<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 2000
REGISTRATION NO. 333-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
____________________
SOLUTIA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-1781797
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI 63166-6760
(314) 674-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
____________________
KARL R. BARNICKOL, ESQ.
575 MARYVILLE CENTRE DRIVE, P.O. BOX 66760, ST. LOUIS, MISSOURI 63166-6760
(314) 674-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
____________________
WITH COPIES TO:
KATHLEEN S. SCHOENE, ESQ.
ARMSTRONG TEASDALE LLP
ONE METROPOLITAN SQUARE, SUITE 2600
ST. LOUIS, MISSOURI 63102-2740
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING
OFFERED PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK
THE FOLLOWING BOX. / /
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE
SECURITIES ACT OF 1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION
WITH DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. /X/
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN
OFFERING PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, CHECK THE
FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF
EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE
462(c) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO
RULE 434, PLEASE CHECK THE FOLLOWING BOX. / /
____________________
<TABLE>
CALCULATION OF REGISTRATION FEE
=================================================================================================================================
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO PROPOSED MAXIMUM PRICE MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED <F1> BE REGISTERED <F2> PER SECURITY OFFERING PRICE <F2> <F3> REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities <F4> <F4> <F4>
---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share <F5> <F6> <F4> <F4> <F4>
---------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, par value $.01 per
share <F4> <F4> <F4>
---------------------------------------------------------------------------------------------------------------------------------
Depositary Shares, representing
Preferred Stock <F4> <F4> <F4>
---------------------------------------------------------------------------------------------------------------------------------
Warrants <F7> <F4> <F4> <F4>
---------------------------------------------------------------------------------------------------------------------------------
TOTAL $600,000,000 <F8> <F4> $600,000,000 <F9> $158,500 <F8>
=================================================================================================================================
<PAGE>
<PAGE>
<FN>
<F1> The securities covered by this registration statement may be sold
or otherwise distributed separately, together or as units with other
securities covered by this registration statement. This registration
statement covers offers, sales and other distributions of the securities
listed in this table from time to time at prices to be determined, as
well as debt securities issuable upon the exercise of debt warrants so
offered or sold, shares of preferred stock distributable upon the
termination of a deposit arrangement for depositary shares so offered or
sold, and shares of common stock issuable upon the exchange or
conversion of debt securities or shares of preferred stock so offered or
sold that are exchangeable for or convertible into shares of common
stock or upon the exercise of common stock warrants or rights so
offered, sold or distributed.
<F2> In U.S. dollars or the equivalent thereof for any security
denominated in one or more, or units of two or more, foreign currencies
or composite currencies based on the exchange rate at the time of sale.
Debt securities may be issued with original issue discount such that the
aggregate initial public offering price will not exceed $600,000,000,
together with the other securities issued hereunder.
<F3> Estimated solely for purposes of calculating the registration fee
under Rule 457.
<F4> Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
<F5> This registration statement also includes preferred stock purchase
rights, which are attached to all shares of common stock issued,
pursuant to the terms of the registrant's rights agreement, dated as of
August 6, 1997. Until the occurrence of certain prescribed events,
these rights are not exercisable, are evidenced by the certificates for
the common stock and will be transferred with and only with the common
stock. Because no separate consideration is paid for these rights, the
registration fee therefor is included in the fee for the common stock.
<F6> The aggregate amount of Common Stock registered hereunder is
limited to that which is permissible under Rule 415(a)(4) of the
Securities Act.
<F7> The warrants covered by this registration statement may be debt
warrants, preferred stock warrants, depositary share warrants or common
stock warrants.
<F8> Calculated under Rule 457(o) of the Rules and Regulations under
the Securities Act of 1933, as amended.
<F9> The aggregate maximum offering price of all securities issued
under this registration statement will not exceed $600,000,000. No
separate consideration will be received for shares of preferred stock or
common stock that are issued upon conversion or exchange of debt
securities or for shares of preferred stock distributed upon termination
of a deposit arrangement for depositary shares.
</TABLE>
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
========================================================================
<PAGE>
<PAGE>
****************************************************************************
* The information contained in this prospectus is not complete and may be *
* changed. We may not sell these securities until the registration *
* statement filed with the Securities and Exchange Commission is *
* effective. This prospectus is not an offer to sell these securities and *
* it is not the solicitation of an offer to buy these securities in any *
* state where the offer or sale is not permitted. *
****************************************************************************
Prospectus, Subject to Completion, Dated September 19, 2000.
$600,000,000
SOLUTIA INC.
575 Maryville Centre Drive
P.O. Box 66760
St. Louis, Missouri 63166-6760
(314) 674-1000
Debt Securities, Common Stock, Preferred Stock, Depositary Shares,
Warrants to Purchase Debt Securities, Warrants to Purchase Common Stock,
Warrants to Purchase Preferred Stock
and Warrants to Purchase Depositary Shares
____________________
This prospectus describes debt and equity securities that we
may issue and sell at various times:
* Our prospectus supplements will be filed at later dates and
will contain specific terms of each issuance of debt or equity
securities.
* We can issue debt and equity securities with a total offering
price of up to $600,000,000 under this prospectus.
* We may sell the debt and equity securities to or through
underwriters, and also to other purchasers or through agents. The names
of the underwriters will be stated in the prospectus supplements. We
may also sell debt and equity securities directly to investors.
Our common stock is listed on the New York Stock Exchange under
the trading symbol "SOI." Any common stock sold pursuant to a
prospectus supplement will be listed on the New York Stock Exchange,
upon official notice of issuance.
You should read this prospectus and any prospectus supplement
carefully before you decide to invest. We will not sell any of the
securities being offered without delivery of the applicable prospectus
supplement describing the method and terms of the offering of the series
of securities being offered.
____________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________
Prospectus dated ______ __, 2000.
<PAGE>
<PAGE>
TABLE OF CONTENTS
About This Prospectus 1
Where You Can Find More Information 1
Cautionary Statement About Forward-Looking Statements 2
About Solutia 4
Use of Proceeds 5
Ratio of Earnings to Fixed Charges 5
Description of the Securities We May Offer 6
Description of Debt Securities 6
Description of Common Stock 24
Description of Preferred Stock 27
Description of Depositary Shares 29
Description of Warrants 31
Plan of Distribution 33
Validity of the Offered Securities 34
Experts 34
<PAGE>
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement
that we filed with the SEC. By using a shelf registration statement, we
may sell, from time to time, in one or more offerings, any combination
of the securities described in this prospectus. The total dollar amount
of the securities we will sell through these offerings will not exceed
$600,000,000.
This prospectus and any accompanying prospectus supplement do
not contain all of the information included in the registration
statement. We have omitted parts of the registration statement as
permitted by the rules and regulations of the SEC. For further
information, we refer you to the registration statement on Form S-3,
including its exhibits. Statements contained in this prospectus and any
accompanying prospectus supplement about the provisions or contents of
any agreement or other document are only summaries. If SEC rules
require that any agreement or document be filed as an exhibit to the
registration statement, you should refer to that agreement or document
for a complete description of these matters. You should not assume that
the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of each
document.
This prospectus provides you with only a general description of
the securities we may offer. Each time we sell securities, we will
provide a prospectus supplement that contains specific information about
the terms of those securities. The prospectus supplement may also add,
update or change information contained in this prospectus. You should
read both this prospectus and any prospectus supplement together with
the additional information described under the heading "Where You Can
Find More Information" below.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. The registration statement and our
other filings are available over the Internet at http://www.sec.gov.
You may also read and copy any document we file, including the
registration statement, at the following SEC public reference rooms:
* 450 Fifth Street, N.W. * 7 World Trade Center
Room 1024 13th Floor
Washington, D.C. 20549 New York, New York 10048
* 500 West Madison Street
Suite 1400
Chicago, Illinois 60661
You may call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms and their copy charges.
<PAGE>
<PAGE>
Our common stock is quoted on the New York Stock Exchange under
the symbol "SOI," and our SEC filings can also be read at:
New York Stock Exchange
20 Broad Street
New York, New York 10005
The SEC allows us to "incorporate by reference" the information
we file with it. This means that we can disclose important
information to you by referring you to the documents containing that
information. The information incorporated by reference is considered
part of this prospectus. Any information we file with the SEC later
will automatically update and, to the extent inconsistent, supersede the
information in this prospectus. We incorporate by reference the
documents listed below:
* Our annual report on Form 10-K for the year
ended December 31, 1999;
* Our quarterly reports on Form 10-Q for the
quarters ended March 31, 2000, and June 30, 2000;
* Our current reports on Form 8-K filed on January 4,
2000, January 20, 2000, February 1, 2000, and April 27,
2000, and our current report on Form 8-K/A filed on
March 6, 2000; and
* Our Form 10 filed on August 7, 1997, and amended
on August 19, 1997, for a description of our common
stock.
We also incorporate by reference any future filings we make
with the SEC, including any filings we make before the registration
statement becomes effective, under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 until we have sold all the
offered securities to which this prospectus relates or the offering is
otherwise terminated.
You may request a copy of these filings, at no cost, by writing
to us at the following address or telephoning us at (314) 674-4520:
Solutia Inc.
Investor Relations
575 Maryville Centre Drive
P.O. Box 66760
St. Louis, Missouri 63166-6760
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
We make statements in this prospectus and the documents
incorporated by reference that are considered forward-looking statements
under the federal securities laws. We consider all statements regarding
the following to be forward-looking statements:
* our expected future financial position, liquidity,
results of operations, and cash flows;
- 2 -
<PAGE>
<PAGE>
* dividends;
* financing plans;
* business strategy;
* budgets;
* projected costs and capital expenditures;
* competitive position;
* growth opportunities for existing products;
* effect of changes in accounting due to recently issued
accounting standards;
* benefits from new technology;
* price increases;
* share repurchases; and
* markets for our stock.
These statements are not guarantees of our future performance. There
are risks, uncertainties and other important factors that could cause
our actual performance or achievements to be materially different from
those we may project. These risks, uncertainties and factors include:
* general economic, business and market conditions,
which affect us because some of our customers are in
cyclical businesses;
* customer acceptance of new products;
* efficacy of new technology and facilities;
* currency fluctuations;
* changes in U.S. and foreign laws and regulations;
* shortages or pricing of raw materials and energy;
* integration of acquired companies into our business; and
* lower prices for our products or a decline in our market
share due to competition or price pressure by customers.
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<PAGE>
<PAGE>
These forward-looking statements represent our estimates and
assumptions only on the date they were made.
ABOUT SOLUTIA
Solutia Inc. and its subsidiaries make and sell a variety of high
performance chemical-based materials. Solutia's strategic focus is
built on key strengths, including:
* complex manufacturing capabilities;
* process engineering expertise;
* polymer chemistry;
* fiber technology;
* technical service; and
* customer problem solving.
We use these world-class skills to create solutions and products for
customers in the consumer, household, automotive, pharmaceutical and
industrial products industries. Solutia's materials and services
include:
* SAFLEX(R) plastic interlayer, used to make laminated glass
for automotive and architectural applications; adhesives;
LLUMAR(R) and VISTA(R) window films; and industrial films;
* liquid, powder and waterborne resins, used to produce high-
performance coatings for various products such as
automobiles, bicycles, bridges and compact discs;
* process research and technology services for the
pharmaceutical industry; and
* VYDYNE(R) and ASCEND(TM) nylon polymers; chemical
intermediates, and nylon fibers.
Solutia Inc. was incorporated in April 1997 as a holding company
for most of Monsanto Company's chemical businesses. On September 1,
1997, Monsanto distributed our shares as a dividend to Monsanto's
stockholders, and we became an independent publicly held company listed
on the New York Stock Exchange.
Solutia Inc. is a Delaware corporation, and our principal executive
office is located at 575 Maryville Centre Drive, P.O. Box 66760, St.
Louis, Missouri 63166-6760. Our telephone number at that address is (314)
674-1000. All references to "we," "us," or "Solutia" in this prospectus
mean, unless the context indicates otherwise, Solutia Inc. and its
consolidated subsidiaries.
For additional information about Solutia, refer to the documents
we have incorporated by reference. See "Where You Can Find More
Information" on pages 1 and 2 for information about how to obtain
copies of these documents.
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<PAGE>
<PAGE>
USE OF PROCEEDS
Unless we have indicated otherwise in the prospectus supplement,
we expect to use the net proceeds we receive from any offering of these
securities for some or all of the following purposes:
* repayment of commercial paper and existing long term debt;
* capital expenditures;
* additional working capital;
* acquisitions; and
* general corporate purposes.
Before we apply the proceeds to the intended use, we may temporarily
invest the proceeds in short-term, interest-bearing instruments or other
investment-grade debt securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratio of earnings to
fixed charges for the four-month period ended December 31, 1997, the
fiscal years ended December 31, 1998 and 1999, and the six-month period
ended June 30, 2000.
<TABLE>
<CAPTION>
Four Months Ended Years Ended December 31 Six Months Ended
December 31, 1997 1998 1999 June 30, 2000
----------------- ---- ---- -------------
<S> <C> <C> <C> <C>
Ratio of Earnings
to Fixed Charges 3.23 7.69 6.18 2.58
</TABLE>
We have calculated the ratio of earnings to fixed charges
according to a formula the SEC requires us to use. This formula defines
earnings generally as our pre-tax earnings from operations, less
interest expense and defines fixed charges generally as all interest and
interest-related payments and accruals. For the six months ended June 30,
2000, the year ended December 31, 1999, and the four months ended
December 31, 1997, earnings include restructuring and other unusual
items of $41 million, $63 million, and $72 million, respectively. If you
would like to see how we have calculated these ratios, you should review
Exhibit 12 to the registration statement. See "Where You Can Find More
Information" on pages 1 and 2 to find out how you can obtain a copy of
the registration statement.
We have not calculated the ratio of earnings to fixed charges for
periods before September 1, 1997. Historical computation of earnings to
fixed charges is not considered meaningful before that date because we
were not an independent company and Monsanto Company did not allocate
debt to us.
Because we have not issued any preferred stock to date, the ratio
of earnings to fixed charges and preferred stock dividend requirements
is identical to the ratio shown above.
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<PAGE>
<PAGE>
DESCRIPTION OF THE SECURITIES WE MAY OFFER
We may issue, from time to time, in one or more offerings the
following securities:
* debt securities, which may be senior or subordinated;
* shares of common stock;
* shares of preferred stock or depositary shares representing
fractions of shares of preferred stock; and
* warrants exercisable for debt securities, common stock,
preferred stock or depositary shares.
The aggregate initial offering price of these offered securities
that we may issue will not exceed $600,000,000. If we issue debt
securities at a discount from their original principal stated amount,
then, for purposes of calculating the aggregate initial offering price
of the offered securities issued under this prospectus, we will treat
the initial offering price of the debt securities as the total original
principal amount of the debt securities.
This prospectus contains a summary of the material and general
terms of the various securities that we may offer. The prospectus
supplement relating to any particular securities offered will describe
the specific terms of the securities, which may be in addition to or
different from the general terms summarized in this prospectus. Because
the summary in this prospectus and in any prospectus supplements does
not contain all of the information that you may find useful, you should
read the documents relating to the securities that are described in this
prospectus or in the prospectus supplement. See "Where You Can Find
More Information" on pages 1 and 2 to find out how you can obtain a copy
of those documents.
The prospectus supplement will also contain the terms of the
offering, the initial public offering price and the net proceeds to
Solutia. Where applicable, the prospectus supplement will also describe
any material United States federal income tax considerations relating to
the securities offered and indicate whether the securities offered are
or will be listed on any securities exchange.
DESCRIPTION OF DEBT SECURITIES
This section summarizes the terms that will generally apply to the
debt securities we may offer. The prospectus supplement relating to any
particular debt securities will contain most of the financial terms and
other specific terms applicable to those securities. Those terms may
vary from the terms described here. The prospectus supplement may also
describe special federal income tax consequences of the particular
securities. As used in this section, "we," "us," "our" and "Solutia"
refer to Solutia Inc. and not to any of our subsidiaries.
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<PAGE>
<PAGE>
The debt securities that we may issue will be unsecured, direct,
general obligations of Solutia. We may issue either senior debt
securities or subordinated debt securities. Our senior debt securities
will rank equally with all other unsecured and unsubordinated
indebtedness of Solutia. Our subordinated debt securities will be
subordinated in right of payment to the prior payment in full of the
"senior debt" of Solutia, as described below under "Subordination of
Subordinated Debt Securities" on page 10 and in the prospectus
supplement applicable to any subordinated debt securities that we may
offer.
As required by federal law for all bonds and notes publicly
offered by companies, the debt securities will be issued under a
document called an "indenture." An indenture is a contract between us
and a corporate trustee. The trustee has two main roles. First, the
trustee can enforce your rights against us if we default. There are
some limitations on the extent to which the trustee acts on your behalf
described under "Remedies If an Event of Default Occurs" on page 14.
Second, the trustee performs administrative duties for us, such as
sending your interest payments, transferring your securities to a new
buyer if you sell, and sending you notices.
We will issue any senior debt securities under a "senior debt
indenture," and any subordinated debt securities under a separate
"subordinated debt indenture." Each indenture will be between Solutia
and a trustee that meets the requirements of the federal Trust Indenture
Act of 1939. For purposes of the descriptions in this section, we may
refer to the senior debt indenture and the subordinated debt indenture
as "an indenture" or, collectively, as "the indentures."
The indentures do not limit the amount of debt securities that may
be issued under them. We may issue the debt securities from time to
time in one or more series. We are not required to issue all of the
debt securities of one series at the same time and, unless otherwise
provided in the applicable indenture or prospectus supplement, we may
reopen a series and issue additional debt securities of that series
without the consent of the holders of the outstanding debt securities of
that series.
The prospectus supplement for any particular debt securities will
indicate whether the debt securities are senior debt securities or
subordinated debt securities and describe the specific terms of the debt
securities. Because this summary and the summary in any prospectus
supplement do not contain all of the information you might find useful,
you should read the applicable indenture for provisions that may be
important to you. In the summaries we include in parentheses references
to sections of the indentures so that you can easily locate these
provisions. The indentures are substantially identical, except for some
of our covenants and provisions relating to subordination and
conversion. The forms of the indentures are exhibits to the
registration statement. See "Where You Can Find More Information" on
pages 1 and 2 to find out how you can obtain a copy of the registration
statement.
TERMS OF DEBT SECURITIES TO BE INCLUDED IN THE PROSPECTUS SUPPLEMENT
The prospectus supplement for any series of debt securities that
we may offer will state the price or prices at which the debt securities
will be offered and will contain the specific terms of the debt
securities of that series. These terms may include the following:
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<PAGE>
<PAGE>
* the title of the debt securities, whether they are senior
debt securities or subordinated debt securities and, if
subordinated, the terms of subordination;
* the aggregate principal amount of the debt securities and
any limit on that aggregate principal amount;
* the date or dates on which the principal of the debt
securities will be payable;
* the interest rate or rates, if any, and the date or dates
from which the interest accrues;
* the dates on which the interest, if any, is payable and the
regular record dates for the interest payment dates;
* the places where the principal of and any premium and any
interest on the debt securities will be payable;
* whether the offered debt securities are redeemable at our
option and, if so, the redemption price or prices and other
redemption terms and conditions;
* whether we must redeem or purchase the offered debt
securities according to any sinking fund or similar
provision or at the option of the holder of the debt
securities, and the period or periods within which, or the
date and dates on which, the price or prices at which, and
the other terms and conditions upon which the debt
securities will be redeemed or purchased, in whole or in
part, in accordance with that obligation;
* if other than denominations of $1,000 and any integral
multiple of $1,000, the denominations in which offered debt
securities of the series will be issuable;
* if other than the principal amount, the portion of the
principal amount payable if the maturity of the offered debt
securities is accelerated;
* whether any index, formula or other method will determine
payments of principal or interest and the manner of
determining the amount of the payments;
* if other than U.S. dollars, the currency, currencies, or
currency units in which the principal of, or any premium or
interest on, debt securities of the series will be payable;
* if the principal or any premium or interest is to be
payable, at the election of Solutia or the holder, in a
currency or currencies other than that or those in which the
debt securities are stated to be payable, the currency or
currencies in which the payment may be elected to be payable
and the periods within which, and the terms and conditions
upon which, the election is to be made;
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<PAGE>
<PAGE>
* whether we have the right to defer payments of interest by
extending the interest payment period and the duration of
any permissible extension;
* whether the provisions relating to defeasance and covenant
defeasance described on page 19 apply;
* if the debt securities will be issued in whole or in part in
the form of a book-entry debt security, as described under
the heading "Book-Entry Securities" on pages 21 through 23,
the depositary for the debt securities and the terms and
conditions, if any, upon which the book-entry debt security
may be registered for transfer or exchange in the name of a
person other than the depositary or its nominee;
* any addition to, or change in, the events of default
described on page 14;
* any addition to, or change in, the covenants in the
indenture applicable to the debt securities;
* if applicable, the terms of any right to convert or exchange
the offered debt securities into common stock of Solutia;
* whether the debt securities will be sold as part of units
consisting of debt securities and other securities;
* if the debt securities are to be issued upon the exercise of
warrants, the time, manner and place for the debt securities
to be authenticated and delivered; and
* any other terms consistent with the applicable indenture.
We may issue some of the debt securities at a substantial discount
below their principal amount as "original issue discount securities."
"Original issue discount securities" means that less than the entire
principal amount of the securities will be payable upon declaration of
acceleration of their maturity. The applicable prospectus supplement
will describe any special federal income tax consequences and other
considerations that apply to debt securities issued at a discount.
Debt securities may bear interest at a fixed rate or a floating
rate. Debt securities bearing no interest or interest at a rate that at
the time of issuance is below the prevailing market rate or as part of
units consisting of debt securities and other securities may be sold or
deemed to be sold at a discount below their stated principal amount. If
Solutia has the right to defer interest with respect to any debt
securities, the holders of these debt securities may be allocated
interest income for federal and state income tax purposes without
receiving equivalent, or any, interest payments. Any material federal
income tax considerations applicable to any discounted debt securities
or to debt securities issued at par that are treated as having been
issued at a discount for federal income tax purposes will be described
in the applicable prospectus supplement.
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<PAGE>
<PAGE>
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
To the extent provided in the subordinated debt indenture, the
payment of the principal of, and any premium and interest on, any
subordinated debt securities, including amounts payable on any
redemption or repurchase, will be subordinated in right of payment to
the prior payment in full of all our "senior debt," as defined below.
This means that in some circumstances, if we do not make payments on all
of our debt obligations as they come due, the holders of our senior debt
will be entitled to receive payment in full of all amounts that are due
or will become due on our senior debt before the holders of subordinated
debt securities will be entitled to receive any amounts on the
subordinated debt securities that they hold. These circumstances
include:
* our filing for bankruptcy or the occurrence of other events
in bankruptcy, insolvency or similar proceedings (Section
1302);
* our payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up or reorganization of
our company, or as part of an assignment or marshaling of
our assets for the benefit of our creditors (Section 1302);
or
* acceleration of the maturity of the subordinated debt
securities. For example, the entire principal amount of a
series of subordinated debt securities may be declared to be
due and immediately payable or may be automatically
accelerated due to an event of default as described under
"Remedies If an Event of Default Occurs" on page 14.
(Section 1303)
In addition, we are not permitted to make payments of principal,
any premium or interest on the subordinated debt securities if we
default in our obligation to make payments on senior debt and do not
cure that default, or if an event of default that permits the holders of
senior debt to accelerate the maturity of the senior debt occurs.
(Section 1303)
These subordination provisions mean that if we are insolvent a
holder of our senior debt may ultimately receive out of our assets more
than a holder of the same amount of our subordinated debt.
"Senior debt" means the principal of, any premium and unpaid
interest on all of our indebtedness, whether the indebtedness exists now
or is created after the date of this prospectus or the applicable
prospectus supplement. Senior debt generally includes:
* indebtedness for money that we borrow;
* obligations represented by our bonds, debentures, notes or
similar securities;
* indebtedness incurred or assumed when we acquire any
business, property or assets;
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* obligations that we owe as a lessee under leases that
generally accepted accounting principles require us to
capitalize on our balance sheet;
* reimbursement obligations under letters of credit relating
to indebtedness or other obligations of the kind referred to
in the four bullets above; and
* obligations under our guarantees of the indebtedness or
obligations of others of the kind referred to in the first
four bullets above.
Senior debt also includes any amendment, renewal, replacement,
extension, modification and refunding of any indebtedness that was
senior debt. Senior debt does not include any indebtedness that
expressly states in the instrument creating or evidencing it that it
does not rank senior in right of payment to the subordinated debt
securities. Senior debt does not include any subordinated debt
securities.
The applicable prospectus supplement may further describe the
provisions applicable to the subordination of the subordinated debt
securities of a particular series. The applicable prospectus supplement
will describe the approximate amount, on a recent date, of senior debt
outstanding to which the subordinated debt of that series will be
subordinated. The indenture does not limit the amount of senior debt we
are permitted to have, and we may in the future incur additional senior
debt.
CONVERSION OR EXCHANGE OF SUBORDINATED DEBT SECURITIES
The applicable prospectus supplement will describe the terms, if
any, on which a series of subordinated debt securities may be converted
into or exchanged for Solutia common stock. These terms will include
whether the conversion or exchange is mandatory, or is at Solutia's
option or the option of the holder. We will also describe in the
applicable prospectus supplement how we will calculate the number of
securities that holders of subordinated debt securities would receive if
they were to convert or exchange their debt securities, the conversion
price, other terms related to conversion and any anti-dilution
protections.
CONSOLIDATION, MERGER OR SALE OF ASSETS
The indentures generally permit Solutia to consolidate with or
merge into another company. They also permit us to sell substantially
all our assets to another company, or to buy substantially all the
assets of another company. However, we may not take any of these
actions unless the following conditions are met (Section 801):
* If we merge out of existence or sell our assets, the other
company may not be organized under a foreign country's laws.
In other words, the other company must be a corporation,
partnership or trust organized under state or federal law or
the laws of the District of Columbia. In addition, the
other company must agree to be legally responsible for the
debt securities; and
* The merger, sale of assets or other transaction must not
cause a default on the debt securities. For purposes of
this no-default test, a default would include any event
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of default described below under "Remedies If an Event of
Default Occurs" on page 14 that has occurred and is
continuing. A default for this purpose would also include
any event that would be an event of default if the
requirement for giving us default notice or the requirement
that the default had to exist for a specific period of time
was disregarded.
It is possible that the merger, sale of assets or other
transaction would cause some of our property to become subject to a
mortgage or other legal mechanism giving lenders rights in that property
that are preferential to the rights of other lenders if we fail to pay
them back. In the senior debt indenture, we have promised to limit
these preferential rights on our property, called "liens," as discussed
below under "Restriction Upon Liens" on pages 16 and 17. If a merger
or other transaction would create any liens on our property, we must
comply with the covenant on restrictions against liens. We would do
this either by deciding that the liens were permitted or by following
the requirements of the covenant to grant an equivalent or higher
ranking lien on the same property to the holders of the senior debt
securities. (Section 802)
If we merge out of existence or sell substantially all our assets,
the surviving or acquiring entity will be substituted for Solutia in the
indenture with the same effect as if it had been an original party to
the indenture. After a merger or sale of substantially all our assets,
the surviving or acquiring entity may exercise Solutia's rights and
powers under the indenture, and Solutia will be released from all its
liabilities and obligations under the indenture and under the debt
securities. (Section 803 in the senior debt indenture and Section 802
in the subordinated debt indenture)
MODIFICATION AND WAIVER
MODIFICATION
There are three types of changes we can make to the indentures and
the debt securities.
CHANGES REQUIRING APPROVAL OF ALL HOLDERS. First, there are
changes that cannot be made to the debt securities without the specific
approval of the holder of each debt security affected by the changes
(Section 902):
* change the stated maturity of the principal of or interest
on any debt security;
* reduce any amounts due on any debt security;
* reduce the amount of principal payable upon acceleration of
the maturity of a debt security following a default;
* change the place or currency of payment on any debt
security;
* impair the right of the holders to sue for payment;
* reduce the percentage of holders whose consent is needed to
modify the indenture;
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* reduce the percentage of holders whose consent is needed to
waive compliance with certain provisions of the indenture or
to waive certain defaults;
* in the case of subordinated debt securities, modify the
ranking or priority of the securities in a way that is
adverse to the holders; or
* modify any aspect of the provisions dealing with
modification and waiver of the indenture.
CHANGES REQUIRING CONSENT BY 66 2/3% OF THE HOLDERS. The second
type of change to the indenture and the debt securities requires a vote
in favor by holders owning 66 2/3% of the principal amount of the
particular debt securities affected by the change. Most changes fall
into this category, except for clarifying changes and certain other
changes that would not adversely affect holders of the debt securities.
(Section 902)
CHANGES NOT REQUIRING APPROVAL. The third type of change does not
require any vote by holders of the debt securities. This type is
limited to clarifications and other changes that would not adversely
affect holders of the debt securities. (Section 901)
WAIVER
A vote in favor by holders owning a majority of the principal
amount of the particular debt securities affected would be required for
us to obtain a waiver of all or part of the restrictive covenants
described below on pages 16 through 18 or a waiver of a past default.
However, we cannot obtain a waiver of a payment default or any other
aspect of the indenture or the debt securities listed above under
"Changes Requiring Approval of All Holders" on pages 12 and 13 unless
we obtain the individual consent of each holder of securities affected
by the change. (Sections 513 and 1011)
RULES CONCERNING VOTING
When taking a vote, we will use the following rules to decide how
much principal amount to attribute to a debt security (Section 101):
* For original issue discount securities, we will use the
principal amount that would be due and payable on the voting
date if the maturity of these securities were accelerated to
that date because of a default.
* For debt securities whose principal amount is not known,
because, for example, it is based on an index, we will use a
special rule described in the prospectus supplement.
* For debt securities denominated in one or more foreign
currencies or currency units, we will use the U.S. dollar
equivalent.
Debt securities will not be considered outstanding and will,
therefore, not be eligible to vote if we have deposited or set aside in
trust for the holders money for their payment or
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redemption. In addition, securities will not be eligible to vote if
they have been fully defeased as described under "Full Defeasance" on
page 19. Also, securities that we or our affiliates own will not be
considered outstanding. However, securities so owned which have been
pledged in good faith may be regarded as outstanding if the pledgee
establishes to the trustee's satisfaction the pledgee's right to vote
with respect to the securities and that the pledgee is not one of the
persons referred to in the preceding sentence.
We will generally be entitled to set any day as a record date for
the purpose of determining the holders of outstanding debt securities
that are entitled to vote or take other action under the indenture. In
certain limited circumstances, the trustee will be entitled to set a
record date for action by holders. If we or the trustee set a record
date for a vote or other action to be taken by holders of a particular
series of debt securities, that vote or action may be taken only if
holders of the required percentage of outstanding debt securities vote
within 90 days of the record date to approve taking the action.
REMEDIES IF AN EVENT OF DEFAULT OCCURS
The indentures define an "event of default" to mean any of the
following (Section 501):
* our failure to pay interest on a debt security within 30
days after its due date;
* our failure to pay the principal of, or any premium on, a
debt security at its due date, or within 30 days after its
due date if it is redeemed under a sinking fund provision;
* our failure to deposit any sinking fund payment within 30
days after it becomes due;
* our failure to perform, or breach of, any other covenant or
warranty of Solutia in the indenture that continues for 90
days after we receive a written notice stating that we are
in default;
* our filing for bankruptcy or the occurrence of other
specific events of bankruptcy, insolvency, or
reorganization; and
* the occurrence of any other event of default described in
the prospectus supplement.
If an event of default applicable to any series of debt securities
then outstanding occurs and continues, the applicable trustee or the
holders of at least 25% of the principal amount of the outstanding debt
securities of that series will have the right to declare the entire
principal of all the debt securities of that series to be due and
payable immediately. This is called a declaration of acceleration of
maturity. Under certain circumstances, the holders of a majority of the
principal amount of the securities of that series may cancel the
declaration of acceleration of maturity and waive the past defaults.
(Sections 502 and 513)
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For most defaults under the indenture, the trustee will be
required to give to the holders of the securities of the series notice
of a default known to it within 90 days of the occurrence of the
default. For these purposes, a default is defined as the occurrence of
any of the events set forth in the events of default in the indenture,
without any grace periods and regardless of notice. For defaults other
than a failure to pay, the trustee is not to give notice until at least
30 days after the occurrence of the default. The trustee may withhold
notice of any default, except in the payment of principal or interest,
if it decides that withholding notice is in the best interests of the
holders. (Section 602)
Generally, the trustee is not required to take any action under
the indenture at the request of any holders unless the holders offer the
trustee reasonable protection from expenses and liabilities. This
protection is called an "indemnity." (Section 603) If they provide
this indemnity, the holders of a majority in principal amount of the
outstanding debt securities of the relevant series may direct the time,
method and place of conducting any lawsuit or other formal legal action
seeking any remedy available to the trustee. These majority holders may
also direct the trustee to exercise any other action permitted under the
indenture. The trustee may decline to act if the direction given is
contrary to law or the indenture. (Section 512)
Before you bypass the trustee and bring your own lawsuit or other
formal legal action or take other steps to enforce your rights or
protect your interests relating to the debt securities, the following
must occur (Section 507):
* You must give the trustee written notice that an event of
default has occurred and is continuing;
* The holders of 25% in principal amount of all outstanding
securities of the relevant series must make a written
request that the trustee take action because of the default
and must offer reasonable indemnity to the trustee against
the cost and other liabilities of taking that action; and
* The trustee must not have taken action for 60 days after
receipt of the above notice and offer of indemnity.
However, you are entitled at any time to bring a lawsuit for the
payment of money due on your debt security on or after its due date.
(Section 508)
COVENANTS
Under the indentures, we have agreed to:
* pay the principal of and any premium and interest on the
debt securities when due (Section 1001);
* maintain a place of payment (Section 1002);
* deposit sufficient funds with the paying agent on or before
the due date for any principal, interest or premium payment,
or, if Solutia acts as its own paying agent,
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segregate such funds and hold them in trust for the benefit
of the holders of the debt securities (Section 1003);
* maintain Solutia's corporate existence, except as described
under Consolidation, Merger or Sale of Assets on pages 11
and 12 (Section 1007);
* make repairs to our principal manufacturing facilities in
the United States (unless we determine that the facility is
no longer necessary for our business) (Section 1005);
* pay all material taxes and claims (except those Solutia is
contesting in good faith) when due (Section 1004); and
* deliver a report to the trustee each year reviewing
Solutia's compliance with its obligations under the
indenture (Section 1006).
RESTRICTIVE COVENANTS IN SENIOR DEBT INDENTURE
RESTRICTION UPON LIENS. Some of our property and the property of
our subsidiaries may be subject to a mortgage or other legal mechanism
that gives some of our lenders preferential rights in those assets over
other lenders, including the direct holders of our debt securities, and
over our general creditors if we fail to pay them back. These
preferential rights are called "liens." Under the indenture, we promise
that we and our Restricted Subsidiaries will not become obligated on any
new debt that is secured by a lien on any Principal Property or on any
shares of stock or debt of any of our Restricted Subsidiaries unless we
grant an equivalent or higher ranking lien on the same property to the
direct holders of our senior debt securities.
We do not need to comply with this restriction if the amount of
all debt that would be secured by liens on Principal Properties is less
than 15% of our Consolidated Net Tangible Assets. Liens on Principal
Properties include the new debt and all "Attributable Debt," as
described under "Restriction upon Sales and Leasebacks" on pages 17
and 18, which results from a sale and leaseback transaction involving
Principal Properties that is entered into after the date of the
indenture, but excludes sale and leaseback transactions the proceeds
of which are applied to purchase a new Principal Property or retire
Funded Debt as described under "Restriction upon Sales and Leasebacks"
on pages 17 and 18.
This restriction on liens does not apply to debt secured by
certain types of liens, and we can disregard this debt when we calculate
the limits imposed by this restriction. These types of liens include:
* Liens that existed as of the date of the indenture;
* Liens on the property of any of our Restricted Subsidiaries,
or on their shares of stock or debt, if those liens existed
at the time the corporation became our Restricted
Subsidiary;
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* Liens on property that existed at the time Solutia acquired
the property or that Solutia granted in order to purchase
the property, sometimes called "purchase money mortgages";
* Liens to secure the cost of exploration, drilling,
development, operation, construction, alteration, repair or
improvement of properties that are not then Principal
Properties;
* Liens in favor of U.S. governmental bodies that we granted
in order to assure our payments to these bodies or that we
owe by law or because of a contract;
* Liens in favor of Solutia or our Restricted Subsidiaries;
* Certain liens in connection with legal proceedings or
arising in the ordinary course of business and not in
connection with the borrowing of money; and
* Liens that extend, renew or replace any of the listed types
of liens.
In addition, production payments and other similar financial
arrangements with regard to oil, gas and mineral properties are not
considered liens securing indebtedness for money borrowed. (Section
1008)
RESTRICTION UPON SALES AND LEASEBACKS. Under the senior debt
indenture, we promise that neither we nor any of our Restricted
Subsidiaries will enter into any sale and leaseback transaction
involving a Principal Property unless we comply with this covenant. A
"sale and leaseback transaction" is generally an arrangement between us
or a Restricted Subsidiary and a lender in which we or the Restricted
Subsidiary sell a property to the lender and then lease it back from the
lender more than 120 days after the property has been constructed and
full operation has begun. Sale and leasebacks of a facility to the
extent financed with Industrial Revenue Bonds are not included in the
definition.
This restriction on sales and leasebacks does not apply to a sale
and leaseback:
* completed within 120 days after the completion of
construction of the property and the beginning of its full
operation;
* if we or our Restricted Subsidiary could grant a lien on the
Principal Property in an amount equal to the Attributable
Debt for the sale and leaseback transaction without being
required to grant an equivalent or higher ranking lien to
the holders of the debt securities under the restriction on
liens described on pages 16 and 17;
* that is between Solutia and one of its Restricted
Subsidiaries or between Restricted Subsidiaries; or
* that involves a lease with a period of three years or less.
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Solutia can comply with this covenant if it buys a Principal
Property or retires an amount of Funded Debt, within 120 days of the
transaction, that equals or exceeds the greater of:
* the proceeds of the sale of the Principal Property that we
lease in the transaction; or
* the fair value of that property, subject to credits for
certain voluntary retirements of debt securities and Funded
Debt we may make.
(Section 1009)
DEFINITIONS USED IN RESTRICTIONS UPON LIENS AND RESTRICTIONS UPON SALES
AND LEASEBACKS
Following are the meanings of the terms that are important in
understanding the two restrictive covenants described above beginning on
page 16:
"Attributable Debt" means the total net amount of rent (discounted
to present value at an annual rate equal to the discount rate that would
apply to a capital lease obligation with the same term) that is required
to be paid during the remaining term of a lease.
"Consolidated Net Tangible Assets" means the total amount of
assets (less reserves and other permitted deductible items) after
subtracting all current liabilities (other than those which Solutia by
their terms may choose to renew or extend beyond 12 months) and all
goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and similar intangible assets, as such amounts appear on our
most recent consolidated balance sheet and computed in accordance with
generally accepted accounting principles.
"Funded Debt" means all debt for borrowed money, or evidenced by a
bond, debenture, note or similar document, that:
* has a maturity of 12 months or more from the date on which
the calculation of Funded Debt is made; or
* has a maturity of less than 12 months from that date but is
by its terms renewable or extendible beyond 12 months from
that date at the option of the borrower.
It also includes commercial paper that is accounted for as long term
debt on Solutia's balance sheet.
"Industrial Revenue Bonds" means obligations issued by or
supported by the full faith and credit of a governmental entity or
authority in the United States.
"Principal Property" means any building or other structure or
facility, and the land on which it sits and its associated fixtures,
that we use primarily for manufacturing and that is located in the
United States, which has a book value, before depreciation, of greater
than 3% of Consolidated Net Tangible Assets, other than a building,
structure or other facility that we have determined is not of material
importance to the total business that we and our Restricted Subsidiaries
conduct or that is financed by Industrial Development Bonds.
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"Restricted Subsidiary" means any subsidiary of Solutia that owns
any Principal Property. A "subsidiary" is a corporation in which we
and/or one or more of our other subsidiaries owns at least 50% of the
"voting stock." "Voting stock" is the type of stock that ordinarily
permits its owners to vote for the election of directors.
DEFEASANCE AND COVENANT DEFEASANCE
The following discussion of defeasance and covenant defeasance
will be applicable to your series of debt securities only if we choose
to have them apply to that series. If we do so choose, we will state
that in the prospectus supplement.
FULL DEFEASANCE
If there is a change in federal tax law, as described below, we
can legally release ourselves from any payment or other obligations on
the debt securities (called "full defeasance") if we put in place the
following other arrangements for you to be repaid (Section 403):
* We must deposit in trust for the benefit of all direct
holders of the debt securities a combination of money and
U.S. government or U.S. government agency notes or bonds (or
if the debt securities are in a foreign currency, foreign
government securities in the same foreign currency) that
will generate enough cash to make interest, principal and
any other payments on the debt securities on their various
due dates.
* There must be a change in current federal tax law or an IRS
ruling that lets us make the above deposit without causing
you to be taxed on the debt securities any differently than
if we did not make the deposit and just repaid the debt
securities ourselves. Under current federal tax law, the
deposit and our legal release from the debt securities would
be treated as though we took back your debt securities and
gave you your share of the cash and notes or bonds deposited
in trust. In that event, you could recognize gain or loss
on the debt securities you give back to us.
* We must deliver to the trustee a legal opinion of our
counsel confirming the tax law change described above.
If we ever do accomplish full defeasance you would have to rely
solely on the trust deposit for repayment on the debt securities. You
could not look to us for repayment in the unlikely event of any
shortfall. Conversely, the trust deposit would most likely be protected
from claims of our lenders and other creditors if we ever become
bankrupt or insolvent. If the debt securities are subordinated debt
securities, their holders would be released from the subordination
provisions described under "Subordination Of Subordinated Debt
Securities" on pages 10 and 11.
COVENANT DEFEASANCE
Under current federal tax law, we can make the same type of
deposit described above and be released from the restriction on liens
and restriction on sales and leasebacks described on pages
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16 and 17, respectively. The release from these covenants is called
"covenant defeasance." In that event, you would lose the protection of
these covenants, and any omission to comply with them would not
constitute an event of default. You would, however, gain the protection
of having money and securities set aside in trust to repay the debt
securities. If the debt securities are subordinated, their holders
would be released from the subordination provisions described above
under "Subordination Of Subordinated Debt Securities" on pages 10
and 11. In order to achieve covenant defeasance, we must do the
following (Section 1010):
* We must deposit in trust for the benefit of all direct
holders of the debt securities a combination of money and
U.S. government or U.S. government agency notes or bonds (or
if the debt securities are in a foreign currency, foreign
government securities in the same foreign currency) that
will generate enough cash to make interest, principal and
any other payments on the debt securities on their various
due dates.
* We must deliver to the trustee a legal opinion of our
counsel confirming that under current federal income tax law
we may make that deposit without causing you to be taxed on
the debt securities any differently than if we did not make
the deposit and just repaid the debt securities ourselves.
If we accomplish covenant defeasance, the following provisions of
the indenture and the debt securities would no longer apply:
* Our promises about restriction of liens and restriction
against sales and leasebacks described under "Restricted
Covenants in Senior Debt Indenture" on pages 16 through 18
and any other covenants applicable to the series of debt
securities described in the prospectus supplement.
* The condition regarding the treatment of liens when we merge
or engage in similar transactions as described above under
"Consolidation, Merger Or Sale Of Assets" on pages 11
and 12.
* The events of default relating to breach of covenants
described above under "Remedies If an Event of Default
Occurs" on page 14.
* If the securities are subordinated, the subordination
provisions of the debt securities described above under
"Subordination Of Subordinated Debt Securities" on pages 10
and 11.
If we accomplish covenant defeasance, the direct holders of the
debt securities could still look to us for repayment of those securities
if there were a shortfall in the trust deposits. If a remaining event
of default occurred and the debt securities became immediately due and
payable, there could be a shortfall. Depending on the event causing the
default, you may not be able to obtain payment of the shortfall.
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LEGAL OWNERSHIP
STREET NAME AND OTHER INDIRECT HOLDERS
Investors who hold securities in accounts at banks or brokers will
generally not be recognized by us as legal holders of securities. This
is called holding in "street name." Instead, we would recognize only
the bank or broker, or the financial institution the bank or broker uses
to hold its securities. These intermediary banks, brokers and other
financial institutions pass along principal, interest and other
payments on the securities, either because they agree to do so in their
customer agreements or because they are legally required to. If you
hold securities in street name, you should check with your own
institution to find out:
* How it handles securities payments and notices.
* Whether it imposes fees or charges.
* How it would handle voting if ever required.
* Whether and how you can instruct it to send you securities
registered in your own name so you can be a direct holder as
described below.
* How it would pursue rights under the securities if there
were a default or other event triggering the need for
holders to act to protect their interests.
DIRECT HOLDERS
Our obligations, as well as the obligations of the trustee and
those of any third parties employed by us or the trustee, run only to
persons who are registered as holders of securities. As noted above, we
do not have obligations to you if you hold in street name or other
indirect means, either because you choose to hold securities in that
manner or because the securities are issued in the form of book-entry
securities as described below. For example, once we make payment to the
registered holder, we have no further responsibility for the payment
even if that holder is legally required to pass the payment along to you
as a street name customer but does not do so.
BOOK-ENTRY SECURITIES
WHAT IS A BOOK-ENTRY SECURITY? A book-entry security is a special
type of indirectly held security, as described above under "Street Name
and Other Indirect Holders". If we choose to issue securities in the
form of book-entry securities, the ultimate beneficial owners can only
be indirect holders. We do this by requiring that the book-entry
security be registered in the name of a financial institution we select
and by requiring that the securities included in the book-entry security
not be transferred to the name of any other direct holder unless the
special circumstances described below occur. The financial institution
that acts as the sole direct holder of the book-entry security is called
the "depositary." Any person wishing to own a security must do so
indirectly by means of an account with a broker, bank or other financial
institution that in turn
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has an account with the depositary. The prospectus supplement indicates
whether your series of securities will be issued only in the form of
book-entry securities.
SPECIAL INVESTOR CONSIDERATIONS FOR BOOK-ENTRY SECURITIES. As an
indirect holder, an investor's rights relating to a book-entry security
will be governed by the account rules of the investor's financial
institution and of the depositary, as well as general laws relating to
securities transfers. We do not recognize this type of investor as a
holder of securities and instead deal only with the depositary that
holds the book-entry security.
An investor should be aware that if securities are issued only in
the form of book-entry securities:
* The investor cannot get securities registered in his or her
own name.
* The investor cannot receive physical certificates for his or
her interest in the securities.
* The investor will be a street name holder and must look to
his or her own bank or broker for payments on the securities
and protection of his or her legal rights relating to the
securities. See "Street Name and Other Indirect Holders" on
page 21 for information about these procedures.
* The investor may not be able to sell interests in the
securities to some insurance companies and other
institutions that are required by law to own their
securities in the form of physical certificates.
* The depositary's policies will govern payments, transfers,
exchange and other matters relating to the investor's
interest in the book-entry security. We and the trustee
have no responsibility for any aspect of the depositary's
actions or for its records of ownership interests in the
book-entry security. We and the trustee also do not
supervise the depositary in any way.
* Payment for purchases and sales in the market for corporate
bonds and notes is generally made in next-day funds. In
contrast, the depositary will usually require that interests
in a book-entry security be purchased or sold within its
system using same-day funds. This difference could have
some effect on how book-entry security interests trade, but
we do not know what that effect will be.
SPECIAL SITUATIONS WHEN BOOK-ENTRY SECURITY WILL BE TERMINATED.
In a few special situations described later, the book-entry security
will terminate and interests in it will be exchanged for physical
certificates representing securities. After that exchange, the choice
of whether to hold securities directly or in street name will be up to
the investor. Investors must consult their own bank or brokers to find
out how to have their interests in securities transferred to their own
name, so that they will be direct holders. The rights of street name
investors and direct holders in the securities are described under
"Street Name and Other Indirect Holders" on page 21 and "Direct Holders"
on page 21.
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The special situations for termination of a book-entry security
are (Section 305):
* When the depositary notifies us that it is unwilling or
unable to continue as depositary, or ceases to be a clearing
agency registered under applicable law, and we have not
appointed a successor depositary within 90 days.
* When we notify the trustee that we wish to terminate the
book-entry security.
* When an event of default on the securities has occurred and
is continuing. Defaults are discussed above under "Remedies
If an Event of Default Occurs" on page 14.
The prospectus supplement may also list additional situations for
terminating a book-entry security that would apply only to the
particular series of securities covered by the prospectus supplement.
CERTIFICATED DEBT SECURITIES
If we issue certificated debt securities, they will be registered
in the name of the direct holder of the debt security. Direct holders
may transfer or exchange these certificated debt securities without the
payment of any service charge, other than any tax or other governmental
charge, by contacting the trustee. (Section 305)
We will pay principal of, and any premium and interest on,
certificated debt securities at designated places, or we may choose to
make these payments by check mailed to the persons in whose names the
debt securities are registered or by wire transfer to their accounts, on
days specified in the prospectus supplement. (Section 202)
GOVERNING LAW
The indentures and the debt securities will be governed by, and
construed in accordance with, the internal laws of the State of New
York. (Section 112)
ABOUT THE TRUSTEE AND PAYING AGENT
The Chase Manhattan Bank is the trustee under the senior debt
indenture. Before we issue any subordinated debt securities, we will
engage a qualified trustee to serve as trustee under the subordinated
debt indenture.
We maintain banking relationships in the ordinary course of
business with The Chase Manhattan Bank. Chase is a lending bank under a
revolving credit agreement with Solutia and acts as the issuing and
paying agent for our commercial paper programs. Chase is also the
trustee under an indenture relating to other senior indebtedness of
Solutia. An affiliate of Chase is one of the investment banks that
advises us on merger and acquisition activities.
If an event of default, or an event that would be an event of
default if the requirements for giving us default notice or our default
having to exist for a specific period of time were disregarded, occurs,
the trustee may be considered to have a conflicting interest with
respect to
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the securities offered by this prospectus and any accompanying
prospectus supplement, or with respect to the securities outstanding
under that other indenture, for purposes of the Trust Indenture Act of
1939. In that case, the trustee may be required to resign as trustee
under the indenture under which the securities offered by this
prospectus and any accompanying prospectus supplement will be issued,
and we would be required to appoint a successor trustee.
At any time, the trustee under either indenture may resign or be
removed by the holders of at least a majority in principal amount of any
series of the outstanding debt securities of that indenture. If the
trustee resigns, is removed or becomes incapable of acting as trustee,
or if a vacancy occurs in the office of the trustee for any reason, a
successor trustee shall be appointed in accordance with the provisions
of the indenture.
The trustee will act as paying agent for the debt securities
unless a different paying agent is identified in any prospectus
supplement.
DESCRIPTION OF COMMON STOCK
The following description summarizes the terms of the common stock
that we may issue. Because the description below and in any prospectus
supplement does not contain all of the information that you may find
useful, you should read our Restated Certificate of Incorporation, our
by-laws and our Rights Agreement for all of the terms of our common
stock. See "Where You Can Find More Information" on pages 1 and 2 to
find out how you can locate a copy of these documents.
Our Restated Certificate of Incorporation provides that we have
authority to issue 600,000,000 shares of our common stock, par value
$0.01 per share. We also have authority to issue 10,000,000 shares of
our preferred stock, par value $0.01 per share. We describe the
preferred stock under the heading "Description of Preferred Stock" on
pages 27 through 29.
TERMS OF THE COMMON STOCK
On August 31, 2000, there were 104,603,990 shares of common stock
issued and outstanding, 13,796,645 shares held as treasury shares, and
27,834,169 shares reserved for issuance under Solutia's stock option
plans.
VOTING RIGHTS. Each holder of shares of our common stock is
entitled to attend all special and annual meetings of our stockholders.
Except for any special voting rights of any series of preferred stock
that we may issue in the future, the holders of our common stock have
one vote for each share held on all matters voted upon by our
stockholders, including the election of our directors. Holders of
common stock may not cumulate their votes in elections of directors.
DIVIDEND RIGHTS. Except for any preferential rights of holders of
any preferred stock that may then be issued and outstanding, holders of
our common stock are entitled to receive dividends when declared by our
board of directors.
LIQUIDATION RIGHTS. In the event of a liquidation, whether
voluntary or involuntary, of Solutia, the holders of our common stock
will be entitled to receive, pro rata according to the
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number of shares held by each, all assets of Solutia remaining for
distribution after payment to creditors and the holders of any issued
and outstanding preferred stock of the full preferential amounts to
which they are entitled.
NO PREEMPTIVE RIGHTS OR RIGHT OF REDEMPTION. Holders of our
common stock do not have preemptive rights to subscribe for and purchase
any new or additional issue of common stock or securities convertible
into common stock. Shares of our common stock are not subject to
redemption.
STOCK EXCHANGE LISTING AND TRANSFER AGENT. The outstanding shares
of our common stock are listed on the New York Stock Exchange. The
transfer agent and registrar of our common stock is the First Chicago
Trust Division of EquiServe.
SHAREHOLDER RIGHTS PLAN
We have had a shareholder rights plan in effect since we became an
independent, publicly held company. Before September 1, 1997, the date
upon which Monsanto distributed all of the outstanding shares of
Solutia stock as a dividend to Monsanto's stockholders, our board of
directors declared a dividend of one preferred stock purchase right on
each share of our common stock issued in the distribution and authorized
the issuance of one right for each share of common stock issued after
September 1, 1997, until the earlier of the date the rights become
exercisable and the termination date of the rights plan.
The rights become exercisable ten days after a public announcement
that a person or group has acquired beneficial ownership of 20% or more
of Solutia's outstanding common stock, or ten business days (or such
later date as determined by Solutia's board of directors) after the
announcement of a tender or exchange offer, or an intention to commence
a tender or exchange offer, that would result in beneficial ownership of
20% or more of Solutia's outstanding common stock. Before the rights
become exercisable, the board of directors is generally authorized to
reduce the 20% thresholds to not less than 10%.
If the rights become exercisable, each right entitles the
registered holder to purchase from Solutia one one-hundredth of a share
of Series A Junior Participating Preferred Stock at a price of $125 per
one one-hundredth of a share, subject to adjustment. In addition, upon
the occurrence of certain events, and upon payment of the then current
purchase price, the rights may "flip in" and entitle holders to buy
Solutia common stock, or "flip over" and entitle holders to buy common
stock in an acquiring entity, in such amount that the market value is
equal to twice the then current purchase price. In addition, under
certain conditions, Solutia's board of directors may, at its option,
exchange part or all of the rights for shares of Solutia common stock at
an exchange ratio of one share for every right.
The rights are nonvoting and may be redeemed by Solutia for one
cent per right at any time before they become exercisable. The rights
expire September 1, 2007.
Because this summary of the rights does not contain all of the
information that you may find useful, you should read the Rights
Agreement for all the terms applicable to the rights. See "Where You
Can Find More Information" on pages 1 and 2 to find out how you can
locate a copy of the Rights Agreement.
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PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
Various provisions of the Delaware General Corporation Law and
Solutia's Restated Certificate of Incorporation and by-laws, as well as
the shareholder rights plan described on page 25, may make more
difficult the acquisition of control of Solutia by means of a tender
offer, open market purchases, a proxy fight or other means that are not
approved by Solutia's board of directors. See "Where You Can Find More
Information" on pages 1 and 2 to find out how you can locate a copy of
these documents.
SHAREHOLDER RIGHTS PLAN AND BUSINESS COMBINATIONS UNDER DELAWARE LAW
As described under "Shareholders Right Plan" on page 25, we have
adopted a shareholder rights plan that has the effect of providing our
stockholders with the right to purchase shares of our common stock, or
securities of an acquiring company, at half the market price under
certain circumstances involving a potential change in control of Solutia
that has not been approved by our board of directors. In addition, the
Delaware General Corporation Law provides that any beneficial owner of
15% or more of Solutia's voting stock is prohibited, without the prior
approval of the board of directors, from entering into any business
combination with Solutia for three years from the date that 15%
ownership interest is acquired unless the combination otherwise
satisfies Section 203 of the Delaware General Corporation Law.
CHARTER AND BY-LAW PROVISIONS
The following provisions of our Restated Certificate of
Incorporation and by-laws could have an antitakeover effect:
CLASSIFIED BOARD OF DIRECTORS, VACANCIES, AND LIMITATIONS ON
REMOVAL OF DIRECTORS. Our Restated Certificate of Incorporation
classifies our board of directors into three classes and provides that,
subject to any rights of the holders of preferred stock, only a majority
of the board of directors then in office shall have the authority to
fill any vacancies on our board of directors. Directors may be removed
from office only with cause and only by the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding
shares of Solutia stock entitled to vote generally in the election of
directors.
NO WRITTEN CONSENT OR CALLING OF SPECIAL MEETINGS BY STOCKHOLDERS.
Our Restated Certificate of Incorporation provides that any action
required or permitted to be taken by our stockholders must be taken at a
duly called annual or special meeting of our stockholders and explicitly
prohibits stockholder action by written consent instead of a meeting. A
vote of the holders of 80% of the voting power of the then outstanding
shares of Solutia stock entitled to vote generally in the election of
directors is required to amend these provisions. In addition, our by-
laws provide that, subject to the rights of holders of preferred stock,
only our chairman of the board, our president or our board of directors
can call a special meeting.
ADVANCE NOTICE PROVISION. Our by-laws provide for an advance
notice procedure for the nomination, other than by our board of
directors, of candidates for election as directors at an annual meeting
of stockholders. Our by-laws also provide for an advance notice
procedure for business, except for items of business included in our
proxy statement, to be brought before an annual or special meeting of
stockholders. Under these provisions, a stockholder must give us
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written notice that complies with the specifications of our by-laws of
an intention to nominate a director for election at an annual meeting or
bring other business before an annual or special meeting. To be timely,
we must generally receive this notice not less than 60 days nor more
than 90 days before the meeting.
ABILITY TO ISSUE PREFERRED AND COMMON STOCK. Our Restated
Certificate of Incorporation authorizes our board of directors to
establish series of preferred stock and to determine for each series the
designation, powers, preferences and special rights of the shares of the
series and the qualifications, limitations and restrictions on these
powers, preferences and special rights. In addition, we have available
for issuance authorized but unissued shares of common stock. The
authorized shares of preferred and common stock could be issued without
action by our stockholders unless their action was required by law or
the rules of any stock exchange on which Solutia may be listed. Our
board of directors could issue preferred stock in one or more
transactions with terms that might make the acquisition of a controlling
interest in Solutia more difficult or costly. Our board could also
issue additional authorized shares of common stock to defend Solutia
against a hostile takeover bid by diluting the stock ownership of a
potential acquirer, or our board could use the authorized but unissued
shares in a private placement with purchasers who might side with our
board of directors in opposing a specific change of control.
AMENDMENT OF CHARTER PROVISIONS AND BY-LAWS. The affirmative vote
of the holders of at least 80% of our then-outstanding common stock
would be required to amend the provisions of our Restated Certificate of
Incorporation pertaining to classification of the board of directors,
the number of directors, filling vacancies in the board of directors,
removal of directors, and the requirement that stockholders can act only
at annual or special meetings and not by written consent. In addition,
the affirmative vote of at least 80% of our then-outstanding common stock
would be required for our stockholders to adopt, amend or repeal any
provision of our by-laws.
DESCRIPTION OF PREFERRED STOCK
The following description summarizes the terms of the preferred
stock that we may issue. The prospectus supplement for a particular
series of preferred stock will describe the specific terms of that
series. Because the description below and in any prospectus supplement
does not contain all of the information you may find useful, you should
read our Restated Certificate of Incorporation, the Certificate of
Designations for the applicable series of preferred stock and our by-
laws for all of the terms of the preferred stock. See "Where You Can
Find More Information" on pages 1 and 2 to find out how you can locate
a copy of these documents.
AUTHORITY OF THE BOARD TO ISSUE PREFERRED STOCK
Our Restated Certificate of Incorporation authorizes our board of
directors, from time to time and without further stockholder action, to
provide for the issuance of up to 10,000,000 shares of preferred stock,
par value $0.01 per share, in one or more series and for such
consideration as the board may fix from time to time. The board has the
authority to fix, before the issuance of any shares of preferred stock
of a particular series, the designation, powers, preferences and special
rights of the shares of the series and the qualifications, limitations
and restrictions on those preferences and special rights. On the date
of this prospectus, no shares of preferred stock were outstanding, but
1,600,000 shares of Series A Junior Participating Preferred
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Stock, were authorized and reserved for issuance under the shareholder
rights plan described on page 25.
You should refer to the prospectus supplement relating to the
class or series of preferred stock being offered for the specific terms
of that class or series, including:
* the title of the series and the number of shares in the
series;
* the price at which the preferred stock will be offered;
* the dividend rate or rates or method of calculating the
rates, the dates on which the dividends will be payable,
whether or not dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which
dividends on the preferred stock being offered shall
cumulate;
* the voting rights, if any, of the preferred stock being
offered;
* the provisions for a sinking fund, if any, and the
provisions for redemption, if applicable, of the preferred
stock being offered;
* the liquidation preference per share;
* the terms and conditions, if applicable, upon which the
preferred stock being offered will be convertible into our
common stock, including the conversion price, or the manner
of calculating the conversion price, and the conversion
period;
* the terms and conditions, if applicable, upon which the
preferred stock being offered will be exchangeable into debt
securities, including the exchange price, or the manner of
calculating the exchange price, and the exchange period;
* any listing of the preferred stock being offered on any
securities exchange;
* whether interests in the shares of the series will be
represented by depositary shares;
* a discussion of any material and/or special federal income
tax considerations applicable to the preferred stock being
offered;
* the relative ranking and preferences of the preferred stock
being offered as to dividend rights and rights upon
liquidation, dissolution or winding up of Solutia's affairs;
* any limitations on the issuance of any class or series of
preferred stock ranking senior or equal to the series of
preferred stock being offered as to dividend rights and
rights upon liquidation, dissolution or winding up of
Solutia's affairs; and
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* any additional rights, preferences, qualifications,
limitations and restrictions of the series.
The preferred stock of each series will rank senior to the common
stock and the Series A Junior Participating Preferred Stock in priority
of payment of dividends, and in the distribution of assets in the event
of any liquidation, dissolution or winding up of Solutia, to the extent
of the preferential amounts to which the preferred stock of the
respective series shall be entitled.
Upon issuance, the shares of preferred stock will be fully paid
and nonassessable. Holders of preferred stock will have no preemptive
rights. Shares of preferred stock redeemed, converted or otherwise
reacquired by Solutia will resume the status of authorized and unissued
shares of preferred stock, undesignated as to series, and will be
available for subsequent issuance.
The transfer agent and registrar for the preferred stock will be
set forth in the applicable prospectus supplement.
DESCRIPTION OF DEPOSITARY SHARES
We may elect to offer fractional interests in shares of preferred
stock, rather than offer whole shares of preferred stock. If we choose
to do this, we will provide for the issuance by a depositary to the
public of receipts for depositary shares. Each depositary share will
represent fractional interests of a particular series of preferred
stock.
The shares of any series of preferred stock underlying the
depositary shares will be deposited under a separate deposit agreement
between us and a bank or trust company, which we will select. The bank
or trust company must have its principal office in the United States and
a combined capital and surplus of at least $500,000,000. The prospectus
supplement relating to a series of depositary shares will set forth the
name and address of the depositary. Unless otherwise provided by the
deposit agreement, each owner of depositary shares will be entitled, in
proportion to the applicable fractional interests in shares of preferred
stock underlying the depositary shares, to all the rights and
preferences of the preferred stock underlying the depositary shares
including dividend, voting, redemption, conversion and liquidation
rights.
The depositary shares will be evidenced by depositary receipts
issued under the deposit agreement. Depositary receipts will be
distributed to those persons purchasing the fractional interests in
shares of the related series of preferred stock in accordance with the
terms of the offering described in the related prospectus supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received in respect of preferred stock to the record
holders of depositary shares relating to the preferred stock in
proportion to the numbers of the depositary shares owned by the holders
on the relevant record date. The depositary shall distribute only an
amount, however, as can be distributed without attributing to any holder
of depositary shares a fraction of one cent, and any balance not
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so distributed shall be added to and treated as part of the next sum
received by the depositary for distribution to record holders of
depositary shares.
If there is a non-cash distribution, the depositary will
distribute property received by it to the record holders of depositary
shares entitled to it, unless the depositary determines that it is not
feasible to make the distribution. If this happens, the depositary may,
with our approval, sell the property and distribute the net sale
proceeds to the holders. The deposit agreement will also contain
provisions relating to the manner in which any subscription or similar
rights that we offer to holders of the preferred stock shall be made
available to the holders of depositary shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of the preferred stock underlying the depositary
shares is redeemed in whole or in part, the depositary shares will be
redeemed from the redemption proceeds received by the depositary. The
depositary will mail notice of redemption not less than 30, and not more
than 60, days before the date fixed for redemption to the record holders
of the depositary shares to be redeemed at their addresses appearing in
the depositary's books. The redemption price for each depositary share
will be equal to the applicable fraction of the redemption price for
each share payable with respect to such series of the preferred stock.
Whenever we redeem shares of preferred stock held by the depositary, the
depositary will redeem on the same redemption date the number of
depositary shares relating to the shares of preferred stock so redeemed.
If less than all of the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by lot or pro rata as
may be determined by the depositary.
After the date fixed for redemption, the depositary shares called
for redemption will no longer be considered outstanding and all rights
of the holders of the depositary shares will cease, except the right to
receive the money, securities or other property payable upon the
redemption and any money, securities or other property to which the
holders of the redeemed depositary shares were entitled upon surrender
to the depositary of the depositary receipts evidencing the depositary
shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the depositary will mail the
information contained in the notice of meeting to the record holders of
the depositary shares relating to the preferred stock. Each record
holder of depositary shares on the record date, which will be the same
date as the record date for the preferred stock, will be entitled to
instruct the depositary how to exercise the voting rights pertaining to
the number of shares of preferred stock underlying the holder's
depositary shares. The depositary will endeavor, to the extent
practicable, to vote the number of shares of preferred stock underlying
the depositary shares in accordance with these instructions, and we will
agree to take all action which the depositary may consider necessary in
order to enable the depositary to vote the shares.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
We may enter into an agreement with the depositary at any time to
amend the form of depositary receipt evidencing the depositary shares
and any provision of the deposit agreement.
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However, the holders of a majority of the depositary shares must approve
any amendment which materially and adversely alters the rights of the
existing holders of depositary shares. We or the depositary may
terminate the deposit agreement only if (1) all outstanding depositary
shares issued under the agreement have been redeemed or (2) a final
distribution in connection with any liquidation, dissolution or winding
up has been made to the holders of the depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. We
will also pay charges of the depositary in connection with the initial
deposit of the preferred stock and any redemption of the preferred
stock. Holders of depositary shares will pay transfer and other taxes
and governmental charges and such other charges as are expressly
provided in the deposit agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to us notice
of its election to resign, and we may at any time remove the depositary.
Any resignation or removal will take effect when a successor depositary
has been appointed and it has accepted the appointment. Appointment must
occur within 60 days after delivery of the notice of resignation or
removal. The successor depositary must be a bank or trust company
having its principal office in the United States and having a combined
capital and surplus of at least $500,000,000.
MISCELLANEOUS
The depositary will forward to the holders of depositary shares
all reports and communications that we deliver to the depositary and
that we are required to furnish to the holders of the preferred stock.
Neither the depositary nor Solutia will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the deposit agreement. The obligations of Solutia and
the depositary under the deposit agreement will be limited to
performance in good faith of their duties under the agreement and they
will not be obligated to prosecute or defend any legal proceeding in
respect of any depositary shares or preferred stock unless satisfactory
indemnity is furnished. They may rely upon written advice of counsel
or accountants, or information provided by persons presenting preferred
stock for deposit, holders of depositary shares or other persons
believed to be competent and on documents they believe to be genuine.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt or equity securities. We
may issue warrants independently or together with any offered
securities. The warrants may be attached to or separate from those
offered securities. We will issue the warrants under warrant agreements
to be entered into between us and a bank or trust company, as warrant
agent, all as described in the applicable prospectus supplement. The
warrant agent will act solely as our agent in connection with the
warrants and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of warrants.
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The prospectus supplement relating to any warrants that we may
offer will contain the specific terms of the warrants. These terms may
include the following:
* the title of the warrants;
* the designation, amount and terms of the securities for
which the warrants are exercisable;
* the designation and terms of the other securities, if any,
with which the warrants are to be issued and the number of
warrants issued with each such security;
* the price or prices at which the warrants will be issued;
* the aggregate number of warrants;
* any provisions for adjustment of the number or amount of
securities receivable upon exercise of the warrants or the
exercise price of the warrants;
* the price or prices at which the securities purchasable upon
exercise of the warrants may be purchased;
* if applicable, the date on and after which the warrants and
the securities purchasable upon exercise of the warrants
will be separately transferable;
* if applicable, a discussion of the material United States
federal income tax considerations applicable to the exercise
of the warrants;
* any other terms of the warrants, including terms, procedures
and limitations relating to the exchange and exercise of the
warrants;
* the date on which the right to exercise the warrants shall
commence, and the date on which the right shall expire;
* the maximum or minimum number of warrants which may be
exercised at any time; and
* information with respect to book-entry procedures, if any.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of warrants to purchase for
cash the amount of debt or equity securities, at the exercise price
stated or determinable in the prospectus supplement for the warrants.
Warrants may be exercised at any time up to the close of business on the
expiration date shown in the prospectus supplement relating to the
warrants, unless otherwise specified in the applicable prospectus
supplement. After the close of business on the expiration date,
unexercised warrants will become void. Warrants may be exercised as
described in the
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prospectus supplement relating to the warrants. When the warrant holder
makes the payment and properly completes and signs the warrant
certificate at the corporate trust office of the warrant agent or any
other office indicated in the prospectus supplement, we will, as soon as
possible, forward the debt or equity securities that the warrant holder
has purchased. If the warrant holder exercises the warrant for less than
all of the warrants represented by the warrant certificates, we will
issue a new warrant certificate for the remaining warrants.
PLAN OF DISTRIBUTION
We may sell the securities through agents, underwriters or
dealers, or directly to one or more purchasers.
We may designate agents who agree to use their reasonable efforts
to solicit purchases for the period of their appointment or to sell
securities on a continuing basis.
If we use underwriters for a sale of securities, the underwriters
will acquire the securities for their own account. The underwriters may
resell the securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The obligations of the underwriters to
purchase the securities will be subject to the conditions set forth in
the applicable underwriting agreement. The underwriters will be
obligated to purchase all the securities of the series offered if any of
the securities of that series are purchased. Any initial public
offering price and any discounts or concessions allowed or re-allowed or
paid to dealers may be changed from time to time.
One or more of the following underwriters may be involved in any
at-the-market offering of equity securities by or on our behalf: Goldman,
Sachs & Co., Salomon Smith Barney Inc., Chase Securities Inc., J.P. Morgan
& Co. Incorporated, Bank One Capital Markets, Inc., Banc of America
Securities LLC, and HSBC Securities (USA) Inc.
We may also sell securities directly to one or more purchasers
without using underwriters or agents.
Underwriters, dealers and agents that participate in the
distribution of the securities may be underwriters as defined in the
Securities Act, and any discounts or commissions they receive from us
and any profit on their resale of the securities may be treated as
underwriting discounts and commissions under the Securities Act. The
applicable prospectus supplement will identify any underwriters, dealers
or agents and will describe their compensation. We may have agreements
with the underwriters, dealers and agents to indemnify them against
certain civil liabilities, including liabilities under the Securities
Act. Underwriters, dealers and agents may engage in transactions with
or perform services for us or our subsidiaries in the ordinary course of
their business.
Unless otherwise specified in the applicable prospectus
supplement, each class or series of securities will be a new issue with
no established trading market, other than the common stock, which is
listed on the New York Stock Exchange. We may elect to list any other
class or series of securities on any exchange, but we are not obligated
to do so. It is possible that one or more underwriters may make a
market in a class or series of securities, but the underwriters will not
be obligated to do so and may discontinue any market making at any time
without notice. We cannot give any assurance as to the liquidity of the
trading market for any of the securities.
Any underwriter may engage in over-allotment, stabilizing
transactions, short-covering transactions and penalty bids in accordance
with Regulation M under the Securities Exchange Act. Over-allotment
involves sales in excess of the offering size, which create a short
position.
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Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
Short-covering transactions involve purchases of the securities in the
open market after the distribution is completed to cover short
positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the securities originally sold by the
dealer are purchased in a covering transaction to cover short positions.
Those activities may cause the price of the securities to be higher than
it would otherwise be. If commenced, the underwriters may discontinue
any of the activities at any time.
VALIDITY OF THE OFFERED SECURITIES
The validity of the offered securities will be passed upon for us
by Karl R. Barnickol, who is our Senior Vice President, General Counsel
and Secretary. On August 31, 2000, Mr. Barnickol owned 127,515 shares of
our common stock and options to purchase an additional 317,121 shares.
EXPERTS
The consolidated financial statements and related consolidated
financial statement schedules incorporated in this prospectus by
reference from Solutia Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1999 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports (which reports express
an unqualified opinion and include an explanatory paragraph relating to
a change in a method of accounting in 1997), which are incorporated
herein by reference and have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of Viking Resins Group
Holdings B.V. and subsidiaries incorporated in this prospectus by
reference from Solutia Inc.'s Form 8-K/A filed March 6, 2000, appearing
in Exhibit 99.1, have been audited by Deloitte & Touche Accountants,
independent auditors, as stated in their report, which is incorporated
herein by reference and have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting
and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table shows the costs and expenses we expect to pay,
except for any underwriters' fees and expenses, in connection with the
offered securities. All of the amounts are estimated except the SEC
registration fee.
SEC Registration Fee $158,500
Blue Sky and NASD Fees 5,000
Printing Expenses 100,000
Legal Fees and Expenses 40,000
Accounting Fees and Expenses 40,000
Transfer Agent and Registrar, Trustee and Depositary Fees 60,000
Rating Agency Fees 265,000
Miscellaneous Expenses 56,500
--------
Total $725,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of
Delaware permits indemnification of directors, officers, employees and
agents of corporations under specified conditions and subject to
specified limitations.
Article VIII of Solutia's Restated Certificate of Incorporation
and Article VII of its by-laws provide for indemnification of any
director or officer to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
In addition, Solutia maintains directors' and officers' liability
insurance for the benefit of its directors and officers.
The form of Underwriting Agreement included as an exhibit to this
registration statement provides for indemnification of directors and
officers of Solutia against certain liabilities.
ITEM 16. EXHIBITS.
A list of exhibits is set forth in the Exhibit Index appearing
elsewhere in this Registration Statement and is incorporated by
reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
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(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action,
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suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) pursuant to the Securities
Act shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(e) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed by
the Securities and Exchange Commission under Section 305(b)(2) of the
Trust Indenture Act.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of St. Louis and State of
Missouri on the 18th day of September, 2000.
SOLUTIA INC.
By: /s/ Robert A. Clausen
---------------------------------
Robert A. Clausen
Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
<F*> Chairman, President, Chief Executive September 18, 2000
------------------------ Officer and Director (Principal
John C. Hunter III Executive Officer)
/s/ Robert A. Clausen Senior Vice President and Chief September 18, 2000
------------------------ Financial Officer (Principal Financial
Robert A. Clausen Officer)
/s/ J. M. Sullivan Vice President and Controller September 18, 2000
------------------------ (Principal Accounting Officer)
James M. Sullivan
<F*> Vice Chairman, Chief Operating September 18, 2000
------------------------ Officer and Director
Michael E. Miller
<F*> Director September 18, 2000
------------------------
Robert T. Blakely
<F*> Director September 18, 2000
------------------------
Paul H. Hatfield
<F*> Director September 18, 2000
------------------------
Robert H. Jenkins
<F*> Director September 18, 2000
------------------------
Frank A. Metz, Jr.
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<PAGE>
<F*> Director September 18, 2000
-----------------------
J. Patrick Mulcahy
<F*> Director September 18, 2000
------------------------
Robert G. Potter
<F*> Director September 18, 2000
------------------------
William D. Ruckelshaus
<F*> Director September 18, 2000
------------------------
John B. Slaughter
<FN>
<F*> Karl R. Barnickol, by signing his name hereto, does sign this
document on behalf of the above noted individuals, pursuant to powers of
attorney duly executed by such individuals which have been filed as an
Exhibit to this Registration Statement.
/s/ Karl R. Barnickol
-------------------------
Karl R. Barnickol
(Attorney-in-Fact)
</TABLE>
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<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
1 Form of Underwriting Agreement (for debt securities)
2 Not Applicable
4.1 Restated Certificate of Incorporation of Solutia Inc. as of
October 28, 1997 (incorporated by reference to Exhibit 3(a) of
Solutia Inc.'s Registration Statement on Form S-1 (333-36355)
filed on September 25, 1997
4.2 By-Laws of Solutia Inc. (incorporated by reference to Exhibit
3(b)of Solutia Inc.'s Form 10-Q for the quarter ended March 31,
1999)
4.3 Rights Agreement (incorporated by reference to Exhibit 4 of
Solutia Inc.'s Registration Statement on Form 10 filed on
August 7, 1997)
4.4 Form of Indenture dated as of [______] between Solutia Inc. and
The Chase Manhattan Bank as Trustee, providing for Issuance of
Senior Debt Securities in Series
4.5 Form of Indenture dated as of [______] between Solutia Inc. and
[________] as Trustee, providing for Issuance of Subordinated
Debt Securities in Series
4.6<F*> Form of Deposit Agreement dated as of [_______] between Solutia
Inc., [__________] and the Holders from Time to Time of the
Depositary Shares Described Therein
4.7<F*> Form of Certificate of Designations of the [___]% Series [___]
[Convertible] Preferred Stock (Par Value $.01 Per Share) of
Solutia Inc.
4.8<F*> Form of Warrant Agreement between Solutia Inc. and
[__________], as Warrant Agent
5 Opinion of Karl R. Barnickol, Esq.
8 Not Applicable
12 Computation of Ratio of Earnings to Fixed Charges
15 Not Applicable
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte & Touche Accountants
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23.3 Consent of Karl R. Barnickol, Esq. (included in Exhibit 5)
24 Powers of Attorney
25.1 Statement of Eligibility on Form T-1 of The Chase Manhattan
Bank, as trustee under the Indenture providing for the issuance
of the senior debt securities
25.2<F*> Statement of Eligibility on Form T-1 of the trustee under the
Indenture providing for the issuance of the subordinated debt
securities
26 Not Applicable
27 Not Applicable
99 Not Applicable
[FN]
----------------------------
<F*> To be filed, if necessary, after the effectiveness of this
registration statement by an amendment to the registration
statement or incorporated by reference pursuant to a Current
Report on Form 8-K in connection with the offering of
securities.
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