lender (other than any failure by the
Company to comply with the terms of Section 5.01(i)(iv), (v) or
(vi)); or
(d) the Company or any of its Material Subsidiaries shall
fail to pay any principal of, premium or interest on or any other
amount payable in respect of any Debt that is outstanding in a
principal or notional amount of at least the Threshold Amount (or
such lower amount as provided for in the proviso to this clause
(d)) in the aggregate (but excluding Debt outstanding hereunder)
of the Company or such Material Subsidiary (as the case may be),
when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace period,
if any, specified in the applicable agreement;
364-DAY CREDIT AGREEMENT
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or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the
holder or holders (or an agent or trustee on its or their behalf)
thereof to cause, such Debt to mature; or any such Debt shall be
declared to be due and payable or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment
or redemption), purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof; provided
that if the Company in any agreement or instrument relating to any
such Debt, shall have agreed to, or shall agree to, a lesser
threshold of the kind specified this clause (d) with respect to
itself or any of its Material Subsidiaries, then, in such event,
the amount provided for above shall be reduced to such lesser
amount(s) with respect to such entity; or
(e) Any judgment or order for the payment of money in
excess of the Threshold Amount shall be rendered against the
Company or any of its Material Subsidiaries and not timely
satisfied or discharged, and either (i) proceedings to attach or
levy upon any assets of the Company or such Material Subsidiary
shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
or
(f) The Company or any of its Material Subsidiaries shall
generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Company or
any of its Material Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a
period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its
property) shall occur; or the Company or any of its Material
Subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this subsection (e);
(g) Any ERISA Event that would result in a Lien in an
amount in excess of $30,000,000 on the properties or assets of the
Company or any of its Subsidiaries shall have occurred and shall
not have been remedied within 90 days;
then, and in any such event, the Administrative Agent (i) shall at the
request, or may with the consent, of the Majority Lenders, by notice to
the Company (on its own behalf and on behalf of the other Borrowers),
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the
request, or may with the consent, of the Majority Lenders, by notice to
the Company, declare the Advances, the Notes, all interest thereon and
all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Advances, the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company and the other Borrowers;
provided that in the event of an actual or deemed entry of an order for
relief with respect to the Company under the Federal Bankruptcy Code,
(A) the obligation of each Lender to make Advances shall automatically
be terminated and (B) the Advances, the Notes, all such interest and all
such amounts shall
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automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company and the other Borrowers.
Notwithstanding anything to the contrary set forth in this
Agreement, in the event of an entry of an order for relief with respect
to a Designated Borrower under the Federal Bankruptcy Code (or under any
analogous law applicable to such Designated Borrower, if such Designated
Borrower is not organized under the laws of the United States or any
state thereof), (A) the obligation of each Lender to make Advances to
such Designated Borrower shall automatically be terminated, (B) on the
date that is three Business Days after the Company becomes aware of the
entry of such order for relief, the Advances, the Notes, all interest
and all other amounts owing by such Designated Borrower shall
automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company and such Designated Borrower and (C)
such Designated Borrower shall cease to be a Designated Borrower
hereunder.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
------------------------
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Administrative Agent by the terms
hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection
of the Notes), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act
or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders and all holders
of Notes; provided that the Administrative Agent shall not be required
to take any action that exposes the Administrative Agent to personal
liability or that is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Lender prompt notice of each
notice given to it by the Company pursuant to the terms of this
Agreement.
SECTION 7.02. Administrative Agent's Reliance, Etc.
-------------------------------------
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the
Administrative Agent: (i) may treat the payee of any Note as the holder
thereof until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee
of such Note, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 8.07; (ii) may consult with legal counsel (including
counsel for the Company), independent public accountants and other
experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender
for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (iv) shall not have
any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement on the
part of the Borrowers or to inspect the property (including the books
and records) of the Borrowers; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of
any lien or security interest created or purported to be created under
or in connection with, this Agreement or any other instrument or
document furnished pursuant hereto; and (vi) shall incur no liability
under or in respect of this Agreement by acting upon any notice,
consent,
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certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
-----------------------
Commitment, the Advances made by it and the Notes issued to it, Citibank
shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the
Administrative Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include Citibank in its individual
capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the
Company, any of its Subsidiaries and any Person who may do business with
or own securities of the Company or any such Subsidiary, all as if
Citibank were not the Administrative Agent and without any duty to
account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
----------------------
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on the financial
statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement.
SECTION 7.05. Indemnification. The Lenders agree to
---------------
indemnify the Administrative Agent and the Syndication Agent (each, an
"Agent") (in each case to the extent not reimbursed by the Company),
-----
ratably according to the respective principal amounts of the Notes then
held by each of them (or if no Notes are at the time outstanding or if
any Notes are held by Persons that are not Lenders, ratably according to
the respective amounts of their Commitments), from and against any and
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against such
Agent in any way relating to or arising out of this Agreement or any
action taken or omitted by such Agent under this Agreement, provided
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross
negligence or willful misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Administrative Agent promptly upon
demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Administrative Agent in connection with
the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the
Administrative Agent is not reimbursed for such expenses by the Company.
SECTION 7.06. Successor Administrative Agent. The
------------------------------
Administrative Agent may resign at any time by giving five Business
Days' written notice thereof to the Lenders and the Company and may be
removed at any time with or without cause (i) by the Majority Lenders
with the Company's approval, which approval shall not unreasonably be
withheld, or (ii) by the Company, subject to the approval of the
Majority Lenders, which approval shall not unreasonably be withheld.
Upon any such resignation or removal, the Company shall have the right
to appoint a successor Administrative Agent, subject to the Majority
Lenders' approval, which approval shall not be unreasonably withheld;
provided that upon and during the continuance of an Event of Default,
the Majority Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's
giving of notice of resignation or the Majority Lenders' removal of the
retiring Administrative Agent, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank organized or licensed under the laws of
the United States of America or of any State
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thereof and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this
Agreement. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 7.07. The Syndication Agent. Except as expressly
---------------------
provided herein, the Syndication Agent shall not have any right, power,
obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the
foregoing, the Syndication Agent shall not have or be deemed to have any
fiduciary relationship with any other Lender in connection herewith.
Each Lender acknowledges that it has not relied, and will not rely, on
the Syndication Agent in deciding to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of
----------------
any provision of this Agreement or the Notes, nor consent to any
departure by the Company therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Majority Lenders,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided that:
(a) no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following:
(1) waive any of the conditions specified in Section
3.01 or 3.02;
(2) increase the Commitments of the Lenders or
subject the Lenders to any additional obligations (other
than as permitted by Sections 2.05(b) and 2.05(d) to the
extent any Lender consents thereunder);
(3) reduce the principal of, or interest on, the A
Notes or any fees or other amounts payable hereunder;
(4) postpone any date fixed for any payment of
principal of, or interest on, the A Notes or any fees or
other amounts payable hereunder (excluding any amounts
payable in connection with the B Notes);
(5) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the A Notes, or the
number of Lenders, that shall be required for the Lenders or
any of them to take any action hereunder;
(6) amend this Section 8.01; or
(7) release the Company from any of its obligations
under Article IX;
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(b) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the
Lenders required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement or any
Note;
(c) no amendment, waiver or consent shall, unless in
writing and signed by the Syndication Agent in addition to the
Lenders required above to take such action, affect the rights or
duties of the Syndication Agent under this Agreement or any Note;
and
(d) this Section 8.01 shall not apply to changes in
Commitments pursuant to Section 2.05, 2.11 or any other Section of
this Agreement.
SECTION 8.02. Notices, Etc. All notices and other
-------------
communications provided for hereunder shall be in writing (including
telecopier) and mailed, telecopied or delivered by hand:
(a) If to the Company or any other Borrower:
Solutia Inc.
575 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: Treasurer
Telephone No.: (314) 674-8081
Telecopier No.: (314) 674-6755
(b) If to the Administrative Agent:
Citibank, N.A.
2 Penns Way
New Castle Delaware, 19720
Attention: Anne Hieronimus
Telephone No.: (302) 894-6034
Telecopier No.: (302) 894-6120
(c) If to any Lender, at the Domestic Lending Office
specified in the Administrative Questionnaire of such Lender,
or, as to the Company (or any other Borrower) or the Administrative
Agent, at such other address as shall be designated by such party in a
written notice to the other parties and, as to each other party, at such
other address as shall be designated by such party in a written notice
to the Company and the Administrative Agent. All such notices and
communications shall be deemed to have been duly given or made (i) in
the case of hand deliveries, when delivered by hand, (ii) in the case of
mailed notices, when received, and (iii) in the case of telecopier
notice, when transmitted and confirmed during normal business hours (or,
if delivered after the close of normal business hours, at the beginning
of business hours on the next Business Day), except that notices and
communications to the Administrative Agent pursuant to Article II or VII
shall not be effective until received by the Administrative Agent.
SECTION 8.03. No Waiver, Remedies. No failure on the part
-------------------
of any Lender or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any such
right preclude any other or
364-DAY CREDIT AGREEMENT
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further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.04. Costs and Expenses.
------------------
(a) The Company agrees to pay on demand all out-of-pocket
costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and expenses of
counsel for the Administrative Agent with respect thereto and with
respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement. The Company further agrees to
pay on demand all costs and expenses of the Administrative Agent and the
Lenders, if any (including, without limitation, reasonable counsel fees
and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the
Notes and the other documents to be delivered hereunder, including,
without limitation, reasonable fees and expenses of counsel for the
Administrative Agent and each Lender in connection with the enforcement
of rights under this Section 8.04(a).
(b) The Company agrees to indemnify and hold harmless the
Administrative Agent, the Syndication Agent and each Lender and each of
their Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all
-----------------
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in
each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation,
litigation or proceeding arising out of, related to or in connection
with the actual or proposed use of the proceeds of the Advances, in each
case whether or not such investigation, litigation or proceeding is
brought by the Company, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent such claim,
damage, loss, liability or expense is found by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct.
(c) If any payment of principal of, or Conversion of, any
Eurocurrency Rate Advance is made by any Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such
Advance, or if any payment of principal of any B Advance consisting of a
Fixed Rate Advance is made by any Borrower to or for the account of a
Lender other than on the maturity date of such Advance, as a result of a
prepayment or Conversion pursuant to Sections 2.05(b), 2.08(d) or (e),
2.10 or 2.12, acceleration of the maturity of the Notes pursuant to
Section 6.01 or for any other reason, the Company and such Borrower
jointly and severally agree, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), to pay to the Administrative
Agent for the account of such Lender any amounts required to compensate
such Lender for any additional losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion, including,
without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such
Advance.
(d) Without prejudice to the survival of any other
agreement of the Company or the other Borrowers hereunder, the
agreements and obligations of the Company and the other Borrowers
contained in Sections 2.11, 2.15 and 8.04 shall survive the payment in
full of principal, interest and all other amounts payable hereunder and
under the Notes.
SECTION 8.05. Right of Set-off. Nothing herein shall
----------------
derogate any Lender's right, if any, if and to the extent payment owed
to such Lender is not made when due hereunder or under any A Note or B
Note held by such Lender, to set off from time to time against any or
all of the Company's or the relevant
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Borrowers' respective deposit (general or special, time or demand,
provisional or final) accounts with such Lender any amount so due. Each
Lender agrees promptly to notify the Company (on its own behalf and on
behalf of the relevant Borrower, if applicable) after any such set-off
and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 8.05 are in
addition to other rights and remedies which such Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become
--------------
effective when it shall have been executed by the Company and the
Administrative Agent and when the Administrative Agent shall have been
notified by each Initial Lender that such Initial Lender has executed it
and thereafter shall be binding upon and inure to the benefit of the
Company, the Administrative Agent and each Lender and their respective
successors and assigns, except that no Borrower shall have the right to
assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
SECTION 8.07. Assignments and Participations, Register.
----------------------------------------
(a) Each Lender may (and shall if requested to do so by the
Company pursuant to Section 2.11, Section 2.12 or 2.15) assign to one or
more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitment, the A Advances owing to it and the A Note held by it, but
excluding the B Advances owing to it and the B Note or B Notes held by
it (other than with respect to an assignment pursuant to Section 2.11,
2.12 or 2.15)); provided that:
(i) other than in the case of an assignment to an Affiliate
of such Lender or assignments of the type described in subsection
(g) below, such Lender shall have obtained the prior written
consent of the Company, the Syndication Agent and the
Administrative Agent, no such consent to be unreasonably withheld;
(ii) each such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations under this
Agreement;
(iii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender, or an
assignment by a Lender to an Affiliate of such Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender
being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof;
(iv) each such assignment shall be to an Eligible Assignee;
and
(v) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together
with any A Note subject to such assignment and a processing and
recordation fee of $3,500.
Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution
and delivery thereof to the Administrative Agent, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement
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(and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the other Borrowers or the performance or
observance by the Company or the other Borrowers of any of their
respective obligations under this Agreement or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon the Administrative Agent, such assigning Lender or any other Lender
and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such assignee confirms that it
is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
By executing and delivering an Assumption and Acceptance,
the Person assuming a Commitment hereunder confirms to and agrees with
the parties hereto as follows: (i) neither the Administrative Agent,
the Syndication Agent nor any other Lender makes any representation or
warranty and assumes no responsibility with respect to the financial
condition of the Company or the other Borrowers or the performance or
observance by the Company or the other Borrowers of any of its
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Person confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assumption and Acceptance; (iii) such
Person will, independently and without reliance upon the Administrative
Agent or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (iv) such
Person confirms that it is an Eligible Assignee; (v) such assignee
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Administrative Agent by the terms
hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vi) such Person agrees that it will perform in
accordance with their terms all of the obligations that by the terms of
this Agreement are required to be performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Acceptance delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of
the A Advances owing to each such Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and
--------
binding for all purposes, absent manifest error, and each Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Company or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
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(d) Upon the Administrative Agent's receipt of an
Acceptance (executed, in the case of an Assignment and Acceptance, by an
assigning Lender and an assignee representing that it is an Eligible
Assignee and accompanied by any A Note subject to such assignment, and
executed, in the case of an Assumption and Acceptance, by the Person
assuming a Commitment hereunder), the Administrative Agent shall, if
such Acceptance has been completed and is in substantially the form of
Exhibit C-1 or C-2, as applicable, (i) accept such Acceptance,
(ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company.
Within five Business Days after its receipt of such notice,
each Borrower, at its own expense, shall execute and deliver to the
Administrative Agent:
(x) In the case of an assignment where (1) A Advances of
the assigning Lender are evidenced by an A Note and (2) the
assigning Lender has retained a Commitment hereunder, in exchange
for the surrendered A Note a new A Note payable to the order of
the assigning Lender in an amount equal to the Commitment retained
by it hereunder;
(y) In the case of an assignment to an Eligible Assignee
where such Eligible Assignee has requested that its A Advances be
evidenced by an A Note in accordance with Section 2.06(c), an A
Note payable to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it pursuant to such Acceptance.
(z) In the case of an assumption of a Commitment hereunder,
where the Person assuming the relevant Commitment hereunder has
requested that its A Advances be evidenced by an A Note in
accordance with Section 2.06(c), a new A Note payable to the order
of such Person in an amount equal to the Commitment assumed by it
pursuant to such Acceptance.
The new A Notes to be executed and delivered by a Borrower
under clauses (x) and (y) above shall be in an aggregate principal
amount equal to the aggregate principal amount of the A Note
surrendered in connection with the related assignment, shall be
dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit A-1
hereto. The new A Note to be executed and delivered under clause
(z) above shall be dated the effective date of such Acceptance and
shall otherwise be in substantially the form of Exhibit A-1
hereto.
(e) Each Lender may sell participations to one or more
banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or
a portion of its Commitment, the Advances owing to it and/or the Note or
Notes held by it); provided that (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Company, each other Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement, and (v) no participant under any
such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to
any departure by the Company or any other Borrower therefrom, except to
the extent that such amendment, waiver or consent would reduce the
principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation.
Upon the sale of a participation pursuant to this Section 8.07(e), such
Lender shall promptly provide notice to the Company of the sale of a
participation (other than a
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 51 -
sale of a participation pursuant to Section 2.16); provided that the
failure by such Lender to provide such notice shall not invalidate the
sale of such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 8.07, disclose to the assignee or participant or proposed
assignee or participant, any information relating to the Company or any
other Borrower furnished to such Lender by or on behalf of the Company
or such Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree
to preserve the confidentiality of any confidential information relating
to the Company and the other Borrowers received by it from such Lender;
provided further that the Company (on its own behalf and on behalf of
the other Borrowers) shall have consented in advance to the disclosure
of any non-public information.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all
or any portion of its rights under this Agreement (including, without
limitation, the Advances owing to it and the Notes held by it) in favor
of any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System.
(h) Each Lender agrees that it will not assign any Note or
Notes or sell any participation in any manner or under any circumstances
that would require registration, qualification or filings under the
securities laws of the United States of America, of any state or of any
country.
SECTION 8.08. Governing Law. This Agreement and the Notes
-------------
shall be governed by, and construed in accordance with, the laws of the
State of New York.
SECTION 8.09. Execution in Counterparts. This Agreement
-------------------------
may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 8.10. Jurisdiction, Etc.
------------------
(a) Each of the parties hereto (and each Designated
Borrower, by its acceptance of the proceeds of Advances made to it)
hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court
or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the Notes, or
for recognition or enforcement of any judgment, and each of the parties
hereto and each Designated Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State or, to
the extent permitted by law, in such federal court. Each of the parties
hereto and each Designated Borrower agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
any party may otherwise have to bring any action or proceeding relating
to this Agreement or the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto and each Designated Borrower
irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby and each
Designated Borrower irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 52 -
SECTION 8.11. Judgment Currency. This is an international
-----------------
loan transaction in which the specification of Dollars or Euros, as the
case may be (the "Specified Currency"), and payment in New York City or
------------------
the country of the Specified Currency, as the case may be (the
"Specified Place"), is of the essence, and the Specified Currency shall
---------------
be the currency of account in all events relating to Advances
denominated in the Specified Currency. The payment obligations of the
Company and the other Borrowers under this Agreement shall not be
discharged or satisfied by an amount paid in another currency or in
another place, whether pursuant to a judgment or otherwise, to the
extent that the amount so paid on conversion to the Specified Currency
and transfer to the Specified Place under normal banking procedures does
not yield the amount of the Specified Currency at the Specified Place
due hereunder. If for the purpose of obtaining judgment in any court it
is necessary to convert a sum due hereunder in the Specified Currency
into another currency (the "Second Currency"), the rate of exchange that
---------------
shall be applied shall be the rate at which in accordance with normal
banking procedures the Administrative Agent could purchase the Specified
Currency with the Second Currency on the Business Day next preceding the
day on which such judgment is rendered. The obligation of the Company
and the other Borrowers in respect of any such sum due from it to the
Administrative Agent or any Lender hereunder (in this Section called an
"Entitled Person") shall, notwithstanding the rate of exchange actually
---------------
applied in rendering such judgment, be discharged only to the extent
that on the Business Day following receipt by such Entitled Person of
any sum adjudged to be due hereunder in the Second Currency such
Entitled Person may in accordance with normal banking procedures
purchase and transfer to the Specified Place the Specified Currency with
the amount of the Second Currency so adjudged to be due; and the Company
and the applicable Borrower hereby, as a separate obligation and
notwithstanding any such judgment, jointly and severally agree to
indemnify such Entitled Person against, and to pay such Entitled Person
on demand, in the Specified Currency, the amount (if any) by which the
sum originally due to such Entitled Person in the Specified Currency
hereunder exceeds the amount of the Specified Currency so purchased and
transferred.
ARTICLE IX
GUARANTEE
SECTION 9.01. The Guarantee. The Company hereby guarantees
-------------
to each Lender and the Administrative Agent and their respective
successors and assigns the prompt payment in full when due (whether at
stated maturity, by acceleration or otherwise) of the principal of and
interest on the Advances made by the Lenders to each Designated Borrower
and all other amounts from time to time owing to the Lenders or the
Administrative Agent by any Designated Borrower under this Agreement and
by the Company under any of the other Notes, in each case strictly in
accordance with the terms thereof (such obligations being herein
collectively called the "Guaranteed Obligations"). The Company hereby
----------------------
further agrees that if any Designated Borrower shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) any
of the Guaranteed Obligations owing by such Designated Borrower, the
Company will promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed Obligations, the same will be promptly
paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
SECTION 9.02. Obligations Unconditional. The obligations
-------------------------
of the Company under Section 9.01 are irrevocable, absolute and
unconditional irrespective of the value, genuineness, validity,
regularity or enforceability of the obligations of any of the Designated
Borrowers under this Agreement or any other agreement or instrument
referred to herein, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations,
and, to the fullest extent permitted
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 53 -
by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, it being the intent of this Article IX
that the obligations of the Company hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one
or more of the following shall not alter or impair the liability of the
Company hereunder, which shall remain absolute and unconditional as
described above:
(i) at any time or from time to time, without notice to the
Company, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance
or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or any other agreement or instrument referred to
herein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall
be modified, supplemented or amended in any respect, or any right
under this Agreement or any other agreement or instrument referred
to herein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released
or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Administrative Agent or any Lender or Lenders as security
for any of the Guaranteed Obligations shall fail to be perfected.
The Company hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that
the Administrative Agent or any Lender exhaust any right, power or
remedy or proceed against any of the Designated Borrowers under this
Agreement or any other agreement or instrument referred to herein, or
against any other Person under any other guarantee of, or security for,
any of the Guaranteed Obligations.
SECTION 9.03. Reinstatement. The obligations of the
-------------
Company under this Article IX shall be automatically reinstated if and
to the extent that for any reason any payment by or on behalf of any of
the Designated Borrowers in respect of the Guaranteed Obligations is
rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Company agrees that
it will indemnify the Administrative Agent and each Lender on demand for
all reasonable costs and expenses (including fees of counsel) incurred
by the Administrative Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses
incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
SECTION 9.04. Subrogation. The Company hereby agrees that
-----------
until the payment and satisfaction in full of all Guaranteed Obligations
and the expiration and termination of the Commitments of the Lenders
under this Agreement it shall not exercise any right or remedy arising
by reason of any performance by it of its guarantee in Section 9.01,
whether by subrogation or otherwise, against any Designated Borrower or
any other guarantor of any of the Guaranteed Obligations or any security
for any of the Guaranteed Obligations.
SECTION 9.05. Remedies. The Company agrees that, as
--------
between the Company and the Lenders, the obligations of the Designated
Borrowers under this Agreement may be declared to be forthwith due and
payable as provided in Article VI (and shall be deemed to have become
automatically due and payable in the circumstances provided in
Article VI) for purposes of Section 9.01
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 54 -
notwithstanding any stay, injunction or other prohibition preventing
such declaration (or such obligations from becoming automatically due
and payable) as against any of the Designated Borrowers and that, in the
event of such declaration (or such obligations being deemed to have
become automatically due and payable), such obligations (whether or not
due and payable by such Designated Borrower) shall forthwith become due
and payable by the Company for purposes of Section 9.01.
SECTION 9.06. Instrument for the Payment of Money. The
-----------------------------------
Company hereby acknowledges that the guarantee in this Article IX
constitutes an instrument for the payment of money, and consents and
agrees that any Lender or the Administrative Agent, at its sole option,
in the event of a dispute by the Company in the payment of any moneys
due hereunder, shall have the right to bring motion-action under New
York CPLR Section 3213.
SECTION 9.07. Continuing Guarantee. The guarantee in this
--------------------
Article IX is a continuing guarantee of payment (and not of collection),
and shall apply to all Guaranteed Obligations whenever arising.
[remainder of page intentionally blank]
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 55 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
SOLUTIA INC.
By /s/ R.L. Bishop
---------------------------------
Name: R.L. Bishop
Title: Vice President & Treasurer
CITIBANK, N.A.,
as Administrative Agent
By /s/ Eileen G. Ogimachi
---------------------------------
Name: Eileen G. Ogimachi
Title: Attorney-in-Fact
BANK OF AMERICA, N.A.,
as Syndication Agent
By /s/ David Noda
---------------------------------
Name: David Noda
Title: Managing Director
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 56 -
Commitment INITIAL LENDERS
- ---------- ---------------
$25,000,000.00 CITIBANK, N.A.
By /s/ Eileen G. Ogimachi
----------------------------------
Name: Eileen G. Ogimachi
Title: Attorney-in-Fact
$25,000,000.00 BANK OF AMERICA, N.A.
By /s/ David Noda
----------------------------------
Name: David Noda
Title: Managing Director
$20,000,000.00 ABN AMRO BANK N.V.
By /s/ Steven M. Buehler
----------------------------------
Name: Steven M. Buehler
Title: Assistant Vice President
By /s/ Scott J. Albert
----------------------------------
Name: Scott J. Albert
Title: Group Vice President
$20,000,000.00 THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Hisashi Miyashiro
----------------------------------
Name: Hisashi Miyashiro
Title: Deputy General Manager
$20,000,000.00 BANK ONE, N.A.
By /s/ William J. Oleferchik
----------------------------------
Name: William J. Oleferchik
Title: Vice President
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 57 -
$20,000,000.00 THE CHASE MANHATTAN BANK
By /s/ Lawrence Palumbo, Jr.
----------------------------------
Name: Lawrence Palumbo, Jr.
Title: Vice President
$20,000,000.00 DEUTSCHE BANK A.G.,
NEW YORK BRANCH
By /s/ Jean M. Hannigan
----------------------------------
Name: Jean M. Hannigan
Title: Vice President
By /s/ Sheryl Paynter
----------------------------------
Name: Sheryl Paynter
Title: Assistant Vice President
$20,000,000.00 HSBC BANK, USA
By /s/ Christopher M. Samms
----------------------------------
Name: Christopher M. Samms
Title: Vice President - Officer
#9426
$20,000,000.00 KBC BANK N.V.
By /s/ Robert Snauffer
----------------------------------
Name: Robert Snauffer
Title: First Vice President
By /s/ Raymond F. Murray
----------------------------------
Name: Raymond F. Murray
Title: First Vice President
$20,000,000.00 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Dennis Wilczek
----------------------------------
Name: Dennis Wilczek
Title: Associate
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 58 -
$20,000,000.00 THE NORTHERN TRUST COMPANY
By /s/ Lisa M. Taylor
----------------------------------
Name: Lisa M. Taylor
Title: Second Vice President
$20,000,000.00 WACHOVIA BANK, N.A.
By /s/ Walter R. Gilikin
----------------------------------
Name: Walter R. Gilikin
Title: Senior Vice President
$12,500,000.00 MELLON BANK, N.A.
By /s/ Jeffrey R. Dickson
----------------------------------
Name: Jeffrey R. Dickson
Title: Vice President
$12,500,000.00 MERCANTILE BANK NATIONAL ASSOCIATION
By /s/ Gregory L. Dryden
----------------------------------
Name: Gregory L. Dryden
Title: Vice President
$12,500,000.00 SOCIETE GENERALE
By /s/ Steven R. Fercho
----------------------------------
Name: Steven R. Fercho
Title: Director
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
- 59 -
$12,500,000.00 THE SUMITOMO BANK, LIMITED
By /s/ John H. Kemper
----------------------------------
Name: John. H. Kemper
Title: Senior Vice President
$300,000,000.00 Total of Commitments
===============
364-DAY CREDIT AGREEMENT
<PAGE>
<PAGE>
SCHEDULE 1
Existing Liens
--------------
By a Deed of Trust and Security Agreement dated as of
August 26, 1999 and a Funding, Mortgage and Lease Agreement of the same
date, made by Solutia Inc., Solutia granted a lien upon and security
interest in Solutia rights as lessee in and against an office building
(which is Solutia's new headquarters) consisting of approximately
270,000 square feet and other fixtures and improvements located on the
site at 575 Maryville Centre, St. Louis County, Missouri. This is a
synthetic lease with State Street Bank and Trust of Missouri NA as
lessor and Solutia as Lessee.
<PAGE>
<PAGE>
SCHEDULE 2A
Pricing Grid
------------
"Applicable Margin" means, for any A Advance (whether
-----------------
denominated in Dollars or Euros) that is a Eurocurrency Rate Advance for
any period during which the Rated Securities are within any Rating Level
set forth below, the rate set forth below opposite the reference to such
Rating Level:
Rating Level Applicable Margin (p.a.)
------------ ------------------------
Rating Level 1 0.205%
Rating Level 2 0.290%
Rating Level 3 0.450%
Rating Level 4 0.625%
Rating Level 5 0.850%
Rating Level 6 1.000%;
provided that, if the ratings of the Rated Securities established by S&P
and Moody's shall fall within different Rating Levels, the Applicable
Margin shall be determined by reference to the higher of the two Rating
Levels (except that, if the lower such Rating Level is more than one
Rating Level below the higher such Rating Level, the Applicable Margin
shall be determined by reference to the Rating Level that is one Rating
Level higher than the lower such Rating Level). Each change in the
Applicable Margin resulting from a Rating Level Change shall be
effective on the effective date of such Rating Level Change.
"Facility Fee Rate" means, for any period during which the
-----------------
Rated Securities are within any Rating Level set forth below, the rate
set forth below opposite the reference to such Rating Level:
Rating Level Facility Fee Rate (p.a.)
------------ ------------------------
Rating Level 1 0.070%
Rating Level 2 0.085%
Rating Level 3 0.100%
Rating Level 4 0.125%
Rating Level 5 0.150%
Rating Level 6 0.250%;
provided that, if the ratings of the Rated Securities established by S&P
and Moody's shall fall within different Rating Levels, the Facility Fee
Rate shall be determined by reference to the higher of the two Rating
Levels (except that, if the lower such Rating Level is more than one
Rating Level below the higher such Rating Level, the Facility Fee Rate
shall be determined by reference to the Rating Level that is one Rating
Level higher than the lower such Rating Level). Each change in the
Facility Fee Rate resulting from a Rating Level Change shall be
effective on the effective date of such Rating Level Change.
<PAGE>
<PAGE>
- 2 -
"Utilization Fee Rate" means, for any period during which
--------------------
the Rated Securities are within any Rating Level set forth below, the
rate set forth below opposite the reference to such Rating Level:
Rating Level Utilization Fee Rate (p.a.)
------------ ---------------------------
Rating Level 1 0.125%
Rating Level 2 0.125%
Rating Level 3 0.125%
Rating Level 4 0.125%
Rating Level 5 0.125%
Rating Level 6 0.250%;
provided that, if the ratings of the Rated Securities established by S&P
and Moody's shall fall within different Rating Levels, the Utilization
Fee Rate shall be determined by reference to the higher of the two
Rating Levels (except that, if the lower such Rating Level is more than
one Rating Level below the higher such Rating Level, the Utilization Fee
Rate shall be determined by reference to the Rating Level that is one
Rating Level higher than the lower such Rating Level). Each change in
the Utilization Fee Rate resulting from a Rating Level Change shall be
effective on the effective date of such Rating Level Change.
<PAGE>
<PAGE>
SCHEDULE 2B
<TABLE>
SOLUTIA INC.<F1>
$300MM 364-DAY REVOLVING CREDIT FACILITY
PRICING GRID
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 LEVEL 6
BASIS FOR Long Term Senior Long Term Senior Long Term Senior Long Term Senior Long Term Senior Long Term Senior
PRICING<F2> Unsecured Debt Unsecured Debt Unsecured Debt Unsecured Debt Unsecured Debt Unsecured Debt
Rated At Least A Rated Less Than Rated Less Than Rated Less Than Rated Less Than Rated Lower Than
By Standard & Level 1 But At Level 2 But At Level 3 But At Level 4 But At Level 5 Or Not
Poor's or A2 Least A- By Least BBB+ By Least BBB By Least BBB- By Rated.
-- Standard & Poor's Standard & Poor's Standard & Poor's Standard & Poor's
By Moody's or A3 By or Baa1 By or Baa2 By or Baa3 By
-- -- -- --
Moody's Moody's Moody's Moody's
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FACILITY FEE 7.0 bps 8.5 bps 10.0 bps 12.5 bps 15.0 bps 25.0 bps
- -----------------------------------------------------------------------------------------------------------------------------------
APPLICABLE 20.5 bps 29.0 bps 45.0 bps 62.5 bps 85.0 bps 100.0 bps
MARGIN
- -----------------------------------------------------------------------------------------------------------------------------------
DRAWN COST<F3> LIBOR + 27.5 bps LIBOR + 37.5 bps LIBOR + 55.0 bps LIBOR + 75.0 bps LIBOR + 100.0 bps LIBOR + 125.0 bps
- -----------------------------------------------------------------------------------------------------------------------------------
UTILIZATION FEE 12.5 bps 12.5 bps 12.5 bps 12.5 bps 12.5 bps 25.0 bps
USAGE > 33%
- -----------------------------------------------------------------------------------------------------------------------------------
FULLY DRAWN LIBOR + 40.0 bps LIBOR + 50.0 bps LIBOR + 67.5 bps LIBOR + 87.5 bps LIBOR + 112.5 bps LIBOR + 150.0 bps
COST<F4>
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> This pricing grid is intended to be a summary of the Applicable Margin, Facility Fee Rate and Rating Level definitions in the
Credit Agreement. In the event of any inconsistency between this pricing grid and the actual terms of the Credit Agreement
(including the definitions set forth on Schedule 2A), the terms of the Credit Agreement shall control and govern.
<F2> If Solutia Inc. is split-rated and the ratings fall in different Rating Levels, the higher of the two Rating Levels will apply
(except that, if the lower such Rating Level is more than one Rating Level below the higher such Rating Level, the Rating
Level that is one Rating Level higher than the lower such Rating Level will apply).
<F3> Facility Fee plus Applicable Margin.
<F4> Drawn Cost plus Utilization Fee.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-1
[Form of A Note]
U.S. $ Dated:
----------- ----------
FOR VALUE RECEIVED, the undersigned, [insert name of
Borrower], a [insert type of entity] organized under the laws of [insert
jurisdiction]<F1> (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of (the "Lender") for the account of its Applicable
---------- ------
Lending Office the principal sum of [INSERT DOLLARS AND CENTS IN WORDS]
(or, to the extent of any A Advances that are denominated in Euros, the
aggregate principal amount thereof in such Currency) or such lesser
amount as shall equal the aggregate unpaid principal amount of the A
Advances made by the Lender to the Borrower under the Credit Agreement,
in immediately available funds, on the dates, in such Currency and in
the principal amounts provided in the Credit Agreement referred to
below. Terms used in this Note and not otherwise defined have the
meanings assigned to them in the Credit Agreement referred to below.
The Borrower promises to pay interest on the unpaid
principal amount of each A Advance made to the Borrower from the date of
such A Advance until such principal amount is paid in full, at such
interest rates, in such Currency, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest of each A Advance are payable in
the Currency in which such A Advance is denominated to Citibank, N.A.
("Citibank"), as Administrative Agent, at the Administrative Agent's
--------
Account, in same day funds. Each A Advance made by the Lender to the
Borrower pursuant to the Credit Agreement, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto which is
part of this Note; provided that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This Note is one of the A Notes referred to in, and is
entitled to the benefits of, the 364-Day Multicurrency Credit Agreement
dated as of November 23, 1999 (as from time to time amended, the
"Credit Agreement") among Solutia Inc. (the "Company"), the Lender
---------------- -------
and certain other lenders parties thereto, Bank of America, N.A., as
Syndication Agent, and Citibank, as Administrative Agent for the Lender
and such other lenders. The Credit Agreement, among other things,
(i) provides for the making of advances (the "A Advances") by the
----------
Lender to the Borrower from time to time in Dollars and Euros in an
aggregate amount not to exceed at any time outstanding the U.S. dollar
amount (or Dollar Equivalent) first above mentioned, the indebtedness of
the Borrower resulting from each such A Advance being evidenced by this
Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof
upon the terms and conditions therein specified.
[Pursuant to Article IX of the Credit Agreement, this Note
is absolutely and unconditionally guaranteed by the Company.]<F2>
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising,
any rights hereunder on the part of the holder hereof shall operate as a
waiver of such rights.
[FN]
- ---------------
<F1> For A Notes for the Company as Borrower, insert "SOLUTIA INC., a
corporation organized under the laws of the State of Delaware".
For A Notes for a Designated Borrower as Borrower, insert
analogous information.
<F2> Include in Notes of Designated Borrowers.
<PAGE>
<PAGE>
- 2 -
This Note shall be governed by, and construed in accordance
with, the law of the State of New York, United States.
[NAME OF BORROWER]
By
---------------------------------
Name:
Title:
<PAGE>
<PAGE>
<TABLE>
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AMOUNT OF CURRENCY OF MATURITY OF PAID OR PRINCIPAL NOTATION
DATE A ADVANCE A ADVANCE A ADVANCE PREPAID BALANCE MADE BY
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<PAGE>
<PAGE>
EXHIBIT A-2
[Form of B Note]
[U.S.$] [EUROS] Dated:
----------- ----------
FOR VALUE RECEIVED, the undersigned, [insert name of
Borrower], a [insert type of entity] organized under the laws of [insert
jurisdiction]<F3> (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of (the "Lender") for the account of its Applicable
---------- ------
Lending Office the principal sum of [INSERT DOLLARS AND CENTS (OR EUROS)
IN WORDS] on [ , ]. Terms used in this Note and not
-------- -- ----
otherwise defined have the meanings assigned to them in the Credit
Agreement referred to below.
The Borrower promises to pay interest on the unpaid
principal amount hereof from the date hereof until such principal amount
is paid in full, in the Currency, at the interest rate and payable on
the interest payment date or dates provided below:
Currency: [Dollars][Euros]
Interest Rate: % per annum (calculated on
-----
the basis of a year of days
-----
for the actual number of days
elapsed).
Interest Payment Date or Dates:
--------------------------------
Both principal and interest are payable in [Dollars] [Euros]
to Citibank, N.A. ("Citibank"), as Administrative Agent, at the
--------
Administrative Agent's Account, in same day funds, free and clear of and
without any deduction, with respect to the payee named above, for any
and all present and future taxes, deductions, charges or withholdings,
and all liabilities with respect thereto, as set forth in the Credit
Agreement.
This Note is one of the B Notes referred to in, and is
entitled to the benefits of, the 364-Day Multicurrency Credit Agreement
dated as of November 23, 1999 (as from time to time amended, the
"Credit Agreement") among Solutia Inc. (the "Company"), the Lender
---------------- -------
and certain other lenders parties thereto, Bank of America, N.A., as
Syndication Agent, and Citibank, as Administrative Agent for the Lender
and such other lenders. The Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events.
[Pursuant to Article IX of the Credit Agreement, this Note
is absolutely and unconditionally guaranteed by the Company.]<F4>
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising,
any rights hereunder on the part of the holder hereof shall operate as a
waiver of such rights.
[FN]
- ----------------
<F3> For A Notes for the Company as Borrower, insert "SOLUTIA INC., a
corporation organized under the laws of the State of Delaware".
For A Notes for a Designated Borrower as Borrower, insert
analogous information.
<F4> Include in Notes of Designated Borrowers.
<PAGE>
<PAGE>
- 2 -
This Note shall be governed by, and construed in accordance
with, the law of the State of New York, United States.
[NAME OF BORROWER]
By
---------------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT B-1
[Form of Notice of A Borrowing]
[Date]
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
The undersigned, Solutia Inc., refers to the 364-Day
Multicurrency Credit Agreement dated as of November 23, 1999 (as amended
from time to time, the "Credit Agreement", the terms defined therein
----------------
being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, Bank of America, N.A., as Syndication Agent,
and Citibank, N.A., as Administrative Agent for said Lenders, and hereby
gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement that the undersigned hereby requests an A Borrowing (the
"Proposed A Borrowing") under the Credit Agreement, and in that
--------------------
connection sets forth below the information relating to the Proposed A
Borrowing as required by Section 2.02(a) of the Credit Agreement:
(1) The Business Day of the Proposed A Borrowing is
, .
-------- ----
(2) The Type of Advances comprising the Proposed A
Borrowing is [Base Rate Advances] [Eurocurrency Rate
Advances].
(3) The Currency of the Proposed A Borrowing is
[Dollars][Euros].
(4) The aggregate amount of the Proposed A Borrowing is
[U.S. $] [Euros] .
---------
(5) The initial Interest Period for each Eurocurrency Rate
Advance made as part of the Proposed A Borrowing is
[ ] month[s].<F5>
--
(6) the Borrower of the A Advances to be made as part of
the Proposed A Borrowing is [the Company][the
following Designated Borrower: ].
-----------------
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of
the Proposed A Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement (except the Excluded Representations)
are correct, before and after giving effect to the Proposed A
Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date; and
[FN]
- -------------
<F5> Include in borrowing notices relating to Eurocurrency Rate
Advances.
<PAGE>
<PAGE>
- 2 -
(B) no event has occurred and is continuing, or would
result from such Proposed A Borrowing or from the application of
the proceeds therefrom, that constitutes a Default.
Very truly yours,
SOLUTIA INC. [on behalf of the Designated
Borrower referred to above]<F6>
By
---------------------------------------
Name:
Title:
[FN]
- -------------
<F6> Insert if applicable.
<PAGE>
<PAGE>
EXHIBIT B-2
[Form of Notice of B Borrowing]
[Date]
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
The undersigned, Solutia Inc., refers to the 364-Day
Multicurrency Credit Agreement dated as of November 23, 1999 (as amended
from time to time, the "Credit Agreement", the terms defined therein
----------------
being used herein as therein defined), among the undersigned, certain
Lenders parties thereto, Bank of America, N.A., as Syndication Agent,
and Citibank, N.A., as Administrative Agent for said Lenders, and hereby
gives you notice, irrevocably pursuant to Section 2.03 of the Credit
Agreement that the undersigned hereby requests a B Borrowing (the
"Proposed B Borrowing") under the Credit Agreement, and in that
--------------------
connection sets forth the terms on which the Proposed B Borrowing is
requested to be made:
(1) Date of B Borrowing:
--------------------
(2) Amount of B Borrowing:
--------------------
(3) Currency of B Borrowing: [Dollars][Euros]
(4) Maturity Date of B Borrowing: <F7>
--------------------
(5) Interest Rate Basis:
--------------------
(6) Interest Payment Date(s)
--------------------
(7) Type of B Borrowing: [Fixed Rate Advance]
[Floating Rate Advance]
(8) Name of Borrower: [the Company][The
following Designated
Borrower: ]
----------
(9) Other Terms:
-----------------------
-----------------------
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of
the Proposed B Borrowing:
[FN]
- -------------
<F7> Maturity date may not be earlier than the date occurring thirty
days after the date of the Proposed B Borrowing or later than the
Commitment Termination Date.
<PAGE>
<PAGE>
- 2 -
(a) the representations and warranties contained in
Section 4.01 of the Credit Agreement (except the Excluded
Representations) are correct, before and after giving effect to
the Proposed B Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would
result from the Proposed B Borrowing or from the application of
the proceeds therefrom, that constitutes a Default; and
(c) in compliance with Section 2.03(a) of the Credit
Agreement, the aggregate amount of the Proposed B Borrowing in
Dollars or in Euros and all other Borrowings to be made on the
same day under the Credit Agreement is within the aggregate amount
of the unused Commitments of the Lenders.
The undersigned hereby confirms that the Proposed B
Borrowing is to be made available to it in accordance with Section
2.03(a)(v) of the Credit Agreement.
Very truly yours,
SOLUTIA INC. [on behalf of the Designated
Borrower referred to above]<F8>
By
---------------------------------------
Name:
Title:
[FN]
- ------------
<F8> Insert if applicable.
<PAGE>
<PAGE>
EXHIBIT C-1
[Form of Assignment and Acceptance]
Reference is made to the 364-Day Multicurrency Credit
Agreement dated as of November 23, 1999 (as amended from time to time,
the "Credit Agreement") among Solutia Inc., a Delaware corporation
----------------
(the "Company"), the Lenders (as defined in the Credit Agreement),
-------
Bank of America, N.A., as Syndication Agent, and Citibank, N.A., as
administrative agent for the Lenders (the "Administrative Agent").
--------------------
Terms defined in the Credit Agreement are used herein with the same
meaning unless otherwise defined herein.
The "Assignor" and the "Assignee" referred to on Schedule 1
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under
the Credit Agreement as of the date hereof (other than in respect
of B Advances and B Notes) equal to the percentage interest
specified on Schedule 1 hereto of all outstanding rights and
obligations of the Assignor under the Credit Agreement (other than
in respect of B Advances and B Notes) including, without
limitation, such interest in the Assignor's Commitment, the A
Advances owing to the Assignor and any A Notes held by the
Assignor. After giving effect to such sale and assignment, the
Assignee's Commitment and the amount of the A Advances owing to
the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse
claim; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Company (or any other
Borrower) or the performance or observance by the Company (or any
other Borrower) of any of its obligations under the Credit
Agreement or any other instrument or document furnished pursuant
thereto; [and] (iv) represents and warrants that the assignment
being made hereby shall not require registration, qualification or
any filings to be made under the securities laws of the United
States of America, of any state or of any country; [and (v)
attaches the A Note of each Borrower held by the Assignor and
requests that the Administrative Agent exchange such A Notes for
new A Notes payable by the respective Borrowers to the order of
the Assignor in an amount equal to the Commitment retained by the
Assignor under the Credit Agreement, as specified on Schedule 1
hereto].<F9>
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial
statements referred to in Section 4.01 thereof and such other
documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Syndication Agent, the
Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible
Assignee; (iv) appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such
powers and
[FN]
- -------------
<F9> Include bracketed text if the Assignor is retaining a Commitment
under the Credit Agreement and holds A Notes executed pursuant to
a request made by such Assignor under Section 2.06(c) of the
Credit Agreement.
<PAGE>
<PAGE>
- 2 -
discretion under the Credit Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such
powers and discretion as are reasonably incidental thereto; (v)
agrees that it will perform in accordance with their terms all of
the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Lender; [and] (vi) attaches
any U.S. Internal Revenue Service forms required under Section
2.15 of the Credit Agreement; [and (vi) requests, in accordance
with Section 2.06(c) of the Credit Agreement, that its A Advances
to each Borrower be evidenced by an A Note payable by such
Borrower to the order of the Assignee in an amount equal to the
Commitment assumed by it, as specified on Schedule 1 hereto]<F10>.
4. Following the execution of this Assignment and
Acceptance, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent. The
effective date for this Assignment and Acceptance (the "Effective
---------
Date") shall be the date of acceptance hereof by the
----
Administrative Agent, unless otherwise specified on Schedule 1
hereto.
5. Upon such acceptance and recording by the Administrative
Agent, as of the Effective Date, (i) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative
Agent, from and after the Effective Date, the Administrative Agent
shall make all payments under the Credit Agreement and the A Notes
in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest, Facility Fees and
Utilization Fees with respect thereto) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the A Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the law of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of
Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have
caused Schedule 1 to this Assignment and Acceptance to be executed by
their officers thereunto duly authorized as of the date specified
thereon.
[FN]
- ------------
<F10> Include bracketed text if the Assignee requests that its A
Advances be evidenced by promissory notes in accordance with
Section 2.06(c) of the Credit Agreement.
<PAGE>
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: %
-------
Assignee's Commitment: $
------------
Aggregate outstanding principal
amount of A Advances assigned: $
------------
and Euros
-------------
Principal amount of A Note of each
Borrower payable to Assignee: $
------------
Principal amount of A Note of each
Borrower payable to Assignor: $
------------
Effective Date<F*> (if other than date of
acceptance by the Administrative Agent): ,
------------ ----
Dated: , [NAME OF ASSIGNOR], as Assignor
-------------- ----
By
-------------------------------------
Name:
Title:
Dated: , [NAME OF ASSIGNEE], as Assignee
-------------- ----
By
-------------------------------------
Name:
Title:
Domestic Lending Office: [Address]
Eurocurrency Lending Office: [Address]
[FN]
- ----------------
<F*> This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Administrative
Agent.
<PAGE>
<PAGE>
- 2 -
Accepted <F**>[and consented to] this
day of , 19
- -- ------ --
CITIBANK, N.A., as Administrative Agent
By
-----------------------------------------
Name:
Title:
<F**>[Consented to:
BANK OF AMERICA, N.A., as Syndication Agent
By
-----------------------------------------
Name:
Title:]
<F**>[Consented to this day
--
of ,
---------- ----
SOLUTIA INC., on its own behalf and on
behalf of each of the Designated Borrowers
By
-----------------------------------------
Name:
Title:]
[FN]
- ---------------
<F**> Required if the assignment is other than to an Affiliate of the
Assignor or pursuant to the terms of Section 8.07(g) of the Credit
Agreement.
<PAGE>
<PAGE>
EXHIBIT C-2
[Form of Assumption and Acceptance]
Dated ,
-------------- ----
Solutia Inc.
Citibank, N.A., as
Administrative Agent for
the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
Reference is made to the 364-Day Multicurrency Credit
Agreement dated as of November 23, 1999 (as amended from time to time,
the "Credit Agreement") among Solutia Inc., a Delaware corporation
----------------
(the "Company"), the Lenders (as defined in the Credit Agreement),
-------
Bank of America, N.A., as Syndication Agent, and Citibank, N.A., as
administrative agent for the Lenders (the "Administrative Agent").
--------------------
Terms defined in the Credit Agreement are used herein with the same
meaning unless otherwise defined herein.
1. [INSERT NAME OF ADDITIONAL COMMITMENT LENDER] (the
"Additional Commitment Lender") agrees to become a party to the
----------------------------
Credit Agreement and to have the rights and perform the
obligations of a Lender under the Credit Agreement, and to be
bound in all respects by the terms of the Credit Agreement.
2. The Additional Commitment Lender hereby agrees to a
Commitment of [INSERT AMOUNT OF PROPOSED COMMITMENT] (the
"Proposed Commitment").
-------------------
3. The Additional Commitment Lender (i) agrees that no
Lender has made any representation or warranty, or assumes any
responsibility with respect to, (x) any statements, warranties or
representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto or (y) the
financial condition of the Company (or any other Borrower) or the
performance or observance by the Company (or any other Borrower)
of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; (ii) confirms
that it has received a copy of the Credit Agreement, together with
copies of the financial statements referred to in Section 4.01
thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into this Assumption and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Administrative Agent,
the Syndication Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under the Credit Agreement; (iv) confirms that it is
an Eligible Assignee; (v) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf
and to exercise such powers and
<PAGE>
<PAGE>
- 2 -
discretion under the Credit Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such
powers and discretion as are reasonably incidental thereto; (vi)
agrees that it will perform in accordance with their terms all of
the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (vii) attaches any
U.S. Internal Revenue Service forms required under Section 2.15 of
the Credit Agreement.
4. The effective date for this Acceptance shall be
[ , ] (the "Assumption Date"); provided that
-------------- ---- ---------------
this Acceptance has been fully executed and delivered to the
Administrative Agent for acceptance and recording by the
Administrative Agent on or prior to such Assumption Date.
5. Upon such execution, delivery, acceptance and recording
and as of the Assumption Date, the Additional Commitment Lender
shall be a party to the Credit Agreement with a Commitment equal
to the Proposed Commitment and, to the extent provided in this
Acceptance, have the rights and obligations of a Lender
thereunder.
6. Upon such acceptance and recording, from and after the
Assumption Date, the Administrative Agent shall make all payments
under the Credit Agreement in respect of the Proposed Commitment
provided for in this Acceptance (including, without limitation,
all payments of principal, interest, Facility Fees and Utilization
Fees with respect thereto) to the Additional Commitment Lender.
7. This Acceptance shall be governed by and construed in
accordance with the law of the State of New York.
8. This Acceptance may be signed in any number of
counterparts, each of which shall be an original, with the same as
if the signatures were upon the same instrument.
[remainder of page intentionally blank]
<PAGE>
<PAGE>
- 3 -
IN WITNESS WHEREOF, the Additional Commitment Lender has
caused Acceptance to be executed by its officers thereunto duly
authorized as of the date specified above.
[NAME OF ADDITIONAL COMMITMENT
LENDER]
By
-------------------------------------
Name:
Title:
Domestic Lending Office: [Address]
Eurocurrency Lending Office: [Address]
This Assumption and Acceptance is
hereby acknowledged and agreed on
as of the date set forth above.
SOLUTIA INC.
By
-----------------------------------------
Name:
Title:
CITIBANK, N.A., as Administrative Agent
By
-----------------------------------------
Name:
Title:
BANK OF AMERICA, N.A., as Syndication Agent
By
-----------------------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT D
[Form of Opinion of Counsel for the Company]
November 23, 1999
To the Lenders party to the
Credit Agreement referred to
below
Citibank, N.A., as Administrative
Agent
399 Park Avenue
New York, New York 10043
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01(b)(1)
of the 364-Day Multicurrency Credit Agreement dated as of November 23,
1999 (the "Credit Agreement"), among Solutia Inc., a Delaware corporation
----------------
(the "Company"), the Lenders parties thereto, Bank of America, N.A., as
-------
Syndication Agent, and Citibank, N.A., as Administrative Agent for said
Lenders. Terms defined in the Credit Agreement are used herein as therein
defined.
I am General Counsel of the Company and am familiar with the
preparation, execution and delivery of the Credit Agreement.
In that connection, I or persons under my supervision have
examined or are familiar with: (1) the Credit Agreement, the A Notes
and the form of the B Note; (2) the documents furnished by the Company
pursuant to Article III of the Credit Agreement; (3) the certificate of
incorporation of the Company and all amendments thereto (the "Charter");
-------
(4) the by-laws of the Company and all amendments thereto (the
"By-laws"); and (5) a certificate of the Secretary of State of
-------
Delaware, dated November 23, 1999, certifying as to the continued
corporate existence and good standing of the Company in that State.
In addition, I or persons under my supervision have examined
or are familiar with the originals, or copies certified to my
satisfaction, of such other corporate records of the Company,
certificates of public officials and of officers of the Company, and
agreements, instruments and other documents, and made such other
investigations and review of relevant documents as I have deemed
necessary as a basis of the opinions expressed below. I have assumed
the due execution and delivery, pursuant to due authorization, of the
Credit Agreement by the Lenders and the Administrative Agent.
I am qualified to practice law in the State of Missouri. My
opinions expressed below are limited to the law of the State of
Missouri, the General Corporation Law of the State of Delaware and the
Federal law of the United States.
Based upon the foregoing and upon such investigation as I
have deemed necessary, I am of the following opinion:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
2. The execution, delivery and performance by the Company
of the Credit Agreement and the Notes, and the other transactions
contemplated by the Credit Agreement, are within the
<PAGE>
<PAGE>
- 2 -
Company's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Charter
or the By-laws, (ii) any law, rule or regulation applicable to the
Company (including, without limitation, Regulation X of the Board
of Governors of the Federal Reserve System) or (iii) to the best
of my knowledge, any contractual or legal restriction contained in
any indenture or other agreement or instrument to which the
Company or any of its Consolidated Subsidiaries is a party or is
bound. The Credit Agreement, and the Notes delivered today, have
been duly executed and delivered on behalf of the Company.
3. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body or any other third party is required for the due execution,
delivery and performance by the Company of the Credit Agreement
and the Notes.
4. The Credit Agreement is, and each Note of the Company
when delivered under the Credit Agreement will be, legal, valid
and binding obligations of the Company enforceable against the
Company in accordance with their respective terms.
5. In any action or proceeding arising out of or relating
to the Credit Agreement or the Notes in any court of the State of
Missouri or in any Federal court sitting in the State of Missouri,
such court would recognize and give effect to the provisions of
Section 8.08 of the Credit Agreement wherein the parties thereto
agree that the Credit Agreement and the Notes shall be governed
by, and construed in accordance with, the law of the State of New
York. Without limiting the generality of the foregoing, a court
of the State of Missouri or a Federal court sitting in the State
of Missouri would apply the usury law of the State of New York to
the Credit Agreement and the Notes. However, if a court were to
hold that the Credit Agreement and the Notes are governed by, and
to be construed in accordance with, the law of the State of
Missouri, the Credit Agreement and the Notes of the Company would
be, under the laws of the State of Missouri, legal, valid and
binding obligations of the Company enforceable against the Company
in accordance with their respective terms.
6. Except as described in the Company's Report on Form 10-K
for the fiscal year ended December 31, 1998 or in the Company's
Report on Form 10-Q for the fiscal quarter ended September 30,
1999, there is no pending or overtly threatened action or
proceeding affecting the Company or any of its Consolidated
Subsidiaries before any court, governmental agency or arbitrator
which (i) would have a Material Adverse Effect or (ii) purports to
affect, or would affect, the legality, validity or enforceability
of the Credit Agreement or any Note.
7. Neither the Company nor any of its Material Subsidiaries
is an "investment company", or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act
of 1940, as amended. Neither the Company nor any of its Material
Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
References herein to the Credit Agreement include the
guarantee by the Company of obligations of Designated Borrowers set
forth in Article IX of the Credit Agreement.
The foregoing opinions are subject to the following comments
and qualifications:
(A) The enforceability of Section 8.04(b) of the Credit
Agreement (and any other similar provisions therein) may be
limited by laws limiting the enforceability of provisions
exculpating or exempting a party from, or requiring
indemnification of a party for, its own action or inaction, to the
extent such action or inaction involves gross negligence,
recklessness or willful or unlawful conduct.
<PAGE>
<PAGE>
- 3 -
(B) Clause (iii) of the second sentence of Section 9.02 of
the Credit Agreement may not be enforceable to the extent that the
Guaranteed Obligations are materially modified.
(C) The enforceability of provisions in the Credit
Agreement and the Notes to the effect that terms may not be waived
or modified except in writing may be limited under certain
circumstances.
(D) I express no opinion as to (i) the effect of the laws
of any jurisdiction in which any Lender is located (other than the
State of Missouri) that limit the interest, fees or other charges
such Lender may impose, (ii) the second sentence of Section 2.16
of the Credit Agreement, (iii) the first sentence of Section 8.10(a)
of the Credit Agreement, insofar as such sentence relates to the
subject matter jurisdiction of any federal court sitting in New York
City to adjudicate any controversy related to the Credit Agreement
and the Notes, (iv) the second sentence of Section 8.10(a), (v) the
waiver of inconvenient forum set forth in Section 8.10(b) of the
Credit Agreement with respect to proceedings in any federal court
sitting in New York City, (vi) Section 8.11 of the Credit Agreement
and (vii) Section 9.06 of the Credit Agreement.
(E) My opinion in paragraph 4 above as to the enforceability
of the Credit Agreement and the Notes is subject to the effect of
(a) any applicable bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfer or preferential
transfers), reorganization, moratorium or similar law affecting
creditors' rights generally and (b) general principles of equity,
including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether considered in a
proceeding in equity or at law).
Very truly yours,
<PAGE>
<PAGE>
EXHIBIT E
[Form of Opinion of Special New York Counsel
to the Administrative Agent]
November 23, 1999
To the Lenders party to the
Credit Agreement referred to
below
Citibank, N.A., as Administrative
Agent
399 Park Avenue
New York, New York 10043
Ladies and Gentlemen:
We have acted as special New York counsel to the Administrative
Agent in connection with the 364-Day Multicurrency Credit Agreement
dated as of November 23, 1999 (the "Credit Agreement") among Solutia Inc.
----------------
(the "Company"), the Lenders parties thereto, Bank of America, N.A.,
-------
as Syndication Agent, and Citibank, N.A., as Administrative Agent,
providing for loans to be made by said Lenders to the Company and the
Designated Borrowers in an aggregate principal amount not exceeding
$300,000,000. Terms defined in the Credit Agreement are used herein
as defined therein. This opinion is being delivered pursuant to
Section 3.01(b)(2) of the Credit Agreement.
In rendering the opinions expressed below, we have examined
the Credit Agreement and the Notes being executed and delivered on the
date hereof (the "Notes" and collectively with the Credit Agreement,
-----
the "Loan Documents").
--------------
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals and the conformity with authentic original documents of all
documents submitted to us as copies.
In rendering the opinions expressed below, we have assumed,
with respect to the Loan Documents, that:
(i) the Loan Documents have been duly authorized by, have
been duly executed and delivered by, and (except to the extent set
forth in the opinions below as to the Company) constitute legal,
valid, binding and enforceable obligations of, all of the parties
thereto;
(ii) all signatories to the Loan Documents have been duly
authorized; and
(iii) all of the parties to the Loan Documents are duly
organized and validly existing and have the power and authority
(corporate or other) to execute, deliver and perform the Loan
Documents.
Based upon and subject to the foregoing and subject also to
the comments and qualifications set forth below, and having considered
such questions of law as we have deemed necessary as a basis for the
opinions expressed below, we are of the opinion that each Loan Document
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium,
<PAGE>
<PAGE>
- 2 -
fraudulent conveyance or transfer or other similar laws relating
to or affecting the rights of creditors generally and except as
the enforceability of such Loan Document is subject to the
application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law), including,
without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and
(b) concepts of materiality, reasonableness, good faith and fair
dealing.
The foregoing opinions are subject to the following comments
and qualifications:
(A) The enforceability of Section 8.04(b) of the Credit
Agreement (and any other similar provisions therein) may be
limited by laws limiting the enforceability of provisions
exculpating or exempting a party from, or requiring
indemnification of a party for, its own action or inaction, to the
extent such action or inaction involves gross negligence,
recklessness or willful or unlawful conduct.
(B) Clause (iii) of the second sentence of Section 9.02 of
the Credit Agreement may not be enforceable to the extent that the
Guaranteed Obligations are materially modified.
(C) The enforceability of provisions in the Loan Documents
to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(D) We express no opinion as to (i) the effect of the laws
of any jurisdiction in which any Lender is located (other than the
State of New York) that limit the interest, fees or other charges
such Lender may impose, (ii) the second sentence of Section 2.16
of the Credit Agreement, (iii) the first sentence of Section 8.10(a)
of the Credit Agreement, insofar as such sentence relates to the
subject matter jurisdiction of any federal court sitting in New York
City to adjudicate any controversy related to the Loan Documents,
(iv) the second sentence of Section 8.10(a), (v) the waiver of
inconvenient forum set forth in Section 8.10(b) of the Credit Agreement
with respect to proceedings in any federal court sitting in New York
City, (vi) Section 8.11 of the Credit Agreement and (vii) Section 9.06
of the Credit Agreement.
(E) We point out with reference to obligations stated to be
payable in a currency other than Dollars that (i) a New York
statute provides that a judgment rendered by a court of the State
of New York in respect of an obligation denominated in any such
other currency would be rendered in such other currency and would
be converted into Dollars at the rate of exchange prevailing on
the date of entry of the judgment and (ii) a judgment rendered by
a Federal court sitting in the State of New York in respect of an
obligation denominated in any such other currency may be expressed
in Dollars, but we express no opinion as to the rate of exchange
such Federal court would apply.
The foregoing opinions are limited to matters involving the
Federal laws of the United States and the law of the State of New York,
and we do not express any opinion as to the laws of any other
jurisdiction.
This opinion letter is, pursuant to Section 3.01(b)(2) of
the Credit Agreement, provided to you by us in our capacity as special
New York counsel to the Administrative Agent and may not be relied upon
by any Person for any purpose other than in connection with the
transactions contemplated by the Credit Agreement without, in each
instance, our prior written consent.
Very truly yours,
EKM/RJW
<PAGE>
<PAGE>
EXHIBIT F-1
FORM OF DESIGNATION LETTER
,
------------ -- ----
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
New Castle, Delaware 19720
Attention: Anne Hieronimus
Ladies and Gentlemen:
We refer to the Credit Agreement (as amended, supplemented
and otherwise modified and in effect from time to time, the "Credit
------
Agreement") dated as of November 23, 1999 among Solutia Inc. (the
- ---------
"Company"), the Lenders party thereto, Bank of America, N.A., as
-------
Syndication Agent, and Citibank, as Administrative Agent for the
Lenders. Terms defined in the Credit Agreement are used herein as
defined therein.
The Company hereby designates [ ] (the "Designated
------------ ----------
Borrower"), a wholly owned Subsidiary of the Company and a
- --------
[corporation duly incorporated under the laws of [ ]], as a
-------------
Borrower in accordance with Section 2.17 of the Credit Agreement until
such designation is terminated in accordance with said Section 2.17.
The Designated Borrower hereby accepts the above designation
and hereby expressly and unconditionally accepts the obligations of a
Borrower under the Credit Agreement, adheres to the Credit Agreement and
agrees and confirms that, upon your execution and return to the Company
of the enclosed copy of this letter, it shall be a Borrower for purposes
of the Credit Agreement and agrees to be bound by and perform and comply
with the terms and provisions of the Credit Agreement applicable to it
as if it had originally executed the Credit Agreement as a Borrower.
The Designated Borrower hereby authorizes and empowers the Company to
act as its representative and attorney-in-fact for the purposes of
signing documents and giving and receiving notices (including notices of
Borrowing under the Credit Agreement) and other communications in
connection with the Credit Agreement and the transactions contemplated
thereby and for the purposes of modifying or amending any provision of
the Credit Agreement and further agrees that the Administrative Agent,
the Syndication Agent and each Lender may conclusively rely on the
foregoing authorization.
The Company hereby represents and warrants to the
Administrative Agent and each Lender that, before and after giving
effect to this Designation Letter, (i) the representations and
warranties set forth in Section 4.01 of the Credit Agreement (except the
Excluded Representations) are true and correct on the date hereof as if
made on and as of the date hereof and (ii) no Default has occurred and
is continuing. The Designated Borrower represents and warrants that
each of the representations and warranties set forth in Section 4.01
(a), (b), (c) and (d) of the Credit Agreement are true as if each
reference therein to the Company were a reference to the Designated
Borrower and as if each reference therein to the Credit Agreement and
the Notes were a reference to this Designation Letter and the Notes
executed by the Designated Borrower in connection herewith.
<PAGE>
<PAGE>
- 2 -
The Designated Borrower hereby agrees that this Designation
Letter, the Credit Agreement and the Notes shall be governed by, and
construed in accordance with, the law of the State of New York. The
Designated Borrower hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York
and of any New York state court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this
Designation Letter, the Credit Agreement or the transactions
contemplated thereby. The Designated Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. The Designated
Borrower further agrees that service of process in any such action or
proceeding brought in New York may be made upon it by service upon the
Company at the "Address for Notices" specified below its name on the
signature pages to the Credit Agreement.
THE DESIGNATED BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS DESIGNATION LETTER, THE
CREDIT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Very truly yours,
SOLUTIA INC.
By
-------------------------------
Name:
Title:
[NAME OF DESIGNATED BORROWER]
By
-------------------------------
Name:
Title:
ACCEPTED:
CITIBANK, N.A,
as Administrative Agent
By
------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT F-2
FORM OF TERMINATION LETTER
,
---------- -- ----
To Citibank, N.A.,
as Administrative Agent
Attention: Anne Hieronimus
Ladies and Gentlemen:
We refer to the Credit Agreement (as amended, supplemented
and otherwise modified and in effect from time to time, the "Credit
------
Agreement") dated as of November 23 , 1999 among Solutia Inc., the
- ---------
Lenders party thereto, Bank of America, N.A., as Syndication Agent, and
Citibank, N.A., as Administrative Agent. Terms defined in the Credit
Agreement are used herein as defined therein.
The Company hereby terminates the status as a Designated
Borrower of [ ], a [corporation incorporated under the
-----------------
laws of [ ]], in accordance with Section 2.17 of the
---------------
Credit Agreement, effective as of the date of receipt of this notice by
the Administrative Agent. The undersigned hereby represent and warrant
that all principal of and interest on all Advances of the above-
referenced Designated Borrower and all other amounts payable by such
Designated Borrower pursuant to the Credit Agreement have been paid in
full on or prior to the date hereof. Notwithstanding the foregoing,
this Termination Letter shall not affect any obligation which by the
terms of the Credit Agreement survives termination thereof.
Very truly yours,
SOLUTIA INC.
By
------------------------------
Name:
Title:
<PAGE>
MANAGEMENT REPORT
Management is responsible for the integrity, objectivity, and
preparation of Solutia Inc.'s consolidated financial statements and all
of the related information appearing in this annual report. The
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. Where necessary,
this information reflects estimates that are based upon currently
available information and management's judgments.
Management is also responsible for maintaining a system of internal
accounting controls designed to provide reasonable assurance that
Solutia's assets are safeguarded against material loss from unauthorized
use or disposition and that authorized transactions are properly
recorded to permit the preparation of accurate financial information.
Cost/benefit judgments are an important consideration in this regard.
The effectiveness of internal controls is maintained by careful
personnel selection and thorough training, division of responsibilities,
establishment and communication of policies, and ongoing internal review
programs and audits.
Management believes that Solutia's system of internal accounting
controls as of and for the period ended December 31, 1999, was effective
and adequate to accomplish the objectives described above.
/s/ John C. Hunter III
John C. Hunter III
Chairman, President, and Chief Executive Officer
/s/ Robert A. Clausen
Robert A. Clausen
Senior Vice President and Chief Financial Officer
February 23, 2000
AUDIT AND FINANCE COMMITTEE REPORT
The Audit and Finance Committee, composed of non-employee directors, met
four times during 1999. The committee reviews and monitors Solutia's
internal controls, financial reports, and accounting practices as well
as the scope and extent of the audits performed by both the independent
and internal auditors. The committee also recommends to the full Board
the selection of Solutia's principal independent auditors, and it
approves in advance all significant audit and nonaudit services provided
by these auditors. Deloitte & Touche LLP was appointed independent
auditor to examine, and to express an opinion as to the fair
presentation of, the consolidated financial statements. The Deloitte &
Touche LLP report follows.
The internal and principal independent auditors meet with the
committee, with and without management representatives present, to
discuss the results of their examination, the adequacy of the company's
internal accounting controls, and the quality of Solutia's financial
reporting. The Audit and Finance Committee also reviews and monitors
Solutia's financial policies, including planning and structure, so that
they conform to Solutia's requirements for growth and sound operation.
The Audit and Finance Committee has reviewed the financial section
of this annual report. Upon the recommendation of the committee, the
Board of Directors has approved the financial section.
/s/ Frank A. Metz Jr.
Frank A. Metz Jr.
Chairman, Audit and Finance Committee
February 23, 2000
18
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of Solutia Inc.:
We have audited the accompanying statements of consolidated financial
position of Solutia Inc. and subsidiaries as of December 31, 1999, and
1998, and the related statements of consolidated income, comprehensive
income, cash flow, and shareholders' equity (deficit) for each of the
three years in the period ended December 31, 1999. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Solutia Inc.
and subsidiaries as of December 31, 1999, and 1998, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 15 to the financial statements, in 1997, the
company changed its method of accounting for environmental obligations
under the Resource Conservation and Recovery Act.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
St. Louis, Missouri
February 23, 2000
19
<PAGE>
<PAGE>
<TABLE>
FINANCIAL SUMMARY
<CAPTION>
Dollars in millions, except per share amounts
1999 1998 1997 1996 1995
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net Sales<F1> $ 2,830 $ 2,835 $ 2,969 $2,977 $2,964
Gross Profit 652 750 653 652 721
As percent of net sales 23% 26% 22% 22% 24%
Marketing, Administrative and
Technological Expenses 355 364 363 427 410
As percent of net sales 13% 13% 12% 14% 14%
Amortization Expense 3 - - - -
Operating Income<F2> 294 386 290 33 258
As percent of net sales 10% 14% 10% 1% 9%
Income Before Income Taxes 303 375 290 33 231
Net Income<F3> 206 249 192 32 147
As percent of net sales 7% 9% 6% 1% 5%
SHARE DATA:
-----------------------------------------------------------------------
Basic Earnings per Share<F4> $ 1.86 $ 2.16 $ 1.63 $ 0.28 $ 1.30
Diluted Earnings per Share<F4> 1.80 2.03 1.55 0.27 1.27
Dividends per Share 0.04 0.04 0.01 - -
Common Stock Price:
High 26 5/16 32 27 3/4 - -
Low 13 1/2 18 11/16 18 11/16 - -
Close 15 7/16 22 3/8 26 11/16 - -
Price/Earnings Ratio on Year-end Stock Price 9 11 17 - -
Number of Registered Shareholders 39,171 41,864 57,894 - -
Year-end Shares Outstanding (in millions) 109.5 112.8 117.4 - -
Shares Repurchased (in millions) 3.8 6.2 1.6 - -
Average Daily Trading Volume (in thousands) 458 401 1,053 - -
OTHER DATA:
-----------------------------------------------------------------------
Interest Expense<F5> $ 40 $ 43 $ 41 $ 36 $ 36
Income Taxes 97 126 98 1 84
Depreciation and Amortization 151 147 145 166 162
Total Assets 3,770 2,765 2,768 2,483 2,462
Capital Expenditures 257 158 165 192 179
Long-Term Debt 802 597 597 - -
Employees (year-end) 10,600 8,700 8,800 - -
-----------------------------------------------------------------------
<FN>
<F1> Net sales for the company included $140 million in 1995 for its
rubber chemicals business. In May 1995, this business was
contributed by Monsanto to the Flexsys, L.P. joint venture.
<F2> Operating income includes charges for restructuring and other
actions of $61 million in 1999, $1 million in 1998, $84 million in
1997, $248 million in 1996, and $46 million in 1995.
<F3> Net income includes charges for restructuring and other actions of
$38 million, or $0.33 per share, in 1999, $1 million, or $0.01 per
share, in 1998, $53 million, or $0.43 per share, in 1997, $164 million,
or $1.37 per share, in 1996, and $52 million, or $0.45 per share, in 1995.
<F4> For periods ended prior to the spinoff, the number of Monsanto
weighted average shares outstanding and common share equivalents
were adjusted for the distribution ratio in the spinoff of one
share of Solutia's common stock for every five shares of Monsanto
common stock.
<F5> Monsanto used a centralized approach to cash management and the
financing of its operations. As a result, cash and cash
equivalents and debt were not allocated to Solutia in the
historical financial statements. Interest expense was allocated to
Solutia in its consolidated financial statements to reflect
Solutia's pro rata share of the financing structure of Monsanto.
</TABLE>
20
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Solutia Inc. and its subsidiaries produce and market a variety of high-
performance, chemical-based materials. Solutia's strategic focus is
built on key strengths, including complex manufacturing capabilities,
process engineering expertise, polymer chemistry, fiber technology,
technical service, and customer problem solving. These world-class
skills are applied to create solutions and products for customers in the
consumer, household, automotive, and industrial products industries.
Solutia's products include Saflex(R) plastic interlayer; adhesives; window
and industrial films; liquid, powder and waterborne resins; Vydyne(R) and
Ascend(TM) nylon polymers; chemical intermediates; and nylon fibers.
During December 1999, Solutia refined its management structure to
align with its growth strategy. Solutia's management is now organized
around four strategic business platforms: Performance Films, Resins and
Additives, Specialties, and Integrated Nylon. Resins and Additives and
Specialties have been aggregated into the Specialty Products reportable
segment because of their similar economic characteristics, as well as
their similar products and services, production processes, types of
customers, and methods of distribution. Solutia's new reportable
segments and representative products are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PERFORMANCE FILMS SPECIALTY PRODUCTS INTEGRATED NYLON
- -----------------------------------------------------------------------------------------------
<C> <C> <C>
Saflex(R) plastic interlayer Resins and additives, Intermediate "building
including Alftalat(R) block" chemicals
KeepSafe(R), Saflex polyester resins, Resimene(R)
Inside(TM), and KeepSafe and Maprenal(R) crosslinkers, Merchant polymer and
Maximum(TM) glass for Synthacryl(R) acrylic resins, nylon extrusion polymers,
residential security and and Alnovol(R) phenolic resins including Vydyne(R) and Ascend(TM)
hurricane protection windows
Therminol(R) heat transfer Carpet fibers, including
Llumar(R), Vista(R), and fluids the Wear-Dated(R) and Ultron
Gila(R) professional and VIP(R) brands
after-market window films Dequest(R) water treatment
chemicals Industrial nylon fibers
Conductive and anti-
reflective coated films Skydrol(R) hydraulic fluids Acrilan(R) acrylic fibers
and deep-dyed films and SkyKleen(R) cleaning for apparel, upholstery
fluid for aviation fabrics, craft yarns, and
Gelva(R) pressure-sensitive other applications
adhesives Phosphorus-based
materials for food and
Santicizer(R) plasticizers beverage ingredients,
and other polymer modifiers personal care products,
industrial cleaners, and
fire retardants
</TABLE>
Internally, Solutia reports its financial results under this revised
management structure. As required by Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise
and Related Information," financial information for the years ended
December 31, 1999, 1998, and 1997, that is included in this annual
report has been restated to conform to the new segment structure. See
Note 19 to the Consolidated Financial Statements for further
information.
Prior to September 1, 1997, the businesses that form Solutia were
wholly owned by Monsanto Company (Monsanto). On September 1, 1997,
Monsanto distributed all of the outstanding shares of common stock of
Solutia as a dividend to Monsanto stockholders (the spinoff). As a
result of the spinoff, Solutia became an independent publicly-held
company listed on the New York Stock Exchange and its operations ceased
to be owned by Monsanto. Monsanto and Solutia entered into a number of
agreements to facilitate the separation of the companies and to provide
mechanisms for an orderly transition following the spinoff. The
separation from Monsanto and the subsequent transition of services have
been completed, although operating agreements for Solutia's
manufacturing facilities located in Monsanto plant sites and Monsanto
manufacturing facilities located in a Solutia plant site continue for
longer terms.
Financial data included in Solutia's consolidated financial
statements for periods prior to the spinoff reflect an estimate of what
the historical assets, liabilities, and operations would have been if
Solutia had been organized as a separate legal entity, owning certain
net assets of Monsanto, during those periods. Management
21
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
believes that the assumptions underlying these financial statements are
reasonable. These historical consolidated financial statements, however,
may not necessarily reflect the results of operations, cash flows, or
financial position that would have existed if Solutia had been a
separate stand-alone public entity.
For periods after the spinoff, Solutia's consolidated financial
statements reflect the historical value of the assets, liabilities, and
operations of the businesses that were contributed to Solutia by
Monsanto. See Note 1 to the Consolidated Financial Statements for a
discussion of the basis of presentation used in the preparation of
Solutia's consolidated financial statements.
RESULTS OF OPERATIONS
Solutia's net sales for 1999 of $2.830 billion were essentially equal to
1998 net sales of $2.835 billion and 5 percent lower than 1997 net sales
of $2.969 billion. Although Solutia's net sales for 1999 were almost
unchanged from 1998, the 1999 results were affected by volume
improvements of 5 percent, directly offset by average selling price
reductions of 5 percent. Operating income for the year ended December 31,
1999, was $294 million, 24 percent lower than 1998 operating income
of $386 million, and slightly higher than 1997 operating income of
$290 million. Most of the decline in 1999 operating income was caused by
special charges taken in the first quarter of 1999 related to exiting
the ammonia business, to writing down certain manufacturing equipment in
the Integrated Nylon segment to fair value, and to the anticipated
settlement of two lawsuits relating to the Anniston, Alabama, plant
site. The remainder of the decline resulted from lower average selling
prices.
During 1999, Solutia began repositioning its portfolio of businesses
to achieve $5 billion in net sales within three to four years. This
growth program includes internal initiatives such as the full global
commercialization of Saflex IIIG(TM), Solutia's third-generation polyvinyl
butryl product, the continued commercialization of KeepSafe(R), Saflex
Inside(TM), and KeepSafe Maximum(TM) for residential security and hurricane
protection windows, the launch of a Saflex(R) product for Enhanced
Protective Glass in side and rear automotive windows, and the
introduction of Ascend(TM) nylon plastics and polymers, among other
programs. As part of Solutia's external growth programs, Solutia
acquired CPFilms Inc., a leading manufacturer and marketer of window
films and other high-technology films products for automotive,
architectural, and other applications, in May 1999, and purchased
Vianova Resins, a leading European producer of resins and additives for
coatings and technical applications, in December 1999. In April 1999,
Solutia announced an agreement with FMC Corporation to form a joint
venture to manufacture and market phosphorus chemicals. Solutia and FMC
will each contribute their phosphorus derivatives businesses, and each
company will own a 50 percent share of the combined venture. The
formation of the joint venture is being reviewed by the Federal Trade
Commission under the Hart-Scott-Rodino Antitrust Improvements Act of
1976. The joint venture is expected to begin operations in the first
half of 2000.
PERFORMANCE FILMS
Net sales for Performance Films were $713 million in 1999, compared with
$614 million in 1998 and $651 million in 1997. The 16 percent increase in
1999 net sales over 1998 was due to an overall volume gain of more than 20
percent, partially offset by selling price declines. The sales volume increase
is attributable to the May 1999 acquisition of CPFilms, and to a greater than
10 percent increase in Saflex(R) plastic interlayer sales volumes. Volume gains
[PERFORMANCE FILMS NET SALES graph]
[PERFORMANCE FILMS SEGMENT PROFIT graph]
for Saflex(R) plastic interlayer resulted from the full global
commercialization of Saflex IIIG(TM), the continued commercialization of
KeepSafe(R), Saflex Inside(TM), and KeepSafe Maximum(TM), and the launch of
a Saflex(R) product for Enhanced Protective Glass. Contractual pricing
provisions that adjust pricing downward for increased volume, caused the
selling price declines.
Performance Films' net sales for 1998 declined compared with 1997 net
sales because of lower selling prices and sales volumes. During 1998,
Solutia reduced its selling prices for Saflex(R) products to maintain
market share. Also during 1998, sales volume of polymer modifier
products used in vinyl flooring declined as a result of competition from
alternative flooring materials.
Segment profit was $189 million in 1999, versus $168 million in 1998
and $177 million in 1997. The improvement in 1999 segment profit over
1998 is due to higher year-over-year net sales, including
22
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
the acquisition of CPFilms, lower raw material costs, and employee
benefits cost and other cost reductions, partially offset by increased
marketing expenditures related to the promotion of KeepSafe(R), Saflex
Inside(TM), KeepSafe Maximum(TM), and Enhanced Protective Glass. Segment profit
for 1998 was lower than that for 1997 due to lower 1998 net sales and
higher production costs related to the changeover of production from the
previous generation of polyvinyl butryl to Saflex IIIG(TM).
SPECIALTY PRODUCTS
Solutia's Specialty Products segment had net sales of $615 million in
1999, compared with $613 million in 1998 and $635 million in 1997. The
slight increase in 1999 net sales over 1998 was due to increased sales
volumes of Solutia's resins and additives products and Skydrol(R) 5
hydraulic fluid for aviation, partially offset by unfavorable currency
exchange movements. The growth in sales volumes for resins and additives
is attributable to strong sales in the coatings market, especially
during the fourth quarter of 1999. Also during 1999, Solutia became the
sole supplier of hydraulic
[SPECIALTY PRODUCTS IN NET SALES graph]
[SPECIALTY PRODUCTS SEGMENT PROFIT graph]
fluid to Boeing Corporation for its new commercial aircraft. Specialty
Products' 1998 net sales were 3 percent lower than in 1997 primarily
because of lower sales volumes of phosphorus derivative products, caused
by competitor price reductions to obtain market share.
Specialty Products' segment profit was $159 million in 1999, compared
with $152 million in 1998 and $137 million in 1997. The 1999 improvement
was due to improved manufacturing performance for Solutia's phosphorus
derivatives products, and to a lesser extent, lower raw material costs.
Segment profit for 1998 improved by 11 percent because of lower
operating costs, including personnel and benefits-related costs.
On April 30, 1999, Solutia announced an agreement with FMC
Corporation to form a joint venture to manufacture and market phosphorus
chemicals. Solutia and FMC will each contribute their phosphorus
derivatives businesses, and each company will hold a 50 percent share of
the combined venture. The formation of the joint venture is being
reviewed by the Federal Trade Commission under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. The joint venture is expected to
begin operations in the first half of 2000.
On December 22, 1999, Solutia purchased Vianova Resins by acquiring
the interest of Morgan Grenfell Private Equity Ltd., a private equity
syndicate, and the interests of the minority shareholders in Viking
Resins Group Holdings B.V. Vianova Resins is a leading European
producer of resins and additives for coatings and technical
applications. It has annual net sales of approximately $450 million.
With the acquisition of Vianova Resins, Solutia is one of the leading
worldwide suppliers of resins and additives. Results of Vianova's
operations for the period of December 22, 1999, through December 31,
1999, were not material to Solutia's Statement of Consolidated Income
for the year ended December 31, 1999. See Note 3 to the Consolidated
Financial Statements for additional information.
INTEGRATED NYLON
Solutia's Integrated Nylon segment had net sales in 1999 of $1.508
billion, compared with $1.613 billion in 1998 and $1.699 billion in
1997. The 7 percent decline in this segment's 1999 net sales compared
with 1998 resulted from lower selling prices for almost all products and
lower Acrilan(R) acrylic fiber volumes, partially offset by higher sales
volumes of carpet fibers and nylon polymers. Lower selling prices and
sales volumes for Acrilan(R) acrylic fibers were caused by weak market
conditions in the Asia Pacific region. In addition, that region's lower
demand depressed markets in the Americas, as acrylic fiber producers
sought alternative outlets for their products. The impact of these
events began early in the third quarter of 1998 and continued through
the third quarter of 1999. Prices stabilized early in the fourth quarter
of 1999 and increased slightly during the remainder of the year. For
1999 compared with 1998, Acrilan(R) acrylic fiber accounted for more than
half of Integrated Nylon's net sales decline. Nylon carpet selling
prices were adversely affected in 1999 by the consolidation of the
carpet mill industry in late 1998 and the resultant increase in the
carpet mills' buying leverage. In addition, lower-priced polyester
carpet fiber also put downward pressure on prices. Sales volumes for the
segment's products were mixed, as improved carpet fiber and Vydyne(R) nylon
molding resins volumes
23
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
were offset by lower Acrilan(R) acrylic fiber volumes, and chlorobenzenes
volumes, and Solutia's exit from the ammonia business.
The decline in 1998 net sales compared with 1997 was due to lower
average selling prices for intermediate chemicals and carpet fibers and
lower selling prices and volumes for Acrilan(R) acrylic
[INTEGRATED NYLON NET SALES graph]
[INTEGRATED NYLON SEGMENT PROFIT graph]
fiber products. These unfavorable trends were partially offset by higher
carpet fiber sales volumes that resulted from strong builder and
commercial sales and by new introductions of Wear-Dated(R) brand products.
Integrated Nylon segment profit was $289 million in 1999, versus
$376 million in 1998 and $350 million in 1997. The 23 percent decrease in
1999 segment profit from 1998 was caused by lower selling prices in
1999, which were partially offset by reduced manufacturing and overhead
costs. Segment profit for 1998 increased 7 percent over 1997 because of
lower raw material costs and other cost-reduction actions, including
those related to benefit costs.
OPERATING INCOME
Solutia's operating income for 1999 was $294 million, compared with
$386 million in 1998 and $290 million in 1997. The 24 percent decline in 1999
operating income from 1998 operating income was caused by lower
Integrated Nylon segment profit and charges recorded in the first
quarter of 1999, partially offset by higher profit in the Performance
Films and Specialty Products segments and lower administrative and
technological expenses.
During February 1999, certain equipment critical to the ammonia
production process failed. After analyzing the economics of purchased
ammonia versus the cost to repair the equipment, Solutia decided to exit
the ammonia business. A $28 million ($18 million aftertax, or $0.16 per
share) charge to cost of goods sold was recorded in the first quarter to
complete the exit plan. The charge included $2 million to write down the
assets to their fair value of approximately $4 million, $4 million of
dismantling costs, and $22 million of estimated costs for which Solutia
is contractually obligated under an operating agreement. The
contractually obligated costs represent an estimate of the direct
manufacturing, overhead, and utilities that Solutia is required to pay
to a third-party operator during a 36-month termination period. Solutia
expects to complete the dismantling of the equipment by the end of the
first quarter of 2000. Ammonia business net sales for the years ended
December 31, 1999, 1998, and 1997, were $1 million, $20 million, and
$17 million, respectively. Operating income for those periods was minimal.
An impairment charge of $6 million ($4 million aftertax, or $0.03 per
share) was recorded to cost of goods sold primarily to write down a bulk
continuous filament spinning machine that was shut down due to a
noncompetitive cost position. The adjusted carrying value of the machine
is $0.5 million. The charge resulted from a SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Assets to Be Disposed Of"
review, which indicated that the carrying amount of the assets exceeded
the identifiable, undiscounted cash flows related to the assets. Fair
value of the assets was determined based on estimates of market prices
for the machinery. Operating income derived from the machinery was
minimal in the years ended December 31, 1999, 1998, and 1997.
During the first quarter of 1999, Solutia also recorded a $29 million
($18 million aftertax, or $0.16 per share) charge to cost of goods sold
related to the anticipated settlement of two lawsuits concerning the
alleged discharge of polychlorinated biphenyls (PCBs) from the
[OPERATING INCOME graph]
Anniston, Alabama, plant site. The anticipated settlement of these cases
provided information that allowed management to estimate more accurately
Solutia's position with respect to that litigation.
During the fourth quarter of 1999, Solutia reversed excess
restructuring reserves due to the completion of the actions at a lower
cost than the 1996 restructuring plan contemplated. A reversal of
$1 million ($1 million aftertax, or $0.01 per share) was made to eliminate
a reserve for headcount reductions after the final stage of headcount
reductions was carried out. A second reversal
24
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
of $1 million ($1 million aftertax, or $0.01 per share) was made to
eliminate a reserve recorded to shutdown a non-strategic facility after
that shutdown was completed at a lower cost.
See Note 4 to the Consolidated Financial Statements for additional
information regarding Solutia's restructuring activities.
Operating income in 1998 increased by 33 percent over 1997 operating
income because of lower environmental charges, as discussed below, and
higher segment profit. Marketing, administrative, and technological
expenses were essentially unchanged in 1998 compared with 1997. However,
the comparison of operating income between 1998 and 1997 was affected by
several unusual items related to reversals of excess restructuring
reserves, inventory charges, the adoption of new accounting standards,
and environmental-related charges.
During 1998 and 1997, Solutia reversed excess restructuring reserves
to reflect lower cost estimates for restructuring actions. A reversal of
$3 million ($2 million aftertax, or $0.02 per share) was made in the
second quarter of 1998 due to lower cost estimates for the shutdown of
certain facilities included in the 1996 restructuring plan. Reversals
made in the third and fourth quarters of 1998 of $3 million ($2 million
aftertax, or $0.02 per share) and $3 million ($2 million aftertax, or
$0.02 per share), respectively, were due to lower cost estimates to
implement Solutia's employment reduction plans. Estimates were lowered
because of higher than anticipated attrition, which reduced employment
levels without additional cost to Solutia. The 1997 reversal of $8 million
($5 million aftertax, or $0.04 per share) occurred in the second quarter.
It became excess as the result of lower than expected exit costs associated
with the sale and closure of certain nonstrategic facilities included in the
1995 restructuring actions.
Operating income for 1998 was also affected by inventory charges of
$4 million ($3 million aftertax, or $0.03 per share) in the third
quarter and $6 million ($4 million aftertax, or $0.04 per share) in the
fourth quarter. The third quarter charge was taken to reduce certain
slow-moving inventories to their net realizable values. The fourth
quarter charge was primarily caused by losses on the disposition of
certain nonsalable inventories.
Operating income for 1998 also included stand-alone expenses for
certain general and administrative services that were provided by
Monsanto during 1997.
Operating income in 1997 was affected by the adoption of new
accounting standards and environmental-related charges taken in the
first, second, and fourth quarters. The first quarter charge of $10 million
($6 million aftertax, or $0.05 per share) was associated with the adoption of
American Institute of Certified Public Accountants' Statement of Position
(SOP) No. 96-1, "Environmental Remediation Liabilities." The second quarter
charge of $10 million ($6 million aftertax, or $0.05 per share) was caused by
environmental-related litigation associated with the Brio Superfund site near
Houston, Texas. The fourth quarter charge of $72 million ($46 million aftertax,
or $0.37 per share) was associated with environmental remediation liability
charges. These charges are discussed further in Note 15 to the
Consolidated Financial Statements.
EQUITY EARNINGS FROM AFFILIATES
Equity earnings from affiliates were $36 million in 1999, compared with
$25 million in 1998 and $31 million in 1997. The improvement in 1999
equity earnings was due to strong sales volumes for products sold by the
Flexsys, L.P., (Flexsys) joint venture, and the Advanced Elastomer
Systems, Inc., joint venture, in which Solutia
[EQUITY EARNINGS FROM AFFILIATES graph]
has 50 percent ownership interests. In addition, Flexsys had higher
earnings as the result of good manufacturing performance in the PPD2
unit, which started operations in 1998. The PPD2 unit produces 4-amino-
diphenylamine, a product that extends the life of rubber products.
Equity earnings from affiliates in 1998 were lower than in 1997
primarily due to the lower earnings from the Quimica "M" S.A. de C.V.
(Quimica) joint venture, in which Solutia has a 49 percent ownership
share, and lower earnings from Flexsys. Quimica was adversely affected
by changeover costs for production of Saflex IIIG(TM) plastic interlayer
and by the devaluation of the Mexican peso. Flexsys experienced lower
earnings due to start-up costs and operational difficulties associated
with the joint venture's new PPD2 facility.
OUTLOOK AND ECONOMIC CONDITIONS
Solutia is affected by economic conditions, particularly those in the
domestic housing industry, the domestic and international automotive
industries, and the domestic and international textile industries. Each
of these industries is cyclical. Global competition
25
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
and weakened general economic conditions in Asia have led to declining
average selling prices. Also contributing to the decline in average
selling prices were products that use formula pricing. Pricing for those
products is tied to raw material costs, which were significantly lower
during the first half of 1999.
During the second half of 1999, costs of many raw material feedstocks
increased significantly as the price of crude oil increased, ending the
trend of declining prices for raw materials. Recent forecasts indicate
that raw material prices will maintain their elevated levels for most of
2000. Solutia expects that average selling prices will rise for those
products with formula pricing. For those products that do not have
contracts with formula pricing, Solutia has announced a number of
selling price increases to help restore gross margins. However, the
delay in adjusting formula pricing and the difficulty in obtaining price
increases for other products may negatively impact gross margins in
2000.
Also, average selling prices and sales volumes to the domestic carpet
industry could be adversely affected by the consolidation of the carpet
mills, by consumer trends toward alternative flooring materials, and by
competition from lower-priced polyester staple.
FINANCIAL CONDITION
During 1999, Solutia took two significant steps in the implementation of
its strategy to improve the overall growth rate of its business. First,
in May, Solutia acquired CPFilms Inc. in an approximately $200 million
transaction that was financed with commercial paper. Second, in
December, Solutia acquired Vianova Resins in an approximately $640 million
transaction that was primarily financed with commercial paper. As a result
of these transactions, Solutia's outstanding commercial paper increased to
$712 million at December 31, 1999, from $0 at December 31, 1998.
Solutia's commercial paper program is supported by an $800 million,
five-year revolving credit facility ($800 million facility) with a
syndicate of commercial banks. The $800 million facility is also
available for working capital and other general corporate purposes. This
agreement was amended during November 1999, principally to allow the
issuance of commercial paper in euros, as well as U.S. dollars.
Also during November 1999, Solutia put in place a $300 million, 364-
day multi-currency revolving credit agreement ($300 million facility)
with a syndicate of commercial banks. The $300 million facility has
terms that are generally consistent with the terms of the $800 million
facility. The $300 million facility supports Solutia's commercial paper
program and is available for working capital and other general corporate
purposes.
During February 2000, Solutia completed the issuance of euro 200 million
($201 million) of notes, due February 2005. Proceeds from the notes were used
primarily to refinance outstanding commercial paper, and also for general
corporate purposes. In anticipation of this transaction, $201 million of the
outstanding commercial paper was reclassified to long-term debt at December 31,
1999.
Solutia's working capital at December 31, 1999, was negative $213 million
as compared to a positive $259 million at December 31, 1998. This decline in
working capital is primarily due to acquiring Vianova Resins assets that were
primarily of a long-term nature, and the funding of the acquisition with
commercial paper.
Cash from operations was $364 million during 1999, which was lower
than 1998 cash from operations of $537 million. The decrease is
primarily due to strong fourth quarter 1999 sales, which resulted in
higher accounts receivable balances between December 31, 1998, and
December 31, 1999, as compared to the significant decrease in accounts
receivable balances between December 31, 1997, and December 31, 1998. In
addition, cash from operations was lower as a result of 1998 incentives
paid during 1999 that were not offset by accruals of 1999 incentives,
and accounts payable balances that were lower in 1999 than in 1998 due
to normal business cycles.
Capital expenditures for 1999 were $257 million. These expenditures
were used to fund various cost reduction, maintenance, and capacity-
expansion projects. Solutia expects that its capital requirements will
be approximately $240 million to $270 million in both 2000 and 2001,
principally for capacity-expansion and cost-reduction projects.
Approximately $100 million of these estimated capital requirements were
committed at December 31, 1999. A portion of the capital expenditures in
1999 was funded from advance payments received from third parties
participating in these projects. Third party payments received during
1999 totaled $56 million.
Solutia had shareholders' equity of $82 million at December 31, 1999,
as compared to a shareholders' deficit of $7 million at December 31,
1998. This $89 million improvement was caused by Solutia's net income,
partially offset by share repurchases and a $44 million decline in the
currency translation adjustment included in Accumulated Other
Comprehensive Income.
26
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
During 1999, Solutia repurchased 3.3 million shares of its common
stock under share repurchase programs, fully utilizing the second
5.0 million share program and beginning on the third 5.0 million share
program authorized by the Board of Directors. The cost of the shares
repurchased in 1999 under these programs was approximately $69 million.
In addition, Solutia repurchased 0.5 million shares, at a cost of
approximately $10 million, for compensation and benefits programs.
Solutia believes that its cash flow from operations and available
borrowing capacity under the $800 million facility and the $300 million
facility provide sufficient resources to finance its operations and
planned capital needs for the next 12 months.
ENVIRONMENTAL MATTERS
Solutia continues its strong commitment to comply with laws and
government regulations concerning environmental matters and employee
safety and health in the United States and other countries. U.S.
environmental legislation that has a particular impact on Solutia
includes the Toxic Substances Control Act; the Resource Conservation and
Recovery Act; the Clean Air Act; the Clean Water Act; the Safe Drinking
Water Act; and the Comprehensive Environmental Response, Compensation
and Liability Act (commonly known as Superfund). Solutia is also subject
to the Occupational Safety and Health Act and regulations of the
Occupational Safety and Health Administration (OSHA) concerning employee
safety and health matters. The U.S. Environmental Protection Agency
(EPA), OSHA, and other federal agencies have the authority to promulgate
regulations that have an impact on Solutia's operations. In addition to
these federal activities, various states have been delegated certain
authority under several of the aforementioned federal statutes. Many
state and local governments have adopted environmental and employee
safety and health laws and regulations, some of which are similar to
federal requirements. State and federal authorities may seek fines and
penalties for violation of these laws and regulations.
Solutia is dedicated to long-term environmental protection and
compliance programs that reduce and monitor emissions of hazardous
materials into the environment as well as to the remediation of
identified existing environmental concerns. Solutia is among the leaders
in Responsible Care, the chemical industry's performance-enhancement
program.
Expenditures in 1999 were approximately $14 million for environmental
capital projects and approximately $88 million for the management of
environmental programs, including the operation and maintenance of
facilities for environmental control, of which $22 million was charged
against recorded environmental liabilities. Solutia estimates that a
total of approximately $25 million will be spent during 2000 and 2001 on
additional capital projects for environmental protection and that
expenses for the management of environmental programs in 2000 and 2001
will increase slightly from the 1999 levels.
With respect to environmental remediation obligations, Solutia's
policy is to accrue costs for remediation of contaminated sites in the
accounting period in which the obligation is probable and the cost is
reasonably estimable.
At the time of the spinoff, Solutia assumed from Monsanto, pursuant
to a distribution agreement, liabilities related to specified Superfund
proceedings. As a result, while Monsanto remains the named potentially
responsible party (PRP) or defendant for actions that occurred prior to
September 1, 1997, Solutia will manage proceedings and litigation against
Monsanto and indemnify Monsanto for costs, expenses, and judgments, if any
are incurred by Monsanto, arising from these proceedings.
Solutia's estimates of its liabilities for Superfund sites are based
on evaluations of currently available facts with respect to each
individual site and take into consideration factors such as existing
technology, laws and agency policy, and prior experience in remediation
of contaminated sites. As assessments and remediation activities
progress at individual sites, these liabilities are reviewed
periodically and adjusted to reflect additional technical, engineering
and legal information that becomes available. Solutia has an accrued
liability of $32 million as of December 31, 1999, for Superfund sites.
Major Superfund sites in this category include the noncompany-owned Brio
and MOTCO sites in Texas, and Fike/Artel in West Virginia, which account
for $21 million of the accrued amount. Solutia spent approximately
$8 million in 1999 for remediation of Superfund sites. Similar amounts can
be expected in future years.
Solutia had an accrued liability of $88 million as of December 31,
1999, for plants no longer in operation and third-party sites for which
it assumed responsibility pursuant to a distribution agreement entered
into with Monsanto. Solutia's estimate of its liability related to these
sites is based on evaluations of currently available facts with respect
to each individual site. The estimate
27
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
takes into consideration factors such as existing technology, laws and
agency policy, and prior experience in remediation of contaminated
sites. The company spent $8 million in 1999 for remediation of these
sites. Similar amounts can be expected in the future.
Solutia had an accrued liability of $81 million as of December 31,
1999, for solid and hazardous waste remediation, and for post-closure
costs at the company's operating locations. Solutia recognizes certain
post-closure costs over the estimated remaining useful life of the
related facilities. Solutia spent $6 million in 1999 for remediation of
these facilities.
Uncertainties related to all of the company's environmental
liabilities are evolving government regulations, the method and extent
of remediation, and future changes in technology. Because of these
uncertainties, Solutia estimates that potential future expenses
associated with these liabilities could be an additional $20 million to
$30 million. Although the ultimate costs and results of remediation of
contaminated sites cannot be predicted with certainty, they are not
expected to result in a material adverse effect on Solutia's
consolidated financial position, liquidity, or profitability in any one
year.
THE YEAR 2000 ISSUE
The year 2000 (Y2K) issue refers to the inability of a date-sensitive
computer program to recognize a two-digit date field designated "00" as
the year 2000. Solutia experienced no significant Y2K problems with its
business applications, manufacturing and warehousing equipment,
information technology infrastructure, or environmental operations
systems. In total, Solutia incurred approximately $8 million in
additional costs specifically to complete Y2K work, excluding the cost
of implementing business application software licensed from SAP AG.
DERIVATIVE FINANCIAL INSTRUMENTS
Solutia's business operations give rise to market risk exposures that
result from changes in currency exchange rates, interest rates, and
certain commodity prices. To manage the volatility relating to these
exposures, Solutia enters into various hedging transactions that enable
it to alleviate the adverse effects of financial market risk. Solutia's
hedging transactions are carried out under policies and procedures
approved by the Audit and Finance Committee of the Board of Directors,
which do not permit the purchase or holding of any derivative financial
instruments for trading purposes.
Solutia uses value-at-risk (VAR) testing and analysis to measure and
control risks. VAR estimates the loss in fair market values, which
Solutia would potentially incur, given a certain move in market prices
over a certain period of time, using specified confidence levels. The
tests discussed below for exposure to interest rate and currency rate
exposures are based on a one-day horizon and a 95 percent confidence
level. The model assumes that financial returns are normally
distributed. The value-at-risk model takes into account correlations and
diversification across market factors, including currencies and interest
rates. Estimates of volatility and correlations of market factors are
drawn from the JP Morgan RiskMetrics dataset as of December 31, 1999. In
cases where data is unavailable, a reasonable approximation is included.
Solutia estimates that the maximum loss that could arise in one day is
not material to shareholders' equity and net income. For the year ended
December 31, 1998, Solutia based its VAR calculations on a one-year
horizon and a 95 percent confidence level. The change in assumption to a
one-day horizon from a one-year horizon did not have a material effect
on Solutia's VAR.
FOREIGN CURRENCY EXCHANGE RATE RISK
Currency forward contracts are used to manage currency exposures for
financial instruments denominated in currencies other than the entity's
functional currency. Gains and losses on contracts that are designated
and effective as hedges are included in net income and offset the
exchange gain or loss of the transaction being hedged. Solutia's policy
prescribes the range of allowable hedging activity and the instruments
that are permitted for use. Because the counterparties to these
contracts are major international financing institutions, credit risk
arising from these contracts is not significant and Solutia does not
anticipate any counterparty losses. This hedging activity is intended to
protect Solutia from adverse fluctuations in foreign currency exchange
rates.
At December 31, 1999, Solutia had currency forward contracts to
purchase $44 million and sell $44 million of other currencies,
principally the Belgian franc, Canadian dollar and euro, with average
maturities of three months. Net unrealized hedging losses at December 31,
1999, were not material.
Based on Solutia's overall currency rate exposure at December 31,
1999, including derivative and other foreign currency sensitive
instruments, a near-term change in currency rates, within a 95 percent
confidence level based on historical currency rate movements, would not
materially affect the consolidated financial position, results of
operations, or cash flows of the company.
28
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
INTEREST RATE RISK
Interest rate risk is primarily related to the changes in fair value
of fixed-rate, long-term debt and short-term, floating-rate debt.
Solutia does not actively manage interest rate risk. Based on the
company's overall interest rate exposure at December 31, 1999, a near-
term change in interest rates, within a 95 percent confidence level
based on historical interest rate movements, would not materially affect
the consolidated financial position, results of operations, or cash
flows of the company. This is consistent with the overall interest rate
exposure at December 31, 1998.
COMMODITY PRICE RISK
Certain raw materials are subject to price volatility caused by weather,
crude oil prices, and other unpredictable factors. Solutia employs
commodity price swaps to hedge this exposure. The commodity price risk
associated with the derivative instruments is not material to Solutia's
consolidated financial position, results of operations, or cash flow.
EUROPEAN MONETARY UNION
On January 1, 1999, 11 member countries of the European Union adopted
the euro as their common legal currency. On that date, conversion rates
between the existing sovereign currency (legacy currency) of each of
these participating countries and the euro were irrevocably fixed, and
the euro became available for noncash transactions. The legacy
currencies of these countries will remain legal tender during a
transition period from January 1, 1999, to January 1, 2002. During this
transition period, parties may pay for goods and services using either
the euro or the relevant legacy currency. Currency conversion will be
performed using a triangulation method, whereby one legacy currency is
converted to the euro and then to the second legacy currency. The
transition to the euro will be completed in July 2002, when the legacy
currencies of the participating member countries cease to be legal
tender.
The conversion to the euro has increased cross-border price
transparency and stimulated cross-border competition within the single-
currency zone. However, the effect of the price transparency on raw
materials that Solutia purchases generally offsets the effect of price
transparency on the sale of Solutia's finished products. In addition,
the conversion to the euro had the positive effects of eliminating
currency risk in cross-border sales and of reducing currency exchange
costs.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activity." SFAS No. 133 provides comprehensive and consistent standards
for the recognition and measurement of derivative and hedging
activities. It requires that derivatives be recorded on the Statement of
Consolidated Financial Position at fair value and establishes criteria
for hedges of changes in the fair value of assets, liabilities or firm
commitments, hedges of variable cash flows of forecasted transactions,
and hedges of foreign currency exposures of net investments in foreign
operations. Changes in the fair value of derivatives that do not meet
the criteria for hedges are to be recognized in the Statement of
Consolidated Income. During June 1999, FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral
of the Effective Date of FASB Statement No. 133," to defer the effective
date of SFAS No. 133 by one year. The standard will now be effective for
Solutia beginning January 1, 2001. Solutia does not expect the adoption
of SFAS No. 133 to have a material effect on its consolidated financial
statements.
29
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
<CAPTION>
Year Ended December 31,
----------------------------------------
Dollars in millions, except per share amounts 1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
NET SALES $2,830 $2,835 $2,969
Cost of goods sold 2,178 2,085 2,316
----------------------------------------
GROSS PROFIT 652 750 653
Marketing expenses 153 145 143
Administrative expenses 122 136 133
Technological expenses 80 83 87
Amortization expense 3 - -
----------------------------------------
OPERATING INCOME 294 386 290
Equity earnings from affiliates 36 25 31
Interest expense (40) (43) (41)
Other income (expense) - net 13 7 10
----------------------------------------
INCOME BEFORE INCOME TAXES 303 375 290
Income taxes 97 126 98
----------------------------------------
NET INCOME $ 206 $ 249 $ 192
========================================
BASIC EARNINGS PER SHARE $ 1.86 $ 2.16 $ 1.63
========================================
DILUTED EARNINGS PER SHARE $ 1.80 $ 2.03 $ 1.55
========================================
Weighted average equivalent shares (in millions):
Basic 110.8 115.5 117.7
Effect of dilutive securities:
Common share equivalents - common stock issuable
upon exercise of outstanding stock options 3.8 7.3 6.0
----------------------------------------
Diluted 114.6 122.8 123.7
========================================
</TABLE>
<TABLE>
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
<CAPTION>
Year Ended December 31,
----------------------------------------
Dollars in millions 1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
NET INCOME $206 $249 $192
OTHER COMPREHENSIVE INCOME:
Currency translation adjustments (44) 10 19
Minimum pension liability adjustments, net of tax of $2 in 1999,
$2 in 1998, and $4 in 1997 (4) (3) (7)
----------------------------------------
COMPREHENSIVE INCOME $158 $256 $204
========================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
30
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
<CAPTION>
As of December 31,
------------------------
Dollars in millions, except per share amounts 1999 1998
------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 28 $ 89
Trade receivables, net of allowances of $12 in 1999 and $7 in 1998 483 357
Miscellaneous receivables and prepaid expenses 131 126
Deferred income tax benefit 101 88
Inventories 371 331
------------------------
TOTAL CURRENT ASSETS 1,114 991
PROPERTY, PLANT AND EQUIPMENT:
Land 68 17
Buildings 436 371
Machinery and equipment 2,919 2,786
Construction in progress 272 127
------------------------
Total property, plant and equipment 3,695 3,301
Less accumulated depreciation 2,379 2,357
------------------------
NET PROPERTY, PLANT AND EQUIPMENT 1,316 944
INVESTMENTS IN AFFILIATES 377 394
GOODWILL, NET OF AMORTIZATION 511 -
LONG-TERM DEFERRED INCOME TAX BENEFIT 232 274
OTHER ASSETS 220 162
------------------------
TOTAL ASSETS $3,770 $2,765
========================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 312 $ 278
Wages and benefits 59 107
Postretirement liabilities 86 88
Miscellaneous accruals 359 259
Short-term debt 511 -
------------------------
TOTAL CURRENT LIABILITIES 1,327 732
LONG-TERM DEBT 802 597
POSTRETIREMENT LIABILITIES 998 971
OTHER LIABILITIES 561 472
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock (authorized, 600,000,000 shares, par value $0.01)
Issued: 118,400,635 shares in 1999 and 1998 1 1
Additional contributed capital (137) (131)
Treasury stock, at cost (8,859,764 shares in 1999 and 5,629,677 shares in 1998) (209) (143)
Unearned ESOP shares (18) (25)
Accumulated other comprehensive income (29) 19
Reinvested earnings 474 272
------------------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 82 (7)
------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $3,770 $2,765
========================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
31
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOW
<CAPTION>
Year Ended December 31,
----------------------------------------
Dollars in millions 1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES:
Net income $ 206 $ 249 $ 192
Adjustments to reconcile to Cash From Operations:
Items that did not use (provide) cash:
Deferred income taxes 23 32 32
Depreciation and amortization 151 147 145
Amortization of deferred credits (10) (7) (11)
Other 78 17 (39)
Working capital changes that provided (used) cash:
Trade receivables (18) 68 (9)
Inventories 42 (6) (32)
Accounts payable and accrued liabilities (114) 3 (115)
Other 6 15 (45)
Other items - 19 41
----------------------------------------
CASH FROM OPERATIONS 364 537 159
----------------------------------------
INVESTING ACTIVITIES:
Property, plant and equipment purchases (257) (158) (165)
Acquisition and investment payments, net of cash acquired (835) (8) (2)
Investment and property disposal proceeds 30 22 9
----------------------------------------
CASH FROM INVESTING ACTIVITIES (1,062) (144) (158)
----------------------------------------
FINANCING ACTIVITIES:
Net transactions with Monsanto Company - - 292
Long-term debt proceeds - - 600
Net change in debt obligations 712 (190) (840)
Treasury stock purchases (79) (161) (35)
Dividend payments (4) (5) (1)
Common stock issued under employee stock plans 8 28 7
----------------------------------------
CASH FROM FINANCING ACTIVITIES 637 (328) 23
----------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (61) 65 24
CASH AND CASH EQUIVALENTS:
Beginning of year 89 24 -
----------------------------------------
End of year $ 28 $ 89 $ 24
========================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
The effect of exchange rate changes on cash and cash equivalents was not
material. Cash payments for interest (net of amounts capitalized) were
$41 million in 1999, $44 million in 1998, and $3 million in 1997. Cash
payments for income taxes were $43 million in 1999, $94 million in 1998
and $30 million in 1997.
32
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY (DEFICIT)
<CAPTION>
Year Ended December 31,
-------------------------------------
Dollars in millions 1999 1998 1997
-------------------------------------
<S> <C> <C> <C>
COMMON STOCK:
BALANCE, JANUARY 1 $ 1 $ 1 $ -
Issuance of 118,371,280 shares at spinoff - - 1
Issuance of 29,355 shares in 1997 for stock option exercises - - -
-------------------------------------
BALANCE, DECEMBER 31 $ 1 $ 1 $ 1
-------------------------------------
ADDITIONAL CONTRIBUTED CAPITAL:
BALANCE, JANUARY 1 $(131) $(119) $ -
Net liability transfer to Solutia at spinoff - - (101)
Post-spinoff adjustments - - (12)
Employee stock plans and ESOP (6) (12) (6)
-------------------------------------
BALANCE, DECEMBER 31 $(137) $(131) $ (119)
-------------------------------------
TREASURY STOCK:
BALANCE, JANUARY 1 $(143) $ (22) $ -
Shares purchased (3,781,700 shares in 1999, 6,246,300 shares in 1998,
and 1,569,800 shares in 1997) (79) (161) (35)
Net shares issued under employee stock option plans (551,613 shares in 1999,
1,609,451 shares in 1998, and 576,972 shares in 1997) 13 40 13
-------------------------------------
BALANCE, DECEMBER 31 $(209) $(143) $ (22)
-------------------------------------
UNEARNED ESOP SHARES:
BALANCE, JANUARY 1 $ (25) $ (31) $ -
Transfer of ESOP reserve balance to Solutia at spinoff - - (31)
Amortization of ESOP balance 7 6 -
-------------------------------------
BALANCE, DECEMBER 31 $ (18) $ (25) $ (31)
-------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
BALANCE, JANUARY 1 $ 19 $ 12 $ -
Currency translation adjustments (44) 10 19
Minimum pension liability adjustments (4) (3) (7)
-------------------------------------
BALANCE, DECEMBER 31 $ (29) $ 19 $ 12
-------------------------------------
REINVESTED EARNINGS:
BALANCE, JANUARY 1 $ 272 $ 28 $ -
Net income 206 249 29
Dividends (4) (5) (1)
-------------------------------------
BALANCE, DECEMBER 31 $ 474 $ 272 $ 28
-------------------------------------
MONSANTO COMPANY EQUITY:
BALANCE, JANUARY 1 $ - $ - $ 656
1997 activity to date of spinoff:
Net income 163
Currency translation adjustments 13
Net transactions with Monsanto Company 292
Elimination of Monsanto Company Equity at spinoff (1,124)
-------------------------------------
BALANCE, DECEMBER 31 $ - $ - $ -
-------------------------------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) $ 82 $ (7) $ (131)
=====================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
33
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in millions, except per share amounts
1. BASIS OF PRESENTATION
Solutia Inc. and its subsidiaries produce and market a variety of high-
performance, chemical-based materials. Solutia's strategic focus is built
on key strengths, including complex manufacturing capabilities, process
engineering expertise, polymer chemistry, fiber technology, technical
service, and customer problem solving. These world-class skills are applied
to create solutions and products for customers in the consumer, household,
automotive, and industrial products industries. Solutia's products include
Saflex(R) plastic interlayer; adhesives; window and industrial films; liquid,
powder and waterborne resins; Vydyne(R) and Ascend(TM) nylon polymers; chemical
intermediates; and nylon fibers.
Prior to September 1, 1997, the businesses that form Solutia were
wholly owned by Monsanto Company (Monsanto). On September 1, 1997, Monsanto
distributed all of the outstanding shares of common stock of Solutia as a
dividend to Monsanto stockholders (the spinoff). As a result of the
spinoff, on September 1, 1997, Solutia became an independent publicly held
company listed on the New York Stock Exchange and its operations ceased to
be owned by Monsanto. Monsanto and Solutia entered into a number of
agreements to facilitate the separation of the companies and to provide
mechanisms for an orderly transition following the spinoff. The separation
from Monsanto and the subsequent transition of services have been
completed, although operating agreements for Solutia's manufacturing
facilities located in Monsanto plant sites and Monsanto manufacturing
facilities located in a Solutia plant site continue for longer terms.
PRE-SPINOFF FINANCIAL INFORMATION
Financial data included in the accompanying consolidated financial
statements for periods prior to the spinoff were prepared on a combined
basis. They reflect an estimate of what the historical assets, liabilities,
and operations would have been if Solutia had been organized as a separate
legal entity, owning certain net assets of Monsanto, during those periods.
Generally, only those assets and liabilities of the ongoing chemicals
businesses that were expected to be transferred to Solutia prior to the
spinoff were included in the Statement of Consolidated Financial Position.
Prior to the spinoff, Monsanto provided certain general and
administrative services to Solutia, including finance, legal, treasury,
information systems, and human resources. The cost allocated to Solutia for
these services was based upon the percentage relationship between the net
assets used in Solutia's operations and Monsanto's total net assets, as
well as other methods which management believed to be reasonable. These
allocations were $12 million in 1997. In preparation for the spinoff,
Monsanto began a transition plan for the separation. As part of this plan,
Monsanto discontinued its allocation of corporate expenses for these
general and administrative services on April 1, 1997, as these expenses
were specifically identified and segregated as part of Solutia's ongoing
cost infrastructure. Solutia now performs these general and administrative
functions using its own resources or purchased services. If Solutia had
operated as a stand-alone entity in 1997, management estimates that general
and administrative expenses would have been higher by approximately $13 million
in 1997 to reflect the cost of replacing the services represented by these
allocations.
As described in Notes 11 and 12, Solutia employees and retirees
participated in various Monsanto pension, health care, savings, and other
benefit plans. The costs and certain obligations related to these plans
were included in Solutia's consolidated financial statements. Generally,
such costs were based on the percentage of Solutia payroll costs to total
Monsanto payroll costs.
Monsanto used a centralized approach to manage its cash and to
finance its operations. As a result, cash and cash equivalents and debt
were not allocated to Solutia in the pre-spinoff historical financial
statements. Solutia generally did not have borrowings, except amounts due
to Monsanto. Interest expense was allocated to Solutia in the consolidated
financial statements to reflect Solutia's pro rata share of the financing
structure of Monsanto. This allocation in the consolidated financial
statements is based on the percentage relationship between the net assets
used in Solutia's operations and Monsanto's total net assets.
The allocation method followed in preparing the pre-spinoff
consolidated financial statements may not necessarily reflect the results
of operations, cash flows, or financial position of Solutia in the future,
or reflect what the results of operations, cash flows, or financial
position would have been if Solutia had been a separate stand-alone entity.
POST-SPINOFF FINANCIAL INFORMATION
Financial data included in the accompanying consolidated financial
statements, for periods subsequent to the spinoff have been prepared to
reflect the historical value of the assets, liabilities, and operations of
the businesses that were contributed to Solutia by Monsanto in accordance
with the distribution and employee benefits and compensation allocation
agreements described in the preceding paragraphs.
Effective with the spinoff on September 1, 1997, the assets contributed
to Solutia and the liabilities assumed by Solutia included cash of $75 million,
debt of $1.029 billion, accrued net pension liability for the U.S. and ex-U.S.
defined benefit pension plans, and additional obligations for health care and
other postretirement benefits. At the date of the spinoff, the amount of
postretirement liabilities assumed by Solutia totaled approximately
$1.018 billion.
34
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Solutia and
its majority-owned subsidiaries. Other companies in which Solutia has a
significant interest (20 to 50 percent) are included in "Investments in
Affiliates" in the Statement of Consolidated Financial Position. Solutia's
share of these companies' net earnings or losses is reflected in "Equity
Earnings from Affiliates" in the Statement of Consolidated Income. Prior to
the spinoff, the consolidated financial statements included the accounts of
Solutia as described in Note 1.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and that affect
revenues and expenses during the period reported. Estimates are adjusted
when necessary to reflect actual experience. Significant estimates were
used to account for the allocation between Monsanto and Solutia of
financial statement amounts, restructuring reserves, environmental
reserves, self-insurance reserves, employee benefit plans, asset
impairments, and contingencies.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and temporary investments with
maturities of three months or less when purchased.
INVENTORY VALUATION
Inventories are stated at cost or market, whichever is less. Actual cost is
used to value raw materials and supplies. Standard cost, which approximates
actual cost, is used to value finished goods and goods in process. Standard
cost includes direct labor and raw materials, and manufacturing overhead
based on practical capacity. The cost of certain inventories (67 percent as
of December 31, 1999) is determined by the last-in, first-out (LIFO)
method, which generally reflects the effects of inflation or deflation on
cost of goods sold sooner than other inventory cost methods. The cost of
other inventories generally is determined by the first-in, first-out (FIFO)
method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. The cost of plant and
equipment is depreciated over weighted average periods of 20 years for
buildings and 12 years for machinery and equipment, by the straight-line
method.
IMPAIRMENT OF LONG-LIVED ASSETS
Impairment tests of long-lived assets are made when conditions indicate a
possible loss. Such impairment tests are based on a comparison of
undiscounted cash flows to the recorded value of the asset. If an
impairment is indicated, the asset value is written down to its fair value
based upon market prices or, if not available, upon discounted cash value
at an appropriate discount rate.
ENVIRONMENTAL REMEDIATION
Costs for remediation of waste disposal sites are accrued in the accounting
period in which the obligation is probable and when the cost is reasonably
estimable. Postclosure costs for hazardous and other waste facilities at
operating locations are accrued over the estimated life of the facility as
part of its anticipated closure cost. Environmental liabilities are not
discounted, and they have not been reduced for any claims for recoveries
from insurance or third parties. In those cases where insurance carriers or
third-party indemnitors have agreed to pay any amounts and management
believes that collectability of such amounts is probable, the amounts are
reflected as receivables in the consolidated financial statements.
Effective January 1, 1997, Solutia adopted the American Institute of
Certified Public Accountants' Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities." SOP 96-1 establishes authoritative
guidance regarding the recognition, measurement and disclosure of
environmental remediation liabilities. The primary change in Solutia's
accounting principles associated with the adoption of this SOP was an
acceleration of the recognition of certain environmental remediation
liabilities at operating facilities. This change and the amounts associated
with it are more fully described in Note 15.
REVENUE RECOGNITION
Revenues are recorded when products are shipped.
DERIVATIVE FINANCIAL INSTRUMENTS
Currency forward contracts are used to manage currency exposures for
financial instruments denominated in currencies other than the entity's
functional currency. Gains and losses on contracts that are designated and
effective as hedges are included in net income and offset the exchange gain
or loss of the transaction being hedged.
Major currencies affecting Solutia's business are the U.S. dollar,
the British pound sterling, the euro, the Canadian dollar, and the
Brazilian real. Currency restrictions are not expected to have a
significant effect on Solutia's cash flow, liquidity, or capital resources.
35
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
Prior to the spinoff, the company did not file separate tax returns because
its results were included in the income tax returns filed by Monsanto and
its subsidiaries in various U.S. and ex-U.S. jurisdictions. The tax
provisions reflected in the Statement of Consolidated Income for periods
prior to the spinoff have been computed as if Solutia were a separate
company.
Solutia accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences of temporary differences between
the carrying amounts and tax bases of assets and liabilities at enacted
rates.
CURRENCY TRANSLATION
The financial statements for most of Solutia's ex-U.S. operations are
translated into U.S. dollars at current exchange rates. Unrealized currency
translation adjustments in the Statement of Consolidated Financial Position
are accumulated in equity. The financial statement components of ex-U.S.
entities that operate in hyperinflationary economies are translated at
either current or historical exchange rates, as appropriate. These currency
translation adjustments are included in net income.
EARNINGS PER SHARE
Solutia measures earnings per share under the guidance of Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." Basic
earnings per share is a measure of operating performance that assumes no
dilution from securities or contracts to issue common stock. Diluted
earnings per share is a measure of operating performance by giving effect
to the dilution that would occur if securities or contracts to issue common
stock were exercised or converted.
COMPREHENSIVE INCOME
Effective January 1, 1998, Solutia adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes the standards for
reporting and displaying comprehensive income and its components in a full
set of general-purpose financial statements. Comprehensive income includes
net income and several other items that were recognized directly in
shareholders' equity under previous accounting standards.
RECLASSIFICATIONS
Certain reclassifications of prior years' financial information have been
made to conform to the 1999 presentation.
3. ACQUISITIONS
On May 25, 1999, Solutia acquired CPFilms Inc. from Akzo Nobel N.V. for
approximately $200 million, which was financed with commercial paper.
CPFilms is a leading manufacturer and marketer of window film and other
high-technology film products for automotive and architectural after-
markets and a variety of other specialty film applications. The acquisition
has been accounted for using the purchase method. The allocation of the
purchase price to the identifiable assets and liabilities acquired resulted
in goodwill of approximately $80 million. This allocation is preliminary
and is subject to change. Goodwill and other intangible assets will be
amortized over their estimated useful lives of 20 years. CPFilms' results
of operations from May 25, 1999, through December 31, 1999, are included in
Solutia's Statement of Consolidated Income for the year ended December 31,
1999.
On December 22, 1999, Solutia acquired Vianova Resins from Morgan
Grenfell Private Equity Ltd. for approximately 1.2 billion deutsche marks
(approximately $640 million), which was financed with commercial paper and
the assumption of debt. Vianova Resins is a leading European producer of
resins and additives for coatings and technical applications for the
specialty, industrial, and automotive sectors.
The acquisition has been accounted for using the purchase method. The
allocation of the purchase price to the assets and liabilities acquired
resulted in goodwill of approximately $430 million. This allocation is
preliminary, due to completing the acquisition near Solutia's fiscal year-
end, and is subject to change. The valuations of assets and liabilities
have not been finalized. Also, Solutia intends to fully integrate Vianova
Resins with Solutia's resins business and corporate service organizations.
Solutia began considering how to integrate Vianova Resins with its
operations during the evaluation of the acquisition, but has not completed
the plans for the corporate service organizations. As part of completing
the integration plans, Solutia expects to record a liability in accordance
with Emerging Issues Task Force Issue 95-3, "Recognition of Liabilities in
Connection with a Purchase Business Combination." In addition to goodwill,
the major components of the purchase allocation were current assets of
$197 million, non-current assets of $235 million, current liabilities of
$67 million, and non-current liabilities of $155 million. Solutia anticipates
completing the allocation of the purchase price by the end of the second
quarter of 2000. Any adjustments to acquired assets and liabilities will
result in either an increase or a decrease to goodwill. Goodwill will be
amortized over its estimated useful life of 20 years. Results of Vianova's
operations for the period of December 22, 1999, through December 31, 1999,
were not material to Solutia's Statement of Consolidated Income for the
year ended December 31, 1999.
<PAGE>
The following unaudited pro forma condensed information for the years
ended December 31, 1999, and 1998, give effect to the acquisitions of
CPFilms and Vianova Resins, and the associated debt financing, as if the
acquisitions and the financing had occurred as of the beginning of the
periods presented.
For the Year Ended
December 31
(Unaudited) 1999 1998
-------------------------
Net sales $3,357 $3,465
Net income 203 241
Basic earnings per share 1.83 2.09
Diluted earnings per share 1.77 1.97
36
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RESTRUCTURING
During February 1999, certain equipment critical to the ammonia production
process failed. Based on an analysis of the economics of purchased ammonia
versus the cost to repair the equipment, Solutia decided to exit the
ammonia business. A $28 million ($18 million aftertax) charge to cost of
goods sold was recorded in the first quarter to complete the exit plan. The
charge included $2 million to write down the assets to their fair value of
approximately $4 million, $4 million of dismantling costs, and $22 million
of estimated costs for which Solutia is contractually obligated under an
operating agreement. The contractually obligated costs represent an
estimate of the direct manufacturing, overhead, and utilities that Solutia
is required to pay to a third-party operator during a 36-month termination
period. Solutia expects to complete the dismantling of the equipment by the
end of the first quarter of 2000. The ammonia business's net sales for the
years ended December 31, 1999, 1998, and 1997, were $1 million, $20 million,
and $17 million, respectively. Operating income for those periods was minimal.
The following table summarizes the 1999 restructuring charge and
amounts utilized to carry out those plans:
<TABLE>
<CAPTION>
Shutdown Asset Other
of Facilities Impairments Costs Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 $- $ - $ - $ -
Charges taken 4 2 22 28
Amounts utilized - (2) (6) (8)
----------------------------------------------------
BALANCE AT DECEMBER 31, 1999 $4 $ - $16 $ 20
====================================================
</TABLE>
In December 1996, Solutia recorded pretax restructuring charges of
$256 million ($164 million aftertax) to cover costs associated with the
closure or sale of certain facilities, asset write-offs, and work force
reductions of approximately 900 people across all world areas and functions
of the company. The workforce reductions were required to reduce staffing
for the spinoff and for the implementation of new business systems and
methodologies. Approximately two-thirds of the workforce reductions were
planned for North American shared service, business and manufacturing
operations, and approximately one-third were planned for European, Asian,
and Latin American shared service operations and sales offices. Of the
North American reductions, approximately half of the reductions were
management and senior management positions.
Activities completed during 1999 include the shutdowns of certain
facilities and the final stage of headcount reductions totaling
approximately 150 people. The 1999 headcount reductions occurred in
Solutia's Asian, European, and North American shared service operations.
Total headcount reductions under the 1996 restructuring were approximately
900 people. The headcount reductions occurred over a longer period of time
than management estimated due to the efforts required to complete the
separation from Monsanto and the transition to new business systems and
methodologies. In the fourth quarter of 1999, Solutia reversed excess
restructuring reserves due to the completion of the actions at a lower cost
than contemplated in the 1996 plan. A reversal of $1 million ($1 million
aftertax) was made to eliminate a reserve for headcount reductions after
the final stage of headcount reductions was carried out. A second reversal
of $1 million ($1 million aftertax) was made to eliminate a reserve
recorded to shutdown a non-strategic facility after that shutdown was
completed at a lower cost.
During 1998, actions taken under the 1996 restructuring plan included
continuing the shutdowns of certain facilities and headcount reductions of
approximately 50 people. The 50 people affected were in almost all areas of
Solutia, but primarily in Solutia's shared service operations, and left the
company by the end of 1998. Solutia also terminated approximately 100
individuals during December 1998 who left Solutia on various dates in the
first half of 1999. During 1998, evaluations of the costs to complete
Solutia's restructuring plans yielded lower cost estimates for certain of
the restructuring actions. The second quarter 1998 review yielded lower
cost estimates to complete the shutdown of certain facilities and resulted
in the reversal of $3 million ($2 million aftertax) in that quarter. The
third and fourth quarter 1998 reviews yielded downward revisions of the
costs to implement the employment reduction plans due to higher than
anticipated attrition that reduced employment levels without additional
cost to the company. As a result, the company reversed restructuring
reserves of $3 million ($2 million aftertax) in the third quarter 1998 and
$3 million ($2 million aftertax) in the fourth quarter.
Significant progress was made on the 1996 restructuring during 1997,
with employment being reduced by approximately 600 people. Employees
terminated were from all regions and areas of Solutia, with almost half in
North American manufacturing operations.
<PAGE>
The following table summarizes the actions of the 1996 plan carried
out during 1997, 1998, and 1999:
<TABLE>
<CAPTION>
Employee Shutdown
Reductions of Facilities Total
-------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1997 $147 $ 30 $177
Amounts utilized (80) (1) (81)
-------------------------------------
BALANCE AT DECEMBER 31, 1997 67 29 96
-------------------------------------
Amounts utilized (24) (8) (32)
Adjustments (6) (3) (9)
-------------------------------------
BALANCE AT DECEMBER 31, 1998 37 18 55
-------------------------------------
Amounts utilized (36) (17) (53)
Adjustments (1) (1) (2)
-------------------------------------
BALANCE AT DECEMBER 31, 1999 $ - $ - $ -
=====================================
</TABLE>
37
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In December 1995, Monsanto's Board of Directors approved a plan of
restructuring resulting in a pretax charge of $66 million ($57 million
aftertax). The charge covered the costs of work force reductions, business
consolidations, facility closures, and the exit from nonstrategic
businesses and facilities. Significant progress was made toward the
completion of the 1995 restructuring during 1996. The actions resulted in
reduced employment of approximately 100 people and the closure of certain
facilities. Reviews of the 1995 restructuring reserves during 1997 resulted
in a second quarter reversal of $8 million ($5 million aftertax) due to
lower exit costs associated with the sale and closure of nonstrategic
facilities.
The following table summarizes the actions of the 1995 plan:
Shutdown
of Facilities
-------------
Balance at January 1, 1997 $24
Amounts utilized (8)
Adjustments (8)
-------------
BALANCE AT DECEMBER 31, 1997 8
-------------
Amounts utilized (8)
-------------
BALANCE AT DECEMBER 31, 1998 $ -
=============
For all of Solutia's restructuring charges, expenses were recorded
based on estimates prepared at the time the restructuring actions were
approved by the Board of Directors. Adjustments to these estimates, shown
in the tables above, were credited to costs of goods sold in the respective
year.
5. ASSET IMPAIRMENTS
An impairment charge of $6 million ($4 million aftertax) was recorded in
the first quarter of 1999 to cost of goods sold primarily to write down a
bulk continuous filament spinning machine as a result of management's
decision to shut down the equipment due to a noncompetitive cost position.
The adjusted carrying value of the machine is $0.5 million. The charge is
due to a Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and Assets to Be Disposed Of,"
review, which indicated that the carrying amount of the assets exceeded the
identifiable, undiscounted cash flows related to the assets. Fair value of
the assets was determined based on estimates of market prices for the
machinery. Operating income derived from the machinery was minimal in the
years ended December 31, 1999, 1998, and 1997.
6. INVESTMENTS IN AFFILIATES
At December 31, 1999, Solutia's investments in affiliates consisted
principally of its 50 percent interests in the Flexsys, L.P. (Flexsys)
rubber chemicals joint venture and the Advanced Elastomers Systems, L.P.
(AES) joint venture for which Solutia uses the equity method of accounting.
Summarized combined financial information for 100 percent of the Flexsys
and AES joint ventures is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Results of operations:
Net sales $869 $838 $865
Gross profit 267 256 254
Operating income 108 116 107
Net income 85 94 78
Financial position:
Current assets $398 $438
Noncurrent assets 518 538
Current liabilities 275 282
Noncurrent liabilities 48 54
</TABLE>
7. INVENTORY VALUATION
The components of inventories were:
<TABLE>
<CAPTION>
1999 1998
--------------------
<S> <C> <C>
Finished goods $ 260 $ 252
Goods in process 121 87
Raw materials and supplies 109 116
--------------------
Inventories, at FIFO cost 490 455
Excess of FIFO over LIFO cost (119) (124)
--------------------
TOTAL $ 371 $ 331
====================
</TABLE>
<PAGE>
Inventories at FIFO approximate current cost. The effects of LIFO
inventory liquidations were not significant in 1999, 1998 and 1997.
8. INCOME TAXES
The components of income before income taxes were:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
United States $224 $285 $187
Outside United States 79 90 103
----------------------------------
TOTAL $303 $375 $290
==================================
</TABLE>
The components of income tax expense charged to operations were:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Current:
U.S. federal $48 $ 66 $36
U.S. state 6 3 7
Outside United States 20 25 23
----------------------------------
74 94 66
----------------------------------
Deferred:
U.S. federal 18 21 19
U.S. state - 6 2
Outside United States 5 5 11
----------------------------------
23 32 32
----------------------------------
TOTAL $97 $126 $98
==================================
</TABLE>
38
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Factors causing Solutia's effective tax rate to differ from the U.S.
federal statutory rate were:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------
<S> <C> <C> <C>
U.S. federal statutory rate 35% 35% 35%
U.S. state income taxes 2 2 2
Tax benefit of foreign sales corporation (2) (2) (2)
Taxes related to foreign income,
net of credits (1) - -
Income from equity affiliates
recorded net of tax (4) (2) (3)
Other 2 1 2
----------------------------------
EFFECTIVE INCOME TAX RATE 32% 34% 34%
==================================
</TABLE>
Deferred income tax balances were related to:
<TABLE>
<CAPTION>
1999 1998
--------------------
<S> <C> <C>
Property $(197) $(174)
Postretirement benefits 399 393
Restructuring reserves 7 31
Environmental liabilities 76 72
Inventory (3) 5
Other 17 31
--------------------
NET DEFERRED TAX ASSETS $ 299 $ 358
====================
</TABLE>
Income taxes and remittance taxes have not been recorded on $85 million
in undistributed earnings of subsidiaries, either because any taxes on dividends
would be offset substantially by foreign tax credits or because Solutia intends
to reinvest those earnings indefinitely. It is not practicable to estimate the
tax effect of remitting these earnings to the United States.
9. DEBT OBLIGATIONS
Solutia's debt obligations include commercial paper, notes, and debentures.
The weighted average interest rate on total debt outstanding was 6.8
percent at December 31, 1999, and was 7.0 percent at December 31, 1998.
DEBT MATURING IN ONE YEAR
Debt maturing in one year consisted of commercial paper balances of $511 million
at December 31, 1999, and $0 at December 31, 1998. Interest expense on
commercial paper balances charged to income during 1999, 1998, and 1997, for the
period following the spinoff, were at weighted average rates of 5.5 percent,
5.7 percent, and 5.8 percent, respectively.
At December 31, 1999, $201 million of outstanding commercial paper
was reclassified from short-term debt to long-term debt based on Solutia's
intention to refinance that amount through the issuance of euro 200 million of
notes, due February 2005.
Solutia's commercial paper program is principally supported by an
$800 million, five-year revolving credit facility ($800 million facility)
with a syndicate of commercial banks. The $800 million facility is also
available for working capital and other general corporate purposes. This
agreement was amended during November 1999, principally to allow the
issuance of commercial paper in euros, as well as U.S. dollars.
During November 1999, Solutia put in place a $300 million, 364-day
multi-currency revolving credit agreement ($300 million facility) with a
syndicate of commercial banks. The $300 million facility has terms that are
generally consistent with the terms of the $800 million facility. The
$300 million facility supports Solutia's commercial paper program and is
available for working capital and other general corporate purposes.
Both the $800 million facility and the $300 million facility contain
various covenants that, among other things, restrict Solutia's ability to
merge with another entity and require Solutia to meet certain leverage and
interest coverage ratios. The company does not anticipate that future
borrowings will be limited by the terms of these agreements. Interest on
amounts borrowed under these credit facilities is expected to approximate
money market rates.
<PAGE>
LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1999 1998
-------------------
<S> <C> <C>
Commercial paper $201 $ -
6.5% notes due 2002 150 150
7.375% debentures due 2027 300 300
6.72% debentures due 2037 150 150
Other 4 -
Unamortized debt discount (3) (3)
-------------------
TOTAL $802 $597
===================
</TABLE>
Other notes of $4 million were assumed in the acquisition of Vianova
Resins.
The notes and debentures are unsecured obligations. Interest is
payable semiannually, on April 15 and October 15 of each year. The holders
of the 2037 debentures have the right to require repayment on October 15,
2004. The notes and debentures contain provisions that, among other things,
restrict Solutia's ability to create liens against assets and its ability
to enter into sale and leaseback transactions.
39
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair value of Solutia's long-term debt was $761 million as of
December 31, 1999, and $587 million as of December 31, 1998. These
estimates compare with the recorded amount of $802 million in 1999 and
$597 million in 1998.
The recorded amounts of cash, trade receivables, third-party
guarantees, accounts payable, and short-term debt approximate their fair
values at both December 31, 1999, and December 31, 1998. The estimated fair
value of the company's foreign currency forward contracts approximates
their notional amounts. Notional amounts at December 31, 1999, and December 31,
1998, for purchase contracts were $44 million and $34 million, respectively,
and for sell contracts were $44 million and $34 million, respectively.
Fair values are estimated by the use of quoted market prices,
estimates obtained from brokers, and other appropriate valuation techniques
and are based upon information available as of December 31, 1999, and
December 31, 1998. The fair-value estimates do not necessarily reflect the
values Solutia could realize in the current market.
11. POSTRETIREMENT BENEFITS
Effective December 31, 1998, the company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which
standardizes, to the extent practicable, the disclosure requirements for
pensions and other postretirement benefits, and which requires disclosure
of the components of the changes in the benefit obligation and fair values
of plan assets.
Pension benefits are based on the employee's age, years of service,
and compensation level. The pension plans are funded in accordance with
Solutia's long-range projections of the plans' financial conditions. These
projections take into account benefits earned and expected to be earned,
anticipated returns on pension plan assets, and income tax and other
regulations. Prior to the spinoff, the majority of Solutia's employees
participated in Monsanto's noncontributory pension plans. In conjunction
with the spinoff, Solutia assumed pension liabilities and received related
assets from those plans for its applicable active employees and for certain
former employees who left Monsanto in earlier years.
The majority of Solutia's employees also participate in benefit
programs that provide certain health care and life insurance benefits for
retired employees. Substantially all regular, full-time U.S. employees and
certain employees in other countries may become eligible for these benefits
if they reach retirement age while employed by Solutia. These
postretirement benefits are unfunded and are generally based on the
employee's years of service and/or compensation level. The costs of
postretirement benefits are accrued by the date the employees become
eligible for the benefits. In connection with the spinoff, Solutia assumed
retiree medical liabilities for its applicable active employees and for
approximately two-thirds of the retired U.S. employees of Monsanto.
During the second quarter of 1998, Solutia amended certain of its
postretirement health care plans, primarily to adjust cost-sharing
provisions. The amendment resulted in a $161 million reduction in the
company's accumulated postretirement benefit obligation, which is being
amortized over the average remaining service life of plan participants of
approximately 12 years.
Net pension cost for 1997 consisted of $9 million of net pension
costs incurred subsequent to the spinoff and $19 million of cost
allocations from Monsanto. Similarly, the 1997 postretirement benefit cost
consisted of $23 million of postretirement benefit costs incurred
subsequent to the spinoff and $31 million of cost allocations from
Monsanto. For the 1999, 1998, and the four months of 1997 subsequent to the
spinoff, the company's pension and healthcare and other benefit costs were
as follows:
<TABLE>
<CAPTION>
Pension Benefits Healthcare and Other Benefits
----------------------------- -----------------------------
1999 1998 1997 1999 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Service costs for benefits earned $ 38 $ 33 $ 11 $ 11 $ 11 $ 4
Interest cost on benefit obligation 132 130 52 49 54 20
Assumed return on plan assets (153) (147) (53) - - -
Prior service costs 21 19 4 (18) (12) -
Transition asset (10) (10) (4) - - -
Unrecognized net (gain)/loss (3) (3) (1) 6 1 (1)
----------------------------- -----------------------------
TOTAL $ 25 $ 22 $ 9 $ 48 $ 54 $23
============================= =============================
</TABLE>
40
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Components of the changes in fair value of plan assets, changes in
the benefit obligation, and the funding status of Solutia's postretirement
plans are as follows:
<TABLE>
<CAPTION>
Healthcare and
Pension Benefits Other Benefits
------------------ ----------------
1999 1998 1999 1998
------------------ ----------------
<S> <C> <C> <C> <C>
CHANGES IN FAIR VALUE OF PLAN ASSETS
Fair value of plan assets at January 1 $1,910 $1,834 $ - $ -
Actual return on plan assets 349 288 - -
Acquisitions 2 - - -
Benefits paid (288) (212) - -
------------------ ----------------
FAIR VALUE OF PLAN
ASSETS AT DECEMBER 31 $1,973 $1,910 $ - $ -
================== ================
CHANGES IN BENEFIT OBLIGATION
Benefit obligation at January 1 $1,983 $1,824 $726 $ 918
Service costs 38 33 11 11
Interest cost 132 130 49 54
Participant contributions - - 2 1
Actuarial (gain)/loss (54) 214 12 (19)
Acquisitions 21 - - -
Benefits paid (300) (229) (80) (78)
Plan amendments 13 11 - (161)
------------------ ----------------
BENEFIT OBLIGATION AT DECEMBER 31 $1,833 $1,983 $720 $ 726
================== ================
</TABLE>
Plan assets consist principally of common stocks and U.S. government
and corporate obligations. Contributions to the pension benefit plans were
neither required nor made in 1999 and 1998 because Solutia's principal
pension plan is adequately funded, using assumed returns.
The funded status of Solutia's postretirement benefit plans at
December 31, 1999, and 1998, was as follows:
<TABLE>
<CAPTION>
Healthcare and
Pension Benefits Other Benefits
---------------- -----------------
1999 1998 1999 1998
---------------- -----------------
<S> <C> <C> <C> <C>
FUNDED STATUS $ 140 $ (73) $(720) $(726)
Unrecognized actuarial (gain)/loss (464) (228) 18 11
Unrecognized prior service costs 149 184 (159) (176)
Additional liability (25) (19) - -
Unrecognized net transition
(gain)/loss (13) (23) - -
---------------- -----------------
ACCRUED NET LIABILITY AT DECEMBER 31 $(213) $(159) $(861) $(891)
================ =================
</TABLE>
The accrued net liability was included in:
<TABLE>
<CAPTION>
Healthcare and
Pension Benefits Other Benefits
---------------- -----------------
1999 1998 1999 1998
---------------- -----------------
<S> <C> <C> <C> <C>
Current postretirement liabilities $ - $ - $ (86) $ (88)
Long-term postretirement liabilities (223) (168) (775) (803)
Less: Other assets 10 9 - -
---------------- -----------------
ACCRUED NET LIABILITY AT DECEMBER 31 $(213) $(159) $(861) $(891)
================ =================
</TABLE>
Certain of Solutia's pension benefit plans are unfunded and therefore
have accumulated benefit obligations in excess of plan assets. Information
regarding these unfunded plans is as follows:
<TABLE>
<CAPTION>
1999 1998
----------------
<S> <C> <C>
Projected benefit obligation $30 $27
Accumulated benefit obligation 24 23
Fair value of plan assets - -
</TABLE>
<PAGE>
The significant actuarial assumptions used to estimate the projected
benefit obligation for the Solutia's principal pension, healthcare, and
other benefit plans were as follows:
<TABLE>
<CAPTION>
Healthcare and
Pension Benefits Other Benefits
---------------- -----------------
1999 1998 1999 1998
---------------- -----------------
<S> <C> <C> <C> <C>
Discount rate 7.50% 7.00% 7.50% 7.00%
Assumed long-term rate
of return on plan assets 9.50% 9.50% - -
Annual rates of salary increase
(for plans that base benefits
on final compensation level) 4.50% 4.00% - -
Assumed trend rate for
healthcare costs - - 5.25% 5.00%
Ultimate trend rate for
healthcare costs - - 5.25% 5.00%
</TABLE>
A 1 percent change in the assumed health care cost trend rates would
have the following effect as of December 31, 1999:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
--------------------------------
<S> <C> <C>
Effect on total service and
interest cost components $ 1 $ (1)
Effect on postretirement benefit obligation 10 (11)
</TABLE>
12. EMPLOYEE SAVINGS PLANS
In connection with the spinoff, Monsanto common stock held by the Monsanto
Employee Stock Ownership Plan (ESOP) and related Monsanto ESOP borrowings
were allocated between Solutia and Monsanto. As a result of this
allocation, Solutia received 2.4 million shares of Monsanto common stock
and assumed $29 million of ESOP debt to third parties. Simultaneously,
Solutia created its own ESOP, established a trust to hold the Monsanto
shares, and issued a $29 million loan to the trust. The trust used the
proceeds of the loan to repay the assumed third-party debt. Subsequent to
the spinoff, the ESOP trust was required by government regulations to
divest its holdings of Monsanto common stock and to use the proceeds to
acquire Solutia common stock. The divestiture of Monsanto common stock and
the purchase of Solutia common stock were completed in early 1998. The
trust held approximately 10.7 million shares of Solutia common stock at
December 31, 1999.
41
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Substantially all U.S. employees of Solutia are eligible to
participate in the Solutia Inc. Savings and Investment Plan, a 401(k) plan.
Shares held in the ESOP are used to make Solutia's matching contribution to
eligible participants' accounts under this plan. The number of shares
released is computed on each pay date based on a formula that considers the
participant contribution, the Solutia matching rate, and Solutia's closing
stock price. Shares allocated to participant accounts totaled 979,439
shares in 1999, 622,598 shares in 1998, and 232,674 shares in 1997, leaving
2,908,080 unallocated shares as of December 31, 1999. The value of these
contributions was $18 million in 1999, $16 million in 1998, and $10 million
in 1997. Unallocated shares held by the ESOP are considered outstanding
for earnings per share calculations. Compensation expense is equal to the
cost of the shares allocated to participants, less dividends paid on the
shares held by the ESOP. Information regarding the ESOP follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------
<S> <C> <C> <C>
Total ESOP expense $ 8 $6 $5
Interest portion of total ESOP expense 2 2 3
Cash contributions 10 7 -
</TABLE>
For the eight-month period of 1997 prior to the spinoff, Monsanto
ESOP expense and related interest were allocated to Solutia by Monsanto.
Cash contributions and dividends paid on ESOP shares for periods prior to
the spinoff were not applicable to the Solutia ESOP.
13. STOCK OPTION PLANS
The Solutia Inc. 1997 Stock-Based Incentive Plan (1997 Plan) provides
incentives to officers and employees of Solutia and its subsidiaries
directly linked to the price of Solutia's stock. The 1997 Plan is the
company's current stock-based incentive plan for management.
The 1997 Plan authorizes up to 7,800,000 shares of Solutia common
stock for grants of non-qualified and incentive stock options, stock
appreciation rights, restricted stock awards, and bonus stock awards to
Solutia's officers and employees. The shares used may be either newly
issued shares, treasury shares, or a combination. Under the 1997 Plan, the
exercise price of a stock option must be no less than the fair market value
of Solutia's common stock on the grant date. Additionally, the 1997 Plan
provides that the term of any stock option granted under the plan may not
exceed 10 years. At December 31, 1999, approximately 1,341,608 shares of
Solutia's common stock remained available for grants under the plan.
During 1999, nonqualified options to purchase 571,000 shares of
Solutia common stock were granted under the 1997 Plan to current executive
officers and other senior executives as a group, and non-qualified stock
options to purchase 1,449,325 shares were granted to other employees at an
average exercise price of $20.61 per share. Total shares covered by options
granted under the 1997 Plan to current executive officers and other senior
executives as a group and other employees were 1,643,000 and 5,200,392,
respectively, through December 31, 1999. The options granted to Solutia's
executive officers and other senior executives are performance options that
become exercisable upon the earlier of achievement of specified share price
targets or the ninth anniversary of the option grant. The options granted
to the other management employees are time-based. They generally become
exercisable in thirds, one-third on each of the first three anniversaries
of the option grant date.
The Solutia Inc. Non-Employee Director Compensation Plan (NEDCP)
provides incentives to non-employee members of Solutia's Board of
Directors. The NEDCP authorizes up to 400,000 shares for grants of non-
qualified stock options and for grants of deferred shares in payment of all
or a portion of the annual retainer for the non-employee directors. Only
treasury shares may be used. Under the NEDCP, the exercise price of a stock
option must be no less than the fair market value of Solutia's common stock
on the grant date and the term of any stock option granted under the plan
may not exceed 10 years. At December 31, 1999, 274,995 shares of Solutia's
common stock remained available for grants under the Plan. Shares covered
by options granted, and deferred shares credited to non-employee directors'
accounts, during 1999, 1998 and 1997 totaled 34,333, 16,000, and 74,672,
respectively.
Certain options granted under Monsanto's stock option plans (Monsanto
options) to Solutia employees in 1997 prior to the spinoff were converted
into Solutia options with adjustments to preserve their value. In addition,
unexercised Monsanto options granted to Solutia and Monsanto employees
prior to 1997 were converted into two awards, one based on Monsanto common
stock and one based on Solutia common stock, with the same overall value at
the time of the spinoff as the original Monsanto award.
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation," Solutia has elected to continue following the guidance of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," for measurement and recognition of stock-based
transactions with employees. Accordingly, no compensation cost has been
recognized for Solutia's option plans. Had the determination of
compensation cost for these plans been based on the fair value at the grant
dates for awards under these plans, consistent with the method of
42
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SFAS No. 123, Solutia's net income would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
NET INCOME:
As reported $ 206 $ 249 $ 192
Pro forma 187 224 159
DILUTED EARNINGS PER SHARE:
As reported $1.80 $2.03 $1.55
Pro forma 1.63 1.82 1.29
</TABLE>
Compensation expense resulting from the fair value method of SFAS No.
123 may not be representative of compensation expense to be incurred on a
pro forma basis in future years.
The fair value of each option grant is estimated on the date of grant
by use of the Black-Scholes option-pricing model.
The following weighted-average assumptions were used to calculate the
expense attributable to Solutia for Monsanto options granted to Solutia
employees in 1997:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Expected dividend yield 0.3%
Expected volatility 27.0%
Risk-free interest rates 6.3%
Expected option lives (years) 4.0
</TABLE>
The following weighted-average assumptions were used for grants of
Solutia options in 1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
Expected dividend yield 0.2% 0.2% 0.2%
Expected volatility 34.0% 28.0% 25.0%
Risk-free interest rates 6.0% 5.1% 5.9%
Expected option lives (years) 5.0 5.0 4.0
</TABLE>
The weighted-average fair values of options granted during 1999,
1998, and 1997 were $8.05, $9.33, and $4.83 per share, respectively.
A summary of the status of the Solutia's stock option plans for years
ended December 31, 1999, and 1998, and the period subsequent to the spinoff
through December 31, 1997, follows:
<TABLE>
<CAPTION>
Outstanding
---------------------------------
Exercisable Weighted-Average
Shares Shares Exercise Price
---------------------------------------------------
<S> <C> <C> <C>
September 1, 1997 10,269,960 24,122,741 $13.48
---------------------------------------------------
Granted 4,640,172 19.23
Exercised (752,102) 9.29
Expired (118,411) 16.32
---------------------------------------------------
DECEMBER 31, 1997 9,517,858 27,892,400 14.53
---------------------------------------------------
Granted 273,567 27.12
Exercised (1,833,225) 12.19
Expired (475,637) 16.22
---------------------------------------------------
DECEMBER 31, 1998 17,116,842 25,875,105 14.79
---------------------------------------------------
Granted 2,054,658 20.61
Exercised (678,710) 10.93
Expired (495,232) 18.43
---------------------------------------------------
DECEMBER 31, 1999 18,852,246 26,737,821 $15.27
===================================================
</TABLE>
<PAGE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
OPTIONS OUTSTANDING:
<TABLE>
<CAPTION>
Weighted-Average
Range of Remaining Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price
----------------------------------------------------------
<S> <C> <C> <C>
$ 3 to 7 4,661,143 3.3 years $ 5.87
8 to 11 47,979 5.9 years 10.12
12 to 15 1,399,674 6.3 years 12.60
16 to 18 13,922,189 7.0 years 16.44
19 to 22 6,461,526 8.3 years 19.70
23 to 29 245,310 8.4 years 27.62
----------------------------------------------------------
$ 3 to 29 26,737,821 6.7 years $15.27
==========================================================
</TABLE>
OPTIONS EXERCISABLE:
<TABLE>
<CAPTION>
Range of Weighted-Average
Exercise Prices Shares Exercise Price
--------------------------------------
<S> <C> <C>
$ 3 to 7 4,661,143 $ 5.87
8 to 11 47,979 10.12
12 to 15 1,390,741 12.59
16 to 18 9,354,897 16.46
19 to 22 3,335,046 19.32
23 to 29 62,440 27.35
--------------------------------------
$ 3 to 29 18,852,246 $14.08
======================================
</TABLE>
14. CAPITAL STOCK
Solutia's Board of Directors declared a dividend of one preferred stock
purchase right for each share of Solutia's common stock issued in the
distribution of shares by Monsanto to its shareholders on the effective
date of the spinoff and authorized the issuance of one right for each share
of common stock issued after the effective date of the spinoff until the
earlier of the date the rights become exercisable and the termination date
of the rights plan. If a person or group acquires beneficial ownership of
20 percent or more, or announces a tender offer that would result in
beneficial ownership of 20 percent or more, of Solutia's outstanding common
stock, the rights become exercisable. Then, for every right held, the owner
will be entitled to purchase one one-hundredth of a share of a series of
preferred stock for $125. If Solutia is acquired in a business combination
transaction while the rights are outstanding, for every right held, the
holder will be entitled to purchase, for $125, common shares of the
acquiring company having a market value of $250. In addition, if a person
or group acquires beneficial ownership of 20 percent or more of Solutia's
outstanding common stock, for every right held, the holder (other than such
person or members of such group) will be entitled to purchase, for $125, a
number of shares of Solutia's common stock having a market value of $250.
Furthermore, at any time after a person or group acquires beneficial
ownership of 20 percent or more (but less than 50 percent) of Solutia's
outstanding common stock, Solutia's Board of Directors may, at its option,
exchange part or all of the rights (other than rights held by the acquiring
person or group) for shares of Solutia's common stock on a one-share-for-
every-one-right basis. At any time
43
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
prior to the acquisition of such a 20 percent position, Solutia can
redeem each right for $0.01. The Board of Directors is also authorized
to reduce the aforementioned 20 percent thresholds to not less than 10
percent. The rights expire in the year 2007.
The company has 10 million shares of preferred stock, par value
$0.01 per share, authorized. As of December 31, 1999, there were no
preferred shares issued or outstanding.
15. COMMITMENTS AND CONTINGENCIES
Commitments, principally in connection with uncompleted additions to
property, were approximately $100 million at December 31, 1999. Solutia
was contingently liable as a guarantor for bank loans totaling
approximately $14 million at December 31, 1999. In addition, as of
December 31, 1999, the company was contingently liable under letters of
credit, primarily related to environmental remediation, totaling
$43 million. Solutia's future minimum payments under noncancelable operating
leases and unconditional purchase obligations are $26 million for 2000,
$22 million for 2001, $19 million for 2002, $52 million for 2003,
$13 million for 2004, and $93 million thereafter.
Solutia has entered into agreements with customers to supply a
guaranteed quantity of certain products annually at prices specified in
the agreements. In return, the customers have advanced funds to Solutia
to cover the costs of expanding capacity to provide the guaranteed
supply. Solutia has recorded the advances as deferred credits and
amortizes the amounts to income as the customers purchase the products.
At December 31, 1999 and 1998, the unamortized deferred credits were
approximately $183 million and $137 million, respectively.
The more significant concentrations in Solutia's trade receivables
at year-end were:
<TABLE>
<CAPTION>
1999 1998
----------------------
<S> <C> <C>
U.S. chemical industry $51 $55
U.S. carpet industry 41 51
European glass industry 50 36
European chemical industry 28 -
</TABLE>
Management does not anticipate losses on its trade receivables in
excess of established allowances.
Solutia's Statement of Consolidated Financial Position included
accrued liabilities of $201 million and $198 million at December 31,
1999 and 1998, respectively, for the remediation of identified waste
disposal sites. Expenditures related to remediation activities were
$22 million in 1999, $22 million in 1998, and $39 million in 1997. Solutia
recorded charges against cost of goods sold of approximately $34 million
($22 million aftertax) in the fourth quarter of 1997 to increase its
environmental reserves. This action was required in order to reflect
revised estimates for changed circumstances relating to the ultimate
outcome of previously known environmental matters. These revised
estimates were based upon further discussions with environmental
authorities and the availability of new information from recently
completed environmental studies. These events and activities help to
define better and to quantify the company's ultimate liability for these
matters.
Effective January 1, 1997, Solutia adopted SOP 96-1, "Environmental
Remediation Liabilities." SOP 96-1 is the authoritative guidance regarding
the recognition, measurement and disclosure of environmental remediation
liabilities. A charge to cost of goods sold of approximately $10 million
($6 million aftertax) was recorded in the first quarter of 1997 associated
with the adoption of SOP 96-1. The timing of this charge was predicated upon
an application of SOP 96-1 in which liabilities arising under the Resource
Conservation and Recovery Act (RCRA) should be recorded when a RCRA corrective
measures study (CMS) is completed. Subsequently, Solutia reassessed its
application of SOP 96-1 and concluded that these liabilities would be recorded
over a continuum of events leading up to and including a CMS. As a result,
Solutia recorded in the fourth quarter of 1997, additional charges
against cost of goods sold of approximately $38 million ($24 million
aftertax) associated with these RCRA environmental liabilities.
Uncertainties related to all of Solutia's environmental liabilities include
evolving government regulations, the method and extent of remediation, and
future changes in technology. Because of these uncertainties, Solutia estimates
that potential future expenses associated with these liabilities could be an
additional $20 million to $30 million. Although the ultimate costs and results
of remediation of contaminated sites cannot be predicted with certainty, they
are not expected to have a material adverse effect on Solutia's consolidated
financial position, liquidity, or profitability in any one year.
During the first quarter of 1999, Solutia recorded a $29 million
($18 million aftertax) charge to cost of goods sold to increase reserves
related to the anticipated settlement of two lawsuits brought against
Monsanto, for which Solutia assumed responsibility in the 1997 spinoff
from Monsanto, relating to the alleged discharge of polychlorinated
biphenyls (PCBs) from the Anniston, Alabama, plant site, and to
environmental remediation of the allegedly affected areas. The
anticipated settlement of these cases provided information that allowed
management to estimate more accurately its position with respect to such
litigation.
<PAGE>
Monsanto is a party to a number of lawsuits and claims relating to
Solutia, for which Solutia assumed responsibility in the spinoff. In
addition, Solutia is also a named party in a number of lawsuits and
claims directly. Solutia intends to defend all suits and claims
vigorously. Such matters arise out of the normal course of business and
relate to product liability; government regulation, including
environmental issues; employee relations; and other issues. Certain of
the lawsuits and claims seek damages in very large amounts. Although the
results of litigation cannot be predicted with certainty, management's
belief is that the final outcome of such litigation will not have a
material adverse effect on Solutia's consolidated financial position,
liquidity or profitability, as applicable, in any one year.
44
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. INTERCOMPANY TRANSACTIONS
Transactions with Monsanto before the spinoff, included in the Statement
of Consolidated Income, are summarized as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Intercompany sales $42
General and administrative services 12
Interest expense 26
</TABLE>
Intercompany sales were made at Monsanto's established transfer
prices. In addition, the costs for certain general and administrative
services were allocated to Solutia. As further discussed in Note 1,
Monsanto discontinued its allocation of the cost of general and
administrative expenses to Solutia, effective April 1, 1997, as part of
its plan for separation. Such expenses were specifically identified and
segregated as part of Solutia's ongoing cost infrastructure. Interest
expense charged to Solutia represents an allocation from Monsanto of its
total interest expense.
17. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activity." SFAS No. 133 provides comprehensive and consistent standards
for the recognition and measurement of derivative and hedging
activities. It requires that derivatives be recorded on the Statement of
Consolidated Financial Position at fair value. It also establishes
criteria for hedges of changes in the fair value of assets, liabilities,
or firm commitments, hedges of variable cash flows of forecasted
transactions, and hedges of foreign currency exposures of net
investments in foreign operations. Changes in the fair value of
derivatives that do not meet the criteria for hedges would be recognized
in the Statement of Consolidated Income. During June 1999, FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133,"
to defer the effective date of SFAS No. 133 by one year. The standard
will now be effective for Solutia as of January 1, 2001. Based on
analyses performed to date, Solutia does not expect the adoption of SFAS
No. 133 to have a material effect on its consolidated financial
statements.
18. SUPPLEMENTAL DATA
Supplemental income statement data were:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
Raw material and energy costs $984 $994 $1,102
Employee compensation and benefits 728 757 746
Current income and other taxes 166 176 149
Rent expense 26 26 28
Technological expenses:
Research and development 58 60 60
Engineering, commercial development
and patent 22 23 27
----------------------------------------
Total technological expenses 80 83 87
Interest expense:
Total interest cost 53 49 49
Less capitalized interest 13 6 8
----------------------------------------
Net interest expense 40 43 41
</TABLE>
19. SEGMENT AND GEOGRAPHIC DATA
During December 1999, Solutia refined its management structure to align
with its growth strategy. Solutia's management is now organized around four
strategic business platforms: Performance Films, Resins and Additives,
Specialties, and Integrated Nylon. Resins and Additives and Specialties
have been aggregated into the Specialty Products reportable segment because
of their similar economic characteristics, as well as their similar
products and services, production processes, types of customers, and
methods of distribution. Solutia's new reportable segments and
representative products are as follows:
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PERFORMANCE FILMS SPECIALTY PRODUCTS INTEGRATED NYLON
- -----------------------------------------------------------------------------------------------
<C> <C> <C>
Saflex(R) plastic interlayer Resins and additives, Intermediate "building
including Alftalat(R) block" chemicals
KeepSafe(R), Saflex polyester resins, Resimene(R)
Inside(TM), and KeepSafe and Maprenal(R) crosslinkers, Merchant polymer and
Maximum(TM) glass for Synthacryl(R) acrylic resins, nylon extrusion polymers,
residential security and and Alnovol(R) phenolic resins including Vydyne(R) and Ascend(TM)
hurricane protection windows
Therminol(R) heat transfer Carpet fibers, including
Llumar(R), Vista(R), and fluids the Wear-Dated(R) and Ultron
Gila(R) professional and VIP(R) brands
after-market window films Dequest(R) water treatment
chemicals Industrial nylon fibers
Conductive and anti-
reflective coated films Skydrol(R) hydraulic fluids Acrilan(R) acrylic fibers
and deep-dyed films and SkyKleen(R) cleaning for apparel, upholstery
fluid for aviation fabrics, craft yarns, and
Gelva(R) pressure-sensitive other applications
adhesives Phosphorus-based
materials for food and
Santicizer(R) plasticizers beverage ingredients,
and other polymer modifiers personal care products,
industrial cleaners, and
fire retardants
</TABLE>
45
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Internally, Solutia reports its financial results under the revised
management structure. As required by Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information," financial information for the years ended December 31,
1999, 1998 and 1997, that is included in this annual report has been
restated to conform to the new segment structure.
In April 1999, Solutia announced the agreement with FMC Corporation
to form a joint venture to manufacture and market phosphorus chemicals.
Solutia will contribute its phosphorus derivatives business and will hold a
50 percent ownership share. The formation of the joint venture is being
reviewed by the Federal Trade Commission under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. It is expected that the joint venture
will be consummated during the first half of 2000.
Accounting policies of the segments are the same as those described
in the summary of significant accounting policies in Note 2. However,
segment profit reflects only operating expenses that are directly
attributable to the segment. Unallocated service costs are managed
centrally and primarily include costs of technology, engineering, and
manufacturing services that are provided to the segments. These amounts
also include corporate administration costs. The company accounts for
intersegment sales at agreed upon transfer prices. Intersegment sales are
eliminated in consolidation. Segment assets consist primarily of customer
receivables, finished goods inventories, and fixed assets directly
associated with the production processes of the segment (direct fixed
assets). Segment depreciation and amortization is based upon direct fixed
assets. Unallocated assets consist primarily of goodwill, deferred taxes,
certain investments in equity affiliates, and indirect fixed assets.
Solutia's 1999, 1998, and 1997 segment information follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------- ---------------------------- ---------------------------
Net Intersegment Net Intersegment Net Intersegment
SEGMENT: Sales Sales Profit Sales Sales Profit Sales Sales Profit
---------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Performance Films $ 713 $ - $ 189 $ 614 $ - $ 168 $ 651 $ - $ 177
Specialty Products 615 2 159 613 3 152 635 13 137
Integrated Nylon 1,508 4 289 1,613 4 376 1,699 10 350
---------------------------- ---------------------------- ---------------------------
SEGMENT TOTALS 2,836 6 637 2,840 7 696 2,985 23 664
RECONCILIATION TO
CONSOLIDATED TOTALS:
Sales eliminations (6) (6) (7) (7) (23) (23)
Other revenues - 2 7
Less unallocated service costs:
Cost of goods sold (124) (70) (148)
Marketing, administrative and
technological expenses (216) (240) (226)
Amortization expense (3) - -
Equity earnings from affiliates 36 25 31
Interest expense (40) (43) (41)
Other income (expense)-net 13 7 10
CONSOLIDATED TOTALS:
---------------------- ----------------------- ----------------------
NET SALES $2,830 $ - $2,835 $ - $2,969 $ -
======================------ =======================----- ======================-----
INCOME BEFORE INCOME TAXES $ 303 $ 375 $ 290
====== ===== =====
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------- --------------------------------- --------------------------------
Depreciation Depreciation Depreciation
Capital and Capital and Capital and
SEGMENT: Assets Expenditures Amortization Assets Expenditures Amortization Assets Expenditures Amortization
--------------------------------- --------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Performance Films $ 538 $ 21 $ 30 $ 376 $ 24 $ 27 $ 358 $ 33 $ 30
Specialty Products 693 8 18 340 20 19 341 18 21
Integrated Nylon 991 189 57 890 81 56 873 87 52
--------------------------------- --------------------------------- --------------------------------
SEGMENT TOTALS 2,222 218 105 1,606 125 102 1,572 138 103
RECONCILIATION TO
CONSOLIDATED TOTALS:
Unallocated amounts 1,548 39 46 1,159 33 45 1,196 27 42
--------------------------------- --------------------------------- --------------------------------
CONSOLIDATED TOTALS $3,770 $257 $151 $2,765 $158 $147 $2,768 $165 $145
================================= ================================= ================================
</TABLE>
46
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Solutia's geographic information for 1999, 1998, and 1997 follows:
<TABLE>
<CAPTION>
Net Sales Long-Lived Assets
------------------------------------ ---------------------
1999 1998 1997 1999 1998
------------------------------------ ---------------------
<S> <C> <C> <C> <C> <C>
United States $1,992 $2,009 $2,030 $1,001 $820
Other countries 838 826 939 315 124
------------------------------------ ---------------------
Consolidated totals $2,830 $2,835 $2,969 $1,316 $944
==================================== =====================
</TABLE>
20. QUARTERLY DATA - UNAUDITED
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 1999 $ 652 $ 711 $ 731 $ 736 $ 2,830
1998 720 745 703 667 2,835
Gross Profit 1999 105 193 183 171 652
1998 187 206 188 169 750
Operating Income 1999 26 102 94 72 294
1998 99 115 95 77 386
Net Income 1999 23 71 61 51 206
1998 64 72 58 55 249
Basic Earnings per Share 1999 0.21 0.64 0.55 0.46 1.86
1998 0.55 0.62 0.50 0.49 2.16
Diluted Earnings per Share 1999 0.20 0.61 0.53 0.46 1.80
1998 0.51 0.58 0.47 0.46 2.03
Common Stock Price:
1999 HIGH 24 3/8 26 5/16 22 15/16 18 7/8 26 5/16
LOW 15 7/8 16 1/16 16 1/8 13 1/2 13 1/2
1998 High 32 30 5/16 30 15/16 28 1/2 32
Low 24 3/16 25 9/16 21 1/2 18 11/16 18 11/16
</TABLE>
Net income in the first quarter of 1999 includes aftertax charges of
$18 million related to exiting Integrated Nylon's ammonia business, $4 million
related to the write down of an Integrated Nylon bulk continuous filament
spinning machine to fair value, and $18 million related to the anticipated
settlement of certain property claims litigation involving the Anniston,
Alabama, plant site.
Net income in the second, third, and fourth quarters of 1998 includes
aftertax reversals of excess restructuring reserves established in 1996 of
$2 million, $2 million, and $2 million, respectively. In the third quarter
of 1998, net income includes an aftertax charge of $3 million to reduce the
carrying value of certain slow-moving inventories to their net realizable
value. Net income for the fourth quarter of 1998 includes an aftertax
charge of $4 million that was caused by losses on the disposition of
certain nonsalable inventories.
Under SFAS No. 128, "Earnings per Share," the quarterly and total
year calculations of basic and diluted earnings per share are based on
weighted average shares outstanding for that quarterly or total year
period, respectively. As a result, the sum of diluted earnings per share
for the quarterly periods may not equal total year earnings per share.
21. SUBSEQUENT EVENT
On February 14, 2000, Solutia completed the offering of euro 200 million of
notes, due February 14, 2005. The notes are listed on the Luxembourg Stock
Exchange and bear interest at 6.25 percent per year.
47
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of Solutia's subsidiaries as of December 31,
1999, except for unnamed subsidiaries which, considered in the
aggregate as a single subsidiary, would not constitute a significant
subsidiary.
<TABLE>
<CAPTION>
Percentage of
Voting Power
Owned by
Solutia
-------------
<S> <C>
Monchem, Inc................................................ 100%
Monchem International, Inc.................................. 100%
Solutia Systems, Inc........................................ 100%
Solutia International Sales, Inc............................ 99%
Solutia Europe S.A./N.V..................................... 100%
Alhadar Holding B.V......................................... 100%
Solutia Netherlands International B.V....................... 100%
Solutia Deutschland Holding GmbH............................ 100%
</TABLE>
22
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Solutia's
Registration Statements on Form S-8 (Nos. 333-34561, 333-34587,
333-34589, 333-34591, 333-34593, 333-34683, 333-35689, 333-47911,
333-51081, 333-74463, and 333-74465) of our opinions dated February
23, 2000 (which includes an explanatory paragraph as to a change in
the method of accounting in 1997), appearing in and incorporated by
reference in this annual report on Form 10-K of Solutia Inc. for the
year ended December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Saint Louis, Missouri
March 9, 2000
23
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director
and/or Officer of Solutia Inc. (the "Company"), a Delaware corporation
with its general offices in the County of St. Louis, Missouri, does
hereby make, constitute and appoint Karl R. Barnickol, Karen L. Knopf,
and Mary B. Cody, or any of them acting alone, to be his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name, place and stead, in any and all
capacities, to sign: (i) the Annual Report on Form 10-K and any
Amendments thereto to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended; (ii) the Registration Statement on Form S-8 and any
Amendments thereto to be filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), covering the registration of
additional securities of the Company to be issued under the Solutia Inc.
Employee Stock Purchase Plan; (iii) the Registration Statement on Form
S-8 and any Amendments thereto to be filed with the Commission under the
Act, covering the registration of additional securities of the Company
to be issued under the Solutia Inc. 1997 Stock-Based Incentive Plan; and
(iv) any Amendments to Registration Statements Nos. 333-34561,
333-34587, 333-34589, 333-34591, 333-34593, 333-34683, 333-35689,
333-47911, 333-51081, 333-74463, and 333-74465, all on Form S-8, which
have previously been filed with the Commission under the Act, covering
the registration of securities of the Company; giving and granting unto
said attorneys full power and authority to do and perform such actions
as fully as he or she might have done or could do if personally present
and executing any of said documents.
Witness my hand this 26th day of January, 2000.
<TABLE>
<C> <C>
/s/ John C. Hunter
- -------------------------------------------- -------------------------------------------
John C. Hunter III, Director, Chairman of Michael E. Miller, Vice Chairman and
the Board, Chief Executive Officer, and Director
President (Principal Executive Officer)
/s/ Robert A. Clausen
- -------------------------------------------- -------------------------------------------
Robert A. Clausen, Senior Vice President James M. Sullivan, Vice President and
and Chief Financial Officer Controller (Principal Accounting Officer)
(Principal Financial Officer)
- -------------------------------------------- -------------------------------------------
Robert T. Blakely, Director Joan T. Bok, Director
/s/ Paul H. Hatfield /s/ Robert H. Jenkins
- -------------------------------------------- -------------------------------------------
Paul H. Hatfield, Director Robert H. Jenkins, Director
/s/ H. M. Love /s/ Frank A. Metz, Jr.
- -------------------------------------------- -------------------------------------------
Howard M. Love, Director Frank A. Metz, Jr., Director
/s/ J. Patrick Mulcahy
- -------------------------------------------- -------------------------------------------
J. Patrick Mulcahy, Director Robert G. Potter, Director
/s/ William D. Ruckelshaus /s/ John B. Slaughter
- -------------------------------------------- -------------------------------------------
William D. Ruckelshaus, Director John B. Slaughter, Director
</TABLE>
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director
and/or Officer of Solutia Inc. (the "Company"), a Delaware corporation
with its general offices in the County of St. Louis, Missouri, does
hereby make, constitute and appoint Karl R. Barnickol, Karen L. Knopf,
and Mary B. Cody, or any of them acting alone, to be his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name, place and stead, in any and all
capacities, to sign: (i) the Annual Report on Form 10-K and any
Amendments thereto to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended; (ii) the Registration Statement on Form S-8 and any
Amendments thereto to be filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), covering the registration of
additional securities of the Company to be issued under the Solutia Inc.
Employee Stock Purchase Plan; (iii) the Registration Statement on Form
S-8 and any Amendments thereto to be filed with the Commission under the
Act, covering the registration of additional securities of the Company
to be issued under the Solutia Inc. 1997 Stock-Based Incentive Plan; and
(iv) any Amendments to Registration Statements Nos. 333-34561,
333-34587, 333-34589, 333-34591, 333-34593, 333-34683, 333-35689,
333-47911, 333-51081, 333-74463, and 333-74465, all on Form S-8, which
have previously been filed with the Commission under the Act, covering
the registration of securities of the Company; giving and granting unto
said attorneys full power and authority to do and perform such actions
as fully as he or she might have done or could do if personally present
and executing any of said documents.
Witness my hand this 28th day of January, 2000.
<TABLE>
<C> <C>
/s/ M. E. Miller
- -------------------------------------------- -------------------------------------------
John C. Hunter III, Director, Chairman of Michael E. Miller, Vice Chairman and
the Board, Chief Executive Officer, and Director
President (Principal Executive Officer)
- -------------------------------------------- -------------------------------------------
Robert A. Clausen, Senior Vice President James M. Sullivan, Vice President and
and Chief Financial Officer Controller (Principal Accounting Officer)
(Principal Financial Officer)
- -------------------------------------------- -------------------------------------------
Robert T. Blakely, Director Joan T. Bok, Director
- -------------------------------------------- -------------------------------------------
Paul H. Hatfield, Director Robert H. Jenkins, Director
- -------------------------------------------- -------------------------------------------
Howard M. Love, Director Frank A. Metz, Jr., Director
- -------------------------------------------- -------------------------------------------
J. Patrick Mulcahy, Director Robert G. Potter, Director
- -------------------------------------------- -------------------------------------------
William D. Ruckelshaus, Director John B. Slaughter, Director
</TABLE>
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director
and/or Officer of Solutia Inc. (the "Company"), a Delaware corporation
with its general offices in the County of St. Louis, Missouri, does
hereby make, constitute and appoint Karl R. Barnickol, Karen L. Knopf,
and Mary B. Cody, or any of them acting alone, to be his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name, place and stead, in any and all
capacities, to sign: (i) the Annual Report on Form 10-K and any
Amendments thereto to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended; (ii) the Registration Statement on Form S-8 and any
Amendments thereto to be filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), covering the registration of
additional securities of the Company to be issued under the Solutia Inc.
Employee Stock Purchase Plan; (iii) the Registration Statement on Form
S-8 and any Amendments thereto to be filed with the Commission under the
Act, covering the registration of additional securities of the Company
to be issued under the Solutia Inc. 1997 Stock-Based Incentive Plan; and
(iv) any Amendments to Registration Statements Nos. 333-34561,
333-34587, 333-34589, 333-34591, 333-34593, 333-34683, 333-35689,
333-47911, 333-51081, 333-74463, and 333-74465, all on Form S-8, which
have previously been filed with the Commission under the Act, covering
the registration of securities of the Company; giving and granting unto
said attorneys full power and authority to do and perform such actions
as fully as he or she might have done or could do if personally present
and executing any of said documents.
Witness my hand this 31st day of January, 2000.
<TABLE>
<C> <C>
- -------------------------------------------- -------------------------------------------
John C. Hunter III, Director, Chairman of Michael E. Miller, Vice Chairman and
the Board, Chief Executive Officer, and Director
President (Principal Executive Officer)
- -------------------------------------------- -------------------------------------------
Robert A. Clausen, Senior Vice President James M. Sullivan, Vice President and
and Chief Financial Officer Controller (Principal Accounting Officer)
(Principal Financial Officer)
/s/ Robert T. Blakely
- -------------------------------------------- -------------------------------------------
Robert T. Blakely, Director Joan T. Bok, Director
- -------------------------------------------- -------------------------------------------
Paul H. Hatfield, Director Robert H. Jenkins, Director
- -------------------------------------------- -------------------------------------------
Howard M. Love, Director Frank A. Metz, Jr., Director
- -------------------------------------------- -------------------------------------------
J. Patrick Mulcahy, Director Robert G. Potter, Director
- -------------------------------------------- -------------------------------------------
William D. Ruckelshaus, Director John B. Slaughter, Director
</TABLE>
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director
and/or Officer of Solutia Inc. (the "Company"), a Delaware corporation
with its general offices in the County of St. Louis, Missouri, does
hereby make, constitute and appoint Karl R. Barnickol, Karen L. Knopf,
and Mary B. Cody, or any of them acting alone, to be his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name, place and stead, in any and all
capacities, to sign: (i) the Annual Report on Form 10-K and any
Amendments thereto to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended; (ii) the Registration Statement on Form S-8 and any
Amendments thereto to be filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), covering the registration of
additional securities of the Company to be issued under the Solutia Inc.
Employee Stock Purchase Plan; (iii) the Registration Statement on Form
S-8 and any Amendments thereto to be filed with the Commission under the
Act, covering the registration of additional securities of the Company
to be issued under the Solutia Inc. 1997 Stock-Based Incentive Plan; and
(iv) any Amendments to Registration Statements Nos. 333-34561,
333-34587, 333-34589, 333-34591, 333-34593, 333-34683, 333-35689,
333-47911, 333-51081, 333-74463, and 333-74465, all on Form S-8, which
have previously been filed with the Commission under the Act, covering
the registration of securities of the Company; giving and granting unto
said attorneys full power and authority to do and perform such actions
as fully as he or she might have done or could do if personally present
and executing any of said documents.
Witness my hand this 31st day of January, 2000.
<TABLE>
<C> <C>
- -------------------------------------------- -------------------------------------------
John C. Hunter III, Director, Chairman of Michael E. Miller, Vice Chairman and
the Board, Chief Executive Officer, and Director
President (Principal Executive Officer)
/s/ J. M. Sullivan
- -------------------------------------------- -------------------------------------------
Robert A. Clausen, Senior Vice President James M. Sullivan, Vice President and
and Chief Financial Officer Controller (Principal Accounting Officer)
(Principal Financial Officer)
- -------------------------------------------- -------------------------------------------
Robert T. Blakely, Director Joan T. Bok, Director
- -------------------------------------------- -------------------------------------------
Paul H. Hatfield, Director Robert H. Jenkins, Director
- -------------------------------------------- -------------------------------------------
Howard M. Love, Director Frank A. Metz, Jr., Director
- -------------------------------------------- -------------------------------------------
J. Patrick Mulcahy, Director Robert G. Potter, Director
- -------------------------------------------- -------------------------------------------
William D. Ruckelshaus, Director John B. Slaughter, Director
</TABLE>
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director
and/or Officer of Solutia Inc. (the "Company"), a Delaware corporation
with its general offices in the County of St. Louis, Missouri, does
hereby make, constitute and appoint Karl R. Barnickol, Karen L. Knopf,
and Mary B. Cody, or any of them acting alone, to be his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name, place and stead, in any and all
capacities, to sign: (i) the Annual Report on Form 10-K and any
Amendments thereto to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended; (ii) the Registration Statement on Form S-8 and any
Amendments thereto to be filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), covering the registration of
additional securities of the Company to be issued under the Solutia Inc.
Employee Stock Purchase Plan; (iii) the Registration Statement on Form
S-8 and any Amendments thereto to be filed with the Commission under the
Act, covering the registration of additional securities of the Company
to be issued under the Solutia Inc. 1997 Stock-Based Incentive Plan; and
(iv) any Amendments to Registration Statements Nos. 333-34561,
333-34587, 333-34589, 333-34591, 333-34593, 333-34683, 333-35689,
333-47911, 333-51081, 333-74463, and 333-74465, all on Form S-8, which
have previously been filed with the Commission under the Act, covering
the registration of securities of the Company; giving and granting unto
said attorneys full power and authority to do and perform such actions
as fully as he or she might have done or could do if personally present
and executing any of said documents.
Witness my hand this 31st day of January, 2000.
<TABLE>
<C> <C>
- -------------------------------------------- -------------------------------------------
John C. Hunter III, Director, Chairman of Michael E. Miller, Vice Chairman and
the Board, Chief Executive Officer, and Director
President (Principal Executive Officer)
- -------------------------------------------- -------------------------------------------
Robert A. Clausen, Senior Vice President James M. Sullivan, Vice President and
and Chief Financial Officer Controller (Principal Accounting Officer)
(Principal Financial Officer)
- -------------------------------------------- -------------------------------------------
Robert T. Blakely, Director Joan T. Bok, Director
- -------------------------------------------- -------------------------------------------
Paul H. Hatfield, Director Robert H. Jenkins, Director
- -------------------------------------------- -------------------------------------------
Howard M. Love, Director Frank A. Metz, Jr., Director
/s/ Robert G. Potter
- -------------------------------------------- -------------------------------------------
J. Patrick Mulcahy, Director Robert G. Potter, Director
- -------------------------------------------- -------------------------------------------
William D. Ruckelshaus, Director John B. Slaughter, Director
</TABLE>
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That each person whose signature appears below, as a Director
and/or Officer of Solutia Inc. (the "Company"), a Delaware corporation
with its general offices in the County of St. Louis, Missouri, does
hereby make, constitute and appoint Karl R. Barnickol, Karen L. Knopf,
and Mary B. Cody, or any of them acting alone, to be his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name, place and stead, in any and all
capacities, to sign: (i) the Annual Report on Form 10-K and any
Amendments thereto to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934,
as amended; (ii) the Registration Statement on Form S-8 and any
Amendments thereto to be filed with the Commission under the Securities
Act of 1933, as amended (the "Act"), covering the registration of
additional securities of the Company to be issued under the Solutia Inc.
Employee Stock Purchase Plan; (iii) the Registration Statement on Form
S-8 and any Amendments thereto to be filed with the Commission under the
Act, covering the registration of additional securities of the Company
to be issued under the Solutia Inc. 1997 Stock-Based Incentive Plan; and
(iv) any Amendments to Registration Statements Nos. 333-34561,
333-34587, 333-34589, 333-34591, 333-34593, 333-34683, 333-35689,
333-47911, 333-51081, 333-74463, and 333-74465, all on Form S-8, which
have previously been filed with the Commission under the Act, covering
the registration of securities of the Company; giving and granting unto
said attorneys full power and authority to do and perform such actions
as fully as he or she might have done or could do if personally present
and executing any of said documents.
Witness my hand this 15th day of February, 2000.
<TABLE>
<C> <C>
- -------------------------------------------- -------------------------------------------
John C. Hunter III, Director, Chairman of Michael E. Miller, Vice Chairman and
the Board, Chief Executive Officer, and Director
President (Principal Executive Officer)
- -------------------------------------------- -------------------------------------------
Robert A. Clausen, Senior Vice President James M. Sullivan, Vice President and
and Chief Financial Officer Controller (Principal Accounting Officer)
(Principal Financial Officer)
/s/ Joan T. Bok
- -------------------------------------------- -------------------------------------------
Robert T. Blakely, Director Joan T. Bok, Director
- -------------------------------------------- -------------------------------------------
Paul H. Hatfield, Director Robert H. Jenkins, Director
- -------------------------------------------- -------------------------------------------
Howard M. Love, Director Frank A. Metz, Jr., Director
- -------------------------------------------- -------------------------------------------
J. Patrick Mulcahy, Director Robert G. Potter, Director
- -------------------------------------------- -------------------------------------------
William D. Ruckelshaus, Director John B. Slaughter, Director
</TABLE>
<PAGE>
SOLUTIA INC.
CERTIFICATE
I, Karen L. Knopf, Assistant Secretary of Solutia Inc. (the
"Company"), hereby certify that the following is a full, true and
correct copy of a resolution adopted by the Board of Directors of the
Company on February 23, 2000, at which meeting a quorum was present and
acting throughout:
FURTHER RESOLVED, that each officer and director who may be required
to sign and execute the 10-K or any document in connection therewith
(whether for and on behalf of the Company, or as an officer or
director of the Company, or otherwise), be and hereby is
authorized to execute a power of attorney appointing Karl R.
Barnickol and Karen L. Knopf, or either of them acting alone, his
or her true and lawful attorney or attorneys to sign in his or her
name, place and stead in any such capacity such Annual Report on
Form 10-K and any and all amendments thereto and documents in connection
therewith, and to file the same with the Commission or any other
governmental body, each of said attorneys to have power to act with
or without the others, and to have full power and authority to do and
perform, in the name and on behalf of each of said officers and
directors, every act whatsoever which such attorneys, or any one
of them, may deem necessary, appropriate or desirable to be done
in connection therewith as fully and to all intents and purposes
as such officers or directors might or could do in person.
IN WITNESS WHEREOF, I have hereunto set my hand in my official
capacity and affixed the corporate seal of the Company this 1st day of
March, 2000.
/s/ Karen L. Knopf
-------------------------------
Karen L. Knopf
Assistant Secretary
SEAL
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Solutia Inc. and Subsidiaries Statement of Consolidated
Income for the year ended December 31, 1999, and the Statement
of Consolidated Financial Position as of December 31, 1999. Such
information is qualified in its entirety by reference to such
consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 495
<ALLOWANCES> 12
<INVENTORY> 371
<CURRENT-ASSETS> 1,114
<PP&E> 3,695
<DEPRECIATION> 2,379
<TOTAL-ASSETS> 3,770
<CURRENT-LIABILITIES> 1,327
<BONDS> 802
<COMMON> 1
0
0
<OTHER-SE> 81
<TOTAL-LIABILITY-AND-EQUITY> 3,770
<SALES> 2,830
<TOTAL-REVENUES> 2,830
<CGS> 2,178
<TOTAL-COSTS> 2,178
<OTHER-EXPENSES> 358
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 303
<INCOME-TAX> 97
<INCOME-CONTINUING> 206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206
<EPS-BASIC> 1.86
<EPS-DILUTED> 1.80
</TABLE>
