SOLUTIA INC, DEF 14A, 2000-03-09

SOLUTIA INC
DEF 14A, 2000-03-09
CHEMICALS & ALLIED PRODUCTS

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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant /X/

Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted
/ / Definitive Additional Materials by Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12

SOLUTIA INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):

/X/ No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:

- ------------------------------------------------------------------------------

(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:

- ------------------------------------------------------------------------------

(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING
FEE IS CALCULATED AND STATE HOW IT WAS DETERMINED):

- ------------------------------------------------------------------------------

(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:

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(5) TOTAL FEE PAID:

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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******************************************************************
* THIS PROXY MATERIAL IS SENT TO YOU FOR YOUR INFORMATION AS THE *
* HOLDER OF SOLUTIA STOCK OPTIONS. YOU ARE NOT ENTITLED, *
* HOWEVER, TO VOTE ANY OPTIONED SHARES. IF YOU WERE A RECORD *
* HOLDER ON FEBRUARY 28, 2000, AS THE RESULT OF YOUR HAVING *
* PARTIALLY EXERCISED YOUR OPTIONS, YOU WILL RECEIVE A PROXY *
* CARD FOR THOSE SHARES. *
******************************************************************

Solutia [Logo]

575 Maryville Centre Drive
P.O. Box 66760
St. Louis, MO 63166-6760

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

DATE: Wednesday, April 26, 2000

TIME: 1:15 p.m., Central Daylight Time

PLACE: St. Louis Marriott West Hotel
660 Maryville Centre Drive
St. Louis, Missouri 63141

MATTERS TO BE VOTED ON: * Election of four directors
* Approval of the Solutia Inc. 2000 Stock-Based
Incentive Plan
* Approval of the Solutia Inc. Annual Incentive Plan
* Approval of the Solutia Inc. Long-Term Incentive
Plan
* Ratification of the appointment of Deloitte &
Touche LLP as principal independent auditors for
the year 2000
* Any other matters if properly raised

Only stockholders of record at the close of business on
February 28, 2000, may vote at the meeting. Your vote is
important. Whether you plan to attend the annual meeting or
not, PLEASE CAST YOUR VOTE BY PHONE OR ON THE INTERNET, OR
COMPLETE, DATE, AND SIGN YOUR PROXY CARD AND RETURN IT IN THE
ENVELOPE PROVIDED. If you attend the meeting and prefer to
vote in person, you may do so even if you have previously
voted by proxy.

If you wish to attend the annual meeting, you will need to
present your admission ticket at the door. Your admission
ticket and directions to the annual meeting are printed on the
back cover of this proxy statement.

/s/ Karl R. Barnickol

Karl R. Barnickol
Secretary

March 9, 2000

<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE NO.
--------
<S> <C>
Information About the Annual Meeting........................ 1

Election of Directors (Proxy Item No. 1).................... 3
Structure of the Board................................. 3
Nominees For a Three-Year Term That Will Expire in
2003................................................. 4
Nominee For a Two-Year Term That Will Expire in 2002... 5
Directors Whose Terms Will Expire in 2001.............. 5
Directors Whose Terms Will Expire in 2002.............. 6
Board Meetings and Committees.......................... 7
Compensation of Directors.............................. 8

Ownership of Solutia Common Stock........................... 9
Ownership by Directors and Executive Officers.......... 9
Ownership by Others.................................... 10

Compensation of Executive Officers and Other Information.... 11
Report of the Executive Compensation and Development
Committee............................................ 11
Summary Compensation Table............................. 14
Option Grants in 1999.................................. 15
Aggregated Option Exercises in 1999 and Year-End Option
Values............................................... 16
Pension Plans.......................................... 17
Change-of-Control Agreements........................... 17
Stock Price Performance Graph.......................... 18
Relationships and Transactions......................... 19

Approval of the Solutia Inc. 2000 Stock-Based Incentive Plan
(Proxy Item No. 2)........................................ 19

Approval of the Solutia Inc. Annual and Long-Term Incentive
Plans (Proxy Items Nos. 3 and 4).......................... 23

Ratification of Independent Auditors (Proxy Item No. 5)..... 24

Additional Information...................................... 25
Information About Stockholder Proposals................ 25
Multiple Copies of Annual Report to Stockholders....... 25

Appendix A--Solutia Inc. 2000 Stock-Based Incentive Plan.... A-1

Appendix B--Solutia Inc. Annual Incentive Plan.............. B-1

Appendix C--Solutia Inc. Long-Term Incentive Plan........... C-1
</TABLE>

PROXY STATEMENT FOR THE SOLUTIA INC.
2000 ANNUAL MEETING OF STOCKHOLDERS

INFORMATION ABOUT THE ANNUAL MEETING

WHY AM I RECEIVING THESE PROXY MATERIALS?

Solutia's Board of Directors is soliciting proxies to be voted at
the 2000 Annual Meeting of Stockholders. This proxy statement
includes information about the issues to be voted upon at the
meeting.

On March 9, 2000, we began mailing these proxy materials to all
stockholders of record at the close of business on February 28, 2000.
On this date, there were 109,459,778 shares of Solutia common stock
outstanding. Each share is entitled to one vote on each matter
properly brought before the annual meeting.

As required by Delaware law, a list of stockholders entitled to
vote at the annual meeting will be available at the St. Louis
Marriott West Hotel on April 26, 2000, and for 10 days prior to
the meeting, during normal business hours, at Solutia's offices,
575 Maryville Centre Drive, St. Louis, Missouri 63141.

HOW MANY VOTES DO I HAVE?

You may vote all shares of Solutia common stock that you owned at
the close of business on February 28, 2000, the record date.
These shares include:

* Shares held directly in your name as the "stockholder of
record";

* Shares held for you as the beneficial owner through a
broker, bank, or other nominee in "street name"; and

* Shares credited to your account in the Solutia Inc. Savings
and Investment Plan or the Monsanto Savings and Investment
Plan.

IF I AM A STOCKHOLDER OF RECORD, HOW CAN I VOTE MY SHARES?

You can vote by proxy or in person.

HOW DO I VOTE BY PROXY?

If you are a stockholder of record, you may vote your proxy by
telephone, Internet, or mail. Our telephone and Internet voting
procedures are designed to authenticate stockholders by using
individual control numbers. Voting by telephone or Internet will
help Solutia reduce costs.

* Voting Your Proxy by Telephone

In the U.S. and Canada, you can vote your shares by
telephone by calling the toll-free telephone number on your proxy
card. Telephone voting is available 24 hours a day, 7 days a
week up through the day before the meeting. Easy-to-follow
voice prompts allow you to vote your shares and confirm that
your instructions have been properly recorded. If you vote
by telephone, you do not need to return your proxy card.

* Voting Your Proxy By Internet

You can also choose to vote via the Internet. The web site
for Internet voting is on your proxy card. Internet voting is
available 24 hours a day, 7 days a week up through the day
before the meeting. If you vote via the Internet, you do not
need to return your proxy card.

* Voting Your Proxy By Mail

If you choose to vote by mail, simply mark your proxy card, date
and sign it, and return it to First Chicago Trust Company, a
division of EquiServe, in the postage-paid envelope
provided.

If you vote by proxy using any of these three methods, the
persons named on the card (your "proxies") will vote your shares
in the manner you indicate. You may specify whether your shares
should be voted for all, some, or none of the nominees for
director and whether your shares should be voted for or against
the other proposals. If you vote by telephone or Internet and
choose to vote with the recommendation of Solutia's Board of
Directors, or if you vote by mail, sign your proxy card, and do
not indicate specific choices, your shares will be voted:

* "FOR" the election of all four nominees for director;

* "FOR" approval of the Solutia Inc. 2000 Stock-Based
Incentive Plan, the Solutia Inc. Annual Incentive Plan, and
the Solutia Inc. Long-Term Incentive Plan; and

* "FOR" ratification of the appointment of the principal
independent auditors for 2000.

If any other matter is presented, your proxies will vote in
accordance with their best judgment. At the time this proxy
statement went to press, we knew of no matters that needed to be
acted on at the annual meeting other than those discussed in this
proxy statement.

If you wish to give a proxy to someone other than the persons
named on the enclosed proxy card, you may strike out the names
appearing on the card and write in the name of any other person,
sign the proxy, and deliver it to the person whose name has been
substituted.

MAY I REVOKE MY PROXY?

If you give a proxy, you may revoke it in any one of three ways:

* Submit a valid, later-dated proxy;

* Notify Solutia's Secretary in writing before the annual
meeting that you have revoked your proxy; or

* Vote in person at the annual meeting.

HOW DO I VOTE IN PERSON?

If you are a stockholder of record, you may cast your vote in
person at the annual meeting. Please bring your admission ticket,
which can be found on the back cover of this proxy statement.

IF I HOLD SHARES IN STREET NAME, HOW CAN I VOTE MY SHARES?

You can submit voting instructions to your broker or nominee. In
most instances, you will be able to do this over the Internet, by
telephone, or by mail. Please refer to the voting instruction
card included in these materials by your broker or nominee.

HOW DO I VOTE MY SHARES HELD IN SOLUTIA'S DIVIDEND REINVESTMENT
PLAN?

If you are a participant in the Dividend Reinvestment Plan for
stockholders of Solutia that is administered by First Chicago
Trust Company, your proxy will also serve as an instruction to
vote the shares held under this plan in the manner indicated on
the proxy. If your proxy is not received, your shares held in the
Dividend Reinvestment Plan will not be voted.

HOW DO I VOTE MY SOLUTIA COMMON STOCK HELD IN SIP?

If you are both a registered stockholder of Solutia and a
participant in either the Solutia Inc. Savings and Investment
Plan or the Monsanto Savings and Investment Plan, you will
receive a single proxy card that covers shares of Solutia common
stock credited to your plan account as well as shares of record
registered in exactly the same name. Accordingly, your proxy card
also serves as a voting instruction for the trustee of the

plan in which you are a participant. If your plan account is not
carried in exactly the same name as your shares of record, you
will receive separate proxy cards for individual and plan
holdings. If you own shares through one of these plans and you do
not return your proxy by Friday, April 21, 2000, the trustee will
vote your shares in the same proportion as the shares that are
voted by the other participants in the plan. The trustee will
also vote unallocated shares of Solutia common stock held in the
plan in direct proportion to the voting of allocated shares in
the plan for which voting instructions have been received unless
doing so would be inconsistent with the trustee's duties.

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?

<TABLE>
<S> <C>
Election of Four Directors The nominees who receive the most votes for the available
(Proxy Item No. 1) positions will be elected. If you do not vote for a
particular nominee, or you indicate "withhold authority to
vote" for a particular nominee on your proxy card, your vote
will not count either "for" or "against" the nominee.

Approval of 2000 Stock-Based Incentive The affirmative vote of a majority of the shares present in
Plan, Annual Incentive Plan, and person or by proxy at the annual meeting is required to
Long-Term Incentive Plan (Proxy Items approve each of these plans. If you "abstain" from voting,
Nos. 2, 3, and 4) it has the same effect as if you voted "against" these
proposals.

Ratification of Appointment of The affirmative vote of a majority of the shares present in
Independent Auditors (Proxy Item No. 5) person or by proxy at the annual meeting is required to
ratify the appointment of the principal independent auditors
for 2000. If you "abstain" from voting, it has the same
effect as if you voted "against" this proposal.
</TABLE>

If a broker indicates on its proxy that it does not have
authority to vote certain shares held in "street name" on
particular proposals, the shares not voted ("broker non-votes")
will have the same effect as a vote against these proposals.
Broker non-votes occur when brokers do not have discretionary
voting authority on certain proposals under the rules of the
New York Stock Exchange and the beneficial owner has not
instructed the broker how to vote on these proposals.

WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?

Solutia is paying the cost of preparing, printing, and mailing
these proxy materials. We will reimburse banks, brokerage firms,
and others for their reasonable expenses in forwarding proxy
materials to beneficial owners and obtaining their instructions.
Solutia has retained Georgeson Shareholder Communications Inc. to
assist with the solicitation of proxies for a fee not to exceed
$17,500 plus reimbursement of out-of-pocket expenses. A few
officers and employees of Solutia may also participate in the
solicitation, without additional compensation.

HOW CAN I GAIN ADMITTANCE TO THE ANNUAL MEETING?

If you plan to attend the annual meeting, you will need to bring
your admission ticket. Stockholders who do not have admission
tickets will be admitted upon verification of ownership at the
door. You will find an admission ticket and directions to the
St. Louis Marriott West Hotel on the back cover of this proxy
statement.

ELECTION OF DIRECTORS (PROXY ITEM NO. 1)

STRUCTURE OF THE BOARD

Our Restated Certificate of Incorporation and by-laws provide for
a Board of Directors that is divided into three classes as equal
in size as possible. The classes have three-year terms, and the
term of one class expires each year in rotation at that year's
annual meeting. Vacancies on the board may be filled by persons
elected by a majority of the remaining directors, or, at the
direction of the remaining directors, by Solutia's

stockholders. A director elected by the board to fill a vacancy,
or a new directorship created by an increase in the size of the
board, serves for the remainder of the full term of the class of
directors in which the vacancy or newly created directorship
occurred. During 1999, the Board of Directors increased the size
of the board from ten to twelve members, and elected Mr. Mulcahy
to fill the newly created directorship in the class of 2002 and
Mr. Miller to fill the newly created directorship in the class of
2001.

Solutia's Board of Directors has nominated four individuals, all of
whom are currently directors of Solutia, for election as directors
at the 2000 Annual Meeting: Mr. Robert T. Blakely, Mr. Paul H. Hatfield,
Mr. Robert H. Jenkins, and Mr. Frank A. Metz, Jr. All but Mr. Jenkins
were previously elected by Monsanto Company, acting as sole stockholder
of Solutia, prior to the spinoff of Solutia by Monsanto on
September 1, 1997. Mr. Jenkins was elected by Solutia's Board of
Directors shortly after the spinoff.

Mr. Blakely, Mr. Jenkins, and Mr. Metz have each been nominated
for a three-year term. Mr. Hatfield has been nominated to fill a
vacancy with a two-year term. This is to keep the three classes
of directors as equal in size as possible following the
retirement of Mrs. Joan T. Bok and Mr. Howard M. Love. Mrs. Bok
and Mr. Love, both of whom currently serve in the class of
directors whose term expires in 2002, are retiring at the 2000
Annual Meeting under Solutia's retirement policy for directors.
This policy calls for directors to retire at the annual meeting
following their 70th birthday. We will greatly miss the advice
and experience of both these directors.

The Board of Directors has reduced its size, effective at the
2000 Annual Meeting, from twelve to ten members to reflect the
retirement of Mrs. Bok and Mr. Love. Six directors will continue
in office for the terms shown below or until their earlier death,
resignation, or removal.

The board is not aware that any nominee named in this proxy
statement will be unwilling or unable to serve as a director. If,
however, a nominee is unavailable for election, your proxy
authorizes us to vote for a replacement nominee if the board
names one. As an alternative, the board may reduce the number of
directors to be elected at the meeting.

NOMINEES FOR A THREE-YEAR TERM THAT WILL EXPIRE IN 2003

<TABLE>
<S> <C>
ROBERT T. BLAKELY PRINCIPAL OCCUPATION: EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, LYONDELL CHEMICAL COMPANY
FIRST BECAME DIRECTOR: 1997
AGE: 58

[PHOTO] Mr. Blakely has been Executive Vice President and Chief
Financial Officer of Lyondell Chemical Company since 1999.
He was an Executive Vice President of Tenneco Inc. and Chief
Financial Officer from 1981 to 1999. He is a Director of
Vlasic Foods International Inc. He also serves as a Trustee
of Cornell University.

ROBERT H. JENKINS PRINCIPAL OCCUPATION: RETIRED CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER, SUNDSTRAND CORPORATION
FIRST BECAME DIRECTOR: 1997
AGE: 57

[PHOTO] Mr. Jenkins was Chairman of the Board and Chief Executive
Officer of Sundstrand Corporation from 1997 to 1999. He was
President and Chief Executive Officer of Sundstrand
Corporation from 1995 to 1997 and Executive Vice President
of Illinois Tool Works, Inc. from 1990 to 1995. Mr. Jenkins
is a Director of AK Steel Holdings Corporation, CLARCOR
Inc., Cordant Technologies, Pella Corporation, and Sentry
Insurance.

FRANK A. METZ, JR. PRINCIPAL OCCUPATION: RETIRED SENIOR VICE PRESIDENT, FINANCE
AND PLANNING, AND CHIEF FINANCIAL OFFICER, INTERNATIONAL
BUSINESS MACHINES CORPORATION
FIRST BECAME DIRECTOR: 1997
AGE: 66

[PHOTO] Mr. Metz was Senior Vice President, Finance and Planning,
and Chief Financial Officer of International Business
Machines Corporation from 1986 to 1993 and a Director from
1991 to 1993. Mr. Metz is a Director of Allegheny Energy, Inc.

<CAPTION>
NOMINEE FOR A TWO-YEAR TERM THAT WILL EXPIRE IN 2002

<S> <C>
PAUL H. HATFIELD PRINCIPAL OCCUPATION: PRINCIPAL, HATFIELD CAPITAL GROUP
FIRST BECAME DIRECTOR: 1997
AGE: 64

[PHOTO] Mr. Hatfield has been a Principal of Hatfield Capital Group
since 1997. He was Chairman of the Board, President, and
Chief Executive Officer of Petrolite Corporation from 1995
to 1997. From 1987 to 1995, Mr. Hatfield was Vice President
of Ralston Purina Company and Chief Executive Officer of
Protein Technologies International, Inc., a subsidiary of
Ralston Purina Company. Mr. Hatfield is a Director of
Penford Corporation.

<CAPTION>
-------------------------------------------------------------------
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THESE NOMINEES.
-------------------------------------------------------------------

DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001

<S> <C>
JOHN C. HUNTER III PRINCIPAL OCCUPATION: CHAIRMAN, PRESIDENT, AND CHIEF
EXECUTIVE OFFICER, SOLUTIA INC.
FIRST BECAME DIRECTOR: 1997
AGE: 53

[PHOTO] Mr. Hunter has been Chairman and Chief Executive Officer of
Solutia Inc. since 1999 and President since 1997. He was
Chief Operating Officer from 1997 to 1999. From 1995 to
1997, he was President of the Fibers Business Unit of
Monsanto Company. From 1993 to 1995, he served as Vice
President and General Manager of the Fibers Division and
Asia-Pacific region of the Chemical Group of Monsanto
Company. Mr. Hunter is a Director of Penford Corporation. He
is also on the Board of Directors of Missouri Baptist
Hospital.

MICHAEL E. MILLER PRINCIPAL OCCUPATION: VICE CHAIRMAN AND CHIEF OPERATING
OFFICER, SOLUTIA INC.
FIRST BECAME DIRECTOR: 1999
AGE: 58

[PHOTO] Mr. Miller has been Vice Chairman of Solutia Inc. since 1998
and Chief Operating Officer since 1999. From 1997 to 1998,
he served as a Senior Vice President. He was an Advisory
Director from 1997 to 1999. From 1995 to 1997, Mr. Miller
was President of the Specialty Products Business Unit of
Monsanto Company, and from 1993 to 1995, he was Group Vice
President of Industrial Products for the Chemical Group of
Monsanto Company. Mr. Miller is a Director of Watlow
Electric Manufacturing Company and Alpha Technologies. He is
also on the advisory board of the Emerson Electric Center
for Business Ethics, St. Louis University and is a Trustee
of Fontbonne College.

WILLIAM D. RUCKELSHAUS PRINCIPAL OCCUPATION: STRATEGIC PARTNER, MADRONA VENTURE FUND
FIRST BECAME DIRECTOR: 1997
AGE: 67

[PHOTO] Mr. Ruckelshaus has been Strategic Partner, Madrona Venture
Fund since 1999. He has also been a Principal of Madrona
Investment Group L.L.C. since 1996. From 1988 to 1997,
Mr. Ruckelshaus was Chairman of Browning-Ferris Industries,
Inc. and Chief Executive Officer from 1988 to 1995. He was
Of Counsel to Perkins Coie from 1985 to 1988. He served as
Administrator of the Environmental Protection Agency from
1983 to 1985. Mr. Ruckelshaus is a Director of Coinstar,
Inc.; Cummins Engine Co., Inc.; Monsanto Company; Nordstrom,
Inc.; and Weyerhaeuser Company.

JOHN B. SLAUGHTER PRINCIPAL OCCUPATION: IRVING R. MELBO PROFESSOR OF
LEADERSHIP IN EDUCATION, UNIVERSITY OF SOUTHERN CALIFORNIA
FIRST BECAME DIRECTOR: 1997
AGE: 65

[PHOTO] Dr. Slaughter has been the Irving R. Melbo Professor of
Leadership in Education at the University of Southern
California since 1999. He is also President Emeritus of
Occidental College where he served as President from 1988 to
1999. He was the Director of the National Science Foundation
from 1980 to 1982. Dr. Slaughter is a Director of Atlantic
Richfield Company, Avery Dennison Corporation, International
Business Machines Corporation, and Northrop Grumman Corp. He
is a Fellow of the American Academy of Arts and Sciences,
the American Association for the Advancement of Science, and
the Institute of Electrical and Electronic Engineers. He is
also a member of the National Academy of Engineering.

<CAPTION>
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2002

<S> <C>
J. PATRICK MULCAHY PRINCIPAL OCCUPATION: CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
EVEREADY BATTERY COMPANY INC. AND VICE PRESIDENT,
RALSTON PURINA COMPANY
FIRST BECAME DIRECTOR: 1999
AGE: 56

[PHOTO] Mr. Mulcahy has been Chairman and Chief Executive Officer of
Eveready Battery Company Inc., a subsidiary of Ralston
Purina Company, since 1987. He has been a corporate officer
of Ralston Purina Company since 1984. He served as Co-Chief
Executive Officer and Co-President of Ralston Purina Company
from 1997 to 1999. Mr. Mulcahy is a Director of Ralston
Purina Company.

ROBERT G. POTTER PRINCIPAL OCCUPATION: RETIRED CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, SOLUTIA INC.
FIRST BECAME DIRECTOR: 1997
AGE: 60

[PHOTO] Mr. Potter was Chairman and Chief Executive Officer of
Solutia Inc. from 1997 to 1999. He served as chief executive
of the chemical businesses of Monsanto Company from 1986 to
1997. He was also an Executive Vice President of Monsanto
Company from 1990 to 1997 and an Advisory Director of
Monsanto Company from 1986 to 1997. Mr. Potter is a Director
of Southdown Inc. and Stepan Company.
</TABLE>

BOARD MEETINGS AND COMMITTEES

Our Board of Directors met seven times in 1999. In addition to
meetings of the full board, directors attended meetings of board
committees. Each director attended at least 91% of the aggregate
board meetings and meetings of committees of which he or she is a
member. A description of each committee and its current
membership follows.

Audit and Finance Committee

Members: Mr. Metz, Chairman; Messrs. Blakely and Mulcahy, and
Dr. Slaughter

The Audit and Finance Committee, composed of non-employee
directors, met four times in 1999. The members are all
independent as defined in the recently adopted New York Stock
Exchange rule on audit committee membership. 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. The internal and principal
independent auditors meet with this committee, with and without
management representatives present, to discuss the results of
their examination, the adequacy of Solutia'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.

Executive Compensation and Development Committee

Members: Mr. Hatfield, Chairman; Messrs. Love and Metz

The Executive Compensation and Development Committee, composed of
non-employee directors, met six times in 1999. The committee
recommends to the board the establishment and modification of
Solutia's management incentive plans. The committee makes grants
and awards under these plans to Solutia's senior management
(including its executive officers) and administers and interprets
these plans. The committee has delegated authority to a
compensation committee composed of senior managers to make grants
and awards under the incentive plans to employees other than
senior management. The Executive Compensation and Development
Committee also has authority to approve the establishment,
modification, and termination of other executive compensation
programs and agreements. In addition, the committee reviews plans
for executive succession and determines the salaries of Solutia's
senior management (including its executive officers).

Governance Committee

Members: Mr. Ruckelshaus, Chairman; Mrs. Bok, Messrs. Jenkins and
Potter, and Dr. Slaughter

The Governance Committee, composed of non-employee directors, met
four times in 1999. The committee serves as a nominating
committee to consider candidates for the board. As such, it
approved the slate of director nominees in this proxy statement
for submission to the board. The committee develops internal
criteria for the selection of directors. In performing these
responsibilities, the committee consults with the Chairman of the
Board. The committee will consider candidates for election as
director whose nomination is recommended by stockholders. Any
stockholder wishing to make such a recommendation should submit
the nominee's name, together with the nominee's qualifications
and consent to being considered as a nominee, in writing by
year-end to Solutia's Secretary.

Each year the Governance Committee evaluates the performance of
the board to ensure that the directors are fulfilling their
responsibilities in a manner that effectively serves the
interests of Solutia's stockholders. As part of this annual
evaluation, the committee also reconsiders the principles and
procedures that it has developed for the board. The Governance
Committee also regularly reviews and monitors Solutia's
performance as it affects employees, communities, and the
environment.

COMPENSATION OF DIRECTORS

Directors who are Solutia employees do not receive payment for
their services as directors.

The following table displays all components of compensation for
non-employee directors:

<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Form of Compensation Amount of Compensation
----------------------------------------------------------------------------
<S> <C>
Annual Board Retainer<F*> $50,000
----------------------------------------------------------------------------
Annual Retainer for Committee
Chairman $5,000
----------------------------------------------------------------------------
Committee Attendance Fee
(each meeting) $1,000
----------------------------------------------------------------------------
Initial Option Grant option on 8,000 shares of company
(upon first election to Board) common stock
----------------------------------------------------------------------------
option on 2,000 shares of company
Annual Option Grant<F**> common stock
----------------------------------------------------------------------------

<FN>
<F*> At least half of the annual retainer is credited to the
director's deferred stock account in quarterly installments
and is paid out in Solutia common stock following the
termination of the director's service on the board. Each
non-employee director may elect to receive the other half of
the annual retainer in cash or to defer all or a part into
the deferred stock account, an interest-bearing cash
account, or both.

<F**> The annual option grant is normally made on the date of the
annual meeting of stockholders to newly elected directors
and those directors who are continuing in office. The annual
option grant for a director's first year is prorated if the
director is elected at a time other than the date of the
annual meeting of stockholders. The exercise price of these
non-qualified stock options is equal to the fair market
value of Solutia common stock on the date of the grant. The
stock options generally become exercisable in three equal
annual installments. The stock options have a term of ten
years but terminate two years after a director's board
service ends for any reason, if earlier.
</TABLE>

Non-employee directors received options as follows in 1999:

<TABLE>
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Shares Exercise
Director Date Under Option Price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mrs. Bok, Messrs. Blakely, Hatfield, 4/28/99 2,000 shares $22.907
Jenkins, Love, Metz, and
Ruckelshaus, and Dr. Slaughter
- -----------------------------------------------------------------------------------------------------------
Mr. Mulcahy 7/28/99 9,500 shares $21.063
- -----------------------------------------------------------------------------------------------------------
Mr. Potter 12/1/99 8,833 shares $14.938
- -----------------------------------------------------------------------------------------------------------
</TABLE>

Non-employee directors do not have a retirement plan, nor do they
participate in Solutia's benefit plans. They are, however,
covered under Solutia's business travel accident insurance policy
while traveling on Solutia's business.

Because non-employee directors are required to take at least half
of their annual retainer in the form of deferred common stock,
they will have an ever increasing stake in Solutia. Therefore,
the board has not considered it necessary to adopt a stock
ownership requirement for non-employee directors.

OWNERSHIP OF SOLUTIA COMMON STOCK

OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

The following table shows Solutia common stock owned beneficially
by Solutia's directors and executive officers, including deferred
shares credited to the account of each non-employee director, as
of December 31, 1999. In general, "beneficial ownership" includes
those shares a person has the power to vote, or the power to
transfer, and stock options that are exercisable currently or
become exercisable within 60 days. Except as otherwise noted,
each person has sole voting and investment power over his or her
shares.

<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Underlying
Shares of Common Stock Options Exercisable
Name Beneficially Owned <Fa><Fb> Within 60 Days <Fc> Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Karl R. Barnickol 58,907<Fd> 284,159 343,066
- ----------------------------------------------------------------------------------------------------------------
Robert T. Blakely 2,664 6,888 9,552
- ----------------------------------------------------------------------------------------------------------------
Joan T. Bok 5,266 6,888 12,154
- ----------------------------------------------------------------------------------------------------------------
Robert A. Clausen 43,270 259,237 302,507
- ----------------------------------------------------------------------------------------------------------------
John J. Ferguson 23,075 256,687 279,762
- ----------------------------------------------------------------------------------------------------------------
Paul H. Hatfield 12,723 6,888 19,611
- ----------------------------------------------------------------------------------------------------------------
John C. Hunter III 85,542 362,614 448,156
- ----------------------------------------------------------------------------------------------------------------
Robert H. Jenkins 5,493<Fe> 6,888 12,381
- ----------------------------------------------------------------------------------------------------------------
Howard M. Love 17,590<Ff> 6,888 24,478
- ----------------------------------------------------------------------------------------------------------------
Frank A. Metz, Jr. 4,446 6,888 11,334
- ----------------------------------------------------------------------------------------------------------------
Michael E. Miller 56,572<Fg> 404,408 460,980
- ----------------------------------------------------------------------------------------------------------------
J. Patrick Mulcahy 2,533 -- 2,533
- ----------------------------------------------------------------------------------------------------------------
Robert G. Potter 214,204<Fh> 1,138,734 1,352,938
- ----------------------------------------------------------------------------------------------------------------
William D. Ruckelshaus 8,245<Fi> 6,888 15,133
- ----------------------------------------------------------------------------------------------------------------
John B. Slaughter 4,464<Fj> 6,888 11,352
- ----------------------------------------------------------------------------------------------------------------
All directors and executive officers
(25 persons) 652,925<Fk> 3,534,732 4,187,657
- ----------------------------------------------------------------------------------------------------------------

<FN>
<Fa> The number of shares shown includes shares held under the
Solutia Inc. Savings and Investment Plan ("SIP"):
Mr. Hunter, 28,388; Mr. Barnickol, 29,866; Mr. Clausen,
3,140; Mr. Ferguson, 8,825; Mr. Miller, 11,715;
Mr. Potter, 68,623; and directors and executive officers as
a group, 215,963. Executive officers have sole discretion
over voting shares held under SIP and, within limitations
provided by SIP, sole discretion over investment of shares.
Shares are voted by the trustees of SIP in accordance with
instructions from participants. If the trustees do not
receive instructions as to the voting of particular shares,
the shares are voted in proportion to instructions actually
received from other participants in SIP.

<Fb> The number of shares shown includes deferred shares credited
to the account of each non-employee director, as follows:
Mr. Blakely, 2,664 shares; Mrs. Bok, 2,664 shares;
Mr. Hatfield, 5,323 shares; Mr. Jenkins, 5,323 shares;
Mr. Love, 2,664 shares; Mr. Metz, 2,664 shares;
Mr. Mulcahy, 1,533 shares; Mr. Potter, 278 shares;
Mr. Ruckelshaus, 5,323 shares; and Dr. Slaughter, 2,664
shares. As noted under "Compensation of Directors" on page
8, a minimum of half of a non-employee director's annual
retainer is credited to the director's deferred stock
account and is paid in stock as soon as practicable
following the termination of the director's service on the
board. The non-employee directors have no current voting or
investment power over these deferred shares.

<Fc> The shares shown represent stock options granted under
Solutia's incentive plans, including stock options resulting
from the conversion of Monsanto Company stock options at the
time of the spinoff.

<Fd> The number of shares shown for Mr. Barnickol includes 1,000
shares of Solutia restricted stock received in the spinoff
as a dividend on shares of Monsanto restricted stock that
Mr. Barnickol held under a Monsanto incentive plan. With
respect to these shares, Mr. Barnickol had sole voting power
and no current investment power. The number of shares shown
for Mr. Barnickol also includes 1,778 shares owned jointly
by Mr. Barnickol and his wife.

<Fe> The number of shares shown for Mr. Jenkins includes 170
shares owned jointly by Mr. Jenkins and his wife.

<Ff> The number of shares shown for Mr. Love includes 1,200
shares held in trust in which Mr. Love has an income
interest. Mr. Love expressly disclaims beneficial ownership
of these shares.

<Fg> The number of shares shown for Mr. Miller includes 44,856
shares with respect to which Mr. Miller shares voting and
investment power.

<Fh> The number of shares shown for Mr. Potter includes 6,520
shares owned by Mr. Potter's wife. Mr. Potter expressly
disclaims beneficial ownership of these shares.

<Fi> The number of shares shown for Mr. Ruckelshaus includes 300
shares of Solutia restricted stock received in the spinoff
by Mr. Ruckelshaus as a dividend on the stock-based portion
of his non-employee director annual retainer from Monsanto
Company. Mr. Ruckelshaus has sole voting power and no
current investment power over these shares. The number of
shares shown for Mr. Ruckelshaus also includes 200 shares
owned jointly by Mr. Ruckelshaus and his wife.

<Fj> The number of shares shown for Dr. Slaughter includes
137 shares owned by Dr. Slaughter's wife. Dr. Slaughter
expressly disclaims beneficial ownership of these shares.

<Fk> The number of shares shown for all directors and executive
officers as a group includes:

* 1,526 shares owned by members of the households of
executive officers not named above;

* 2,466 shares over which an executive officer not named
above shares investment and voting power; and

* 2,825 shares under contract through Solutia's Employee
Stock Purchase Plan.
</TABLE>

The total share holdings reported above for all directors and
executive officers as a group equal approximately 3.82% of the
number of shares of Solutia common stock outstanding on
December 31, 1999. Mr. Potter's total share holdings equal
approximately 1.22%.

OWNERSHIP BY OTHERS

The following table shows all persons or entities that Solutia
knows were "beneficial owners" of more than five percent of
Solutia common stock on December 31, 1999.

<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Percent
Name and Address of Beneficial Owner Company Common Stock of Class
------------------------------------ ----------------------- --------
<S> <C> <C>
FMR Corp. 7,764,704<Fa> 7.049%
82 Devonshire Street
Boston, Massachusetts 02109

<FN>
<Fa> This information is based on a Schedule 13G filed with the
Securities and Exchange Commission by FMR Corp. on behalf of
itself, two wholly-owned subsidiaries of FMR, and certain
FMR shareholders. Fidelity Management & Research Company,
one of these subsidiaries, is the beneficial owner of
7,402,020 of these shares (6.72% of Solutia's common stock).
This subsidiary, and FMR through its control of this
subsidiary, each have sole power to dispose of 7,402,020
shares but no sole or shared power to vote or direct the
voting of these shares. Through its control of Fidelity
Management Trust Company, FMR has sole power to dispose of
the remaining 362,684 shares and sole power to vote or
direct the voting of 89,184 shares.
</TABLE>

COMPENSATION OF EXECUTIVE OFFICERS AND OTHER INFORMATION

REPORT OF THE EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE

The Executive Compensation and Development Committee of the Board
of Directors is comprised of three directors who are not, and
have never been, employees of Solutia. The committee establishes
compensation policy for Solutia and administers the compensation
program for Solutia's senior management, including its executive
officers and the other members of Solutia's enterprise leadership
team.

The committee adopted Solutia's compensation program for 1997
through 1999 at the time of the spinoff of Solutia by Monsanto
Company in 1997. Prior to the spinoff, Solutia engaged the
services of a nationally recognized compensation consulting firm
to assist in developing Solutia's overall compensation structure
and in determining an appropriate and effective compensation
program for Solutia's executive officers. The consulting firm
reviewed historical pay practices for Monsanto's chemical
businesses. It also provided information on base salary levels,
annual bonus levels, and long-term incentives at a broad group of
companies (the "survey group"). The survey group included
companies represented in the S&P specialty and diversified
chemicals indices as well as other industrial companies. Based on
this comparative pay data, financial parameters that the
committee considered critical to the achievement of Solutia's
success, and the compensation-related objectives that the
committee wished to foster, the committee adopted the program
that is described below.

Policies and Objectives

The committee's objectives reflected in Solutia's compensation
programs, including its executive compensation program for 1997
through 1999, were to:

* achieve a successful "one enterprise" culture focused on
stockholder value and profitable long-term growth;

* recognize business unit and site accomplishments;

* focus and reward employees based upon three key measures of
Solutia's success: cash management, earnings growth, and
stock price; and

* build an ownership mentality throughout Solutia.

The three key components of Solutia's executive compensation
program are:

* base salary;

* annual incentive compensation; and

* long-term incentive compensation.

The intention is to maintain base salaries for the executives
named in the Summary Compensation Table and other members of the
enterprise leadership team at approximately the 50th percentile
of companies of comparable size in the survey group. Annual
incentive awards are also targeted at about the 50th percentile.
Long-term incentive compensation for 1997 through 1999 has been
pegged at approximately the 75th percentile.

Annual Incentive Program

The annual incentive program for the enterprise leadership team,
including the chief executive officer, and all other management
level employees provides for awards to be determined shortly
after the end of the year being measured. The annual plan in
effect in 1999 provided that:

* threshold levels of free cash flow and earnings per share
had to be attained in order for the plan to be funded;

* actual awards would depend principally upon achieving free
cash flow and earnings per share targets set at the
beginning of 1999; and

* the committee had discretion to adjust awards based on
business results measured against targets and an
individual's personal performance as measured against his
or her particular responsibilities.

Long-Term Incentive Program

For the executive officers, including the chief executive
officer, and other members of the enterprise leadership team, the
1998-1999 long-term incentive program had two components:

* a long-term incentive opportunity based upon cumulative
enterprise results for the 1998-1999 performance period;
and

* a non-qualified stock option grant.

Together these two components were designed to result in
long-term compensation at the 75th percentile of companies of
comparable size in the survey group, assuming performance at
target levels.

1998-1999 LONG-TERM INCENTIVE OPPORTUNITY. This opportunity was
designed to focus senior management on the financial performance
required during this critical post-spinoff period. Awards
depended principally upon achieving cumulative earnings per share
and free cash flow targets for the two-year period 1998-1999.
These cumulative targets were more aggressive than the earnings
per share and free cash flow targets established for the annual
incentive plan. Threshold levels of cumulative earnings per share
and cumulative free cash flow had to be achieved for awards to be
earned. The committee had discretion to adjust awards. Awards
were to be paid by the end of March 2000 in the form of
restricted stock, rather than cash, to discourage senior
management from focusing solely on the two-year performance
period at the expense of the longer term prospects of Solutia.
The restricted stock would be forfeitable if the executive left
Solutia voluntarily, other than as a result of retirement, before
the restrictions lapsed.

STOCK OPTIONS. In September 1999, approximately 800 management
level employees received option grants. The size of the grant to
each employee was based upon a table that reflects the employee's
level of responsibility. The committee approved this table in
1997 after considering data from the survey group and the
committee's policy of targeting total long-term compensation at
the 75th percentile.

The stock options granted in September 1999 have a ten-year term
and an exercise price equal to $20.594, the fair market value of
a share of Solutia common stock on the option grant date. The
options granted to members of the enterprise leadership team
become exercisable on the earlier of the achievement of four
pre-established increases in the fair market value of Solutia's
common stock or on the ninth anniversary of the option grant
date. Options granted to other management level employees
generally become exercisable in thirds on each of the first three
anniversaries of the stock option grant date.

Compensation for 1999

Effective May 1, 1999, the committee increased Mr. Hunter's base
salary to an annual rate of $525,000, in recognition of the new
responsibilities that Mr. Hunter assumed as chief executive
officer on April 28, 1999. This increase was consistent with the
stated policy of maintaining base salaries for executive officers
at the 50th percentile for companies of comparable size in the
survey group. Mr. Potter's salary remained the same.

Because one of the thresholds set for funding the annual
incentive plan for the 1999 performance year--the free cash flow
threshold--was not achieved, none of the named executive
officers, including Mr. Potter and Mr. Hunter, received an annual
incentive award for the 1999 performance year.

The long-term incentive opportunity for 1998-1999 also had
thresholds for cumulative earnings per share and free cash flow
which had to be achieved for any payouts to be earned. Although
these thresholds were more aggressive than the combined
thresholds for the 1998 and 1999 performance years under the
Annual Incentive Plan, results significantly exceeded both of
these thresholds. Given these results, the committee determined
that Mr. Hunter earned an award of $2,862,500, and Mr. Potter,
$3,812,500. The awards to Mr. Hunter and the other named
executive officers other than Mr. Potter are being paid in the
form of restricted stock. In light of Mr. Potter's retirement,
the committee elected to pay Mr. Potter's award in cash.

On September 1, 1999, as part of the general grant of stock
options to management level employees, Mr. Potter and Mr. Hunter
each received a non-qualified stock option to buy 120,000 shares
of Solutia common stock. The size and the terms of these grants
and the grants to the other executive officers named in the
Summary Compensation Table were as described above. Because
Mr. Potter retired as an employee before holding his stock option
for the required minimum one-year period, he forfeited this
option.

Deductibility of Executive Compensation

The committee is complying with the requirements of Section
162(m) of the Internal Revenue Code with respect to options and
annual and long-term incentive plans to avoid losing tax
deductibility for compensation in excess of $1,000,000 paid to
one or more of the executive officers named in the Summary
Compensation Table. The committee has been advised by counsel
that the new stock-based incentive plan and the new annual and
long-term incentive plans submitted for stockholder approval at
the 2000 Annual Meeting comply with Section 162(m).

Management Stock Ownership Requirements

The committee and management believe that the financial
well-being of senior executives should be linked to the creation
of stockholder value. Therefore, the committee has implemented
stock ownership requirements for all executive officers and most
other members of the enterprise leadership team. Stock ownership
requirements are as follows:

* six times base salary for the chief executive officer and
the chief operating officer;

* three times base salary for the three senior vice
presidents; and

* two times base salary for all other senior managers who
have stock ownership requirements.

These requirements must be achieved in accordance with the
following schedule:

* 25% within two years of election;

* 50% within three years of election; and

* 100% within five years of election.

Restricted stock and shares held through Solutia's 401(k) plan
count toward achievement of these requirements as do shares held
by the executive directly or in a trust. Unexercised stock
options do not count. All of the named executive officers have
achieved at least the 25% level.

EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE

Paul H. Hatfield, Chairman
Howard M. Love
Frank A. Metz, Jr.

<TABLE>
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Long-Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying LTIP Compen-
Principal Year Salary Bonus sation Awards Options Payouts sation
Position <F1> ($) ($) ($)<F2> ($)<F3> (#) ($)<F4> ($)<F5>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. C. Hunter III 1999 508,333 -0- -0- -0- 120,000 2,862,500 88,895
Chairman, President, 1998 445,834 550,000 -0- -0- -0- -0- 86,002
Chief Executive 1997 391,667 687,000 -0- -0- 250,117 1,204,893 51,580
Officer, and
Director<F6>
- ----------------------------------------------------------------------------------------------------------------------------------
K. R. Barnickol 1999 250,000 -0- -0- -0- 25,000 800,000 43,048
Senior Vice President, 1998 250,000 280,000 -0- -0- -0- -0- 40,378
General Counsel, and 1997 231,250 357,200 -0- -0- 123,612 121,740 28,618
Secretary
- ----------------------------------------------------------------------------------------------------------------------------------
R. A. Clausen 1999 270,000 -0- -0- -0- 25,000 864,001 43,912
Senior Vice President 1998 270,000 300,000 -0- -0- -0- -0- 41,547
and Chief Financial 1997 255,000 346,000 600 -0- 76,245 160,563 27,504
Officer
- ----------------------------------------------------------------------------------------------------------------------------------
J. J. Ferguson 1999 240,000 -0- -0- -0- 25,000 690,000 35,677
Senior Vice President, 1998 226,667 189,000 -0- -0- 26,000 -0- 27,671
Integrated Nylon<F7>
- ----------------------------------------------------------------------------------------------------------------------------------
M. E. Miller 1999 383,333 -0- -0- -0- 50,000 1,133,340 64,842
Vice Chairman, Chief 1998 325,000 360,000 -0- -0- -0- -0- 38,369
Operating Officer, 1997 263,750 325,000 3,069 -0- 136,789 1,577,168 41,759
and Director
- ----------------------------------------------------------------------------------------------------------------------------------
R. G. Potter 1999 644,583<F8> -0- -0- -0- 128,833<F9> 3,812,500 151,773
Retired Chairman 1998 620,833 1,000,000 -0- -0- -0- -0- 117,614
and Chief Executive 1997 566,667 1,082,000 2,898 -0- 311,692 1,489,537 96,139
Officer; and
Director<F6>
- ----------------------------------------------------------------------------------------------------------------------------------

<FN>
<F1> Excluding the 1997 annual bonus, compensation for the first eight months
of 1997 was determined solely by Monsanto Company.

<F2> The figures for 1997 represent reimbursement for taxes on amounts received
in connection with the termination of the Monsanto Employee Benefits
Trust. The trust, which was established to provide a means for employees
to save for post-retirement medical expenses, was terminated prior to the
spinoff.

<F3> On December 31, 1999, Mr. Barnickol held 1,000 shares of Solutia
restricted stock. These shares were received as a dividend on shares of
Monsanto restricted stock as a result of the spinoff. These 1,000 shares
had a value of $15,438 on December 31, 1999. In accordance with the terms
of the original Monsanto Company restricted stock grant, these Solutia
restricted shares vested on January 25, 2000. Dividends are paid on
these shares at the same rate as paid to all stockholders.

None of the other named executive officers held shares of restricted stock
on December 31, 1999.

<F4> The figures for 1999 represent awards earned under the Solutia Inc.
1998-1999 Long-Term Incentive Plan. On February 25, 2000, awards for
Messrs. Hunter, Barnickol, Clausen, Ferguson, and Miller were paid in the
form of shares of Solutia common stock restricted against sale or other
disposition until the earliest of December 31, 2004, the executive's
retirement, death, total and permanent disability, or involuntary
termination other than for cause, or a change of control. The number of
shares was determined by dividing the dollar amount of the executive's
award by the average of the high and low trading prices for Solutia's
common stock for the three days immediately preceding the payment date.
Because of Mr. Potter's retirement, his award was paid in cash.

The figures for 1997 represent payment of (a) awards earned by
Messrs. Potter, Hunter, and Miller under Monsanto's 1994-1996 long-term
incentive program and (b) "banked" amounts and sustained performance
adjustments for all of the named executive officers under Monsanto's
annual incentive program for the years 1994 through 1996.

<F5> Amounts shown for 1999 include:

* contributions to thrift/savings plans, and credits in lieu of such
contributions on any portion of the annual bonus for 1998 deferred at the
election of the named executive officer, as follows: Mr. Hunter, $46,588;
Mr. Barnickol, $25,440; Mr. Clausen, $27,360; Mr. Ferguson, $20,592;
Mr. Miller, $35,680; and Mr. Potter, $76,600;

* split dollar life insurance premiums, as follows: Mr. Hunter, $42,189;
Mr. Barnickol, $17,490; Mr. Clausen, $16,434; Mr. Ferguson, $14,967;
Mr. Miller, $27,878; and Mr. Potter, $70,888;

* cost of executive travel accident protection for each executive officer
named in this table: $118;

* for Mr. Miller, the $1,166 in "above-market interest" (as defined by the
Securities and Exchange Commission) credited to his Solutia Inc. Deferred
Compensation Plan account; and

* for Mr. Potter, the $4,167 in non-employee director compensation for
December 1999, all of which Mr. Potter is receiving in the form of
deferred stock as described on page 8.

<F6> Mr. Hunter succeeded Mr. Potter as Chief Executive Officer on
April 28, 1999, and as Chairman on December 1, 1999.

<F7> Mr. Ferguson became an executive officer of Solutia on April 22, 1998.
Therefore, his compensation for 1997 is not included in this table
pursuant to Securities and Exchange Commission rules.

<F8> This figure includes $48,750 for unused vacation days at the time of
Mr. Potter's retirement under Solutia's policy applicable to employees
generally.

<F9> Mr. Potter forfeited the option covering 120,000 of these shares upon his
retirement as an employee of Solutia. The remaining 8,833 shares represent
the option received by Mr. Potter as a non-employee director as described
on page 8.
</TABLE>

<TABLE>
OPTION GRANTS IN 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Grant
Individual Grants<F1> Date Value
- ---------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options Granted Employees in Base Price Expiration Present Value
Name (#)<F2> Fiscal Year ($/Share) Date ($)<F3>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J. C. Hunter III 120,000 5.9 20.594 8/31/09 896,400
- ---------------------------------------------------------------------------------------------------------------------------------
K. R. Barnickol 25,000 1.2 20.594 8/31/09 186,750
- ---------------------------------------------------------------------------------------------------------------------------------
R. A. Clausen 25,000 1.2 20.594 8/31/09 186,750
- ---------------------------------------------------------------------------------------------------------------------------------
J. J. Ferguson 25,000 1.2 20.594 8/31/09 186,750
- ---------------------------------------------------------------------------------------------------------------------------------
M. E. Miller 50,000 2.5 20.594 8/31/09 373,500
- ---------------------------------------------------------------------------------------------------------------------------------
R. G. Potter 120,000<F4><F5> 5.9 20.594 <F4> 896,400
- ---------------------------------------------------------------------------------------------------------------------------------

<FN>
<F1> All Solutia management stock options have a minimum one-year holding
period, except in the event of a change of control. They expire ten years
from the grant date unless forfeited earlier. They all carry stock tax
withholding rights.

<F2> These options were granted on September 1, 1999, under the Solutia Inc.
1997 Stock-Based Incentive Plan. The exercise price of $20.594 was the
fair market value per underlying share on the grant date. These options
become exercisable in accordance with the following schedule:

--------------------------------------------------
<CAPTION>
Percentage Increase in
Fair Market Value of
Company Common Stock Percentage of Option
from Option Grant Date Exercisable
--------------------------------------------------
<C> <C>
20 25
--------------------------------------------------
30 50
--------------------------------------------------
50 75
--------------------------------------------------
75 100
--------------------------------------------------

The required increases in fair market value shown above must be maintained
for a period of ten consecutive trading days in order for the respective
percentages of the options to become exercisable. To avoid variable
accounting treatment, these options become exercisable on the ninth
anniversary of the option grant date even if the required percentage
increases in fair market value have not been achieved.

<F3> In accordance with rules of the Securities and Exchange Commission, we
have chosen the Black-Scholes option pricing model to estimate the grant
date present value of the options shown in this table. Our use of this
model should not be construed as an endorsement of its accuracy at valuing
options. There is no assurance that the value realized by an executive, if
any, will be at or near the value estimated by the Black-Scholes model.
Future compensation resulting from option grants is based solely on the
performance of Solutia's stock price. The following assumptions were made
for purposes of calculating the original grant date present value: an
option life of five years, volatility of 28%, a dividend yield of 0.2%,
and a risk-free interest rate of 6%.

<F4> Mr. Potter forfeited these options when he retired as an employee of
Solutia before satisfying the one-year minimum holding period.

<F5> The options shown in this table do not include the option to buy 8,833
shares of Solutia common stock which was granted to Mr. Potter as a
non-employee director on December 1, 1999, as described on page 8 above.
</TABLE>

<TABLE>
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at FY-End Options at FY-End
(#) ($)<F1>
Shares --------------------------------------------------
Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. C. Hunter III -0- -0- 362,614/160,000 214,693/0
- --------------------------------------------------------------------------------------------------------------------
K. R. Barnickol -0- -0- 284,159/37,500 1,729,784/0
- --------------------------------------------------------------------------------------------------------------------
R. A. Clausen -0- -0- 259,237/37,500 608,672/0
- --------------------------------------------------------------------------------------------------------------------
J. J. Ferguson -0- -0- 256,687/57,000 446,059/0
- --------------------------------------------------------------------------------------------------------------------
M. E. Miller -0- -0- 404,408/62,500 1,577,214/0
- --------------------------------------------------------------------------------------------------------------------
R. G. Potter 9,734 143,956<F2> 1,138,734/8,833<F3> 4,097,752/6,899<F3>
- --------------------------------------------------------------------------------------------------------------------

<FN>
<F1> These year-end values represent the difference between (a) the
fair market value of the company common stock underlying the options
on December 31, 1999, and (b) the exercise prices of the options.

"In-the-money" means that the fair market value of the underlying
stock is greater than the option's exercise price on the valuation date.

<F2> This amount reflects the fair market value of the shares Mr. Potter
received on the exercise date minus the exercise price.

<F3> The year-end option information includes the option to buy 8,333 shares of
Solutia common stock, which was granted to Mr. Potter as a non-employee
director, as described on page 8 above.
</TABLE>

PENSION PLANS

The named executive officers are eligible for benefits payable
under the defined benefit pension plans applicable to Solutia's
regular full-time employees. An executive's benefits are based on
his service with Monsanto Company prior to the spinoff and
service with Solutia since the spinoff. Solutia's defined benefit
pension plans consist of two accounts: a "Prior Plan Account" and
a "Cash Balance Account."

* The opening balance of the Prior Plan Account was the lump
sum value of the executive's December 31, 1996 monthly
retirement benefit earned prior to January 1, 1997, under
Monsanto Company's defined benefit pension plans,
calculated using the assumption that the monthly benefit
would be payable at age 55 with no reduction for early
payment. The formula used to calculate the opening balance
was the greater of 1.4% of average final compensation
multiplied by years of service, without reduction for
Social Security or other offset amounts, or 1.5% of average
final compensation multiplied by years of service, less a
50% Social Security offset. Average final compensation for
purposes of determining the opening balance was the greater
of (1) average compensation received during the 36 months
of employment with Monsanto prior to 1997 or (2) average
compensation received during the highest three of the five
calendar years of employment with Monsanto prior to 1997.
For each year of the executive's continued employment with
Solutia (including all of 1997), the executive's Prior Plan
Account increases by 4% to recognize that prior plan
benefits would have grown as a result of pay increases.

* For each year during which the executive is employed by
Solutia, 3% of annual compensation in excess of the Social
Security wage base and a percentage (based on age) of
annual compensation (salary and annual bonus) is credited
to the Cash Balance Account. The applicable percentages and
age ranges are: 3% before age 30, 4% for ages 30 to 39, 5%
for ages 40 to 44, 6% for ages 45 to 49, and 7% for age 50
and over. In addition, the Cash Balance Account of
executives who earned benefits under Monsanto Company's
defined benefit pension plans before 1997 are credited each
year (for up to ten years based on prior years of service
with Monsanto Company before 1997) during which the executive
is employed by Solutia (including all of 1997) with an amount
equal to a percentage (based on age) of annual compensation.
The applicable percentages and age ranges are: 2% before age
30, 3% for ages 30 to 39, 4% for ages 40 to 44, 5% for ages
45 to 49, and 6% for age 50 and over.

The estimated annual benefits payable as a single life annuity
beginning at age 65 (assuming that each executive officer remains
employed by the company until age 65 and receives 4% annual
compensation increases) are as follows: Mr. Hunter, $694,617;
Mr. Barnickol, $303,850; Mr. Clausen, $422,407; Mr. Ferguson,
$555,453; Mr. Miller, $526,149; and Mr. Potter, $869,923.

CHANGE-OF-CONTROL AGREEMENTS

Each executive officer named in the Summary Compensation Table,
other than Mr. Potter, is a party to a change-of-control
employment agreement. These agreements become effective upon a
"change of control" of Solutia (as defined in the agreements).
The agreements provide for the continuing employment of the
executive after the change of control on terms and conditions no
less favorable than those in effect before the change of control.
If the executive's employment is terminated by the company
without "cause," or if the executive terminates his own
employment for "good reason" (each as defined in the
change-of-control employment agreement), the executive is
entitled to severance benefits equal to three times his annual
compensation (including bonus) and continuation of certain
benefits for three years (or the shorter number

of years until the executive's normal retirement date). In addition,
each of these executives is entitled to receive the severance
benefits if he voluntarily terminates his own employment during the
30-day period beginning on the first anniversary of certain changes
of control. Finally, each of these executives is entitled to an
additional payment, if necessary, to make him whole as a result
of any excise tax imposed by the Internal Revenue Code on certain
change-of-control payments (unless the safe harbor below which
the excise tax is imposed is not exceeded by more than ten
percent, in which event the payments will be reduced to avoid the
excise tax).

STOCK PRICE PERFORMANCE GRAPH

The graph below compares the cumulative total return to
stockholders (stock price appreciation plus reinvested dividends)
on Solutia's common stock with the cumulative total return on
each of three indices: the Standard & Poor's ("S&P") 500 Index,
the S&P Chemicals (Diversified) Index, and the S&P Chemicals
(Specialty) Index. We have chosen to compare Solutia's
performance with that of these two chemicals indices because
Solutia has a diversified portfolio of products, including a
large number of specialty chemicals. The graph assumes that:

* you invested $100 in Solutia common stock and in each of
the indices at the closing price on August 20, 1997 (the
date on which Solutia common stock began trading on the
New York Stock Exchange);

* all dividends were reinvested; and

* you continued to hold your investment through
December 31, 1999.

[GRAPH]

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
20-Aug-97 30-Sep-97 31-Dec-97 31-Mar-98 30-Jun-98 30-Sep-98 31-Dec-98 31-Mar-99 30-Jun-99 30-Sep-99 31-Dec-99
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOLUTIA INC. 100 93 124 138 134 106 104 81 99 83 72
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500(R) 100 101 104 119 123 110 134 141 150 141 162
- ---------------------------------------------------------------------------------------------------------------------------------
S&P(R) CHEMICALS
(DIVERSIFIED) 100 97 95 116 121 111 102 96 94 86 88
- ---------------------------------------------------------------------------------------------------------------------------------
S&P(R) CHEMICALS
(SPECIALTY) 100 101 105 106 95 79 90 89 118 96 99
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

RELATIONSHIPS AND TRANSACTIONS

On January 3, 2000, Mr. Timothy M. Potter, the son of
Mr. Robert G. Potter, a director and former chairman and chief
executive officer of Solutia, purchased Kimsway Company Inc. In
1999, Solutia paid Kimsway approximately $389,000 for supplies,
tickets and administrative services for business entertainment.
We anticipate that Solutia will pay Kimsway approximately the
same amount for similar goods and services in 2000.

Mr. Robert T. Blakely, a director of Solutia, became Executive
Vice President and Chief Financial Officer of Lyondell Chemical
Company in November 1999. Solutia purchases propylene and minor
quantities of other raw materials from Equistar Chemicals LP, a
joint venture 41% owned by Lyondell. Propylene, a commodity
petrochemical, is a raw material used to produce Solutia's
acrylic fiber and nylon products. Solutia's propylene purchases
from Equistar are under a long-term contract, negotiated prior to
Mr. Blakely's employment by Lyondell. During 1999, Solutia's
purchases from Equistar, primarily for propylene, totaled
approximately $110 million. Purchases in 2000 are projected to be
in a range of approximately $160 million to $180 million. In
addition, Equistar owns a production facility located at
Solutia's plant in Alvin, Texas. This facility receives support
services from Solutia. Equistar paid Solutia approximately
$12 million for these services in 1999 and a similar amount is
expected in 2000. Solutia's Board of Directors has reviewed these
arms length commercial transactions and concluded that they will
not interfere with Mr. Blakely's exercise of independent
judgment.

APPROVAL OF THE SOLUTIA INC. 2000 STOCK-BASED INCENTIVE PLAN
(PROXY ITEM NO. 2)

We are asking for your approval of the Solutia Inc. 2000
Stock-Based Incentive Plan as a successor to the Solutia Inc.
1997 Stock-Based Incentive Plan. Solutia's Board of Directors,
upon recommendation of its Executive Compensation and Development
Committee ("ECDC"), has adopted the 2000 Plan and directed that
the 2000 Plan be submitted to you for approval at the 2000 Annual
Meeting.

REASONS FOR THE PROPOSAL

On February 28, 2000, only 655,929 shares remained available for
grants under the 1997 Plan. Approval of the 2000 Plan will allow
Solutia to continue grants to both mid-level and senior
management employees of Solutia and its subsidiaries after the
shares available under the 1997 Plan have been exhausted. This
will enable Solutia to attract, retain, and motivate officers and
employees, and to provide incentives directly linked to the
profitability of Solutia's businesses and increases in
stockholder value. In addition, approval will secure for Solutia
certain tax deductions. Section 162(m) of the Internal Revenue
Code imposes a limitation on the tax deductibility by a
corporation of compensation in excess of $1,000,000 paid in any
year to any of its executive officers whose compensation is
required to be disclosed in the Summary Compensation Table. This
limitation does not apply to performance-based compensation if
certain conditions, including stockholder approval, are met.

SIGNIFICANT FEATURES OF THE PLAN

Significant features of the 2000 Plan are summarized below.
Because this is a summary, it may not contain all the information
that is important to you. The full text of the 2000 Plan appears
as an appendix at the end of this proxy statement.

AUTHORIZED SHARES. The 2000 Plan authorizes the use of 5,400,000
shares of Solutia common stock for grants of nonqualified and
incentive stock options, stock appreciation rights, restricted
stock awards, and bonus stock awards. The number of shares
authorized may be proportionately adjusted for stock dividends,
stock splits, reorganizations, recapitalizations, and other
similar transactions. Shares subject to awards that are forfeited
or terminated, and shares tendered to Solutia in payment of the
option price or required tax withholding, will be available again
for issuance under the 2000 Plan. The shares used for grants may
be either newly issued shares or treasury shares or both.

ADMINISTRATION. The ECDC will administer the 2000 Plan. The
members of this committee are directors who are not, and have
never been, employees of Solutia or its subsidiaries. This
committee may delegate the administration of the plan except as
it relates to those officers who are subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of
1934. With certain exceptions, Solutia's full Board of Directors
may also exercise the authority granted to the ECDC.

ELIGIBLE EMPLOYEES. Any employee of Solutia or any of its
subsidiaries or associated companies who is responsible for, or
contributes to, the growth and profitability of Solutia, a
subsidiary, or an associated company is eligible for grants under
the 2000 Plan. In practice, approximately 800 management
employees received awards under the 1997 Plan. The total number
of shares for which awards may be made to any one participant
during any calendar year cannot exceed 250,000, as adjusted for
any changes in capitalization, such as stock splits.

GRANTS IN 1999. On September 1, 1999, non-qualified options to
buy shares of Solutia common stock were granted under the 1997
Plan as follows: Mr. Hunter, 120,000 shares; Mr. Barnickol,
25,000 shares; Mr. Clausen, 25,000 shares; Mr. Ferguson, 25,000
shares; Mr. Miller, 50,000 shares; Mr. Potter, 120,000 shares;
all current executive officers as a group, 315,000 shares; and
all other employees, 1,584,325 shares. These numbers include the
performance options granted to Solutia's executive officers and
other members of senior management, which are described in
footnote 2 to the table captioned "Option Grants in 1999" on page
16 above. They also include the time-based stock options granted
to other management employees. These generally become exercisable
in thirds, one-third on each of the first three anniversaries of
the option grant date. Had the 2000 Plan been in effect, these
grants would have been approximately the same.

STOCK OPTIONS. The ECDC will determine the terms and conditions
of the stock options granted under the 2000 Plan. In determining
these terms and conditions, the ECDC must follow the limitations
established by the plan. For example, the plan requires the
exercise price of a stock option to be at least as great as the
fair market value of Solutia common stock on the grant date. The
plan also prohibits repricing options to decrease the exercise
price. The plan provides that the term of any stock option
granted under the plan may not exceed ten years and, additionally,
may not exceed 12 months following a termination of employment
unless the termination is the result of retirement, death,
disability or involuntary termination without cause.

Options granted under the 2000 Plan are not transferable except
by will or the laws of descent and distribution. Options may be
exercised during the participant's lifetime only by the participant
or the participant's guardian or legal representative.

Incentive stock options may be granted if they meet the
requirements of the Internal Revenue Code. Solutia has not
granted, and has no plans to grant, incentive stock options.

The plan provides that, upon receipt of written notice of
exercise, the ECDC may elect to cash out all or part of the
shares of common stock subject to an option by paying the
participant an amount, in cash or common stock, equal to the
excess of the fair market value of the common stock on the
effective date of the cash-out over the exercise price. The ECDC
does not currently intend to make use of this cash-out provision.

U.S. FEDERAL TAX CONSEQUENCES OF STOCK OPTIONS. A participant
does not realize taxable income upon the grant of a non-qualified
stock option, and no tax deduction is available to Solutia at
grant. Upon exercise of the option, the excess of the fair market
value of the shares on the date of exercise over the option price
will be taxable to the participant and deductible by Solutia. The
tax basis of shares acquired will be the fair market value on the
date of exercise. The participant will realize capital gain or
loss upon disposition of the shares.

A participant does not realize taxable income, and no tax
deduction is available to Solutia, upon either the grant or
exercise of an incentive stock option. If a participant holds the
shares acquired upon the exercise of an incentive stock option
for more than one year after the stock option exercise and more
than two years after the date of the option grant (the "holding
period"), the difference between the option price and the amount
realized upon the sale of the shares will be treated as long-term
capital gain or loss and no deduction will be available to
Solutia. If the shares are transferred before the expiration of
the holding period, the participant will realize ordinary income,
and Solutia will be entitled to a deduction on a portion

of the gain, if any, equal to the difference between the option
price and the lesser of the fair market value of the shares on
the date of exercise or the amount realized on the disposition.
Any further gain or loss will be taxable as long-term or
short-term capital gain or loss depending upon the holding period
before disposition.

Solutia believes that compensation received by participants on
the exercise of non-qualified options, or the disposition of
shares acquired upon the exercise of any incentive stock options,
will be considered performance-based compensation and thus not
subject to the $1,000,000 limit on deductibility of compensation
under Section 162(m) of the Internal Revenue Code.

Participants are responsible for the payment of all withholding
taxes due in connection with the exercise or disposition of a
stock option or the vesting of a restricted stock award.
Participants may direct Solutia to withhold shares to be issued
on an option exercise or stock award to satisfy their minimum
required withholding obligation.

STOCK APPRECIATION RIGHTS. The 2000 Plan, like the 1997 Plan,
authorizes the grant of stock appreciation rights in tandem with
stock options. It authorizes the grant of freestanding stock
appreciation rights only to employees outside the United States
in countries where the grant of a stock option is impossible or
impracticable because of securities or tax laws or other
governmental regulations. Solutia has not granted any stock
appreciation rights in tandem with stock options. Solutia has
granted freestanding stock appreciation rights to only one
ex-U.S. employee.

RESTRICTED AND UNRESTRICTED STOCK. The 2000 Plan authorizes the
ECDC to use up to 3% of the shares authorized under the 2000 Plan
for restricted or unrestricted stock awards.

The ECDC may set the terms and conditions of restricted stock
awards, including restrictions against sale, transfer, or other
disposition, and may make the lapse of such restrictions
contingent upon the achievement of performance goals or upon
continued employment. Restricted stock awards must either be
restricted against sale for at least three years, with earlier
vesting permitted only upon retirement, death, total and
permanent disability, involuntary termination without cause,
international reassignment, or a change of control (as defined in
the plan), or the award must include performance conditions and
be restricted against sale for one year, with the same provisions
for earlier vesting. The committee may determine to withhold
payment of dividends pending satisfaction of specified terms and
conditions. The committee may also determine that cash dividends
be deferred and reinvested in additional shares of restricted
stock and that dividends payable in common stock be paid in
restricted stock. One award of 1,000 restricted shares was made
under the 1997 Plan in 1999 to an employee who is not an
executive officer. Approximately 775,290 shares of restricted
stock were used in February 2000 to satisfy awards earned by
executive officers and other members of Solutia's senior
management under the Solutia Inc. 1998-1999 Long-Term Incentive
Plan.

The 2000 Plan provides that unrestricted stock can be used only
as a substitute for, and not in addition to, cash awards under
Solutia's incentive plans and programs. The ECDC has not made any
unrestricted stock awards and currently has no intention to make
any in the future.

U.S. FEDERAL TAX CONSEQUENCES OF RESTRICTED STOCK. The grant of
shares that are nontransferable and subject to a substantial risk
of forfeiture does not result in the recognition of taxable
income to the participant or a deduction to Solutia unless the
participant makes an election, within 30 days after the grant, to
be taxed at the time of grant. If the participant makes this
election, the participant will recognize taxable compensation
income on the date of grant equal to the fair market value of the
shares on the date of grant (without regard to the restrictions).
If the participant does not make this election, the participant
will recognize taxable compensation income on the date the shares
become transferable or no longer subject to a substantial risk of
forfeiture (whichever occurs first) equal to the fair market
value of the shares on that date.

Generally, Solutia will be entitled to a compensation deduction
when the participant recognizes compensation income with respect
to restricted shares, and in the same amount.

CHANGE OF CONTROL. Upon a change of control, as defined in the
2000 Plan, any stock option or stock appreciation right that is
not then exercisable will become fully exercisable, and the
restrictions applicable to an award of restricted stock will
lapse immediately. During the 60-day period following a change of
control,

a participant will have the right, in lieu of paying the exercise
price for the shares of common stock under an option, to elect to
surrender all or part of the option to Solutia and receive cash,
or, in certain circumstances at the ECDC's option, shares of
common stock, in an amount equal to the amount by which the
change of control price, as defined in the plan, exceeds the
exercise price per share of the common stock underlying the
option. If necessary to preserve favorable accounting treatment,
the ECDC may modify or eliminate this right.

AMENDMENTS. Solutia's Board of Directors may amend or discontinue
the 2000 Plan at any time. However, the board may not make any
amendment without the approval of Solutia's stockholders to the
extent any law or agreement requires stockholder approval or if
the amendment would:

* permit decreasing the option price on any outstanding
option or the base price on any stock appreciation right;

* permit shortening the required periods for continued
performance or waiving performance conditions associated
with grants of restricted stock except to the extent
currently permitted by the plan;

* increase the number of shares authorized for grant under
the plan;

* increase the number of shares authorized for awards of
restricted stock and unrestricted stock; or permit awards
of unrestricted stock other than in lieu of cash payments
under Solutia's incentive plans and programs;

* expand the classes of persons eligible for awards;

* allow the creation of additional types of awards; or

* change the provisions of the plan relating to amendments.

In addition, no amendment or termination of the plan may, without
the relevant participants' consent, adversely affect any awards
already made to participants under the plan unless the amendment
is required to cause the plan to qualify for any exemption
provided by Rule 16b-3 under the Exchange Act or to comply with
rules of any stock exchange on which Solutia's shares are listed,
accounting rules or legal requirements.

ADDITIONAL INFORMATION

The closing price of Solutia's common stock on February 28, 2000,
as reported in The Wall Street Journal, was $13.125.

The affirmative vote of the majority of the shares present in
person or represented by proxy at the annual meeting is required
for approval of the 2000 Plan. If you do not approve the 2000
Plan, grants will not be made under that plan. Only the shares
remaining in the 1997 Plan will be available for awards.

- -----------------------------------------------------------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE SOLUTIA INC. 2000 STOCK-BASED INCENTIVE PLAN.
- -----------------------------------------------------------------

APPROVAL OF THE SOLUTIA INC. ANNUAL AND LONG-TERM INCENTIVE PLANS
(PROXY ITEMS NOS. 3 AND 4)

We are asking for your approval of the Solutia Inc. Annual
Incentive Plan (Proxy Item No. 3) and the Solutia Inc. Long-Term
Incentive Plan (Proxy Item No. 4). Both of these plans provide
for incentive compensation for Solutia's executive officers and
certain other officers designated by the Executive Compensation
and Development Committee ("ECDC"). Awards under these plans will
be determined by the level of achievement of financial and other
performance criteria upon which Solutia's sustained progress,
growth, and profitability depend. Upon recommendation of the
ECDC, the Board of Directors adopted these plans in
February 2000 and directed that they be submitted to the
stockholders for approval at the annual meeting. Certain key
provisions of the plans are summarized below. Because these are
summaries, they may not contain all the information that is
important to you. The full text of both plans appears as
appendices at the end of this proxy statement.

REASON FOR SEEKING STOCKHOLDER APPROVAL

Under Section 162(m) of the Internal Revenue Code ("Code"),
approval of Solutia's stockholders is required to enable Solutia
to obtain a tax deduction for incentives paid under these plans
to any of the executive officers named in the Summary
Compensation Table whose compensation for the taxable year
exceeds $1,000,000.

MATERIAL FEATURES COMMON TO BOTH PLANS

ELIGIBLE EMPLOYEES. Solutia's executive officers, currently 11 in
number, are eligible to receive awards under both of these plans.
In addition, certain other officers designated by the ECDC,
currently 10 in number, are eligible to receive awards under the
Long-Term Incentive Plan.

ADMINISTRATION. The ECDC administers both of these plans. It is
composed of "outside directors" as defined under the Code.

AMENDMENTS. The ECDC may modify or terminate the plans at any
time.

MATERIAL FEATURES OF THE ANNUAL INCENTIVE PLAN

PERFORMANCE GOALS AND DETERMINATION OF AWARDS. At the beginning
of each year, the ECDC will establish performance goals that must
be achieved before any awards may be made. The performance goals
may be based on one or more of the following: revenue growth,
operating margins, and working capital (each as defined by the
ECDC). The ECDC will also establish an objective formula or
standard for computing the amount of incentive compensation
payable to the participants if the performance goals are
attained. The ECDC will have the discretion to reduce, but not
increase, the final amount of any award, based on criteria such
as individual performance, safety performance, business unit and
site accomplishments, the actual level of revenue growth,
operating margins, or working capital, or other factors tied to
the success of the company or any of its business units.

AWARDS. The ECDC will make any awards following the end of the
performance year. Awards, if any, will be paid in cash. A
participant may defer receipt of all or any portion of an award.
The maximum value of the award that a participant can receive
under this plan for any year is $3,000,000. The actual amount of
any annual incentive awards that may be made in the future is not
determinable, nor are the amounts that participants would have
received for 1999 if the plan had been in effect for that year.

MATERIAL FEATURES OF THE LONG-TERM INCENTIVE PLAN

PERFORMANCE GOALS AND DETERMINATION OF AWARDS. Long-term
incentive awards will be determined in essentially the same
manner as described for annual incentive awards, except that
performance goals will be established for non-overlapping
three-year periods and will be based on one or more of the
following: net income, free cash flow, and revenue growth.

AWARDS. Awards, if any, will be paid in cash at the end of the
three-year performance period. A participant may defer receipt of
all or any portion of an award. The maximum award that a
participant may receive

under this plan for any three-year performance period is
$20,000,000. The amounts that participants will receive under the
Long-Term Incentive Plan are not currently determinable, nor are
the amounts that participants would have received for the
1997-1999 period if the plan had been in effect for those years.

ADDITIONAL INFORMATION

The affirmative vote of the majority of the shares present in
person or represented by proxy at the annual meeting is required
for approval of each of these plans. If you do not approve either
or both of these plans, the ECDC will not make awards under the
rejected plan or plans. It will investigate the reasons for your
rejection and consider alternate incentive plans or other
compensation arrangements.

- -------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
OF THE SOLUTIA INC. ANNUAL INCENTIVE PLAN AND "FOR" THE APPROVAL
OF THE SOLUTIA INC. LONG-TERM INCENTIVE PLAN.
- -------------------------------------------------------------------------

RATIFICATION OF INDEPENDENT AUDITORS (PROXY ITEM NO. 5)

We are asking you to ratify the Board's appointment of Deloitte &
Touche LLP as principal independent auditors to examine the
consolidated financial statements of the company and its
subsidiaries for the year 2000. The Audit and Finance Committee
recommended the selection of Deloitte to the board. Deloitte was
originally appointed to act as Solutia's independent auditors in
1997 when Solutia became an independent entity. Deloitte is
knowledgeable about the company's operations and accounting
practices and is well qualified to act as auditor.

Although we are not required to seek your approval of this
appointment, the board believes it to be sound corporate practice
to do so. If you do not ratify the appointment of independent
auditors, the Audit and Finance Committee will investigate the
reasons for your rejection and the board will reconsider the
appointment.

Representatives of Deloitte do not plan to make a formal
statement at the annual meeting. However, they will attend the
meeting and be available to respond to appropriate questions.

- -------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
PRINCIPAL INDEPENDENT AUDITORS FOR THE YEAR 2000.
- -------------------------------------------------------------------------

ADDITIONAL INFORMATION

INFORMATION ABOUT STOCKHOLDER PROPOSALS

If you wish to submit proposals for possible inclusion in our
2001 proxy materials, we must receive them on or before
November 9, 2000. Proposals should be mailed to:

Solutia Inc.
P.O. Box 66760
St. Louis, Missouri 63166-6760
Attention: Karl R. Barnickol, Secretary

If you wish to nominate directors and/or propose proper business
from the floor for consideration at the 2001 Annual Meeting of
Stockholders, our by-laws provide that:

* You must notify Solutia's Secretary in writing.

* Your notice must be received at Solutia's world
headquarters not earlier than December 27, 2000 and not
later than January 26, 2001.

* Your notice must contain the specific information required
in our by-laws. We will send copies of these requirements
to any stockholder who writes to us requesting this
information.

Please note that these three requirements apply only to matters
that you wish to bring before your fellow stockholders at the
2001 Annual Meeting without submitting them for possible
inclusion in our 2001 proxy materials.

MULTIPLE COPIES OF ANNUAL REPORT TO STOCKHOLDERS

If more than one copy of Solutia's Annual Report is currently
being sent to your address, we will discontinue the mailing of
reports on the accounts you select if you mark the designated box
on the appropriate proxy card(s), or follow the prompts when you
vote if you are a stockholder of record voting by telephone or
Internet.

At least one account must continue to receive the Annual Report.
Mailing of dividends, dividend reinvestment account statements,
and any special notices will not be affected by your election to
discontinue future duplicate mailings of the Annual Report. To
discontinue or resume the mailing of an Annual Report to an
account, you may call First Chicago Trust Company at
1-888-987-6588.

If you own common stock through a bank, broker or other nominee
and receive more than one Solutia Annual Report, contact the
holder of record to eliminate duplicate mailings.

KARL R. BARNICKOL
Secretary

March 9, 2000

APPENDIX A

SOLUTIA INC. 2000 STOCK-BASED INCENTIVE PLAN

SECTION 1. PURPOSE; DEFINITIONS

The purpose of the Plan is to give the Company a competitive
advantage in attracting, retaining and motivating officers and
employees and to provide the Company and its Subsidiaries and
Associated Companies with a stock plan providing incentives
directly linked to the profitability of the Company's businesses
and increases in shareholder value.

For purposes of the Plan, the following terms are defined as
set forth below:

a. "Associated Company" means any corporation (or
partnership, joint venture, or other enterprise), of which
the Company owns or controls, directly or indirectly, 10% or
more, but less than 50%, of the outstanding shares of stock
normally entitled to vote for the election of directors (or
comparable equity participation and voting power).

b. "Award" means a Stock Appreciation Right, Stock
Option, Restricted Stock, unrestricted share of Common Stock,
dividend equivalent, interest equivalent or other award
granted under this Plan.

c. "Board" means the Board of Directors of the Company.

d. "Change in Control" and "Change in Control Price" have
the meanings set forth in Sections 9(b) and (c), respectively.

e. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.

f. "Commission" means the Securities and Exchange
Commission or any successor agency.

g. "Committee" means the Executive Compensation and
Development Committee referred to in Section 2.

h. "Common Stock" means common stock, par value $0.01 per
share, of the Company.

i. "Company" means Solutia Inc., a Delaware corporation.

j. "Compensation Committee" means one or more committees
appointed by the Executive Compensation and Development
Committee composed of one or more senior managers of the
Company or a Subsidiary or Affiliated Company to whom the
Executive Compensation and Development Committee may delegate
its powers (or a portion thereof) to administer this Plan
pursuant to Section 2.

k. "Covered Employee" means a participant designated
prior to the grant of shares of Restricted Stock by the
Committee who is or may be a "covered employee" within the
meaning of Section 162(m)(3) of the Code in the year in which
Restricted Stock is expected to be taxable to such participant.

l. "Disability" means permanent and total disability as
determined by the Committee for purposes of the Plan.

m. "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor
thereto.

n. "Fair Market Value" means, as of any given date, the
average of the highest and lowest sales prices of the Common
Stock reported as the New York Stock Exchange-Composite
Transactions for such day, or if the Common Stock was not
traded on the New York Stock Exchange on such day, then on
the next preceding day on which the Common Stock was traded,
all as reported by The Wall Street Journal under the heading
New York Stock Exchange-Composite Transactions or by such
other source as the Committee may select.

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o. "Incentive Stock Option" means any Stock Option
designated as, and qualified as, an "incentive stock option"
within the meaning of Section 422 of the Code.

p. "Non-Employee Director" means a member of the Board
who qualifies as a Non-Employee Director as defined in Rule
16b-3(b)(3), as promulgated by the Commission under the
Exchange Act, or any successor definition adopted by the
Commission.

q. "Non-Qualified Stock Option" means any Stock Option
that is not an Incentive Stock Option.

r. "Performance Goals" means the performance goals
established by the Committee in connection with the grant of
Restricted Stock. In the case of Qualified Performance-Based
Awards, (i) such goals shall be based on the attainment of
specified levels of one or more of the following measures:
earnings per share, sales, revenue growth, net profit after
tax, gross profit, operating profit, cash generation,
economic value added, unit volume, return on equity, change
in working capital, return on capital or shareholder return,
and (ii) such Performance Goals shall be set by the Committee
within the time period prescribed by Section 162(m) of the
Code and related regulations.

s. "Plan" means the Solutia Inc. 2000 Stock-Based
Incentive Plan, as set forth herein and as hereinafter
amended from time to time.

t. "Qualified Performance-Based Award" means an Award of
Restricted Stock designated as such by the Committee at the
time of grant, based upon a determination that (i) the
recipient is or may be a "covered employee" within the
meaning of Section 162(m)(3) of the Code in the year in which
the Company would expect to be able to claim a tax deduction
with respect to such Restricted Stock and (ii) the Committee
wishes such Award to qualify for the Section 162(m) Exemption.

u. "Restricted Stock" means an Award granted under
Section 7.

v. "Retirement" means retirement from employment with the
Company, a Subsidiary or an Associated Company as determined
by the Committee for purposes of an Award under the Plan.

w. "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as
amended from time to time.

x. "Section 162(m) Exemption" means the exemption from
the limitation on deductibility imposed by Section 162(m) of
the Code that is set forth in Section 162(m)(4)(C) of the
Code.

y. "Stock Appreciation Right" means an Award granted
under Section 6.

z. "Stock Option" means an Award granted under Section 5.

aa. "Subsidiary" means: (i) for the purpose of an
Incentive Stock Option, any corporation (other than the
Company) in an unbroken chain of corporations beginning with
the Company if, at the time of the granting of the Incentive
Stock Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain; and
(ii) for the purposes of a Non-Qualified Stock Option, a
Stock Appreciation Right or Restricted Stock Award, any
corporation (or partnership, joint venture, or other
enterprise) of which the Company owns or controls, directly
or indirectly, 50% or more of the outstanding shares of stock
normally entitled to vote for the election of directors (or
comparable equity participation and voting power).

bb. "Termination of Employment" means the termination of
the participant's employment with the Company and any
Subsidiary or Associated Company. A participant employed by a
Subsidiary or an Associated Company shall also be deemed to
incur a Termination of Employment if the Subsidiary or
Associated Company ceases to be such a Subsidiary or
Associated Company, as the case may be, and the participant
does not immediately thereafter become an employee of the
Company or another Subsidiary or Associated Company.
Temporary absences from employment because of illness,
vacation or leave of absence and transfers among the Company
and its Subsidiaries, or, if the Committee so determines,
among the group consisting of the Company, its Subsidiaries
and Associated Companies, shall not be considered
Terminations of Employment.

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In addition, certain other terms used herein have definitions
given to them in the first place in which they are used.

SECTION 2. ADMINISTRATION

The Plan shall be administered by the Executive Compensation
and Development Committee or such other committee of the Board as
the Board may from time to time designate (the "Committee"),
which shall be composed of not less than two Non-Employee
Directors, each of whom shall be an "outside director" for
purposes of Section 162(m)(4) of the Code, and shall be appointed
by and serve at the pleasure of the Board.

The Committee shall have plenary authority to grant Awards
pursuant to the terms of the Plan or, in the Committee's
discretion, in connection with awards under other bonus plans or
programs of the Company, to officers and employees of the Company
and its Subsidiaries and Associated Companies.

Among other things, the Committee shall have the authority,
subject to the terms of the Plan:

(a) To select the officers and employees to whom Awards
may from time to time be granted;

(b) To determine whether and to what extent Incentive
Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights and Restricted Stock, or any combination
thereof, are to be granted hereunder;

(d) To determine the terms and conditions of any Award
granted hereunder (including, but not limited to, the option
price (subject to Section 5(a)) or base price, as applicable,
any vesting condition, restriction or limitation (which may
be related to the performance of the participant, the Company
or any Subsidiary or Associated Company) and any vesting
acceleration or forfeiture waiver regarding any Award and the
shares of Common Stock relating thereto, based on such
factors as the Committee shall determine but consistent with
the provisions of this Plan;

(e) To modify, amend or adjust the terms and conditions
of any Award, at any time or from time to time, including but
not limited to Performance Goals; provided, however, that the
Committee may not adjust upwards the amount payable with
respect to a Qualified Performance-Based Award or waive or
alter the Performance Goals associated therewith; and,
provided further, that the Committee may not waive Performance
Goals or requirements for continued service contained in Awards
of Restricted Stock except to the extent permitted under
Sections 7 and 9.

(f) To determine under what circumstances an Award may be
settled in cash or Common Stock under Sections 5(g) and
6(d)(ii); and

(g) To determine under what circumstances dividends,
dividend equivalents or interest equivalents with respect to
an Award shall be paid.

The Committee shall have the authority to adopt, alter and
repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable,
to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any award certificate relating thereto)
and to otherwise supervise the administration of the Plan.

The Committee may act only by a majority of its members then
in office, except that the members thereof may delegate all
or a portion of the administration of the Plan to one or more
Compensation Committees and authorize further delegation by the
Compensation Committees to senior managers of the Company or its
Subsidiaries (provided that no such delegation may be made that
would cause Awards or other transactions under the Plan to cease
to be exempt from Section 16(b) of the Exchange Act or not to
qualify for, or cease to qualify for, the Section 162(m) Exemption).

Any determination made by the Committee or pursuant to
delegated authority pursuant to the provisions of the Plan with
respect to any Award shall be made in the sole discretion of the
Committee or

A-3

such delegate at the time of the grant of the Award or, unless
in contravention of any express term of the Plan, at any time
thereafter. All decisions made by the Committee or any appropriate
delegate pursuant to the provisions of the Plan shall be final
and binding on all persons, including the Company and Plan
participants.

Any authority granted to the Committee may also be exercised
by the full Board, except to the extent that the grant or
exercise of such authority would cause any Award or transaction
to become subject to (or lose an exemption under) the short-swing
profit recovery provisions of Section 16 of the Exchange Act or
cause an award designated as a Qualified Performance-Based Award
not to qualify for, or to cease to qualify for, the Section
162(m) Exemption. To the extent that any permitted action taken
by the Board conflicts with action taken by the Committee, the
Board action shall control.

SECTION 3. COMMON STOCK SUBJECT TO PLAN

The total number of shares of Common Stock reserved and
available for grant under the Plan shall not exceed 5,400,000.
Notwithstanding the foregoing, the total number of shares of
Common Stock that shall be available for Awards of Restricted
Stock or unrestricted shares shall not exceed 3% of the total
number of shares authorized for grant under the Plan. No
participant may be granted Awards covering in excess of 250,000
shares of Common Stock in any calendar year. Shares subject to an
Award under the Plan may be authorized and unissued shares or may
be treasury shares, or both.

If any shares of Restricted Stock are forfeited, or if any
Stock Option or Stock Appreciation Right terminates without being
exercised, or if any Stock Appreciation Right (whether granted
alone or in conjunction with a Stock Option) is exercised for
cash, shares subject to such Awards shall again be available for
distribution in connection with Awards under the Plan. Any
forfeited shares of Restricted Stock shall revert to the Company.
If the option price of any Stock Option granted under the Plan is
satisfied by delivering shares of Common Stock to the Company (by
either actual delivery or by attestation), and to the extent any
shares of Common Stock subject to an Award are not delivered to a
participant because such shares are used to satisfy an applicable
tax-withholding obligation, the shares that are so delivered or
so used, respectively, shall again be available for distribution
in connection with Awards under the Plan.

In the event of any change in corporate capitalization, such
as a stock split or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other
distribution of stock or property (without regard to the payment
of any cash dividends by the Company in the ordinary course) of
the Company, any reorganization (whether or not such reorganization
comes within the definition of such term in Section 368 of the Code)
or any partial or complete liquidation of the Company, the Committee
or Board may make such substitution or adjustments in the aggregate
number and kind of shares reserved for issuance under the Plan, in
the maximum number of shares with respect to which any participant
may be granted Awards in any calendar year, in the number, kind and
option price or base price, as applicable, of shares subject to
outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares subject to other outstanding Awards granted
under the Plan and/or such other equitable substitution or adjustments
as it may determine to be appropriate in its sole discretion;
provided, however, that the number of shares subject to any Award
shall always be a whole number. Such adjusted option price shall
also be used to determine the amount payable by the Company upon
the exercise of any Stock Appreciation Right associated with any
Stock Option.

SECTION 4. ELIGIBILITY

Officers and employees of the Company, a Subsidiary or an
Associated Company who are responsible for or contribute to the
growth and profitability of the business of the Company, a
Subsidiary or an Associated Company are eligible to be granted
Awards under the Plan.

A-4

SECTION 5. STOCK OPTIONS

Stock Options may be granted alone or in addition to other
Awards granted under the Plan and may be of two types: Incentive
Stock Options and Non-Qualified Stock Options. Any Stock Option
granted under the Plan shall be in such form as the Committee may
from time to time approve.

The Committee shall have the authority to grant any optionee
Incentive Stock Options, Non-Qualified Stock Options or both
types of Stock Options (in each case with or without Stock
Appreciation Rights); provided, however, that grants hereunder
are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may
be granted only to employees of the Company and its subsidiaries
(within the meaning of Section 424(f) of the Code). To the extent
that any Stock Option is not designated as an Incentive Stock
Option or, even if so designated, does not qualify as an Incentive
Stock Option, it shall constitute a Non-Qualified Stock Option.

Stock Options shall be evidenced by option award certificates,
the terms and provisions of which may differ. An option award
certificate shall indicate on its face whether it is intended to
be an award certificate for an Incentive Stock Option or a
Non-Qualified Stock Option. The grant of a Stock Option shall
occur on the date the Committee by resolution selects an individual
to be a participant in any grant of a Stock Option, determines
the number of shares of Common Stock to be subject to such Stock
Option to be granted to such individual and specifies the terms
and provisions of the Stock Option, or on such later date as is
specified by the Committee.

Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to Incentive Stock Options shall be
interpreted, amended or altered nor shall any discretion or
authority granted under the Plan be exercised so as to disqualify
the Plan under Section 422 of the Code or, without the consent of
the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.

Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions as the Committee shall deem desirable:

(a) Option Price. The option price per share of Common
Stock purchasable under a Stock Option shall be determined by
the Committee and set forth in the option award certificate,
and shall not be less than the Fair Market Value of the
Common Stock subject to the Stock Option on the date of
grant. The option price per share shall not be decreased
thereafter except pursuant to Section 3 of this Plan.

(b) Option Term. The term of each Stock Option shall be
fixed by the Committee, but no Stock Option shall be
exercisable more than ten years after the date the Stock
Option is granted.

(c) Exercisability. Except as otherwise provided herein,
Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined
by the Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may
at any time waive such installment exercise provisions, in
whole or in part, based on such factors as the Committee may
determine. In addition, the Committee may at any time
accelerate the exercisability of any Stock Option.

(d) Method of Exercise. Subject to the provisions of this
Section 5, Stock Options may be exercised, in whole or in
part, at any time during the option term by giving written
notice of exercise, or notice in accordance with such other
procedures as may be established from time to time, to the
Company or its designated agent specifying the number of
shares of Common Stock subject to the Stock Option to be
purchased.

Such notice shall be accompanied by payment in full of
the purchase price in cash or by certified or cashier's check
or such other instrument as the Company may accept. If
approved by the Committee, payment, in full or in part, may
also be made in the form of unrestricted Common Stock already
owned by the optionee of the same class as the Common Stock
subject to the Stock Option (based on the Fair Market Value
of the Common Stock on the date the Stock Option is
exercised); provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the
form of already owned shares of Common Stock of the same
class as the Common Stock subject to the Stock Option may be
authorized only at the time the Stock Option is granted and
provided, further, that, in the case

A-5

of either an Incentive Stock Option or a Non-Qualified Stock
Option, such already owned shares have been held by the
optionee for at least six months at the time of exercise.

In the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to
a broker to deliver promptly to the Company the amount of
sale or loan proceeds necessary to pay the purchase price,
and, if requested, by the amount of any federal, state, local
or foreign withholding taxes. To facilitate the foregoing,
the Company may enter into agreements for coordinated
procedures with one or more brokerage firms.

In addition, in the discretion of the Committee, payment
for any shares subject to a Stock Option may also be made by
instructing the Company or its designated agent to withhold a
number of such shares having a Fair Market Value on the date
of exercise equal to the aggregate exercise price of such
Stock Option.

No shares of Common Stock shall be issued until full
payment therefor has been made. An optionee shall have all of
the rights of a shareholder of the Company holding the class
or series of Common Stock that is subject to such Stock
Option (including, if applicable, the right to vote the
shares and the right to receive dividends), when the optionee
has given written notice of exercise, has paid in full for
such shares and, if requested, has given the representation
described in Section 12(a).

(e) Nontransferability of Stock Options. No Stock Option
shall be transferable by the optionee other than by will or
by the laws of descent and distribution, or, in the
Committee's discretion, pursuant to a written beneficiary
designation. All Stock Options shall be exercisable, subject
to the terms of this Plan, only by the optionee or guardian
or legal representative or beneficiary of the optionee, it
being understood that the terms "holder" and "optionee"
include any such guardian, legal representative or
beneficiary.

(f) Termination of Employment. The Stock Option and its
related Stock Appreciation Right, if any, may be exercised in
full or in part from time to time within ten years from the
date of the grant, or such shorter period as may be specified
by the Committee in the award certificate, provided that in
any event each shall lapse and cease to be exercisable upon,
or within such period following, Termination of Employment as
shall have been determined by the Committee and as specified
in the Stock Option or Stock Appreciation Right award
certificate; provided, however, that such period following
Termination of Employment shall not exceed twelve months
unless employment shall have terminated:

(i) as a result of Retirement, Disability, or
involuntary termination without cause, in which event
such period shall not exceed the original term of the
Stock Option or Stock Appreciation Right; or

(ii) as a result of death, or death shall have
occurred following Termination of Employment and while
the Stock Option or Stock Appreciation Right was still
exercisable, in which event such period shall not exceed
the original term of the Stock Option; and

provided, further, that such period following Termination of
Employment shall in no event exceed the original exercise
period of the Stock Option or related Stock Appreciation
Right, if any.

(g) Cashing Out of Stock Option. On receipt of written
notice of exercise, the Committee may elect to cash out all
or part of the portion of the shares of Common Stock for
which a Stock Option is being exercised by paying the
optionee an amount, in cash or Common Stock, equal to the
excess of the Fair Market Value of the Common Stock over the
option price times the number of shares of Common Stock for
which the Option is being exercised on the effective date of
such cash-out.

(h) Change in Control Cash-Out. Notwithstanding any other
provision of the Plan, during the 60-day period from and
after a Change in Control (the "Exercise Period"), unless the
Committee shall determine otherwise at the time of grant, an
optionee shall have the right, whether or not the Stock
Option is fully exercisable and in lieu of the payment of the
exercise price for the shares of Common Stock being purchased
under the Stock Option and by giving notice to the Company,
to elect (within the Exercise Period) to surrender all or
part of the Stock Option to the Company and to receive cash,

A-6

within 30 days of such notice, in an amount equal to the
amount by which the Change in Control Price per share of
Common Stock on the date of such election shall exceed the
exercise price per share of Common Stock under the Stock
Option (the "Spread") multiplied by the number of shares of
Common Stock granted under the Stock Option as to which the
right granted under this Section 5(h) shall have been
exercised. Notwithstanding the foregoing, if any right
granted pursuant to this Section 5(h) would make a Change in
Control transaction ineligible for pooling-of-interests
accounting under APB No. 16 that but for the nature of such
grant would otherwise be eligible for such accounting
treatment, the Committee shall have the ability to substitute
for the cash payable pursuant to such right Common Stock with
a Fair Market Value equal to the cash that would otherwise be
payable hereunder, or, if necessary to preserve such
accounting treatment, otherwise modify or eliminate such
right.

SECTION 6. STOCK APPRECIATION RIGHTS

(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option
granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the
time of grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at
the time of grant of such Stock Option. In addition, Stock
Appreciation Rights may be granted without relationship to a
Stock Option to employees residing in foreign jurisdictions,
where the grant of a Stock Option is impossible or
impracticable because of securities or tax laws or other
governmental regulations.

(b) Freestanding Stock Appreciation Rights. A Stock
Appreciation Right granted without relationship to a Stock
Option, pursuant to Section 6(a), shall be exercisable as
determined by the Committee, but in no event after ten
years from the date of grant. The base price of a Stock
Appreciation Right granted without relationship to a Stock
Option shall be the Fair Market Value of a share of Common
Stock on the date of grant. A Stock Appreciation Right
granted without relationship to a Stock Option shall entitle
the holder, upon receipt of such right, to a cash payment
determined by multiplying (i) the difference between the base
price of the Stock Appreciation Right and the Fair Market
Value of a share of Common Stock on the date of exercise of
the Stock Appreciation Right, by (ii) the number of shares of
Common Stock as to which the Stock Appreciation Right shall
have been exercised. A freestanding Stock Appreciation Right
may be exercised by giving written notice of exercise to the
Company or its designated agent specifying the number of
shares of Common Stock as to which such Stock Appreciation
Right is being exercised.

(c) Tandem Stock Appreciation Rights. A Stock Appreciation
Right granted in conjunction with a Stock Option may be
exercised by an optionee in accordance with Section 6(d) by
surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the optionee
shall be entitled to receive an amount determined in the
manner prescribed in Section 6(d). Stock Options which have
been so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been
exercised. A Stock Appreciation Right shall terminate and
no longer be exercisable upon the termination or exercise
of the related Stock Option.

(d) Terms and Conditions. Stock Appreciation Rights
granted in conjunction with a Stock Option shall be subject
to such terms and conditions as shall be determined by the
Committee, including the following:

(i) Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the
Stock Options to which they relate are exercisable in
accordance with the provisions of Section 5 and this
Section 6.

(ii) Upon the exercise of a Stock Appreciation Right,
an optionee shall be entitled to receive an amount in
cash, equal to the excess of the Fair Market Value of one
share of Common Stock over the option price per share
specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation
Right shall have been exercised.

A-7

(iii) Stock Appreciation Rights shall be transferable
only to permitted transferees of the underlying Stock
Option in accordance with Section 5(e).

(iv) Upon the exercise of a Stock Appreciation Right,
the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set
forth in Section 3 on the number of shares of Common
Stock to be issued under the Plan, but only to the extent
of the number of shares covered by the Stock Appreciation
Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.

SECTION 7. BONUS SHARES AND RESTRICTED STOCK

(a) Administration. Awards of unrestricted shares of
Common Stock may be made only in lieu of cash payments
awarded under other incentive plans or programs of the
Company and its Subsidiaries. Awards of Restricted Stock may
be made either alone, in addition to other Awards granted
under the Plan, or in lieu of cash payments awarded under
other incentive plans or programs of the Company and its
Subsidiaries. Subject to the foregoing limitations, the
Committee shall determine the officers and employees to whom
and the time or times at which grants of unrestricted shares
of Common Stock and Restricted Stock will be awarded, the
number of shares to be awarded to any participant (subject to
the aggregate limit on grants to individual participants set
forth in Section 3 in the case of Qualified Performance-Based
Awards), the conditions for vesting, the time or times within
which such Awards may be subject to forfeiture and any other
terms and conditions of the Awards, in addition to those
contained in Section 7(c).

(b) Awards and Certificates. Awards of unrestricted
shares of Common Stock and Restricted Stock shall be
evidenced in such manner as the Committee may deem
appropriate, including, book-entry registration or delivery
of one or more stock certificates to the participant, or, in
the case of Restricted Stock, a custodian or escrow agent.
Any stock certificate issued in respect of unrestricted
shares or shares of Restricted Stock shall be registered in
the name of such participant. The Committee may require that
the stock certificates evidencing shares of Restricted Stock
be held in custody or escrow by the Company or its designated
agent until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the
participant shall have delivered a stock power, endorsed in
blank, relating to the Common Stock covered by such Award.

(i) The Committee may, prior to or at the time of
grant, designate an Award of Restricted Stock as a
Qualified Performance-Based Award, in which event it
shall condition the grant or vesting, as applicable, of
such Restricted Stock upon the attainment of Performance
Goals. If the Committee does not designate an Award of
Restricted Stock as a Qualified Performance-Based Award,
it may also condition the grant or vesting thereof upon
the attainment of Performance Goals. Regardless of
whether an Award of Restricted Stock is a Qualified
Performance-Based Award, the Committee shall also
condition the grant or vesting thereof upon the continued
service of the participant. The period of service set by
the Committee commencing with the date of such Award for
which the participant's continued service is required
(the "Restriction Period") shall be not less than one
year if the Restricted Stock Award includes Performance
Goals and not less than three years if the Restricted
Stock Award does not include Performance Goals. The
conditions for grant or vesting and the other provisions
of Restricted Stock Awards (including without limitation
any applicable Performance Goals) need not be the same
with respect to each recipient. Awards of Restricted
Stock may provide for the acceleration of vesting or for
release from the Performance Goals only in the event of
the death, Disability, Retirement, involuntary
termination without cause, or international transfer of
the participant; provided, further, that in the case of
Restricted Stock that is a Qualified Performance-Based
Award, satisfaction of the applicable Performance Goals
shall nonetheless be required unless the participant's
employment is terminated by reason of death or
Disability. In addition, the Committee may at any time,
in its sole discretion, accelerate vesting

A-8

or waive Performance Goals in the event of death,
Disability, Retirement, involuntary termination without
cause, or international transfer of the participant;
provided, however, that in the case of Restricted Stock
that is a Qualified Performance-Based Award, the
applicable Performance Goals have been satisfied.

(ii) Subject to the provisions of the Plan and the
terms of the Restricted Stock Award, during the
Restriction Period, and until the later of (A) the
expiration of the Restriction Period and (B) the date the
applicable Performance Goals (if any) are satisfied, the
participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of
Restricted Stock; provided that the foregoing shall not
prevent a participant from pledging Restricted Stock as
security for a loan, the sole purpose of which is to
provide funds to pay the option price for Stock Options.

(iii) Except as provided in this paragraph (iii) and
Sections 7(c)(i) and 7(c)(ii) and the terms of the
Restricted Stock Award, the participant shall have, with
respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class
or series of Common Stock that is the subject of the
Restricted Stock, including, if applicable, the right to
vote the shares and the right to receive any cash
dividends. If so determined by the Committee under the
applicable terms of the Restricted Stock Award and
subject to Section 12(e) of the Plan, (A) cash dividends
on the class or series of Common Stock that is the
subject of the Restricted Stock Award shall be
automatically deferred and reinvested in additional
Restricted Stock, held subject to the vesting of the
underlying Restricted Stock, or held subject to meeting
Performance Goals applicable only to dividends, and (B)
dividends payable in Common Stock shall be paid in the
form of Restricted Stock of the same class as the Common
Stock with which such dividend was paid, held subject to
the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to
dividends.

(iv) Except to the extent otherwise provided under
the applicable terms of the Restricted Stock Award and
Sections 7(c)(i), 7(c)(ii), 7(c)(v) and 9(a)(ii), upon a
participant's Termination of Employment for any reason
during the Restriction Period or before the applicable
Performance Goals are satisfied, all shares still subject
to restriction shall be forfeited by the participant.

(v) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a
prior forfeiture of the Restricted Stock, unlegended
certificates for such shares shall be delivered to the
participant upon surrender of the legended certificates,
or the restrictions on such shares shall be removed from
the book-entry registration.

SECTION 8. DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS

(a) The Committee may provide that a participant to whom
a Stock Option has been awarded, which is exercisable in
whole or in part at a future time for shares of Common Stock
(such shares, the "Option Shares") shall be entitled to
receive an amount per Option Share, equal in value to the
cash dividends, if any, paid per share of Common Stock on
issued and outstanding shares, as of the dividend record
dates occurring during the period between the date of the
Award and the time each such Option Share is delivered
pursuant to the exercise of such Stock Option. Such amounts
(herein called "dividend equivalents") may, in the discretion
of the Committee, be:

(i) paid in cash or shares of Common Stock from time
to time prior to or at the time of the delivery of such
shares of Common Stock or upon expiration of the Stock
Option if it shall not have been fully exercised (except
that payment of the dividend equivalents on an Incentive
Stock Option may not be made prior to exercise); or

(ii) converted into contingently credited shares of
Common Stock (with respect to which dividend equivalents
shall accrue) in such manner, at such value, and
deliverable at such time or times, as may be determined
by the Committee.

Such shares of Common Stock (whether delivered or
contingently credited) shall be charged against the
limitations set forth in Section 3.

A-9

(b) The Committee, in its discretion, may authorize
payment of interest equivalents on any portion of any Award
payable at a future time in cash, and interest equivalents on
dividend equivalents which are payable in cash at a future
time.

SECTION 9. CHANGE IN CONTROL PROVISIONS

(a) Impact of Event. Notwithstanding any other provision
of the Plan to the contrary, in the event of a Change in
Control:

(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is
determined to have occurred, and which are not then
exercisable and vested, shall become fully exercisable
and vested to the full extent of the original grant.

(ii) The restrictions and deferral limitations
applicable to any Restricted Stock shall lapse, and such
Restricted Stock shall become free of all restrictions
and become fully vested and transferable to the full
extent of the original grant.

(b) Definition of Change in Control. For purposes of the
Plan, a "Change in Control" shall mean the happening of any
of the following events:

(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the
then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) 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, however, that, for
purposes of this Section 9(b)(i), the following
acquisitions shall not constitute a Change in Control:
(A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any affiliated company or
(D) any acquisition by any corporation pursuant to a
transaction that complies with Sections 9(b)(iii) (A),
(B) and (C).

(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the
Board; provided, however, 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 was 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.

(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of all or substantially all of the assets or
stock of any other entity (a "Business Combination"), in
each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and
entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 60% of, 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 entity resulting from such Business
Combination (including, without limitation, an entity
that 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, (B) no Person
(excluding any entity resulting from such Business

A-10

Combination or any employee benefit plan (or related
trust) of the Company or such entity resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the entity
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such entity, except to the extent that such ownership
existed prior to the Business Combination, and (C) at
least a majority of the members of the board of directors
of the entity 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 providing for such Business Combination; or

(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.

(c) Change in Control Price. For purposes of the Plan,
"Change in Control Price" means the higher of (i) the highest
reported sales price, regular way, of a share of Common Stock
in any transaction reported on the New York Stock Exchange
Composite Tape or other national exchange on which such
shares are listed or on NASDAQ during the 60-day period prior
to and including the date of a Change in Control or (ii) if
the Change in Control is the result of a tender or exchange
offer or a Corporate Transaction, the highest price per share
of Common Stock paid in such tender or exchange offer or
Corporate Transaction; provided, however, that in the case of
Incentive Stock Options and Stock Appreciation Rights
relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the
Common Stock on the date such Incentive Stock Option or Stock
Appreciation Right is exercised. To the extent that the
consideration paid in any such transaction described above
consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of
the Board.

SECTION 10. AMENDMENT AND TERMINATION

The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which
would impair the rights of an optionee under any Award
theretofore granted without the optionee's or recipient's
consent, except such an amendment made to cause the Plan to
comply with applicable law, stock exchange rules or accounting
rules. In addition, no such amendment shall be made without the
approval of the Company's shareholders to the extent such
approval is required by law or agreement or if such amendment
would:

(a) expand the classes of persons to whom Awards may be
made under Section 4 of this Plan;

(b) increase the number of shares of Common Stock
authorized for grant under Section 3 of this Plan;

(d) increase the percentage of shares available for
Awards of Restricted Stock or unrestricted shares of Common
Stock;

(e) permit unrestricted shares of Common Stock to be
granted other than in lieu of cash payments under other
incentive plans and programs of the Company and its
Subsidiaries;

(f) allow the creation of additional types of awards;

(g) permit decreasing the option price on any outstanding
option or the base price on any Stock Appreciation Right;

(h) permit shortening the Restriction Periods or removing
or waiving Performance Goals except to the extent permitted
under Sections 7 and 9 of the Plan; or

(i) change any of the provisions of this paragraph of
Section 10.

The Committee may amend the terms of any Stock Option or
other Award theretofore granted, prospectively or retroactively,
but no such amendment (a) shall cause a Qualified Performance-Based

A-11

Award to cease to qualify for the Section 162(m) Exemption or
(b) impair the rights of any holder without the holder's consent
except such an amendment made to cause the Plan or Award to
qualify for any exemption provided by Rule 16b-3 or (c) modify
the terms of any Stock Options or other Award in a manner
inconsistent with the provisions of this Plan.

Subject to the above provisions, the Board shall have
authority to amend the Plan to take into account changes in law
and tax and accounting rules as well as other developments, and
to grant Awards which qualify for beneficial treatment under such
rules without stockholder approval.

SECTION 11. UNFUNDED STATUS OF PLAN

It is presently intended that the Plan constitute an
"unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that
unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded"
status of the Plan.

SECTION 12. GENERAL PROVISIONS

(a) The Committee may require each person purchasing or
receiving shares pursuant to an Award to represent to and
agree with the Company in writing that such person is
acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any
legend, or, in the case of book-entry registration any
notation, which the Committee deems appropriate to reflect
any restrictions on transfer.

Notwithstanding any other provision of the Plan or
certificates made pursuant thereto, the Company shall not be
required to issue or deliver any stock certificate or
certificates for shares of Common Stock, or account for such
shares by book-entry registration, under the Plan prior to
fulfillment of all of the following conditions:

(i) Listing or approval for listing upon notice of
issuance, of such shares on the New York Stock Exchange,
Inc., or such other securities exchange as may at the
time be the principal market for the Common Stock;

(ii) Any registration or other qualification of such
shares of the Company under any state, federal or foreign
law or regulation, or the maintaining in effect of any
such registration or other qualification which the
Committee shall, in its absolute discretion upon the
advice of counsel, deem necessary or advisable; and

(iii) Obtaining any other consent, approval, or
permit from any state or federal governmental agency or
foreign governmental body which the Committee shall, in
its absolute discretion after receiving the advice of
counsel, determine to be necessary or advisable.

(b) Nothing contained in the Plan shall prevent the
Company or any Subsidiary or Associated Company from adopting
other or additional compensation arrangements for its
employees.

(c) Adoption of the Plan shall not confer upon any
employee any right to continued employment, nor shall it
interfere in any way with the right of the Company or a
Subsidiary or an Associated Company to terminate the
employment of any employee at any time.

(d) No later than the date as of which an amount first
becomes includible in the gross income of the participant for
federal income tax purposes with respect to any Award under
the Plan, the participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Company, the
minimum withholding obligations may be settled with Common
Stock, including Common Stock that is part of the Award that
gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and its Subsidiaries
or Associated Companies shall, to the extent permitted by
law, have the right to deduct any such taxes from any

A-12

payment otherwise due to the participant. The Committee may
establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of
withholding obligations with Common Stock.

(e) Reinvestment of dividends in additional Restricted
Stock at the time of any dividend payment shall only be
permissible if sufficient shares of Common Stock are
available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).

(f) The Committee, in its sole discretion, may establish
such procedures as it deems appropriate for a participant to
designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom
any rights of the participant, after the participant's death,
may be exercised.

(g) In the case of a grant of an Award to any employee of
a Subsidiary or Associated Company, the Company may, if the
Committee so directs, issue or transfer the shares of Common
Stock, if any, covered by the Award to the Subsidiary or
Associated Company, for such lawful consideration as the
Committee may specify, upon the condition or understanding
that the Subsidiary or Associated Company will transfer the
shares of Common Stock to the employee in accordance with the
terms of the Award specified by the Committee pursuant to the
provisions of the Plan.

(h) The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to
principles of conflict of laws.

SECTION 13. EFFECTIVE DATE OF PLAN

The Plan shall be effective as of April 27, 2000.

SECTION 14. EFFECT OF CERTAIN SALES

Notwithstanding any other provision of the Plan, the
Committee shall have authority to determine for purposes of any
Award that (a) is outstanding as of the date that the Company
sells any business, or its interest in any business, to Monsanto
Company and (b) is held by a participant who in connection with
such sale becomes an employee of Monsanto Company (or a
subsidiary or associated company of Monsanto Company) rather than
an employee of the Company (or a Subsidiary or Associated Company
of the Company), such change of employment shall not constitute a
Termination of Employment. With respect to any such Award held by
any such participant, Termination of Employment shall mean the
termination of the participant's employment with Monsanto
Company, a subsidiary of Monsanto Company, or an associated
company of Monsanto Company other than as the result of a
transfer among such companies. A participant employed by a
subsidiary or an associated company of Monsanto Company shall
also be deemed to incur a Termination of Employment if the
subsidiary or associated company ceases to be such a subsidiary
or associated company of Monsanto Company, as the case may be,
and the participant does not immediately thereafter become an
employee of Monsanto Company or another subsidiary or associated
company of Monsanto Company. For purposes of this Section 14, a
subsidiary of Monsanto Company means any corporation (or
partnership, joint venture, or other enterprise) of which
Monsanto Company owns or controls, directly or indirectly, 50% or
more of the outstanding shares of stock normally entitled to vote
for the election of directors (or comparable equity participation
and voting power), and an associated company of Monsanto Company
means any corporation (or partnership, joint venture, or other
enterprise), of which Monsanto Company owns or controls, directly
or indirectly, 10% or more, but less than 50% of the outstanding
shares of stock normally entitled to vote for the election of
directors (or comparable equity participation and voting power).

A-13

APPENDIX B

SOLUTIA INC. ANNUAL INCENTIVE PLAN

1. PURPOSE. The purpose of the Solutia Inc. Annual Incentive
Plan (the "Plan") is to provide executive officers of Solutia
Inc. (the "Company") and its affiliates with annual incentive
compensation based on the level of achievement of financial and
other performance criteria. The Plan is intended to focus the
interests of these key employees on the key measures of the
Company's success and to reward these employees for achieving the
key measures of the Company's success.

2. DEFINITIONS. As used in the Plan, the following terms
shall have the meanings set forth below:

(a) "Award" shall mean a cash payment (whether paid
currently or deferred) for a Performance Year.

(b) "Board" shall mean the Board of Directors of the
Company.

(d) "ECDC" shall mean the Executive Compensation and
Development Committee of the Board (or any successor
committee), which committee shall consist solely of two or
more "outside directors" within the meaning of Section 162(m)
of the Code.

(e) "Participant" shall mean any executive officer who is
eligible to participate in accordance with Section 3 of this
Plan.

(f) "Performance Year" shall mean the fiscal year of the
Company in which a Participant provides services on account
of which the Award is made.

(g) "Performance Award" shall mean an Award level that
may be paid if certain performance goals are achieved in the
Performance Year.

3. ELIGIBILITY. Individuals employed by the Company or any of
its affiliates in active service during a Performance Year who
are executive officers at any time during such year are eligible
to be Participants under the Plan for such Performance Year and
may be considered by the ECDC for an Award.

4. AWARDS.

(a) The ECDC shall establish objective performance goals
not later than 90 days after the beginning of each
Performance Year. The performance goals will be based on one
or more of the following business criteria: revenue growth,
operating margins and working capital.

(b) The ECDC shall also establish the Performance Award
payable to a Participant if the performance goals are
achieved. The payment of any Award shall be subject to
achievement of the performance goals. The ECDC may, in its
discretion, reduce the amount of any Award based on such
criteria as it shall determine, including, but not limited
to, the actual level of revenue growth, operating margins or
working capital, individual performance, safety performance,
business unit and site accomplishments, and other factors
tied to the success of the Company or any of its business
units. Awards shall be paid in cash as soon as practicable
after the ECDC has certified in writing that the performance
goals for the Performance Year have been achieved.

(c) The ECDC shall have the power to impose such other
restrictions on Awards as it may deem necessary or
appropriate to ensure that such Awards satisfy all
requirements for "performance-based compensation" within the
meaning of Section 162(m) of the Code, the regulations
promulgated thereunder, and any successors thereto, and the
Plan shall be interpreted accordingly.

(d) The maximum amount of the Award to a Participant for
any Performance Year shall be $3,000,000.

B-1

such an election shall be based on a reasonable rate of interest
or on one or more predetermined actual investments, as determined
by the ECDC.

6. OTHER CONDITIONS.

(a) No person shall have any claim to an Award under the
Plan. There is no obligation of uniformity of treatment of
Participants under the Plan. Awards under the Plan may not be
assigned or alienated.

(b) Neither the Plan, nor any action taken hereunder,
shall be construed as giving to any Participant the right to
be retained in the employ of the Company or an affiliate.

(c) The Company or any affiliate shall have the right to
deduct from any Award to be paid under the Plan any federal,
state, or local taxes required by law to be withheld with
respect to such payment.

7. PLAN ADMINISTRATION.

(a) The ECDC shall have full discretionary power to
administer and interpret the Plan and to establish rules for
its administration. In making any determinations under or
referred to in the Plan, the ECDC shall be entitled to rely
on opinions, reports or statements of employees of the
Company and its affiliates and of counsel, public
accountants, and other professional or expert persons.

(b) The Plan shall be governed by the laws of the State
of Delaware and applicable federal law.

8. MODIFICATION OR TERMINATION OF PLAN. The ECDC may modify
or terminate the Plan at any time, effective at such date as the
ECDC may determine.

B-2

APPENDIX C

SOLUTIA INC. LONG-TERM INCENTIVE PLAN

1. PURPOSE. The purpose of the Solutia Inc. Long-Term
Incentive Plan (the "Plan") is to provide executive officers, or
other designated employees, of Solutia Inc. (the "Company") and
its affiliates with long-term incentive compensation based on the
level of achievement of financial and other performance criteria.
The Plan is intended to focus the interests of these key
employees on the key measures of the Company's success and to
reward these employees for achieving the key measures of the
Company's success.

2. DEFINITIONS. As used in the Plan, the following terms
shall have the meanings set forth below:

(a) "Award" shall mean a cash payment (whether paid
currently or deferred) for a Performance Period.

(b) "Board" shall mean the Board of Directors of the
Company.

(e) "Participant" shall mean any executive officer, or
any other key employee, who is eligible to participate in
accordance with Section 3 of this Plan.

(f) "Performance Period" shall mean a three-year period
for which the ECDC has established performance goals, which
period shall not overlap with any other Performance Period.

(g) "Performance Award" shall mean an Award level that
may be paid if certain performance goals are achieved in the
Performance Period.

3. ELIGIBILITY. Individuals employed by the Company or any of
its affiliates in active service during a Performance Period who
are executive officers, or other key employees designated by the
ECDC, at any time during such period are eligible to be
Participants under the Plan for such Performance Period and may
be considered by the ECDC for an Award.

4. AWARDS.

(a) The ECDC shall establish objective performance goals
not later than 90 days after the beginning of each
Performance Period. The performance goals will be based on
one or more of the following business criteria: net income,
free cash flow, and revenue growth.

(b) The ECDC shall also establish the Performance Award
payable to a Participant if the performance goals are
achieved. The payment of any Award shall be subject to
achievement of the performance goals. The ECDC may, in its
discretion, reduce the amount of any Award based on such
criteria as it shall determine, including, but not limited
to, the actual level of net income, free cash flow and
revenue growth, individual performance, safety performance,
business unit and site accomplishments, and other factors
tied to the success of the Company or any of its business
units. Awards shall be paid in cash as soon as practicable
after the ECDC has certified in writing that the performance
goals for the Performance Period have been achieved.

(d) The maximum amount payable to a Participant as an
Award for a Performance Period shall be $20,000,000.

C-1

5. DEFERRALS. The ECDC may establish procedures pursuant to
which Participants are permitted to defer the receipt of Awards;
provided that any increase in the amount of the cash payable as a
result of such an election shall be based on a reasonable rate of
interest or on one or more predetermined actual investments as
determined by the ECDC.

6. OTHER CONDITIONS.

(b) Neither the Plan, nor any action taken hereunder,
shall be construed as giving to any Participant the right to
be retained in the employ of the Company or an affiliate.

(c) The Company or any affiliate shall have the right to
deduct from any Award to be paid under the Plan any federal,
state or local taxes required by law to be withheld with
respect to such payment.

7. PLAN ADMINISTRATION.

(a) The ECDC shall have full discretionary power to
administer and interpret the Plan and to establish rules for
its administration. In making any determinations under or
referred to in the Plan, the ECDC shall be entitled to rely
on opinions, reports or statements of employees of the
Company and its affiliates and of counsel, public accountants
and other professional or expert persons.

(b) The Plan shall be governed by the laws of the State
of Delaware and applicable federal law.

8. MODIFICATION OR TERMINATION OF PLAN. The ECDC may modify
or terminate the Plan at any time, effective at such date as the
ECDC may determine.

C-2

DIRECTIONS TO [MAP]
ST. LOUIS
MARRIOTT
WEST HOTEL

FROM LAMBERT
INTERNATIONAL AIRPORT:
Take I-70 West approximately 3 miles to I-270 South, then 8 miles
to the 40/I-64 West exit.

FROM DOWNTOWN
ST. LOUIS:
Take Highway 40/I-64 West.

From Highway 40/I-64, exit Maryville Centre Drive (exit #23). Go
North 1/8 of a mile. The St. Louis Marriott West Hotel will be on
the left. Turn into the parking lot and follow the Solutia annual
meeting signs.

----------------------------------
Solutia [Logo]

Annual Meeting of Stockholders

St. Louis Marriott West Hotel
660 Maryville Centre Drive
St. Louis, Missouri 63141

April 26, 2000
1:15 P.M.

ADMISSION TICKET
----------------------------------

/ X / PLEASE MARK YOUR
VOTE AS IN THIS
EXAMPLE.

WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2, 3, 4 AND 5.
- ------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3, 4 AND 5.
- ------------------------------------------------------------------------------
FOR WITHHELD
1. Election of
Directors / / / /
to terms listed
on reverse.

For, except vote withheld from the following nominee(s):

- --------------------------------------------------------

FOR AGAINST ABSTAIN
2. Approval of the
Solutia Inc. 2000 / / / / / /
Stock-Based
Incentive Plan.

3. Approval of the
Solutia Inc. Annual / / / / / /
Incentive Plan.

FOR AGAINST ABSTAIN
4. Approval of the Solutia Inc.
Long-Term Incentive Plan. / / / / / /

5. Ratification of Deloitte &
Touche LLP as principal inde- / / / / / /
pendent auditors for 2000.

- -------------------------------
SPECIAL ACTION
- ------------------------------- / /
Check box if you wish to dis-
continue duplicate annual
report mailing.
- -------------------------------

Please sign your name or names exactly as printed hereon.
When shares are held by joint tenants, both should sign.
Trustees and other fiduciaries should so indicate when
signing.

---------------------------------------------------------

---------------------------------------------------------
SIGNATURE(S) DATE
- ------------------------------------------------------------------------------
^ FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL ^

[Solutia logo]

Solutia Inc. encourages you to vote your shares electronically by telephone or
through the Internet. This will eliminate the need to return your proxy card.

To vote your shares by telephone or through the Internet, you must use the
control numbers printed in the box above, just below the perforation, to
access the system.

The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up through the day before the meeting.

TO VOTE BY TELEPHONE:
- ---------------------
Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683)
From outside the United States, call direct: 1-201-536-8073

TO VOTE BY INTERNET:
- --------------------
Log on to the Internet and go to the website: http://www.eproxyvote.com/soi
-----------------------------
Note: If you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be
responsible.

If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.

YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING YOUR SHARES.

[Solutia logo] SOLUTIA INC.
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2000 ANNUAL MEETING
ST. LOUIS MARRIOTT WEST HOTEL, 660 MARYVILLE CENTRE DRIVE
ST. LOUIS, MISSOURI 63141
APRIL 26, 2000 AT 1:15 P.M.
P
R The undersigned hereby appoints John C. Hunter III, Michael E. Miller,
O and Karl R. Barnickol, and each of them, with full power of substitution,
X proxies to vote all shares of Common Stock of Solutia Inc. that the
Y undersigned is entitled to vote at the 2000 Annual Meeting of
Stockholders, and any adjournments thereof, as specified upon the matters
indicated on the reverse side and in their discretion upon such other
matters as may properly come before the meeting.

If the undersigned is a participant in the Solutia Inc. Savings and
Investment Plan or the Monsanto Savings and Investment Plan, and this
proxy card is received on or prior to April 21, 2000, then this card also
provides voting instructions to the trustee of such plan to vote at the
2000 Annual Meeting, and any adjournments thereof, all shares of Common
Stock of Solutia held in the undersigned's plan account as specified upon
the matters indicated on the reverse side and in its discretion upon such
other matters as may properly come before the meeting. If the undersigned
is a participant in one of these plans and does not instruct the trustee
by April 21, 2000, then the trustee will vote the undersigned's plan
account shares in proportion to the votes of the other participants in
that plan. In addition, the trustee will vote unallocated shares in the
plan in direct proportion to voting by allocated shares for which
instructions have been received.

Election of directors to the terms listed below (see reverse).
For term expiring 2003: (01) Robert T. Blakely, (02) Robert H. Jenkins,
(03) Frank A. Metz, Jr.
For term expiring 2002: (04) Paul H. Hatfield

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^ FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL ^

PLEASE SEE REVERSE SIDE FOR INFORMATION ON VOTING
YOUR PROXY BY TELEPHONE OR INTERNET.

IF YOU WILL BE ATTENDING THE MEETING, PLEASE BRING THE ADMISSION
TICKET PRINTED ON THE BACK COVER OF THE PROXY STATEMENT.

APPENDIX

1. The legend appearing at the top of the Notice of Annual Meeting of
Stockholders in the EDGAR filing appears in the printed document
vertically in red along the left side of the Notice. The printed
documents containing this legend will be distributed only to
participants in Solutia's stock option plans. The legend will not
appear on documents delivered to other stockholders.

2. On printed pages 4 through 6, the blank spaces to the left of each
director's biography depicted by the word "[PHOTO]," contain a
1-1/8 inch by 1-5/8 inch black-and-white photograph of the
respective director.

3. On printed page 5, "Your Board of Directors recommends a vote
'FOR' these nominees" is in bold-face type.

4. On printed page 18, the Stock Price Performance Graph is being
transmitted in a format which can be processed by EDGAR.

5. On printed page 18, the trademarks are designated by the
superscript letter "R" in a circle.

6. On printed page 22, "Your Board of Directors recommends that you
vote 'FOR' approval of the Solutia Inc. 2000 Stock-Based Incentive
Plan" is in bold-face type.

7. On printed page 24, "Your Board of Directors recommends that you
vote 'FOR' the approval of the Solutia Inc. Annual Incentive Plan
and 'FOR' the approval of the Solutia Inc. Long-Term Incentive
Plan" and "Your Board of Directors recommends that you vote 'FOR'
the ratification of the appointment of Deloitte & Touche LLP as
principal independent auditors for the year 2000" are in bold-face
type.