Solutia Announces New Compensation Plan, Board

St. Louis, MO, November 20, 2007--Solutia Inc. on Monday revealed a compensation package that ties its executives' pay to company performance — and should keep them glued to their seats as the chemical firm emerges from a four-year bankruptcy reorganization, according to the St. Louis Post-Dispatch.

Solutia, based in Town and Country, was set to file by midnight Monday the final documents in its reorganization plan. Included is an incentive plan that once again grants restricted shares and stock options to a pool of more than 200 executives and managers, after a long bankruptcy process that rendered the company's shares worthless.

When a company reorganizes, "you want to provide some long-term incentives to get (executives) to continue building value in the company. It is essential … that their future fortunes are tied to those of the shareholders of the newly public company," said Patrick McGurn, special counsel with the ISS Governance Services Unit of RiskMetrics Group Inc., an investor advisory firm.

Solutia expects to issue new shares on December 28, the date it will emerge from bankruptcy if Judge Prudence Carter Beatty approves the reorganization plan.

In all, the company has reserved for executive compensation 12% of the 60 million new common shares. At an estimated initial trading price of $20 a share, they hold a value of $144 million. This pool is intended to cover incentive awards over the next five to six years, Solutia said.

The chief beneficiaries are Solutia's top executives, who will receive restricted shares and stock options that vest in equal annual installments over three years.

Under the plan, Jeffry Quinn, chairman, president and chief executive, receives 200,000 restricted shares plus 500,000 options with a $20 exercise price; James Sullivan, chief financial officer, gets 60,000 shares plus 150,000 options. Senior vice presidents Luc De Temmerman, James Voss and Jonathon Wright each get 40,000 shares plus 100,000 options.

Quinn and his team "not only did a good job getting this company out of bankruptcy, but it is going to do a good job in this next phase after emerging. … If they do, they will get wealthy," said a former member of a committee of Solutia creditors that approved the compensation plan. He could not be identified according to the policy of the firm where he is employed.

It is important to retain managers who forged the strategy that has improved Solutia's financial performance and overall value during its reorganization, he said. Doing so should build Wall Street's confidence in the emerged firm.