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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from to
Commission file number 1-14601
Arch Chemicals, Inc.
(Exact name of registrant as specified in its charter)
Virginia 06-1526315
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
501 Merritt 7 06856
Norwalk, CT (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (203) 229-2900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock New York Stock Exchange
Series A Participating Cumulative New York Stock Exchange
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes _ No X .
-
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of February 28, 1999, the aggregate market value of registrant's common
stock held by non-affiliates of registrant was approximately $434,611,016.
As of February 28, 1999, 22,981,630 shares of the registrant's common stock
were outstanding.
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TABLE OF CONTENTS
FORM 10-K
PART I
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Page No.
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Item 1 Business................................................... 1
Item 2 Properties................................................. 7
Item 3 Legal Proceedings.......................................... 10
Item 4 Submission of Matters to a Vote of Security Holders........ 10
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 10
Item 6 Selected Financial Data.................................... 11
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
Item 7A Quantitative and Qualitative Disclosures about Market
Risk...................................................... 21
Item 8 Financial Statements and Supplementary Data................ 22
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 41
PART III
Item 10 Directors and Executive Officers of the Registrant......... 42
Item 11 Executive Compensation..................................... 46
Item 12 Security Ownership of Certain Beneficial Owners and
Management................................................ 52
Item 13 Certain Relationships and Related Transactions............. 54
PART IV
Item 14 Exhibits, Financial Statements Schedules and Reports on
Form 8-K.................................................. 58
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PART I
Item 1. Business
General
Arch Chemicals, Inc. (the "Company") was organized under the laws of the
Commonwealth of Virginia on August 25, 1998 as a wholly-owned subsidiary of
Olin Corporation ("Olin") for the purpose of effecting a tax-free distribution
of Olin's Specialty Chemical Businesses ("Distribution") to the shareholders
of Olin. The Distribution occurred on February 8, 1999 ("Distribution Date")
upon which the Company became a separate, independent company. In the
Distribution, for every two shares of Olin Common Stock held by a shareholder
of record as of February 1, 1999, the shareholder received one share of the
Company's Common Stock ("Company Common Stock") (such one share for every two
being the "Distribution Ratio").
The Company is a specialty chemicals manufacturer which supplies value added
products and services to several industries on a worldwide basis, including
the consumer products and the semiconductor industries. The principal
businesses in which the Company competes are microelectronic chemicals, water
chemicals and performance chemicals. The Company's ability and willingness to
provide superior levels of technical customer support, the manufacturing
flexibility of many of its facilities, and the cultivation of close customer
relationships are the common skills on which the Company relies in servicing
its global markets and customers.
Information as to the total assets attributable to each of the Company's
segments as of the last two fiscal years appears in the Notes to Combined
Financial Statements--"Segment Information" contained in Item 8 of Part II of
this Report. Information as to sales and income (or loss) of the Company's
segments for each of the last three fiscal years is contained in the Notes to
Combined Financial Statements--"Segment Information" contained in Item 8 of
Part II of this Report.
The term "Company" as used herein means Arch Chemicals, Inc. and its
subsidiaries unless the context indicates otherwise.
Products and Services
The Company's principal products and services fall within three businesses:
microelectronic chemicals, water chemicals and performance chemicals. For
financial information about each of the Company's industry segments, and
foreign and domestic and export sales, see Notes to Combined Financial
Statements--"Segment Information" contained in Item 8 of Part II of this
Report. The principal products of each business are described below.
Microelectronic Chemicals
The Company manufactures and supplies a range of products and services to
semiconductor manufacturers and to flat panel display manufacturers throughout
the world. The microelectronic chemicals sold by the Company include a variety
of high purity acids, bases, oxidizers, etchants and solvents (collectively
referred to as "process chemicals"). The Company plans to expand its process
chemicals product line of ultra high purity, parts per trillion (ppt)
chemicals in 1999. These leading edge products will service the newest
generation semiconductor manufacturing facilities. Another microelectronic
chemical product line, referred to as diffusion systems, includes film
deposition precursors, dopants, chlorine sources and chemical refill
equipment. The Company also offers a range of semiconductor photopolymers,
which include photoresists, ancillary materials and polyimides. In addition to
the range of products offered, the Company provides semiconductor
manufacturers with a variety of chemical usage related services, known as
chemical management services, including inventory management and chemical
handling.
The Company manufactures a wide range of photoresist and ancillary products
encompassing negative, g-line, i-line and 248nm deep UV technologies to meet
the constantly evolving needs of the semiconductor industry. Within the past
twelve months, the Company has announced new products based on two new series
of 248nm deep UV resists, new advanced i-line products and environmentally-
friendly strippers and has begun sampling both bi-layer and single-layer 193nm
resist materials. The current focus of the photoresist research and
development efforts is aimed at evolving the technology platforms underlying
these products through
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modification of the respective materials chemistries to meet the ongoing
demands of the semiconductor industry. The Company is pursuing advanced
photoresist development through internal development, strategic alliances and
licensing agreements.
The Company's microelectronic chemicals business competes against other
suppliers on the basis of performance, product quality, service, technology
and pricing. The Company has a broad patent portfolio encompassing the
technologies underlying the design of its products which the Company believes
provides a competitive advantage against other suppliers. The Company enhances
its technological competitive advantage by entering into technology licenses
and joint development agreements with third parties to meet the rapidly
evolving needs of the semiconductor industry. The current semiconductor
industry downturn and the addition of several new suppliers to the market has
significantly intensified price-based competition. Numerous programs have been
implemented, are planned or are in progress which are expected to improve the
cost structure and are designed to make this business a low cost industry
supplier. The Company's extensive product line and global infrastructure are
distinct advantages that enhance its competitiveness. This enables this
business to service virtually all semiconductor industry wet chemical
requirements on a worldwide basis. Product performance and quality and the
technology associated with quality are generally considered an industry
prerequisite. The high quality standards of the semiconductor industry serve
as a hurdle, which limit the number of new entrants as suppliers to the
market.
The Company's microelectronic chemicals are sold on a direct basis or
through independent third party distributors. Chemical management services are
offered on a direct basis only.
Water Chemicals
The Company manufactures and sells chemicals and distributes equipment on a
worldwide basis for the sanitization and recreational use of residential and
commercial pool water, and the purification of potable water. The Company
sells both calcium hypochlorite and chlorinated isocyanurates for the
sanitization of residential and commercial pool water. The Company is a
leading worldwide producer of calcium hypochlorite with 65% to 70% available
chlorine. The Company has a competitive advantage through ownership of the J3
technology which enables it to produce calcium hypochlorite with superior
dissolving characteristics and 75% available chlorine as compared to calcium
hypochlorite with 65% available chlorine. The Company owns widely recognized
brand names for both calcium hypochlorite (HTH(R)) and chlorinated
isocyanurates (Pace(R)). The Company's water chemical products are sold under
a variety of brand names, including Company-owned trademarks such as Sock-
It(R), Super Sock-It(R), Duration(R) and Pulsar(R). The Company's water
chemical products are also distributed as private label brands. In addition to
the pool water sanitizers calcium hypochlorite and chlorinated isocyanurates,
the Company sells ancillary chemicals and accessories for the maintenance and
recreational use of residential and commercial pools.
The Company's water chemical products are also sold in the municipal water
market for the purification of potable water. Currently, the Company sells
calcium hypochlorite to purify potable water mainly outside the U.S. in a
number of countries. The Company has plans to expand its presence in the
municipal water market both domestically and internationally.
Seventy-five percent of the Company's water chemical sales are within North
America, and the remaining 25% are throughout the rest of the world. In North
America, the Company sells water chemical products either directly to retail
or through independent third party distributors. The Company also has
subsidiaries and ownership interests in joint ventures in South Africa and
Brazil which manufacture and distribute calcium hypochlorite to local markets.
In addition to the manufacture and sale of water chemicals, the Company
distributes chemicals, equipment, parts and accessories for pools mainly
through two wholly-owned subsidiaries. One subsidiary, Superior Pool Products,
Inc., is headquartered in Anaheim, California with 18 locations throughout
Arizona, California and
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Nevada. Another subsidiary, Hydrochim, S.A., located in France, distributes
chemicals and equipment throughout Europe.
Performance Chemicals
The Company's performance chemicals business consists of the manufacture and
sale of a broad range of products with diverse end uses. The performance
chemicals sold by the Company are critical to the performance and value of the
customer's end use products. As a result, there is a high level of operational
integration with many customers. The performance chemicals business is
characterized by technology driven product solutions that benefit specific
customers and provide manufacturing flexibility. In addition, the business is
characterized by close customer relationships with entities who are leaders in
the markets in which they compete. The flexibility afforded by batch
manufacturing in some operations combined with the Company's ability and
willingness to provide superior technical support enables it to respond to the
specific needs of a diverse group of customers. This gives the Company a
competitive advantage over competitors whose manufacturing processes and
related cost structure constrain their ability to respond cost effectively to
smaller volume customers. Customers, however, include industry leaders such as
Procter & Gamble, Unilever and Uniroyal.
The Company's performance chemicals business manufactures flexible polyols,
specialty polyols, urethane systems and glycol and glycol ethers. Flexible
polyols, which are used in the furniture, bedding, carpet and packaging
industries, are manufactured by the Company's wholly-owned, Venezuelan
subsidiary, Etoxyl, C.A., for South American markets. Specialty polyols, which
are used as an ingredient for elastomers, adhesives, coatings, sealants and
rigid foam, are manufactured at the Company's Brandenburg, Kentucky site, as
well as by its Venezuelan subsidiary. The Brandenburg facility also
manufactures glycol and glycol ethers for use as an ingredient in cleaners,
personal care products and antifreeze and provides custom manufacturing of
specialty chemicals for a small group of companies.
The performance chemicals business also manufactures biocides that control
the growth of micro-organisms, particularly fungus and algae, and control
dandruff on the scalp. All of the biocide products are marketed under the well
recognized trademarks, Omadine(R), Omacide(R) and Triadine(R) biocides. The
majority of the biocide chemicals produced by the Company are based on the
zinc, sodium and copper salts of the pyrithione molecule. These pyrithione-
based biocides include over twenty products with differing concentrates, forms
and salts and the Company is a worldwide leader in these biocide products.
Other biocide chemicals are based on iodopropargyl-n-butylcarbamate ("IPBC"),
a broad spectrum fungicide, which was introduced by the Company in 1995, and
serves the metalworking fluids and coatings markets. The IPBC-based biocides
currently consist of five variations with others in the development stages.
Biocides make up a small portion of the customers' end products, and therefore
must be highly effective at low concentrations as well as compatible with the
formulation's other components. Meeting the biocide customer's needs requires
a high degree of technical support and the expertise to do business in a
highly regulated environment. The Company's ability to meet these needs makes
it a preferred supplier in the high growth, anti-dandruff market. The Company
is also uniquely positioned as the only pyrithione supplier with U.S.
Environmental Protection Agency registrations for metalworking fluids,
coatings and anti-foulant paints. The manufacturing flexibility of the
biocides assets also permits the Company to offer fine chemical custom
manufacturing services.
The Company's performance chemicals business also supplies hydrazine
hydrates as well as propellant grade hydrazine and hydrazine derivatives.
Hydrazine hydrate products are sold for use in chemical blowing agents, water
treatment chemicals, agricultural products, pharmaceutical intermediates and
other chemical products. Hydrazine hydrates are produced at its Lake Charles,
Louisiana production facility. The hydrazine hydrates are supplied in various
concentrations, ranging from 51-100%, and packaging containers including bulk,
tote bins and drums.
The performance chemicals business also supplies propellant grade hydrazine
and hydrazine derivatives for use as fuel in satellites, expendable launch
vehicles and auxiliary and emergency power units. These propellant grade
hydrazine products include Ultra PureTM Hydrazine (UPH), anhydrous hydrazine
(AH), unsymmetrical
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dimethyl hydrazine (UDMH), monomethyl hydrazine (MMH) and hydrazine fuel
blends. In addition to space-related applications in satellites and launch
vehicles, auxiliary power from hydrazine-driven units is supplied to the NASA
Space Shuttle for maneuvering its rocket engine nozzles and for operating
valves, control surfaces, brakes and landing gear on the Shuttle Orbiter.
Emergency power from hydrazine is also provided to jet aircraft like the F-16
to operate electrical and hydraulic units in the event of an engine flameout.
The Company also supplies launch services and special packaging containers
including cylinders to improve the safe handling and storage of propellants
and to reduce launch costs.
The Company's performance chemicals business is also a major regional
supplier of sulfuric acid regeneration services and virgin sulfuric acid sales
to the U.S. Gulf Coast market with manufacturing facilities located in
Beaumont, Texas and Shreveport, Louisiana. The Company supplies sulfuric acid
to refineries for their petroleum alkylation process and to pulp and paper
manufacturers for use as a reagent for chlorine dioxide generation and water
treatment neutralization for pH control.
Customers
No single customer has accounted for more than 10% of the Company's total
annual sales over the last three fiscal years. The Company's customer base is
diverse and includes semiconductor manufacturers, flat panel display
manufacturers, world-renowned consumer product companies, national and
regional chemical and equipment distributors, other chemical manufacturers and
the U.S. Government.
Raw Materials and Energy
The Company utilizes a variety of raw materials in the manufacture of
products for its three businesses. The Company has not experienced any
difficulty in securing raw materials. Outlined below are the principal raw
materials for the product businesses. The majority of the Company's raw
material requirements are purchased and many are provided under the terms and
conditions of written agreements.
Microelectronic Chemicals. The principal raw materials for the
microelectronic chemicals business include sulfuric acid, hydrofluoric acid,
nitric acid, phosphoric acid, hydrochloric acid, hydrogen peroxide, ammonia,
isopropyl alcohol, acetone, tetraethylorthosilicate (TEOS), dichloroethylene
(DCE), trichloroethane (TCA), phosphorous oxychloride (POCL/3/),
hexamethyldisilazone (HMDS), custom polymers, photoinitiators, tetra methyl
ammonium hydroxide (TMAH) and custom polyimide resins and photosensitizers.
Water Chemicals. The principal raw materials for the water chemicals
business include chlorine, caustic soda, sodium hydroxide, lime and
chlorinated isocyanurates. Chlorine and sodium hydroxide will be provided by
Olin pursuant to the Chlor-Alkali Supply Agreement and with respect to the
Company's Charleston facility, will be delivered via a pipeline from the
adjacent Olin facility. The balance of the raw materials are purchased from
other suppliers and are readily available.
Performance Chemicals. The raw materials for the performance chemicals
business include a variety of chemicals including propylene oxide, ethylene
oxide, pyridine, iodine, propargyl butyl carbamate, chlorine, caustic soda,
sulfur and ammonia.
Electricity is the predominant energy source for the Company's manufacturing
facilities and is primarily supplied to the Company by public or government
utilities. Natural gas used for steam production is an important energy source
for many of the Company's manufacturing sites and is purchased from multiple
suppliers.
Research and Development; Patents
The Company's research activities are conducted at a number of facilities.
Company-sponsored research expenditures were approximately $16.2 million,
$21.1 million and $21.0 million for 1998, 1997 and 1996, respectively.
In general, intellectual property is important to the Company, but no one
technology, patent, or license or group thereof related to a specific process
or product is of material importance to the Company as a whole. The
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Company believes that its broad patent portfolio in the microelectronic
chemicals segment provides a sustainable competitive advantage for that
product line. The Company owns three process patents for the technology
relating to the manufacture of J3 calcium hypochlorite which are materially
important to the water chemicals business. One of these patents expires in
2009 and the others expire in 2010. The Company owns a patent covering a
process for producing Ultra Pure(TM) Hydrazine, the world's purest grade of
anhydrous hydrazine, which makes it the preferred propellant for
monopropellant satellite thruster applications. This patent expires in 2006.
Seasonality
Although the businesses of the Company as a whole are not seasonal in
nature, 40% of the sales in the water chemicals business occur in the second
quarter of the calendar year. The purchase of water chemical products by
consumers in the residential pool market is concentrated in the United States
between Memorial Day and the Fourth of July. In addition, the weather can also
have a significant effect on water chemical sales during any given year.
Backlog
The amount of backlog orders is immaterial to the Company as a whole.
U.S. Government Contracts and Regulations
The Company's performance chemicals business sells hydrazine to the U.S.
Government. Consequently, as a government contractor, the Company is subject
to extensive and complex U.S. Government procurement laws and regulations.
These laws and regulations provide for ongoing government audits and reviews
of contract procurement, performance and administration. Failure to comply,
even inadvertently, with these laws and regulations and with laws governing
the export of controlled products and commodities could subject the Company or
one or more of its businesses to civil and criminal penalties and under
certain circumstances, suspension and debarment from future government
contracts and the exporting of products for a specified period of time.
Competition
The Company's microelectronic chemicals, water chemicals and performance
chemicals businesses are in highly competitive industries, and the Company
encounters strong competition with respect to each of its product lines from
other manufacturers worldwide. This competition, from other manufacturers of
the same products and from manufacturers of different products designed for
the same uses, is expected to continue in both U.S. and foreign markets. More
recently, the Company has experienced increased price competition as a result
of the recent downturn in the semiconductor market. Depending on the product
involved, various types of competition are encountered, including price,
delivery, service, performance, product innovation, product recognition and
quality. Overall, the Company regards its principal product groups to be
competitive with many other products of other producers, and believes that it
is an important producer of many such product groups.
Export Sales
The Company's export sales from the United States to unaffiliated customers
were $63.9 million, $93.6 million and $102.4 million in 1998, 1997 and 1996,
respectively. The financial information about geographic areas contained in
the Notes to the Combined Financial Statements--"Segment Information" found in
Item 8 of Part II of this Report is incorporated herein by reference.
Employees
As of February 8, 1999, the Company had approximately 3,000 employees,
approximately 663 of whom were working in foreign countries. Approximately 388
of the hourly paid employees of the Company located at its Brandenburg,
Kentucky, Lake Charles, Louisiana, Shreveport, Louisiana and Beaumont, Texas
facilities are represented for purposes of collective bargaining, by several
different labor organizations and the Company is party to nine labor contracts
relating to such employees. These labor contracts extend for three or four
year terms
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which expire in the years 2000, 2001 and 2002. No major work stoppages have
occurred in the last three years. While relations between the Company and its
employees and their various representatives are generally considered
satisfactory, there can be no assurance that new labor contracts can be
entered into without work stoppages.
Environmental Matters
The establishment and implementation of Federal, state and local standards
to regulate air and water quality and to govern contamination of land and
groundwater has affected, and will continue to affect, substantially all of
the Company's manufacturing locations. Federal legislation providing for
regulation of the manufacture, transportation, use and disposal of hazardous
and toxic substances has imposed additional regulatory requirements on
industry in general, and particularly on the chemicals industry. In addition,
the implementation of environmental laws, such as the Resource Conservation
and Recovery Act, the Clean Air Act and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, has required and will continue to
require new capital expenditures and will increase operating costs. The
Company employs waste minimization and pollution prevention programs at its
manufacturing sites.
The Distribution Agreement specifies that the Company is only responsible
for certain environmental liabilities at the Company's current facilities and
certain off-site locations.
Associated costs of investigatory and remedial activities are provided for
in accordance with generally accepted accounting principles governing
probability and the ability to reasonably estimate future costs. Charges to
income for investigatory and remedial efforts were not material to operating
results in 1998, 1997 and 1996 but may be material to net income in future
years. In 1997, in connection with the sale of the surfactants businesses to
BASF, a $2.3 million provision was recorded to provide for future
environmental spending at the Brandenburg, Kentucky site.
Cash outlays for remedial and investigatory activities associated with
former waste sites and past operations were incurred by Olin. Cash outlays for
normal plant operations for the disposal of waste and the operation and
maintenance of pollution control equipment and facilities to ensure compliance
with mandated and voluntarily imposed environmental quality standards were
charged to income. Cash outlays for environmental related activities totaled
$12.0 million in 1998, $10.8 million in 1997 and $12.5 million in 1996. During
1998, $1.0 million ($2.8 million in 1997; $4.0 million in 1996) was spent on
capital projects, $10.6 million ($8.0 million in 1997; $8.5 million in 1996)
was spent on normal plant operations, and $0.4 million was spent on remedial
activities. Historically, the Company has funded its environmental capital
expenditures through cash flow from operations and expects to do so in the
future.
The Company's combined balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting
to $2.8 million at December 31, 1998, and $3.2 million at December 31, 1997,
all of which were classified as other noncurrent liabilities. These amounts
did not take into account any discounting of future expenditures, any
consideration of insurance recoveries or any advances in technology. These
liabilities are reassessed periodically to determine if environmental
circumstances have changed or if the costs of remediation efforts can be
better estimated. As a result of these reassessments, future charges to income
may be made for additional liabilities.
Annual environmental-related cash outlays for site investigation and
remediation, capital projects and normal plant operations are expected to
range between $10 to $15 million over the next several years. While the
Company does not anticipate a material increase in the projected annual level
of its environmental-related costs, there is always the possibility that such
increases may occur in the future in view of the uncertainties associated with
environmental exposures. Environmental exposures are difficult to assess for
numerous reasons, including the identification of new sites, developments at
sites resulting from investigatory studies, advances in technology, changes in
environmental laws and regulations and their application, the scarcity of
reliable data pertaining to identified sites, the difficulty in assessing the
involvement and financial capability of other potentially responsible parties
and the Company's ability to obtain contributions from other parties and the
lengthy time periods over which site remediation occurs.
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Item 2. Properties
The table below sets forth the locations where the Company conducts its
business and a brief description of the activities conducted at each
identified location. A more detailed description of the Company's principal
manufacturing facilities follows the table. The Company believes that its
facilities are sufficiently maintained and suitable and adequate for its
immediate needs and that additional space is available to accommodate
expansion. Unless otherwise noted below, the identified location is owned by
the Company.
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Location Primary Activities
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McIntosh, Alabama(1) Blending facility for performance chemicals
Chandler, Arizona(2) Warehouse and office facility for
microelectronic chemicals
Mesa, Arizona Manufacturing facility for microelectronic
chemicals
Anaheim, California(2) Office and warehouse space for water chemicals
Cheshire, Connecticut Research and development facility and offices
Norwalk, Connecticut(2) Corporate headquarters
Bethalto, Illinois (2) Corporate data center
Naperville, Illinois(2) Water chemicals service center
Seward, Illinois Manufacturing facility for microelectronic
chemicals
Brandenburg, Kentucky Manufacturing facility for microelectronic and
performance chemicals
Lake Charles, Louisiana Manufacturing facility for performance chemicals
Shreveport, Louisiana Manufacturing facility for performance chemicals
Rochester, New York Manufacturing facility for performance chemicals
East Providence, Rhode Island Manufacturing facility and materials research
center for microelectronic chemicals
North Kingston, Rhode Island Manufacturing facility of microelectronic
chemicals; North American technical support
center; new product development center for
microelectronic chemicals
Charleston, Tennessee(1) Manufacturing facility for water chemicals
Beaumont, Texas Manufacturing facility for performance chemicals
Zwijndrecht, Belgium(1) Manufacturing facility for microelectronic
chemicals and European technical support center
Igarassu, Brazil Facility of a joint venture for the manufacture
of water chemicals
Salto, Brazil Repackaging facility for water chemicals and
manufacturing facility for performance
chemicals
Amboise, France Repackaging, distribution and warehouse facility
for water chemicals
Swords, Ireland Manufacturing facility for performance chemicals
Kempton Park, South Africa Facility of a joint venture for the manufacture
of water chemicals
Maricaibo, Venezuela Manufacturing facility for performance chemicals
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(1)Land is leased.
(2)Leased facility.
The Company also leases several warehouse facilities in Arizona, California,
Idaho, Nevada and Texas and several overseas sales offices and warehouses.
Principal Manufacturing Facilities
The principal manufacturing properties of the Company described below are
all owned by the Company, except for the land under the Belgium facility which
is leased until 2041, the land under the McIntosh plant and
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Charleston facility which are being leased from Olin and except for properties
held by joint ventures as noted below.
McIntosh, Alabama. The Company's facility located in McIntosh, Alabama
blends, packages and stores propellant grade hydrazine products. Special
hydrazine fuel blends are produced as the principal propellant for several
U.S. Air Force launch vehicle programs including the Titan and Delta rockets.
Mesa, Arizona. The Company has a state-of-the-art microelectronic chemical
manufacturing facility in Mesa, Arizona. This facility manufactures, purifies,
formulates and packages extensive product lines of ultra high purity process
chemicals. This facility is ISO-9002 certified. A second facility for
diffusion chemicals is under construction at Mesa. The Company expects this
second facility to be ISO-9002 certified by the end of 1999.
In addition to manufacturing operations, the Company has extensive
analytical testing, applications testing and warehousing capabilities for both
process and diffusion chemicals at the Mesa plant site. Current operations
(including the diffusion chemicals plant under construction) occupy
approximately 30 acres of the 52 acre plant site. The remaining acreage is
available for future expansions.
Brandenburg, Kentucky. The ISO 9000-certified Brandenburg plant covers an
area of 200 acres, surrounded by 1,200 acres of land which provides both a
buffer zone and expansion capability. The plant contains multiple
manufacturing facilities producing a wide range of products. Many of these
products are derivatives of ethylene oxide and propylene oxide. A broad line
of specialty polyols are produced in a flexible batch facility and sold into
urethane coatings, adhesives, sealant and elastomer applications. Chemical
intermediates for the Company's microelectronic materials business are
produced in a separate manufacturing facility dedicated to this purpose. There
is a research and development center at the site which supports the
development and technical service needs of the polyol and glycol products and
new product scale up for the microelectronics business. Ethylene oxide is
produced on site in a facility owned by Sun Company and operated by the
Company. The Company also operates other facilities on the site to produce
commodity and specialty chemicals for third parties under long-term
contractual arrangements.
Lake Charles, Louisiana. The Company's facility located in Lake Charles,
Louisiana consists of three manufacturing plants that produce various
hydrazine products. One ISO 9002-certified plant, built in 1979, produces
solution grade hydrazine products for use in chemical blowing agents, water
treatment chemicals, agricultural products, pharmaceutical intermediates and
other chemical products. A second ISO 9002-certified plant, built in 1953,
produces propellant grade hydrazine products including anhydrous hydrazine
(AH), unsymmetrical dimethyl hydrazine (UDMH) and monomethyl hydrazine (MMH)
for use as fuel in satellites, expendable launch vehicles and auxiliary power
units. A third plant, built in 1988, produces propellant grade Ultra Pure(TM)
Hydrazine (UPH), the world's purest grade of anhydrous hydrazine, for
satellite propulsion.
Shreveport, Louisiana. This ISO 9002-certified plant produces industrial
grade virgin sulfuric acid for delivery to the U.S. Gulf Coast and provides
regeneration services primarily to local refineries. In addition, this site
provides non-hazardous waste fuel burning services and markets sodium
bisulfite solution.
Rochester, New York. This facility manufactures a large number of chemicals
for the specialty chemicals industry. Many of these chemicals are biocides
used to control the growth of microorganisms, particularly, fungus and algae
and to control dandruff on the scalp. The largest 2-chloropyridine production
facility in the world is located here. 2-Chloropyridine is the key
intermediate used to produce the Company's Omadine(R) biocides. These products
are based on the salts of the pyrithione molecule. The Company manufactures
over a dozen pyrithione products at this site by modifying these salts by
concentration, form or combining them with other biocides. The Company's
Triadine(R) brand of biocides is a combination of pyrithione and triazine, a
bactericide purchased from a supplier. This facility also produces the
Omacide(R) IPBC brand, which is based upon iodopropargyl-n-butylcarbamate
(IPBC), a broad-spectrum fungicide. In addition, this facility also
manufactures several chemicals custom-made for specific customers for widely
diverse markets.
8
<PAGE>
East Providence, Rhode Island. This ISO 9001-certified facility is located
in an industrial park in East Providence, Rhode Island. Originally built as a
materials research center in 1974, the facility was expanded in 1984 to
manufacture photoresists, photoresist developers, and photoresist strippers
used in the semiconductor industry. The materials research center at this site
develops new compounds used in the manufacture of photoactive products and has
on site capabilities for chemical synthesis, testing, and product formulation.
This capability allows for rapid commercialization of new technologies and is
augmented by scale-up facilities at the Brandenburg, Kentucky site. The
manufacturing plant at the site receives raw materials, formulates, filters
and packages finished goods in a high purity, clean environment. Full quality
control capabilities are located on-site or at the nearby Quonset Point
facility. The high degree of flexibility required to custom manufacture
specific products is maintained through the number of and multiple sized
formulation vessels available here.
North Kingston, Rhode Island. This facility is located in a new industrial
park in North Kingston, Rhode Island (Quonset Point Industrial Park) which
originally housed a distribution warehouse. A new state-of-the-art
manufacturing facility and product development center for advanced
photoresists is being built on-site to expand the Company's capabilities in
the development and manufacture of advanced technology photoresists. A
technical service center is located on site with advanced photolithography
equipment identical to that of the customer base and provides technical
service support to North America. The equipment is also used by the advanced
product development groups to develop state-of-the-art products in
anticipation of customer requirements. The manufacturing plant will receive
raw materials and will formulate, filter and package finished goods in a high
purity, clean environment. Full test capabilities are located on-site or at
the nearby East Providence facility. The high degree of flexibility required
to custom manufacture specific products is maintained through the number of
and multiple sized formulation vessels available here. Packaging and
manufacturing facilities were designed for a new generation of purity
requirements. The Company is in the process of applying for ISO 9001
certification for the site.
Charleston, Tennessee. The Company's ISO 9002-certified facility located in
Charleston, Tennessee produces, packages, and stores calcium hypochlorite for
the water chemicals business. There are two distinct manufacturing operations
at this site. One produces our 65% (nominal) available chlorine product while
the other produces our patented, 75% high available chlorine product. Products
are packaged into containers that range in size from 5 pounds to 2,000 pounds
per container. The site also stores as much as 10-14 million pounds of product
during peak periods. Purchased chemicals are also stored in warehouses at this
site. These products, along with those manufactured at the site, are often
combined on shipments to meet the requests of customers.
Beaumont, Texas. The Company is a major regional manufacturer and supplier
of industrial grade virgin sulfuric acid to the U.S. Gulf Coast and provides
regeneration services primarily to local refineries. In addition, the Company
provides limited hazardous and non-hazardous waste fuel burning services and
markets sodium bisulfite solution. This facility has achieved and maintained
ISO 9002 certification since 1993.
Zwijndrecht, Belgium. The original facility located in Zwijndrecht, Belgium
has been operational since 1993 and primarily manufactures, tests, and
provides technical support for photoresists, photoresist developers, and
photoresist strippers used in the semiconductor industry. In 1998, the
facility was expanded to manufacture and test high purity acids, etchants, and
diffusion chemicals also used in the semiconductor industry. This expanded
facility is ISO 9002-certified. A technical service center is also located on
the site with photolithography equipment identical to that of the customer
base and provides technical service support to European customers.
Igarassu, Brazil. The Company's facility located in Igarassu, Brazil is a
joint venture operation (Nordesclor S.A.) that produces and packages calcium
hypochlorite for the water chemicals business within Brazil. Products for the
swimming pool market and the water treatment market are manufactured and
packaged at this site. The Company also has a small repackaging facility in
Salto, Brazil. The Salto facility also blends and manufactures products for
performance chemicals. This facility is currently shared with Olin Reductone
operations.
9
<PAGE>
Swords, Ireland. This facility is located just north of Dublin, Ireland and
has been producing biocides for over twenty-five years. 2-Chloropyridine is
imported from the Company's Rochester, New York plant and converted into zinc,
copper and sodium salts of the pyrithione molecule. The finished product is
shipped to customers in over fifty countries around the world. This facility
is both ISO 9002 and ISO 14001 certified.
Kempton Park, South Africa. The Company's facility located in Kempton Park,
South Africa is a joint venture operation (Aquachlor (Pty) Ltd.), that
produces and packages calcium hypochlorite for the water chemicals business
within the Southern Africa region. Products for the swimming pool and water
treatment markets are also packaged at this site.
Maricaibo, Venezuela. The Company's ISO 9000-certified facility in Venezuela
is a multi product manufacturing plant producing a broad range of polyols and
surfactants to support regional markets. Specialty polyols are also produced
for local consumption and export.
Item 3. Legal Proceedings
In connection with the Distribution, the Company assumed substantially all
non-environmental liabilities for legal proceedings relating to the Company's
businesses as conducted prior to the Distribution Date. See Item 13 of Part
III of this Report. In addition, in the normal course of business, the Company
is subject to proceedings, lawsuits and other claims, including proceedings
under laws and regulations related to environmental and other matters. All
such matters are subject to many uncertainties and outcomes that are not
predictable with assurance. While these matters could materially affect
operating results when resolved in future periods, it is management's opinion
that after final disposition, any monetary liability or financial impact to
the Company beyond that provided in the combined balance sheet as of December
31, 1998 would not be material to the Company's financial position or annual
results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the three
months ended December 31, 1998.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
As of February 28, 1999, there were approximately 8,600 record holders of
Company Common Stock.
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "ARJ." The Company's Common Stock began "regular way" trading on
the NYSE on February 9, 1999.
Information concerning the high and low sales prices of the Company's Common
Stock and dividends paid on Common Stock during each quarterly period in 1998
and 1997 is not presented because no stock trading occurred prior to 1999.
Among the provisions of the Credit Facility (as defined on page 17) are
restrictions relating to the payments of dividends and the acquisition of the
Company's Common Stock based on a financial formula. As of February 8, 1999,
which is the date the Credit Facility was assumed by the Company, dividends
and stock repurchases were limited to approximately $65 million.
The Company began operating as a publicly-held, independent company on
February 8, 1999. Since its inception in October 1998 to the date hereof, it
has not paid any cash dividends. The payment and level of cash dividends by
the Company after the Distribution will be subject to the discretion of the
Board of Directors of the Company (the "Board"). The Company currently
anticipates that it will initially pay quarterly cash common stock dividends
which, on an annual basis, will aggregate $0.80 per share. However, future
dividend decisions will be based on, and affected by, a number of factors,
including the operating results and financial requirements of the Company on
an independent basis, and will be subject to the restrictions contained in the
Credit Facility.
10
<PAGE>
Item 6. Selected Financial Data
The following table summarizes certain selected historical financial and
operating information with respect to the Company and is derived from the
Combined Financial Statements of the Company. The financial data as of and for
each of the three years ended December 31, 1998 were derived from the audited
financial statements included elsewhere herein. Such historical financial data
may not be indicative of the Company's future performance as an independent
company. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical Combined Financial Statements and Notes thereto
included elsewhere in this Form 10-K. The historical financial information
includes an allocated share of Olin's historical centralized activities. The
following information is qualified in its entirety by the information and
financial statements appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1998 1997 1996 1995 1994
($ in millions, except per share
amounts)
<S> <C> <C> <C> <C> <C>
Operations
Sales................................. $862.8 $929.9 $913.5 $872.8 $686.5
Cost of Goods Sold.................... 622.0 676.3 647.8 659.6 515.1
Selling and Administration............ 167.6 153.5 159.0 141.1 120.0
Research and Development.............. 16.2 21.1 21.0 17.4 12.5
------ ------ ------ ------ ------
Operating Income...................... 57.0 79.0 85.7 54.7 38.9
Interest and Other Income, net(1)..... 3.8 7.2 8.4 12.6 3.3
------ ------ ------ ------ ------
Income Before Taxes................... 60.8 86.2 94.1 67.3 42.2
Income Tax Provision.................. 20.8 29.9 33.0 23.4 14.7
------ ------ ------ ------ ------
Net Income............................ 40.0 56.3 61.1 43.9 27.5
====== ====== ====== ====== ======
Unaudited Pro Forma Net Income(2)..... 35.7 52.0 56.7 39.6 23.2
Unaudited Pro Forma Basic Income Per
Share(2)............................. 1.55 2.26 2.47 1.72 1.01
Other
Capital Expenditures.................. 84.3 71.0 53.2 65.4 51.4
Depreciation.......................... 43.1 43.6 40.2 41.4 39.4
Effective Tax Rate.................... 34.2% 34.7% 35.1% 34.8% 34.8%
<CAPTION>
Years Ended December 31,
--------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
($ in millions)
<S> <C> <C> <C> <C> <C>
Financial Position
Working Capital....................... $147.1 $151.5 $124.9 $129.9 $ 81.0
Property, Plant and Equipment, net.... 331.6 280.4 257.3 261.4 225.5
Total Assets.......................... 721.6 693.2 651.2 624.1 500.3
Capitalization(2).....................
Short-Term Borrowings................. 0.9 1.4 1.8 0.1 0.4
Long-Term Debt........................ 7.0 5.5 5.5 5.5 --
Equity and Cumulative Translation
Adjustment........................... 504.5 455.6 429.6 411.4 329.2
------ ------ ------ ------ ------
Total Capitalization.................. 512.4 462.5 436.9 417.0 329.6
====== ====== ====== ====== ======
</TABLE>
- --------
(1) Interest and other income, net in 1995 includes a gain ($7.0) from the
sale of the Sun(R) brand trademark, a dry sanitizer plant in Charleston,
West Virginia and a related tableting facility in Livonia, Michigan.
(2) In January 1999, Olin borrowed $75 million and on February 8, 1999, the
Company assumed this debt from Olin. Pro forma net income reflects the pro
forma effects of borrowings assuming $75 million is outstanding and that
the Company has seasonal weighted average borrowings related to the Water
Chemicals segment of $20 million at an aggregate effective rate of 7%. Pro
forma common stock outstanding represents the number of common shares
issued at the Distribution Date and assumes that such shares were
outstanding for all periods prior to the Distribution. See Notes to
Combined Financial Statements--"Subsequent Events".
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers periods when the Company operated as the specialty
chemical businesses of Olin. However, this discussion and analysis of
financial condition and results of operations has been prepared as if the
Company were a separate entity for all periods discussed. It should be read in
conjunction with the Company's historical Combined Financial Statements and
Notes thereto included elsewhere herein. Sales consist of sales to third
parties net of any discounts. Gross Margin is defined as Sales less Cost of
Goods Sold which includes raw materials, labor, overhead and depreciation
associated with the manufacture of the Company's various products. Other
operating expenses include selling, administration, research and development.
Results of Operations
Combined
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
($ in millions)
<S> <C> <C> <C>
Sales............................................... $862.8 $929.9 $913.5
Gross Margin........................................ 240.8 253.6 265.7
Selling and Administration.......................... 167.6 153.5 159.0
Research and Development............................ 16.2 21.1 21.0
Operating Income(1)................................. 60.4 86.1 93.3
Net Income.......................................... 40.0 56.3 61.1
Unaudited Pro Forma Financial Information:(2)
Interest Expense, net............................... $ 6.3 $ 6.5 $ 5.9
Net Income.......................................... $ 35.7 $ 52.0 $ 56.7
Basic Income Per Share.............................. $ 1.55 $ 2.26 $ 2.47
Common Stock Outstanding............................ 23.0 23.0 23.0
</TABLE>
- --------
Notes:
(1) Operating income includes operating income and the equity in earnings of
affiliated companies.
(2) In January 1999, Olin borrowed $75 million and on February 8, 1999, the
Company assumed this debt from Olin. Pro forma net income reflects the pro
forma effects of borrowings assuming $75 million is outstanding and that
the Company has seasonal weighted average borrowings related to the Water
Chemicals segment of $20 million at an aggregate effective rate of 7%. Pro
forma common stock outstanding represents the number of common shares
issued at the Distribution Date and assumes that such shares were
outstanding for all periods prior to the Distribution. See Notes to
Combined Financial Statements--"Subsequent Events".
Year Ended December 31, 1998 Compared to 1997
Sales and operating income decreased 7.2% and 29.8%, respectively. Sales
decrease was attributable to a 1.1% decrease in prices and a 6.1% decrease due
to the sales of the surfactants, fluids, non-urethane polypropylene glycol and
polyethylene glycol (collectively, "surfactants") business and the conversion
of the flexible polyol business to a tolling operation. Under the tolling
operation, the Company does contract manufacturing for a third party who sells
the manufactured product to other parties.
Gross margin percentage was 27.9% in 1998 and 27.3% in 1997. Higher gross
margin as a result of the impact of the surfactants supply agreement and the
conversion of the polyols business to a tolling operation were primarily the
main contributors to the increased gross margin percentage. Excluding the
results of the surfactants business which was sold in 1997 and the related
supply agreement, the gross margin percentage for 1998 and 1997 would have
been 27.1% and 27.3%, respectively.
12
<PAGE>
Selling and administration expenses as a percentage of sales increased to
19.4% in 1998 from 16.5% in 1997 due to lower sales and higher expenses.
Selling and administration expenses increased in amount due to higher
administration expenses for information technology systems (primarily SAP
implementation) and increased international operating expenses.
Research and development expenses decreased due to the consolidation of the
foreign research efforts for photopolymers into the U.S. operations and the
sale of the surfactants businesses to BASF in November 1997.
The effective tax rate decreased to 34.2% in 1998 from 34.7% in 1997,
resulting from the utilization of higher foreign tax credits and lower state
taxes in 1998.
The Company's 1999 sales and operating income are expected to be higher than
1998. Basic income per share is expected to be in the $1.85 range.
Year Ended December 31, 1997 Compared to 1996
Sales increased 1.8% while operating income decreased 7.7%. Sales increase
was attributable to a 1.1% increase in prices and a 0.7% increase in volume.
Gross margin percentage was 27.3% in 1997 and 29.1% in 1996. Higher raw
materials and manufacturing costs more than offset the impact of increased
volumes and contributed to the decreased gross margin percentage.
Selling and administration expenses as a percentage of sales were 16.5% in
1997 and 17.4% in 1996. Selling and administration expenses decreased in
amount due to lower advertising and sales promotion expenses for water
chemicals, reduced legal expenses and lower international operating expenses.
Research and development expenses were about equal.
The effective tax rate decreased to 34.7% in 1997 from 35.1% in 1996 due to
lower foreign taxes.
In November 1997, the Company completed a transaction with BASF whereby the
Company received $42 million for the sale of its performance chemicals'
surfactants business and a three-year supply agreement. Of the proceeds
received, $12 million was allocated to the sale of the surfactants business
based on the fair value of such business and $30 million was allocated to the
supply agreement. No gain or loss was recorded on the sale. In the supply
agreement, the Company agreed to reserve production capacity for surfactants
products at its Brandenburg, Kentucky facility and to supply BASF with such
products in exchange for a $30 million payment made at the time of signing the
agreement, plus recovery of all fixed and variable costs during the term of
the agreement. The agreement expires on December 31, 2000 unless extended; the
Company does not believe it will be extended. The $30 million payment was
recorded as deferred income and is amortized ratably into operating income
over the three-year term. Unless the supply agreement is extended beyond 2000,
which the Company does not expect to happen, no future income will be realized
with respect to this supply agreement after December 31, 2000.
Microelectronic Chemicals
<TABLE>
<CAPTION>
Years Ended December
31,
---------------------
1998 1997 1996
------ ------ ------
($ in millions)
Results of Operations
<S> <C> <C> <C>
Sales............................................... $227.6 $242.6 $232.9
Operating Income (Loss)............................. (4.1) 9.5 16.9
</TABLE>
13
<PAGE>
Year Ended December 31, 1998 Compared to 1997
Sales decreased 6.2% with an operating loss occurring in 1998 compared to an
operating profit in 1997. Sales of all products weakened during 1998 as the
Company's businesses were adversely impacted by the poor conditions in the
worldwide semiconductor market. Also, major semiconductor customers underwent
extended shutdowns and some delayed or canceled fab construction projects
resulting in decreased sales. In addition to the poor market condition of the
semiconductor industry, start-up costs for the Company's new process chemicals
facility in Belgium and photoresist facility in Rhode Island, unfavorable
operating performance from its foreign affiliate and higher administration
expenses for information technology systems (SAP implementation) contributed
to the operating loss. These were slightly offset by lower R&D spending
resulting from the consolidation of its overseas photopolymers R&D operations
to existing facilities in the U.S.
The Company expects its microelectronic chemicals businesses to be
profitable in 1999. Cost reduction programs resulting in lower manufacturing
expenses and general and administration expenses, decreased information
technology systems expenses and lower start-up costs compared to 1998 are
expected to be the main factors leading to profitability.
Year Ended December 31, 1997 Compared to 1996
Sales increased 4.2% while operating income decreased 43.8%. Since
microelectronic chemicals sales are a direct result of the demand for
semiconductor products, process chemicals sales increased as the semiconductor
industry began to improve and recover from its depressed levels of 1996. Sales
of chemical management services increased due to price increases and the
addition of new customers and services. Higher photopolymer sales more than
offset reduced demand from certain customers whose operations were undergoing
technological changes and improvements. Operating income decreased as higher
manufacturing costs at several plants, additional operating expenses and an
unfavorable product mix more than offset the profit impact from the higher
volumes and prices.
Water Chemicals
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
($ in millions)
Results of Operations
<S> <C> <C> <C>
Sales......................... $290.3 $286.9 $293.7
Operating Income.............. 13.8 26.5 24.1
</TABLE>
Year Ended December 31, 1998 Compared to 1997
Sales increased 1.2% while operating income decreased 47.9%. Increased sales
from North America branded calcium hypochlorite, higher volumes of Pace(R)
brand products (chlorinated isocyanurates) and higher distribution sales more
than offset lower bulk and export volumes and lower prices. Chinese calcium
hypochlorite producers increased their exports of product, which disrupted the
supply/demand balance and affected prices on a worldwide basis. The decrease
in operating income was primarily attributable to the decline in calcium
hypochlorite prices and higher manufacturing costs and operating expenses.
Lower production volumes, higher depreciation expense and other plant costs,
legal expenses, along with higher distribution costs in connection with a new
customer accounted for the increased operating costs.
The Company expects slightly improved operating performance in 1999 from its
water chemicals business primarily from anticipated lower manufacturing costs
and projected increase in volumes of branded calcium hypochlorite.
14
<PAGE>
Year Ended December 31, 1997 Compared to 1996
Sales decreased 2.3% while operating income increased 10.0%. The sales
decline was attributable to reduced volumes of chlorinated isocyanurates
("iso") due to a strategy to enhance product mix and reduced volumes of
calcium hypochlorite due to increased competition and unfavorable weather
conditions. Lower volumes, principally from lower iso sales, more than offset
higher prices. Operating income was higher due to the profit impact from the
improved pricing, lower operating expenses and an improved product mix. Lower
advertising, sales promotion and legal expenses along with lower international
operating expenses due to lower spending and a stronger U.S. dollar
contributed to the decrease in operating expenses. The increased pricing more
than offset the higher cost of a raw material used in the production of
Pace(R) brand products, and other additional manufacturing costs.
Performance Chemicals
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
($ in millions)
Results of Operations
<S> <C> <C> <C>
Sales................................................. $344.9 $400.4 $386.9
Operating Income...................................... 50.7 50.1 52.3
</TABLE>
Year Ended December 31, 1998 Compared to 1997
Sales decreased 13.9%, while operating income increased 1.2%. The sales
decrease was attributable primarily to the sale of the surfactants businesses
to BASF in November 1997 and the conversion of the flexible polyols business
from a merchant business to a tolling operation. Higher sales of IPBC-based
biocide, which is used primarily in metalworking and the coatings markets, and
Copper Omadine(R) biocide, which is used in the marine antifoulant paint
market, were partially offset by a decline in volume in the Asian antidandruff
agent market along with lower pricing due to the relatively stronger value of
the U.S. dollar.
The operating income increase was attributable primarily to the conversion
of the flexible polyols business to a tolling operation. In addition,
operating income increased by $4 million due to the conversion of the
surfactants business to a contract manufacturing arrangement under a supply
agreement with BASF which, unless extended, expires on December 31, 2000. This
increase along with the profit impact from higher IPBC-based biocide and
Copper Omadine(R) biocide volumes were offset in part by lower antidandruff
agent volumes to the Asian market, and higher administration expense for
additional international personnel.
The Company expects improved operating performance in 1999 from its
performance chemicals businesses primarily due to lower administration
expenses, decreased distribution costs, and improved sales growth which is
expected to be slightly offset by increased depreciation expenses.
Year Ended December 31, 1997 Compared to 1996
Sales increased 3.5%, while operating income decreased 4.2%. Sales increase
was due in part to higher volumes of antidandruff agents and marine
antifoulant agents which benefited from capacity expansions, enabling many
products to set annual production and sales records due to growth in market
demand and market share. Higher specialty polyol sales were more than offset
by lower flexible polyol sales. Additionally the Company's subsidiary in
Venezuela was adversely impacted by approximately a 40% reduction in price for
its product which is used in the production of oil emulsions. Higher
propellant sales were due to increased volumes of Ultra Pure(TM) hydrazine and
MMH. Sales and production of Ultra Pure(TM) hydrazine achieved record levels
in 1997. Additional propellant volumes more than offset lower hydrate volumes
and pricing. Sulfuric acid volumes were enhanced by the addition of a new
refinery account and the Company becoming a sole supplier to another refinery.
Operating income decreased due to higher raw material, maintenance and
manufacturing costs and more than offset the profit impact from additional
antidandruff agents, marine antifoulant agents and IPBC-based biocide volumes.
15
<PAGE>
In November 1997, the Company completed a transaction with BASF whereby the
Company received $42 million for the sale of its performance chemicals'
surfactants business and a three-year supply agreement. Of the proceeds
received, $12 million was allocated to the sale of the surfactants business
based on the fair value of such business and $30 million was allocated to the
supply agreement. In the supply agreement, the Company agreed to reserve
production capacity for surfactants products at its Brandenburg, Kentucky
facility and to supply BASF with such products in exchange for a $30 million
payment made at the time of signing the agreement plus recovery of all fixed
and variable costs during the term of the agreement. The agreement expires on
December 31, 2000 unless extended; the Company does not believe it will be
extended. The $30 million payment was recorded as deferred income and is being
amortized ratably into operating income over the three-year period. Unless the
supply agreement is extended beyond 2000, which the Company does not expect to
happen, no future income will be realized with respect to this supply
agreement after December 31, 2000.
Environmental
The establishment and implementation of Federal, state and local standards
to regulate air and water quality and to govern contamination of land and
groundwater has affected, and will continue to affect, substantially all of
the Company's manufacturing locations. Federal legislation providing for
regulation of the manufacture, transportation, use and disposal of hazardous
and toxic substances has imposed additional regulatory requirements on
industry in general, and particularly on the chemicals industry. In addition,
the implementation of environmental laws, such as the Resource Conservation
and Recovery Act, the Clean Air Act and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, has required and will continue to
require new capital expenditures and will increase operating costs. The
Company employs waste minimization and pollution prevention programs at its
manufacturing sites.
The Distribution Agreement specifies that the Company is only responsible
for certain environmental liabilities at the Company's current facilities and
certain off-site locations.
Associated costs of investigatory and remedial activities are provided for
in accordance with generally accepted accounting principles governing
probability and the ability to reasonably estimate future costs. Charges to
income for investigatory and remedial efforts were not material to operating
results in 1998, 1997 and 1996 but may be material to net income in future
years. In 1997, in connection with the sale of the surfactants businesses to
BASF, a $2.3 million provision was recorded to provide for future
environmental spending at the Brandenburg, Kentucky site.
Cash outlays for remedial and investigatory activities associated with
former waste sites and past operations were incurred by Olin. Cash outlays for
normal plant operations for the disposal of waste and the operation and
maintenance of pollution control equipment and facilities to ensure compliance
with mandated and voluntarily imposed environmental quality standards were
charged to income. Cash outlays for environmental related activities totaled
$12.0 million in 1998, $10.8 million in 1997 and $12.5 million in 1996. During
1998, $1.0 million ($2.8 million in 1997; $4.0 million in 1996) was spent on
capital projects, $10.6 million ($8.0 million in 1997; $8.5 million in 1996)
was spent on normal plant operations, and $0.4 million was spent on remedial
activities. Historically, the Company has funded its environmental capital
expenditures through cash flow from operations and expects to do so in the
future.
The Company's combined balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting
to $2.8 million at December 31, 1998, and $3.2 million at December 31, 1997
all of which were classified as other noncurrent liabilities. These amounts
did not take into account any discounting of future expenditures, any
consideration of insurance recoveries or any advances in technology. These
liabilities are reassessed periodically to determine if environmental
circumstances have changed or if the costs of remediation efforts can be
better estimated. As a result of these reassessments, future charges to income
may be made for additional liabilities.
Annual environmental-related cash outlays for site investigation and
remediation, capital projects and normal plant operations are expected to
range between $10 to $15 million over the next several years. While the
16
<PAGE>
Company does not anticipate a material increase in the projected annual level
of its environmental-related costs, there is always the possibility that such
increases may occur in the future in view of the uncertainties associated with
environmental exposures. Environmental exposures are difficult to assess for
numerous reasons, including the identification of new sites, developments at
sites resulting from investigatory studies, advances in technology, changes in
environmental laws and regulations and their application, the scarcity of
reliable data pertaining to identified sites, the difficulty in assessing the
involvement and financial capability of other potentially responsible parties
and the Company's ability to obtain contributions from other parties and the
lengthy time periods over which site remediation occurs.
Income Taxes
Prior to the Distribution, the Company's operations were included in the
U.S. Federal consolidated income tax returns of Olin. The provision for income
taxes includes the Company's allocated share of Olin's consolidated income tax
provision and is calculated on a separate Company basis consistent with the
requirements of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Allocated current income taxes payable are settled with Olin on a
current basis. Deferred taxes are provided for the differences between the
financial statement and the tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Future Service Costs
For a transition period following the Distribution, Olin and the Company
will provide to one another certain services such as payroll and benefits
administration, mainframe computing services and telecommunications support.
Historically, these services were provided by Olin to the Company. Each
company will be reimbursed for the services provided at rates comparable to
the current intercompany accounting charges. By the end of such transition
period, the Company will develop and establish these services on its own at
costs that may be more or less than the rates charged by Olin. Costs for such
services historically provided by Olin were $30.6 million in 1998, $31.8
million in 1997 and $27.7 million in 1996. It is anticipated that as a
separate public company, the cost of other types of services, in addition to
those previously mentioned, will increase by approximately $4 million per year
as a result of additional financial reporting requirements, stock transfer
fees, directors' fees, insurance and executive compensation and benefits.
Liquidity, Investment Activity and Other Financial Data
Cash flows from operations supplemented by credit provided by Olin and
proceeds from the sales of businesses were used to finance the Company's
working capital requirements and capital and investment projects. Prior and up
to the Distribution, the Company's financing requirements were provided by
Olin.
On January 27, 1999, Olin obtained an unsecured $125 million revolving five-
year credit facility ("Five-year Facility") which expires in January 2004 and
an unsecured $125 million 364-day facility ("364-day Facility"), which expires
in January 2000 (collectively, the "Credit Facility"). Olin borrowed $75
million under the Five-year Facility. On February 8, 1999, the Company
succeeded to the Credit Facility and assumed the $75 million of debt. The
amounts remaining under the Credit Facility are expected to provide sufficient
liquidity for the Company's current and future funding needs.
Cash Flow Data
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
($ in millions)
Provided By (Used For)
<S> <C> <C> <C>
Net Operating Activities........................... $ 85.2 $ 83.5 $ 86.1
Capital Expenditures............................... (84.3) (71.0) (53.2)
Net Investing Activities........................... (85.3) (59.4) (49.4)
Net Financing Activities........................... (1.2) (21.6) (37.0)
</TABLE>
17
<PAGE>
For the 1998 year, the increase in cash flow from net operating activities
was primarily attributable to a reduced investment in working capital. Lower
accounts receivable levels due primarily from exiting the merchant flexible
polyols business and the lower accounts receivable and reduced sales resulting
from the depressed semiconductor industry, as well as the Company's ability to
manage its inventory in response to the decreased demand, were the main
contributors to the reduced investment in working capital. These more than
offset the effect of lower net income and BASF payments received in 1997.
For the 1997 year, the decrease in cash flow from operating activities was
primarily attributable to an additional investment in working capital to
support higher accounts receivable and inventory levels in microelectronic
chemicals, partially offset by a $30 million payment on a three-year supply
agreement in connection with the sale of the surfactants business to BASF. In
1996, the increase in cash flow from operating activities was primarily
attributable to higher operating income and a reduced investment in working
capital.
Capital spending for the 1998 year increased 18.7% over the prior year. In
microelectronic chemicals, there are three major capital projects: an ultra
high-purity chemicals plant and distribution center in Zwijndrecht, Belgium to
better serve the semiconductor industry in Europe, a photoresist facility in
North Kingston, Rhode Island to support the rapid commercialization of advanced
photoresist products and a diffusion facility in Mesa, Arizona which will
replace an existing facility and support the development of advanced
semiconductor devices. The high-purity chemicals plant in Belgium started up
operations in the third quarter of 1998, the photoresist facility in Rhode
Island started up operations in the fourth quarter of 1998 while the diffusion
facility is expected to start up in the first half of 1999. These three projects
represent a total investment of approximately $58 million, of which
approximately $36 million was spent during 1998. In performance chemicals, the
Company is investing in a $55 million expansion plan over the next several years
for the increased capacity for key intermediate materials, including a new plant
to be built in China to support increasing demand in China and the rest of Asia
for antidandruff shampoos and other personal care products that use biocides.
This plant is scheduled to be on stream in the year 2001. During 1998, $10.4
million was spent at the Rochester, New York, Swords, Ireland and Suzhou, China
facilities related to the expanded capacity for key intermediate materials.
Capital spending for the 1997 year increased 33.5% over the prior year.
During 1997, $20 million was spent in microelectronic chemicals for the
Belgium and Rhode Island facilities and approximately $5 million was spent for
the Rochester, New York and Swords, Ireland facilities related to the expanded
capacity for key intermediate materials used in the production of performance
chemicals.
Capital spending for 1999 is expected to decrease approximately 10-15% from
1998. This is primarily the result of completion of certain capital projects
in the microelectronic chemicals segment.
In November 1997, the Company completed a transaction with BASF whereby the
Company received $42 million for the sale of its performance chemicals'
surfactants business and a three-year supply agreement.
In 1996, the Company sold its electrostatics business, generating proceeds
of $5.5 million.
New Accounting Standards
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." It requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. The Company is currently evaluating the effect this statement will have
on its financial position and results of operations in the period of adoption.
In 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. The Company will
adopt this statement in 1999 and does not expect it to have a material effect
on its financial position and results of operations.
18
<PAGE>
Also in 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"),
"Reporting on the Costs of Start-up Activities." This Statement of Position
requires the expensing of certain costs such as pre-operating expenses and
organizational costs associated with the Company's start-up activities, and is
effective for fiscal years beginning after December 15, 1998. The effect of
adoption is required to be accounted for as a cumulative effect of change in
accounting principle. The Company does not expect however that the amount
recognized as a cumulative effect of change in accounting principle, if any,
would be material.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European
Union adopted the euro as their common legal currency and established fixed
conversion rates between their existing sovereign currencies and the euro. The
Company does not expect the conversion to the euro to have a material impact
on its business, operations, or financial position.
Derivative Financial Instruments
The Company enters into forward sales and purchase contracts and currency
options to manage currency risk resulting from purchase and sale commitments
denominated in foreign currencies (principally Belgian franc, Canadian dollar,
Irish punt and Japanese yen) and relating to particular anticipated but not
yet committed purchases and sales expected to be denominated in those
currencies. All of the currency derivatives expire within one year and are for
United States dollar equivalents. At December 31, 1998, the Company had
forward contracts to sell foreign currencies with face values of $5.3 million
(1997-$4.1 million) and forward contracts to buy foreign currencies with face
values of $3.1 million (1997-$5.1 million). At December 31, 1998 and
December 31, 1997 the Company had no outstanding option contracts to sell or
buy foreign currencies.
In accordance with Statement of Financial Accounting Standards No. 52 ("SFAS
52"), "Foreign Currency Translation," a transaction is classified as a hedge
when the foreign currency is designated as, and is effective as, a hedge of a
foreign currency commitment and the foreign currency commitment is firm. A
hedge is considered by the Company to be effective when the transaction
reduces the currency risk on its foreign currency commitments. If a
transaction does not meet the criteria to qualify as a hedge, it is considered
to be speculative. For a foreign currency commitment that is classified as a
hedge, any gain or loss on the commitment is deferred and included in the
basis of the underlying instrument. Any realized and unrealized gains or
losses associated with foreign currency commitments that are classified as
speculative are recognized in the current period and are included in Selling
and Administration in the combined statements of income. If a foreign currency
transaction previously considered as a hedge is terminated before the
transaction date of the related commitment, any deferred gain or loss shall
continue to be deferred. Premiums paid for currency options and gains or
losses on forward sales and purchase contracts are not material to operating
results.
Year 2000 Computer Systems
The Company views the impact of the Year 2000 as a critical business issue.
It manages the process by having each business identify its own Year 2000
issues and develop appropriate corrective action steps, while instituting a
series of management processes that coordinate and manage the process across
business boundaries and the corporate center. The process includes corporate
oversight and provides for consistent attention to progress made against
planned activities and a forum for issue resolution at the business and
corporate levels with periodic assessments made by independent parties which
are periodically reported to the Board.
The Company recognizes that the Year 2000 issue is not limited to computer
programs normally associated with the processing of business information, but
can also be found in certain equipment and processes used in manufacturing and
operation of facilities. Furthermore, it also recognizes that the potential
exists for Year 2000 issues within the supply chain. The Company's approach
was to subdivide the program into four distinct segments: 1) Business Systems;
2) Manufacturing; 3) Supply Chain; and 4) Infrastructure.
19
<PAGE>
In the business systems segment, the Company has positioned itself very
favorably with respect to software and equipment that is Year 2000 compliant.
In 1994, the Company began implementing a Year 2000 compliant client-server
system, Peoplesoft, to address payroll and human resource needs and it
presently uses such system in all businesses. Deployment of Peoplesoft was
completed in 1997. In 1993, the Company began implementing for all domestic
businesses a client-server system, SAP, for core business requirements as a
vehicle to obtain certain improvements in the business processes. SAP is
currently utilized in a majority of its domestic businesses. Since SAP was
also a certified Year 2000 compliant solution, migration plans were adjusted
to take advantage of the business benefit while eliminating the cost of
remediating old legacy system code. Deployment has been aggressive with all
domestic functions and locations transferred to SAP with the exception of the
microelectronic chemicals business which is scheduled for March 1999. In the
few instances where SAP is not utilized, replacement systems are scheduled for
June 1999. Offshore processing systems will continue using existing systems
until conversion to SAP during 2000 and beyond. All systems have been examined
with Year 2000 upgrades targeted for completion by the second quarter of 1999.
In the manufacturing segment, plant level employees and independent
assessments were used to identify places where embedded systems exist and
categorize them by the potential impact to the business. Fifty-three items
which have the potential for causing process shutdowns or unsafe conditions
remain to be remediated or replaced in the manufacturing segment. The plan,
which takes maximum advantage of "planned outages" in order to minimize the
impact on operations, targets completion by May 1999.
The supply chain segment has seen much activity in terms of assessing vendor
Year 2000 preparedness, identifying alternate sources, as well as insertion of
certain Year 2000 compliance language in all purchase orders issued. The
Company has completed a review of single source and critical suppliers. During
1999, the Company will continue to re-evaluate its suppliers on a periodic
basis.
Personal computers, networks, and PBX's represent the majority of items in
the Company's infrastructure segment. The Company has deployed new Pentium
Year 2000 compliant equipment in large numbers to support its SAP deployment
program and for internal standards compliance. In addition, the Company is
currently utilizing software tools to test the entire PC inventory for Year
2000 compliance and this is expected to be completed in the first quarter
1999. The Company's wide area network is already Year 2000 compliant as is
most of its PBX's and voice mail systems. The non-compliant equipment is
planned to be replaced with compliant versions as leases expire but no later
than June 1999.
The Company believes its Year 2000 initiative is on track to address all
significant Year 2000 issues by the middle of 1999, and is supported by the
findings of an independent assessment completed in December 1998. The
independent assessment does not address the accuracy of the Company's cost
estimates. Plans include additional assessments throughout 1999.
Plans for a worst case scenario in the unlikely event of a major failure due
to a Year 2000 problem which causes significant disruptions to business
operations have been formulated. In the area of business systems, management
believes that the Company, with most of its operating units already migrated
to Year 2000 compliant solutions, has already significantly reduced its
potential risk. As added protection, software migration plans to new releases
of SAP and Peoplesoft which are planned in 1999, include Year 2000 testing
scenarios.
The Company continues to focus attention to the manufacturing segment. It
has deployed several independent initiatives to identify embedded systems,
develop comprehensive equipment lists, and obtain vendor certifications of
Year 2000 compliance. It has developed plans for further testing with respect
to key manufacturing equipment and systems, during periods of scheduled
outages.
The Company will continue to monitor progress against plans in the business
systems, manufacturing, infrastructure, and supply chain segments, and take
corrective action should slippage occur. The use of vendor-supplied Year 2000
compliant solutions, coupled with substantive pre-testing of key systems and a
strong management commitment and oversight are the cornerstone of the
Company's Year 2000 program.
20
<PAGE>
Nonetheless, in the unlikely occurrence of some unforeseen event, divisional
emergency teams skilled in each of the disciplines will be formed during the
last half of 1999. They will be deployed to assist local personnel in the
event of a Year 2000 issue at the turn of the millennium.
The Company does not expect Year 2000 initiative costs to exceed $10 million
over the next 12 months, inclusive of the cost for continued deployment of SAP
and related infrastructure.
Cautionary Statement under Federal Securities Laws
The information contained in this Form 10-K contains forward-looking
statements that are based on management's beliefs, certain assumptions made by
management and management's current expectations, estimates and projections
about the markets and economy in which the company and its various profit
centers operate. Words such as "anticipates," "believes," "estimates,"
"expects," "forecasts," "opines," "plans," "projects," "should," "will," and
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expected or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of future events,
new information or otherwise. Future factors which could cause actual results
to differ materially from those discussed include but are not limited to:
general economic and business and market conditions, lack of moderate growth
in the U.S. economy or even a slight recession in 1999; worsening economic
conditions in Asia; customer acceptance of new products, efficacy of new
technology, changes in U.S. laws and regulations, costs or difficulties
relating to the establishment of the Company as an independent entity and
increased competitive and/or customer pressure; the Company's ability to
maintain chemical price increases; higher-than-expected raw material costs for
certain chemical product lines; increased foreign competition in the calcium
hypochlorite markets; lack of stability or growth in the semiconductor
industry; unfavorable court or jury decisions, the supply/demand balance for
the company's products, including the impact of excess industry capacity;
failure to achieve targeted cost reduction programs; unsuccessful entry into
new markets for electronic chemicals; capital expenditures, such as cost
overruns, in excess of those scheduled; environmental costs in excess of those
projected; and the occurrence of unexpected manufacturing
interruptions/outages.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. The Company does not enter into
derivatives or other financial instruments for trading or speculative
purposes.
Interest Rates
The Company is exposed to interest rate risk primarily from its new Credit
Facility which is based upon various floating rates. The facility was utilized
to incur the $75 million of debt which was assumed by the Company from Olin
and will be utilized by the Company for working capital needs and other
corporate uses as deemed appropriate. Based upon the expected levels of
borrowings under this facility in 1999, an increase in interest rate of 100
basis points would not have a material adverse affect on the Company's results
of operations or cash flows (less than $1.0 million).
Foreign Currency Risk
The Company operates manufacturing facilities in six countries and sells
products in over 60 countries. Approximately 15 percent of the Company's sales
are denominated in currencies other than the U.S. dollar. As a result, the
Company is subject to risks associated with these foreign operations,
including currency devaluations and fluctuations in currency exchange rates.
These exposures from foreign exchange fluctuations can effect the Company's
equity investments and its respective share of earnings (losses), the
Company's net investment in
21
<PAGE>
foreign subsidiaries, translation of the Company's foreign operations for U.S.
GAAP reporting purposes and from purchase and sales commitments denominated in
foreign currencies. The Company enters into forward sales and purchase
contracts and currency options to manage currency risk from actual and
anticipated purchase and sales commitments denominated or expected to be
denominated in a foreign currency (principally Belgian franc, Canadian dollar,
Irish punt and Japanese yen). It is the Company's policy to hedge
approximately 80% of these transactions. All of the currency derivatives
expire within one year and are for United States dollar equivalents. The
counterparties to the options and contracts are major financial institutions.
At December 31, 1998, the Company had forward contracts to sell foreign
currencies with face values of $5.3 million (fair value of $5.4 million) and
forward contracts to buy foreign currencies with face values of $3.1 million
(fair value of $3.1 million).
Holding other variables constant, if there was a 10 percent adverse change
in foreign currency exchange rates, the net effect on the Company's cash flows
would be a decrease between $1 million -- $2 million, as any increase
(decrease) in cash flows resulting from the Company's forward contracts would
be offset by an equal increase (decrease) in cash flows on the underlying
transaction being hedged.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Arch Chemicals, Inc.:
We have audited the accompanying combined balance sheets of Arch Chemicals,
Inc. as of December 31, 1998 and 1997, and the related combined statements of
income, equity and cash flows for each of the years in the three-year period
ended December 31, 1998. These combined financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Arch Chemicals,
Inc. as of December 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the years in the three-year period ended December
31, 1998, in conformity with generally accepted accounting principles.
KPMG LLP
Stamford, CT
January 26, 1999
22
<PAGE>
ARCH CHEMICALS, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------ ------
($ in
millions)
<S> <C> <C>
ASSETS
Current Assets:
Cash.......................................................... $ 7.1 $ 9.0
Receivables, net:
Trade....................................................... 130.3 147.8
Other....................................................... 11.4 13.8
Inventories, net.............................................. 139.3 139.1
Other Current Assets.......................................... 25.6 24.4
------ ------
Total Current Assets...................................... 313.7 334.1
Investments & Advances--Affiliated Companies at Equity.......... 21.1 21.1
Property, Plant and Equipment, net.............................. 331.6 280.4
Goodwill........................................................ 34.8 35.2
Other Assets.................................................... 20.4 22.4
------ ------
Total Assets.............................................. $721.6 $693.2
====== ======
LIABILITIES AND EQUITY
Current Liabilities:
Short-Term Borrowings......................................... $ 0.9 $ 1.4
Accounts Payable.............................................. 106.7 118.2
Accrued Liabilities........................................... 59.0 63.0
------ ------
Total Current Liabilities................................. 166.6 182.6
Long-Term Debt.................................................. 7.0 5.5
Other Liabilities............................................... 43.5 49.5
------ ------
Total Liabilities......................................... 217.1 237.6
Commitments & Contingencies
Cumulative Translation Adjustment............................... (14.5) (16.2)
Equity.......................................................... 519.0 471.8
------ ------
Total Equity.............................................. 504.5 455.6
------ ------
Total Liabilities and Equity.............................. $721.6 $693.2
====== ======
</TABLE>
See accompanying notes to the combined financial statements
23
<PAGE>
ARCH CHEMICALS, INC.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1998 1997 1996
------- ------- -------
($ in millions, except
per share amounts)
<S> <C> <C> <C>
Sales.................................................. $ 862.8 $ 929.9 $ 913.5
Operating Expenses:
Cost of Goods Sold................................... 622.0 676.3 647.8
Selling and Administration........................... 167.6 153.5 159.0
Research and Development............................. 16.2 21.1 21.0
------- ------- -------
Operating Income....................................... 57.0 79.0 85.7
Equity in Earnings of Affiliated Companies............. 3.4 7.1 7.6
Interest Income, net................................... 0.4 0.1 0.8
------- ------- -------
Income Before Taxes.................................... 60.8 86.2 94.1
Income Taxes........................................... 20.8 29.9 33.0
------- ------- -------
Net Income............................................. $ 40.0 $ 56.3 $ 61.1
======= ======= =======
Unaudited Pro Forma Financial Information:
Interest Expense, net.................................. $ 6.3 $ 6.5 $ 5.9
Net Income............................................. $ 35.7 $ 52.0 $ 56.7
Basic Income Per Share................................. $ 1.55 $ 2.26 $ 2.47
Common Stock Outstanding (in millions)................. 23.0 23.0 23.0
</TABLE>
See accompanying notes to the combined financial statements
24
<PAGE>
ARCH CHEMICALS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
($ in millions)
<S> <C> <C> <C>
Operating Activities
Net Income...................................... $ 40.0 $ 56.3 $ 61.1
Adjustments to Reconcile Net Income to Net Cash
and Cash Equivalents Provided (Used) by
Operating Activities:
Earnings of Non-consolidated Affiliates....... (3.4) (7.1) (7.6)
Depreciation.................................. 43.1 43.6 40.2
Amortization of Intangibles................... 4.0 3.8 4.0
Deferred Taxes................................ 2.7 (5.2) 4.3
Change in Assets and Liabilities Net of
Purchases and Sales of Businesses:
Receivables................................. 19.9 (13.7) (6.5)
Inventories................................. 0.2 (14.9) (27.8)
Other Current Assets........................ 1.4 0.7 3.4
Accounts Payable & Accrued Liabilities...... (14.0) (8.4) 35.1
Noncurrent Liabilities...................... (7.1) 17.4 (14.1)
Other Operating Activities...................... (1.6) 11.0 (6.0)
-------- -------- --------
Net Operating Activities...................... 85.2 83.5 86.1
-------- -------- --------
Investing Activities
Capital Expenditures............................ (84.3) (71.0) (53.2)
Proceeds from Sales of Businesses............... -- 12.0 5.5
Investments and Advances--Affiliated Companies
at Equity...................................... 0.1 (0.2) 1.2
Other Investing Activities...................... (1.1) (0.2) (2.9)
-------- -------- --------
Net Investing Activities...................... (85.3) (59.4) (49.4)
-------- -------- --------
Financing Activities
Long-Term Debt Borrowings....................... 1.7 -- --
Short-Term Debt Borrowings (Repayments)......... (0.7) (0.2) 1.7
Transfers To Olin............................... (2.2) (21.4) (38.7)
-------- -------- --------
Net Financing Activities...................... (1.2) (21.6) (37.0)
-------- -------- --------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents............................. (0.6) 1.0 --
-------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents.................................. (1.9) 3.5 (0.3)
Cash and Cash Equivalents, Beginning of Year.... 9.0 5.5 5.8
-------- -------- --------
Cash and Cash Equivalents, End of Year.......... $ 7.1 $ 9.0 $ 5.5
======== ======== ========
</TABLE>
See accompanying notes to the combined financial statements
25
<PAGE>
ARCH CHEMICALS, INC.
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
Cumulative
Translation
Equity Adjustment Total
------ ----------- ------
($ in millions)
<S> <C> <C> <C>
Balance at January 1, 1996.......................... $414.5 $ (3.1) $411.4
Net Income.......................................... 61.1 -- 61.1
Translation Adjustment.............................. -- (4.2) (4.2)
Comprehensive Income................................ -- -- 56.9
Net Intercompany Activity........................... (38.7) -- ( 38.7)
------ ------ ------
Balance at December 31, 1996........................ 436.9 (7.3) 429.6
Net Income.......................................... 56.3 -- 56.3
Translation Adjustment.............................. -- (8.9) (8.9)
Comprehensive Income................................ -- -- 47.4
Net Intercompany Activity........................... (21.4) -- (21.4)
------ ------ ------
Balance at December 31, 1997........................ 471.8 (16.2) 455.6
Net Income.......................................... 40.0 -- 40.0
Translation Adjustment.............................. -- 1.7 1.7
Comprehensive Income................................ -- -- 41.7
Net Intercompany Activity........................... 7.2 -- 7.2
------ ------ ------
Balance at December 31, 1998........................ $519.0 $(14.5) $504.5
====== ====== ======
</TABLE>
See accompanying notes to the combined financial statements
26
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
($ in millions, except share amounts)
Formation of Arch Chemicals, Inc.
Arch Chemicals, Inc. (the "Company") was organized under the laws of the
Commonwealth of Virginia on August 25, 1998 as a wholly-owned subsidiary of
Olin Corporation ("Olin") for the purpose of effecting the distribution of
Olin's Specialty Chemical Businesses ("Distribution") to the shareholders of
Olin. The Company is a specialty chemicals manufacturer which supplies value-
added products and services to several industries on a worldwide basis,
including the consumer products and the semiconductor industries. The
principal businesses in which the Company competes are microelectronic
chemicals, water chemicals and performance chemicals.
Olin and the Company have entered into a Tax Sharing Agreement providing
that Olin will be responsible for the Federal tax liability of the Company for
each year that the Company and its subsidiaries were included in Olin's
consolidated Federal income tax return, and for state, local and foreign taxes
of the Company and its subsidiaries attributable to periods prior to the
Distribution, in each case including tax subsequently assessed pursuant to the
audit of, or other adjustment to, previously filed tax returns.
Olin and the Company have entered into a Chlor-Alkali Supply Agreement
providing for the supply by Olin of chlorine and caustic soda subsequent to
the Distribution. Olin and the Company have also entered into a Charleston
Service Agreement pursuant to which the Company and Olin will provide each
other with various services at the Charleston, Tennessee plant site.
Olin and the Company have also entered into other various transition
services agreements for such items as information technology services and
telecommunications support, facilities, payroll and benefits administration,
etc. None of these agreements extends beyond two years subsequent to the
Distribution date, and most expire at the end of 1999. The terms of these
agreements are consistent with the amounts included in the historical combined
financial statements.
Accounting Policies
The preparation of the combined financial statements requires estimates and
assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those
estimates. Certain reclassifications were made to prior year amounts to
conform with the 1998 presentation.
Basis of Presentation
The Company was a business unit of Olin consisting of the Specialty
Chemicals Division. The Company has organized its segments around differences
in products and services, which is how the Company manages its business.
The microelectronic chemicals segment supplies a range of products and
services to semiconductor manufacturers and flat panel display manufacturers.
These include a variety of high purity acids, bases, oxidizers, etchants,
solvents, photoresists, polyimides and ancillary products. The water chemicals
segment manufactures and sells chemicals and distributes equipment for the
sanitization and recreational use of residential and commercial pool water and
the purification of potable water. The performance chemicals segment
manufactures and sells a broad range of products with diverse end uses.
Performance chemicals are characterized by technology driven product solutions
that benefit specific customers and provide manufacturing flexibility. The
products include flexible and specialty polyols, glycols and glycol ethers,
pyrithione-based and IPBC-based biocides, hydrazine hydrates and propellants
and virgin and regenerated sulfuric acid.
The accompanying combined financial statements, which have been prepared as
if the Company had operated as a separate stand-alone entity for all periods
presented except as discussed in the following paragraph
27
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
and, include only those assets, liabilities, revenues and expenses
attributable to the Company's operations. The combined financial statements
include the accounts of the Company and certain majority-owned subsidiaries of
Olin which will become subsidiaries of the Company prior to the Distribution.
Intercompany balances and transactions between entities included in these
financial statements have been eliminated. Investments in 20-50% owned
affiliates of Olin which will become investments of the Company prior to the
Distribution are accounted for on the equity method.
The combined financial statements do not include an allocation of Olin's
consolidated debt and interest expense nor do they reflect the $75 of debt
assumed by the Company from Olin on February 8, 1999. An assessment of
corporate overhead is included in selling and administration expenses with the
allocation based on either effort committed or number of employees. Management
believes that the allocation methods used to allocate the costs and expenses
are reasonable, however, such allocated amounts may or may not necessarily be
indicative of what selling and administration expenses would have been if the
Company operated independently of Olin. It is anticipated that as a separate
public company, administration expenses will increase by approximately $4.0
(unaudited) per year as a result of additional financial reporting
requirements, stock transfer fees, directors' fees, insurance and executive
compensation and benefits.
Foreign Currency Translation
Foreign affiliate balance sheet amounts are translated at the exchange rates
in effect at year-end, and income statement and cash flow amounts are
translated at the average rates of exchange prevailing during the year.
Translation adjustments are recorded as a component of equity. Where foreign
affiliates operate in highly inflationary economies non-monetary amounts are
translated at historical exchange rates while monetary assets and liabilities
are translated at the current rate with the related adjustments reflected in
the combined statements of income.
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
U.S. Government Contracts
The Company has entered into a contract with the United States Department of
the Air Force to supply hydrazine based propellant. It is a one year contract
with four one year renewal options beginning January 1, 1995 and expiring on
December 31, 1999. The contract consists of a fixed priced facility usage fee
and a product purchase arrangement whereby the Company supplies product at a
fixed price per pound of product adjusted annually for agreed upon cost
escalations. In 1998, 1997 and 1996 the Company's sales include $17.6, $20.2
and $19.3, related to these agreements.
Inventories
Inventories are stated at the lower of cost or net realizable value. Certain
inventories are included in a larger pool of Olin inventories valued by the
dollar value last-in, first-out (LIFO) method of inventory accounting. The
allocation of LIFO reserves is determined by the Company's percentage share of
the related inventory pool (based on first-in, first-out). Costs for other
inventories have been determined principally by the first-in, first-out (FIFO)
method. Elements of costs in inventories include raw materials, direct labor
and manufacturing overhead.
28
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Improvements to land.................... 10 to 20 years
Building and building equipment......... 10 to 25 years
Machinery and equipment................. 3 to 12 years
</TABLE>
Leasehold improvements are amortized over the term of the lease or the
estimated useful life of the improvement, whichever is less. Start-up costs
are expensed as incurred.
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which
established standards for the reporting and display of comprehensive income
and its components in the financial statements. The Company's other
comprehensive income consists solely of the cumulative translation adjustment.
The Company does not provide for U.S. income taxes on foreign currency
translation adjustments since it does not provide for such taxes on
undistributed earnings of foreign subsidiaries.
Goodwill and Other Intangibles
Goodwill, the excess of the purchase price of the acquired businesses over
the fair value of the respective net assets, is amortized principally over 30
years on a straight-line basis. Accumulated amortization was $21.4 and $19.4
at December 31, 1998 and 1997, respectively. The Company periodically reviews
the value of its goodwill to determine if any impairment has occurred. The
Company assesses the potential impairment of recorded goodwill and other long-
lived assets by comparing the undiscounted value of the related expected
future operating cash flows to the net book value of the goodwill. An
impairment would be recorded based on the estimated fair value. Other
intangibles, which consist primarily of patents, trademarks, and various
technology licensing agreements, are amortized on a straight-line basis
principally over 3 to 15 years.
Environmental Liabilities and Expenditures
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based upon current law and existing technologies. These amounts,
which are not discounted and are exclusive of claims against third parties,
are adjusted periodically as assessment and remediation efforts progress or
additional technical or legal information becomes available. Environmental
remediation costs are charged to expense. Environmental costs are capitalized
if the costs increase the value of the property and/or mitigate or prevent
contamination from future operations.
Income Taxes
Prior to the Distribution, the Company's operations are included in the U.S.
federal consolidated tax returns of Olin. The provision for income taxes
includes the Company's allocated share of Olin's consolidated income tax
provision and is calculated on a separate company basis consistent with the
requirements of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Allocated income taxes payable are reflected
herein as being settled with Olin on a current basis. Deferred taxes are
provided for differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
29
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Derivative Financial Instruments
The Company enters into forward sales and purchase contracts and currency
options to manage currency risk resulting from purchase and sale commitments
denominated in foreign currencies (principally Belgian franc, Canadian dollar,
Irish punt and Japanese yen) and relating to particular anticipated but not
yet committed purchases and sales expected to be denominated in those
currencies. All of the currency derivatives expire within one year and are for
United States dollar equivalents. At December 31, 1998, the Company had
forward contracts to sell foreign currencies with face values of $5.3 (1997-
$4.1) and forward contracts to buy foreign currencies with face values of $3.1
(1997-$5.1). The fair market value of these forward contracts to sell was $5.4
and $4.0 at December 31, 1998 and 1997, respectively. The fair market value of
the forward contracts to buy were $3.1 and $4.9 at December 31, 1998 and 1997,
respectively. At December 31, 1998, the Company had no outstanding option
contracts to sell or buy foreign currencies. The counterparties to the
contracts and options are major financial institutions. The risk of loss to
the Company in the event of nonperformance by a counterparty is not
significant.
In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation" ("SFAS 52"), a transaction is classified as a
hedge when the foreign currency is designated as, and is effective as, a hedge
of a foreign currency commitment and the foreign currency commitment is firm.
A hedge is considered by the Company to be effective when the transaction
reduces the currency risk on its foreign currency commitments. If a
transaction does not meet the criteria to qualify as a hedge, it is considered
to be speculative. For a foreign currency commitment that is classified as a
hedge, any gain or loss on the commitment is deferred and included in the
basis of the underlying transaction. Any realized and unrealized gains or
losses associated with foreign currency commitments that are classified as
speculative are recognized in the current period and are included in selling
and administration in the combined statements of income. If a foreign currency
transaction previously considered as a hedge is terminated before the
transaction date of the related commitment, any deferred gain or loss shall
continue to be deferred and included in the basis of the underlying
transaction. Premiums paid for currency options and gains or losses on forward
sales and purchase contracts are not material to operating results.
Foreign currency exchange gains (losses), net of taxes, were $.7 in 1998,
$.5 in 1997 and $(3.3) in 1996.
Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable and
accounts payable approximated fair values due to the short-term maturities of
these instruments. The fair value of the Company's long-term debt was
determined based on current market rates for debt of the same risk and
maturities. The fair values of currency forward and option contracts were
estimated based on quoted market prices for contracts with similar terms.
Stock-Based Compensation
The Company accounts for stock-based compensation under SFAS No. 123
"Accounting for Stock-Based Compensation." As allowed under SFAS No. 123, the
Company has chosen to account for stock-based compensation cost in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." Under this option, compensation cost is recorded when the fair
market value of the Company's stock at the date of grant for fixed options
exceeds the exercise price of the stock option. Olin's policy was to grant
stock options with an exercise price equal to its common stock fair value on
the date of grant. Accordingly, there are no charges reflected herein for
stock options granted to employees. Compensation cost for restricted stock
awards is accrued over the life of the award based on the quoted market price
of the Company's stock at the date of the award. Prior to the Distribution,
certain employees of the Company received
30
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
restricted stock unit awards under Olin's stock-based compensation plans. The
cost associated with the employees participating in these plans is included in
the combined statements of income and is not material to operating results.
See "Long Term Incentive Plan."
Pro forma net income was calculated based on the following assumptions as if
the Company had recorded compensation expense for the Olin stock options
granted to those employees of the Specialty Chemicals business since 1995. The
fair value of each Olin option granted during 1998, 1997 and 1996 was
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions used: dividend yield of 3.2%
in 1998, 2.8% in 1997 and 4.0% in 1996, risk free interest rate of 5.5% in
1998 and 1997 and 6.5% in 1996, expected volatility of 27% in 1998, 21% in
1997 and 22% in 1996 and an expected life of 7 years. Pro forma net income as
if the Company had recorded compensation expense for the Olin stock options
granted was $39.5, $55.6, and $60.7 in 1998, 1997 and 1996, respectively.
The pro forma amounts are not necessarily representative of the effects of
stock-based awards on future pro forma net income because (1) future grants of
employee stock options to Arch management may not be comparable to awards made
to employees while Arch was a part of Olin and (2) the assumptions used to
compute the fair value of any stock option awards may not be comparable to the
Olin assumptions used.
Trade Receivables
Allowance for doubtful accounts was $6.7 and $5.3 at December 31, 1998 and
1997, respectively. Provision for doubtful accounts charged to operations was
$1.4, $1.3 and $0 in 1998, 1997 and 1996, respectively. Bad debt write-offs,
net of recoveries, amounted to $0, $.3 and $1.3 in 1998, 1997 and 1996,
respectively.
Inventories
<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------ ------
<S> <C> <C>
Raw materials and supplies................................. $ 55.4 $ 48.2
Work-in-progress........................................... 14.2 13.1
Finished goods............................................. 121.7 129.4
------ ------
Inventories, gross......................................... 191.3 190.7
LIFO reserves.............................................. (52.0) (51.6)
------ ------
Inventories, net........................................... $139.3 $139.1
====== ======
</TABLE>
Inventory valued using the LIFO method comprised 65% of the total inventory
at December 31, 1998 and 64% at December 31, 1997. Gross inventory values
approximate replacement cost.
Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
-------------
1998 1997
------ ------
<S> <C> <C>
Land and improvements to land............................... $ 34.0 $ 31.8
Building and building equipment............................. 117.7 110.0
Machinery and equipment..................................... 624.3 576.5
Leasehold improvements...................................... 4.4 4.4
Construction-in-progress.................................... 81.6 57.3
------ ------
Property, plant and equipment............................... 862.0 780.0
Less accumulated depreciation............................... 530.4 499.6
------ ------
Property, plant and equipment, net.......................... $331.6 $280.4
====== ======
</TABLE>
31
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Leased assets capitalized and included above are not significant.
Maintenance and repairs charged to operations amounted to $31.3, $37.9 and
$34.6 in 1998, 1997 and 1996, respectively.
Long-Term Debt
The financial statements include a $5.5 note floating with LIBOR which is
due in monthly installments of $.05 commencing April 1, 1999 through 2009 and
a $1.7 note floating with LIBOR which is due on August 28, 2000. The fair
value of the Company's long-term debt was $5.1 at December 31, 1998 and $4.4
at December 31, 1997.
Subsequent Events (Unaudited)
On January 27, 1999, Olin obtained an unsecured $125 revolving five-year
credit facility ("Five-year Facility") which expires in January 2004 and an
unsecured $125 364-day facility ("364-day Facility"), which expires in January
2000 (collectively the "Credit Facility"). Olin borrowed $75 under the Credit
Facility. On February 8, 1999, the Company succeeded to the Credit Facility
and assumed the $75 of debt.
The Credit Facility contains leverage and interest coverage ratio covenants,
and restricts the payment of dividends in excess of 50% of net income under
certain circumstances. Facility fees are payable on the unused credit and
range from 0.125% to 0.30%. The Company may select various floating rate
borrowing options, including but not limited to, LIBOR plus .325% to 1.00% and
Prime. At January 29, 1999, borrowings under the Credit Facility were $75 and
the interest rate was 5.525%.
The following represents the pro forma effects of borrowings assuming $75
was outstanding under the Credit Facility for one full year and that the
Company had seasonal weighted average borrowings related to the Water
Chemicals Segment of $20 under the Credit Facility at an aggregate effective
rate of 7%, inclusive of facility fees and amortization of initial bank fees.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997
------------ -----------
<S> <C> <C>
Pro forma effect on:
Increase to Interest Expense.................. $ 6.6 $ 6.6
Decrease to Net Income........................ 4.3 4.3
</TABLE>
The Pro forma effect on long-term debt would be an increase of $75.0.
On February 8, 1999 (the "Distribution Date"), Olin, the sole shareholder of
the Company, distributed (on a 1-for-2 basis) all the issued and outstanding
shares of common stock, (par value $1.00 per share) of the Company, to the
shareholders of record of Olin's common stock as of February 1, 1999, upon
which the Company became a separate, independent company. The total shares
distributed was approximately 22,980,000. The Pro Forma effect of this
distribution on equity, inclusive of the $75 debt assumed from Olin, would be
a reclassification to common stock of $23.0 and additional paid-in capital of
$421.0 and a net reduction in total equity of $75.0.
Pro forma basic income per share was calculated using the number of common
shares that were issued at the Distribution date and assuming that such shares
were outstanding for all periods prior to the Distribution date.
On February 9, 1999, the Company granted to certain employees approximately
968,000 options to purchase common stock at an exercise price of $19.41 (fair
market value of the common stock on the grant date). In addition, the Company
granted to certain employees approximately 245,000 performance share units.
All these
32
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
grants were made under the Company's 1999 Long Term Incentive Plan. The
options vest at the end of a three-year period and are exercisable up to ten
years from the date of grant. The performance share units will vest if certain
performance measures are met at the end of a three-year performance period and
upon vesting are paid out in shares of common stock. Units may be paid out in
shares on a basis of up to 1.5 shares for every unit depending on the
Company's performance.
Pension Plans and Retirement Benefits
Virtually all U.S. employees of the Company are participants in one of
several Olin pension benefit plans covering employees of other Olin
businesses. Costs and expenses include accruals for pensions and
postretirement medical and death benefits.
Following the Distribution, the Company will establish a defined benefit
pension plan for Company employees that will provide benefits based on service
with Olin and with the Company. The Company will become liable for the payment
of all pension plan benefits earned by Company employees prior to and
following the Distribution who retire after the Distribution. Olin will
transfer assets to the Company's pension plan and the amount of the assets to
be transferred will be calculated by multiplying the percentage of the
projected benefit obligation of the Company to the total projected benefit
obligation of Olin and the Company to the total fair value of assets. If
necessary, this amount of assets to be transferred will be adjusted to comply
with the asset allocation methodology set forth in Section 4044 of the
Employee Retirement Income Security Act of 1974, as amended.
Olin will remain liable for postretirement medical and death benefits
provided to former employees of the Company who retire prior to the
Distribution. The Company will adopt a retiree medical and death benefits plan
which largely replicates the Olin retiree medical and death benefit program.
The Company will become liable for the payment of all retiree medical and
death benefits earned by Company employees prior to and following the
Distribution who retire after the Distribution. The Olin plan is an unfunded
plan, therefore no assets will be transferred. The following tables provide a
reconciliation of the changes in the plans' projected benefit obligations,
fair value of plan assets, funded status, certain assumptions and components
of net periodic pension expense of the portion of the Olin retirement plans,
which represents the Company's share and are reflected in the Combined
Financial Statements. This disclosure reflects the Company's adoption of SFAS
No. 132 "Employers' Disclosures about Pensions and Other Postretirement
Benefits, an Amendment to FASB Statements No. 87, 88 and 106."
33
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
<TABLE>
<CAPTION>
Pension Benefits Post Retirement Benefits
------------------- ----------------------------
1998 1997 1998 1997
------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
Reconciliation of Projected
Benefit Obligation:
Projected benefit
obligation at beginning of
year...................... $ 81.0 $58.8 $ 6.4 $ 4.9
Service cost (benefits
earned during the
period)................... 5.0 6.1 0.7 0.4
Interest cost on the
projected benefit
obligation................ 6.6 4.6 0.5 0.4
Plan amendments............ 1.8 -- -- --
Actuarial loss............. 12.7 11.5 0.6 0.7
------ ----- -------- --------
Projected benefit
obligation at end of
year...................... $107.1 $81.0 $ 8.2 $ 6.4
====== ===== ======== ========
Reconciliation of Fair
Value of Plan Assets:
Fair value of plan assets
at beginning of year...... $ 73.4 $62.6
Actual return on plan
assets (net of expenses).. 13.6 10.8
------ -----
Fair value of plan assets
at end of year............ $ 87.0 $73.4
====== =====
Funded Status.............. $(20.1) $(7.6) $ (8.2) $ (6.4)
Unrecognized net actuarial
loss/(gain)............... 5.5 (3.0) 1.6 0.9
Unamortized prior service
cost...................... 4.8 5.5 (0.5) (0.5)
Unrecognized transition
obligation/(asset)........ (1.0) (1.6) -- --
------ ----- -------- --------
Accrued benefit cost....... $(10.8) $(6.7) $ (7.1) $ (6.0)
====== ===== ======== ========
<CAPTION>
1998 1997 1996 1998 1997 1996
------ ----- ---- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Weighted Average
Assumptions:
Discount rate.............. 7.00% 7.25% 8.00% 7.00% 7.25% 8.00%
Rate of compensation
increase.................. 4.50% 4.50% 4.50% -- -- --
Long-term rate of return on
assets.................... 9.50% 9.50% 9.50% -- -- --
Net Periodic Benefit
Expense:
Service cost (benefits
earned during the
period)................... $ 5.0 $ 6.1 $5.8 $ 0.7 $ 0.4 $ 0.5
Interest cost on the
projected benefit
obligation................ 6.6 4.6 4.2 0.5 0.4 0.3
Expected (return) on plan
assets.................... (7.0) (5.8) (5.3) -- -- --
Amortization of prior
service cost.............. 0.8 0.7 0.7 (0.1) (0.1) (0.1)
Amortization of transition
obligation................ (0.5) (0.5) (0.5) -- -- --
Recognized actuarial (gain)
loss...................... 0.1 -- -- -- -- --
------ ----- ---- -------- -------- --------
Net periodic benefit cost.. $ 5.0 $ 5.1 $4.9 $ 1.1 $ 0.7 $ 0.7
====== ===== ==== ======== ======== ========
</TABLE>
34
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
The accumulated benefit obligation relating to the Company's unfunded
pension plans was $4.1, as of December 31, 1998 and 1997.
For measurement purposes, the assumed health care cost trend rate was 6% for
HMO plans and 8% for non-HMO plans in 1998, which reduce ratably to 4.5% for
the HMO plans and 5% for the non-HMO plans in the years 2003 and 2002,
respectively. The assumed health care cost trend rate assumptions can have a
significant impact on the amounts reported. A one percent increase or decrease
each year in the health care cost trend rate used would have resulted in a $.1
increase, (decrease), respectively in the aggregate service and interest cost
components of expense for the year 1998, and a $.4 increase, (decrease),
respectively in the accumulated postretirement benefit obligation at December
31, 1998.
The Company's foreign subsidiaries maintain pension and other benefit plans
which are consistent with statutory practices and are not significant.
Accrued and Other Non-Current Liabilities
Included in accrued liabilities are the following items:
<TABLE>
<CAPTION>
December 31,
-------------
1998 1997
----- -----
<S> <C> <C>
Deferred income.............................................. $ 9.6 $10.4
Accrued Compensation......................................... 10.3 11.1
Other........................................................ 39.1 41.5
----- -----
Total accrued liabilities.................................. $59.0 $63.0
===== =====
Included in other non-current liabilities are the following items:
<CAPTION>
December 31,
-------------
1998 1997
----- -----
<S> <C> <C>
Deferred income.............................................. $12.8 $20.9
Other........................................................ 30.7 28.6
----- -----
Total other non-current liabilities........................ $43.5 $49.5
===== =====
</TABLE>
Deferred income relates primarily to a $30 payment under a three-year supply
agreement expiring on December 31, 2000, unless extended, entered into in
connection with the sale of the surfactants business to BASF in November 1997.
Sales and operating income for the years ending December 31, 1998, and 1997
include $9.5 and $1.6, respectively, related to the amortization of the
deferred income under such supply agreement. See "Dispositions."
35
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Income Taxes
Components of Pretax Income
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Domestic....................................... $ 39.7 $ 64.4 $ 62.6
Foreign........................................ 21.1 21.8 31.5
-------- -------- --------
Pretax income.................................. $ 60.8 $ 86.2 $ 94.1
======== ======== ========
Components of Income Tax Expense (Benefit)
Currently payable:
Federal...................................... $ 7.5 $ 20.5 $ 12.7
State........................................ 3.0 6.8 4.7
Foreign...................................... 7.6 7.8 11.3
Deferred....................................... 2.7 (5.2) 4.3
-------- -------- --------
Income tax expense............................. $ 20.8 $ 29.9 $ 33.0
======== ======== ========
</TABLE>
The following table accounts for the difference between the actual tax
provision and the amounts obtained by applying the statutory U.S. federal
income tax rate of 35% to the income before taxes.
Effective Tax Rate Reconciliation (Percent)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory federal tax rate................... 35.0 35.0 35.0
Foreign income tax........................... (6.6) (3.5) (1.7)
State income taxes, net...................... 3.6 4.2 2.5
Goodwill..................................... 1.0 .7 .7
Equity in net income of affiliates........... (0.6) (1.5) (1.4)
Other, net................................... 1.8 (.2) --
-------- -------- --------
Effective tax rate........................... 34.2 34.7 35.1
======== ======== ========
</TABLE>
Components of Deferred Tax Assets and Liabilities
<TABLE>
<CAPTION>
December 31,
-------------
1998 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Post retirement benefits................................... $ 7.0 $ 5.3
Non-deductible reserves.................................... 21.9 22.3
Other miscellaneous items.................................. 3.7 4.5
----- -----
Total deferred tax assets................................ 32.6 32.1
----- -----
Deferred tax liabilities:
Property, plant and equipment.............................. 12.7 8.5
Other miscellaneous items.................................. 1.4 2.4
----- -----
Total deferred tax liabilities........................... 14.1 10.9
----- -----
Net deferred tax asset....................................... $18.5 $21.2
===== =====
</TABLE>
36
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Included in Other Current Assets at December 31, 1998 and 1997,
respectively, are $19.5 and $17.0 of net current deferred tax assets. Taxable
income is expected to be sufficient to recover the net benefit within the
period in which these differences are expected to reverse and, therefore, no
valuation allowance was established.
At December 31, 1998, the Company's share of the cumulative undistributed
earnings of foreign subsidiaries was approximately $65.0. No provision has
been made for U.S. or additional foreign taxes on the undistributed earnings
of foreign subsidiaries since the Company intends to continue to reinvest
these earnings. Foreign tax credits would be available to substantially reduce
or eliminate any amount of additional U.S. tax that might be payable on these
foreign earnings in the event of distributions or sale.
Contributing Employee Ownership Plan
Prior to the Distribution, Company employees participated in the Olin
Corporation Contributing Employee Ownership Plan ("Olin CEOP"), which is a
defined contribution plan available to essentially all domestic Olin employees
and provides a match of employee contributions. The matching contribution
allocable to the Company employees has been included in costs and expenses in
the accompanying combined statements of income and was $3.6, $3.1, and $2.7 in
1998, 1997 and 1996, respectively. Subsequent to the Distribution, the Olin
CEOP was converted into a multiple employer plan in which both Olin and the
Company participate.
Long Term Incentive Plan
At the time of the Distribution, stock options issued by Olin were converted
into both an option to purchase Company common stock ("Company Options") and
an option to purchase Olin common stock ("New Olin Options") with the same
aggregate "intrinsic value" at the time of the Distribution as the old award.
The conversion of the options did not result in a charge to earnings as no new
measurement date was created. The Company will be responsible for delivering
shares of Company common stock upon exercise of Company Options, and Olin will
be responsible for the delivery of shares of Olin Common stock upon exercise
of New Olin Options. Options granted under the Olin 1980 Stock Option Plan to
Olin employees who become Company employees upon the Distribution will
terminate upon the earlier of (i) the end of their term or (ii) two years
following the Distribution. Options granted to such employees under the Olin
1988 Stock Option Plan or the Olin 1996 Stock Option Plan will retain the
original term of the option. Options granted to such employees under the Olin
1996 Stock Option Plan which are not yet vested at the time of the
Distribution will continue to vest in accordance with their vesting schedule
so long as the optionee remains employed at the Company. As of December 31,
1998, after giving effect to the Distribution, there were 1,556,575 Company
options outstanding with a range of option exercise prices per share of
$15.68 - $34.88 and a weighted average option exercise price per share of
$26.84. Of the outstanding options at December 31, 1998, options covering
833,704 shares were currently exercisable at a weighted average exercise price
of $23.70.
The Company has adopted a long term incentive plan to encourage selected
salaried employees to acquire a proprietary interest in the Company's growth
and performance and to attract and retain qualified individuals. The plan will
provide for the ability to issue stock options, restricted stock and
restricted stock units, and performance awards. See "Subsequent Events".
Shareholder Rights Plan
The Company has adopted a Shareholder Rights Plan which is designed to
prevent an acquiror from gaining control of the Company without offering a
fair price to all shareholders.
37
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Segment Information
The Company has adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information."
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Sales:
Microelectronic Chemicals............................. $227.6 $242.6 $232.9
Water Chemicals....................................... 290.3 286.9 293.7
Performance Chemicals................................. 344.9 400.4 386.9
------ ------ ------
Total Sales............................................. $862.8 $929.9 $913.5
====== ====== ======
Operating Income (Loss), including Equity Income in
Affiliated Companies:
Microelectronic Chemicals............................. $ (4.1) $ 9.5 $ 16.9
Water Chemicals....................................... 13.8 26.5 24.1
Performance Chemicals................................. 50.7 50.1 52.3
------ ------ ------
Total Operating Income, including Equity Income in
Affiliated Companies................................... $ 60.4 $ 86.1 $ 93.3
====== ====== ======
Equity Income in Affiliated Companies
Microelectronic Chemicals............................. $ 0.9 $ 4.5 $ 4.4
Water Chemicals....................................... 2.5 2.6 3.2
------ ------ ------
Total Equity Income in Affiliated Companies............. $ 3.4 $ 7.1 $ 7.6
====== ====== ======
Depreciation Expense:
Microelectronic Chemicals............................. $ 14.3 $ 13.1 $ 8.9
Water Chemicals....................................... 11.7 10.4 10.1
Performance Chemicals................................. 17.1 20.1 21.2
------ ------ ------
Total Depreciation Expense.............................. $ 43.1 $ 43.6 $ 40.2
====== ====== ======
Amortization Expense:
Microelectronic Chemicals............................. $ 3.9 $ 3.7 $ 4.0
Water Chemicals....................................... 0.1 0.1 --
------ ------ ------
Total Amortization Expense.............................. $ 4.0 $ 3.8 $ 4.0
====== ====== ======
Capital Spending:
Microelectronic Chemicals............................. $ 43.3 $ 39.8 $ 22.2
Water Chemicals....................................... 10.1 16.2 14.6
Performance Chemicals................................. 30.9 15.0 16.4
------ ------ ------
Total Capital Spending.................................. $ 84.3 $ 71.0 $ 53.2
====== ====== ======
</TABLE>
38
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
<TABLE>
<CAPTION>
December 31,
-------------
1998 1997
------ ------
<S> <C> <C>
Total Assets:
Microelectronic Chemicals................................ $309.6 $286.5
Water Chemicals.......................................... 166.4 182.1
Performance Chemicals.................................... 194.7 171.6
Other.................................................... 50.9 53.0
------ ------
Total Assets............................................... $721.6 $693.2
====== ======
Investment & Advances--Affiliated Companies at Equity:
Microelectronic Chemicals................................ $ 9.2 $ 10.0
Water Chemicals.......................................... 11.9 11.1
------ ------
Total Investment & Advances--Affiliated Companies at
Equity.................................................... $ 21.1 $ 21.1
====== ======
</TABLE>
Segment operating income includes the equity in the earnings of investees
accounted for by the equity method and does not include interest income or
interest expense. Segment operating income includes an allocation of corporate
charges based on various allocation bases. Segment assets include only those
assets which are directly identifiable to a segment and do not include such
items as cash, deferred taxes and other assets. Sales by segment substantially
represent sales for the three major product lines of the Company.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Sales
United States...................................... $646.2 $719.8 $690.6
Foreign............................................ 216.6 210.1 222.9
Transfers between areas:
United States...................................... 57.6 68.9 57.2
Foreign............................................ 1.7 1.9 1.6
Eliminations....................................... (59.3) (70.8) (58.8)
------ ------ ------
Total Sales...................................... $862.8 $929.9 $913.5
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------ ------
<S> <C> <C>
Total Assets
United States............................................... $560.1 $503.9
Foreign..................................................... 243.7 234.1
Investments................................................. 9.5 10.5
Eliminations................................................ (91.7) (55.3)
------ ------
Total Assets.............................................. $721.6 $693.2
====== ======
</TABLE>
Transfers between geographic areas are priced generally at prevailing market
prices. Export sales from the United States to unaffiliated customers
(included in United States sales above) were $63.9, $93.6 and $102.4 in 1998,
1997, and 1996, respectively.
39
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
Dispositions
In November 1997, the Company completed a transaction with BASF whereby the
Company received $42 for the sale of its performance chemicals' surfactants
business and a three-year supply agreement. Of the proceeds received, $12 was
allocated to the sale of the surfactants business based on the fair value of
such business and $30 was allocated to the supply agreement. No gain or loss
was recorded on the sale. In the supply agreement, the Company agreed to
reserve production capacity for surfactants products at its Brandenburg,
Kentucky facility and to supply BASF with such products in exchange for a $30
payment made at the time of signing the agreement plus recovery of all fixed
and variable costs during the term of the agreement. The agreement expires on
December 31, 2000 unless extended; the Company does not believe it will be
extended. The $30 payment was recorded as deferred income and is being
amortized ratably into operating income over the three-year period. Unless the
supply agreement is extended beyond 2000, which the Company does not expect to
happen, no future income will be realized with respect to this supply
agreement after December 31, 2000.
During 1996 the Company sold its electrostatics business.
Supplemental cash flow information on the businesses sold is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996
------------ ------------
<S> <C> <C>
Proceeds....................................... $ 12.0 5.5
Working Capital................................ (9.0) (5.5)
Property, Plant and Equipment.................. -- (2.0)
Other Assets................................... (.2) 3.0
Other Liabilities.............................. (2.8) (1.0)
------------ ------------
Gain on Disposition of Businesses.............. $ -- $ --
============ ============
</TABLE>
Environmental
Olin and the Company have entered into an agreement which specifies that the
Company is only responsible for environmental liabilities at the Company's
current operating plant sites and certain offsite locations. Olin will retain
the liability for all former plant sites and former waste disposal sites. In
1997, in connection with the sale of the surfactants business, a $2.3
provision was recorded to provide for future environmental spending at the
Brandenburg, Kentucky site. The combined balance sheets include liabilities
for future environmental expenditures to investigate and remediate known sites
amounting to $2.8 and $3.2 at December 31, 1998 and December 31, 1997,
respectively, all of which are classified as other noncurrent liabilities.
Environmental exposures are difficult to assess for numerous reasons,
including the identification of new sites, developments at sites resulting
from investigatory studies, advances in technology, changes in environmental
laws and regulations and their application, the scarcity of reliable data
pertaining to identified sites, the difficulty in assessing the involvement
and financial capability of other potentially responsible parties and the
Company's ability to obtain contributions from other parties and the length of
time over which site remediation occurs.
Commitments and Contingencies
The Company leases certain properties, such as manufacturing, warehousing
and office space, data processing and office equipment. Leases covering these
properties generally contain escalation clauses based on
40
<PAGE>
ARCH CHEMICALS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
($ in millions, except share amounts)
increased costs of the lessor, primarily property taxes, maintenance and
insurance and have renewal or purchase options. Total rent expense charged to
operations amounted to $16.9 in 1998, $17.4 in 1997 and $17.5 in 1996
(sublease income is not significant).
Future minimum rent payments under operating leases having initial or
remaining noncancelable lease terms in excess of one year at December 31, 1998
are as follows: $8.9 in 1999; $7.9 in 2000; $6.3 in 2001; $4.4 in 2002; $3.6
in 2003; and $10.9 thereafter.
There are a variety of non-environmental legal proceedings pending or
threatened against the Company. Those matters that are probable have been
accrued for in the accompanying financial statements. Any contingent amounts
in excess of amounts accrued are not expected to have a material adverse
effect on results of operations, financial position or liquidity of the
Company.
Related Party Transactions
Olin sells chlorine and caustic to the Company which is used primarily in
the production of calcium hypochlorite. These product purchases aggregated
$20.7 in 1998, $22.8 in 1997 and $23.7 in 1996, and are reflected in cost of
goods sold in the combined statements of income for the respective periods.
Settlement of these intercompany sales occurred at the time of shipments by
way of the intercompany account.
The Company is charged by Olin for the Company's share of expenses of
certain centralized activities using various allocation bases. These
activities include, but are not limited to, administration of employee benefit
programs, tax compliance, management information systems, treasury, legal and
general corporate functions. Cumulative charges to the Company for centralized
corporate services were $30.6 in 1998, $31.8 in 1997 and $27.7 in 1996.
Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter Year
- ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales................................ $220.4 $270.4 $203.6 $168.4 $862.8
Cost of Goods Sold................... 150.1 190.7 152.9 128.3 622.0
Net Income (Loss).................... 16.3 21.1 4.0 (1.4) 40.0
Pro Forma Net Income (Loss).......... 15.0 19.8 3.2 (2.3) 35.7
Pro Forma Basic Income (Loss) Per
Share............................... 0.65 0.86 0.14 (0.10) 1.55
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter Year
- ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales.................................. $230.2 269.9 $228.0 $201.8 $929.9
Cost of Goods Sold..................... 160.2 194.0 171.6 150.5 676.3
Net Income............................. 17.4 20.3 10.4 8.2 56.3
Pro Forma Net Income................... 16.1 19.0 9.6 7.3 52.0
Pro Forma Basic Income Per Share....... 0.70 0.82 0.42 0.32 2.26
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
41
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The biographical information relating to the Company's Directors is set
forth below. These individuals were elected Directors of the Company in
February 1999.
CLASS I
DIRECTORS WHOSE TERMS EXPIRE IN 2000
JOHN W. JOHNSTONE, JR., 66, retired in April 1996 as Chairman of the Board
of Olin. In 1954, he joined Hooker Chemicals and Plastics Corporation, where
he spent 22 years in various sales, marketing and management positions of
increasing responsibility, leaving in 1975 to become President of the Airco
Alloys division of Airco, Inc. He joined Olin in 1979 as Vice President and
General Manager of the Chemicals Group's Industrial Products department. Mr.
Johnstone became a corporate Vice President and President of the Chemicals
Group in 1980, and an Executive Vice President of Olin in 1983. He was named
President of Olin in 1985, Chief Operating Officer in 1986, Chief Executive
Officer in 1987 and Chairman of the Board in 1988. He is a graduate of
Hartwick College, where he received a BA degree in chemistry and physics and a
Doctor of Science (Hon.). He has attended the Harvard Business School's
Advanced Management Program. Mr. Johnstone is a trustee of Hartwick College
and Research Corporation Technologies, Inc. He is former Chairman of the Soap
and Detergent Association and the Chemical Manufacturers Association. He is a
director of Phoenix Home Life Mutual Insurance Company, McDermott
International, Inc. and Fortune Brands, Inc.
JACK D. KUEHLER, 66, retired in 1993 as Vice Chairman of the Board of
International Business Machines Corporation, a computer manufacturing
corporation. He joined IBM in 1958 as an associate engineer in the San Jose
Research Laboratory. Over the years, he played a significant management role
in many of the corporation's advanced technologies. He served as Director of
the Raleigh Communications Laboratory, Director of the San Jose Storage
Products Laboratory and President of the Systems Product Division. In 1980, he
was elected an IBM Vice President and named President of the General
Technology Division. He became a member of the IBM Board in 1986, Executive
Vice President in 1987, Vice Chairman and member of the Executive Committee in
1988 and President in 1989. He resumed the title of Vice Chairman in January
1993. He is a member of the National Academy of Engineering, a fellow of the
Institute of Electrical and Electronics Engineers and a trustee of Santa Clara
University (from which he graduated with a BS degree in mechanical engineering
and an MS degree in electrical engineering). He is a director of Aetna Life
and Casualty Company, and the Parsons Corporation. Mr. Kuehler holds an
honorary doctorate of science from Clarkson University and an honorary
doctorate of engineering science from Santa Clara University.
CLASS II
DIRECTORS WHOSE TERMS EXPIRE IN 2001
RICHARD E. CAVANAGH, 52, is President and Chief Executive Officer of The
Conference Board, Inc., a leading research and business membership
organization. He has held this position since November 1995. Previously, he
was Executive Dean of the John F. Kennedy School of Government at Harvard
University for eight years. Prior to the position with Harvard, he spent 17
years with McKinsey & Company, Inc., the international management consulting
firm, where he led the firm's public issues consulting practice. Mr. Cavanagh
is a Trustee of the BlackRock Mutual Funds. He is also a Trustee of Wesleyan
University and The Educational Testing Service and a director of Fremont Group
and The Guardian Life Insurance Company. He holds a BA degree from Wesleyan
University and an MBA degree from the Harvard Business School.
MICHAEL O. MAGDOL, 61, is Vice Chairman of the Board and Chief Financial
Officer of Fiduciary Trust Company International, an independent global
investment manager for families and institutions, and has held
42
<PAGE>
this position since 1987. Prior to 1987, he was Executive Vice President and a
director of J. Henry Schroder Bank. He is Chairman and Director of The Ronald
McDonald House of New York, Chairman of the International Committee of the New
York State Bankers Association and a Trustee of The Lingnan Foundation. He
holds a B.S.E. degree from the University of Pennsylvania.
CLASS III
DIRECTORS WHOSE TERMS EXPIRE IN 2002
MICHAEL E. CAMPBELL, 51, is Chairman of the Board and Chief Executive
Officer of the Company. Prior to the Distribution, he was Executive Vice
President of Olin and had global management responsibility for all of Olin's
businesses. Prior to his election as Executive Vice President, Mr. Campbell
served as President of the Microelectronic Materials Division. He joined Olin
in 1978 in the Legal Department, later serving in legal and administrative
positions of increasing responsibility. In 1987, he was elected Olin's
Corporate Vice President, Human Resources. Mr. Campbell is a graduate of the
University of New Hampshire and received a J.D. degree from George Washington
University. He is also a director of Westvaco Corporation.
H. WILLIAM LICHTENBERGER, 63, is Chairman and Chief Executive Officer of
Praxair, Inc., an industrial gases company, a position he assumed in 1992 when
Praxair was spun off from Union Carbide Corporation. In 1986, Mr.
Lichtenberger was elected a Vice President of Union Carbide Corporation and
was appointed President of the Union Carbide Chemicals and Plastics Company,
Inc. He was elected President and Chief Operating Officer and a director of
Union Carbide Corporation in 1990. He resigned as an officer and director of
Union Carbide Corporation upon Praxair's spin-off. Mr. Lichtenberger is a
graduate of the University of Iowa where he majored in chemical engineering
and has a masters degree in business administration from the State University
of New York, Buffalo. He is a director of Ingersoll-Rand Company. He is on the
Advisory Board of Western Connecticut State University, a director of the
National Association of Manufacturers and a member of The Business Roundtable.
He is a director of the Fairfield County Boy Scouts Advisory Board.
JOHN P. SCHAEFER, 64, is President of the Research Corporation, a
foundation, and Chairman of Research Corporation Technologies, Inc.
Previously, he was President of the University of Arizona (1971-1982) and
Professor of Chemistry at the University where he had been a member of the
faculty since 1960. Before his appointment as President of the University, he
served as head of its Department of Chemistry and Dean of its College of
Liberal Arts. Dr. Schaefer received his BS degree in chemistry from the
Polytechnic Institute of Brooklyn in 1955 and his Ph.D. degree from the
University of Illinois in 1958. After postdoctoral studies at the California
Institute of Technology, he taught chemistry at the University of California
(Berkeley). Dr. Schaefer's research interests have been in the area of
synthetic and structural chemistry. He served on the Board of Governors of the
U.S.-Israeli Binational Science Foundation (1973-1978). He is a director of
Research Corporation and Research Corporation Technologies, Inc.
Executive Officers
The biographical information of the executive officers of the Company as of
March 1, 1999 are noted below.
<TABLE>
<CAPTION>
Name and Age Office
------------ ------
<S> <C>
Michael E. Campbell
(51)................... Chairman of the Board and Chief Executive Officer
Leon B. Anziano (56).... President and Chief Operating Officer
Mark A. Killian (51).... Corporate Vice President, Human Resources
Sarah Y. Kienzle (40)... Corporate Vice President, Strategic Development
Louis S. Massimo (41)... Corporate Vice President and Chief Financial Officer
Sarah A. O'Connor (39).. Corporate Vice President, General Counsel and Secretary
W. Paul Bush (48)....... Vice President and Treasurer
John E. Culbertson
(44)................... Vice President and General Manager, Biocides
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Name and Age Office
------------ ------
<S> <C>
Paul J. Craney (50)................ Vice President and General Manager,
Urethane Products
Roderick C. Flint (33)............. Vice President and General Manager,
Hydrazine and Sulfuric Acid
James P. LaCasse (47).............. Vice President and General Manager,
Photopolymers
Bruce A. Lipisko (44).............. Vice President and General Manager,
Semiconductor Chemicals and Services
John J. Margherio (50)............. Vice President, International
James A. Rushton (49).............. Vice President and General Manager, Water
Services
Alfred C. Schmidt (53)............. Vice President, Information Technology
Carl G. Seefried (54).............. Vice President and Chief Technologist
Steven C. Giuliano (29)............ Controller
</TABLE>
No family relationship exists between any of the above named executive
officers or between any of them and any Director of the Company. Such officers
were elected or appointed to serve as such, subject to the Bylaws, until their
respective successors are chosen.
Mr. Campbell was elected Chairman of the Board and Chief Executive Officer
on February 7, 1999. Prior to the Distribution, he was Executive Vice
President of Olin and had global management responsibility for all of Olin's
businesses. Prior to his election as an Executive Vice President of Olin, Mr.
Campbell served as President of Olin's Microelectronic Materials Division.
Prior to that time and since 1987, he served as Olin's Corporate Vice
President, Human Resources.
Mr. Anziano was elected President and Chief Operating Officer on February 7,
1999. Prior to the Distribution and since April 1993, he was a Corporate Vice
President of Olin and since April 30, 1998 had the title of President
Specialty Chemicals at Olin. Since 1988, he has served Olin in the following
management capacities: Group Vice President & General Manager, Industrial
Chemicals; Group Vice President & General Manager, Urethanes; and President,
Basic Chemicals Division.
Mr. Killian was elected Corporate Vice President-Human Resources on February
7, 1999. Prior to the Distribution, Mr. Killian served as Director, Human
Resources for Olin since his appointment in February 1991.
Mrs. Kienzle was elected a Corporate Vice President on February 7, 1999.
Prior to the Distribution and since September 25, 1997, she was a Corporate
Vice President Planning and Development of Olin. Prior to September 1997 and
since August 1996, she was a Vice President of SRI Consulting. Since 1994, she
was employed as a manager and later a principal of A.T. Kearney, Inc., a
consulting firm, and prior to that she held various managerial positions at
Amoco Chemical Company.
Mr. Massimo was elected a Corporate Vice President and Chief Financial
Officer on January 27, 1999. Prior to the Distribution, he served as
Controller of Olin since April 1, 1996 and, in addition, a Corporate Vice
President since January 1, 1997. Since November 1994 until April 1996, he had
served as Olin's Director of Corporate Accounting. Prior to November 1994, he
was an Audit Senior Manager for KPMG LLP.
Ms. O'Connor was elected Corporate Vice President, General Counsel and
Secretary on February 7, 1999. She was elected a Vice President of the Company
on October 13, 1998 when the Company was a wholly-owned subsidiary of Olin.
Prior to the Distribution and since 1995, Ms. O'Connor served as Olin's
Director, Planning and Development. Ms. O'Connor became an Associate Counsel
in the Olin Corporate Legal Department in 1989 and was promoted to Counsel in
1992 and to Senior Counsel in January 1995.
Mr. Bush was elected Treasurer on February 7, 1999 and also appointed a Vice
President on that date. Prior to the Distribution and since February 1998, Mr.
Bush was a consultant to Olin. Prior to February 1998, and since March 1994,
he was Vice President, Treasurer and then Vice President, Investments of
Johnson & Higgins, an insurance brokerage and benefits consulting firm. Prior
to 1994, he held various managerial positions, including Vice President and
Treasurer and Vice President, Financial Planning and Analysis for Squibb
Corporation.
44
<PAGE>
Mr. Craney was appointed Vice President and General Manager, Urethane
Products on February 7, 1999. Prior to the Distribution and since May 1996,
Mr. Craney served as Vice President and General Manager, Urethane Products
Chemicals Division, at Olin. Prior to May 1996, he served as Vice President,
Business Development and Materials Management Chemicals Division, at Olin.
Mr. Culbertson was appointed Vice President and General Manager, Biocides on
March 1, 1999. He joined the Company on February 25, 1999 and prior to that
time he served in various management capacities at Colgate Palmolive,
including Director, Strategic Planning-Global (1998-1999), General Manager,
Colgate Costa Rica (1995-1998) and Director, Marketing-Latin America (1994-
1995).
Mr. Flint was appointed Vice President and General Manager, Hydrazine and
Sulfuric Acid on February 7, 1999. Prior to the Distribution and since January
1997, Mr. Flint served as General Manager of Hydrazine at Olin. Prior to 1997
and since March 1996, Mr. Flint served as Olin's Manager of Planning and
Development for Performance Urethanes. Prior to March 1996 and since February
1995, he served as Olin's International Marketing Manager, Alphatic
Diisocyanates. Prior to February 1995 and since January 1994, he served as
Olin's Business Evaluator for Performance Urethanes.
Mr. LaCasse was appointed Vice President and General Manager, Photopolymers
on February 7, 1999. Prior to the Distribution and since 1996, Mr. LaCasse
served as Vice President and General Manager, Photopolymers at Olin and from
1991 to 1996 as Vice President, Asia-Pacific for both Olin Microelectronic
Materials and OCG Microelectronic Materials.
Mr. Lipisko was appointed Vice President and General Manager, Semiconductor
Chemicals and Services on February 7, 1999. Prior to the Distribution, and
since 1997, Mr. Lipisko served as Vice President and General Manager,
Chemicals and Services for Olin. Prior to 1997 and since 1992, he served as
General Manager of the Electronic Chemicals Group of General Chemical.
Mr. Margherio was appointed Vice President, International on February 7,
1999. Prior to the Distribution and since December 1997, Mr. Margherio served
as Olin's Vice President, International. Prior to December 1997 and since
February 1996, he served as Vice President and General Manager of Polychrome,
a division of Sun Chemical. Prior to February 1996, he served as Olin's
General Manager, Urethanes & Hydrazine.
Mr. Rushton was appointed Vice President and General Manager, Water Services
on February 7, 1999. Prior to the Distribution and since 1996, Mr. Rushton
served as Director for Aquachlor. Prior to 1996 and since 1988, he served as
Director, International Marketing, Pool Chemicals.
Mr. Schmidt was appointed Vice President, Information Technology on February
7, 1999. Prior to the Distribution, and since 1997, Mr. Schmidt served as
Olin's Vice President, Information Technology. Prior to 1997, he was Executive
Director, Software and Systems Engineering of Pitney Bowes.
Dr. Seefried was appointed Vice President and Chief Technologist on February
7, 1999. Prior to the Distribution, Dr. Seefried was Vice President-
Technology, Planning and Development at Olin. Prior to that time, he was Vice
President-Technology of Olin's Chemicals Division.
Mr. Giuliano was elected Controller on January 27, 1999. Prior to the
Distribution, Mr. Giuliano was an Audit Senior Manager for KPMG LLP, an
accounting firm and prior to that and since 1991, he held various positions of
increasing responsibility for KPMG LLP, where he had overall responsibility
for services provided in connection with audits, Commission filings, private
offerings and other services for certain domestic and multinational clients.
45
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act") requires
the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the SEC and the New York
Stock Exchange. Officers, directors and greater than ten-percent shareholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. During the period January 1, 1998 to December
31, 1998, no Section 16(a) filing requirements were applicable to its
officers, directors and greater than ten-percent beneficial owners because the
Company was not subject to the 1934 Act.
Item 11. Executive Compensation
Compensation of Executive Officers
The Company was formed on August 25, 1998. The following table discloses
compensation received by the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered to Olin for the fiscal year ended
December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
1998 Annual Compensation Compensation
--------------------------------- -------------------
Awards(a) Payouts
---------- --------
Securities
Name and Principal Position with Olin Other Annual Underlying LTIP All Other
at December 31, 1998 Salary Bonus Compensation(b) Options(c) Payouts Compensation(d)
- ------------------------------------- -------- -------- --------------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael E. Campbell...... $425,004 $152,412 $17,619 50,000 $207,140 $ 32,168
Executive Vice President
Leon B. Anziano.......... $301,668 $ 76,972 $16,163 20,000 $203,733 $125,755
Vice President and
President,
Specialty Chemicals
Division
Paul J. Craney........... $196,010 $ 98,926 $ 469 7,500 $ 44,769 $ 18,294
Vice President and
General
Manager, Urethane
Products
Sarah Y. Kienzle......... $225,000 $ 49,445 $ 0 20,000 $ 0 $ 60,591
Vice President,
Planning and Development
Louis S. Massimo......... $200,004 $ 53,639 $ 0 12,500 $ 0 $ 12,214
Vice President and
Controller
</TABLE>
- --------
(a) All Olin awards shown reflect an equitable adjustment made pursuant to the
anti-dilution provisions of the plans for a 2-for-1 Olin stock split
effective October 30, 1996 and an equitable adjustment made pursuant to
such provisions as a result of the spin-off of Primex Technologies, Inc.
(b) Includes dividend equivalents on outstanding performance share units paid
at the same rate as dividends paid on Olin Common Stock. Also includes tax
gross-ups, if any, paid for imputed income on use of company-provided
automobiles, the Olin airplane and an outside personal financial advisor.
(c) The stock options reported are for Olin Common Stock and do not represent
options to acquire Company Common Stock. In the event options are
exercised and shares of Olin Common Stock are issued prior to the Record
Date, the option holder will receive Company Common Stock in the
Distribution on the same basis as all other shareholders of record of Olin
Common Stock on the Record Date.
46
<PAGE>
(d) Amounts reported in this column for 1998 are comprised of the following
items:
<TABLE>
<CAPTION>
Olin Contributing Olin Supplemental Olin Value of Split-
Employee Contributing Olin Term Dollar Life
Ownership Plan Employee Life Insurance
Company Match Ownership Plan(1) Insurance(2) Premiums(3)
----------------- ----------------- ----------- --------------------
<S> <C> <C> <C> <C>
M. E. Campbell.......... $8,310 $11,756 $1,390 $10,712
L. B. Anziano........... 8,258 6,594 1,390 6,125
P. J. Craney............ 7,448 2,116 0 8,730
S. Y. Kienzle........... 3,067 5,563 1,303 1,422
L. S. Massimo........... 5,038 4,613 1,158 1,405
</TABLE>
- --------
(1) The Olin Supplemental CEOP permits participants in the CEOP to make
contributions, and Olin to match the same, in amounts permitted by the
CEOP but which would otherwise be in excess of those permitted by certain
Internal Revenue Service limitations.
(2) Under Olin's key executive insurance program, additional life insurance is
provided and monthly payments are made to the spouse and dependent
children of deceased participants.
(3) The amount of the premium shown represents the full dollar amount of the
premium Olin paid in 1998 for the whole life insurance and to fund the
retiree death benefit. Such amounts also include retroactive premiums
which Olin paid to cover a period of time during which some premiums were
suspended due to the financial instability of the insurance carrier.
The figure for Mr. Anziano also includes $103,388 of relocation payments
(including tax gross-ups) made under Olin's relocation policy in connection
with Mr. Anziano's relocation from Olin's Cleveland, Tennessee office to its
Norwalk, Connecticut headquarters. The figure for Mrs. Kienzle also includes
$49,236 of relocation payments (including tax gross-ups) made under Olin's
relocation policy in connection with her move from Chicago, Illinois to Olin's
Norwalk, Connecticut headquarters.
Option Grants of Olin Common Stock to Company Executives in the Last Fiscal
Year
The following table sets forth as to the Named Executive Officers
information relating to options for Olin Common Stock granted by Olin from
January 1, 1998 through December 31, 1998.
<TABLE>
<CAPTION>
Individual Grants(a)
- -----------------------------------------------------------------
% of
Total
Number of Options
Securities Granted
Underlying to All
Options Employees Potential Realizable Value at
Granted in Fiscal Exercise Expiration Assumed Rates of Stock Price
Name (a)(b) Year Price(c) Date Appreciation for Option Term(d)(e)
---- ---------- --------- -------- ---------- ------------------------------------
0% 5% 10%
-- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
M. E. Campbell.......... 50,000 6.0% $43.13 1/28/08 0 $ 1,356,211 $ 3,436,906
L. B. Anziano........... 20,000 2.4% $43.13 1/28/08 0 542,485 1,374,762
P. J. Craney............ 7,500 1.0% $43.13 1/28/08 0 203,432 515,536
S. Y. Kienzle........... 20,000 2.4% $43.13 1/28/08 0 542,485 1,374,762
L. S. Massimo........... 12,500 1.5% $43.13 1/28/08 0 339,053 859,226
All Stockholders........ N/A N/A N/A N/A 0 1,245,622,105 3,156,650,978
All Optionees........... 835,700 100.0% $43.05 (f) 0 22,734,571 57,511,296
</TABLE>
- --------
(a) Options were awarded to the Named Executive Officers on January 29, 1998.
One-third of the grant becomes exercisable on each January 28 beginning in
1999.
(b) Under Olin's 1996 Stock Option Plan, the Compensation Committee of Olin's
Board of Directors, in its discretion, may grant stock appreciation rights
("SAR's") to optionees. To date, no such SAR's for Olin stock have been
granted. Each such right will relate to and have the same terms and
conditions, including restrictions, as a specific option granted, together
with such additional terms and conditions as the Compensation Committee
may prescribe.
47
<PAGE>
(c) The exercise price of the options reflects the fair market value of Olin
Common Stock on the date of grant.
(d) No gain to the optionees is possible without appreciation in the stock
price which will benefit all shareholders commensurately. The dollar
amounts under these columns are the result of calculations at the 5% and
10% assumption rates set by the Commission and therefore are not intended
to forecast possible future appreciation of Olin's stock price or to
establish any present value of the options.
(e) Realizable values are computed based on the number of options which were
granted in 1998 and which were still outstanding at year-end.
(f) The expiration dates of options granted during fiscal 1998 are January 28,
2008, May 1, 2008 and September 24, 2008.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth as to the Named Executive Officers
information regarding options to purchase Olin Common Stock exercised during
1998 and the value of in-the-money outstanding options to purchase Olin Common
Stock at the end of 1998.
<TABLE>
<CAPTION>
Number of Securities Aggregate Value of
Underlying Unexercised Unexercised, In-the-Money
Shares Options at 12/31/98 Options at 12/31/98(a)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. E. Campbell.......... 4,289 $95,473 88,446 90,325 $133,078 $ 0
L. B. Anziano........... 0 0 44,643 40,163 38,952 0
P. J. Craney............ 0 0 15,628 15,565 11,652 0
S. Y. Kienzle........... 0 0 3,334 26,666 0 0
L. S. Massimo........... 0 0 11,477 23,238 0 0
</TABLE>
- --------
(a) Value was computed as the difference between the exercise price and the
$28.3125 per share closing price of Olin Common Stock on December 31,
1998, as reported on the consolidated transaction reporting system of the
NYSE.
Executive Agreements
Each of the Named Executive Officers has an agreement with the Company which
provides, among other things, that in the event of a covered termination of
employment (which could include, among other things, termination of employment
by the Company (other than for cause) and termination at the election of the
individual to leave the Company under certain circumstances), the individual
will receive a lump sum severance payment from the Company equal to 12 months'
base pay plus the greater of (a) the average incentive compensation award paid
from the Company during the three years preceding the termination or (b) the
then standard annual incentive compensation award, less any amounts payable
under existing severance or disability plans of the Company. In the event that
a "Change in Control" of the Company occurs, and there is a covered
termination, the individual will receive three times the severance payment.
Pension credit and insurance coverage would be afforded for the period
reflected in the severance payment, and in certain cases, insurance coverage
will be extended beyond such period. The agreements also provide for certain
outplacement services. A "Change in Control" would occur if the Company ceases
to be publicly owned; 20% or more of its voting stock is acquired by others
(other than the Company, a Subsidiary or a Company employee benefit plan); the
incumbent Directors and their designated successors cease over a two-year
period to constitute a majority of the Board; all or substantially all of the
Company's business is disposed of in a transaction in which the Company is not
the surviving corporation or the Company combines with another company and is
the surviving corporation (unless the Company's shareholders following the
transaction own more than 50% of the voting stock or other ownership interest
of the surviving entity or combined company); or the shareholders of the
Company approve a sale of all or substantially all the Company's assets or a
liquidation or dissolution of the Company. Each agreement provides that the
individual agrees to remain in the Company's employ for six months after a
"Potential Change in Control" of the Company has occurred. The agreements
provide that payments made thereunder or under any change in control provision
of the Company's compensation or benefit plan which are subject to "excess
48
<PAGE>
parachute payment" tax will be increased so that the individual will receive a
net payment equal to that which would have been received if such tax did not
apply. Certain of the Company's benefit and compensation plans, including its
annual incentive bonus plan, also contain "change-in-control" provisions.
Adjustment to Prior Olin Equity-Based Benefits
At the time of the Distribution, options to purchase Olin stock ("Olin
Option") were converted into both an option to purchase Company Common Stock
("Company Option") and an option to purchase Olin Common Stock ("New Olin
Option") with adjustments designed to preserve the "intrinsic value" at the
time of the Distribution as the old award. The Company will be responsible for
delivering shares of Company Common Stock upon exercise of Company Options,
and Olin will be responsible for the delivery of shares of Olin Common Stock
upon exercise of New Olin Options. Options granted under the Olin 1980 Stock
Option Plan to Olin employees who became Company employees upon the
Distribution will terminate upon the earlier of (i) the end of their term or
(ii) two years following the Distribution. Options granted to such employees
under the Olin 1988 Stock Option Plan or the Olin 1996 Stock Option Plan will
expire at the end of the original term of the option rather than terminate
when the employee ceases to be an Olin employee. Options granted to such
employees under the Olin 1996 Stock Option Plan which are not yet vested at
the time of the Distribution will continue to vest in accordance with their
respective vesting schedules so long as the optionee remains employed at the
Company.
In connection with the Distribution, holders of outstanding Olin restricted
stock unit awards received restrictive stock units of the Company in the same
ratio as the Distribution Ratio bears to the Olin restricted stock units held,
however, Olin restricted stock units held by employees of the Company were
amended and will no longer be paid out in Olin Common Stock but instead will
be paid out in cash. Deferred Olin phantom stock accounts, including Olin
director accounts, were credited with Company phantom stock also in the same
proportion as the Distribution Ratio bears to phantom stock held in the
accounts. Olin phantom stock accounts for such employees and directors of the
Company are also paid out in cash when distributed.
Retirement Benefits
Following the Distribution, the Company established a tax-qualified, defined
benefit pension plan for Company employees ("Tax Qualified Pension Plan") that
provides benefits based on service with Olin and with the Company. The Company
will become liable for the payment of all pension plan benefits accrued by
Company employees prior to and following the Distribution who cease to be
Company employees after the Distribution. Olin will transfer assets to the
Company's pension plan and the amount of the assets will be equal to the
Company's proportionate share of the assets (based on an allocation of assets
used to fund projected benefit obligations), provided that in any event the
amount transferred will comply with Section 414(l) of the Code using the asset
allocation methodology set forth in Section 4044 of the Employee Retirement
Income Security Act of 1974, as amended.
The Tax Qualified Pension Plan, together with a supplementary plan
(collectively, the "Company Pension Plan"), provide for fixed benefits upon
retirement. The normal retirement age is 65, but early retirement is available
after attainment of age 55 with at least 10 years of service at a reduced
percentage of the normal retirement allowance (100% is payable if early
retirement is at age 62). Directors who are not also employees of the Company
are not eligible to participate in the Company Pension Plan. The Tax Qualified
Pension Plan is a tax-qualified plan, and benefits are payable only with
respect to non-deferred compensation. Under one of the supplementary plans
mentioned above, the Company pays a supplemental pension, based on the formula
described below, on deferred compensation (including deferred incentive
compensation). Under the supplementary plan, the Company will pay employees
affected by the limitations imposed by the Internal Revenue Code on qualified
plans a supplemental pension in an annual amount equal to the reduction in
pensions resulting from such limitations.
"Compensation" for purposes of the Company Pension Plan represents average
cash compensation per year (salary and bonus shown in the summary compensation
table under Compensation of Executive Officers in this
49
<PAGE>
Item 11), including deferred compensation, received for the highest three
years during the ten years up to and including the year in which an employee
retires, including compensation with Olin. The normal retirement allowance is
1.5% of "Compensation" as so defined multiplied by the number of years of
benefit service, less an amount of the employee's primary Social Security
benefit not to exceed 50% of such Social Security benefit. Years of benefit
service shall also include benefit service with Olin.
Under the Company's Senior Executive Pension Plan (the "Senior Plan"), which
is a second nonqualified pension plan, the Company pays retirement benefits to
certain senior executives upon their retirement after age 55, which benefits
are reduced if retirement is prior to age 62. Under the Senior Plan, the
maximum benefit will be 50% of "Compensation" (as defined above), less
payments from the Company Pension Plan, any other Olin or Company pension,
pension benefits from other employers, and certain Social Security benefits.
Subject to the above limitations, benefits under the Senior Plan will accrue
at the rate of 3% for each year of service that a senior executive is eligible
to participate in the Senior Plan and in all cases are reduced by payments
under the Pension Plan which accrued during the period the employee was in the
Senior Plan and 50% of the employee's primary Social Security benefit. The
Senior Plan also provides benefits to the executive's surviving spouse equal
to 50% of the executive's benefits. Payment of benefits under the Senior Plan
is not automatic, notwithstanding satisfaction of its service requirements,
but is subject to plan provisions regarding suspension of benefit accruals and
cessation of benefits. The Senior Plan and the other supplementary plans
provides that unless the participant elects installment payments, the
participant will receive benefits under these plans in a lump sum upon
retirement if the lump sum would exceed $100,000. The Compensation Committee
may remove a participant from the Senior Plan for cause as defined in such
plan, and no payments will be made if the participant voluntarily terminates
employment without the committee's consent.
The Tax Qualified Pension Plan provides that if, within three years
following a "Change in Control" of the Company, any corporate action is taken
or filing made in contemplation of, among other things, a plan termination or
merger or other transfer of assets or liabilities of the plan, and such
termination, merger or other event thereafter takes place, plan benefits would
automatically be increased for affected participants (and retired
participants) to absorb any plan surplus.
Each of the Senior Plan and the supplementary plan mentioned above provides
that in the event of a "Change in Control", the Company will pay each
participant a lump-sum amount sufficient to purchase an annuity which
(together with any monthly payment provided under trust arrangements or other
annuities established or purchased by the Company to make payments under such
plan) will provide the participant with the same monthly after-tax benefit as
the participant would have received under the plan, based on benefits accrued
thereunder to the date of the "Change in Control." The agreements described
under "Executive Agreements" below provide that an executive officer who is
less than age 55 at the time of a "Change in Control" will, for purposes of
calculating the above lump-sum payment under the Senior Plan, be treated as if
he had retired at age 55, with the lump-sum payment being calculated on the
basis of service to the date of the "Change in Control."
50
<PAGE>
The following table shows the maximum combined amounts payable annually on
normal retirement under the Company Pension Plan and Senior Plan. Such amounts
will be reduced by Social Security benefits and the other offsets described
above.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------
Remuneration 10 Years 15 years 20 Years 25 Years 30 Years 35 Years 40 Years
------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$
200,000 $ 60,000 $ 90,000 $100,000 $100,000 $100,000 $105,000 $120,000
300,000 90,000 135,000 150,000 150,000 150,000 157,500 180,000
400,000 120,000 180,000 200,000 200,000 200,000 210,000 240,000
500,000 150,000 225,000 250,000 250,000 250,000 262,500 300,000
600,000 180,000 270,000 300,000 300,000 300,000 315,000 360,000
700,000 210,000 315,000 350,000 350,000 350,000 367,500 420,000
800,000 240,000 360,000 400,000 400,000 400,000 420,000 480,000
</TABLE>
Credited years of service for the Named Executive Officers as of December
31, 1998 are as follows: Mr. Campbell, 20.6 years (11.3 years under the Senior
Plan); Mr. Anziano, 25.1 years (11.0 years under the Senior Plan), Mr. Craney,
28.5 years (0 years under the Senior Plan), Ms. Kienzle, 1.4 years (1.4 years
under the Senior Plan), and Mr. Massimo, 4.1 years (1.1 years under the Senior
Plan).
The Company will be the "successor employer" under the union contracts
covering employees at its unionized sites. These contracts require the Company
essentially to replicate the benefits provided to covered employees by Olin
prior to the Distribution. The Tax Qualified Pension Plan will also provide
for the benefits accrued under these union contracts for union employees who
become employees of the Company at the time of the Distribution. Service
credited under Olin's pension plan for these unionized employees will be
recognized for the purpose of calculating benefits and for qualifying for
vesting and early retirement benefits under the terms of the Tax Qualified
Pension Plan.
Following the Distribution, the Company became liable for payment of
benefits accrued for employees of the Company under any Olin non-qualified
pension plans as of the Distribution. Such benefits will not be paid until the
participant retires from the Company.
Deferrals
Under the Company's Employee Deferral Plan, all participants therein may
defer payment of salaries, bonuses and other incentive compensation to cash
and phantom stock accounts.
Compensation of Directors
Each nonemployee member of the Board will receive an annual retainer as
determined by the Board, all or part of which may be paid or credited in the
form of shares of Company Common Stock as provided in the 1999 Stock Plan for
Nonemployee Directors (the "Directors Plan") at the election of the Board. In
addition, the Directors receive a fee as determined by the Board for each
meeting of the Board and for each meeting of a committee of the Board
attended, together with expenses incurred in the performance of his or her
duties as a director. Each director who serves as the chair of a Board
committee may also receive an additional annual meeting fee as determined by
the Board. For 1999, the annual retainer is $30,000, the meeting fee is $1,500
and the committee chair fee is $5,000. No Board fees were paid in 1998.
Generally speaking, the Directors Plan (i) provides for the granting
annually, at the election of the Board, of a number of shares of Company
Common Stock, options to purchase shares of Company Common Stock, performance
shares or a combination of the foregoing (as determined by the Board following
the Distribution) to each nonemployee director and, in the case of a grant of
shares of Company Common Stock, the deferral of the
51
<PAGE>
payment of such shares until after such director ceases to be a member of the
Board, (ii) permits the Board to determine if all or part of the annual
retainer shall be paid in shares of Common Stock, (iii) permits such director,
subject to the approval of the Board, to elect to receive his or her quarterly
meeting fees in the form of shares of Company Common Stock in lieu of cash,
(iv) permits such director, subject to the approval of the Board, to elect to
receive in the form of shares of Company Common Stock the amount by which the
annual retainer exceeds the amount payable in shares of Company Common Stock
("Excess Retainer") in lieu of cash for such excess and (v) permits such
director, subject to the approval of the Board, to elect to defer any meeting
fees and Excess Retainer paid in cash and any shares to be delivered under the
Directors Plan. Interest on deferred cash and dividends on deferred shares are
paid to the Non-employee Director unless the director, subject to the approval
of the Board, elects to defer such amounts in which case interest is credited
quarterly and dividend equivalents are reinvested in phantom shares of Company
Common Stock on the dividend payment date. Deferred shares are paid out in
shares of Company Common Stock. Performance shares vest and are paid out,
unless deferred by the director, upon the satisfaction of performance goals
established by the Compensation Committee. Deferred accounts under the
Directors Plan are paid out if there is a "Change in Control" as defined in
such plan. Existing accounts under The Olin Corporation 1997 Stock Plan for
Non-employee Directors (including Olin phantom shares) held for the benefit of
individuals who become non-employee directors of the Company were transferred
to the Directors Plan.
Directors who are not officers or employees of the Company or one of its
subsidiaries are covered while on Company business under the Company's
business travel accident insurance policy which covers employees of the
Company generally.
Item 12. Security Ownership of Certain Beneficial Owners and Management
By Directors and Executive Officers
All of the outstanding shares of Company Common Stock were prior to the
Distribution held beneficially and of record by Olin. The following table sets
forth information concerning shares of Company Common Stock beneficially owned
after the Distribution on February 8, 1999 by (i) each person who was a
director of the Company at the time of the Distribution, (ii) each of the
Named Executive Officers of the Company and (iii) all persons who were
directors and executive officers of the Company at the time of the
Distribution as a group. The percentage ownership of Company Common Stock of
each person named below is calculated based on the number of shares of Company
Common Stock outstanding as of February 8, 1999. Unless otherwise indicated in
the footnotes below, each person or entity has sole voting and investment
power with respect to the shares of Company Common Stock set forth opposite
such person's or entity's name. Also included in the figures are shares of
Company Common Stock which may be acquired within 60 days through the exercise
of employee stock options, if any.
<TABLE>
<CAPTION>
No. of Shares
Beneficially Percent of
Name of Beneficial Owner Owned(a,b) Class(c)
------------------------ ------------- ----------
<S> <C> <C>
Richard E. Cavanagh............................ 3,238 --
John W. Johnstone, Jr.......................... 176,477 --
Jack D. Kuehler................................ 7,097 --
H. William Lichtenberger....................... 5,699 --
John P. Schaefer............................... 9,449 --
Michael E. Campbell............................ 81,450 --
Leon B. Anziano................................ 43,765 --
Paul J. Craney................................. 15,773 --
Sarah Y. Kienzle............................... 5,660 --
Louis S. Massimo............................... 11,985 --
Directors and executive officers as a group,
including those named above (23 persons)...... 415,425 1.7%
</TABLE>
52
<PAGE>
- --------
(a) Included in this table with respect to officers are shares credited under
the Olin CEOP. Also included in the case of the incumbent directors are
certain shares of Company Common Stock credited to a deferred account for
such directors pursuant to the arrangements described above under
"Compensation of Directors" in the amounts of 3,115 for Mr. Cavanagh;
1,394 for Mr. Johnstone; 7,096 for Mr. Kuehler; 5,499 for Mr.
Lichtenberger; and 5,259 for Mr. Schaefer. Such shares so credited to
these directors have no voting power.
(b) The amounts shown include shares that may be acquired within 60 days
following February 8, 1999 through the exercise of stock options, as
follows: Mr. Johnstone, 119,302; Mr. Campbell, 67,725; Mr. Anziano,
33,240; Mr. Craney, 12,099; Ms. Kienzle, 5,002; Mr. Massimo, 11,526; and
all directors and executive officers as a group, including the named
individuals, 288,629.
(c) Unless otherwise indicated, beneficial ownership of any named individual
does not exceed 1% of the outstanding shares of Company Common Stock.
By Others
The following table sets forth information concerning shares of the Company
Common Stock beneficially owned by Franklin Mutual Advisers, Inc. ("FMAI")
after the Distribution on February 8, 1999 and projected to be beneficially
owned after the Distribution on February 8, 1999 by each other person or
entity known by the Company to own more than 5% of the outstanding Common
Stock of Olin. The figures reflect the distribution ratio of one share of
Company Common stock for every two shares of Olin Common Stock. The
projections are based on the number of shares of Olin Common Stock owned by
such other person or entity at December 31, 1998. The percentage of ownership
of Company Common Stock of each entity named below is calculated based on the
number of shares of Olin Common Stock outstanding as of December 31, 1998,
except in the case of FMAI, where it is based on the number of shares of
Company Common Stock outstanding as of February 8, 1999. Unless otherwise
indicated in the footnotes below, each person or entity has sole voting and
investment power with respect to the shares of Company Common Stock set forth
opposite such person's or entity's name.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name and Address of Beneficial Owner Ownership Class
------------------------------------ ----------- -------
<S> <C> <C>
Franklin Mutual Advisers, Inc........................ 2,732,214(a) 11.9
777 Mariners Island Boulevard
San Mateo, CA 94404
Scudder, Kemper Investments, Inc..................... 1,980,403(b) 8.6
345 Park Avenue
New York, NY 10154
FMR Corp............................................. 1,689,000(c) 7.3
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc........................ 1,348,600(d) 5.9
100 East Pratt Street
Baltimore, MD 21202
</TABLE>
- --------
(a) Franklin Mutual Advisers, Inc. ("FMAI"), a direct subsidiary of Franklin
Resources, Inc., has advised the Company in a Schedule 13G that the shares
are owned by one or more open or closed-end investment companies or other
managed accounts which are advised by FMAI and such advisory contracts
grant to FMAI all voting and investment power over such shares. It also
reports that FMAI has sole power to vote and sole dispositive power with
respect to such shares.
(b) Scudder, Kemper Investments, Inc., a registered investment adviser
("Scudder"), has advised Olin in an amended Schedule 13G filing that it
has sole dispositive power with respect to the shares, has sole power to
vote with respect to 456,253 shares, and shared power to vote with respect
to 1,417,850 shares. Scudder disclaims beneficial ownership of all the
shares.
(c) Olin has been advised in an amended Schedule 13G filing as follows with
respect to these shares: Fidelity Management & Research Company
("Fidelity") and Fidelity Management Trust Company ("FMTC")
53
<PAGE>
beneficially own 1,495,700 and 193,300 shares, respectively. Both are
subsidiaries of FMR Corp. ("FMR"). Edward C. Johnson 3rd ("Johnson"), who is
the Chairman of FMR, FMR, through its control of Fidelity, and its Funds
each has sole dispositive power with respect to the 1,495,700 shares owned
by the Funds. Neither Johnson nor FMR has sole voting power with respect to
the shares owned by the Funds, which power rests with the Funds' Board of
Trustees. Johnson and FMR, through its control of FMTC, each has sole
dispositive power over 193,300 shares, sole voting power over 150,300 shares
and no voting power with respect to 43,000 of the shares.
(d) T. Rowe Price Associates, Inc., a registered investment adviser, has
advised Olin in a Schedule 13G filing that it has sole dispositive power
with respect to such shares and sole voting power with respect to 264,900
shares of such shares. T. Rowe Price Associates, Inc. expressly disclaims
that it is, in fact, the beneficial owner of such securities.
Item 13. Certain Relationships and Related Transactions
In connection with the Distribution, the Company and Olin entered into
certain agreements for the purpose of giving effect to the Distribution,
governing their relationship subsequent to the Distribution, including the
operation and maintenance of certain facilities at shared plant sites, and
providing for the allocation of employee benefits, tax and certain other
liabilities and obligations arising from periods prior to the Distribution.
The principal agreements are described below. While the agreements contain
terms which are thought to be comparable to those which would have been
reached in arms-length negotiations with unaffiliated parties, these
agreements were reached while the Company was wholly owned by Olin and
therefore are not the result of arm's-length negotiations between independent
parties.
Distribution Agreement
Olin and the Company entered into a Distribution Agreement providing for,
among other things, certain corporate transactions required to effect the
Distribution and other arrangements between Olin and the Company subsequent to
the Distribution.
The Distribution Agreement provides for the transfer by Olin to the Company
of the assets and business entities comprising the Specialty Chemical
Businesses and the assumption of liabilities and cross indemnities designed to
place with the Company responsibility for liabilities of the Specialty
Chemical Businesses and with Olin responsibility for liabilities of the
Retained Businesses and prior discontinued businesses of Olin. The assets of
the Specialty Chemical Businesses were transferred to the Company on an "as
is, where is" basis and no representations were made by Olin with respect
thereto. The Distribution Agreement also provides that prior to the
Distribution, the Company will assume $75 million of indebtedness expected to
be incurred by Olin pursuant to the Credit Facility. The Distribution
Agreement also provides for the allocation of coverage between the Company and
Olin under existing insurance policies after the Distribution and sets forth
procedures for the administration of insured claims.
The Distribution Agreement also provides that, subject to certain
exceptions, the Company and Olin have each agreed to assume and indemnify and
hold the other harmless from and against, all damages, losses, liabilities,
fines, penalties, costs and expenses arising out of or associated with the
business, conduct, operations, assets, properties or status of the Company or
Olin, respectively, prior to, on or after the Distribution. The Distribution
Agreement further provides that the Company will assume, and indemnify and
hold Olin harmless from, certain liabilities in connection with the removal,
remediation or control of environmental conditions at the Company's current
facilities and at certain off-site locations.
The Distribution Agreement provides that Olin and the Company each will be
granted access to certain records and information in the possession of the
other. The Distribution Agreement provides that, in general, except as
otherwise set forth therein or in any related agreement, all costs and
expenses incurred in connection with the Distribution will be paid by Olin.
54
<PAGE>
Charleston Services Agreement
As part of the Distribution, Olin's Charleston, Tennessee plant site which
contains several manufacturing facilities was divided between Olin and the
Company. As a result, the Company and Olin entered into a Charleston Services
Agreement pursuant to which the Company and Olin will provide each other with
services in connection with the continued operations at this site. The
services to be provided include environmental services, water treatment
services, steam power, administrative services regarding the plant site, and
raw material storage. Some of the services are being provided for a
transitional period. The fees for the services vary by service but generally
are at cost.
Chlor-Alkali Supply Agreement
Olin and the Company entered into a supply agreement whereby Olin agreed to
supply the Company with chlorine and caustic soda for the Company's plants.
Under the terms of the agreement, Olin will supply all of the Company's
requirements for chlorine and caustic soda for a five-year period ending in
2003, with extensions unless canceled on two years' prior notice by either
party. Purchases of electrochemical units (ECUs) of chlorine and caustic soda
will be at a fixed price which approximates the current market price. Excess
chlorine purchases will be at Olin's then lowest price for comparable volumes
of chlorine sold to third parties.
Covenant Not To Compete Agreement
The Company and Olin entered into a Covenant Not to Compete Agreement
("Covenant Not to Compete Agreement") which generally provides that for a
period of five years after the Distribution Date (i) Olin shall not, with
certain limited exceptions, directly or indirectly manufacture, sell, market
or distribute products or product-related services that are the same as or
substantially similar to those which the Specialty Chemical Businesses are
manufacturing, selling, marketing or distributing at the time of the
Distribution and (ii) the Company shall not, with certain limited exceptions,
directly or indirectly manufacture, sell, market or distribute products or
product-related services that are the same as or substantially similar to
those which Olin's Retained Businesses are manufacturing, selling, marketing
or distributing at the time of the Distribution. The Covenant Not to Compete
Agreement also provides that, for a period of two years after the Distribution
Date, neither Olin nor the Company shall solicit, recruit, hire or induce to
leave any of the other's employees, subject to certain limited exceptions.
Employee Benefits Allocation Agreement
Olin and the Company entered into an employee benefits and compensation
allocation agreement (the "Employee Benefits Allocation Agreement") which sets
forth the manner in which assets and liabilities under employee benefit plans
and other employment-related liabilities will be divided between them. In
general, the Company will be responsible for compensation and employee
benefits relating to its employees but not persons who became former employees
of the Specialty Chemical Businesses prior to the Distribution. The Company
will receive no assets under employee benefit plans except as provided below.
Certain liabilities relating to former employees of the Company will be
retained by Olin (along with any corresponding assets), including liabilities
and assets for defined benefit pension plan benefits accrued by employees of
the Specialty Chemical Businesses who ceased to be Olin employees prior to the
Distribution, liabilities and assets under the Olin Corporation Contributing
Employee Ownership Plan and the corresponding supplemental executive plan for
such former employees and unfunded deferred compensation liabilities for such
persons. The Company intends to establish its own pension plan and related
trust for its employees and will assume the pension liabilities for these
persons from Olin. Olin will transfer assets from its tax-qualified pension
plan trust to the Company's pension trust relating to the Company's employees
who were previously participants in Olin's tax-qualified pension plan. Olin's
obligations relating to nonqualified, unfunded pension liabilities for Company
employees who were prior employees of Olin will also be assumed by the
Company. However, since these are unfunded obligations, no assets will be
transferred from Olin to the Company with respect to these obligations.
55
<PAGE>
The Company further intends to establish its own long-term disability plan
and related trust for its employees. The Company will assume the liability for
long-term disability benefits for employees of the Company and for former
employees of Olin who were employed in the Specialty Chemical Businesses. Olin
will transfer a proportionate amount of assets from its tax qualified
Voluntary Employee Benefit Association Trust ("VEBA") based on an equitable
allocation.
The Employee Benefits Allocation Agreement also provides for the treatment
of outstanding employee stock options to purchase Olin Common Stock ("Olin
Options"). At the time of the Distribution, for Company employees, Olin
Options were converted into adjusted New Olin Options and Company Options,
with adjustments to preserve the "intrinsic value" inherent in the Olin
Options immediately prior to the Distribution. Options (including Olin
Options) held by Company employees will be provided under the Company's 1999
Long Term Incentive Plan. The Company will be responsible for delivering
shares of Company Common Stock upon exercise of Company Options, and Olin will
be responsible for the delivery of shares of Olin Common Stock upon exercise
of New Olin Options. The holders of restricted stock units of Olin Common
Stock ("Olin Restricted Units") (whether employed by the Company or Olin after
the Distribution) will be entitled to receive a distribution of units of
Company Common Stock ("Company Restricted Units") in the same proportion as
the Distribution Ratio with respect to their Olin Restricted Units, and the
Company Restricted Units so distributed and representing shares of Company
Common Stock will generally be subject to the same restrictions as the Olin
Restricted Units.
Intellectual Property Transfer and License Agreement
The Company and Olin entered into an intellectual property transfer and
license agreement (the "Intellectual Property Transfer and License
Agreement"), which provides for the transfer by Olin to the Company of certain
intellectual property and proprietary technology and certain trademarks
relating to the Company's businesses. The Intellectual Property Transfer and
License Agreement provides for the grant of licenses by the Company to Olin to
use such transferred intellectual property and technology in certain of Olin's
retained businesses following the Distribution and for the granting of
licenses between Olin and the Company relating to the use of certain
intellectual property and technology.
Information Technology Services Agreement
The Company and Olin entered into an information technologies services
agreement (the "Information Technology Services Agreement") pursuant to which
the Company will provide Olin after the Distribution Date with certain
computer and communication services previously provided by Olin prior to the
Distribution. These services include data center services, computer software
and hardware technical support and network operations support. The agreement
will have an initial term of two years with limited exceptions for certain
services, related to third party contracts, which will extend beyond two
years. Services are to be provided on a cost allocation basis.
Sublease
The Company and Olin entered into a Sublease whereby the Company subleases
office space from Olin at Olin's Norwalk, Connecticut headquarters on
substantially the same terms as Olin's lease with its landlord.
Tax Sharing Agreement
The Company and Olin entered into a Tax Sharing Agreement ("Tax Sharing
Agreement") providing that Olin will be responsible for the Federal tax
liability of the Company for each year that the Company was included in Olin's
consolidated Federal income tax return, and for state, local and foreign taxes
of the Company attributable to periods prior to the Distribution, in each case
including tax subsequently assessed pursuant to the audit of, or other
adjustment to, previously filed tax returns. The Tax Sharing Agreement also
provides that the Company and Olin will each bear 50% of any corporate level
tax arising on the Distribution, except that the
56
<PAGE>
Company or Olin, as the case may be, will be obligated to indemnify the other
party on an after-tax basis for 100% of such corporate level tax if such tax
is primarily attributable to (i) actions of the Company or Olin after the
Distribution (including any cessation, transfer to affiliates or disposition
of its active trades or businesses, and certain reacquisitions of its stock
and payments of extraordinary dividends to its shareholders), (ii) involvement
by the Company or Olin in a Change in Control Transaction, or (iii) the breach
of one or more representations with respect to the Company or Olin made to
Cravath, Swaine & Moore in connection with its opinion. Notwithstanding the
Tax Sharing Agreement, under the consolidated return regulations, the Company
and Olin will each be severally liable to the IRS for the full amount of any
corporate level tax arising on the Distribution that is not paid by the other
party.
Trade Name License Agreement
The Company and Olin entered into a tradename and trademark license
agreement (the "Trade Name License Agreement") to permit the Company and its
subsidiaries to use the "Olin" name and its derivatives on
a royalty-free basis in certain limited circumstances for a certain limited
period of time.
Transition Services Agreement
The Company and Olin entered into a transition services agreement (the
"Transition Services Agreement") pursuant to which Olin and the Company will
provide each other with certain services which have been provided by Olin and
the Company prior to the Distribution. The length of time for which any such
service shall be provided, and the compensation therefor, vary based upon the
mutual agreement of the Company and Olin. Pursuant to Olin's management of the
receipts and disbursements of the Company for an interim period which is not
expected to exceed six months, periodic indebtedness between Olin and the
Company may arise in an amount which is not expected to exceed $25 million.
57
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following is a list of the Financial Statements included in Item 8 of
Part II of this Report:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report....................................... 22
Combined Balance Sheets as of December 31, 1998 and 1997........... 23
Combined Statements of Income for the Years Ended December 31,
1998, 1997 and 1996............................................... 24
Combined Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996............................................... 25
Combined Statements of Equity for the Years Ended December 31,
1998, 1997 and 1996............................................... 26
Notes to Combined Financial Statements............................. 27
</TABLE>
2. Financial Statement Schedules
Schedules not included herein are omitted because they are inapplicable or
not required or because the required information is given in the combined
financial statements and notes thereto.
Separate financial statements of 50% or less owned subsidiaries accounted
for by the equity method are not summarized herein and have been omitted
because, in the aggregate, they would not constitute a significant subsidiary.
3. Exhibits
Management contracts and compensatory plans and arrangements are listed as
Exhibits 10.12 through 10.20 below.
The Company is party to other instruments defining the rights of holders of
long-term debt. No such instrument authorizes an amount of securities in
excess of 10% of the total assets of the Company and its subsidiaries on a
consolidated basis. The Company agrees to furnish a copy of each instrument to
the Commission upon request.
<TABLE>
<CAPTION>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of the Company--Exhibit
3.1 to the Company's Current Report on Form 8-K, filed February 17,
1999.*
3.2 Bylaws of the Company effective February 25, 1999.
4.1 Specimen Common Share certificate--Exhibit 4.1 to the Company's
Registration Statement on Form 10, as amended.*
4.2 Amended and Restated Articles of Incorporation of the Company (filed as
Exhibit 3.1 hereto).
4.3 Bylaws of the Company (filed as Exhibit 3.2 hereto).
4.4 Rights Agreement dated as of January 29, 1999 between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent--Exhibit 4.1 to
the Company's Current Report on Form 8-K, filed February 17, 1999.*
4.5 Form of Rights Certificate (attached as Exhibit B to the Rights Agreement
filed as Exhibit 4.4 hereto).*
4.6 364-Day Credit Agreement, dated as of January 27, 1999, among the
Company, Olin, the Lenders party thereto, Bank of America, National Trust
and Savings Association, as Syndication Agent, Wachovia Bank, N.A., as
Documentation Agent, The Chase Manhattan Bank, as Administrative Agent
and Chase Securities Inc., as Arranger--Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed February 17, 1999.*
</TABLE>
58
<PAGE>
<TABLE>
<C> <S>
4.7 Five-year Credit Agreement, dated as of January 27, 1999, among the
Company, Olin, the Lenders party thereto, Bank of America, National
Trust and Savings Association, as Syndication Agent, Wachovia Bank,
N.A., as Documentation Agent, The Chase Manhattan Bank, as
Administrative Agent and Chase Securities Inc., as Arranger--Exhibit
10.2 to the Company's Current Report on Form 8-K, filed February 17,
1999.*
10.1 Distribution Agreement, dated as of February 1, 1999, between the
Company and Olin--Exhibit 2 to the Company's Current Report on Form 8-K,
filed February 17, 1999.*
10.2 Chlor-Alkali Supply Agreement, dated as of February 8, 1999, between the
Company and Olin.
10.3 Covenant Not To Compete Agreement, dated as of February 8, 1999, between
the Company and Olin.
10.4 Form of Employee Benefits Allocation Agreement between the Company and
Olin.
10.5 Form of Intellectual Property Transfer and License Agreement between the
Company and Olin--Exhibit 10.9 to the Company's Registration Statement
on Form 10, as amended.*
10.6 Form of Sublease between the Company and Olin--Exhibit 10.5 to the
Company's Registration Statement on Form 10, as amended.*
10.7 Form of Trade Name License Agreement between the Company and Olin--
Exhibit 10.11 to the Company's Registration Statement on Form 10, as
amended.*
10.8 Transition Services Agreement, dated as of February 8, 1999, between the
Company and Olin.
10.9 Tax Sharing Agreement, dated as of February 8, 1999, between the Company
and Olin.
10.10 Charleston Services Agreement, dated as of February 8, 1999, between the
Company and Olin.
10.11 Information Technology Services Agreement, dated as of February 8, 1999,
between the Company and Olin.
10.12 Form of Executive Agreement.
10.13 1999 Stock Plan for Non-employee Directors.
10.14 1999 Long Term Incentive Plan.
10.15 Supplemental Contributing Employee Ownership Plan.
10.16 Supplementary and Deferral Benefit Pension Plan.
10.17 Senior Executive Pension Plan.
10.18 Employee Deferral Plan.
10.19 Key Executive Death Benefits--Exhibit 10.19 to the Company's
Registration Statement on Form 10, as amended.*
10.20 Form of Endorsement Split Dollar Agreement--Exhibit 10.20 to the
Company's Registration Statement on Form 10, as amended.*
21. List of Subsidiaries.
23. Consent of KPMG LLP, dated March 15, 1999.
27. Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1998.
- --------
* Previously filed as indicated and incorporated herein by reference. Exhibits
incorporated by reference are located in SEC File No. 1-14601 unless
otherwise indicated.
59
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 17, 1999
Arch Chemicals, Inc.
By /s/ Michael E. Campbell
----------------------------------
Michael E. Campbell
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title
--------- -----
/s/ Michael E. Campbell Chairman of the Board, Chief
------------------------------------- Executive Officer and Director
Michael E. Campbell (Principal Executive Officer)
/s/ Richard E. Cavanagh Director
-------------------------------------
Richard E. Cavanagh
/s/ John W. Johnstone, Jr. Director
-------------------------------------
John W. Johnstone, Jr.
/s/ Jack D. Kuehler Director
-------------------------------------
Jack D. Kuehler
/s/ H. William Lichtenberger Director
-------------------------------------
H. William Lichtenberger
/s/ Michael O. Magdol Director
-------------------------------------
Michael O. Magdol
/s/ John P. Schaefer Director
-------------------------------------
John P. Schaefer
/s/ Louis S. Massimo Vice President and Chief
------------------------------------- Financial Officer (Principal
Louis S. Massimo Financial Officer)
/s/ Steven C. Giuliano Controller (Principal Accounting
------------------------------------- Officer)
Steven C. Giuliano
Date: March 17, 1999
60
<PAGE>
EXHIBIT 3.2
- --------------------------------------------------------------------------------
BYLAWS
OF
ARCH CHEMICALS, INC.
Effective
February 25, 1999
- --------------------------------------------------------------------------------
<PAGE>
BYLAWS
of
ARCH CHEMICALS, INC.
------------------------------
ARTICLE I.
MEETINGS OF SHAREHOLDERS.
SECTION 1. Place of Meetings. All meetings of the shareholders of Arch
-----------------
Chemicals, Inc. (hereinafter called the "Corporation") shall be held at such
place, either within or without the Commonwealth of Virginia, as may from time
to time be fixed by the Board of Directors of the Corporation (hereinafter
called the "Board").
SECTION 2. Annual Meetings. Except for the 1999 annual meeting of
---------------
shareholders which shall be held by written consent of the sole shareholder, the
annual meeting of the shareholders of the Corporation for the election of
directors and for the transaction of such other business as may properly come
before the meeting shall be held on the last Thursday in April in each year (or,
if that day shall be a legal holiday, then on the next succeeding business day),
or on such other day and/or in such other month as may be fixed by the Board, at
such hour as may be specified in the notice thereof.
SECTION 3. Special Meetings. A special meeting of the shareholders for
----------------
any purpose or purposes, unless otherwise provided by law or in the Articles of
Incorporation of the Corporation as from time to time amended (hereinafter
called the "Articles"), may be held at any time upon the call of the Board, the
Chairman of the Board or the President. No other person shall be authorized or
entitled to call a special meeting of the shareholders.
SECTION 4. Notice of Meetings. Except as otherwise provided by law or
------------------
the Articles, not less than ten nor more than sixty days' notice in writing of
the place, day, hour and purpose or purposes of each meeting of the
shareholders, whether annual or special, shall be given to each shareholder of
record of the Corporation entitled to vote at such meeting, either by the
delivery thereof to such shareholder personally or by the mailing thereof to
such shareholder in a postage prepaid envelope addressed to such shareholder at-
his address as it appears on the stock transfer books of the Corporation. Notice
of any meeting of shareholders shall not be required to be given to any
shareholder who shall attend the meeting in person or by proxy, unless
attendance is for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened, or who shall
waive notice thereof in writing signed by the shareholder before, at
<PAGE>
or after such meeting. Notice of any adjourned meeting need not be given, except
when expressly required by law. Any previously scheduled annual meeting of the
shareholders may be postponed, and any special meeting of the shareholders may
be canceled, by resolution of the Board of Directors upon public announcement
given prior to the time previously scheduled for such annual or special meeting
of the shareholders.
SECTION 5. Quorum. Shares representing a majority of the votes entitled
------
to be cast on a matter by all classes or series which are entitled to vote
thereon and be counted together collectively, represented in person or by proxy
at any meeting of the shareholders, shall constitute a quorum for the
transaction of business thereat with respect to such matter, unless otherwise
provided by law or the Articles. In the absence of a quorum at any such meeting
or any adjournment or adjournments thereof, shares representing a majority of
the votes cast on the matter of adjournment, either in person or by proxy, may
adjourn such meeting from time to time until a quorum is obtained. At any such
adjourned meeting at which a quorum has been obtained, any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 6. Voting. Unless otherwise provided by law or the Articles, at
------
each meeting of the shareholders each shareholder entitled to vote at such
meeting shall be entitled to one vote for each share of stock standing in his
name on the books of the Corporation upon any date fixed as hereinafter
provided, and may vote either in person or by proxy in writing. Unless demanded
by a shareholder present in person or represented by proxy at any meeting of the
shareholders and entitled to vote thereon or so directed by the chairman of the
meeting, the vote on any matter need not be by ballot. On a vote by ballot, each
ballot shall be signed by the shareholder voting or his proxy, and it shall show
the number of shares voted.
SECTION 7. Judges. One or more judges or inspectors of election for any
------
meeting of shareholders may be appointed by the chairman of such meeting, for
the purpose of receiving and taking charge of proxies and ballots and deciding
all questions as to the qualification of voters, the validity of proxies and
ballots and the number of votes properly cast.
SECTION 8. Conduct of Meeting. The chairman of the meeting at each
------------------
meeting of shareholders shall have all the powers and authority vested in
presiding officers by law or practice, without restriction, as well as the
authority to conduct an orderly meeting and to impose reasonable limits on the
amount of time taken up in remarks by any one shareholder.
SECTION 9. Business Proposed by a Shareholder. At any annual or special
----------------------------------
meeting of the shareholders, only such business shall be conducted as shall have
been properly brought before such meeting. To be properly brought before an
annual or special meeting of shareholders, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the meeting by or
at the direction of the Board of Directors or (iii) in the case of an annual
meeting of shareholders, properly brought before the meeting by a shareholder.
In addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given
2
<PAGE>
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be given, either by personal delivery or by
United States registered or certified mail, postage prepaid, to the Secretary of
the Corporation not later than 90 days nor more than 120 days before the
anniversary of the date of the first mailing of the Corporation's proxy
statement for the immediately preceding year's annual meeting; provided,
however, that with respect to the annual meeting to be held in 2000, a
shareholder's notice shall be deemed timely if delivered to the Secretary of the
Corporation after November 15, 1999 but before December 14, 1999. In no event
shall the public announcement of an adjournment or postponement of an annual
meeting or the fact that an annual meeting is held before or after the
anniversary of the preceding annual meeting commence a new time period for the
giving of a shareholder's notice as described above. A shareholder's notice to
the Secretary shall set forth as to each matter the shareholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting with respect to such business,
and the reasons for conducting such business at the annual meeting, (ii) the
name and address of record of the shareholder proposing such business and any
other person on whose behalf the proposal is being made, (iii) the class and
number of shares of the Corporation that are beneficially owned by the
shareholder and any other person on whose behalf the proposal is made, (iv) a
representation that the shareholder is a holder of record of shares of the
Corporation entitled to vote at such annual meeting and intends to appear in
person or by proxy at the annual meeting to propose such business and (v) any
material interest of the shareholder and any other person on whose behalf the
proposal is made, in such business. In the event that a shareholder attempts to
bring business before a meeting without complying with the procedures set forth
in this Article 1, Section 9, such business shall not be transacted at such
meeting. The Chairman of the Board of Directors shall have the power and duty to
determine whether any business proposed to be brought before the meeting was
made in accordance with the procedures set forth in this Article 1, Section 9
and, if any business is not proposed in compliance with this Article 1, Section
9, to declare that such defective proposal shall be disregarded and that such
proposed business shall not be transacted at such meeting. For purposes of these
Bylaws, "public announcement" shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended.
SECTION 10. Nominations by Shareholders. Subject to the rights of
---------------------------
holders of any Preferred Stock outstanding, nominations for the election of
directors may be made by the Board or a committee appointed by the Board or by
any shareholder entitled to vote in the election of directors generally. Any
such shareholder may nominate one or more persons for election as directors at a
meeting only if it is an annual meeting and such shareholder has given timely
written notice of such shareholder's intent to make such nomination or
nominations. To be timely, a shareholder's notice must be delivered either by
personal delivery or by United States registered or certified mail, postage
prepaid, to the Secretary of the Corporation not later than 90 days nor more
than 120 days before the anniversary of the date of the first mailing of the
Corporation's proxy statement for the immediately preceding year's annual
meeting; provided, however, that with respect to the annual meeting to be held
in 2000, a shareholder's notice shall be deemed timely if
3
<PAGE>
delivered to the Secretary of the Corporation after November 15, 1999 but before
December 14, 1999. In no event shall the public announcement of an adjournment
or postponement of an annual meeting or the fact that an annual meeting is held
before or after the anniversary of the preceding annual meeting commence a new
time period for the giving of a shareholder's notice as described above. Each
such notice shall set forth: (a) the name and address of the shareholder who
intends to make the nomination and any other person on whose behalf the
nomination is being made, and of the person or persons to be nominated; (b) the
class and number of shares of the Corporation that are owned by the shareholder
and any other person on whose behalf the nomination is being made, (c) a
representation that the shareholder is a holder of record of shares of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (d) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; and (e) such other information regarding each nominee proposed
by such shareholder as would be required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required to be disclosed, pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated or intended to be nominated
by the Board of Directors, and shall include a consent signed by each such
nominee to being named in the Proxy Statement as a nominee and to serve as a
director of the Corporation if so elected. In the event that a shareholder
attempts to nominate any person without complying with the procedures set forth
in this Article 1, Section 10, such person shall not be nominated and shall not
stand for election at such meeting. The Chairman of the Board of Directors shall
have the power and duty to determine whether a nomination proposed to be brought
before the meeting was made in accordance with the procedures set forth in this
Article 1, Section 10 and, if any proposed nomination is not in compliance with
this Article 1, Section 10, to declare that such defective proposal shall be
disregarded.
ARTICLE II.
BOARD OF DIRECTORS.
SECTION 1. Number, Classification, Term, Election. The property,
--------------------------------------
business and affairs of the Corporation shall be managed under the direction of
the Board as from time to time constituted. The Board shall consist of seven
directors, but the number of directors may be increased to any number, not more
than ten directors as set forth in the Articles of Incorporation, or decreased
to any number, not less than three directors, by amendment of these Bylaws,
provided that no decrease in the number of directors shall shorten or terminate
the term of any incumbent director. No director need be a shareholder.
SECTION 2. Compensation. Each director, in consideration of his serving as such,
------------
shall be entitled to receive from the Corporation such amount per annum or such
fees for attendance at Board and Committee meetings, or both, in cash or other
property, including securities of the Corporation, as the Board shall from time
to time determine, together with reimbursements for the reasonable expenses
incurred by him in connection
4
<PAGE>
with the performance of his duties. Nothing contained herein shall preclude any
director from serving the Corporation, or any subsidiary or affiliated
corporation, in any other capacity and receiving proper compensation therefor.
If the Board adopts a resolution to that effect, any director may elect to defer
all or any part of the annual and other fees hereinabove referred to for such
period and on such terms and conditions as shall be permitted by such
resolution.
SECTION 3. Place of Meetings. The Board may hold its meetings at such
-----------------
place or places within or without the Commonwealth of Virginia as it may from
time to time by resolution determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 4. Organization Meeting. After each annual election of directors
--------------------
(other than the election in 1999), as soon as conveniently may be, the newly
constituted Board shall meet for the purposes of organization. At such
organization meeting, the newly constituted Board shall elect officers of the
Corporation and transact such other business as shall come before the meeting.
Notice of organization meetings of the Board need not be given. Any organization
meeting may be held at any other time or place which shall be specified in a
notice given as hereinafter provided for special meetings of the Board, or in a
waiver of notice thereof signed by all the directors.
SECTION 5. Regular Meetings. Regular meetings of the Board may be held
----------------
at such time and place as may from time to time be specified in a resolution
adopted by the Board then in effect; and, unless otherwise required by such
resolution, or by law, notice of any such regular meeting need not be given.
SECTION 6. Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the Chief Executive Officer, or by the Secretary at the
request of any three directors. Notice of a special meeting shall be mailed to
each director, addressed to him at his residence or usual place of business, not
later than the second day before the day on which such meeting is to be held, or
shall be sent addressed to him at such place by telegraph, cable or wireless, or
be delivered personally or by telephone, not later than the day before the day
on which such meeting is to be held. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board need be
specified in the notice of such meeting, unless required by the Articles.
5
<PAGE>
SECTION 7. Quorum. At each meeting of the Board the presence of a
------
majority of the number of directors fixed by these Bylaws shall be necessary to
constitute a quorum. The act of a majority of the directors present at a meeting
at which a quorum shall be present shall be the act of the Board, except as may
be otherwise provided by law or by these Bylaws. Any meeting of the Board may be
adjourned by a majority vote of the directors present at such meeting. Notice of
any adjourned meeting need not be given.
SECTION 8. Waivers of Notice of Meetings. Notwithstanding anything in
-----------------------------
these Bylaws or in any resolution adopted by the Board to the contrary, notice
of any meeting of the Board need not be given to any director if such notice
shall be waived in writing signed by such director before, at or after the
meeting, or if such director shall be present at the meeting. Any meeting of the
Board shall be a legal meeting without any notice having been given or
regardless of the giving of any notice or the adoption of any resolution in
reference thereto, if every member of the Board shall be present thereat. Except
as otherwise provided by law or these Bylaws, waivers of notice of any meeting
of the Board need not contain any statement of the purpose of the meeting.
SECTION 9. Telephone Meetings. Members of the Board or any committee may
------------------
participate in a meeting of the Board or such committee by means of a conference
telephone or other means of communications whereby all directors participating
may simultaneously hear each other during the meeting, and participation by such
means shall constitute presence in person at such meeting.
SECTION 10. Actions Without Meetings. Any action that may be taken at a
------------------------
meeting of the Board or of a committee may be taken without a meeting if a
consent in writing, setting forth the action, shall be signed, either before or
after such action, by all of the directors or all of the members of the
committee, as the case may be. Such consent shall have the same force and effect
as a unanimous vote.
ARTICLE III.
COMMITTEES.
SECTION 1. Executive and Finance Committee. The Board may, by resolution
-------------------------------
or resolutions adopted by a majority of the number of directors fixed by these
Bylaws, appoint two or more directors to constitute an Executive and Finance
Committee, each member of which shall serve as such during the pleasure of the
Board, and may designate for such committee a chairman, who shall continue as
such during the pleasure of the Board.
All completed action by the Executive and Finance Committee shall be
reported to the Board at its meeting next succeeding such action or at its
meeting held in the month following the taking of such action, and shall be
subject to revision or alteration by the Board; provided, that no acts or rights
of third parties shall be affected by any such revision or alteration.
6
<PAGE>
The Executive and Finance Committee shall fix its own rules of procedure
and shall meet where and as provided by such rules or by resolution of the
Board. At all meetings of the Executive and Finance Committee, a majority of the
full number of members of such committee shall constitute a quorum, and in every
case the affirmative vote of a majority of members present at any meeting of the
Executive and Finance Committee at which a quorum is present shall be necessary
for the adoption of any resolution.
During the intervals between the meetings of the Board, the Executive
and Finance Committee shall possess and may exercise all the power and authority
of the Board (including, without limitation, all the power and authority of the
Board in the management, control and direction of the financial affairs of the
Corporation) except with respect to those matters reserved to the Board by
Virginia law, in such manner as the Executive and Finance Committee shall deem
best for the interests of the Corporation, in all cases in which specific
directions shall not have been given by the Board.
SECTION 2. Other Committees. To the extent permitted by law, the Board
----------------
may from time to time by resolution adopted by a majority of the number of
directors fixed by these Bylaws create such other committees of directors,
officers, employees or other persons designated by it as the Board shall deem
advisable and with such limited authority, functions and duties as the Board
shall by resolution prescribe. The Board shall have the power to change the
members of any such committee at any time, to fill vacancies, and to discharge
any such committee, either with or without cause, at any time.
ARTICLE IV.
OFFICERS.
SECTION 1. Number, Term, Election. The officers of the Corporation shall
----------------------
be a Chief Executive Officer, a Chairman of the Board, a President, one or more
Vice Presidents, a Treasurer, a Controller and a Secretary. The Board may
appoint such other officers and such assistant officers and agents with such
powers and duties as the Board may find necessary or convenient to carry on the
business of the Corporation. Such officers and assistant officers shall serve
until their successors shall be chosen, or as otherwise provided in these
Bylaws. Any two or more offices may be held by the same person.
SECTION 2. Chief Executive Officer. The Chief Executive Officer shall,
-----------------------
subject to the control of the Board and the Executive and Finance Committee,
have full authority and responsibility for directing the conduct of the
business, affairs and operations of the Corporation. In addition to acting as
Chief Executive Officer of the Corporation, he or she shall perform such other
duties and exercise such other powers as may from time to time be prescribed by
the Board and shall see that all orders and resolutions of the Board and the
Executive and Finance Committee are carried into effect. In the event of the
inability of the Chief Executive Officer to act, the Board will designate an
officer of the Corporation to perform the duties of that office.
7
<PAGE>
SECTION 3. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the Board and of the shareholders and, in the absence
of the Chairman of the Executive and Finance Committee, at all meetings of the
Executive and Finance Committee. He or she shall perform such other duties and
exercise such other powers as may from time to time be prescribed by the Board
or, if he or she shall not be the Chief Executive Officer, by the Chief
Executive Officer.
SECTION 4. President. The President shall have such powers and perform
---------
such duties as may from time to time be prescribed by the Board or, if he or she
shall not be the Chief Executive Officer, by the Chief Executive Officer.
SECTION 5. Vice Presidents. Each Vice President shall have such powers
---------------
and perform such duties as may from time to time be prescribed by the Board, the
Chief Executive Officer or any officer to whom the Chief Executive Officer may
have delegated such authority.
SECTION 6. Treasurer. The Treasurer shall have the general care and
---------
custody of the funds and securities of the Corporation. He or she shall perform
such other duties and exercise such other powers as may from time to time be
prescribed by the Board, the Chief Executive Officer or any officer to whom the
Chief Executive Officer may have delegated such authority. If the Board shall so
determine, he or she shall give a bond for the faithful performance of his or
her duties, in such sum as the Board may determine to be proper, the expense of
which shall be borne by the Corporation. To such extent as the Board shall deem
proper, the duties of the Treasurer may be performed by one or more assistants,
to be appointed by the Board.
SECTION 7. Controller. The Controller shall be the accounting officer of
----------
the Corporation. He or she shall keep full and accurate accounts of all assets,
liabilities, receipts and disbursements and other transactions of the
Corporation and cause regular audits of the books and records of the Corporation
to be made. He or she shall also perform such other duties and exercise such
other powers as may from time to time be prescribed by the Board, the Chief
Executive Officer or any officer to whom the Chief Executive Officer may have
delegated such authority. If the Board shall so determine, he or she shall give
a bond for the faithful performance of his duties, in such sum as the Board may
determine to be proper, the expense of which shall be borne by the Corporation.
To such extent as the Board shall deem proper, the duties of the Controller may
be performed by one or more assistants, to be appointed by the Board.
SECTION 8. Secretary. The Secretary shall keep the minutes of meetings
---------
of shareholders, of the Board, and, when requested, of Committees of the Board;
and he or she shall attend to the giving and serving of notices of all meetings
thereof. He or she shall keep or cause to be kept such stock and other books,
showing the names of the shareholders of the Corporation, and all other
particulars regarding them, as may be required by law. He or she shall also
perform such other duties and exercise such other powers as may from time to
time be prescribed by the Board, the Chief Executive Officer or any officer to
whom the Chief Executive Officer may have delegated such authority. To such
extent as the Board shall deem proper, the duties of the Secretary may be
performed by one or more assistants, to be appointed by the Board.
8
<PAGE>
ARTICLE V.
REMOVALS AND RESIGNATIONS.
SECTION 1. Removal of Officers. Any officer, assistant officer or agent
-------------------
of the Corporation may be removed at any time, either with or without cause, by
the Board in its absolute discretion. Any such removal shall be without
prejudice to the recovery of damages for breach of the contract rights, if any,
of the officer, assistant officer or agent removed. Election or appointment of
an officer, assistant officer or agent shall not of itself create contract
rights.
SECTION 2. Resignation. Any director, officer or assistant officer of
-----------
the Corporation may resign as such at any time by giving written notice of his
resignation to the Board, the Chief Executive Officer or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, at the time of delivery thereof, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 3. Vacancies. Any vacancy in the office of any officer or
---------
assistant officer caused by death, resignation, removal or any other cause, may
be filled by the Board for the unexpired portion of the term.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC.
SECTION 1. Execution of Contracts. Except as otherwise provided by law
----------------------
or by these Bylaws, the Board (i) may authorize any officer, employee or agent
of the Corporation to execute and deliver any contract, agreement or other
instrument in writing in the name and on behalf of the Corporation, and (ii) may
authorize any officer, employee or agent of the Corporation so authorized by the
Board to delegate such authority by written instrument to other officers,
employees or agents of the Corporation. Any such authorization by the Board may
be general or specific and shall be subject to such limitations and restrictions
as may be imposed by the Board. Any such delegation of authority by an officer,
employee or agent may be general or specific, may authorize re-delegation, and
shall be subject to such limitations and restrictions as may be imposed in the
written instrument of delegation by the person making such delegation.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no negotiable paper shall be issued in its name unless
authorized by the Board. When authorized by the Board, any officer, employee or
agent of the Corporation may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution, or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other certificates or evidences of
indebtedness of the Corporation and when so authorized may pledge, hypothecate
or
9
<PAGE>
transfer any securities or other property of the Corporation as security for
any such loans or advances. Such authority may be general or confined to
specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts and other orders for
-------------------
the payment of money out of the funds of the Corporation and all notes or other
evidences of indebtedness of the Corporation shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by the
Board.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select or as may
be selected by the Treasurer or any other officer, employee or agent of the
Corporation to whom such power may from time to time be delegated by the Board.
SECTION 5. Voting of Securities. Unless otherwise provided by the Board,
--------------------
the Chief Executive Officer may from time to time appoint an attorney or
attorneys, or agent or agents of the Corporation, in the name and on behalf of
the Corporation, to cast the votes which the Corporation may be entitled to cast
as the holder of stock or other securities in any other corporation, any of
whose stock or other securities may be held by the Corporation, at meetings of
the holders of the stock or other securities of such other corporation, or to
consent in writing, in the name of the Corporation as such holder, to any action
by such other corporation, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and may execute
or cause to be executed in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, all such written proxies or other instruments
as such officer may deem necessary or proper in the premises.
ARTICLE VII.
CAPITAL STOCK.
SECTION 1. Shares. Shares of the Corporation may but need not be
------
represented by certificates.
When shares are represented by certificates, the Corporation shall issue
such certificates in such form as shall be required by the Virginia Stock
Corporation Act (the "VSCA") and as determined by the Board of Directors, to
every shareholder for the fully paid shares owned by such shareholder. Each
certificate shall be signed by, or shall bear the facsimile signature of, the
Chairman of the Board, the President or a Vice President and the Secretary or an
Assistant Secretary of the Corporation and may bear the corporate seal of the
Corporation or its facsimile. All certificates for the Corporation's shares
shall be consecutively numbered or otherwise identified.
The name and address of the person to whom shares (whether or not
represented by a certificate) are issued, with the number of shares and date of
issue, shall be entered on the share transfer books of the Corporation. Such
information may be stored or retained on discs, tapes, cards or any other
approved storage device relating to data
10
<PAGE>
processing equipment; provided that such device is capable of reproducing all
information contained therein in legible and understandable form, for inspection
by shareholders or for any other corporate purpose.
When shares are not represented by certificates, then within a
reasonable time after the issuance or transfer of such shares, the Corporation
shall send the shareholder to whom such shares have been issued or transferred a
written statement of the information required by the VSCA to be included on
certificates.
SECTION 2. Stock Transfer Books and Transfer of Shares. The Corporation,
-------------------------------------------
or its designated transfer agent or other agent, shall keep a book or set of
books to be known as the stock transfer books of the Corporation, containing the
name of each shareholder of record, together with such shareholder's address and
the number and class or series of shares held by such shareholder. Shares of
stock of the Corporation shall be transferable on the stock books of the
Corporation by the holder in person or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or the transfer
agent, but, except as hereinafter provided in the case of loss, destruction or
mutilation of certificates, no transfer of stock shall be entered until the
previous certificate, if any, given for the same shall have been surrendered and
canceled. Transfer of shares of the Corporation represented by certificates
shall be made on the stock transfer books of the Corporation only upon surrender
of the certificates for the shares sought to be transferred by the holder of
record thereof or by such holder's duly authorized agent, transferee or legal
representative, who shall furnish proper evidence of authority to transfer with
the Secretary of the Corporation or its designated transfer agent or other
agent. All certificates surrendered for transfer shall be canceled before new
certificates for the transferred shares shall be issued. Except as otherwise
provided by law, no transfer of shares shall be valid as against the
Corporation, its shareholders or creditors, for any purpose, until it shall have
been entered in the stock records of the Corporation by an entry showing from
and to whom transferred.
SECTION 3. Holder of Record. Except as otherwise required by the VSCA,
----------------
the Corporation may treat the person in whose name shares of stock of the
Corporation (whether or not represented by a certificate) stand of record on its
books or the books of any transfer agent or other agent designated by the Board
of Directors as the absolute owner of the shares and the person exclusively
entitled to receive notification and distributions, to vote, and to otherwise
exercise the rights, powers and privileges of ownership of such shares.
SECTION 4. Record Date. For the purpose of determining shareholders
-----------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the Board
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof unless the Board fixes
a new record date, which it
11
<PAGE>
shall do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting.
SECTION 5. Lost, Destroyed or Mutilated Certificates. In case of loss,
-----------------------------------------
destruction or mutilation of any certificate of stock, another may be issued in
its place upon proof of such loss, destruction or mutilation and upon the giving
of a bond of indemnity to the Corporation in such form and in such sum as the
Board may direct; provided that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is proper so to do.
SECTION 6. Transfer Agent and Registrar; Regulations. The Corporation
-----------------------------------------
may, if and whenever the Board of Directors so determines, maintain in the
Commonwealth of Virginia or any other state of the United States, one or more
transfer offices or agencies and also one or more registry offices which offices
and agencies may establish rules and regulations for the issue, transfer and
registration of certificates. No certificates for shares of stock of the
Corporation in respect of which a transfer agent and registrar shall have been
designated shall be valid unless countersigned by such transfer agent and
registered by such registrar. The Board of Directors may also make such
additional rules and regulations as it may deem expedient concerning the issue,
transfer and registration of shares represented by certificates and shares
without certificates.
ARTICLE VIII.
INSPECTION OF RECORDS.
The Board from time to time shall determine whether, to what extent, at
what times and places, and under what conditions and regulations the accounts
and books and papers of the Corporation, or any of them, shall be open for the
inspection of the shareholders, and no shareholder shall have any right to
inspect any account or book or paper of the Corporation except as expressly
conferred by statute or by these Bylaws or authorized by the Board.
ARTICLE IX.
AUDITOR.
The Board shall annually appoint an independent accountant who shall
carefully examine the books of the Corporation. One such examination shall be
made immediately after the close of the fiscal year and be ready for
presentation at the annual meeting of shareholders of the Corporation, and such
other examinations shall be made as the Board may direct.
ARTICLE X.
SEAL.
12
<PAGE>
The seal of the Corporation shall be circular in form and shall bear the
name of the Corporation and the year "l998."
ARTICLE XI.
FISCAL YEAR.
The fiscal year of the Corporation shall end on the 31st day of December
in each year.
13
<PAGE>
EMERGENCY BYLAWS.
SECTION 1. Definitions. As used in these Emergency Bylaws,
-----------
(a) the term "period of emergency" shall mean any period during which a
quorum of the Board cannot readily be assembled because of some catastrophic
event.
(b) the term "incapacitated" shall mean that the individual to whom such
term is applied shall not have been determined to be dead but shall be missing
or unable to discharge the responsibilities of his office; and
(c) the term "senior officer" shall mean the Chairman of the Board, the
Chief Executive Officer, the President, any corporate Vice President, the
Treasurer, the Controller and the Secretary, and any other person who may have
been so designated by the Board before the emergency.
SECTION 2. Applicability. These Emergency Bylaws, as from time to time
-------------
amended, shall be operative only during any period of emergency. To the extent
not inconsistent with these Emergency Bylaws, all provisions of the regular
Bylaws of the Corporation shall remain in effect during any period of emergency.
No officer, director or employee shall be liable for actions taken in
good faith in accordance with these Emergency Bylaws.
SECTION 3. Board of Directors. (a) A meeting of the Board may be called
------------------
by any director or senior officer of the Corporation. Notice of any meeting of
the Board need be given only to such of the directors as it may be feasible to
reach at the time and by such means as may be feasible at the time, including
publication or radio, and at a time less than twenty-four hours before the
meeting if deemed necessary by the person giving notice.
(b) At any meeting of the Board, three directors in attendance shall
constitute a quorum. Any act of a majority of the directors present at a meeting
at which a quorum shall be present shall be the act of the Board. If less than
three directors should be present at a meeting of the Board, any senior officer
of the Corporation in attendance at such meeting shall serve as a director for
such meeting, selected in order of rank and within the same rank in order of
seniority.
(c) In addition to the Board's powers under the regular Bylaws of the
Corporation to fill vacancies on the Board, the Board may elect any individual
as a director to replace any director who may be incapacitated and to serve
until the latter ceases to be incapacitated or until the termination of the
period of emergency, whichever first occurs. In considering officers of the
Corporation for election to the Board, the rank and seniority of individual
officers shall not be pertinent.
(d) The Board, during as well as before any such emergency, may change
the principal office or designate several alternative offices or authorize the
officers to do so.
14
<PAGE>
SECTION 4. Appointment of Officers. In addition to the Board's powers
-----------------------
under the regular Bylaws of the Corporation with respect to the election of
officers, the Board may elect any individual as an officer to replace any
officer who may be incapacitated and to serve until the latter ceases to be
incapacitated.
SECTION 5. Amendments. These Emergency Bylaws shall be subject to repeal
----------
or change by further action of the Board of Directors or by action of the
shareholders, except that no such repeal or change shall modify the provisions
of the second paragraph of Section 2 with regard to action or inaction prior to
the time of such repeal or change. Any such amendment of these Emergency Bylaws
may make any further or different provision that may be practical and necessary
for the circumstances of the emergency.
15
<PAGE>
EXHIBIT 10.2
CHLOR ALKALI SUPPLY AGREEMENT
-----------------------------
THIS CHLOR ALKALI SUPPLY AGREEMENT ("AGREEMENT") BETWEEN OLIN CORPORATION
("OLIN"), A VIRGINIA CORPORATION, AND ARCH CHEMICALS, INC. ("ARCH"), A VIRGINIA
CORPORATION, IS EXECUTED AS OF THIS 8TH DAY OF FEBRUARY, 1999.
1. RECITALS
1.1 Olin ("Seller") is a manufacturing corporation operating
primarily in the chemicals industry. Olin operates liquid chlorine and
caustic production facilities at its Chlor Alkali plants at
Charleston, Tennessee, McIntosh, Alabama, and Niagara Falls, New York,
and from time to time engages in caustic and liquid chlorine commodity
exchanges with other producers.
1.2 Arch ("Buyer") is a specialty chemicals manufacturer which has a
need for a reliable supply of liquid chlorine and caustic (Products).
1.3 To insure a reliable source of supply of the Products for
internal use by Buyer, and to enable Seller to sell to Buyer such
Products under the terms and conditions set forth below, and for other
good and valuable consideration, Seller agrees to sell, and Buyer
agrees to purchase from Seller, the Products described herein.
2. PRODUCT. Membrane Grade or Rayon Grade Caustic (Exhibit 1), Liquid
---------
Chlorine (Exhibit 2).
---------
3. QUANTITY. Buyer agrees to purchase 100% of its requirements of the
Products during the term of the Agreement, but this "requirements" obligation
shall not apply to Products used in any business acquired by Buyer after the
effective date of this Agreement. Buyer initially estimates its requirements
for liquid chlorine at 100,000 tons annually. Buyer initially estimates its
requirements for caustic at 80,000 tons annually. During the Agreement, Buyer
shall continually provide to Seller, in writing, an estimate of its prospective
monthly and quarterly requirements for the respective Products.
4. TERM. The Initial Term shall be five (5) years, from February 8x,
1999, through December 31, 2003; and said Initial Term shall extend thereafter
automatically for two (2) year periods (Extended Term). Either party may
terminate the Agreement upon two (2) years written notice; however, written
notice of termination may not be given before December 31, 2001, and any notice
of termination of this Agreement shall be given so that the effective
termination date will be the last day of a calendar year. If such written notice
of termination is given by December 31, 2001,
<PAGE>
then said Agreement shall terminate on December 31, 2003. If such written
notice of termination is not given by December 31, 2001, then said Agreement
shall renew automatically at the end of the Initial Term for a period of one (1)
year (Extended Term), commencing January 1, 2004.
5. SHIPPING CONTAINERS. Bulk.
6. METHOD OF SHIPMENT. Seller's Railcars or Seller's Bulk Truck
Carriers, Seller's pipeline, or barge.
7. PRICES. The prices for Products purchased by Buyer from Seller during
the Term of this Agreement shall be established at competitive levels by mutual,
written agreement between Buyer and Seller from time to time.
8. TERMS OF PAYMENT: Net 30 days on cycle billing.
9. ORIGIN. (a) Seller will supply Products under this Agreement from its
own manufacturing facilities or from manufacturing facilities owned by third-
parties with whom Seller has commodity-exchange agreements (Exchange) in place.
Seller will use its best reasonable efforts to tender delivery of Products
F.O.B. at points which would represent the most economical transportation cost
to Buyer. Except as provided in subparagraph (b), Seller retains the sole,
subjective right to manage the Exchange of Products and shall have no liability
to Buyer for such decisions, nor shall such Exchange decision be a breach of
this Agreement.
(b) Regardless of any Exchange conducted by Seller for the Products
subject to this Agreement, in no event shall Buyer be responsible for freight
charges to its Charleston facility. The parties agree to use their best efforts
to enter into Exchanges that will result in freight savings. Any net freight
savings resulting from an Exchange shall be shared equally by the parties. All
Product supplied under an Exchange shall be subject to the same terms and
conditions as set forth in this Agreement.
10. DESTINATION. Buyer's facilities at Lake Charles, Louisiana, Beaumont,
Texas, Shreveport, Louisiana, Doe Run, Kentucky, Charleston, Tennessee, and
Rochester, New York, or any other reasonable USA locations designated by Buyer.
11. COMPARATIVE FAULT, PERSONAL INJURY, PROPERTY DAMAGE, AND ENVIRONMENTAL
INDEMNITY. Seller and Buyer will each defend, indemnify, and hold the other
harmless from any loss, liability, damage, or expense due to any property
damage, bodily injury, death, or any liability for damages, including any
governmental fines, penalties, or assessments arising from the violation of any
local, state, or federal environmental laws whatsoever,
-2-
<PAGE>
arising out of, or in connection with, or resulting from, this Agreement, or any
matters related thereto, but only for the amount proximately caused by, or
legally resulting from the respective percentage, if any, of each party's
comparative negligence.
12. FORCE MAJEURE. Failure (in whole or in part) or delay on the part of
either party, or any carrier in the performance of any of the obligations
imposed upon the other hereunder shall be excused and such party shall not be
liable for damages or otherwise on account thereof, when such failure or delay
is the direct or indirect result of any of the following causes whether or not
existing at the date hereof, and whether or not reasonably within the
contemplation of the parties at the date hereof, namely: acts of God,
earthquakes, fire, flood or the elements; malicious mischief, insurrection,
riot, strikes, lockouts, boycotts, picketing or labor disturbances; public
enemy; war (declared or undeclared); compliance with any federal, state or
municipal law, or with any regulation, order or rule (including, but not limited
to, priority, rationing or allocation orders or regulation) of governmental
agencies, or authorities or representatives of any government (foreign or
domestic) acting under claim or color of authority; total or partial failure or
loss or shortage of all or part of transportation facilities ordinarily
available to and used by a party hereto in the performance of the obligations
imposed by this Contract, whether such facilities are such party's own or those
of others; or total or partial loss or shortage of raw or component materials or
products ordinarily required by a party to produce the Product; the
commandeering or requisitioning by civil or military authorities of any raw or
component materials, products, or facilities, including, but not limited to,
producing manufacturing, transportation and delivery facilities, perils of
navigation, even when occasioned by negligence, malfeasance, default or errors
in judgment of the pilot, master, mariners or other servants of the ship's
owner; or any cause whatsoever beyond the control of either party hereto,
whether similar to or dissimilar from the causes herein enumerated; provided,
however, that the settlement of strikes or lockouts shall be entirely within the
discretion of the party having such difficulty and that any requirement that a
force majeure shall be remedied with the exercise of due diligence shall not
require the settlement of strikes or lockouts by acceding to the demands of the
opposing party when such course is inadvisable in the discretion of the party
having such difficulty. If by reason of any such circumstances, Seller's supply
of Product shall be insufficient to meet all of its Product requirements, Seller
shall have the right at its option and without liability to apportion among any
and all of its customers, including its affiliated division and companies, in
such manner as Seller believes equitable. In the event a force majeure is
declared under this Agreement, Buyer shall be excused from purchasing that
portion of its requirements for Products which are purchased from an alternate
supplier during the period of force majeure. If, during a force majeure, Seller
is unable to supply Products via pipeline at Buyer's Charleston facility, Seller
agrees to provide any reasonable, existing unloading and delivery services at
Charleston to facilitate the supply of Product from an alternate means of
supply, but Seller shall not be required to spend or invest any capital or money
to comply with this requirement. Notwithstanding the above, Seller expressly
acknowledges and agrees that it shall not be excused from performing its
obligation to supply Product under this Agreement as a result of its decision to
impose order control on its customers.
13. TERMINATION. If either party shall fail to comply with any material
provisions, requirements, or conditions of this Agreement, or should file a
voluntary petition under any
-3-
<PAGE>
bankruptcy law, or be adjudicated a bankrupt, become insolvent, or commit an act
of bankruptcy (Material Breach), and such Material Breach shall go unabated for
a period of at least sixty (60) days, then the aggrieved party, upon three (3)
days written notice to the party in violation of such conditions, may terminate
this contract in whole without prejudice to any other remedy. The aggrieved
party shall give written notice of such Material Breach as soon as possible
following discovery of such Material Breach.
14. CONFIDENTIALITY. Buyer acknowledges that prior to and during year one
(1) of this Agreement, Seller shall be disclosing to Buyer certain pricing and
manufacturing information which it considers confidential and proprietary to
Seller (hereinafter called "Confidential Information"). Buyer agrees during any
term of this Agreement to refrain from disclosing such Confidential Information
to any third person, except to Buyer's outside auditors who are under a written
duty of confidentiality to Buyer. Buyer and such auditors may only disclose
such Confidential Information to employees of Buyer who have a reasonable need
to know such Confidential Information.
15. NOTICES. Any notice or written communication provided for in this
Agreement by either party, shall be in English by facsimile, telegram, and/or
electronic mail, and shall be confirmed immediately by registered air mail
letter, promptly transmitted and addressed to the appropriate party. All
notices and communications shall be sent to the appropriate address set forth
below, until the same is changed by notice in writing to the other party as the
case may be.
If to Seller: Olin Corporation
490 Stuart Road NE
Cleveland, TN 37312
Attention: President, Chlor Alkali Products
If to Buyer: Arch Chemicals, Inc.
501 Merritt 7
Norwalk, CT 06856
Attention: General Counsel
16. DELIVERY. Unless specified otherwise deliveries of Product shall be
made at such times, within the usual business hours of Seller, as Buyer shall
specify by reasonable advance notice to Seller, which shall include any
necessary shipping instructions, and Seller shall prepare and deliver to Buyer
such shipping papers as may be agreed.
17. PRODUCT STEWARDSHIP. The parties agree to adhere to and use their
best efforts to comply with an implement the RESPONSIBLE CARE initiative
developed by the
-4-
<PAGE>
Chemical Manufacturers Association (CMA), whether or not both parties are
members of CMA. This duty includes, but is not limited to, adherence to the
GUIDING PRINCIPLES for RESPONSIBLE CARE and implementation of the six CODES OF
MANAGEMENT PRACTICES. In the event either party fails to comply with the
RESPONSIBLE CARE provisions set out above, the non-complying party shall have
thirty (30) days to cure such non-compliance, otherwise the complying party
shall have the right to immediately terminate this Agreement, without liability,
except for any liability for already-incurred imbalances.
18. TITLE. Title to and risk of loss for Product transferred hereunder
shall pass from Seller to Buyer upon delivery to Buyer's location . With
respect to Product delivered by pipeline, title and risk of loss shall pass from
Seller to Buyer at the point where the Seller pipeline enters onto the leased or
owned premises of Buyer. Buyer is free to contract with any designated party
for the passage of title and risk of loss for Product upon Seller's delivery to
such designated party at any shipping location.
19. WARRANTIES. Seller warrants that (a) the Products are of the quality
set forth in Exhibits 1 and 2 hereto, and (b) the title conveyed is good and the
product is free from any lawful security interest, lien or encumbrance. SELLER
MAKES NO FURTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF
MERCHANTABILITY OR OTHERWISE. Buyer assumes all risk of patient infringement by
reason of any use Buyer makes of the product in combination with other material
or in the operation of any process.
20. CREDIT. Seller may recover for each shipment hereunder as a separate
transaction, without reference to any other shipment. If Buyer fails to pay any
invoice in accordance with the terms of this contract, Seller may, at its
option, defer further shipments until payment has been made (in which event
Seller may elect to extend the contract period for a time equal to that for
which shipments were so deferred), or, in addition to any other legal remedy,
Seller may decline further performance of this contract. If at any time, in the
judgment of Seller, the financial responsibility of Buyer is impaired, Seller
may change the terms of payment and/or require payment as a condition of
shipment.
21. TAXES. Upon invoice, Buyer shall reimburse Seller for any federal,
state or local excise or other tax, assessment, license fee or other charge, or
increases thereof, which Seller may be required to pay upon the sale,
production, transportation, delivery or use of the Products.
22. GOVERNMENTAL REGULATION. Should Seller elect to discontinue, curtail
or limit the production or sale of the Products in consequence of the
application of any governmental regulation or order (including but not limited
to those relating to environment, Seller shall not be obligated to deliver the
Products from other than the production or shipping points designated herein and
there shall be no obligation to rebuild or repair any damage or destruction to
such production or shipping points in order to fulfill this contract.
-5-
<PAGE>
23. CLAIMS. The weights, tares and tests fixed by Seller's invoice shall
govern unless proven to be incorrect. Claims relating to quantity, quality,
weight, condition and loss of or damage to any of the product sold hereunder
shall be waived by Buyer unless made within thirty (30) days after receipt of
Products by Buyer.
24. LIMITATION OF LIABILITY. (a) Buyer's exclusive remedy and Seller's
exclusive liability under this contract or otherwise (including contractual and
tort liability) shall be for damages which shall in no event exceed so much of
the purchase price as is applicable to that portion of the particular shipment
with respect to which damages are claimed. In no event shall Seller be liable
to Buyer for any incidental or consequential damages arising in connection with
this contract or the product sold hereunder.
(b) Except to the extent provided by Seller, Buyer assumes all risks and
liability, and Seller assumes no liability, with respect to transporting or
unloading of the Products (including failure of discharge or unloading
implements or materials used by Buyer), storage, handling, sale and use of the
Products (including its use alone or in combination with other substances or in
the operation of any process), and the compliance or non-compliance with all
federal, state and local laws and regulations applicable to the Product; Seller
assumes the same risks and liability stated in this subparagraph with respect to
Products transported or unloaded by Seller. The limitations stated in Paragraph
24 shall not apply to Paragraph 11 of this Agreement.
25. NON-WAIVER. Seller's or Buyer's waiver of any breach or failure to
enforce any of the terms and conditions of this contract at any time shall not
in any way affect, limit or waive such party's right thereafter to enforce
strict compliance with every term and condition hereof.
26. ASSIGNMENT. Neither Buyer nor Seller shall assign this contract (nor
any right or obligation hereunder), in whole or in part without the prior
written consent of the other, which consent shall not be unreasonably withheld.
It shall be reasonable to withhold consent if the requested assignment is to a
competitor of either party or their related entities, divisions, and
subsidiaries. Any such purported assignment without such consent shall be void.
Either party shall have the right to assign this contract and its rights and
obligations hereunder, without obtaining the prior written consent of the other,
to any entity with which either party (a) merges, (b) sells a substantial part
of its assets or business, or (c) sells a substantial part of its assets or
business relating to the manufacture and/or sale of the Product.
27. APPLICABLE LAW. Tennessee law shall apply to the interpretation of
this Agreement for any matter arising from the sale of Product produced from
Seller's Charleston, Tennessee Facility, without giving effect to its conflict
of law provisions. Otherwise, this contract shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
its conflict of law provisions.
-6-
<PAGE>
28. CAPTIONS. The titles contained in this contract are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this contract.
29. SEVERABILITY. If any provision of this contract shall be prohibited
or invalid, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
and the remaining provisions of this contract.
30. AMENDMENT. This contract is intended as the final expression of the
parties' agreement and is the complete and exclusive statement of the terms
hereof. No statements or agreements, oral or written, made prior to or at the
signing hereof, shall vary or modify the written terms hereof; and neither party
shall claim any amendment, modification or release from any provisions hereof by
reason of (a) a course of action or mutual agreement unless such agreement is in
writing signed by the other party and specifically stating it as an amendment to
this contract, (b) course of performance, or (c) usage of trade. No
modification or addition to this contract shall be affected by the
acknowledgment or acceptance by Seller of any purchase order, acknowledgment,
release or other forms submitted by Buyer containing other or different terms or
conditions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
OLIN CORPORATION ARCH CHEMICALS, INC.
Chlor Alkali Products Division
By: /s/ Johnnie M. Jackson, Jr. By: /s/ Sarah A. O'Connor
---------------------------------- -----------------------------
Name: Johnnie M. Jackson, Jr. Name: Sarah A. O'Connor
Title: Vice President, General Counsel Title: Vice President
and Secretary
-7-
<PAGE>
Olin Chlor Alkali Products
650 25th Street N. W., Suite 300, Cleveland, TN 37311
423/336-4850 - Fax: 423/336-4830
- --------------------------------------------------------------------------------
CAUSTIC SODA SPECIFICATIONS
GRADE
-----
Component Basis Rayon Membrane Commercial
- --------- ----- ----- -------- ----------
NaOH weight% 50.0 - 51.5 49.5 - 51.5 49.0 - 52.0
Na\2\O weight% 38.7 - 39.9 38.3 - 39.9 38.0 - 40.3
Na\2\CO\3\ weight% 0.06 0.05 0.2
NaCl ppm 30 75 11,000
Na\2\SO\4\ ppm 20 100 200
NaClO\3\ ppm 1 5 3,000
Iron (Fe) ppm 2.0 2.0 7
Si (Silicon) ppm 10 2.4 195
Al (Aluminum) ppm 3 0.25 20
Ca (Calcium) ppm 20 0.5 45
Mg (Magnesium) ppm 1.2 0.1 12
Mn ppm 0.4 0.2 1
Ni ppm 0.3 0.5 2
Cu ppm 0.5 0.2 2
Hg ppm 0.5 0.01 N.D.*
* Note: N.D. is below Minimum Detection Limit (MDL) of 0.01 ppm
. Certified by the NSF for the ANSI/NSF 60 Standard
. Satisfies the Food Chemical Codex IV(FCC IV) requirements
. Satisfies the AWWA Standard B-501-93
EXHIBIT 1
<PAGE>
Olin Chlor Alkali Products
650 25th Street N. W., Suite 300, Cleveland, TN 37311
423/336-4850 - Fax: 423/336-4830
- --------------------------------------------------------------------------------
Chlorine Specifications
Chemical Properties Augusta Charleston McIntosh Niachlor
------------------- ------- ---------- -------- --------
Purity, weight % 99.5 min. 99.5 min. 99.5 min. 99.5 min.
Moisture, ppm 75 max. 75 max. 30 max 50 max.
Non-volatile Residue, ppm 30 max. 30 max. 30 max. 50 max.
Arsenic, as As, ppm 3 max. 3 max. 3 max. 3 max.
Lead, as Pb, ppm 5 max. 5 max. 5 max. 5 max.
Mercury, as Hg, ppm 1 max. 1 max. 1 max. 1 max.
Heavy Metals, as Pb, ppm 10 max. 10 max. 10 max. 10 max.
Carbon Tetrachloride, ppm 100 max. 100 max. 100 max. 100 max.
Trihalomethanes, ppm 300 max. 300 max. 300 max. 300 max.
. Certified by the NSF for the ANSI/NSF 60 Standard
. Satisfies the Food Chemical Codex IV(FCC IV) requirements
. Satisfies the AWWA Standard B-301-92
EXHIBIT 2
<PAGE>
EXHIBIT 10.3
COVENANT NOT TO COMPETE AGREEMENT dated as of February 8,
1999 (this "Agreement"), between ARCH CHEMICALS, INC., a Virginia
corporation ("Arch"), and OLIN CORPORATION, a Virginia
corporation ("Olin"). Each of Arch and Olin are sometimes
hereinafter referred to as a "Party" and collectively referred to
as the "Parties".
WITNESSETH:
-----------
WHEREAS, Olin and Arch have entered into that certain Distribution
Agreement dated as of the date hereof, between Olin and Arch (the "Distribution
Agreement"), providing for the distribution of all of the outstanding shares of
common stock of Arch to the shareholders of Olin;
WHEREAS, prior to entering into the Distribution Agreement, the
Parties and their predecessor businesses freely shared information concerning
their respective businesses, including the research and development of specialty
chemical products and other chemical products and product-related services, as
these businesses were part of a single corporate entity and parent-subsidiary
corporate structure;
WHEREAS, Olin and Arch each have a substantial amount of know-how and
other knowledge concerning the operations of the business of the other entity;
and
WHEREAS, to allow each of Olin and Arch to obtain the full value of
its respective rights under the Distribution Agreement, Olin and Arch desire to
enter into and execute this Agreement concerning the Arch Business and the Olin
Business (as such terms are defined in the Distribution Agreement).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth below, the Parties hereby agree as follows:
1. Definitions.
------------
Capitalized terms used herein without definitions shall have the respective
meanings assigned to them in the Distribution Agreement. As used in this
Agreement, the following terms shall have the following respective
meanings:
"Engage In" and derivations thereof shall mean directly or indirectly to engage
in, own, manage, participate in, or otherwise obtain an interest in (as
owner, stockholder, agent, partner, representative, director, consultant,
or otherwise).
"Non-Compete Term" shall mean a five (5) year period commencing on the
Distribution Date.
<PAGE>
2
"Non-Solicit Term" shall mean a two (2) year period commencing on the
Distribution Date.
"Pension Plan" shall mean, with respect to a Party and its Affiliates, any
"employee pension benefit plan" or "pension plan", in each case as defined
in Title 1, Subtitle A, Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended, of such Party and its Affiliates.
"Territory" shall mean the entire world.
"Water Treatment" shall mean the manufacture, sale, marketing or distribution of
water purification products and product-related services for the purpose of
water purification or sanitization.
2. Covenant Not to Compete.
------------------------
During the Non-Compete Term:
(a) Olin agrees that it shall not, and shall not permit any of
its Subsidiaries, to Engage In, anywhere in the Territory,
the manufacture, sale, marketing or distribution of products
or product-related services that are the same as or
substantially similar to those which the Arch Business is
manufacturing, selling, marketing or distributing as of the
Distribution Date ("Arch Business Activities"); provided,
-------
however, that nothing herein shall prevent Olin and its
-------
Subsidiaries from (i) Engaging In Water Treatment, except
that Olin and its Subsidiaries may not Engage In Water
Treatment with respect to those products (including products
substantially similar in chemical composition to any such
product or derivative of such product; it being understood
and agreed by the Parties that sodium hydrosulfite is not
substantially similar in chemical composition to calcium
hypochlorite) that are manufactured, sold, marketed or
distributed by the Arch Business as of the Distribution
Date; and/or (ii) making any investment through a Pension
Plan of Olin or any of its Subsidiaries.
(b) Arch agrees that it shall not, and shall not permit any of
its Subsidiaries, to Engage In, anywhere in the Territory,
the manufacture, sale, marketing or distribution of products
or product-related services that are the same as or
substantially similar to those which the Olin Business is
manufacturing, selling, marketing or distributing as of the
Distribution Date ("Olin Business Activities"); provided,
--------
however, that nothing herein shall prevent Arch and its
-------
Subsidiaries from making any investment through a Pension
Plan of Arch or any of its Subsidiaries.
<PAGE>
3
(c) Nothing herein shall prevent Olin and Arch from mutually
agreeing to develop or manufacture chemical products or
product-related services cooperatively, whether through
subcontracting, work share arrangements or joint development
projects.
(d) Neither Party shall be deemed to violate this Section 2 in
the event that such Party directly or indirectly acquires in
whole or in part (an "Acquisition") any person or business
(an "Acquired Enterprise"), that Engages In (x) in the case
of Olin, Arch Business Activities and (y) in the case of
Arch, Olin Business Activities; provided, that such Acquired
Enterprise does not have a significant portion of its gross
revenues (measured at the time it is acquired by such Party)
attributable to Arch Business Activities or Olin Business
Activities, as the case may be. Olin or Arch may continue,
after consummation of an Acquisition, the Arch Business
Activities or the Olin Business Activities, as the case may
be, of the Acquired Enterprise as and to the extent, in the
same manner and for the same purposes that the Acquired
Enterprise Engaged In such Arch Business Activities or Olin
Business Activities, as the case may be, immediately prior
to the consummation of the Acquisition. Notwithstanding the
foregoing, neither Olin nor Arch may consummate any
Acquisition or series of Acquisitions pursuant to this
Section 2(d), or continue any Arch Business Activities or
Olin Business Activities, as the case may be, pursuant to
this Section 2(d), the purpose of which would be to evade,
or that are part of a scheme, device or plan to evade, the
purpose or spirit of this Agreement.
3. Covenant Not To Solicit.
------------------------
During the Non-Solicit Term:
(a) Olin agrees that it shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, (i) solicit,
recruit or hire for employment, (ii) induce or encourage to
leave the employment of Arch or its Subsidiaries or (iii)
attempt to do any of the foregoing with respect to, any
employee of Arch or its Subsidiaries, who is (other than
through a violation of Section 3(b)) such during the Non-
Solicit Term.
(b) Arch agrees that it shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, (i) solicit,
recruit or hire for employment, (ii) induce or encourage to
leave the employment of Olin or its Subsidiaries or (iii)
attempt to do
<PAGE>
4
any of the foregoing with respect to, any employee of Olin
or its Subsidiaries, who is (other than through a violation
of Section 3(a)) such during the Non-Solicit Term.
(c) Notwithstanding the foregoing, if a Party (the "Solicitor")
desires to engage in any actions with respect to employees
of the other Party (the "Solicitee") that would otherwise be
prohibited by Sections 3(a) or 3(b) above (a "Prohibited
Solicitation"), then the appropriate corporate officer in
charge of human resources matters of the Solicitor shall
contract the analogous corporate officer of the Solicitee
and inform such Solicitee officer of such desire. Only upon
the express prior written consent of the Solicitee, which
consent may be withheld in the Solicitee's sole and absolute
discretion, may the Solicitor engage in such Prohibited
Solicitation with respect to such employee of the Solicitee.
(d) Nothing in this Section 3 shall be deemed to prohibit either
Party or its respective Subsidiaries from (i) making a
general solicitation of employment opportunities or openings
("Opportunities") through the public media (including the
Internet), (ii) posting or advertising Opportunities at any
location where such Party has employees, including common
areas used by the employees of both Parties or any of their
respective Subsidiaries, (iii) listing any Opportunities in
any government or government-sponsored job bank or
opportunity center or (iv) making any dissemination required
to be made by law regarding Opportunities.
(e) This Section 3 shall not apply with respect to (i) any
individual who is the subject of Section 4.3 of the
Information Technology Services Agreement, which Section 4.3
shall preempt this Section 3 with respect to any such
individual, (ii) any employee of Olin who is leased from
Olin to Arch after the Distribution Date and (iii) any
individual who ceases to be an employee of Olin or Arch, for
the time such individual ceases to be such an employee.
4. Reasonableness.
---------------
The Parties hereto agree that the terms contained in this Agreement
are reasonable in all respects. In the event that a court determines
that any of the terms or provisions of this Agreement are
unreasonable, the court may limit the application of any provision or
term, or modify any provision or term, and proceed to enforce the
Agreement as so limited or modified.
<PAGE>
5
5. Severability.
-------------
The Parties hereto agree that each and every paragraph, sentence, term
and provision of this Agreement shall be considered severable in that,
in the event that a court finds any paragraph, sentence, term or
provision to be invalid or unenforceable, the validity and
enforceability, operation or effect of the remaining paragraphs,
sentences, terms or provisions shall not be affected, and this
Agreement shall be construed in all respects as if the invalid or
unenforceable matter had been omitted. The Parties shall endeavor in
good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions. The Parties intend the covenants of
Sections 2 and 3 to be a series of separate covenants, one for each
county of each and every state, province, territory or political
jurisdiction of the Territory and one for each month of the period
specified above. If, in any arbitration or judicial proceeding, an
arbitrator or a court shall refuse to enforce any one or more of such
separate covenants because the total time and/or the geographic
boundaries thereof are deemed to be excessive or unreasonable, then it
is the intent of the parties hereto that such covenants, which would
otherwise be unenforceable due to such excessive or unreasonable
period of time and/or geography, be enforced for such lesser period of
time and/or for such more limited geographic area as shall be deemed
reasonable and not excessive by such arbitrator or court.
6. Specific Performance.
---------------------
Each of the Parties hereto acknowledges that its covenants in this
Agreement are of a special and unique character, and that there is no
adequate remedy at law for failure by such Parties to comply with the
provisions of this Agreement and that such failure would cause
immediate harm that would not be adequately compensable in damages,
and therefore agree that their covenants and agreements contained
herein may be specifically enforced without the requirement of posting
a bond or other security, in addition to all other remedies available
to the Parties hereto under this Agreement or at law or in equity.
7. Merger, Sale of Assets, Spin-Off, Etc. During the Noncompete Term,
--------------------------------------
neither Party shall (i) consolidate with or merge into any other
person, (ii) convey, transfer or lease its properties and assets
substantially as an entirety to any other person or (iii) spin off,
distribute the capital stock to its shareholders of, or engage in a
similar divisive transaction with respect to, a subsidiary, division
or any of its assets (each of the transactions described in clauses
<PAGE>
6
(i) through (iii) being referred to as a "Transaction"), in each case,
unless:
(a) The person formed by or party to such Transaction shall (x) be a
corporation, (y) be organized and validly existing under the laws
of the United States of America, any State thereof or the District
of Columbia and (z) expressly assume, by an instrument
satisfactory to the other Party, each and every obligation of said
Party to be performed or observed hereunder;
(b) The Party attempting to consummate a Transaction shall have
delivered to the other Party immediately prior to the consummation
of such Transaction a Certificate executed by its Chief Executive
Officer and Chief Financial Officer stating that such Transaction
complies with this Section 7 and that all conditions precedent
herein relating to such Transaction have been complied with; and
(c) Notwithstanding anything to the contrary in this Agreement, in the
event that a Transaction (other than a Transaction described in
clause (iii) of the first paragraph of this Section 7) is
consummated, the person formed by or party to such Transaction
(the "Acquiror"), after consummation of such Transaction may (x)
in the case of a Transaction involving Olin, Engage In Arch
Business Activities or (y) in the case of a Transaction involving
Arch, Engage In Olin Business Activities, in either case, only as
and to the extent the Acquiror Engaged In such Arch Business
Activities or Olin Business Activities, as the case may be,
immediately prior to such Transaction; provided, however, that
-------- -------
nothing in this Agreement shall prohibit the Acquiror from
expanding its Engagement In such Arch Business Activities or Olin
Business Activities, as the case may be, within the scope thereof
that the Acquiror Engaged In immediately prior to the consummation
of such Transaction.
8. Dispute Resolution. In the event of a controversy, dispute or claim
------------------
arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of
this Agreement or otherwise arising out of, or in any way related to
this Agreement, including, without limitation, any claim based on
contract, tort, statute or constitution (collectively, "Agreement
Disputes"), the respective General Counsels of the Parties or their
designees shall negotiate, commencing within 30 days of the occurrence
of such Agreement Dispute, in good faith for a reasonable period of
time to settle such Agreement Dispute. If after such reasonable
period such General Counsels or their
<PAGE>
7
designees are unable to settle such Agreement Dispute (and in any
event after 60 days have elapsed from the time the relevant parties
began such negotiations), such Agreement Dispute shall be determined,
at the request of any relevant party, by arbitration conducted in New
York City before and in accordance with the then-existing Rules for
Commercial Arbitration of the American Arbitration Association (the
"Rules"), and any judgment or award rendered by the arbitrator shall
be final, binding and nonappealable (except upon grounds specified in
9 U.S.C. (S)10(a) as in effect on the date hereof), and judgment may
be entered by any state or Federal court having jurisdiction thereof
in accordance with Section 13 hereof. Unless the arbitrator otherwise
determines, the pre-trial discovery of the then-existing Federal Rules
of Civil Procedure and the then-existing Rules 46 and 47 of the Rules
of the United States District Court for the Southern District of New
York shall apply to any arbitration hereunder. Any controversy
concerning whether an Agreement Dispute is an arbitrable Agreement
Dispute, whether arbitration has been waived, whether an assignee of
this Agreement is bound to arbitrate, or as to the interpretation or
enforceability of this Section 8 shall be determined by the
arbitrator. The arbitrator shall be a retired or former judge of any
United States District Court or Court of Appeals or such other
qualified person as the relevant parties may agree to designate,
provided such individual has had substantial professional experience
--------
with regard to settling commercial disputes. The Parties intend that
the provisions to arbitrate set forth herein be valid, enforceable and
irrevocable. The designation of a situs or a governing law for this
Agreement or the arbitration shall not be deemed an election to
preclude application of the Federal Arbitration Act, if it would be
applicable. In his award the arbitrator shall allocate, in his
discretion, among the Parties to the arbitration all costs of the
arbitration, including, without limitation, the fees and expenses of
the arbitrator and reasonable attorneys' fees, costs and expert
witness expenses of the Parties. The Parties agree to comply with any
award made in any such arbitration proceedings that has become final
in accordance with the Rules and agree to the entry of a judgment in
any jurisdiction upon any award rendered in such proceedings becoming
final under the Rules. The arbitrator shall be entitled, if
appropriate, to award any remedy in such proceedings, including,
without limitation, monetary damages, specific performance and all
other forms of legal and equitable relief; provided, however, the
-------- -------
arbitrator shall not be entitled to award punitive damages.
9. Attorney Fees. A Party in breach of this Agreement shall, on demand,
--------------
indemnify and hold harmless the other parties hereto for and against
all out-of-pocket expenses, including, without
<PAGE>
8
limitation, legal fees, incurred by such other Party by reason of the
enforcement and protection of its rights under this Agreement. The
payment of such expenses is in addition to any other relief to which
such other Party may be entitled hereunder or otherwise.
10. Notices.
--------
All notices and other communications hereunder shall be in writing and
hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the
Parties at the following addresses (or at such other addresses for a
Party as shall be specified by like notice) and will be deemed given
on the date on which such notice is received:
To Olin Corporation:
501 Merritt 7
4th Floor
Norwalk, CT 06851
Attn: General Counsel
To Arch Chemicals, Inc.:
501 Merritt 7
3rd Floor
Norwalk, CT 06851
Attn: General Counsel
11. Successors.
-----------
This Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the Parties and their respective successors and
permitted assigns.
12. Applicable Law.
---------------
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without giving effect to its
conflict of laws provisions.
13. Consent to Jurisdiction.
------------------------
Without limiting the provisions of Section 8 hereof, each of the
Parties irrevocably submits to the exclusive personal jurisdiction and
venue of (a) the Circuit Court of Henrico County,
<PAGE>
9
Commonwealth of Virginia, and (b) the United States District Court for
the Eastern District of Virginia (Richmond Division) for the purposes
of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Each of the Parties agrees to
commence any action, suit or proceeding relating hereto either in the
United States District Court for the Eastern District of Virginia
(Richmond Division) or if such suit, action or other proceeding may
not be brought in such court for jurisdictional reasons, in the
Circuit Court of Henrico County, Commonwealth of Virginia. Each of the
Parties further agrees that service of any process, summons, notice or
document by U.S. registered mail to such Party's respective address
set forth above shall be effective service of process for any action,
suit or proceeding in Virginia with respect to any matters to which it
has submitted to jurisdiction in this Section 13. Each of the Parties
irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the Circuit Court of
Henrico County, Commonwealth of Virginia, or (ii) the United States
District Court for the Eastern District of Virginia (Richmond
Division), and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been brought
in an inconvenient forum, and the right to object, with respect to
such action, suit or proceeding, that such court does not have
jurisdiction over such Party.
14. Miscellaneous.
--------------
(a) Amendments. This Agreement may not be modified or amended
-----------
except by an agreement in writing signed by the Parties.
(b) Waivers. The failure of either Party to require strict
--------
performance by the other party of any provision in this Agreement
will not waive or diminish that Party's right to demand strict
performance thereafter of that or any other provision hereof.
(c) Title and Headings. Titles and headings to sections herein are
-------------------
inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or
interpretation of this Agreement.
(d) Third Party Beneficiaries. This Agreement is solely for the
--------------------------
benefit of the Parties hereto and should not be deemed to confer
upon third parties any remedy, claim, liability,
<PAGE>
10
reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
(e) Complete Agreement; Construction. This Agreement shall
---------------------------------
constitute the entire agreement between the Parties with respect
to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such
subject matter.
<PAGE>
11
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date and year first above written.
ARCH CHEMICALS, INC.
By: /s/ Sarah A. O'Connor
-------------------------
Name: Sarah A. O'Connor
Title: Vice President
OLIN CORPORATION
By: /s/ Johnnie M. Jackson, Jr.
-----------------------------------
Name: Johnnie M. Jackson, Jr.
Title: Vice President,
General Counsel & Secretary
<PAGE>
EXHIBIT 10.4
================================================================================
FORM OF
EMPLOYEE
BENEFITS
ALLOCATION AGREEMENT
BETWEEN
OLIN CORPORATION
AND
ARCH CHEMICALS, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
-----------
Section 1.1. General.............................................. 1
ARTICLE II
U.S. Plans and Stock Plans
--------------------------
Section 2.1. Qualified Retirement Plan............................ 8
Section 2.2. Supplemental Retirement Plans and
Employment Agreements................................ 11
Section 2.3. Qualified Defined Contribution Plan.................. 13
Section 2.4. Welfare Plans........................................ 14
Section 2.5. Options.............................................. 17
Section 2.6. Executive and Director Compensation
Plans.............................................. 20
ARTICLE III
Foreign Plans
-------------
Section 3.1. General Principles................................... 22
Section 3.2. Exceptions to General Principles..................... 22
ARTICLE IV
General Provisions
------------------
Section 4.1. Employment Transfers; Severance Pay.................. 23
Section 4.2. Recognition of Olin Employment
Service, Etc......................................... 23
Section 4.3. Workers' Compensation................................ 24
ARTICLE V
<PAGE>
Miscellaneous
-------------
Section 5.1. Guarantee of Subsidiaries'
Obligations.......................................... 24
Section 5.2. Disputes............................................. 24
Section 5.3. Sharing of Information............................... 24
Section 5.4. Termination.......................................... 25
Section 5.5. Rights to Amend or Terminate Plans;
No Third Party Beneficiaries......................... 25
Section 5.6. Complete Agreement................................... 25
Section 5.7. Governing Law........................................ 25
Section 5.8. Notices.............................................. 26
Section 5.9. Amendment and Modification........................... 26
Section 5.10. Successors and Assigns............................... 26
Section 5.11. Consent to Jurisdiction.............................. 27
Section 5.12. Counterparts......................................... 27
Section 5.13. Interpretation....................................... 27
Section 5.14. Legal Enforceability................................. 28
Section 5.15. References, Construction............................. 28
<PAGE>
EMPLOYEE BENEFITS ALLOCATION AGREEMENT, dated as of
February 8, 1999, by and between Olin Corporation, a Virginia
corporation ("Olin"), and Arch Chemicals, Inc., a Virginia
corporation ("Arch").
W I T N E S S E T H:
WHEREAS Olin and Arch have entered into that certain Distribution
Agreement dated as of the date hereof, between Olin and Arch (the "Distribution
Agreement"), providing for the distribution to the holders of the issued and
outstanding shares of common stock, par value $1.00 per share, of Olin ("Olin
Common Stock") all of the issued and outstanding shares of common stock, par
value $1.00 per share, of Arch ("Arch Common Stock");
WHEREAS the Distribution is intended to qualify as a tax-free
transaction under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS the Distribution Agreement, among other things, sets forth the
principal corporate transactions required to effect the Distribution and sets
forth other agreements that will govern certain other matters prior to and
following the Distribution; and
WHEREAS in connection with the Distribution and pursuant to the
Distribution Agreement, Olin and Arch desire to provide for the allocation of
assets and Liabilities and other matters relating to employee benefit plans and
compensation arrangements.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
Definitions
-----------
Section 1.1. General. Any capitalized terms that are used in this
--------
Agreement but not defined herein (other than the names of Olin employee benefit
plans) shall have the meanings set forth in the Distribution Agreement, and, as
used herein, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Agreement": this Employee Benefits Allocation Agreement.
---------
"Alternate Payee": an alternate payee under a domestic relations
---------------
order which has been determined by the appropriate Plan administrator to be
qualified under Section 414(p) of the Code and Section 206(d) of ERISA and which
creates or recognizes an alternate payee's right to, or assigns to an alternate
payee, all or a portion of the benefits payable to a participant under any Plan,
or an alternate recipient under a medical child support order which has been
determined by the appropriate Plan administrator to be qualified under Section
609(a) of ERISA and which creates or recognizes the existence of an alternate
recipient's right to, or assigns to an alternate recipient the right to, receive
benefits for which a participant or beneficiary is eligible under any Plan.
"Arch": defined in the preamble.
----
"Arch Common Stock": defined in the recitals.
-----------------
"Arch Employee": any individual who is, as of the Distribution Date,
-------------
identified on the records of Arch as being, an Employee of any member of the
Arch Group (including an individual who is receiving long-term disability
benefits on the Distribution Date and whose most recent active employment was
with any member of the Pre-Distribution Group in the Arch Business). If such an
individual has received notice of layoff or termination from Olin or any of its
Affiliates prior to the Distribution Date, he or she shall not be considered to
be an Arch Employee on the Distribution Date if he or she is listed on Schedule
A hereto. Individuals who are leased to Arch by Olin as of the Distribution
Date are not considered Arch Employees.
<PAGE>
3
"Arch Foreign Plan": a Foreign Plan provided by, contributed to or
-----------------
sponsored by one or more members of the Arch Group.
"Arch Former Employee": any individual who is, as of the Distribution
--------------------
Date, identified on the records of Olin as being an Arch Former Employee, which
identification shall have been made based upon a good faith determination by
Olin and Arch that (i) such individual was, at any time before the Distribution
Date, an employee of any member of the Pre-Distribution Group, (ii) such
individual is not an Olin Employee or an Arch Employee, and (iii) such
individual's most recent active employment was with any such member of the Arch
Business; provided that, if at any time on or before December 31, 1999, Arch and
--------
Olin determine that any one or more individuals were identified as Arch Former
Employees in error and should have been identified as Olin Former Employees and
agree to correct such error, such individuals shall be considered Olin Former
Employees and Arch and Olin shall use their reasonable best efforts to implement
the terms of this Agreement as they apply to such individuals as if such
individuals had been correctly identified as of the Distribution Date.
"Arch Group": Arch and its Subsidiaries after the Distribution.
----------
"Arch Option": an option to purchase from Arch shares of Arch Common
-----------
Stock provided to an Arch Participant or an Olin Participant pursuant to Section
2.5.
"Arch Participant": any individual who is an Arch Employee, an Arch
----------------
Former Employee, or a Beneficiary of such an individual.
"Arch Ratio": the amount obtained by dividing (i) the opening price
----------
on the first day of regular way trading of the Arch Common Stock on the NYSE
Composite Tape, as reported in The Wall Street Journal, by (ii) the closing
price on the last day of trading of Olin Common Stock with due bills on the NYSE
Composite Tape, as reported in The Wall Street Journal.
"Arch Restricted Stock Units": units representing shares of Arch
---------------------------
Common Stock granted pursuant to an Arch Plan.
<PAGE>
4
"Arch SAR": a stock appreciation right granted with respect to Arch
--------
Common Stock in accordance with Section 2.5.
"Arch SIP": the Qualified Plan established by Arch pursuant to
--------
Section 2.3(a).
"Arch U.S. Welfare Plan": an Arch Welfare Plan that is a U.S. Plan.
----------------------
"Arch Welfare Plan": a Welfare Plan sponsored by one or more members
-----------------
of the Arch Group.
"Assigned Split Dollar Policies": defined in Section 2.4(c).
------------------------------
"Beneficiary": a beneficiary, dependent or Alternate Payee or estate
-----------
of a participant in a Plan, in each case in his, her or its capacity as such a
beneficiary, dependent, Alternate Payee or estate.
"Code": defined in the recitals.
----
"Deferred Compensation Plan": a Plan, other than a Qualified Plan or
--------------------------
a Supplemental Retirement Plan, providing deferred compensation.
"Distribution Agreement": defined in the recitals.
----------------------
"Distribution Ratio": the ratio of one share of Arch Common Stock to
------------------
two shares of Olin Common Stock.
"Employee": with respect to any entity, an individual who is
--------
considered, according to the payroll and other records of such entity, to be
employed by such entity, regardless of whether such individual is, at the
relevant time, actively at work or on leave of absence (including vacation,
holiday, sick leave, family and medical leave, disability leave, military leave,
jury duty, and any other leave of absence or similar interruption of active
employment that is not considered, according to the policies or practices of
such entity, to have resulted in a permanent termination of such individual's
employment).
"Enrolled Actuary": with respect to all U.S. Plans, The Segal
----------------
Company, and, with respect to all Foreign Plans, an enrolled actuary or other
party making actuarial
<PAGE>
5
or similar determinations pursuant to this Agreement with respect to assets or
Liabilities relating to a particular employee benefit plan selected by Olin with
the approval of Arch, which approval shall not be unreasonably withheld.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended, or any successor legislation, and the regulations promulgated
thereunder.
"Foreign Plan": any Plan maintained outside of the United States
------------
primarily for the benefit of individuals substantially all of whom are
nonresident aliens with respect to the United States.
"New Olin Option": defined in Section 2.5(b).
---------------
"Olin": defined in the preamble.
----
"Olin CEOP": the Olin Corporation Contributing Employee Ownership
---------
Plan.
"Olin CEOP Trust": the trust established to fund the Olin CEOP.
---------------
"Olin Common Stock": defined in the recitals.
-----------------
"Olin Employee": any individual who is, as of the Distribution Date,
-------------
identified on the records of Olin as being an Employee of any member of the Olin
Group (excluding an individual who is receiving long-term disability benefits on
the Distribution Date and whose most recent active employment was with any
member of the Pre-Distribution Group in the Arch Business); provided, however,
-------- -------
that an Employee of Olin or its Affiliates on the Distribution Date who becomes
a Subsequent Arch Employee shall not be considered an Olin Employee once he or
she becomes a Subsequent Arch Employee.
"Olin Foreign Plan": a Foreign Plan provided by, contributed to or
-----------------
sponsored by one or more members of the Olin Group.
"Olin Former Employee": any individual who was, at any time before
--------------------
the Distribution Date, an Employee of any member of the Pre-Distribution Group,
and who is not an Olin Employee, an Arch Employee or an Arch Former Employee;
provided that, if at any time on or before December 31, 1999, Arch and Olin
determine that any one or more
<PAGE>
6
individuals were identified as Olin Former Employees in error and should have
been identified as Arch Former Employees, and agree to correct such error, such
individuals shall be considered Arch Former Employees, and Arch and Olin shall
use their reasonable best efforts to implement the terms of this Agreement as
they apply to such individuals as if such individuals had been correctly
identified as of the Distribution Date.
"Olin Group": Olin and its Subsidiaries after the Distribution.
----------
"Olin Incentive Plans": collectively, the 1980 Stock Option Plan for
--------------------
Key Employees of Olin Corporation and Subsidiaries (the "1980 Olin Stock Option
Plan"); the 1988 Stock Option Plan for Key Employees of Olin Corporation and
Subsidiaries (the "1988 Olin Stock Option Plan"); the 1996 Stock Option Plan for
Key Employees of Olin Corporation and Subsidiaries (the "1996 Olin Stock Option
Plan"); and the Olin 1991 Long-Term Incentive Plan, each as in effect on the
Distribution Date.
"Olin Option": an option to purchase shares of Olin Common Stock
-----------
granted pursuant to any of the Olin Incentive Plans.
"Olin Participant": any individual who is an Olin Employee, an Olin
----------------
Former Employee, or a Beneficiary of such an individual.
"Olin Pension Plan": the Olin Corporation Employees Pension Plan.
-----------------
"Olin Ratio": the amount obtained by dividing (i) the opening price
----------
of Olin Common Stock on the first day of trading ex-dividend (the trading day
after due bill trading ends) on the NYSE Composite Tape, as reported in The Wall
Street Journal, by (ii) the closing price on the last day of trading of Olin
Common Stock with due bills on the NYSE Composite Tape, as reported in The Wall
Street Journal.
"Olin Restricted Stock Units": units representing restricted shares
---------------------------
of Olin Common Stock granted pursuant to, and subject to forfeiture under, any
of the Olin Incentive Plans.
"Olin Supplemental Plans": collectively, the Olin Corporation Senior
-----------------------
Executive Benefit Plan, the Olin
<PAGE>
7
Supplementary Pension Plan, Olin Deferral Benefit Pension Plan and the Olin
Supplemental Contributory Employee Ownership Plan, each as in effect on the
Distribution Date.
"Olin U.S. Welfare Plan": any Olin Welfare Plan that is a U.S. Plan.
----------------------
"Olin Welfare Plan": any Welfare Plan of one or more members of the
-----------------
Olin Group.
"Plan": any written or unwritten plan, policy, program, payroll
----
practice, ongoing arrangement, trust, fund, contract, insurance policy or other
agreement or funding vehicle provided by, contributed to or sponsored by one or
more members of the Olin Group or the Arch Group, providing benefits to Olin
Participants or Arch Participants, regardless of whether it is mandated under
local law or negotiated or agreed to as a term or condition of employment or
otherwise, and regardless of whether it is governmental, private, funded,
unfunded, financed by the purchase of insurance, contributory or
noncontributory.
"Pre-Adjustment Option": defined in Section 2.5(b).
---------------------
"Pre-Distribution Group": the Olin Group and the Arch Group together,
----------------------
as in effect immediately prior to the Distribution Date.
"Qualified Plan": a Plan that is an "employee pension benefit plan"
--------------
as defined in Section 3(2) of ERISA that constitutes, or is intended in good
faith to constitute, a qualified plan under Section 401(a) of the Code.
"Retained Arch Inactive Participant": any Arch Former Employee who is
----------------------------------
a retired or terminated vested participant in the Olin Pension Plan whose
termination under the Olin Pension Plan occurred prior to the Distribution Date,
or a Beneficiary of any such Arch Former Employee.
"Subsequent Arch Employee": any individual who is identified as an
------------------------
Olin Employee as of the Distribution Date but who becomes an Employee of any
member of the Arch Group after the Distribution Date but on or prior to February
8, 2000. An individual ceases to be an Olin Employee when he or she becomes a
Subsequent Arch Employee.
<PAGE>
8
"Subsequent Olin Employee": any individual who is identified as an
------------------------
Arch Employee as of the Distribution Date but who becomes an Employee of any
member of the Olin Group after the Distribution Date but on or prior to February
8, 2000. An individual ceases to be an Arch Employee when he or she becomes a
Subsequent Olin Employee.
"Successor Plan": defined in Section 2.1(a).
--------------
"Supplemental Employment Agreement": any written enforceable
---------------------------------
agreement (other than Tier I Executive Agreements and Tier II Change in Control
Agreements) between any member of the Pre-Distribution Group and any single Olin
Employee, Olin Former Employee, Arch Employee or Arch Former Employee providing
for post-retirement income, pension or welfare benefits (other than pursuant to
a Welfare Plan, a Qualified Plan or a Supplemental Retirement Plan).
"Supplemental Retirement Plan": a U.S. Plan that is (i) an "employee
----------------------------
pension benefit plan" within the meaning of Section 3(2) or ERISA but is not a
Qualified Plan, or (ii) an excess benefit plan under ERISA, including the Olin
Supplementary Pension Plan, Olin Corporation Senior Executive Benefit Plan and
the Olin Supplemental Contributing Employee Ownership Plan.
"U.S. Plan": any Plan that is not a Foreign Plan.
---------
"Welfare Plan": any Foreign Plan or U.S. Plan that is an "employee
------------
welfare benefit plan" as defined in Section 3(l) of ERISA (whether or not such
plan is subject to ERISA).
ARTICLE II
U.S. Plans and Stock Plans
--------------------------
Section 2.1. Qualified Retirement Plan. Olin and Arch shall take all
--------------------------
steps necessary or appropriate so that the provisions of this Section 2.1 are
implemented in a timely fashion, as more fully set forth below.
(a) Establishment of Successor Plan. On or prior to the Distribution
--------------------------------
Date, Arch shall establish a defined benefit pension plan that is a Qualified
Plan (the "Successor Plan") that contains terms substantially similar to the
terms in the Olin Pension Plan for the benefit of Arch Employees and Subsequent
Arch Employees. Arch agrees
<PAGE>
9
that each Arch Employee or Subsequent Arch Employee shall (i) immediately become
eligible to participate in the Successor Plan as of the Distribution Date (or in
the case of a Subsequent Arch Employee, as of the date of transfer) and (ii) for
all purposes (other than eligibility) under the Successor Plan, be entitled to
service, compensation and the accrued benefit credited to such Arch Employee as
of the Distribution Date (or in the case of a Subsequent Arch Employee, as of
the date of transfer) under the terms of the Olin Pension Plan as if such
service had been rendered to Arch, as if such compensation had been paid by Arch
and as if such accrued benefit had originally been credited to such Arch
Employee or Subsequent Arch Employee under the Successor Plan.
(b) Transfer of Assets and Liabilities to the Successor Plan.
---------------------------------------------------------
Subject to the completion of the asset transfer described in the next paragraph,
Olin shall arrange for the transfer from the Olin Pension Plan to the Successor
Plan and the Successor Plan shall assume and be responsible for all Liabilities
of the Olin Pension Plan with respect to benefits accrued by Arch Employees and
Subsequent Arch Employees (including disability pensions) through the
Distribution Date (or through the date of transfer in the case of a Subsequent
Arch Employee) and, effective upon such transfer, the members of the Olin Group
shall have no further responsibility for such Liabilities. All Liabilities of
the Olin Pension Plan attributable to Retained Arch Inactive Participants shall
be retained by the Olin Pension Plan and the members of the Arch Group shall
have no responsibility for such Liabilities.
As soon as practicable after the Distribution Date, Olin shall cause
to be transferred from the trust established under the Olin Pension Plan to the
trust established under the Successor Plan a portion of the assets thereof, as
provided hereinbelow. As soon as practical following the Distribution Date, the
Enrolled Actuary will estimate preliminarily the amount of assets to be
transferred by multiplying the fair market value of the assets in the trust
established under the Olin Pension Plan as of the last day of the month prior to
the Distribution Date by the ratio of (x) the Liabilities attributable to Arch
Employees which shall be equal to the projected benefit obligations determined
as of the Distribution Date of Arch Employees who are participants in the Olin
Pension Plan to (y) all Liabilities under the Olin Pension Plan which shall be
equal to the projected benefit obligations determined as
<PAGE>
10
of the Distribution Date of all participants in the Olin Pension Plan (including
Arch Former Employees and Olin Former Employees). Projected benefit obligations
will be determined based on the assumptions used for purposes of Financial
Accounting Standards No. 87 in the disclosure footnote in Olin's 1998 Annual
Report to Shareholders (the "FAS 87 Assumptions"). If necessary, the amount
determined to be transferred will be adjusted to comply with Code Section 414(l)
as a result of the transfer to and assumption of Liabilities by the Successor
Plan, as reasonably and equitably determined by the Enrolled Actuary using the
asset allocation methodology set forth in Section 4044 of ERISA, the PBGC safe
harbor assumptions referred to in Treasury Regulation Section 1.414(l)-
1(b)(5)(ii) and the pre-retirement withdrawal assumption used by Olin in the
above-referenced FAS-87 disclosure. As soon as practicable after the
Distribution Date and after receipt of the opinion of counsel described in
Section 2.1(d) hereof, Olin shall cause 85% of the amount determined above
(increased by interest at the settlement rate included in the FAS-87 Assumptions
from the Distribution Date to the date of such transfer) to be transferred from
the trust under the Olin Pension Plan to the trust established under the
Successor Plan (the "Initial Transfer"). On or about August 31, 1999, Olin will
cause an additional amount to be transferred to the trust established under the
Successor Plan (the "Subsequent Transfer") equal to the excess of (i) the actual
amount to be transferred as determined by the Enrolled Actuary using the
methodology described above, over (ii) the amount previously transferred
provided that such amount will be credited with interest at the settlement rate
included in the FAS-87 Assumptions from the date of the Initial Transfer to the
date of the Subsequent Transfer and shall be reduced by all benefit payments
paid from the Olin Pension Plan to Arch Employees who retire or otherwise
terminate employment on or after the Distribution Date but prior to the date of
actual transfer.
On or about February 1, 2000, the Enrolled Actuary will determine a
net amount ("Net Amount") equal to the greater of the (i) the excess of (A) the
additional assets and related Liabilities that are required to be transferred to
the trust established under the Successor Plan from the trust established under
the Olin Pension Plan as a result of Olin Employees who become Subsequent Arch
Employees over (B) the additional assets and related Liabilities that should be
transferred from the trust established under the Successor Plan to the trust
established under the Olin Plan as a result of Arch Employees who become
Subsequent Olin
<PAGE>
11
Employees or (ii) the excess of (B) above over (A). Such Liabilities will be
based on the individual's accrued benefit under the applicable plan as of the
date of transfer of such individual. The assets representing the Net Amount to
be transferred from the appropriate trust shall be based on the same
proportionate percentage as applied in the preceding paragraph; provided,
---------
however, that if necessary, the amount to be transferred will be adjusted to
- --------
comply with Code Section 414(l). Interest (at the same rate as was used for the
initial transfer) shall be credited on the Net Amount and transferred along with
the Net Amount to the trust that will be receiving the transfer, which Net
Amount will be transferred to the appropriate trust as soon as practicable.
(c) Union Contracts. Arch shall honor and assume all rights and
----------------
obligations of Olin, and shall become the successor employer under union
contracts covering Arch Employees and such employees will be eligible to
participate in the Successor Plan subject to the provisions of any union consent
required to implement paragraph (a) of this Section 2.1.
(d) Implementation. Arch and Olin shall, in connection with the
---------------
actions taken pursuant to this Section 2.1, cooperate in making any and all
appropriate filings required under the Code or ERISA, and the regulations
thereunder and any applicable securities laws, implementing all appropriate
communications with participants, transferring appropriate records, and taking
all such other actions as may be necessary and appropriate to implement the
provisions of this Section 2.1 in a timely manner and to cause the transfer of
assets pursuant to Section 2.1(b) to take place as soon as practicable after the
Distribution Date (or in the case of a Subsequent Arch Employee, as soon as
practicable following January 31, 2000); provided, however, that such transfer
-------- -------
shall not take place until Olin receives an opinion of counsel satisfactory to
Olin (or a copy of a favorable determination letter from the Internal Revenue
Service) to the effect that the Successor Plan is in form qualified under
Section 401(a) of the Code, and the related trust is in form exempt under
Section 501(a) of the Code.
Section 2.2. Supplemental Retirement Plans and Employment Agreements.
--------------------------------------------------------
(a) Establishment of Successor Supplemental Retirement Plans. On or prior to
---------------------------------------------------------
the Distribution Date, Arch shall establish nonqualified
<PAGE>
12
Supplemental Retirement Plans for the benefit of Arch Employees and Subsequent
Arch Employees that will contain terms that are substantially similar to those
contained in the Olin Supplemental Plans. Arch agrees that each Arch Employee
and Subsequent Arch Employee shall, for all purposes under the Supplemental
Retirement Plans, be entitled to service, compensation and the accrued benefit
(or account balance, as the case may be) credited to such Arch Employee as of
the Distribution Date (or in the case of a Subsequent Arch Employee, the date of
transfer) under the terms of the Olin Supplemental Plans as if such service had
been rendered to Arch, as if such compensation had been paid by Arch and as if
such accrued benefit (or account balance) had originally been credited to such
Arch Employee under the Supplemental Retirement Plans of Arch provided that in
the case of a Subsequent Arch Employee who is participating in an Arch
Supplemental Retirement Plan that is a defined benefit plan, his or her benefit
from such plan shall be offset by the benefit payable (regardless of whether or
not actually paid) under the comparable Olin Supplemental Plan (assuming the
terms of which do not change after the Distribution Date). All reserves and
liabilities held under the Olin Supplemental Plans with respect to Arch
Employees (who are determined to be Arch Employees on the Distribution Date)
shall be transferred to Arch. Arch shall be responsible for all claims arising
under the Supplemental Retirement Plans with respect to Arch Employees whether
incurred before, on or after the Distribution Date and the Olin Group shall have
no responsibility for such claims. All reserves and Liabilities determined
through the date of transfer held under the Olin Supplemental Plans with respect
to Subsequent Arch Employees shall remain with Olin. To the extent an Arch
Employee becomes a Subsequent Olin Employee, any reserves and Liability for such
Arch Employee under such Arch Supplemental Retirement Plan through the date of
transfer shall be retained by Arch and if such individual is participating in an
Olin Supplemental Plan that is a defined benefit plan, his or her benefit from
such plan shall be offset by the benefit payable (regardless of whether or not
actually paid) under the comparable Arch Supplemental Retirement Plan (assuming
the terms which do not change after the Distribution Date). Olin shall include
similar provisions in the Olin Supplemental Plans for Subsequent Olin Employees
as the Arch Supplemental Retirement Plans include for Subsequent Arch Employees.
(b) Olin's Supplemental Plans. Effective as of the Distribution
--------------------------
Date, Olin shall continue to sponsor the
<PAGE>
13
Olin Supplemental Plans, subject to the terms thereof. Olin hereby retains all
liability for benefits (whether funded or unfunded) that have accrued prior to
the Distribution Date under the Olin Supplemental Plans with respect to Arch
Former Employees.
(c) Supplemental Employment Agreements. Effective as of the
-----------------------------------
Distribution Date, Arch shall assume and be solely responsible for all
Liabilities of the Pre-Distribution Group relating to Supplemental Employment
Agreements with Arch Employees. Arch and Olin shall cooperate in taking all
actions necessary or appropriate to implement the foregoing, including amending
any Supplemental Employment Agreement and obtaining any necessary consents of
affected individuals.
Section 2.3. Qualified Defined Contribution Plan. (a) Olin CEOP.
------------------------------------ ----------
As of the Distribution Date, Olin and Arch will take such steps as are necessary
or desirable to convert the Olin CEOP into a multiple employer plan in which
both Olin and Arch shall be participating employers. On and after the
Distribution Date, employer contributions made on behalf of Arch Employees will
be made solely by Arch. As of a date to be determined by Arch which may not be
more than two years after the Distribution Date, Arch shall establish an Arch
SIP and shall no longer participate in the Olin CEOP. Under the multiple
employer plan, Arch Employees will become 100% vested in matching contributions
following completion of five years of service (including prior service with
Olin). Arch Common Stock received by Olin Employees in the Olin CEOP as a
result of the Distribution that is attributable to (i) Olin contributions made
before the Distribution may be retained in Arch Common Stock or reinvested in
Olin Common Stock at the participant's election at any time and (ii) employee
contributions may be retained in Arch Common Stock or reinvested in any other
available option under the Olin CEOP at the participant's election at any time.
Except as provided in the preceding sentence, contributions made to or held
under the Olin CEOP on behalf of Olin Employees may not be invested in Arch
Common Stock. Dividends on Arch Common Stock in accounts of Olin Employees will
be reinvested in Olin Common Stock. Olin Common Stock held in the accounts of
Arch Employees that is attributable to (i) Olin contributions made before the
Distribution may be retained in Olin Common Stock or reinvested only in Arch
Common Stock at the participant's election and (ii) employee contributions may
be retained in Olin Common Stock or reinvested in any other available
<PAGE>
14
option under the Olin CEOP at the participant's election. Except as provided in
the preceding sentence, contributions after the Distribution Date made to or
held under the Olin CEOP on behalf of Arch Employees may not be invested in Olin
Common Stock. Dividends on Olin Common Stock in accounts of Arch Employees will
be reinvested in Arch Common Stock.
(b) Implementation. Olin and Arch shall cooperate in making all
---------------
appropriate filings required under the Code or ERISA, and the regulations
thereunder and any applicable securities laws, implementing all appropriate
communications with participants, maintaining, and transferring appropriate
records, and taking all such other actions as may be necessary and appropriate
to implement the provisions of this Section 2.3.
Section 2.4. Welfare Plans. (a) Pre-Retirement Welfare Plans. Arch
-------------- -----------------------------
shall take, and shall cause the other members of the Arch Group to take, all
actions necessary or appropriate to establish, on or before the Distribution
Date, Arch U.S. Welfare Plans to provide each Arch Employee and Subsequent Arch
Employee in the United States with benefits substantially similar to the
benefits provided to him or her under the Olin U.S. Welfare Plans. The Arch
Group shall assume, and shall be solely responsible for, all Liabilities in
connection with unpaid health care and short-term and long-term disability
claims by or in respect of Arch Employees in the United States for benefits
under the Olin Welfare Plans whether incurred before, on or after the
Distribution Date and the Olin Group shall have no responsibility for such
claims. With respect to Subsequent Arch Employees, the Olin Group shall assume,
and shall be solely responsible for all Liabilities in connection with unpaid
health care and short-time and long-term disability incurred claims by or in
respect of such individuals prior to their transfer to any member of the Arch
Group and Arch shall be responsible for such claims incurred by or in respect of
such individuals on or subsequent to such transfer. With respect to other
benefits provided under Olin Welfare Plans (including job transition benefits,
accidental death benefits, group-term life insurance and tuition aid): (i) the
Arch Group shall assume, and shall be solely responsible for, all Liabilities
for such claims payable to Arch Employees and/or Subsequent Arch Employees where
the event giving rise to the claim occurs on or after the Distribution Date (or
on or after the date of transfer for Subsequent Arch Employees) and the Olin
Group shall have no responsibility for such claims and (ii) the Olin Group
<PAGE>
15
shall assume, and be responsible for such claims payable to (A) Arch
Participants and Subsequent Arch Employees where the event giving rise to the
claim occurs prior to the Distribution Date (or in the case of a Subsequent Arch
Employee, prior to the date of transfer) and (B) Olin Participants whether the
claim incurred before, on or after the Distribution Date; and the Arch Group
shall have no responsibility for such claims. Claims for tuition aid benefits
shall be considered incurred when the semester or course is successfully
completed.
Olin shall take all actions necessary or appropriate to transfer a proportionate
share of the assets held under the voluntary employee benefit association trust
("VEBA") maintained by Olin and attributable to long-term disability benefits to
a VEBA established by Arch. Such proportionate share shall be equal to the
product of (i) the fair market value of the assets in the VEBA as of the
Distribution Date earmarked for long-term disability benefits and (ii) the ratio
of the Liabilities for long-term disability benefits attributable to Arch
Employees to the Liabilities for long-term disability benefits for Olin
Employees, Olin Former Employees, Arch Employees and Arch Former Employees. In
determining such Liabilities, a 7-1/2% interest assumption shall be used. Olin
shall transfer the same proportionate share of reserves on its books to Arch for
such long-term disability benefits. Olin shall retain responsibility for
continuation health coverage benefits under the Olin Welfare Plans for Arch
Former Employees providing health benefits under ERISA section 601(a) whether
the claims are incurred before, on or after the Distribution Date.
(b) Flexible Spending Account Plan. Prior to the Distribution Date,
-------------------------------
Arch shall establish a flexible spending account plan (which shall provide
benefits substantially similar to the Flexible Spending Account Plan of Olin
Corporation) to assume Liabilities of Arch Employees and Subsequent Arch
Employees in the Flexible Spending Account Plan of Olin Corporation. As soon as
practicable after the Distribution Date (or in the case of a Subsequent Arch
Employee, the date of transfer), Olin shall transfer to Arch an amount equal to
the monies deducted from the compensation of such individuals during the
calendar year in which the Distribution Date occurs reduced by the amount of
benefits paid under such plan during such year. Olin and Arch shall take all
other action necessary or appropriate so that, effective as of the Distribution
Date, Arch shall assume and be solely responsible for all flexible spending
account
<PAGE>
16
Liabilities of such individual under its flexible spending account plan. Olin
shall retain liability for Arch Former Employees and for any claims incurred in
the calendar year preceding the year of the Distribution under the Flexible
Spending Account Plan of Olin Corporation.
(c) Assigned Split Dollar and Corporate-Owned Life Insurance
--------------------------------------------------------
Policies. Olin and Arch shall take all actions necessary or appropriate to
- ---------
assign to Arch, effective as of the Distribution Date, all of the rights and
interests of the Pre-Distribution Group in the split dollar life insurance
policies insuring the lives of Arch Participants pursuant to the Split Dollar
Life Insurance Program (such policies, the "Assigned Split Dollar Policies").
Such actions shall include Arch's acceptance of any collateral assignments,
policy endorsements or such other documentation executed by or on behalf of such
Arch Participants or any trustee of any trust to which any Arch Participant's
policy rights or incidents of ownership under the Assigned Split Dollar Policies
have been assigned, and Arch's entering into such agreements as may be necessary
to fulfill any obligations of Olin to any insurance company or insurance agent
or broker under Assigned Split Dollar Policies. From and after the date of the
assignment of any Assigned Split Dollar Policy to Arch, Arch shall assume and be
solely responsible for all Liabilities, and shall be entitled to all benefits,
of the Pre-Distribution Group to the applicable Arch Participant under his or
her Split Dollar Policy, including under any related agreements entered into by
such Arch Participant or any such trustee.
Olin shall retain and pay any premiums or take any action required to keep any
corporate-owned life insurance ("COLI") insuring the lives of Arch Participants
in force. Olin shall be entitled to the life insurance proceeds when payable
and Olin shall pay the related $5,000 to the Arch Participant's Beneficiary when
payable in accordance with COLI plan provisions. For purposes of COLI, the Arch
Participant will be deemed to be an Olin Employee.
(d) Post-Retirement Medical and Life Insurance Benefits. Effective
----------------------------------------------------
as of the Distribution Date, Olin shall continue to sponsor the retiree medical
benefit and life insurance plans of Olin. Olin agrees that it will retain all
liability with respect to medical and life insurance benefits provided to Arch
Former Employees who retired or otherwise terminated prior to the Distribution
Date. Effective as of the Distribution Date, Arch shall adopt a
<PAGE>
17
medical benefit plan substantially similar to Olin's retiree benefits plan
program. Such plan shall provide credit to Arch Employees and Subsequent Arch
Employees for service with Olin on the same basis as credit for such service was
provided under Olin's plan. Other than possible increases in employee
contributions, Arch agrees that the benefits provided under its retiree medical
benefits program shall not be reduced or terminated prior to the fifth
anniversary of the Distribution Date. Arch hereby agrees to assume, and shall
indemnify and hold Olin harmless from and against, all claims brought against
any member of the Olin Group under Olin's retiree medical benefit plans by any
Arch Employee or Subsequent Arch Employee who retires after the Distribution
Date. If an Arch Employee is transferred to Olin or any of its Affiliates by the
Arch Group on or prior to January 31, 2000, Olin shall be responsible for such
individual's retiree medical benefits.
(e) Implementation. Olin agrees to provide Arch or its designated
---------------
representative with such information (in the possession of a member of the Olin
Group and not already in the possession of a member of the Arch Group) as may be
reasonably requested by Arch in order to carry out the requirements of this
Section 2.4.
Section 2.5. Options. (a) Arch Long Term Incentive Plan. Arch
-------- ------------------------------
shall take all actions necessary or appropriate to establish on or before the
Distribution Date the Arch Chemicals, Inc. 1999 Long Term Incentive Plan which
shall contain terms that are substantially similar to the terms provided under
the Olin 1991 Long Term Incentive Plan.
(b) Olin Options. Olin and Arch shall take all actions necessary or
-------------
appropriate so that each Olin Option is adjusted and/or replaced as set forth
below.
(1) Certain Employees and Former Employees of the Olin Group. This
---------------------------------------------------------
Section 2.5(b)(1) sets forth the treatment in the Distribution of each Olin
Option that is, as of the Distribution Date, outstanding and held by an Olin
Employee employed by (or Olin Former Employee formerly employed by) a member of
the Olin Group other than Olin, or a Beneficiary of any such Employee. Each
such Olin Option ("Pre-Adjustment Option") shall be adjusted to constitute an
Olin option (a "New Olin Option") and an Arch SAR. With respect to each New
Olin Option (i) the number of shares of Olin Common Stock subject to such New
Olin Option shall equal the number of shares of Olin Common Stock subject to
<PAGE>
18
the Pre-Adjustment Option, and (ii) the per-share exercise price of such New
Olin Option shall equal the per-share exercise price of such Pre-Adjustment
Option, as applicable, multiplied by the Olin Ratio (rounded down to the nearest
whole cent). With respect to each such Arch SAR (i) the number of shares of Arch
Common Stock subject to such Arch SAR shall equal the number of shares of Olin
Common Stock subject to the Pre-Adjustment Option multiplied by the Distribution
Ratio (rounded up to the nearest whole share), and (ii) the per-share base
amount of such Arch SAR shall equal the per-share exercise price of such Pre-
Adjustment Option multiplied by the Arch Ratio (and then rounded down to the
nearest whole cent).
(2) Other Olin Participants and Arch Participants. This Section
----------------------------------------------
2.5(b)(2) sets forth the treatment in the Distribution of each Olin Option that
is, as of the Distribution Date, outstanding and held by an Olin Participant
(other than one described in Section 2.5(b)(1)), or by an Arch Participant. As
of the Distribution Date, each such outstanding Olin Option shall be adjusted to
constitute two options (one a "New Olin Option" and the other an "Arch Option")
as provided in this Section 2.5(b)(2). With respect to each such New Olin
Option, (i) the number of shares of Olin Common Stock subject to such New Olin
Option, shall equal the number of shares of Olin Common Stock subject to the
Pre-Adjustment Option, and (ii) the per-share exercise price of such New Olin
Option shall equal the per-share exercise price of such Pre-Adjustment Option,
as applicable, multiplied by the Olin Ratio (rounded down to the nearest whole
cent). With respect to each such Arch Option (i) the number of shares of Arch
Common Stock subject to such Arch Option shall equal the number of shares of
Olin Common Stock subject to the Pre-Adjustment Option multiplied by the
Distribution Ratio (rounded up to the nearest whole share), and (ii) the per-
share exercise price of such Arch Option shall equal the per-share exercise
price of such Pre-Adjustment Option multiplied by the Arch Ratio (rounded down
to the nearest whole cent).
(c) Terms of Options and Arch SARs. The terms and conditions of each
-------------------------------
New Olin Option, Arch Option and/or Arch SAR adjusted pursuant to this Section
2.5 shall be the same as those of the Olin Option it replaces, except as
otherwise specifically provided in this Section 2.5 and except that (1) in the
case of such options issued under the Olin 1980 Stock Option Plan to individuals
who become Arch
<PAGE>
19
Employees, such options shall expire no later than on the earlier of (i) the end
of their original term or (ii) the second anniversary of the Distribution Date,
or (2) in the case of such options issued under the Olin 1988 Stock Option Plan
or the Olin 1996 Stock Option Plan to individuals who become Arch Employees,
such options shall expire no later than at the end of their original term. With
respect to individuals who become Arch Employees, references to employment with
or termination of employment with the Olin Group shall be changed to references
to employment with or termination of employment with the Arch Group, and (ii)
other references to the Olin Group shall be changed to references to the Arch
Group as appropriate.
(d) Delivery of Shares and Cash. Effective as of the Distribution
----------------------------
Date, New Olin Options and Arch Options held by Arch Employees shall be
transferred to the Arch Chemicals, Inc. 1999 Long Term Incentive Plan. New Olin
Options, Arch Options and Arch SARs held by Olin Employees, Olin Former
Employees, Subsequent Arch Employees and Arch Former Employees shall be retained
by the Olin Incentive Plans. Olin shall be solely responsible for the delivery
of Olin Common Stock upon exercise of New Olin Options in exchange for payment
of the exercise price and Arch shall be solely responsible for the delivery of
Arch Common Stock upon exercise of Arch Options, in each case in exchange for
payment of the applicable exercise price. Olin shall assume and be solely
responsible for all Liabilities with respect to Arch SARs which shall be issued
under the Olin Incentive Plans. Any adjustment to or cash-out of New Olin
Options made by Olin in accordance with the Olin Incentive Plans shall apply to
all outstanding New Olin Options including those transferred to an Arch Plan and
Olin shall be liable for such adjustment or cash-out. Similarly, any adjustment
to or cash-out of Arch Options made by Arch in accordance with the Arch
Chemicals, Inc. 1999 Long Term Incentive Plan shall apply to all outstanding
Arch Options resulting from the Distribution, including those held under
Incentive Plans, and Arch shall be liable for such adjustment or cash-out.
(e) Implementation. Olin and Arch shall each maintain a registration
---------------
statement on Form S-8 to cover all of their respective outstanding options,
regardless of who holds such options. Notwithstanding the foregoing provisions
of this Section 2.5, if either Olin or Arch determines that because of legal,
accounting, tax, and/or regulatory rules or requirements applicable to options,
or
<PAGE>
20
restricted stock in any jurisdiction outside the United States, compliance with
any of its obligations under this Section 2.5 with respect to options, or
restricted stock held by or to be issued to any individual employed outside the
United States would be impossible, illegal, impracticable or unreasonably
expensive, it shall so notify the other party, and Arch and Olin shall use their
best efforts to agree to appropriate alternative arrangements.
Section 2.6. Executive and Director Compensation Plans. (a) 1998
----------------------------------------- ----
Incentive Awards. Arch Employees and Former Arch Employees who were
- -----------------
participating in the EVA Management Incentive Compensation Plan will be entitled
to receive an annual incentive bonus award with respect to 1998 performance
assuming plan provisions are satisfied.
(b) Other Equity Awards. Olin shall continue to sponsor the Olin
--------------------
1991 Long-Term Incentive Plan for the benefit of Olin Participants and Former
Arch Employees. Immediately prior to the Distribution Date, holders of Olin
Restricted Stock Units (whether an Olin Participant or an Arch Participant)
shall be credited with one Arch Restricted Stock Unit for every two Olin
Restricted Stock Units credited to them under an Olin Plan. Such Arch
Restricted Stock Units shall be subject to substantially the same restrictions
as the Olin Restricted Stock Units except that with respect to Arch Employees,
any requirement for continued employment with the Olin Group shall be deemed to
refer to continued employment with the Arch Group. All liability for Olin
Restricted Stock Units and Arch Restricted Stock Units held by Arch Employees
shall be transferred to the Arch Chemicals, Inc. 1999 Long Term Incentive Plan
immediately prior to the Distribution Date and all reserves related to such
units attributable to Arch Employees who are determined to be Arch Employees on
the Distribution Date shall be transferred to Arch. Olin shall take all actions
necessary or appropriate to provide that each individual who is expected to
become an Arch Employee who has "Olin Performance Unit Plan" retention units
shall have the payment of such units accelerated and paid out prior to the
Distribution Date in Olin Common Stock.
(c) Deferred Compensation Plan. Olin will continue to sponsor the
---------------------------
Olin Corporation Employee Deferral Plan ("Olin Deferral Plan") for the benefit
of Olin Participants and Arch Former Employees. Arch shall take all actions
necessary or appropriate to establish before the Distribution Date, a Deferred
Compensation Plan which shall
<PAGE>
21
contain terms that are substantially similar to the terms contained in the Olin
Deferral Plan. Immediately prior to the Distribution Date, participants in the
Olin Deferral Plan (whether Olin Participants or Arch Participants) who have an
account invested in phantom shares of Olin Common Stock shall be credited with
one phantom share of Arch Common Stock for every two phantom shares of Olin
Common Stock credited to their accounts. All liability for phantom shares of
Arch Common Stock and Olin Common Stock credited to Arch Employees and related
cash accounts for such employees and all related reserves attributable to Arch
Employees who are determined to be Arch Employees on the Distribution Date shall
be transferred to Arch immediately prior to the Distribution Date.
(d) Benefits for Non-Employee Directors. Arch shall take all actions
------------------------------------
necessary or appropriate to establish on or before the Distribution Date, a
stock plan for non-employee directors which shall contain terms that are similar
to the terms contained in the Olin Corporation 1997 Stock Plan for Non-Employee
Directors; provided, however, that in lieu of or in addition to the annual
-------- -------
grants of shares of Arch Common Stock to non-employee directors, the board of
directors of Arch may elect to grant options to purchase shares of Arch Common
Stock and/or performance shares. Phantom shares of Olin Common Stock and Arch
Common Stock (after an adjustment which is similar to the Distribution) credited
to Arch directors will be transferred to the Arch stock Plan for non-employee
directors.
(e) Dividend Equivalents. Dividend equivalent units on Olin
---------------------
Restricted Stock Units and phantom shares of Olin Common Stock will be
reinvested in Olin Restricted Stock Units and phantom shares of Olin Common
Stock, respectively. Similarly, dividend equivalent units on Arch Restricted
Stock Units and phantom shares of Common Stock will be reinvested in Arch
Restricted Stock Units and phantom shares of Arch Common Stock, respectively.
Effective as of the Distribution Date, (i) Arch shall assume and be solely
responsible for all Liabilities (whether accrued, contingent or otherwise) with
respect to dividend equivalent units on awards held by Arch Employees, and (ii)
Olin shall assume or retain, as applicable, and be solely responsible for all
Liabilities (whether accrued, contingent or otherwise) with respect to dividend
equivalent units on awards held by Olin Participants or Former Arch Employees.
<PAGE>
22
ARTICLE III
Foreign Plans
-------------
Section 3.1. General Principles. This Section 3.1 sets forth certain
-------------------
general principles relating to Foreign Plans; however, exceptions may be made to
those general principles as set forth in Section 3.2. Olin and Arch shall take
all actions necessary or appropriate so that, effective no later than the
Distribution Date, all Foreign Plans have been divided and/or new Foreign Plans
established (to the extent necessary) so that all benefits of Olin Participants
under Foreign Plans (whether accrued or payable before, on or after the
Distribution Date) are provided by Olin Foreign Plans, and all benefits of Arch
Participants under Foreign Plans (whether accrued or payable before, on or after
the Distribution Date) are provided by Arch Foreign Plans. If any Foreign Plan
that is separated into an Olin Foreign Plan and an Arch Foreign Plan in
connection with or in anticipation of the Distribution is funded through a
trust, insurance contract or other funding vehicle, then such funding vehicle
shall be divided between such Olin Foreign Plan and Arch Foreign Plan on an
equitable basis. From and after the Distribution Date: (i) the members of the
Olin Group and the Olin Foreign Plans shall assume or retain, as applicable, and
shall be solely responsible for, all Liabilities of the Pre-Distribution Group
arising out of or relating to the Olin Foreign Plans; and (ii) the members of
the Arch Group and the Arch Foreign Plans shall assume or retain, as applicable,
and shall be solely responsible for, all Liabilities arising out of or relating
to the Arch Foreign Plans.
Section 3.2. Exceptions to General Principles. Olin and Arch
---------------------------------
recognize that it is possible that, in certain cases, applicable law may
prohibit the implementation of the general principles set forth in Section 3.1,
or that there may be special circumstances making such implementation
inadvisable or impractical. In all such cases, such general principles shall
not be implemented and Olin and Arch shall use best efforts to develop and
implement an alternative approach, and shall enter into such additional
agreements as may be necessary or appropriate in connection therewith.
<PAGE>
23
ARTICLE IV
General Provisions
------------------
Section 4.1. Employment Transfers; Severance Pay. (a) Arch and Olin
------------------------------------
shall take all steps necessary and appropriate so that, on or immediately after
the Distribution Date, all individuals who have been designated to be Arch
Employees are employed by a member of the Arch Group, and all individuals who
have been designated to be Olin Employees are employed by a member of the Olin
Group.
(b) Arch and Olin agree that, except as specifically provided by law
or otherwise in this Agreement, individuals who, in connection with the
Distribution, cease to be Olin Employees and become Arch Employees shall not be
deemed to have experienced a termination or severance of employment from Olin
and its subsidiaries for purposes of any Olin Plan that provides for the payment
of severance, redundancy, salary continuation or similar benefits.
Section 4.2. Recognition of Olin Employment Service, Etc. The Arch
--------------------------------------------
Plans shall, to the extent permitted by applicable law, recognize service before
the Distribution with the Pre-Distribution Group as service with the Arch Group.
Each Arch Welfare Plan shall, to the extent permitted by applicable law, provide
benefits to Arch Employees without interruption or change solely as a result of
the transition from the corresponding Olin Welfare Plans, and, without limiting
the generality of the foregoing: (a) shall, to the extent applicable, recognize
all amounts applied to deductibles, out-of-pocket maximums and lifetime maximum
benefits with respect to Arch Employees under the corresponding Olin Welfare
Plan for the plan year that includes the Distribution Date and for prior periods
(if applicable); (b) shall, to the extent applicable, not impose any limitations
on coverage of preexisting conditions of Arch Employees except to the extent
such limitations applied to such Arch Employees under the corresponding Olin
Welfare Plan immediately before such Arch Welfare Plan became effective; and (c)
shall not impose any other conditions (such as proof of good health, evidence of
insurability or a requirement of a physical examination) upon the participation
by Arch Employees who were participating in the corresponding Olin Welfare Plan
immediately before such Arch Welfare Plan became effective.
<PAGE>
24
Section 4.3. Workers' Compensation. Arch shall be responsible for
----------------------
all workers' compensation claims payable to or on behalf of Arch Participants
and Subsequent Arch Employees whether arising before, on or after the
Distribution Date; provided, however, that with respect to such individuals
-------- -------
receiving or entitled to receive workers' compensation benefits on the
Distribution Date, Olin shall pay or cause to be paid such benefits on and after
the Distribution Date and shall be reimbursed for such payments by Arch to the
extent not covered by Olin's insurance. Accruals for such Liabilities shall be
transferred to Arch.
ARTICLE V
Miscellaneous
-------------
Section 5.1. Guarantee of Subsidiaries' Obligations. Each of the
---------------------------------------
parties hereto shall cause to be performed, and hereby guarantees the
performance and payment of, all actions, agreements, obligations and Liabilities
set forth herein to be performed or paid by any Subsidiary of such party which
is contemplated by the Distribution Agreement to be a Subsidiary of such party
on or after the Distribution Date.
Section 5.2. Disputes. (a) In any case in which Arch or Olin shall
---------
disagree with the determination of an amount which this Agreement requires to be
made by the Enrolled Actuary, each such disagreeing party shall have the right,
within 30 days after receipt of notice of such determination, to engage, at its
own expense, an independent expert to make the determination of such amount. If
the amount determined by such independent experts should differ, such amount
shall be reasonably and equitably determined by another independent expert
selected by agreement between or among the Enrolled Actuary and such independent
experts.
(b) Any other dispute, controversy or claim arising out of or relating
to this Agreement shall be governed by Article V of the Distribution Agreement.
Section 5.3. Sharing of Information. Each of Olin and Arch shall,
-----------------------
and shall cause each of the other members of their respective Groups to, provide
to the other all such information in its possession as the other may reasonably
request to enable it to administer its employee benefit plans and programs, and
to determine the scope of,
<PAGE>
25
and fulfill, its obligations under this Agreement. Such information shall, to
the extent reasonably practicable, be provided in the format and at the times
and places requested, but in no event shall the party providing such information
be obligated to incur any direct expense not reimbursed by the party making such
request, nor to make such information available outside its normal business
hours and premises except as the parties otherwise specifically agree. The right
of the parties to receive information hereunder shall, without limiting the
generality of the foregoing, extend to any and all reports, and the data
underlying such reports, prepared by the Enrolled Actuary in making any
determination under this Agreement or by any third party engaged pursuant to
Section 5.2.
Section 5.4. Termination. This Agreement shall be terminated in the
------------
event that the Distribution Agreement is terminated and the Distribution
abandoned prior to the Distribution Date. In the event of such termination,
neither party shall have any liability of any kind to the other party.
Section 5.5. Rights To Amend or Terminate Plans; No Third Party
--------------------------------------------------
Beneficiaries. Except as provided in Section 2.4(d), no provision of this
- --------------
Agreement shall be construed (a) to limit the right of Olin, any other member of
the Olin Group, Arch or any other member of the Arch Group to amend any Plan or
terminate any Plan, or (b) to create any right or entitlement whatsoever in any
Employee, former Employee or Beneficiary, including a right to continued
employment or to any benefit under a Plan or any other compensation. This
Agreement is solely for the benefit of the parties hereto and their respective
subsidiaries and should not be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 5.6. Complete Agreement. This Agreement and the agreements
-------------------
and other documents referred to herein shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to
such subject matter.
Section 5.7. Governing Law. Subject to applicable U.S. federal law,
--------------
this Agreement shall be governed by and construed in accordance with the laws of
the
<PAGE>
26
Commonwealth of Virginia applicable to contracts executed therein and to be
performed therein as to all matters, including matters of validity,
construction, effect, performance and remedies.
Section 5.8. Notices. All notices, requests, claims, demands and
--------
other communications hereunder shall be given in accordance with the provisions
of Section 8.08 of the Distribution Agreement.
Section 5.9. Amendment and Modification. This Agreement may be
---------------------------
amended, modified or supplemented only by a written agreement signed by both of
the parties hereto.
Section 5.10. Successors and Assigns. This Agreement and all of the
-----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns, but neither this Agreement
nor any of the rights, interests and obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other party (which
consent shall not be unreasonably withheld or delayed).
<PAGE>
27
SECTION 5.11. Consent to Jurisdiction. Without limiting the
------------------------
provisions of Article V of the Distribution Agreement, each of the parties
irrevocably submits to the exclusive personal jurisdiction and venue of (a) the
Circuit Court of Henrico County, Commonwealth of Virginia, and (b) the United
States District Court for the Eastern District of Virginia (Richmond Division),
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Eastern District of Virginia (Richmond Division)
or if such suit, action or other proceeding may not be brought in such court for
juris dictional reasons, in the Circuit Court of the Henrico County,
Commonwealth of Virginia. Each of the parties further agrees that service of
any process, summons, notice or document by U.S. registered mail to such party's
respective address set forth in the Distribution Agreement shall be effective
service of process for any action, suit or proceeding in Virginia with respect
to any matters to which it has submitted to jurisdiction in this Section 5.11.
Each of the parties irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the Circuit Court of Henrico
County, Commonwealth of Virginia, or (ii) the United States District Court for
the Eastern District of Virginia (Richmond Division), and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum, and the right to object, with respect
to such action, suit or proceeding, that such court does not have jurisdiction
over such Party.
Section 5.12. Counterparts. This Agreement may be executed in two or
-------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.13. Interpretation. The Article and Section headings
---------------
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties hereto and shall not in any way affect the
meaning or interpretation of this Agreement.
<PAGE>
28
Section 5.14. Legal Enforceability. Any provision of this Agreement
---------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Each party
acknowledges that money damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 5.15. References; Construction. References to any "Article"
-------------------------
or "Section" without more, are to Articles or Sections to or of this Agreement.
Unless otherwise expressly stated, "including", "includes" or "include" shall be
deemed followed by the words "without limitation".
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
OLIN CORPORATION,
by
-----------------------------------
Name: Johnnie M. Jackson, Jr.
Title: Vice President,
General Counsel and
Secretary
ARCH CHEMICALS, INC.,
by
-----------------------------------
Name: Sarah A. O'Connor
Title: Vice President
<PAGE>
EXHIBIT 10.8
TRANSITION SERVICES AGREEMENT
-----------------------------
THIS TRANSITION SERVICES AGREEMENT dated as of February 8, 1999, by and
between ARCH CHEMICALS, INC., a Virginia corporation ("ARCH"), and OLIN
CORPORATION, a Virginia corporation ("OLIN").
WITNESSETH:
----------
WHEREAS, OLIN and ARCH have entered into a Distribution Agreement (as
defined below);
WHEREAS, pursuant to the Distribution Agreement, OLIN has agreed to
transfer certain assets and businesses constituting the Arch Assets and the Arch
Business, respectively (each as defined in the Distribution Agreement) to ARCH;
WHEREAS, prior to the Distribution Date (as defined in the Distribution
Agreement), the Arch Business has received various support services from, and
provided various support services to, OLIN and its subsidiaries; and
WHEREAS, following the Distribution Date, OLIN and ARCH desire that for a
period of transition and for purposes of continuity, OLIN continue to provide
certain services to ARCH and its subsidiaries and that ARCH continue to provide
certain services to OLIN and its subsidiaries, all in a manner and amount as
historically provided prior to the Distribution Date, and on terms and
conditions as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, OLIN and ARCH agree as follows:
1. Definitions.
-----------
The following terms have the meanings hereinafter assigned to them:
"ARCH Services" means each Service listed on Exhibit A hereto.
"Confidential Information" means any and all information owned or
controlled by a Party and disclosed to the receiving Party by a disclosing Party
pursuant to this Agreement, in any form such as, but not limited to, visual,
oral, written, graphic, electronic or model form, including but not limited to,
know-how and trade secrets, whether of a business or a technical nature, whether
patented or not, and whether in the laboratory, pilot plant or commercial plant
<PAGE>
stage (including without limitation, drawings, operating conditions,
specifications, safety instructions, environmental recommendations, emergency
instructions).
"Customer" means (i) with respect to OLIN Services, ARCH and its
subsidiaries and (ii) with respect to ARCH Services, OLIN and its subsidiaries.
"Distribution Agreement" means that certain Distribution Agreement, dated
as of February 1, 1999, by and between ARCH and OLIN.
"Employee Benefits Information" means information relating to the
administration of ARCH's and OLIN's employee benefit programs as provided in
Exhibits attached hereto, including but not limited to information and/or data
submitted for reimbursement of, or in support of, any benefits claim (including
but not limited to health, counseling, medical, dental, or disability claims).
"Governmental Authority" means any federal, state or local government,
governmental authority, regulatory or administrative agency, governmental
commission, board, bureau, court or tribunal or any other similar arbitral body.
"OLIN Services" means each Service listed on Exhibit B hereto.
"Party" or "Parties" means either ARCH or OLIN or both of them.
"Prime Rate" means the rate of interest published as the "Prime Rate" in
the Wall Street Journal under the title "Money Rates" and defined therein as
-------------------
being the base rate on corporate loans at large money center commercial banks
(or if no longer published, an equivalent rate agreed by the Parties).
"Provider" means (i) with respect to OLIN Services, OLIN and (ii) with
respect to ARCH Services, ARCH.
"Services" means the furnishing, supply, distribution and delivery of each
service as set forth in Exhibit A or Exhibit B hereto to be provided by or on
behalf of a Party pursuant to the terms and conditions of this Agreement.
"Service Charge" - See Section 4 hereof.
"Service Description" means the description of each individual Service
respectively provided in Exhibits A and B.
"Standard of Care" - See Section 2(b) hereof.
2
<PAGE>
2. Services.
--------
(a) Subject to the terms of this Agreement, (i) OLIN will provide to ARCH
and its subsidiaries the OLIN Services in substantially the same manner, to the
same location and as and to the extent provided by OLIN (and not by an outside
contractor) to the Arch Business as it existed prior to the Distribution Date
during the one-year period immediately preceding the date of this Agreement, and
(ii) ARCH shall provide to OLIN and its subsidiaries the ARCH Services in
substantially the same manner, to the same location and as and to the extent
provided by the Arch Business as it existed prior to the Distribution Date (and
not by an outside contractor) during the one-year period immediately preceding
the date of this Agreement.
(b) In providing the Services, the Provider shall employ the same standards
of care, priority and diligence employed in providing services of the same type
for itself and its affiliates ("Standard of Care").
(c) Exhibits A and B identifies the Services to be provided by the Parties
and subject to the mutual agreement of the Parties acting reasonably, may be
amended from time to time, to add any additional Services, or to modify or
delete Services, as the Parties may agree.
(d) No Provider employee shall be considered a Customer employee for any
purpose, and the Provider shall provide the Services as an independent
contractor.
(e) The Customer shall, in a timely manner, take all such actions as may be
reasonably necessary or desirable in order to enable or assist the Provider in
the provision of the Services, including, but not limited to, providing
necessary information and specific written authorizations and consents, and the
Provider shall be relieved of its obligations hereunder to the extent that the
Customer's failure to take any such action renders performance by the Provider
of such obligations unlawful or impracticable.
(f) A Provider shall not be required to expand its facilities, incur new
long-term capital expenses or employ additional personnel to provide Services to
the other Party.
3. Confidentiality.
---------------
(a) Confidentiality Obligation. Each of the Parties agrees to keep
--------------------------
confidential and neither disclose to others nor use, except as permitted herein,
any Confidential Information or any Employee Benefits Information received from
the other Party pursuant to this Agreement.
(b) Limits on Disclosure. The receiving Party shall treat all Confidential
--------------------
Information in the same manner and with the same degree of care (but in any
event with no less of a degree of care than is reasonable for such information)
as it uses with respect to its own Confidential Information of like nature, and
shall disclose Confidential Information of the other Party only to
3
<PAGE>
its employees who have a need to know it, provided that such employees agree in
writing to be bound by all confidentiality obligations provided for in this
Agreement. The receiving Party shall treat all Employee Benefits Information
with highest standard of care reasonable for such information, and shall
disclose Employee Benefit Information of the other Party only to its employees
who have a strict need to know such information, provided that such employees
agree in writing to be bound by all confidentiality obligations provided for in
this Agreement.
(c) Exceptions. The obligations set forth in this Section 3 shall not
----------
apply with respect to any Confidential Information which:
(i) Public Knowledge. Is generally available to the public or
----------------
subsequently becomes generally available to the public through no
breach by the receiving Party of secrecy obligations under this
Agreement or prior agreements between the Parties concerning the
Confidential Information; or
(ii) Received from a Third Party. Is received from a third party who
---------------------------
is legally free to disclose such Confidential Information and who
did not receive such Confidential Information in confidence from
the disclosing Party; or
(iii) Independently Developed. Is independently developed by the
-----------------------
receiving Party without reference to the Confidential Information
received from the disclosing Party.
(d) Permitted Disclosures. The provisions of this Section 3
---------------------
notwithstanding, in exercising the rights granted under this Agreement, either
Party may disclose Confidential Information to others for the purpose of
obtaining consulting services under a license agreement permitted hereunder,
provided that any such third party, to which such Confidential Information is
disclosed shall have first entered into a written secrecy and non-use agreement
imposing obligations on such party that are at least as stringent as those
imposed on the Parties pursuant to this Agreement.
(e) Subpoena or Demand. The provisions of this Section 3 notwithstanding,
------------------
a Party may disclose Confidential Information and/or Employee Benefits
Information pursuant to a subpoena or demand for production of documents in
connection with any suit or arbitration proceeding, any administrative procedure
or hearing before a governmental or administrative agency or instrumentality
thereof, or any legislative hearing or other similar proceeding, provided that
the receiving Party shall promptly notify the disclosing Party of the subpoena
or demand and provided further that in such instances, the Parties use their
reasonable best efforts to maintain the confidential nature of the Confidential
Information and/or Employee Benefits Information by protective order or other
means.
4
<PAGE>
(f) Government Audit. The provisions of this Section 3 notwithstanding, a
----------------
Party may disclose Confidential Information (other than information which is not
required by U.S. Government regulations to be made available to U.S. Government
auditors (e.g., internal audit reports) to U.S. Government auditors upon request
----
during the performance of a governmental audit or review of any U.S. Government
contract of such Party in the normal course of the audit function and according
to standard practices; provided that prompt notice of the disclosure of such
information shall be given prior to such disclosure to the Party from which the
information was obtained.
4. Compensation.
------------
(a) Service Charge. In consideration of the provision of the Services, the
--------------
Customer shall, for each Service performed, pay Provider monthly the applicable
fee plus the additional charges set forth in Exhibits A or B (such monthly fee
and additional charges being collectively, the "Service Charge" for such
Service) which monthly fee shall be either (i) a base fee, as specified on
Exhibits A or B, or (ii) if not otherwise specified, the Provider's directly
allocable cost for such Service. Unless otherwise stated in Exhibits A or B,
such allocations shall be made on a basis consistent with the allocation
methodology used by OLIN immediately prior to the Distribution Date, which shall
include a fair and reasonable allocation for Provider's employee benefit costs
relating to employees, and for Provider's facilities and other overhead. In
addition to such monthly fee, Provider shall be entitled to reimbursement from
Receiver upon receipt of reasonable supporting documentation for all out-of-
pocket expenses incurred in connection with Provider's provision of the Services
which are not included as part of the normal allocated cost. The monthly
Service Charge will be prorated for the number of days of Service received in
the calendar month (based on a thirty day month) in which the Service is
terminated.
(b) Invoicing and Payments. The monthly fee of the Service Charge for any
----------------------
month will be paid in advance on the last business day of the preceding month
except that the first monthly fee paid hereunder shall be paid immediately
following the Distribution Date. Monthly fees which are based on cost
allocations shall be estimated and paid based on then current budgeted cost
allocations, with the Provider providing a reconciling invoice quarterly within
thirty (30) days after the end of the quarter, and any net credit applied to the
next monthly fees due thereafter and any net payment due from the Receiver
within fifteen (15) days thereafter. Except as otherwise set forth herein, the
Provider will invoice the Customer for any additional costs incurred by the
Provider for the benefit of the Customer which are to be paid pursuant to
Exhibits A or B hereto, and such invoices will be payable within fifteen (15)
days of receipt. Upon termination of this Agreement, there will be a final
accounting and each Party shall promptly pay to the other Party any amounts owed
to the other Party. All payments due hereunder shall be made by electronic
funds transfer unless otherwise agreed by the Parties.
(c) Taxes. To the extent not included directly in the price the Provider
-----
charges for Services, the Customer shall pay to the Provider the amount of any
taxes or charges set forth in
5
<PAGE>
(i) through (iii) below imposed now or in the future by any Governmental
Authority including any increase in any such tax or charge imposed on Provider
after the Distribution Date of this Agreement.
(i) Any applicable sales, use, gross receipts, value added or
similar tax that is imposed as a result of, or measured by, any
sale or Service rendered hereunder unless covered by an
exemption certificate,
(ii) Any applicable real or personal property taxes, including any
special assessments, and any impositions imposed on the
Provider in lieu of or in substitution for such taxes on any
property used in connection with any sale or Service rendered
hereunder, and
(iii) Any other governmental taxes, duties, and/or charges of any
kind, excluding any income or franchise taxes imposed on the
Provider, which the Provider is required to pay with respect to
any sale or Service rendered hereunder.
(d) Late Payments. In the event the Customer disputes the accuracy of any
-------------
invoice, the Customer shall pay the undisputed portion of such invoice and the
Parties will promptly meet and seek to resolve the dispute. If the Customer
fails to pay any undisputed amount owed under this Agreement, the Customer shall
correct such failure promptly following notice of the failure, and shall pay the
Provider interest on the amount paid late at two percent (2%) above the Prime
Rate prorated for the number of days such overdue amounts are outstanding.
5. Government Contracts. In the event that the Services to be performed
--------------------
involve contracts the Customer may have as a U.S. Government prime contractor or
subcontractor, the provisions of such contracts that are required by any
applicable U.S. federal acquisition regulation, including but not limited to,
the Walsh-Healey Public Contracts Act, Fair Labor Standards Act, Officials Not
to Benefit, Covenant Against Contingent Fees, Nondiscrimination in Employment,
Military Security Requirements, Office of Federal Procurement Policy Act and
Examination of Records, shall be binding on Provider to the extent necessary to
enable the Customer to meet its legal and contractual commitments.
If the Services to be performed by Provider include the receiving,
handling, or developing of any U.S. Government classified material or data,
Provider agrees, and agrees to cause all persons or entities in its employ or
control, to comply with all applicable security regulations and requirements.
Each Provider agrees to immediately submit a confidential report to Customer
whenever, for any cause, it has reason to believe that there is an active danger
of espionage or sabotage affecting any work under such U.S. Government
contracts.
6
<PAGE>
Each Provider represents and warrants that it is familiar with the laws,
rules, orders, and regulations applicable to the performance of U.S. Government
procurement contracts with federal agencies including, but not limited to, the
Department of Defense, the Department of Energy, and the National Aeronautics
and Space Administration; that each will abide by all such laws, rules, orders
and regulations; that it, and each of its employees performing Services
hereunder, is eligible to act as a consultant to a U.S. Government defense
contractor under all applicable federal laws and regulations regarding post-
government employment; and that it will provide any and all certifications,
representations, reports, records or any other document required to be submitted
by suppliers under federal contracts.
6. Limitation of Liability; Indemnity.
----------------------------------
(a) A Provider shall have no liability to the Customer or any third party
in connection with the provision of the Services except to the extent such
Services were provided in breach of the Provider's Standard of Care and, in such
a case, only to the extent of the following:
(i) a dollar amount limited to the amount of insurance proceeds paid
to Provider therefor from a third party insurance company, and
(ii) at the option of the Customer, the Provider shall either:
(x) perform again the particular Service performed in breach of
the Standard of Care at no cost to Customer, or
(y) give the Customer a refund of the portion of the Service
Charge attributable to the cost of performance of the
Service provided in breach of the Standard of Care.
In no event shall the Provider be liable in connection with its provision of the
Services for any indirect, special or consequential damages, including any fines
or penalties payable by the Customer to any government agency, or for any loss
of profits or other economic damages.
(b) The Customer hereby agrees to indemnify and hold the Provider and its
affiliates, officers, directors, agents and employees (collectively, the
"Provider Indemnitees") harmless from and against any and all liabilities,
losses, damages, expenses, fines and penalties of any kind, including reasonable
attorneys' fees and disbursements, incurred by the Provider Indemnitees either:
(i) as the result of any claim made against the Provider Indemnitees
by any third party arising out of the Provider's provision of the
Services (except to the extent, and only to the extent, of
Provider's liability to Customer for the respective Service as
provided in Paragraph 6(a) above); and/or
7
<PAGE>
(ii) arising out of the Customer's negligence or malfeasance in
connection with its use of the Services.
7. Insurance. The Provider shall procure and maintain fire, extended
---------
casualty, public liability, worker's compensation, employer's liability, and
such other types of insurance which are reasonably necessary to protect itself
and the Customer and consistent with past practice (which may include self-
insurance). If requested, such policies of insurance with third party insurers
shall name Customer as an additional insured party to the extent applicable.
8. Force Majeure. Neither the Customer nor the Provider shall be liable
-------------
for any delays in its performance hereunder caused by events beyond its
reasonable control (a "force majeure event") including, without limitation:
acts of God, acts of government, fire, equipment breakdown, strikes or other
similar labor disputes (settlement of which shall be in the sole discretion of
the employer), or the inability to acquire materials or third-party services.
Upon the occurrence of any event which is reasonably expected to or does cause a
delay in performance hereunder, the person or Party whose performance is or may
be delayed shall give prompt written notice thereof to the Customer or Provider,
as the case may be. The Parties shall use reasonable efforts to cooperate and
minimize the impact of such force majeure event on the provision of Services.
9. Disputes. In the event of any disputes arising out of or in
--------
connection with the execution, interpretation, performance or nonperformance of
this Agreement, Provider and Customer shall use the following procedure prior to
either Party pursuing other available legal remedies:
Upon signing of this Agreement, each Party will designate one
representative ("Representative") for the purpose of resolving disputes which
may arise from time to time. A Party may change its Representative to act
hereunder at any time upon notice to the other. Upon a dispute arising, either
or both Representatives may request in writing a conference with the other. If
so requested, the conference shall occur within ten (10) days of the initial
written request and shall be held via telephone or at a mutually agreed upon
location, at the option of the Representatives. The purpose and scope of the
conference shall be limited to issues related to resolving the dispute. At the
conference, each Representative shall use their reasonable best efforts to
attempt to resolve the dispute. If the dispute has not been settled within
thirty (30) days of the first meeting of the Representatives, the parties shall
establish a Management Appeal Board ("MAB") within ten (10) days of receipt of a
request by either Party to set up a MAB. The MAB shall consist of two (2)
members of each respective Party's management. OLIN shall appoint two members
to represent OLIN, and ARCH shall appoint two members to represent ARCH. The
sole purpose of MAB shall be to resolve any dispute over which the
Representatives failed to resolve. The MAB members shall be comprised of
persons other than the Representatives. The MAB shall meet at OLIN's
headquarters or other place mutually
8
<PAGE>
agreed upon and shall confer to resolve the dispute by good faith negotiations,
which may include presentations by the Representatives or others.
In the event the Parties are unable to resolve their disputes within ninety
(90) days after the establishment of a MAB, upon election by either Party such
disputes shall be solely and finally settled by a board of three (3) arbitrators
in accordance with the Commercial Arbitration Rules (the "Arbitration Rules") of
the American Arbitration Association ("AAA"). The Party electing arbitration
shall notify the other Party in writing in accordance with the Arbitration Rules
and such notice shall be accompanied by the name of the arbitrator selected by
the Party serving the notice. The other Party shall choose the second
arbitrator, and the two arbitrators so selected shall choose a neutral
arbitrator who shall be the third arbitrator. If a Party fails to select an
arbitrator or to advise the other Party of its selection within thirty (30) days
after receipt by such a Party of the notice of the intent to arbitrate, the
second arbitrator shall be selected by the AAA. If the third arbitrator shall
not have been selected within thirty (30) days after the selection of the second
arbitrator, the appointment shall be made by the AAA. All such proceedings
shall be conducted in Norwalk, Connecticut or another mutually agreed upon
location. The arbitrators shall make detailed findings of fact and law in
writing in support of the decision of the arbitrator panel, but shall not be
empowered to award reimbursement of attorneys' fees and other costs of
arbitration to the prevailing Party. The provisions of this Section 9 shall not
be deemed to preclude any Party hereto from seeking preliminary injunctive
relief to protect or enforce its rights hereunder, or to prohibit any court from
making preliminary findings of fact in connection with granting or denying such
preliminary injunctive relief, or to preclude any Party hereto from seeking
permanent injunctive or other equitable relief after and in accordance with the
decision of the arbitrator panel. Whether any claim or controversy is
arbitrable or litigable shall be determined solely by the arbitrator panel
pursuant to the provisions of this Section 9. Any monetary award of the
arbitrators panel shall include interest from the date of any breach or any
violation of this Agreement. The arbitrators shall fix an appropriate rate of
interest from the date of the breach or other violation to the date when the
award is paid in full. The Parties agree that the decision of the arbitrators
shall be final and conclusive and that judgment on the arbitration award may be
entered in any court having jurisdiction over the Parties or their assets.
It is expressly agreed that the failure of the parties to resolve a dispute
on any issue to be resolved hereunder shall not relieve either Party from any
obligation set forth in this Agreement. In addition, the Parties expressly
state their mutual determination that the failure to resolve any such disputes
shall not hinder or delay the providing of the Services, and that,
notwithstanding the pendency of any such dispute, neither Party will be excused
of its obligations hereunder to cooperate with the other to effectuate the
purposes of this Agreement.
10. Books and Records. The Provider shall, upon reasonable notice and
-----------------
during normal business hours, allow the Customer's financial personnel
reasonable access to its books,
9
<PAGE>
records and other information necessary to confirm the calculation of the
compensation and reimbursement due the Provider hereunder.
11. Term and Termination of Particular Services.
-------------------------------------------
(a) The term of this Agreement shall commence as of the Distribution Date
and shall continue until Services are no longer provided hereunder. Unless
otherwise agreed by the Parties, each Service shall terminate on the earliest of
(i) thirty (30) days (or such later date as is stipulated in the notice)
following receipt by the Provider of written notice from the Customer to
terminate the Service, (ii) the last day of the term for such Service as
specified in the respective Service Description, or (iii) the date on which the
Provider discontinues providing such Services to its own business, provided that
the Provider has given the Receiver at least ninety (90) days' notice of its
intention to discontinue such Service to its own operations. If the Provider
employs a third party provider to provide a Service previously provided directly
by the Provider, then it will request that such third party provide such Service
to the Receiver.
(b) Upon termination of a Service with respect to which the Provider holds
books, records or files, including current and archived copies of computer
files, owned by Customer and used by Provider in connection with the provision
of a Service to Customer, Provider will return all of such books, records or
files as soon as reasonably practicable, provided however, that Provider may
make a copy, at its expense, of such books, records or files for archival
purposes only.
12. Non-Waiver. The Customer's or the Provider's waiver of any breach or
----------
failure to enforce any of the terms or conditions of this Agreement at any time
shall not in any way affect, limit or waive such person's right thereafter to
enforce strict compliance with every term and condition hereof.
13. Assignment. Neither this Agreement nor any right or obligation
----------
hereunder is assignable or transferable by either party (in whole or part)
without the prior written consent of the other party and any such purported
assignment without such consent shall be void, except that either party shall
have the right to assign this Agreement and its rights and obligations
hereunder, without obtaining the prior written consent of the other party, to
any entity with which the assigning party merges or transfers a substantial part
of its assets or businesses to which this Agreement relates, provided that such
assignee or transferee accepts such assignment or transfer and the rights and
obligations hereunder in writing. Nothing in this Agreement, express or
implied, is intended to confer any rights or remedies under this Agreement on
any person or entity other than ARCH or OLIN and their respective successors and
permitted assigns.
14. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of Connecticut, without giving effect to
its conflict of laws provisions.
10
<PAGE>
15. Captions. The titles contained in this Agreement are for reference
--------
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
16. Amendment. This Agreement may be modified or amended only pursuant to
---------
a written agreement executed on behalf of each of OLIN and ARCH. No
modification or addition to this Agreement shall be effected by the
acknowledgment or acceptance by either party of any purchase order, invoice,
acknowledgment, release or other forms submitted by the other party containing
additional, other or different terms or conditions.
17. Notices. All notices, consents, termination notices, and other
-------
communications to be given hereunder, other than routine immaterial
communications, shall be by telex or electronic facsimile, confirmed in writing
as hereinafter provided, or in writing which shall be valid and sufficient only
if delivered by hand, by confirmed facsimile (with a copy mailed first class to
the address listed below promptly thereafter), by national overnight courier
service or by registered or certified mail, return receipt requested, postage
prepaid, addressed to the other party at its address as set forth below, or to
such other address as has theretofore been designated by the other party by
notice given in accordance with this Section.
If to OLIN
OLIN CORPORATION
501 Merritt 7
Norwalk, CT 06851
Attention: Corporate Secretary
Telecopier: (203) 750-3018
If to ARCH
ARCH CHEMICALS, INC.
501 Merritt 7
Norwalk, CT 06851
Attention: Corporate Secretary
Telecopier: (203) 750-2613
18. Entire Agreement. This Agreement (including the exhibits and
----------------
schedules referred to herein) constitutes the entire agreement with respect to
the subject matter hereof between the parties hereto and supersedes all prior
agreements and understandings, oral and written, between the parties hereto,
with respect to the subject matter hereof.
11
<PAGE>
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall for all purposes be deemed to be an original
and all of which together shall constitute one and the same instrument.
20. Severability. If any provision of this Agreement or the application
------------
of any such provision to any person or circumstances shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
OLIN CORPORATION
By: /s/ Johnnie M. Jackson, Jr.
---------------------------
Johnnie M. Jackson, Jr.
Vice President, General Counsel and Secretary
ARCH CHEMICALS, INC.
By: /s/ Sarah A. O'Connor
---------------------
Sarah A. O'Connor
Vice President
13
<PAGE>
Focus Team: EH&S
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Environmental Remediation Consultation
- ---------------- by Dr. L. Wikstrom
ARCH Department Providing
- -------------------------
Service: Arch - Environmental Hygiene and
- -------- Toxicology
Location of Provider: Cheshire
- ---------------------
OLIN Department Receiving Service: Olin - Environmental Remediation Group
- ----------------------------------
Location of Receiver: Wilmington, MA
- ---------------------
Description: 1. Provide consulting services regarding
- ------------ water chemicals at Wilmington.
2. Assist in design and implementation
of bio treatment for the Plant B
area.
Term: Ends no later than 12/31/99.
- -----
Monthly Base Fee: $1,667/month
- -----------------
Additional Charges: $0
- -------------------
1
<PAGE>
Focus Team: Accounting, Finance
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Credit Services
- ---------------
ARCH Department
Providing Service: Finance
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Chlor-Alkali
- -----------------
Location of Receiver: Various
- --------------------
Description: Credit Reports, investigation and
- ------------ collection activities on an
as-requested basis.
Term: Ends no later than December 31, 1999.
- -----
Monthly Fee: $0
- ------------
Additional Charges: $100 per hour
- -------------------
2
<PAGE>
Focus Team: Purchasing, Shipping & Transportation
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Logistics
- ---------------
ARCH Department
Providing Service: Transportation and Distribution
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Purchasing, Logistics and MIS
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Transportation Related Regulatory
- ----------- Compliance and Monitoring, Bills of
Lading, Description Table and Updates
Term: No later than 12/31/99
- -----
Monthly Fee: $4,166.66
- ------------
Additional Charges: $0
- -------------------
3
<PAGE>
Focus Team: EH&S
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Material Safety Data Sheets (MSDSs)
- ---------------
ARCH Department
Providing Service: MSDS Control (#422)
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: EH&S
- -----------------
Location of Receiver: Various
- --------------------
Description: Provide services outlined on the
- ----------- attached form.
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: $19,900 ($238,800 annual)
- -----------
Additional Charges: $0
- ------------------
4
<PAGE>
================================================================================
PRIMARY SERVICES PROVIDED BY MSDS CONTROL FOR THE
CORPORATION
================================================================================
1. WITH THE ASSISTANCE OF THE MSDS PROJECT AND IMPLEMENTATION TEAMS, DEVELOP,
IMPLEMENT AND TRAIN THE CORPORATION ON OLIN'S NEW HAZOX (EMS) SYSTEM. OUR
GOAL IS TO PROVIDE THE CORPORATION WITH IMPROVED DOMESTIC/INTERNATIONAL
MSDS CAPABILITIES INCLUDING MSDSs READILY AVAILABLE IN MULTI-LANGUAGES;
LABEL, BILL OF LADING, CHEMICAL REPORT GENERATION AND SUPPLIER MSDS
SOLUTION FOR ALL OLIN LOCATIONS; ELECTRONIC AND INTRA/INTERNET DISTRIBUTION
OF DOCUMENTS.
2. ANNUALLY DEVELOP 800 PRODUCT AND 150 R& D SAMPLE DOMESTIC MATERIAL SAFETY
DATA SHEETS (MSDSs), 30 TECHNICAL DATA SHEETS/BULLETINS (TDSs) AND OTHER
LITERATURE (I.E. PRODUCT STEWARDSHIP SHEETS), 120 EUROPEAN FORMAT MSDSs, 50
INTERNATIONAL MSDSs (E.G. SPANISH, CANADIAN FRENCH), 100 DANGEROUS GOODS
RECORDS (SAP) AND EMERGENCY RESPONSE INFORMATION SHEETS (ERISs) AS
REQUIRED.
3. MAINTAIN HAZARD COMMUNICATION COMPLIANCE FOR 6100 PRODUCT, 1100 R&D SAMPLE
AND 900 INTERNATIONAL MSDSs; REGULATORY COMPLIANCE FOR 250 EMERGENCY
RESPONSE INFORMATION SHEETS; 280 MASTER DANGER GOODS RECORDS (SAP) AND 240
TECHNICAL DATA SHEETS AND OTHER LITERATURE. THIS INCLUDES PERFORMING, ON
AVERAGE, 60 MSDS AND 10 TDS REVISIONS PER MONTH.
4. HANDLE APPROXIMATELY 10,000 REQUESTS/YEAR (OR 40/DAY) FOR DOCUMENTS FROM
INTERNAL AND EXTERNAL CUSTOMERS.
5. ADDRESS OVER 5,000 CALLS/YEAR (OR 20/DAY) FOR DIVERSE CUSTOMER INQUIRIES
RANGING FROM TECHNICAL SUPPORT TO EMERGENCY SITUATIONS WHERE WE SUPPORT
OCEANa AS NEEDED.
6. MAINTAIN MSDS SUPPORT SERVICES FOR DIVESTED BUSINESSES [E.G. CLEARON CORP
(POOL CHEMICALS) AND HUNT IMAGING LLC (OMM ELECTROSTATICS)].
7. PROVIDE FOR THE PROPER PRINTING, DISTRIBUTION, AND HISTORICAL DOCUMENTATION
(FOR USE IN LITIGATION) OF MSDSs/TDSs.
8. ASSIST THE LAW DEPARTMENT IN PRODUCING APPROPRIATE DOCUMENTATION AND
HISTORICAL INFORMATION NECESSARY IN LITIGATIONS.
9. CONDUCT MSDS DATABASE SEARCHES FOR THE CORPORATION AS NEEDED. (E.G. ASSIST
THE MEDICAL DEPARTMENT IDENTIFY ANY PRODUCTS/INGREDIENTS EMPLOYEES MAY HAVE
BEEN EXPOSED TO IN THE EVENT OF AN ALLERGIC REACTION.)
10. PARTICIPATE IN GROUP/PROFESSIONAL ORGANIZATIONS/ACTIVITIES/LEGISLATION
INVOLVING CURRENT MSDS RELATED TOPICS I.E. SOCIETY FOR CHEMICAL HAZARD
COMMUNICATION (SCHC); CMA's WORK GROUP FOR THE REVIEW OF ANSI Z400.1-1998
"GUIDE TO PREPARATION OF MATERIAL SAFETY DATA SHEETS; HOUSE MSDS BILL, HR
4037.
11. PROVIDE SUMMARY OF RELEVANT NEW OR PROPOSED REGULATIONS FROM THE
DEPARTMENTS OF STATE, COMMERCE & TREASURY AFFECTING EXPORT LICENSING.
ASSIGN EXPORT CLASSIFICATIONS (ECCNs) FOR NEW PRODUCTS AS NEEDED. MAINTAIN
CURRENT LISTING OF "BANNED PARTIES" WHO HAVE BECOME INELIGIBLE TO RECEIVE
OLIN GOODS AND SERVICES DUE TO PENALTIES IMPOSED FOR VIOLATION OF U.S.
EXPORT LAW.
5
<PAGE>
Focus Team: EH&S
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Medical Services for 501 Merritt 7
- ---------------
ARCH Department
Providing Service: Medical
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: EH&S
- ----------------- (Olin Norwalk Employees)
Location of Receiver: Norwalk
- --------------------
Description: Supply medical services in-house to
- ----------- Olin employees located in Norwalk.
Term: The Initial Term will be through
- ---- February 1, 2000. Thereafter, the
Parties may elect to enter into a
separate agreement on mutually agreed
terms for the provision of medical
services for an additional period of
time.
Monthly Fee: $10,083 per month.
- -----------
Additional Charges: $0
- ------------------
6
<PAGE>
Focus Team: Tax Services
- -------------------------
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Tax
- ---------------
ARCH Department Providing Service: Tax
- ---------------------------------
Location of Provider: Norwalk, CT
- --------------------
OLIN Department Receiving Service: Tax
- ---------------------------------
Location of Receiver: Norwalk, CT
- --------------------
Description: Compliance Services: Actual
- ----------- preparation and filing of any tax
returns, licenses, permits and related
extension requests and/or payments
(estimated and actual).
Consulting Services: Provide all
assistance and guidance required for
various tax matters that are not
specifically covered under Compliance
Services. Also included is deferred tax
Accounting matters.
Term: Ends no later than 12/31/99
- ----
Monthly Base Fee: $0
- ----------------
Additional Charges: Consulting Services: $335/hour
- ------------------ Compliance Services: $250/hour
7
<PAGE>
Focus Team: Admin
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Administration
- --------------- (account # 401)
ARCH Department
Providing Service: Facility Services
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Various
- --------------------
Location of Receiver: Norwalk
- --------------------
Description: Services include receptionist, safety,
- ----------- fleet cars, maintenance and lease copier
contracts, general building maintenance
and administrative.
Term: Ends no later than December 31, 1999
- -----
Monthly Fee: (35% $135,281/yr) $11,274
- ------------
Additional Charges: $0
- -------------------
8
<PAGE>
Focus Team: Admin
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Automotive
- --------------- (account # 402)
ARCH Department
Providing Service: Facility Services
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Various
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Lease two (2) chauffeur Cadillac and
- ----------- one (1) Tahoe. Includes repairs, gas and
car phones. Board meeting car travel
arrangements. Chauffeur driven
eligibility scheduling.
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: (50% $135,500/yr) $11,292
- -----------
Additional Charges: $0
- ------------------
9
<PAGE>
Focus Team: Admin
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Apartments
- --------------- (account # 403)
ARCH Department
Providing Service: Facility Services
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Various
- --------------------
Location of Receiver: Norwalk
- --------------------
Description: Provide corporate apartments for
- ----------- employee temporary living relocation and
project assignment temporary housing.
Term: Ends no later than December 31, 1999
- -----
Monthly Fee: (25% $15,500/yr) $1,292
- ------------
Additional Charges: $0
- -------------------
10
<PAGE>
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Mail pickup and delivery/shipping and receiving
- --------------- (account #405)
ARCH Department
Providing Service: Facility Services
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Various
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Provide post office pickup daily and interoffice
- ----------- pickup and delivery. Includes rental and
maintenance of mailroom equipment and copy paper
supply and delivery. Shipping and receiving -
general courier services. Special projects:
burst, fold, insert. Postage meter operation.
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: (35% $173,600/yr) $14,467
- -----------
Additional Charges: $0
- ------------------
11
<PAGE>
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Cafeteria
- --------------- (account # 407)
ARCH Department
Providing Service: Facility Services
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Various
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Provide dining, catering, pantry and convenience
- ----------- store service daily. Excludes cost of each
catered event which is a direct charge.
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: (35% $81,200/yr) $6,767
- -----------
Additional Charges: $0
- ------------------
12
<PAGE>
Focus Team: IR/PR
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Graphics Support
- ---------------
ARCH Department
Providing Service: Graphics
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Public Affairs and Investor Relations
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Preparation of 35mm slides and overheads.
- -----------
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: None.
- -----------
Additional Charges: For costs up to $30,000 per year.
- ------------------
13
<PAGE>
Focus Team: N/A
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Support for Chemical Industry Meetings and
- --------------- Special Events
ARCH Department
Providing Service: n/a
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Chlor-Alkali Sales
- -----------------
Location of Receiver: Charleston, Tennessee
- --------------------
Description: Miscellaneous support for the planning and
- ----------- coordination of chemical industry trade shows,
meetings, promotional events, etc.
Term: Ends no later than December 31, 1999, unless
- ---- otherwise mutually agreed.
Monthly Fee: $0
- -----------
Additional Charges: $100 per hour.
- ------------------
14
<PAGE>
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Electricity and Natural Gas Consulting
- ---------------
ARCH Department
Providing Service: A.M. Malatzky, if available.
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: To be determined.
- -----------------
Location of Receiver: Any Olin location.
- --------------------
Description: To be utilized on an as-needed basis. To be
- ----------- provided on an as-available basis, with ARCH
internal needs to be given first priority.
Term: Ends no later than December 31, 1999.
- ---- Services beyond that date shall be negotiated
under a new agreement.
Monthly Fee: Fully loaded cost of employee, charged on an
- ----------- hourly basis, including all travel time.
Additional Charges: All travel and other out-of-pocket expenses.
- ------------------
15
<PAGE>
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Purchasing
- ---------------
ARCH Department
Providing Service: Purchasing
- -----------------
Location of Provider: Norwalk
- --------------------
OLIN Department
Receiving Service: Purchasing
- -----------------
Location of Receiver: Various
- --------------------
Description: 1. Provide various purchasing and
- ----------- contracting services for consulting
contracts, equipment financing and
leasing, aviation services and
equipment, procurement cards (issuance,
bank activities and corporate
administrative), national supplier
contracts, facilities management,
travel, and fleet car management.
2. To the extent not covered separately
under the Information Technology
Services Agreement, provide purchasing
and contracting services for computer
hardware, software licensing and
maintenance contracts, phones, voice
mail technology service maintenance,
disaster recovery contracts and remote
access, SAP support and training.
Term: Ends no later than December 31, 2000.
- ----
Monthly Base Fee: $9,550 per month.
- ----------------
Additional Charges: None.
- ------------------
16
<PAGE>
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
Name of Service: Laboratory Services
- ---------------
ARCH Department
Providing Service: Lake Charles Plant
- -----------------
Location of Provider: Charleston
- --------------------
OLIN Department
Receiving Service: EH&S
- -----------------
Location of Receiver: Charleston
- --------------------
Description: Laboratory services available to ARCH
- ----------- under the Services Agreement between
Arco Chemical Company (n/k/a Lyondell
Chemicals Worldwide, Inc.) and Olin
Corporation, dated October 9, 1996, as
further described in Exhibit A, #13 of
such Services Agreement.
Term: To end no later than 12/31/00, with
- ---- ARCH reserving the right to terminate at
any time upon thirty (30) days prior
notice.
Monthly Fee: The actual fees charged to ARCH under
- ----------- the referenced Services Agreement for
the laboratory services performed for
OLIN.
Additional Charges: None.
- ------------------
17
<PAGE>
Focus Team: EH&S
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Environmental Remediation
- ---------------
OLIN Department
Providing Service: Environmental Remediation (#424)
- -----------------
Location of Provider: Charleston
- --------------------
ARCH Department
Receiving Service: Administration
- -----------------
Location of Receiver: Various
- --------------------
Description: Environmental Remediation Support
- -----------
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: $0
- -----------
Additional Charges: $110/ hour professional
- ------------------ $ 30/ hour clerical plus
"Out of Pocket" Expenses
18
<PAGE>
Focus Team: EH&S
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Real Estate
- ---------------
OLIN Department
Providing Service: EH&S Administration (#420)
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Administration
- -----------------
Location of Receiver: Various
- --------------------
Description: Real Estate Services
- -----------
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: $0
- -----------
Additional Charges: $100/ hour plus
- ------------------ "Out of Pocket" Expenses
19
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Pension Administration
- ---------------
OLIN Department
Providing Service: Pension Department
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Company-wide
- -----------------
Location of Receiver: Various
- --------------------
Description: Provide services relative to all aspects of
- ----------- pension administration including retirement
estimates, retirement processing (e.g.
retirement calculations, confirmation of
payments to retirees, instructions to the
trustee for payments, check processing), design
of retirement forms. Provide for use of Pension
Partner as database for retirees and actuarial
valuations. Administer non-qualified benefits,
Qualified Domestic Relations Orders and orders
for Medical Support.
Term: Through 12/31/2000
- ----
Monthly Fee: $1500 first year, $2000 second year
- ----------- To be paid from pension trust
Charges for Additional To be negotiated on an as-needed basis.
- ----------------------
Services:
- ---------
Fees for Consulting Services: $100 per hour
- -----------------------------
20
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Accounting for Employee Benefits
- ---------------
OLIN Department
Providing Service: Benefits Administration
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Corporate Compensation & Benefits
- ----------------- Benefits Administration company wide
Location of Receiver: Norwalk
- --------------------
Description: Provide service with respect to accounting and
- ----------- reporting requirements for medical and dental
claims processing (e.g. banking requirements,
billings to individual locations.)
Development of site costs, including HMO's.
Preparation and submission of FAS 106 data for
actuarial valuation purposes, including LTD
valuation.
Payment of life insurance premiums.
Term: Through 12/31/2000
- ----
Monthly Fee: $750 per month.
- -----------
Charges for Additional Services: To be negotiated on an as-needed basis.
- -------------------------------
Fees for Consulting Services: $100 per hour
- -----------------------------
21
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Disability Administration
- ---------------
OLIN Department
Providing Service: Benefits Administration
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department Corporate Compensation & Benefits
Receiving Service: Company wide
- -----------------
Location of Receiver: Various
- --------------------
Description: Process Long Term Disability payments and
- ----------- balance Arch LTD payroll. Provide Arch with
analytical data concerning disabilities through
Risk Track. Interface as required with Arch
employees and benefits administrators and
Liberty Mutual.
Term: Through 12/31/2000.
- ----
Monthly Fee: $1,000
- -----------
Charges for Additional
Services: To be negotiated on an as-needed basis.
- ---------
Fees for Consulting Services: $100 per hour
- -----------------------------
22
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Executive Compensation Administration
- ---------------
OLIN Department
Providing Service: Compensation
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department Corporate Compensation & Benefits
Receiving Service:
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Administer Arch Stock Option Plan including
- ----------- participant transactions and plan recordkeeping,
Director's Plan and establish recordkeeping
system for Employee Deferral Plan and Restricted
Stock Units.
Term: Through 12/31/99
- ----
Monthly Fee: $250
- -----------
Charges for Stock Option
Transactions: $20 per transaction
- -------------
Fees for Consulting Services: To be negotiated on an as-needed basis.
- -----------------------------
23
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: CEOP Administration
- ---------------
OLIN Department
Providing Service: Benefits Administration Compensation
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department Various
Receiving Service:
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Administer the Arch CEOP.
- -----------
Term: No later than 12/31/2000
- ----
Monthly Fee: $5.50 per participant
- ----------- If monthly fee is greater than needed or
insufficient to cover full cost of
administration, the per participant charge will
be adjusted for Olin and Arch such that any
overage or shortfall is shared pro-rata, based
on number of participants.
Charges for Additional
Services: To be negotiated on an as-needed basis.
- ---------
Charges for Project
Work Related of the
Specifically to Arch: To be paid directly by Arch to the provider
- --------------------- work/service.
24
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: PeopleSoft Processing
- ---------------
OLIN Department
Providing Service: HRMS Project Team & Charleston Plant team
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Company-wide
- -----------------
Location of Receiver: Various
- --------------------
Description: Provide routine processing of employee related
- ----------- data on PeopleSoft for employee transactions
including Benefits, Payroll and Training.
Term: Through January 31, 2000
- ----
Monthly Fee: $25,500 (based on per capita charge )
- -----------
Additional Charges for
Additional Services: To be negotiated on an as-needed
- -------------------- basis.
25
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Payroll Processing and Distribution
- ---------------
OLIN Department
Providing Service: Corporate Payroll Department
- -----------------
Location of Provider: East Alton
- --------------------
ARCH Department
Receiving Service: Company wide
- -----------------
Location of Receiver: Various
- --------------------
Description: Provide routine processing of employee
- ----------- payroll and distribution of pay
checks/EFT receipts utilizing the
PeopleSoft Payroll module.
Term: Ends no later than December 31, 1999
- ----
Monthly Fee: $18,000 (based on per capita charge)
- -----------
Additional Charges: To be negotiated on an as-needed basis.
- ------------------
Additional Charges for
Additional Software Licensing: All additional licensing costs will be
- ----------------------------- paid by ARCH.
26
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Labor & Employee Relations Consulting
- ---------------
OLIN Department
Providing Service: MC Bentley/Randy Timmerman, if available
- -----------------
Location of Provider: Niagara Falls or East Alton
- --------------------
ARCH Department
Receiving Service: Human Resources
- -----------------
Location of Receiver: Any Arch Location
- --------------------
Description: Would only be utilized on an as-needed basis.
- ----------- To be provided on an as-available basis, with
OLIN internal needs to be given first-priority.
Term: Through December 31, 2001.
- ----
Monthly Fee: Fully loaded cost of employee, charged on an
- ----------- hourly basis, including all travel time, plus
five percent (5%).
Additional Charges: All travel and other out-of-pocket expenses.
- ------------------
27
<PAGE>
Focus Team: IR/PR
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Public Affairs and Investor Relations
- ---------------
OLIN Department
Providing Service: Olin Public Affairs
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Arch Public Affairs
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Assistance in message development and speech
- ----------- writing.
Term: Ends three (3) months after Distribution Date.
- ----
Monthly Fee: $5,000 per month.
- -----------
Additional Charges: None.
- ------------------
28
<PAGE>
Focus Team: Purchasing, Shipping & Transportation
* JMossa
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Purchasing
- ---------------
OLIN Department
Providing Service: Purchasing, Logistics and MIS
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Purchasing
- -----------------
Location of Receiver: Various.
- --------------------
Description: Procurement Card Bank and American
- ----------- Express Activities/Issues
Term: Ends no later than December 31, 1999.
- ----
Monthly Fee: $0. ARCH will pay the charges
- ----------- incurred by its employees directly to
the bank card issuer.
Additional Charges: None.
- ------------------
29
<PAGE>
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Regulatory Audit
- ---------------
OLIN Department
Providing Service: Regulatory Audit
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Operations
- -----------------
Location of Receiver: Various
- --------------------
Description: Compliance audit for environmental,
- ----------- health, safety and transportation
regulations.
Term: Through 12/31/99.
- ----
Monthly Fee: $33,000 (total cost including travel).
- -----------
Additional Charges: To be negotiated on an as-needed basis.
- ------------------
30
<PAGE>
Focus Team: Tax Services
- -------------------------
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Tax
- ---------------
OLIN Department Providing Service: Tax
- ---------------------------------
Location of Provider: Norwalk, CT
- --------------------
ARCH Department Receiving Service: Tax
- ---------------------------------
Location of Receiver: Norwalk, CT
- --------------------
Description: Compliance Services: Actual
- ----------- preparation and filing of any
tax returns, licenses, permits
and related extension requests
and/or payments (estimated and
actual).
Consulting Services: Provide all
assistance and guidance required
for various tax matters that are
not specifically covered under
Compliance Services. Also
included is deferred tax
Accounting matters.
Term: Ends no later than 12/31/99
- ----
Monthly Base Fee: $0
- ----------------
Additional Charges: Consulting Services: $335/hour
- ------------------ Compliance Services: $250/hour
31
<PAGE>
Focus Team: Ethics & Business Integrity
EXHIBIT B
---------
OLIN SERVICES TO ARCH
---------------------
Name of Service: Ethics Program
- ---------------
OLIN Department Providing Service: Ethics
- ---------------------------------
Location of Provider: Norwalk
- --------------------
ARCH Department Receiving Service: Support to Arch VP Human
- --------------------------------- Resources / Ethics
Location of Receiver: Various.
- --------------------
Description: Provide creative designs,
- ----------- program materials and updates,
1999 training program and
general oversight in support of
ARCH's Ethics initiative.
Term: Initial term through
- ---- December 31, 1999 with an option
to renew for 1 year.
Monthly Base Fee: $15,777 per month, $189,324
- ---------------- for 1999 year. (Based on Ethics
Department budget with the cost
of shared/common activities
prorated on the basis of
headcount, with Olin assuming
70% of all such costs and ARCH
assuming 30% of all such costs.)
Additional Charges: Plus out of pocket costs:
- ------------------
1. Helpline outsourcing
2. Layout and copy work,
specifically for Arch
Chemicals.
3. Printing
4. Postage
5. Employee novelties
Estimated range of cost is
$60,000 - $150,000 with the
significant variable being
employee novelties, if any. All
such expenditures will be
preapproved in advance.
32
<PAGE>
EXHIBIT B
---------
OLIN SERVICES TO ARCH
---------------------
Name of Service: Internal Auditing
- ----------------
OLIN Department Providing Service: Internal Audit
- ---------------------------------
Location of Provider: Norwalk
- ---------------------
ARCH Department Receiving Service: Arch Chief Financial Officer is primary
- --------------------------------- customer.
Location of Receiver: Various.
- ---------------------
Description: Arthur Andersen & Co. will provide
- ------------ financial and computer audit services.
They will perform this work under the
direction of ARCH management and bill
ARCH directly for all such work. In
connection with this activity, OLIN
audit may be asked from time to time to
provide assistance including but not
limited to planning support.
Term: Ends no later than 12/31/99.
- -----
Monthly Base Fee: OLIN assistance for all personnel
- ----------------- except R.K. Gebing, who is charged to
ARCH on a pro-rata basis through the
ethics program billing, will be at the
rate of $100 per hour.
Billing to be prepared monthly, based on
hours incurred.
33
<PAGE>
Focus Team: Treasury
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Treasury Services
- ---------------
OLIN Department
Providing Service: Funds Management
- -----------------
Location of Provider: Norwalk, CT
- --------------------
ARCH Department
Receiving Services: Treasury Department
- ------------------
Location of Receiver: Norwalk, CT
- --------------------
Description: Provide daily cash management
- ----------- services necessary to collect cash,
concentrate cash, fund disbursements,
and invest/borrow excess/short-fall cash
positions. Cash management services will
also include the electronic transfer of
funds, necessary review of daily
receipts and disbursements, preparation
of reporting, processing of foreign
exchange transactions, amendments to
existing letter of credit facilities and
preparation of billing associated with
the above.
Term: Ends no later than 8/1/99.
- ----
Monthly Base Fee: $4,500.00
- ----------------
Additional Charges: Charges for ARCH's monthly average
- ------------------ cash deficits owing to OLIN will be
calculated at ARCH's average borrowing
rate for the period. ARCH will receive
from OLIN a payment for monthly average
excess cash balances based on Olin's
average investment rate for the period.
ARCH will be billed for any out-of-
pocket fees paid by OLIN on behalf of
ARCH.
34
<PAGE>
Additional services (opening of bank accounts,
lockbox studies, disbursement analysis, etc.) will
be billed at $100 per hour.
Major Activities Provided Under Treasury Services Arrangement
-------------------------------------------------------------
1. Review of prior day activity transactions and necessary research of disputed
items, communication of results to A/R and A/P.
2. Daily position of cash, including investment and borrowing needs as
appropriate.
3. Funds transfers to concentrate cash, fund disbursement accounts and initiate
electronic funds transfer payments to third parties.
4. Review of bank fees and payment of bank invoices.
5. Execution of foreign currency transactions.
6. Maintain current bank account signer records and log of outstanding Letters
of Credit.
7. Preparation of monthly billing analysis including excess/deficit cash
position.
Major Activities Provided Under
--------------------------------
Treasury Services Arrangement At $100 per Hour
----------------------------------------------
1. Modification to the existing banking network, including but not limited to,
the establishment of new bank accounts, implementation of a new lockbox
network or maintenance of bank account signer records post spin-off date.
2. Negotiation of new services with existing banks.
3. Consulting on Treasury Workstation requirements and/or implementation.
4. Implementation of processing changes as a result of technological changes
whether initiated by Arch or not.
5. Procurement of new Letters of Credit.
6. Development of hedging strategies and procurement of the associated
contracts and/or options necessary to implement a hedging strategy.
Note: Subject to resource availability, Olin reserves the right to decline to
perform additional services.
35
<PAGE>
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Research & Development support from Metals
- --------------- Research Laboratories ("MRL")
OLIN Department
Providing Service: MRL
- -----------------
Location of Provider: New Haven
- --------------------
ARCH Department
Receiving Service: Microelectronic Chemicals
- -----------------
Location of Receiver: Various
- --------------------
Description: Continued research & development activities
- ----------- related to the chemical mechanical planarization
("CMP") project, consistent with levels
anticipated in MRL's 1999 Budget; and research &
development support, as requested, for diffusion
chemicals.
Term: Through December 31, 1999.
- ----
Monthly Fee: Actual costs incurred on a time and materials
- ----------- basis. Costs for work related to the CMP project
during calendar year 1999 shall not exceed
$450,000 without ARCH's consent.
Additional Charges for
Additional Services: To be negotiated on an as-needed
- -------------------- basis.
36
<PAGE>
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Security Services
- ---------------
OLIN Department Providing Service: Corporate Security
- ---------------------------------
Location of Provider: Norwalk, CT
- --------------------
ARCH Department Receiving Service: Managed through Arch Human Resources
- ---------------------------------
Location of Receiver: Various
- --------------------
Description: Various investigative, research,
- ----------- ethics help-line response etc. Support
and services related to security matters
involving ARCH employees and/or
facilities. Services may involve both
domestic and international facilities.
Term: Through 12/31/99, at which time to be
- ---- revisited as to whether an extension or
modification is mutually agreeable.
Monthly Base Fee: $6,325 (1/3 of total 1999 budget)
- ----------------
Additional Charges: None
- ------------------
37
<PAGE>
Focus Team: HR/Benefits
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Relocation services
- ---------------
OLIN Department
Providing Service: Olin Facility Services
- -----------------
Location of Provider: Norwalk
- --------------------
ARCH Department
Receiving Service: Company wide
- -----------------
Location of Receiver: Various
- --------------------
Description: Provide relocation transition services.
- -----------
Term: Through 12/31/99
- ----
Monthly Fee: $24,500
- -----------
Charges for Additional Services: To be negotiated on an as-needed basis.
- -------------------------------
Fees for Consulting Services: To be negotiated on an as-needed basis.
- -----------------------------
38
<PAGE>
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
Name of Service: Water Disinfection Tiger Team
- ---------------
OLIN Department
Providing Service: Chlor Alkali Products
- -----------------
Location of Provider: Cleveland
- --------------------
ARCH Department
Receiving Service: Water Chemicals
- -----------------
Location of Receiver: Norwalk
- --------------------
Description: Consulting Services: Complete Teamwork on
- ----------- Water Disinfection Team. Will include completion
of assessment for worldwide drinking water
market including report compilation, maintenance
of Internet website, travel and meeting
attendance.
Term: Ends no later than 03/15/99.
- ----
Monthly Fee: $0
- -----------
Consulting Services: $29.30/Hr (includes fringes)*
- ------------------- * 80% of total time
39
<PAGE>
EXHIBIT 10.9
TAX SHARING AGREEMENT dated as of February 8, 1999, between
OLIN CORPORATION, a Virginia corporation ("Olin"), and ARCH
CHEMICALS, INC., a Virginia corporation ("Arch"). Olin and Arch
are hereinafter referred to as the "Companies."
WHEREAS, as of the date hereof, Olin is the common parent of an
affiliated group of domestic corporations, including Arch and its direct and
indirect subsidiaries, which has elected to file consolidated Federal income tax
returns;
WHEREAS, the Board of Directors of Olin has determined to distribute
all the outstanding shares of common stock of Arch to the Olin shareholders of
record on February 1, 1999 (the "Distribution") and, as a result of the
Distribution, Arch and its subsidiaries will not be included in the consolidated
Federal income tax return of Olin for the portion of the taxable year following
the Distribution or in future years;
WHEREAS, the Companies have entered into an agreement, dated as of
February 1, 1999 (the "Distribution Agreement"), to, among other things,
allocate and assign responsibility for certain liabilities of the Companies in
connection with and after the Distribution; and
WHEREAS, the Companies intend that the Distribution qualify as a tax-
free spin-off under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code
of 1986, as amended (the "Code");
WHEREAS, the Companies desire to allocate the tax responsibilities,
liabilities and benefits of transactions which occurred on or prior to the date
on which the Distribution occurs (the "Distribution Date"), and transactions
which may occur after the Distribution Date, and to provide for certain other
tax matters;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Companies (each on behalf of itself, each of
its subsidiaries as of the Distribution Date, and its future subsidiaries)
hereby agree as follows:
<PAGE>
2
ARTICLE I
Definitions
-----------
This Agreement is the "Tax Sharing Agreement" referred to in Section 1.01
of the Distribution Agreement. Terms defined in the Distribution Agreement but
not defined herein shall have the meanings set forth in the Distribution
Agreement, and the following terms shall have the following meanings herein
(such meanings to be equally applicable to both the singular and the plural
forms of the terms defined):
"Affiliated Group" means an affiliated group of corporations within
----------------
the meaning of Code Section 1504(a) for the taxable period in question.
"Arch Affiliated Group" means, for each taxable period, the Affiliated
---------------------
Group of which Arch or any successor of Arch is the common parent.
"Arch Group" means, for each taxable period, (i) the corporations that
----------
are members of the Arch Affiliated Group, and (ii) the corporations that would
be members of the Arch Affiliated Group but for the fact they are not includible
corporations under Code Section 1504(b).
"Code" is defined in the recitals to this Agreement.
----
"Distribution Agreement" is defined in the recitals to this Agreement.
----------------------
"Distribution Taxes" means Taxes of any member of the Olin Affiliated
------------------
Group (as in existence prior to the Distribution) resulting from, or arising in
connection with, the failure of the Distribution to be tax-free to such member
under Code Sections 355 and 368(a)(1)(D) (including without limitation by reason
of the application of Code Sections 355(d) or (e)).
"Final Determination" shall mean the final resolution of liability for
-------------------
any Tax for any taxable period, by or as a result of: (i) a final and
unappealable decision, judgment, decree or other order by any court of competent
jurisdiction; (ii) a final settlement with the IRS, a closing agreement or
accepted offer in compromise under Code Sections 7121 or 7122, or a comparable
agreement under the laws of other jurisdictions, which resolves the entire Tax
liability for any taxable period; (iii) any allowance of a refund or credit in
respect of an overpayment of Tax, but
<PAGE>
3
only after the expiration of all periods during which such refund may be
recovered by the jurisdiction imposing the Tax; or (iv) any other final
disposition, including by reason of the expiration of the applicable statute of
limitations.
"Income Taxes" shall mean any federal, state, local or foreign Taxes
------------
determined by reference to income, net worth, gross receipts or capital, or any
such Taxes imposed in lieu of income Taxes.
"Indemnifying Party" is defined in Section 4.01(a) herein.
------------------
"Indemnity Issue" is defined in Section 4.01(a) herein.
---------------
"IRS" means the United States Internal Revenue Service or any
---
successor thereto, including, but not limited to its agents, representatives,
and attorneys.
"Olin Affiliated Group" means, for each taxable period, the Affiliated
---------------------
Group of which Olin or any successor of Olin is the common parent.
"Olin Group" means, for each taxable period, (i) the corporations that
----------
are members of the Olin Affiliated Group, and (ii) the corporations that would
be members of the Olin Affiliated Group but for the fact they are not includible
corporations under Code Section 1504(b).
"Other Taxes" shall mean any federal, state, local or foreign Taxes
-----------
other than Income Taxes.
"Post-Distribution Period" means any period, and in the case of a
------------------------
Straddle Period the portion of any such period, beginning after the Distribution
Date.
"Pre-Distribution Period" means any period, and in the case of a
-----------------------
Straddle Period the portion of any such period, ending on or before the
Distribution Date.
"Representations" shall mean the written representations made to
---------------
Cravath, Swaine & Moore in connection with their tax opinion regarding certain
tax consequences of the Distribution.
"Straddle Period" means any period that begins on or before and ends
---------------
after the Distribution Date.
<PAGE>
4
"Taxes" means all forms of taxation imposed by a Taxing Authority,
-----
including, but not limited to, net income, gross income, alternative minimum,
sales, use, ad valorem, gross receipts, value added, franchise, license,
transfer, withholding, payroll, employment, excise, severance, stamp, property,
custom duty, taxes or governmental charges, together with any related interest,
penalties or other additional amounts imposed by a Taxing Authority.
"Taxing Authority" means any governmental authority imposing Taxes.
----------------
"Tax Return" means any return, filing, questionnaire, information
----------
statement or other document required to be filed, including amended returns that
may be filed, for any period with any Taxing Authority, in connection with any
Tax (whether or not a payment is required to be made with respect to such
filing).
ARTICLE II
Preparation and Filing of Tax Returns
-------------------------------------
SECTION 2.01. Pre-Distribution and Straddle Period Tax Returns. Olin
-------------------------------------------------
shall prepare and file (i) all Tax Returns of the Olin Group or any member
thereof that are required to be filed for any Pre-Distribution Period, (ii) any
Tax Returns (other than property tax returns) of the Olin Group or any member
thereof (other than members of the Arch Group who are not members of the Arch
Affiliated Group) for any Straddle Period, and (iii) any property tax returns of
any Olin Group member with respect to an assessment date on or prior to the
Distribution Date. Arch hereby irrevocably designates, and agrees to cause each
of its affiliates to designate, Olin as its agent to take any and all actions
necessary or incidental to the preparation and filing by Olin of any Tax Return
described in the preceding sentence of this Section 2.01. Arch shall prepare
and file (i) all Tax Returns of members of the Arch Group that are not members
of the Arch Affiliated Group for any Straddle Period, and (ii) any property tax
returns of any Arch Group member with respect to an assessment date after the
Distribution Date.
SECTION 2.02. Post-Distribution Tax Returns. All Tax Returns for any
------------------------------
Post-Distribution Period (other than Straddle Periods) shall be prepared and
filed by Olin if they relate to any member of the Olin Group (as in effect after
the Distribution) and by Arch if they relate to any member of the Arch Group.
<PAGE>
5
SECTION 2.03. Manner of Tax Return Preparation. (a) Unless otherwise
---------------------------------
required by a Taxing Authority or a Court, the Companies hereby agree to file
all Tax Returns, and to take all other actions, in a manner consistent with the
following positions: (i) the Distribution is a tax-free spin-off within the
meaning of Code Sections 355 and 368(a)(1)(D), (ii) the last day on which any
member of the Arch Affiliated Group was included in the Olin Affiliated Group is
the Distribution Date, and (iii) the taxable year of each member of the Arch
Affiliated Group ended on the Distribution Date. All Tax Returns shall be filed
on a timely basis by the party responsible for filing such returns under this
Agreement.
(b) For each Straddle Period Tax Return that Olin is required to file
under Section 2.01 that includes a member of the Arch Affiliated Group, Arch
shall prepare and provide to Olin, a pro-forma Return for the portion of the
Straddle Period beginning after the Distribution Date. With respect to sales or
use tax Returns, Arch shall provide a pro-forma Return 7 business days prior to
the due date of such tax return, and with respect to all other Straddle Period
Tax Returns, Arch shall provide a pro-forma Return at least 30 days prior to the
due date (including extensions) of such Return.
(c) Within 90 days after filing the 1999 consolidated federal Income
Tax Return for the Olin Affiliated Group, Olin shall notify Arch of the tax
attributes associated with the Olin subsidiaries, and the tax bases of the
assets and liabilities, transferred to Arch in connection with the Distribution.
At Arch's request, Olin will use its best efforts to provide Arch with
preliminary estimates of such information as soon as is practicable.
ARTICLE III
Payment of Taxes
----------------
SECTION 3.01. Pre-Distribution Non-Straddle Period Taxes. Except as
-------------------------------------------
otherwise provided in Sections 3.04 and 3.05 of this Agreement, Olin shall be
liable for and shall pay all Taxes, and shall be entitled to receive all refunds
of Taxes, for the Olin Group (as in effect prior to the Distribution) or any
member thereof for all Pre-Distribution Periods other than Straddle Periods.
SECTION 3.02. Straddle Period Taxes. (a) Pre-Distribution Straddle
--------------------- -------------------------
Period Taxes. Except as otherwise
- ------------
<PAGE>
6
provided in Sections 3.04, 3.05 and 3.06 of this Agreement, Olin shall be liable
for all Taxes, and shall be entitled to receive all refunds of Taxes, for the
Olin Group (as in effect prior to the Distribution) or any member thereof for
the portion of any Straddle Period ending on the Distribution Date. Olin shall
pay all Taxes described in this Section 3.02(a), provided that Olin shall pay to
Arch, rather than to the applicable Taxing Authorities, any such Taxes for
members of the Arch Group for which Arch is required to file Straddle Period Tax
Returns under Section 2.01. Arch shall remit to the applicable Taxing
Authorities all Straddle Period Taxes it receives from Olin.
(b) Post-Distribution Straddle Period Taxes. Except as otherwise
---------------------------------------
provided in Sections 3.04, 3.05 and 3.06 of this Agreement, Arch shall be liable
for Taxes, and shall be entitled to receive all refunds of Taxes, for the Arch
Group or any member thereof for the portion of any Straddle Period after the
Distribution Date. Arch shall pay all Taxes described in this Section 3.02(b),
provided that Arch shall pay to Olin, rather than to the applicable Taxing
Authorities, any such Taxes for members of the Arch Group for which Olin is
required to file Straddle Period Tax Returns under Section 2.01. Olin shall
remit to the applicable Taxing Authorities all Straddle Period Taxes it receives
from Arch.
(c) Straddle Period Income Taxes shall be apportioned between the
Pre-Distribution Period and the Post-Distribution Period on a closing of the
books basis, and Other Taxes will be apportioned between the Pre-Distribution
Period and the Post-Distribution Period on a daily proration basis.
SECTION 3.03. Other Post-Distribution Taxes. Except as otherwise
------------------------------
provided in Section 3.05 and 3.06 of this Agreement, Arch and Olin shall each
pay all Taxes, and shall be entitled to receive and retain all refunds of Taxes,
that are owed by members of their respective Groups for periods beginning after
the Distribution Date.
SECTION 3.04. Distribution Taxes.
-------------------
(a) Olin Group Liability for Certain Distribution Taxes. The members
----------------------------------------------------
of the Olin Group shall be liable for any Distribution Taxes that are primarily
attributable to one or more of the following:
(i) any inaccurate statement or representation of fact or intent (or
omission to state a material fact)
<PAGE>
7
with respect to the Olin Group (excluding members of the Arch Group) in the
Representations;
(ii) any action or omission by the Olin Group after the date of the
Distribution, including without limitation, a cessation, transfer to
affiliates or disposition of its active trades or businesses, or an
issuance of stock, stock buyback or payment of an extraordinary dividend by
any member of the Olin Group following the Distribution;
(iii) any acquisition of any stock or assets of any member of the Olin
Group by one or more other persons prior to or following the Distribution;
or
(iv) any issuance of stock by Olin, or change in ownership of stock in
Olin, that causes Code Sections 355(d) or 355(e) to apply to the
Distribution.
(b) Arch Group Liability for Certain Distribution Taxes. The members
----------------------------------------------------
of the Arch Group shall be liable for any Distribution Taxes that are primarily
attributable to one or more of the following:
(i) any inaccurate statement or representation of fact or intent (or
omission to state a material fact) in the Representations that relates to
the Arch Group;
(ii) any action or omission by the Arch Group after the date of the
Distribution, including without limitation, a cessation, transfer to
affiliates or disposition of its active trades or businesses, or an
issuance of stock, stock buyback or payment of an extraordinary dividend by
any member of the Arch Group following the Distribution;
(iii) any acquisition of any stock or assets of any member of the Arch
Group by one or more other persons following the Distribution; or
(iv) any issuance of stock by Arch, or change in ownership of stock in
Arch, that causes Code Sections 355(d) or 355(e) to apply to the
Distribution.
(c) Joint Liability for Remaining Distribution Taxes. The liability
-------------------------------------------------
for any Distribution Taxes not allocated by Sections 3.04(a) or (b) shall be
borne equally by the Olin Group and the Arch Group.
<PAGE>
8
(d) Applicability. The provisions of this Section 3.04 shall apply
--------------
notwithstanding any other provisions of this Agreement.
SECTION 3.05. (a) Gain Recognition Agreement Taxes. If a Taxing
---------------------------------
Authority determines that any member of the Olin Group or Arch Group has failed
to comply with the terms of any Code Section 367 "gain recognition agreement"
executed by a member of the Olin Group during a Pre-Distribution Period, and
such non-compliance is attributable to any action or omission by a member of the
Arch Group or any other affiliate of Arch after the Distribution, the Arch Group
shall be liable for any resulting Tax liability (such liability, a "GRA Tax
Liability").
(b) Applicability. The provisions of this Section 3.05 shall apply
--------------
notwithstanding any other provisions of this Agreement.
SECTION 3.06. (a) Compensation Deductions. With respect to any non-
------------------------
qualified stock options relating to Olin or Arch stock, or stock appreciation
rights relating to Arch stock, that are outstanding immediately after the
Distribution (the "Options"), each of Olin and Arch shall be responsible for
timely filing all required reports with any relevant Taxing Authorities with
respect to grants or exercises of Options on its stock. Olin (or the
appropriate member of the Olin Group) shall claim all Tax deductions arising by
reason of exercises by Olin Group employees, and all employees who retired prior
to the Distribution, of all Options. Arch (or the appropriate member of the
Arch Group) shall claim all Tax deductions arising by reason of exercises of
Options by Arch Group employees.
(b) If, pursuant to a Final Determination, all or any part of a Tax
deduction claimed by a member of the Olin or Arch Group pursuant to Section
3.06(a) is disallowed, the appropriate member of the Arch or Olin Group, as the
case may be, shall, to the extent such deduction may be allowable to such
appropriate member, promptly claim such deduction. If such appropriate member
realizes a Tax benefit (i.e., a reduction in Taxes) in any period as a result of
----
claiming a deduction pursuant to this Section 3.06(b), such member shall
promptly pay the amount of such Tax benefit to the member whose Tax deduction
was so disallowed.
(c) Applicability. The provisions of this Section 3.06 shall apply
--------------
notwithstanding any other provisions of this Agreement.
<PAGE>
9
SECTION 3.07. Indemnification. (a) Indemnification Obligations. Olin
---------------- ----------------------------
and Arch shall each indemnify, defend and hold harmless the members of the other
party's Affiliated Group from and against any and all Taxes for which Olin or
Arch is liable pursuant to this Agreement. The amount of all indemnification
obligations for payments described in Sections 3.03, 3.04, 3.05 and 3.06 shall
be calculated on an after-Tax basis.
(b) No Indemnification for Tax Attributes. Nothing in this Agreement
--------------------------------------
shall be construed as a guarantee of the existence or amount of any loss,
credit, carryforward, basis or other Tax attribute, whether past, present or
future, of the Companies or any members of their respective Affiliated Groups.
(c) Indemnity Payments. To the extent that one Party (the
-------------------
"Indemnifying Party") has an indemnification obligation to another party (the
"Indemnitee") pursuant to this Agreement, the Indemnitee shall provide the
Indemnifying Party with its calculation of the amount of such indemnification
payment. Such calculation shall provide sufficient detail to permit the
Indemnifying Party to reasonably understand the calculations. The Indemnifying
Party shall make the required payment to the Indemnitee within 14 business days
after receiving the Indemnitee's calculations, and in no event less than 10
business days prior to the due date (including extensions) of any relevant Tax
Return, unless the Indemnifying Party reasonably disputes the amount of, or its
liability for, such payment. All such disputes regarding payments shall be
resolved pursuant to the procedures in Section 5.02 of this Agreement. Interest
shall accrue with respect to any payment not made within 10 days after the due
date for such payment, at the underpayment rate in effect under the Code at such
time, until such amounts are fully paid. Interest shall accrue with respect to
disputed payments, and shall be payable with respect to, and when any portion of
such payments are subsequently required to be made.
(d) Right of Offset. Any party making a payment under this Agreement
----------------
shall have the right to reduce any such payment by any amounts owed to it by the
other party to this Agreement.
(e) Treatment of Payments. The parties agree that any payments made
----------------------
to one party by another party pursuant to this Agreement shall be treated for
all Tax and financial accounting purposes as nontaxable payments (dividends or
capital contributions, as the case may be) made immediately prior to the
Distribution, unless, and then
<PAGE>
10
only to the extent, otherwise required by a Final Determination.
ARTICLE IV
Tax Proceedings; Cooperation and Exchange of Information
--------------------------------------------------------
SECTION 4.01. Tax Proceedings. (a) Notification. Within 15 days
---------------- -------------
after a party becomes aware of the existence of a Tax issue that may give rise
to an indemnification obligation under this Agreement (an "Indemnity Issue"),
such party shall notify the other party of the Indemnity Issue, and thereafter
shall promptly forward to the other party copies of notices and material
communications with a Taxing Authority relating to such issue (e.g., any IRS
----
revenue agent's reports or similar reports, notices of proposed adjustment, or
notices of deficiency).
(b) Control of Pre-Distribution Tax Proceedings. Except as provided
--------------------------------------------
in Section 4.01(c), Olin shall control, and shall have sole discretion in
handling, settling or contesting any audit inquiry, information request, audit
proceeding, suit, action or contest (each, a "Tax Proceeding") that relates to a
(i) Pre-Distribution Period Tax liability or refund (a "Tax Claim") (including a
Tax Claim with respect to a Straddle Period) that is not related to a Straddle
Period Tax Return filed by Arch, or (ii) GRA Tax Liability. Arch shall control
any Tax Proceeding that relates to a Tax Claim with respect to a Straddle Period
Tax Return filed by Arch. Neither party shall settle any Tax Proceeding that
they control concerning a Straddle Period Tax Claim on a basis that would
materially adversely affect the noncontrolling party without obtaining such
noncontrolling party's consent, which consent shall not be unreasonably withheld
if failure to consent would adversely affect the controlling party. Any costs
incurred in handling, settling or contesting a Tax controversy shall be borne by
the party controlling the Tax controversy.
(c) Control of Distribution Tax Proceedings. Olin and Arch shall
----------------------------------------
jointly control, and shall each have the right to participate in all activities
and strategic decisions with respect to, any Tax Proceedings relating to
Distribution Taxes. Either Company may assume sole control of a Distribution
Tax Proceeding if it acknowledges in writing that it has sole liability for any
Distribution Taxes that might arise in such Proceeding. No Tax Proceeding with
respect to Distribution Taxes shall be settled without the consent of the
Indemnifying Party, which
<PAGE>
11
consent shall not be unreasonably withheld if failure to consent would adversely
affect the other party.
SECTION 4.02. Cooperation and Exchange of Information. (a) Arch and
----------------------------------------
Olin shall each cooperate fully (and each shall cause each member of its
respective Affiliated Group to cooperate fully) with all reasonable requests
from the other party in connection with the preparation and filing of Tax
Returns, claims for refund, and Tax Proceedings concerning issues or other
matters covered by this Agreement. Such cooperation shall include, without
limitation:
(i) the retention until the expiration of the applicable statute of
limitations, and the provision upon request, of Tax Returns, books, records
(including information regarding ownership and tax basis of property),
documentation and other information relating to the Tax Returns, including
accompanying schedules, related work papers, and documents relating to rulings
or other determinations by Taxing Authorities;
(ii) the execution of any document that may be necessary or reasonably
helpful in connection with any Tax Proceeding, or the filing of a Tax Return or
refund claim by a member of the Olin or Arch Affiliated Group, including
certification, to the best of a party's knowledge, of the accuracy and
completeness of the information it has supplied; and
(iii) the use of the parties' best efforts to obtain any documentation that
may be necessary or reasonably helpful in connection with any of the foregoing.
Each party shall make its employees and facilities available on a reasonable and
mutually convenient basis in connection with the foregoing matters.
(b) If a party fails to comply with any of its obligations set forth
in Section 4.02(a) of this Agreement upon reasonable request and notice by the
other party, and such failure results in the imposition of additional Taxes, the
nonperforming party shall be liable in full for such additional Taxes.
SECTION 4.03. Retention of Information. A party intending to dispose
-------------------------
of documentation of Olin or Arch or any member of its respective Affiliated
Group, including without limitation, books, records, Tax Returns and all
supporting schedules and information relating thereto (after the expiration of
the applicable statute of limitations), shall
<PAGE>
12
provide written notice to the other party describing the documentation to be
destroyed or disposed of 60 days prior to taking such action. The other party
may arrange to take delivery of the documentation described in the notice at its
expense during the succeeding 60 day period.
ARTICLE V
Miscellaneous Provisions
------------------------
SECTION 5.01. Notice. Any payment, notice or communication required
-------
or permitted to be given under this Agreement shall be in writing (including
facsimile) and mailed, faxed or delivered to the parties at the following
addresses (or at such other address as one party may specify by notice to the
other party):
If to Olin to:
Olin Corporation
501 Merritt 7
PO Box 4500
Norwalk, CT 06856-4500
Attention: General Counsel
If to Arch:
Arch Chemicals, Inc.
501 Merritt 7
Norwalk, CT 06851
Attention: General Counsel
Notification of a change of address shall be given by either party to the other
as provided in this Section 5.01. All such notices and communications shall be
effective (i) when received, if mailed or delivered, or (ii) when confirmed by
fax answerback, if faxed.
SECTION 5.02. Resolution of Disputes. (a) The party required to file
-----------------------
a Straddle Period Tax Return under Section 2.01 (the "Filing Party") shall
provide the other party (the "Non-Filing Party") with a calculation and
determination of the amount of the Straddle Period Taxes the Non-Filing Party is
required to pay to the Filing Party pursuant to Section 3.02(a) or (b) (a "Tax
Determination"). In the absence of a controlling change in law or circumstances,
all Tax Determinations shall be prepared in a manner consistent with the
elections, accounting methods, conventions, and principles of taxation used for
the most
<PAGE>
13
recent taxable periods for which Tax Returns involving similar Tax items have
been filed. If the Non-Filing Party disputes such Tax Determination, it may make
a written request that the Filing Party obtain written confirmation from a "Big
Five" certified public accounting firm (the "Accounting Firm") that the Tax
Determination is (i) consistent with the preceding sentence, and (ii) supported
by substantial authority (such written confirmation, a "Confirmation"). If the
Accounting Firm issues a Confirmation, the applicable Tax Determination shall be
binding upon the parties. If not, the Filing Party shall amend the Tax
Determination to permit a Confirmation to be issued in respect of the amended
Tax Determination. If a dispute is not resolved prior to the due date of a Tax
Return, the Tax Return shall be filed in accordance with the Tax Determination,
and the Companies hereby agree to file an amended return, if necessary.
(b) The Accounting Firm shall be mutually acceptable to Olin and Arch
and may not be the auditor of, or primary tax advisor for, either Olin or Arch
in the year in which such Confirmation is to be made or with respect to the
taxable period subject to such Confirmation. The Accounting Firm shall treat
all Tax Returns of the Companies as confidential, and shall not reveal any
information contained in, or any part of, the Tax Returns of one party to the
other without obtaining written consent to do so. The Non-Filing Party shall be
liable for the fees and disbursements of the Accounting Firm unless the amounts
of the Tax payments (excluding interest thereon) required under an amended Tax
Determination differ by more than the greater of (i) $100,000 or (ii) 10% from
the payments under the original Tax Determination (excluding any interest), in
which case the Filing Party shall be liable for such fees and disbursements.
(c) All other disputes with respect to the interpretation,
performance, non-performance, validity or breach of this Agreement shall be
settled pursuant to the procedures set forth in Section 5.01 of the Distribution
Agreement.
SECTION 5.03. Governing Law. This Agreement shall be governed by the
--------------
laws applicable to contracts entered into and to be performed within the State
of Connecticut by residents thereof.
SECTION 5.04 Binding Effect; Successors. This Agreement shall be
---------------------------
binding upon the parties hereto and shall inure to the benefit of and be binding
upon any of their successors or assigns.
<PAGE>
14
SECTION 5.05 Entire Agreement; Assignment. This Agreement embodies
-----------------------------
the entire understanding between the parties relating to its subject matter and
supersedes and terminates all prior agreements and understandings among the
parties with respect to such matters. No promises, covenants or representations
of any kind, other than those expressly stated herein, have been made to induce
any party to enter into this Agreement. This Agreement shall not be modified or
terminated except by a writing duly signed by each of the parties hereto, and no
waiver of any provisions of this Agreement shall be effective unless in a
writing duly signed by the party sought to be bound. If, and to the extent, the
provisions of this Agreement conflict with the Distribution Agreement, or any
other agreement entered into in connection with the Distribution, the provisions
of this Agreement shall control.
SECTION 5.06. Counterparts. This Agreement may be executed in two or
-------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same.
SECTION 5.07. Severability. If any provision of this Agreement or
-------------
the application of any such provision to any person or circumstances shall be
held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
SECTION 5.08. Headings. Headings of sections in this Agreement are
---------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
<PAGE>
15
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed by its respective duly authorized officer of the date first set
forth above.
OLIN CORPORATION,
by /s/ Johnnie M. Jackson, Jr.
----------------------------
Name: Johnnie M. Jackson, Jr.
Title: Vice President, General
Counsel and Secretary
ARCH CHEMICALS, INC.,
by /s/ Sarah A. O'Connor
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Name: Sarah A. O'Connor
Title: Vice President
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EXHIBIT 10.10
Charleston
SERVICES AGREEMENT
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This Agreement is entered into as of the 8th day of February, 1999, by and
between Arch Chemicals, Inc., a Virginia corporation (hereinafter "ARCH"), and
Olin Corporation, a Virginia corporation (hereinafter "OLIN").
WITNESSETH:
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WHEREAS, OLIN and ARCH have entered into a Distribution Agreement (as
defined below);
WHEREAS, pursuant to the Distribution Agreement, OLIN has agreed to
transfer certain assets and businesses constituting the Arch Assets and the
Arch Business, respectively (each as defined in the Distribution Agreement) to
ARCH;
WHEREAS, included in the Arch Assets and the Arch Business are certain
assets and operations located at the Charleston, Tennessee chlor-alkali and pool
chemicals facility owned and operated by OLIN prior to the Distribution Date (as
defined in the Distribution Agreement); and
WHEREAS, following the Distribution Date, OLIN and ARCH have both requested
from each other, and each has agreed, that ARCH receive certain services to be
provided by OLIN, and that OLIN receive certain services to be provided by ARCH,
for their respective operations at the Charleston, Tennessee facilities, on the
terms and conditions as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, OLIN and ARCH agree as follows:
ARTICLE I
DEFINITIONS
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As used in this Agreement, the following terms have the following
meanings:
"Authorized Representative" means the plant manager of each Party at
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the Charleston Site, who shall be responsible for implementing this Agreement at
the Charleston Site.
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"Budgeted Service Quantity" means the quantity of a Service the
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Service Provider has agreed to provide and the Service Receiver has agreed to
receive during the next Contract Year.
"Budgeted Service Quantity Percentage" means the quantity the Service
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Receiver has requested and the Service Provider has agreed to provide, expressed
as a percentage of the total of that Service which is budgeted to be produced or
available during the next Contract Year at the Charleston Site
"Capital Carrying Charge" means a cost to cover the financing of a
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capital project or capital investment by the Service Provider, as further
described in Section 5.01(c).
"Charleston Plant" means OLIN's chlor-alkali and pool chemicals
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facility located in Charleston, Tennessee as it existed and operated prior to
the Distribution Date.
"Charleston Site" means the combined operations of Olin Corporation
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and Arch Chemicals, Inc. located in Charleston, Tennessee on the former site of
OLIN's Charleston Plant, as of the Distribution Date.
"Claim(s)" shall mean any action, claim, demand, interference,
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obligation, suit, arbitration or other proceeding brought or asserted by or
against a Party to this Agreement.
"Confidential Information" means any and all information owned or
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controlled by a Party and disclosed to the receiving Party by a disclosing Party
pursuant to this Agreement, in any form such as, but not limited to, visual,
oral, written, graphic, electronic or model form, including but not limited to,
know-how and trade secrets, whether of a business or a technical nature, whether
patented or not, and whether in the laboratory, pilot plant or commercial plant
stage (including without limitation, drawings, operating conditions,
specifications, safety instructions, environmental recommendations, and
emergency instructions).
"Contract Year" means the First Contract Year and each calendar year
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thereafter during the term of this Agreement, or any shorter period commencing
on any January 1 and ending, as to any Service upon expiration of its Term, and
as to this Agreement at the termination of this Agreement.
"Curtailment Plan" means the Charleston Site Plan for the sequence in
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which Services will be reduced or temporarily suspended for the various
operating units.
"Damages" shall mean all costs, liabilities, obligations, damages,
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fines, penalties, deficiencies, losses and judgments, including incidental
damages, consequential damages, punitive damages, strict liability, and
reasonable attorneys' fees, in each case after the application
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of any amounts recoverable under insurance contracts or similar arrangements and
recoverable from third parties by the Entity claiming indemnity.
"Distribution Agreement" means the Distribution Agreement dated as of
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February 1, 1999, between OLIN and ARCH.
"Distribution Date" has the meaning assigned to such term in the
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Distribution Agreement.
"Entity" shall mean any individual or person, or general partnership,
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limited partnership, limited liability company, corporation, joint venture,
trust, business trust, cooperative, association, foreign trust or foreign
business organization or government, or government organization, and the heirs,
executors, administrators, legal representatives, successors, and assigns of the
Entity when the context so permits.
"Environmental Laws" means any and all applicable regulations,
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ordinances, codes, licenses, permits, orders, approval, authorizations,
requirements and similar items and any and all applicable judicial or
administrative decrees, judgments or orders relating to the protection of human
health or the environment or to the protection of the health and safety of
employees and the public.
"First Contract Year" means the period from the Distribution Date
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until December 31, 1999.
"Fixed Costs" means those costs which do not vary directly with units
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of production or usage, as further described in Section 5.01(b).
"Force Majeure" means, for either Party, any circumstance(s) beyond
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the reasonable control of that Party, which prevents full performance,
including, but not limited to: acts of God; fire; accident; flood; explosion;
war; hurricanes; tornadoes; riots; government action or inaction or request of
Governmental Authority, including any law, decree, order or regulation of any
governmental agency or authority whether federal, state or local; strikes,
lockouts or labor disputes; injunction; failure or delay of transportation;
shortage of, or inability to obtain, supplies, equipment, fuel, power, labor or
other operational necessity; failure of third party suppliers to furnish raw
materials or services; or curtailment of power supply.
"Governmental Authority" means any federal, state or local government,
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governmental authority, regulatory or administrative agency, governmental
commission, board, bureau, court or tribunal or any other similar arbitral body.
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"Hours of Operation" means, for any Service, the days and times during
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which a Service Provider is required to provide such Service and during which a
Service Receiver shall accept such Service.
"Party/Parties" means either ARCH or OLIN or both of them.
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"Prime Rate" means the rate of interest published in the Wall Street
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Journal under the title "Money Rates," and defined therein as being the base
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rate on corporate loans at large money center commercial banks (or if no longer
published, an equivalent rate agreed by the Parties).
"Reasonable and Prudent Operator" means a person seeking to perform
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its contractual obligations and in so doing and in the general conduct of its
undertaking, exercising that degree of skill, diligence, prudence and foresight
which would reasonably and ordinarily be expected from an experienced operator
in substantial compliance with all applicable laws engaged in the same type of
undertaking in the same locality and under the same or similar circumstances and
conditions, and any reference to the standard of a Reasonable and Prudent
Operator herein shall be a reference to such degree of skill, diligence,
prudence and foresight as aforesaid. Notwithstanding the above, the term
Reasonable and Prudent Operator does not imply a higher standard of care which
may be applicable to commercial providers of a Service which a Party may provide
under this Agreement.
"Service" means the furnishing, supply, distribution and delivery of
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each service as set forth in Exhibit A hereto to be provided by or on behalf of
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a Party pursuant to the terms and conditions of this Agreement.
"Service Charges" shall mean the charges for a Service, comprised of
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Fixed Costs, Variable Costs and Capital Carrying Charges.
"Service Facilities" means, on any date of determination, any asset
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located at the Charleston Site used by the Service Provider on such date to
provide Services to the Service Receiver.
"Service Provider" shall mean the Party providing a Service hereunder.
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"Service Receiver" shall mean the Party receiving a Service hereunder.
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"Specification" means the Service Descriptions of the Service stated
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in the relevant section of Exhibit A, as those Service Descriptions may be
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amended from time to time either in accordance with the terms of the relevant
section of Exhibit A or by agreement in writing between the Parties.
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"Term" means for any Service, the period in which the Service Provider
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must provide a Service, commencing at the Distribution Date and continuing for
the term set forth in Exhibit A for such Service.
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"Utility Service" means the following services: Electricity and
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Electricity Distribution, Steam, Water Supply System and Treatment of HAN
Process Waste Water and HAN Area Storm Water. For purposes of the provisions of
this Agreement, Utility Services are included in "Services."
"Variable Costs" means, for any Service, costs that vary directly with
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units of production, as further described in Section 5.01(a).
"Willful Breach" consists of the following two elements: (a) a
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deliberate, volitional, non-coerced and non-accidental failure by a Party to
provide a Service in accordance with this Agreement, which is not due to Force
Majeure, and (b) the Party's failure, following written notice from the
Authorized Representative of the Service Receiver to the Authorized
Representative of the Service Provider, to immediately correct the failure in
all material respects within five (5) business days after receipt of such
notice.
ARTICLE II
PROVISION OF SERVICES
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2.01 Undertaking to Provide Services
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Each Service Provider shall provide or cause the Services to be
provided to the Service Receiver, and shall act as a Reasonable and Prudent
Operator with respect to its provision of Services (or, subject to the
provisions of Section 2.05, shall act as a Reasonable and Prudent Operator with
respect to its efforts to arrange for one or more third parties to provide
Services), in accordance with the terms and conditions set forth in this
Agreement, including, without limitation, the service standard provisions set
forth in Section 2.02.
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2.02 Service Standard
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(a) The Parties agree that a Service Provider's sole obligation and
undertaking with respect to the provision of Services pursuant to this Agreement
shall be to act as a Reasonable and Prudent Operator upon the terms and
conditions set forth herein. Further, the Service Provider shall only be liable
to the Service Receiver for Willful Breaches of the Reasonable and Prudent
Operator standard.
(b) The Service Provider shall initially provide Services to the Service
Receiver on substantially the same basis, and under substantially the same terms
and conditions as the Service Provider provides to its own operations and as
such Services were provided at the Charleston Plant prior to the Distribution
Date. Thereafter, the basis for provision of Services may reflect such non-
material changes as occur in the ordinary course of business, but any material
changes (i.e. changes which may have any impact on the Service Receiver
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operations, or may increase the cost thereof), must be approved in advance by
the Service Receiver, such approval not to be unreasonably withheld.
(c) No changes in the Specifications of any of the Services may be made
without the written consent of both the Service Provider and Service Receiver.
The Parties, however, can mutually agree to supply and receive Services which do
not accord with the Specifications, provided each such variation is agreed in
writing. In the event a Service Provider anticipates Specifications hereunder
may not be met, it shall promptly notify the Service Receiver.
2.03 Services Quantities
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(a) Subject to the terms of this Agreement, a Service Provider shall
provide each Service to the Service Receiver at the quantity requested by the
Service Receiver up to its Budgeted Service Quantity.
(b) Not later than August 31, 1999 and August 31 of each Contract Year
thereafter, the Service Receiver shall give to the Service Provider a written
notice setting forth the quantity of each Service requested by the Service
Receiver for the next succeeding Contract Year. Not later than sixty (60) days
after receiving such notice, the Service Provider and the Service Receiver will
agree, acting in good faith and based on reasonably determined future
projections, on the Budgeted Service Quantity to be made available to the
Service Receiver and the estimated charges therefor. For calendar year 1999 the
Budgeted Service Quantities for each Party shall be as stated in the 1999
Charleston Plant budget.
(c) If during any Contract Year the Service Receiver requests Services in
excess of the Budgeted Service Quantity, the Service Provider shall provide such
excess Services if unused capacity exists. In such case, the Fixed Cost
component of the Service Charge will be reset for
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the balance of the Contract Year to reflect properly the annualized Fixed Cost
component of the Services, including the Services provided in excess of the
Budgeted Service Quantity.
(d) If either Party requires increased Services to meet the need of its
expanded operating facilities, and unused capacity exists, the Service Provider
shall make such unused capacity available to the Party first requesting the
increased Services. If both Parties require and request a portion of unused
capacity, and their combined request exceeds the amount of unused capacity
existing at that time, the Service Provider will allocate the available unused
capacity to each Party on the basis of each Party's percentage use of the
Service.
2.04 Measurements
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(a) Measurements of the levels and quantities of Services to be provided
to Service Receiver shall be undertaken in accordance with the practices in
effect at the Charleston Site on the Distribution Date. In the event either
Party should desire an additional or improved system of meters, weights and
measures, then the Parties shall meet and discuss the implementation of such
request. Unless otherwise agreed, the requesting Party shall pay all expenses
related to the acquisition and installation of such improvements, and any
increased cost of operations.
(b) In the case of Services using meters to measure quantity:
(i) The Parties agree that the Party owning the meters shall bear
all costs of calibration except when the Party that does not own
the meter requests that a calibration be performed at a time
other than at the agreed upon interval and, upon such
calibration, it is determined that the reading was within the
stated range of accuracy of that meter.
(ii) If discrepancies in excess of 5% are determined between the sum
of the actual readings of all of Service Receiver's operations
receiving a Service at the Charleston Site and the meter reading
at the output source of the Service, the Service Receiver shall
be due a credit or debit against prior deliveries of that
quantity of the Service determined by multiplying the total
discrepancy (expressed as a percentage) by all quantities of
such Service delivered to the Service Receiver during the period
within which such discrepancy existed; provided that if such
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period cannot reasonably be determined, then such period shall
be deemed to be equal to one-half of the number of days between
the date of the last meter calibration and the date on which
such calibration was corrected.
(c) From time to time, as agreed by the Parties, each Party shall permit
the other Party (or its agents or representatives) to visit its relevant
facility or equipment at the Charleston Site in
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order to witness meter calibrations, tank strappings or other tests to be
conducted to verify the accuracy of equipment used to determine the quantity of
Services provided by or on behalf of a Service Provider to a Service Receiver;
provided that (i) such calibrations and tank strappings or other tests shall not
occur more frequently than every thirty (30) days, and (ii) each Party shall
cause its employees, agents and representatives to comply with all of the other
Party's rules and regulations and follow designated routes. The Party
responsible for taking the measurement will provide the other Party with two (2)
business days' notice of such calibrations, tank strappings or tests.
(d) If at any time any of the measuring devices are out of service,
the Party responsible therefor will make available to the other Party the
relevant data from up-stream or down-stream meters or measures or from elsewhere
to enable the Parties to determine or estimate as accurately as possible the
appropriate charges to be made while such meters or measures are out of service.
2.05 Entities to Provide Services
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(a) All Services shall be provided by employees of the Service
Provider or, at the Service Provider's election, by third parties with whom it
has contracted to provide such Services to itself. All references in this
Agreement to a Service Provider's "providing" a Service shall include both
direct Service provision by the Service Provider and Service provision by third
parties.
(b) Notwithstanding (a) above, in the event that a Service Provider
elects to utilize a third party to provide a Service and such third party
supplier did not provide such Service at the Charleston Site as of the
Distribution Date, then the Service Provider shall notify the Service Receiver
in advance, which notice shall include the terms on which the third party
supplier will be providing the Service, and the Service Receiver may elect
either to receive the affected Service to be provided by a third party supplier
or terminate the affected Service upon thirty (30) days written notice.
(c) All contracts with third party suppliers must contain appropriate
indemnities and insurance requirements of the third party supplier, and must
exclude liability of the Service Provider and the Service Receiver for any
punitive, special, indirect, or consequential damages, or lost profits or
business interruption, incurred by the third party supplier.
2.06 Warranties
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(a) The Service Provider warrants to the Service Receiver that the
Services delivered pursuant to this Agreement will meet the Specifications in
Exhibit A hereto except in the case of
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Services purchased by the Service Provider where the Service as supplied by a
third party supplier is not within the applicable specifications, in which case
Section 2.06(c) shall apply.
(b) The Service Receiver may refuse to accept or may reject any
Service which does not conform with the relevant Specification and shall notify
the Service Provider in writing within thirty (30) days after the receipt of
such non-conforming Service, in which case, the Service Provider shall at the
Service Recipient's option, either: (i) provide the Services again in
replacement for the non-conforming Service, or (ii) issue a credit to the
Service Recipient for the Service Charge allocable to such non-conforming
Service. Failure to give such notice shall constitute a waiver by the Service
Receiver of all claims with respect to the non-conforming Service.
(c) In the event that a third party supplier to the Service Provider
supplies any Service and that Service does not meet the Specification, then the
Service Provider shall: (i) notify the Service Receiver forthwith upon becoming
aware that the Service is outside the Specification, (ii) use reasonable
efforts to work with the Service Receiver and the third party supplier to bring
the Service within Specification, and (iii) provide the Service Receiver with
full cooperation in pursuing a Claim against the third party supplier. To the
extent that the Service Provider has complied with Section 2.05 and this Section
2.06(c), the Service Provider shall have no further liability in respect of any
Service supplied hereunder by a third party supplier which fails to meet the
Specification in the circumstances set out in this Section 2.06(c).
(d) EXCEPT FOR THE EXPRESS WARRANTIES ABOVE, SERVICE RECEIVER AND
SERVICE PROVIDER MAKE NO OTHER WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SERVICES PROVIDED OR PRODUCT(S) MADE UNDER THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
2.07 Risk of Loss - Title
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Liability associated with and, as appropriate, title to, any Service
supplied hereunder shall pass to the Service Receiver at the point at which the
Service is received by the Service Receiver (i.e., comes under the operational
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control of the Service Receiver, as applicable). Before such point, the risk of
loss remains with the Service Provider. Except in the case of gross negligence
by either the Service Provider or Service Receiver, employees of each shall
utilize the applicable Workers Compensation program of their respective employer
as exclusive remedy.
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2.08 Monthly Meetings
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The Parties' Authorized Representatives, or such other person(s) a
Party may designate, shall meet monthly, or more often as may be required, to
review the Services being provided, the Service Charges for such Services, the
next ninety (90) days' projected requirements for Services and other related
items. Such a meeting of the Parties' Authorized Representatives will also be
held during the annual Budgeted Service Quantity meeting.
2.09 Regulatory Approvals
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The Service Provider shall endeavor to obtain all contract
modifications, permits, licenses and other authorizations from Governmental
Authorities needed to operate the Service Facilities and provide the Service
Receiver with the Services listed in Exhibit A. However, the Service Provider
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shall not be liable to the Service Receiver for any failure to provide the
Services if such failure is attributable to any delay or inability in obtaining
the necessary contract modifications or in obtaining the necessary permits,
licenses or authorizations from Governmental Authorities.
ARTICLE III
SERVICE FACILITIES
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3.01 Expansion / Improvement of Service Facilities
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(a) The Parties recognize that normal operations of the Service
Facilities require some ongoing level of capital improvement and expenditures.
Also capital improvements and expenditures may be required to meet local, state
or Federal regulations. To the degree that these expenditures are required to
maintain and operate the Service Facilities to the benefit of all the Service
users, the funding for such capital improvements shall be the responsibility of
the Service Provider. The Service Receiver will be obligated to participate in
these capital improvements and expenditures but will have the option of funding
its share of the capital expenditures, in which case the charges associated with
the capital improvement and expenditures will not be included in Capital
Carrying Charges and the Service Provider will not charge the Service Receiver
for depreciation. If the Service Receiver elects to fund its share of the
capital improvement and expenditure, its share will be based upon its percentage
usage or consumption during the past twelve (12) months. If, however, the
Service Receiver elects not to fund its share of the capital expenditure, it
will be charged start-up costs and on-going depreciation and Capital Carrying
Charges based upon its Budgeted Service Quantity Percentage in future years.
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(b) To the extent that capital improvements and expenditures are known,
they will be included in the annual capital budget by the Service Provider and
reviewed at budget time with the Service Receiver. Individual projects included
in the capital budget with costs totaling less than Two Hundred Thousand Dollars
($200,000) will be performed at the sole discretion of the Service Provider,
provided that the sum total of all such projects for an individual Service does
not exceed Six Hundred Thousand Dollars ($600,000) in any one calendar year. For
a project totaling less than Two Hundred Thousand Dollars ($200,000) but not
included in the annual capital budget, the Service Provider, after reviewing the
project with the Service Receiver, may proceed at its sole discretion with
implementation of the project provided that the aggregate sum of all projects
applicable to that particular Service does not exceed Six Hundred Thousand
Dollars ($600,000) for that calendar year.
(c) For capital improvements and expenditures in excess of Two Hundred
Thousand Dollars ($200,000) for any single project or the aggregate sum of such
projects exceeding Six Hundred Thousand Dollars ($600,000) for a particular
Service during a Contract Year, the Service Provider will review such capital
improvements and expenditures with and receive the approval of the Service
Receiver.
(d) To the extent that capital investment for the improvement or
expansion of the Service Facilities are made to meet a specific need of either
the Service Provider or the Service Receiver then the Party whose needs are
being met will be responsible for funding such capital improvements and
expenditures and all operating costs associated with such capital investments.
(e) If the Service Provider identifies a capital expenditure it considers
will provide sufficient cost savings to justify the expenditure, then the
Service Receiver will be asked to fund the expenditure in proportion to the
Service Receiver's consumption of such Service during the previous twelve (12)
month period. If the Service Receiver decides not to participate in the cost
saving project and the Service Provider proceeds with the project, then no
Capital Carrying Charges for such cost savings project will accrue to the
Service Receiver, and only the Service Provider shall receive the benefit of any
cost savings achieved from the project. The Service Charge for the Service to
the Service Receiver, if it decides not to participate in the project, shall be
computed to reflect the costs that the Service Provider would have incurred in
providing the Service had the cost saving project not been done.
(f) The Service Receiver also shall have the right to identify cost
savings projects and if the Service Provider elects not to participate in such
projects, the Service Receiver can direct that the Service Provider implement
the projects with funding by the Service Receiver and all cost benefits accruing
exclusively to the Service Receiver.
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3.02 Unused Service Assets, Land
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(a) If the Service Provider's operations at the Charleston Site no longer
require the provision of a Service, the Service Provider shall make available
for purchase by the Service Receiver the assets providing such Service at the
Service Provider's net book value of the assets.
(b) Each of the Parties agrees that as and when requested by the other
Party, it shall consider in good faith, without creating a binding obligation
hereunder, the sale of unused land by it to the requesting Party for expansions,
improvement of operations, safety and environmental concerns and other matters.
3.03 Rights of Way, Easements
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Each of the Parties agrees to grant to the other Party such temporary or
permanent rights of way, easements or access licenses, on mutually satisfactory
and commercially reasonable terms, for pipelines, communication lines and
transportation access that may be reasonably required by the other Party for
movement of raw materials and finished products; provided that such rights of
way, easements or access licenses do not interfere with the granting Party's
operations, and do not in any way impair the value of the granting Party's
property. In no event will the foregoing sentence obligate the granting Party to
make any grant or agreement which will cause it to be in breach of any agreement
to which it is a party or its assets are bound, or violates any law, rule or
regulation of a Government Authority applicable to the Charleston Site.
3.04 Relocation of Service Facilities
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Each Party shall have the right to relocate utilities and other equipment,
property or assets in order to accommodate plant expansions, construction of new
facilities, or the need to obtain Services by alternate means; provided that
such relocation shall not impair or add costs to the other Party's operations at
the Charleston Site. In the event that such relocation will cause an increase in
the Service Charge for the affected Service, then the Party effecting the
relocation shall be responsible for such increase.
ARTICLE IV
TERM AND TERMINATION
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4.01 Term of Agreement
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This Agreement shall become effective on the Distribution Date and
shall continue in full force and effect for an initial term of ten (10) years
and shall renew automatically
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thereafter from year to year until all Services have been terminated pursuant to
Section 4.02 below.
4.02 Duration of Services
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(a) The Service Provider will provide each Service for the Term described
for such Service on Exhibit A. The Service Receiver will accept each Service for
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any minimum period specifically provided for such Service in Exhibit A, if any,
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and thereafter until such time as the obligation to accept a Service is
terminated in the manner set forth in subsection (b) below.
(b) The Service Receiver may terminate a Service, upon such notice as is
set forth in the relevant section of Exhibit A, or if none is specified as to
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the Service Receiver, upon one year's advance written notice.
(c) After the expiration of the Term for a Service, the Service Provider
may terminate the provision of such Service, upon such notice as is set forth in
the relevant section of Exhibit A, or if none is specified as to the Service
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Provider, upon one (1) year's advance written notice; provided, however, that a
Service Provider may not terminate a Utility Service for so long as it provides
such utilities for its own operations or to any other Entity conducting
operations at the Charleston Site.
(d) From and after the Service termination date, all Service Charges
associated with such Service shall cease to occur, and neither Party shall have
an obligation to further provide or to accept such Service.
ARTICLE V
PAYMENTS FOR SERVICES
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5.01 Services Charges
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The Service Charges for Services provided by the Service Provider to
the Service Receiver shall include three (3) components: (1) Variable Costs;
(2) Fixed Costs; and (3) Capital Carrying Costs.
(a) Variable Costs cover the costs that vary in proportion to the
amount of Service being provided, as defined at the Charleston Plant immediately
prior to the Distribution Date (unless otherwise agreed by the Parties), and are
expressed in terms of dollars per unit of production of such Service. Actual
unit costs of production for the Charleston Site and actual
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volumes of consumption by the Service Receiver will be used to compute the
monthly Variable Cost Service Charge to the Service Receiver.
(b) Fixed Costs cover the costs of providing a Service which do not
vary in proportion to the amount of Service, as defined at the Charleston Plant
immediately prior to the Distribution Date (unless otherwise agreed by the
Parties), and shall cover such costs, without limitation, as operating labor,
maintenance labor, maintenance materials and contracts, laboratory, technical
and environmental support costs, depreciation, taxes and administrative costs.
Monthly Fixed Cost Service Charges to a Service Receiver will be based upon
total budgeted Fixed Costs for the Service multiplied by the Service Receiver's
Budgeted Service Quantity Percentage for the Service, adjusted semi-annually to
actual Fixed Costs as provided in Section 5.02(a) below.
(c) Capital Carrying Charges will apply to new capital investments
made by the Service Provider after the Distribution Date, and will consist of
all costs incurred by the Service Provider to make the capital investment for
the Service and properly accounted for as capital expenditures. The Capital
Carrying Charge will apply during the normal depreciation period for the
investment and will be at Prime Rate plus two (2) percentage points. The
formula for allocating Capital Carrying Charges properly chargeable to the
Service Receiver will be:
Monthly Charleston Site Capital Carrying Charges X Budgeted Service
Quantity Percentage
(d) All labor charges included in Service Charges shall be charged at
the fully loaded rate, which shall include wages/salary, fringe benefits, and as
applicable, supervision and a cost for equipment and tools required to perform
the Service.
5.02 Adjustments
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(a) The Fixed Costs reflected in the Service Charges paid monthly for
each Service will be adjusted semi-annually to reflect actual Fixed Costs
incurred for the period January through June, and for July through December,
which adjustments shall be included on the next invoice issued thereafter.
(b) If during any Contract Year, the Service Receiver's consumption or
use of a Service exceeds its Budgeted Service Quantity by more than 5%, the
Service Provider may, at its option, at the end of the Contract Year, bill a
Fixed Cost adjustment to the Service Receiver. If the Service Receiver, during
any Contract Year, consumes or uses less than the Budgeted Service Quantity, the
Service Receiver still will be responsible for its portion of the Site's Fixed
Costs and Capital Carrying Charges based upon its Budgeted Service Quantity,
unless prior arrangements have been made for the Service Provider to take and
consume or utilize the Service Receiver's planned consumption and to pay the
Fixed Costs thereon.
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(c) In the event of Force Majeure preventing the delivery of a Service
to the Service Receiver, the Service Receiver will continue to pay its
proportionate share of Fixed Costs and Capital Carrying Charges for a period up
to six (6) months, but payment of such Fixed Costs and Capital Carrying Charges
will abate after six (6) months for the duration of the Force Majeure.
(d) During other interruptions of a Service, the Service Receiver will
continue to pay its share of the Fixed Costs and Capital Carrying Charges of the
Service, however, in the event of a breach of this Agreement by the Service
Provider that results in the cessation of the Service, the Service Receiver will
not have any obligation to pay the Fixed Costs and Capital Carrying Charges of
that Service until the Service is resumed.
5.03 Invoicing and Payment
---------------------
(a) The Service Provider shall issue an invoice with reasonable
detailed support to the Service Receiver at the end of each month indicating the
quantity of Services received and the Service Charges for such Services.
Payment by the Service Receiver for Services received shall be due fifteen (15)
days after the date of the invoice.
(b) In the event the Service Receiver disputes the accuracy of any
invoice, the Service Receiver shall pay the undisputed portion of such invoice
and the Parties will promptly meet and seek to resolve the dispute.
(c) If the Service Receiver fails to pay any undisputed amount owed
under this Agreement, Service Receiver shall correct such failure promptly
following notice of the failure, and shall pay Service Provider interest on the
amount paid late at two percent (2%) above the Prime Rate prorated for the
number of days such overdue amounts are outstanding.
(d) All payments due under this Agreement shall be made by electronic
funds transfer, unless otherwise agreed by the Parties.
5.04 Taxes
-----
To the extent not included in the price Service Provider charges for
Services, Service Receiver shall pay to Service Provider the amount of any taxes
or charges set forth in (a) through (c) below imposed now or in the future by
any Governmental Authority including any increase in any such tax or charge
imposed on Service Provider after the Distribution Date:
(a) Any applicable sales, use, gross receipts, value added or similar
tax that is imposed as a result of, or measured by, any sale or Service rendered
hereunder unless covered by an exemption certificate;
15
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(b) Any applicable real or personal property taxes, including any
special assessments, and any impositions imposed on Service Provider in lieu of
or in substitution for such taxes on any property used in connection with any
sale or Service rendered hereunder; and
(c) Any other governmental taxes, duties, and/or charges of any kind,
excluding any income or franchise taxes imposed on Service Provider, which
Service Provider is required to pay with respect to any sale or Service rendered
hereunder.
5.05 Advance Payments
----------------
Prior to the Distribution Date both Parties jointly will determine and
agree on whether an advance payment may be required by one Party to the other
under this Services Agreement, to compensate either Party for carrying costs
associated with any imbalance in cash disbursements in providing Services
hereunder.
ARTICLE VI
SHUTDOWNS; FORCE MAJEURE
------------------------
6.01 Maintenance, Planned and Unplanned Temporary Shutdowns
------------------------------------------------------
(a) Each Party will maintain the Service Facilities to the same
standards in effect at the Charleston Plant immediately prior to the
Distribution Date, which shall include at all times such maintenance as required
to comply with all applicable laws, rules and regulations of a Governmental
Authority.
(b) Each Party shall have the right and freedom to temporarily
shutdown its own facilities used for the production, distribution, supply or
receipt of Services as well as facilities supportive of such activities in the
event of Force Majeure circumstances or to ensure their continued safe and
efficient operation.
(c) The Parties shall use all reasonable efforts to minimize
interruptions in the supply and receipt of Services hereunder and to mitigate
the consequences for the other Party of any interruptions arising from
shutdowns.
(d) The Parties shall provide each other at least prior notice of any
planned shutdown, as soon as such schedule is established, but in no event less
than three (3) months in advance. The Authorized Representatives shall meet and
seek to coordinate such planned temporary shutdown, but the final decision on
the period(s) of any shutdown(s) shall be for the Party
16
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owning the facility to be shut down, provided, however that no planned shutdowns
expected to lead to interruptions of supply, or the receipt of Services in the
aggregate exceeding fourteen (14) days per calendar year, shall be made unless
otherwise agreed by the Parties.
(e) In the event of an unplanned shutdown, the Party whose facility is
to be shut down must inform the other Party with as much notice as reasonably
practicable of its unplanned shutdown, of the expected commencement date and
extent of the shutdown, and plans for any partial and full resumption of supply
or receipt of the Service concerned.
(f) In the event of an emergency temporary shutdown, the Party whose
facility is concerned must inform the other Party as soon as reasonably
practicable and the Parties will cooperate fully to minimize the consequences
and risks, and to mitigate any losses.
(g) In the event that a planned or unplanned shutdown of a Service
Facility results in a reduction of the Service that is available, the available
Service will be apportioned between the Parties in accordance with the
Curtailment Plan for such Service, or in the absence of an applicable section
for the Service in the Curtailment Plan, based on usage or as otherwise agreed
by the Parties as being most practicable. The Service Provider shall use its
best efforts to restore the Service to full capacity as soon as possible and
minimize the Service Facility shutdown.
(h) Unplanned or emergency shutdowns causing interruptions of supply
for more than seven (7) days shall be deemed a case of Force Majeure.
6.02 Force Majeure.
-------------
(a) A Party's failure or inability to comply with the terms of this
Agreement shall not provide a basis for such party's liability to the other
party in the event performance is prevented by any Force Majeure event, provided
that such Party complies with its obligations under this Section 6.02.
(b) If a party is in a position of Force Majeure or is aware of the
likelihood of a situation constituting Force Majeure, it shall notify the other
party in writing promptly of the cause and extent of such non-performance or
likely non-performance, the date or likely date of commencement thereof, the
expected duration and estimated effect, and the means proposed to be adopted to
remedy or abate the Force Majeure; and the Parties shall without prejudice to
the other provisions of this Section 6.02 consult with a view to taking such
steps as may be appropriate to mitigate the effects of such Force Majeure.
(c) The party subject to Force Majeure shall act as follows:
17
<PAGE>
(i) The affected party shall coordinate closely with the other
party, shall keep the other party regularly informed during the
course of the Force Majeure as to when resumption of performance
shall or is likely to occur, and shall use all reasonable
efforts to remedy or abate the Force Majeure as expeditiously as
possible; provided, however, nothing herein shall require a
Party to settle or compromise any strike or labor dispute.
(ii) In the case of a Force Majeure affecting the Service Provider,
the Service Provider will allocate such portions of the affected
Services that are available to ensure safety, health and
environmental compliance at the Charleston Site, such that after
the allocation the Service Receiver will receive the Service in
accordance with the Curtailment Plan, or if not provided for
therein, based on the usage level of such Service by said
facilities as a percentage of the total for the Charleston Site.
(iii) The affected party shall notify the other party and shall resume
performance as expeditiously as possible after termination of
the Force Majeure or the Force Majeure has abated to an extent
which permits resumption of such performance.
(d) Upon the occurrence and during the continuance of a Force Majeure,
a Service Receiver shall be entitled to obtain substitute Services on a
temporary or permanent basis as set forth in this paragraph. The Service
Provider shall cooperate with the Service Receiver's efforts to obtain temporary
substitute Services, including allowing a responsible third party to have
reasonable access to the Charleston Site and the Services Facilities to allow
for delivery of such Services. In the event of a Force Majeure event which has
a continuous duration of six (6) months or more, the Service Receiver shall be
entitled to obtain permanent substitute Services. In such case the Service
Provider will have no further obligation to provide and the Service Receiver
shall have no further obligation to accept such Service or Services and all
costs associated with such Service shall cease to accrue on the later of: (i)
the thirtieth (30th) day after the date on which the Service Receiver notifies
the Service Provider that it intends to exercise its right to obtain permanent
substitute Services and (ii) any later date of termination specified in such
notice.
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ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
7.01 Limitation of Liability.
-----------------------
The Parties shall have no liability to each other for any and all
Claims and/or Damages arising out of this Agreement, whether such Claims and/or
Damages arise on account of a Party's furnishing Services hereunder, the failure
to furnish Services hereunder, or otherwise, and whether or not such Claims
and/or Damages were caused by the negligence of a Party, including a Party's
sole negligence; provided, however, that the foregoing limitation shall not
apply to Claims and/or Damages to the extent caused by a Party's gross
negligence or Willful Breach.
7.02 Consequential Damages.
---------------------
Notwithstanding anything to the contrary contained herein or at law
and in equity, in no event (except in the case of Willful Breach) shall a Party
be liable to the other Party for punitive, special, indirect or consequential
damages (including, without limitation, damages for loss of business profits,
business interruption or any other loss) arising from or relating to any claim
made under this Agreement or regarding the provision of or the failure to
provide Service(s) hereunder, even if a Party had been advised or was aware of
the possibility of such damages.
7.03 Mitigation.
----------
OLIN and ARCH (as the case may be) shall use all reasonable efforts
to mitigate the loss and damage (if any) incurred by it as a result of any
breach by another Party of that other Party's obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
---------------
8.01 Indemnification
---------------
(a) ARCH shall indemnify, defend and hold harmless OLIN, including its
affiliates, employees, representatives and agents (the "OLIN Indemnitees") from
and against all Claims and Damages asserted by any third party or by ARCH
employees (including their families and estates) against the OLIN Indemnitees in
connection with, or as a result of, OLIN's provision of
19
<PAGE>
Services under this Agreement except to the extent such Claims and Damages are
caused by the gross negligence or Willful Breach of any of the OLIN Indemnitees.
(b) OLIN shall indemnify, defend and hold harmless ARCH, including its
affiliates, employees, representatives and agents (the "ARCH Indemnitees") from
and against all Claims and Damages asserted by any third party or by OLIN
employees (including their families and estates) against the ARCH Indemnitees in
connection with, or as a result of, ARCH's provision of Services under this
Agreement unless such Claims and/or Damages are caused by the gross negligence
or Willful Breach of any of the ARCH Indemnitees.
(c) Each Party shall indemnify, defend and hold harmless the other Party
from and against all monetary fines, penalties or the like, imposed by a
Governmental Authority against the Party entitled to indemnification arising
from a violation by the indemnifying Party of applicable laws, rules,
regulations, orders, or the like of the Governmental Authority.
8.02 Third Party Service Provider
----------------------------
(a) Where a third party supplier provides a Service on behalf of the
Service Provider hereunder and that third party (including its subcontractor,
employee or agent) files Claims and/or Damages against either Party (or both
Parties) relating to that third party's provision of a Service, the Parties
shall indemnify, defend and hold the other Party, its employees, representatives
and agents, harmless with respect to such Claims and/or Damages as follows:
(i) OLIN shall indemnify, defend (or provide for the defense) and
hold ARCH harmless from and against all third party supplier
Claims made by a third party supplier which provides Services to
ARCH on behalf of OLIN (including Claims and/or Damages of its
subcontractor, employee or agent) and/or Damages which are
alleged to occur in or on the Charleston Site, whether or not
such Claims and/or Damages are based (in whole or in part) on
the negligence of OLIN, ARCH or the third party supplier, except
to the extent such Claims and/or Damages are caused by the gross
negligence of ARCH;
(ii) ARCH shall indemnify, defend (or provide for the defense) and
hold OLIN harmless from and against all third party supplier
Claims made by a third party supplier which provides Services to
OLIN on behalf of ARCH (including Claims and/or Damages of its
subcontractor, employee or agent) and/or Damages which are
alleged to occur in or on the Charleston Site whether or not
such Claims and/or Damages are based (in whole or in part) on
the negligence of OLIN, ARCH or the third party supplier, except
20
<PAGE>
to the extent such Claims and/or Damages are caused by the gross
negligence of OLIN.
(b) In no event will an indemnitor be liable under paragraph (a) for
punitive, special, indirect or consequential damages, lost profits or business
interruption claimed by a third party supplier.
8.03 Indemnification Procedures.
--------------------------
(a) In the event of any Claim for which a Party is entitled to
indemnification, the Party seeking indemnification shall immediately notify in
writing the indemnifying Party of such Claim and shall fully cooperate with the
indemnifying Party in the defense of the Claim and, at the indemnifying Party's
cost, permit the indemnifying Party's attorney(s), reasonably acceptable to the
indemnified Party, to handle and control the conduct and defense, and/or
settlement of such Claim, including making personnel and records available for
the defense of the Claim.
(b) The indemnifying Party shall keep the indemnitee(s) reasonably
informed regarding any claim, action or proceeding in which the indemnifying
Party is defending the indemnitee(s), and shall not enter into any settlement or
compromise of such claim, action or proceeding affecting the indemnitee(s)
without the indemnitee(s)'s consent, unless such settlement or compromise
contains a complete and unconditional release of the indemnitee(s). In no event
shall the indemnifying Party agree to a settlement which contains a non-monetary
component without the consent of the indemnitee(s), which consent shall not be
unreasonably withheld.
(c) The indemnification provisions of Sections 8.01 and 8.02 are
contingent upon the indemnitee(s) promptly turning over the complete control of
the claim and/or suit to the indemnifying Party.
8.04 Scope of Indemnification as Permitted by Applicable Law.
-------------------------------------------------------
Nothing in this Article VIII shall be construed to violate directly or
indirectly any applicable law prohibiting indemnification for the sole or
partial negligence of the indemnitee. In the event any provision of this
indemnity is contrary to applicable law, this indemnity shall not be void or
unenforceable, but shall be enforced to, and only to, the fullest extent
permitted by the applicable law.
21
<PAGE>
ARTICLE IX
RECORDS AND AUDITS
------------------
9.01 Records
-------
(a) Each Service Provider shall maintain books of record and account,
recording the levels or quantities of Services provided by or on behalf of the
Service Provider to the Service Receiver under this Agreement, the costs and
expenses associated therewith and amounts paid by the Service Receiver.
(b) Each Service Provider agrees to maintain financial records
consistent with its normal practices and adequate to reflect fairly the
accuracy of charges invoiced under this Agreement. Should the Service Receiver
reasonably request the Service Provider to develop or maintain additional
records in connection with this Agreement, and if the Service Provider agrees,
the cost of this effort will be negotiated by the Parties and borne by the
Service Receiver.
9.02 Audits
------
(a) Third Party Audit (Cost of Service). From time to time as agreed
-----------------------------------
by the Parties, each Party shall have the right to have an independent certified
public accounting firm ("CPA firm"), mutually acceptable to the Parties, audit
the other Party's books of account and other records pertaining to a dispute
arising from the cost of Services (including invoiced and reimbursed costs)
provided pursuant to this Agreement for a period of five (5) years following the
end of the calendar year in which such disputed Services were rendered. Prior
to commencing its audit, the CPA firm shall execute a confidentiality agreement
reasonably acceptable to the audited Party. Upon completing its audit, the CPA
firm shall report only whether or not the charges from the Service Provider to
the Service Receiver hereunder were correct or, if not, the amount of any
overcharge or undercharge. The Parties agree to accept the determination of the
CPA firm as binding and final, and if the audit determines that either Party
owes money to the other Party, the owing Party shall promptly pay such sum to
the other Party. The cost of such audit shall be borne by the requesting Party
and shall be limited to a duration not to exceed two (2) months.
(b) Functional Audit. From time to time as agreed by the Parties, the
----------------
Service Receiver shall have the right to conduct functional audits of a Service
provided hereunder. Such audits shall be limited in scope to: (i) comparison
against a mutually agreed upon standard, or (ii) as required to effect
certification promulgated by a recognized industry organization (for example,
"ISO" certification) or by a Governmental Authority. Each Party shall bear its
own costs of any Functional Audits and such Functional Audits shall be limited
to a duration not to exceed two (2) weeks on site.
22
<PAGE>
(c) Unrelated Information. Notwithstanding the above audit rights,
---------------------
the Service Provider shall have the right to redact from records which may be
audited information that is unrelated to the provision of Services to the
Service Receiver.
ARTICLE X
INSURANCE, SAFETY, HEALTH AND ENVIRONMENT
-----------------------------------------
10.01 Insurance
---------
(a) Each Party shall be responsible for maintaining insurance (which
may include self insurance) in coverages and amounts sufficient to replace its
own Service Facilities and production facilities, to cover potential liabilities
hereunder, and otherwise to comply with all applicable requirements of
Governmental Authorities.
(b) Each Party shall look to its own insurance (including self
insurance and any deductible amount) as its exclusive remedy to recover damages
for property damage, business interruption or extra expenses relating to an
insurable event. Each Party hereby waives its rights of recovery against the
other for any loss insured by fire, extended coverage and other property
insurance policies (including self insurance and any deductible amount) existing
for the benefit of such Party. Each Party shall obtain from its insurer a
waiver of subrogation against the other Party.
10.02 Safety, Health and Environment
------------------------------
(a) Each Party shall be responsible for complying with Environmental
Laws relating to the operation of its activities at the Charleston Site after
the Distribution Date. Notwithstanding the above, a Party may contract out the
record keeping and/or reporting activities required by any federal, state and
local law, provided that the Party shall not contract away its liability and
responsibility for assuring that any required records or reports comply with the
legal requirements, and are truthful and accurate.
(b) Unless otherwise agreed, each Party shall retain sole and complete
responsibility for the management, storage and proper disposal of wastes,
discharges and emissions in all media produced from its activities and shall
obtain necessary Governmental Authority permits, permissions or licenses to
effect this responsibility.
(c) Each Party shall notify the other Party on a timely basis of any
incidents or conditions which may have adverse safety, health or environmental
consequences to employees
23
<PAGE>
or property of the other. Each Party shall provide information to the other
Party for any hazardous materials to which their employees may be exposed while
on the Charleston Site.
(d) Either Party shall have the right to immediately suspend the
provision of any Service under operation of this Agreement, without liability to
itself by informing the Authorized Representative of the other Party as soon as
practical by telephone followed by written notice, if at any time a Party
believes, in its sole reasonable judgment, that an unsafe practice related to
that Service, which endangers the employees of either Party, the general public,
or the environment, is being undertaken. Further, if this practice is not
corrected or substantial steps taken to effect its correction within fifteen
(15) days, then that Party may declare Force Majeure and suspend its obligations
in accordance with Section 6.02.
ARTICLE XI
DISPUTE RESOLUTION
------------------
11.01 Alternative Dispute Resolution
------------------------------
(a) The Parties understand and appreciate that their long term mutual
interests will be best served by effecting a rapid and fair resolution of any
claims or disputes which may arise out of this Agreement or from any dispute
concerning this Agreement's terms. Therefore, each Party agrees, to use its
best efforts to resolve all such disputes as rapidly as possible on a fair and
equitable basis. Toward this end, each Party agrees to develop and follow a
process for presenting, rapidly assessing, and settling claims and other
disputes on a fair and equitable basis.
(b) If any dispute or claim arising under this Agreement cannot be
readily resolved by the Parties pursuant to Section 11.01(a), the Parties agree
to refer the matter to the OLIN and ARCH Authorized Representatives which shall
meet and attempt to resolve the dispute within thirty (30) days from the date
the dispute was brought before its attention.
(c) If any dispute or claim arising under this Agreement cannot be
resolved pursuant to Section 11.01(b), the Parties agree to refer the matter to
a panel consisting of one (1) senior executive from each Party for review and
resolution. The senior executive shall not have been directly involved in the
claim or dispute. A copy of the Agreement terms, relevant facts, areas of
disagreement and a concise summary of basis of each side's contention will be
provided to both executives who shall review the same, and attempt to reach a
mutual resolution of the issue. The senior executives shall meet and attempt to
resolve the dispute within thirty (30) days of their appointment.
24
<PAGE>
(d) If the dispute cannot be resolved by the senior executive panel
pursuant to Section 11.01(c), then within ten (10) days after the end of the
senior executives' conference the Parties will notify the Authorized
Representatives in writing and within thirty (30) days therefrom either Party
may refer the matter to arbitration for sole and final settlement by a board of
three (3) arbitrators in accordance with the Commercial Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association ("AAA").
(e) The Party electing arbitration shall notify the other Party in
writing in accordance with the Arbitration Rules and such notice shall be
accompanied by the name of the arbitrator selected by the Party serving the
notice. The second arbitrator shall be chosen by the other Party, and a neutral
arbitrator shall be chosen by the two arbitrators so selected. If a Party fails
to select an arbitrator or to advise the other Party of its selection within
thirty (30) days after receipt by such a Party of the notice of the intent to
arbitrate, the second arbitrator shall be selected by the AAA. If the third
arbitrator shall not have been selected within thirty (30) days after the
selection of the second arbitrator, the appointment of the third arbitrator
shall be made by the AAA. Arbitrators shall be selected taking into account
their background in the chemical industry and familiarity with chemical
production facilities, or other appropriate qualifications.
(f) All such proceedings shall be conducted in Norwalk, Connecticut
or another mutually agreed upon location. The arbitrators shall make detailed
findings of fact and law in writing in support of the decision of the arbitrator
panel, but shall not be empowered to award reimbursement of attorneys' fees and
other costs of arbitration to the prevailing Party. Any monetary award of the
arbitrators panel shall include interest from the date of any breach or any
violation of this Agreement. The arbitrators shall fix an appropriate rate of
interest from the date of the breach or other violation to the date when the
award is paid in full. The Parties agree that the decision of the arbitrators
shall be final and conclusive and that judgment on the arbitration award may be
entered in any court having jurisdiction over the Parties or their assets.
(g) The provisions of this Section 11.01 shall not be deemed to
preclude any Party hereto from seeking preliminary injunctive relief to protect
or enforce its rights hereunder, or to prohibit any court from making
preliminary findings of fact in connection with granting or denying such
preliminary injunctive relief, or to preclude any Party hereto from seeking
permanent injunctive or other equitable relief after and in accordance with the
decision of the arbitrator panel. Whether any claim or controversy is arbitrable
or litigable shall be determined solely by the arbitrator panel pursuant to the
provisions of this Section 11.01.
11.02 Ongoing Obligations.
-------------------
It is expressly agreed that the failure of the Parties to
resolve a dispute on any issue to be resolved hereunder shall not relieve either
Party from any obligation set forth in this Agreement. In addition, the Parties
expressly state their mutual determination that the failure to
25
<PAGE>
resolve any such disputes shall not hinder or delay the providing of the
Services, and that, notwithstanding the pendency of any such dispute, neither
Party will be excused of its obligations hereunder to cooperate with the other
to effectuate the purposes of this Agreement.
ARTICLE XII
CONFIDENTIALITY
---------------
12.01 Confidentiality Obligation.
--------------------------
Each of the Parties agrees to keep confidential and neither disclose to
others nor use, except as permitted herein, any Confidential Information
received from the other Party pursuant to this Agreement. In the event that the
Service Provider elects to use a third party supplier to provide Services, the
Service Provider shall require that the third party supplier be bound by these
provisions of confidentiality in its provision of Services.
12.02 Limits on Disclosure.
--------------------
The receiving Party shall treat all Confidential Information in the same
manner and with the same degree of care as it uses with respect to its own
Confidential Information of like nature, except that the obligations set forth
herein shall not apply with respect to any Confidential Information which:
(i) Public Knowledge. Is generally available to the public or
----------------
subsequently becomes generally available to the public through
no breach by the receiving Party of secrecy obligations under
this Agreement or prior agreements between the Parties
concerning the Confidential Information; or
(ii) Received from Third Party. Is received from a third party who is
-------------------------
legally free to disclose such Confidential Information and who
did not receive such Confidential Information in confidence from
the disclosing Party; or
(iii) Independently Developed. Is independently developed by the
-----------------------
receiving Party without reference to the Confidential
Information received from the disclosing Party.
26
<PAGE>
12.03 Subpoena or Demand.
------------------
A Party may disclose Confidential Information pursuant to a subpoena or
demand for production of documents in connection with any suit or arbitration
proceeding, any administrative procedure or hearing before a governmental or
administrative agency or instrumentality thereof, or any legislative hearing, or
any governmental audit or other similar proceeding, provided that the receiving
Party shall promptly notify the disclosing Party of the subpoena or demand and
provided further that in such instances, the Parties use their reasonable best
efforts to maintain the confidential nature of the Confidential Information by
protective order or other means.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 (a) Waiver. Neither Party shall be construed to have waived any
------
of its respective rights or interests in this Agreement by a failure, in any one
instance, to have asserted, or made claim on, such right at the time such Party
was entitled to assert same.
(b) Assignment. Neither Party shall assign this Agreement without the
----------
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed; provided, however, that ARCH or OLIN may
assign its rights and obligations under this Agreement in whole or in part
without consent to (i) any wholly owned subsidiary of ARCH or OLIN, so long as
the performance of such subsidiary is guaranteed by ARCH or OLIN, as the case
may be, or (ii) in connection with a sale by ARCH of all or substantially all of
the business conducted by ARCH at the Charleston Site, or by OLIN of all or
substantially all of the business conducted by OLIN at the Charleston Site.
Nothing in this Agreement, express or implied, is intended to confer any rights
or remedies under this Agreement on any person or entity other than ARCH or OLIN
and their respective successors and permitted assigns.
(c) Notices. Unless otherwise provided for herein, all notices or other
-------
communications authorized or required between the Parties hereto by any
provision of this Agreement shall be in writing and delivered by hand, by
national overnight courier or transmitted by registered or certified mail,
return receipt requested, postage prepaid, and in all cases addressed to the
respective Parties, at the address set forth below or such other address as may
be designated by the Parties hereto.
27
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If to ARCH:
Arch Chemicals, Inc.
1186 Lower River Road
Charleston, TN 37310
Attn: Plant Manager
If to OLIN:
Olin Corporation
1186 Lower River Road
P. O. Box 248
Charleston, TN 37310-248
Attn: Plant Manager
Unless otherwise provided herein, the date of receipt (or refusal to receive)
shall be deemed to be the date the notice is given.
(d) Modification; Entire Agreement. This Agreement (including the exhibits
------------------------------
and schedules referred to herein) represents the entire agreement of the Parties
with respect to the matters discussed herein, and supersedes all prior
agreements and understandings, oral and written, between the Parties with
respect to the subject matter herein. There shall be no modification,
amendment, change, or alteration of this Agreement unless reflected in a written
instrument executed by both Parties.
(e) Captions. Titles or captions of articles and sections contained in
--------
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend, or describe the scope of this Agreement or
the intent of any provision hereof.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
according to the laws of the State of Connecticut without regard to its conflict
of law provisions.
(g) No Public Utility. It is understood that neither Party hereto
-----------------
considers itself or the other Party to be a public utility, and neither Party
intends by this Agreement to engage in the business of being a public utility,
or to enjoy any of the power and privileges of a public utility or by its
performance of its obligations to dedicate to public or quasi-public use or
purpose any of the facilities which it operates, and the Parties agree that the
execution of this Agreement shall not, nor shall any performance or partial
performance, be or ever deemed, asserted or urged by the Parties to be a
dedication to public or quasi-public use of any such facilities of a Party, or
as subjecting a Party to any jurisdiction or regulation as a public utility. If
at any time an Entity or a Governmental Authority should initiate any action
claiming or asserting jurisdiction over a Party
28
<PAGE>
as a public utility, or shall take jurisdiction in any proceeding whereby any
Entity should assert or claim that a Party is a public utility because of the
provision of a Service which is the subject of this Agreement, the Service
Provider shall have the right to terminate the supply of the Service under this
Agreement without penalty or further obligation to the Service Receiver at any
time thereafter by giving ninety (90) days written notice to the Service
Receiver of its intention to do so.
(h) Relationship of Parties. In all matters relating to this Agreement,
-----------------------
both Parties will be acting solely as independent contractors and will be solely
responsible for the acts of their employees, officers, directors, and agents.
Employees, agents, or contractors of one Party shall not be considered
employees, agents, or contractors of the other Party. Neither Party shall have
the right, power, or authority to create any obligation, express or implied, on
behalf of the other Party.
(i) Compliance. In performing its obligations, each Party will comply with
----------
all federal, state and local laws, ordinances, tariffs, and regulations of
Governmental Authorities applicable to such Party.
(j) Severability. In the event that any provision of this Agreement shall
------------
be found to be void or unenforceable, such findings shall not be construed to
render any other provision of this Agreement either void or unenforceable, and
all other provisions shall remain in full force and effect unless the provisions
which are invalid or unenforceable shall substantially affect the rights or
obligations granted to or undertaken by either Party.
(k) Survival of Certain Provisions. The Parties expressly agreed that
------------------------------
Article V (Payments for Services); Article VII (Limitation of Liability);
Article VIII (Indemnification) and Article X (Safety, Health and Environment)
shall survive any termination or expiration of this Agreement.
29
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be execute by their duly authorized representatives as of the day and year first
above written.
OLIN CORPORATION
By: /s/ Johnnie M. Jackson, Jr.
-------------------------------------------
Johnnie M. Jackson, Jr.
Vice President, General Counsel and Secretary
ARCH CHEMICALS, INC.
By: /s/ Sarah A. O'Connor
-------------------------------------------
Sarah A. O'Connor
Vice President
30
<PAGE>
EXHIBIT A
---------
SERVICE: Electricity and Electricity Distribution
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will transmit annually to ARCH approximately 83,800MKWH of 13.2KV, three
phase, AC power for use in the existing ARCH facilities. OLIN will make all
arrangements with the power supplier for delivery of electricity to the site.
. AC power will be made available to ARCH at the load sides of Switchgear #1
and #19. ARCH will own HTH Feeder Lines #1 and #2 which feed power to
Switchgear #4 and #18 for further distribution through unit substations to
the ARCH operating units.
. ARCH will own and maintain all the electric power distribution system from
the load sides of Switchgear #1 and #19 to the operating units.
. Any modifications to the ARCH power distribution system require OLIN
approval. ARCH will operate the ARCH power distribution system in a manner
approved by OLIN. Any reasonable recommendations with regard to reliability,
power factor control, system coordination, engineering standards, operating
and maintenance practices, etc. made by OLIN to ARCH must be implemented by
ARCH in the time frame reasonably required by OLIN.
. ARCH will notify OLIN immediately of any load changes in ARCH's AC power
requirements.
SERVICE CHARGE
. OLIN will bill ARCH monthly for AC electric power actually used (expressed in
MKWH) by ARCH and at a weighted average rate of all elements of the power
bill (including the firm, LIP and ESP rates for the total of AC and DC
Charleston Site power purchases from TVA for the month) as billed to OLIN by
TVA.
. The AC electric power used monthly by ARCH will be the sum of the meter
readings expressed in MKWH, at unit substations Nos. 9, 10, 11, 16, 17, 18,
19, 27, 28, 36, 37, 38, 39, 34 and 35 plus meter readings or estimates of
other miscellaneous uses of power by ARCH.
31
<PAGE>
. OLIN will bill ARCH a flat sum of $1,600 per month to cover ARCH's allocation
of costs for routine maintenance and repairs to the incoming plant power line
and to Switchgear #1 and #19. The cost of any major repairs will be shared
according to the ratio of demand of each company for the prior calendar year.
. Line losses will be computed monthly by OLIN (MKWH billed by TVA minus sum of
all Charleston Site AC and DC power meter readings) and 10% of the overall
Site power losses will be billed to ARCH at the weighted average noted above.
. Olin will seek to obtain the most favorable electricity prices possible for
Chlor-Alkali as an on-going activity. Both companies will work together to
adjust their operations to utilize the most favorably priced power.
. In the event that the price for ESP power becomes higher than the price for
firm power, each Party has an option to either take an economic curtailment
(i.e., a voluntary cutback in operations in view of the high cost of
incremental ESP power) and reduce or eliminate its use of ESP power or
continue to take its allotted share of ESP power in addition to its allotted
portion of firm and LIPS power. The Party (or Parties) continuing to take ESP
power under such circumstances will pay for the ESP power first, at the going
ESP power rate, and the remainder of each Party's power consumption will be
at the weighted average rate. For purposes of this section only, the quantity
of power allotted to each Party in each power category (i.e., firm, LIPS and
ESP) will be determined by multiplying the quantity in each category as
billed by TVA in the preceding month multiplied by a fraction, the numerator
being the Party's power demand for the preceding month and the denominator
being the total power demand of the Charleston Site during the preceding
month.
. Both parties will establish their minimum firm power requirements as of the
Distribution Date. As long as the total minimum firm power requirements for
the Charleston Site are less than the firm power available under the existing
power supply contract, the current methodology of using a weighted average
rate will be used to determine Arch's electricity costs. If the firm power
offered in a new power supply contract is less than the total minimum firm
power requirements of both Parties, the two Parties will each restate their
minimum firm power requirements. If the restated total minimum firm power
requirements still exceed the amount of firm power offered, and the firm
power requirements of the two Parties are not equal, the Party with the
higher firm power requirement will pay a full firm power rate for the unequal
firm power increment between the two Parties. The remaining power consumption
of each Party will be billed at the weighted average rate (including the
equal portions of firm power).
32
<PAGE>
TERM:
. OLIN will transmit AC electric power to ARCH for the duration of its present
electric power supply contract with TVA. The incoming plant power line and
Switchgear #1 and #19 will be made available to ARCH for the life of the
facilities.
33
<PAGE>
Exhibit A
SERVICE: Steam
PROVIDER: ARCH
SERVICE DESCRIPTION
. ARCH will provide 150 psig saturated steam to OLIN for use in the Chlor-
Alkali Plant, the Charleston Administration Building, the Tech Center and for
other miscellaneous users.
. Steam will be provided at the downstream side of the 150 psig regulator
located in the Boilerhouse.
. ARCH will add a meter at a point beyond the first block valve on the 150 psig
steam line in Piperack West of TRU area, to measure the steam flow to the HTH
Plant.
SERVICE CHARGE
. Fixed Costs associated with the entire operation of the Boilerhouse
(including those associated with the boiler feed water turbine and the
deareator) will be allocated to OLIN monthly based upon OLIN's Budgeted
Service Quantity Percentage for steam.
. OLIN's Budgeted Service Quantity of steam will include steam requirements for
the Chlor-Alkali Plant, Administration Building, Tech Center and other
miscellaneous users.
. Variable Cost of steam will be charged to OLIN based upon the quantity of
steam used by OLIN in any month and the unit variable cost of producing and
distributing steam during that month.
. By-product 30 psig steam from the SO2 Plant will be supplied directly to HTH
Decomposition Unit. The volume of steam provided to HTH Decomp will be added
to the volume of steam produced at the Boilerhouse in calculating the
Variable Unit Cost of steam production.
TERM:
. ARCH will provide steam to OLIN at Charleston as long as ARCH
provides steam to its own Charleston operations. OLIN, as
Service Receiver, will have the right to terminate this
Service upon providing two years advance written notice.
34
<PAGE>
Exhibit A
SERVICE: Water Supply System Consisting of Treated Water, Cooling Water and
Potable Water
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will provide treated water, cooling water and potable water to ARCH.
. The Charleston Site water system is not metered to the individual operating
units; hence, the volume of treated water, cooling water and potable water
used directly by ARCH's operating units will be estimated in a manner
consistent with past practices at Charleston. For 1999 ARCH's Charleston
operations are estimated to consume 20% of all the Sites' treated water,
cooling water and potable water.
. Either Party will notify the other if any modifications are required to be
made to any of the water systems. Any major modifications require prior
approval of both Parties before the modification is performed.
. The following water specifications apply
. Treated Water-ambient temperature, less than .5ppm Cl\\2\\, 60 psig and
pH of 8 to 8.5.
. Cooling Water-less than 90 degrees F, corrosion inhibited, minimum 50
psig.
. Potable Water-ambient temperature, higher than 60 psig, Cl\\2\\
content-greater than 1.0ppm and turbidity less than 0.5.
. The total Site treated water (which is used directly by the operating units
and fed as a raw material to the potable water and cooling water systems) is
calculated from the amount of AC electric power that is metered to the
treating water system.
<TABLE>
<S> <C>
Total Treated Water AC Usage (metered) = Estimated M Gals. Treated Water Used for the entire Charleston Site.
--------------------------------------
33 KWH/M Gals.
</TABLE>
SERVICE CHARGE
. For each month of 1999, ARCH will be allocated and billed for 20% (based upon
past Charleston Plant practices) of the volume of treated water, cooling
water and potable water produced and used at the Charleston Site multiplied
by the variable unit cost.
. During 1999, 20% of the Fixed Costs of the Charleston Site Water System will
be allocated to ARCH.
. There will be no additional charge to ARCH for the amount of treated water
used as boiler feed water.
35
<PAGE>
TERM:
. OLIN will provide treated water, cooling water and potable water to ARCH for
as long as such Service is provided to its own Charleston Site facilities.
36
<PAGE>
Exhibit A
SERVICE: Treatment of HAN Process Waste Water and HAN Area Storm Water
PROVIDER: OLIN
SERVICE DESCRIPTION
. ARCH will continue to treat HAN process waste water and HAN area
storm water for removal of mercury contaminants before discharge
into the OLIN system.
. OLIN will analyze the samples and give approval before HAN storm or
process waters are discharged into the OLIN system consistent with
the practices employed at the Charleston Plant prior to the
Distribution Date.
SERVICE CHARGE
. There will be no charge to ARCH for treatment of the HAN area storm
water if the HAN unit is not operating.
. If the HAN unit is operating, OLIN will charge to ARCH its
proportionate share of costs for analytical work based on the time
that is required to perform these analyses.
TERM:
. OLIN will provide this Service for ARCH for an Initial Term of ten
(10) years with ARCH reserving the right to terminate this Service
upon 90 days advance written notice.
37
<PAGE>
Exhibit A
SERVICE: Automotive Maintenance Service
PROVIDER: ARCH
SERVICE DESCRIPTION
. ARCH will provide maintenance service to all internal
combustion powered equipment at the Charleston Site. This
includes forklift trucks, pick-up trucks, mobile cranes,
manlifts, vacuum truck, trackmobiles, automobiles, emergency
generator, firewater pumps, etc.
. All work will be performed upon receipt of a properly approved
work order.
. Work will be performed for OLIN on an as-requested basis.
SERVICE CHARGE
. Mechanics time and material used will be recorded on the work
order covering each job performed by the Autoshop.
. Mechanic's time will be billed to OLIN at a fully loaded rate
which includes the use of equipment and tools.
. Spare parts used from the Autoshop inventory or purchased from
outside sources will be billed to OLIN at cost plus 10%.
TERM:
. Autoshop maintenance services will be provided to OLIN for as
long as ARCH operates the Autoshop for its own equipment at
the Charleston Site.
38
<PAGE>
Exhibit A
SERVICE: Emergency Response
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN shall provide emergency response equipment to ARCH's Charleston
facilities consistent with emergency response service provided to OLIN's
Charleston Plant prior to the Distribution Date.
. However, OLIN and ARCH each shall be responsible for managing its own
disaster responses, including implementation of their respective Emergency
Plans which will be shared between the companies.
. Emergency response will include, but not be limited to response to plant
emergencies, chemical releases, chemical spills, fire, explosions, etc.
. OLIN will provide and maintain appropriate emergency response equipment
(including the fire truck, ambulance and the Emergency Equipment Building
with the Crisis Management Center) in a ready state.
. The Charleston Site Emergency Response Team will include ARCH and OLIN
employees who will be the first level primary responders, the number to be
agreed upon by the respective Plant Managers. Each company will assign an on-
scene incident commander as well as a higher level crisis team, to respond to
incidents of such company. Employees' wages associated with time spent in
training will be absorbed by the employees' companies and not charged to
OLIN's emergency response cost account.
. ARCH will have access to the Charleston Site emergency communication system.
ARCH shall maintain, and replace if necessary, the emergency radios and
pagers used in connection with the system and ensure that they are in an
operable condition at all times.
. The command post for an incident shall be the Crisis Management Center.
SERVICE CHARGE
. All costs, Fixed and Variable, associated with the Charleston Site emergency
response system (exclusive of employees' wages applicable to training time)
will be accumulated and
39
<PAGE>
billed monthly to ARCH on basis of ARCH's Charleston head count as a
percentage of the total Charleston Site head count.
TERM:
. This Service will be provided by OLIN to ARCH for as long as OLIN provides
this Service to its own Charleston operations. ARCH reserves the right to
terminate this Service upon two (2) years advance written notice.
40
<PAGE>
Exhibit A
SERVICE: Environmental Services
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN shall provide to ARCH, on a routine basis, certain
environmental services, performed for the ARCH operating facilities
prior to the Distribution Date and which have not been assigned
specifically to ARCH personnel. These Services include, but are not
limited to, operation of the Site ponds and HTH landfill,
monitoring outfalls, monitoring for NPDES compliance, obtaining
samples and monitoring compliance with stormwater permits and
preparing required reports to regulatory agencies and to ARCH
Management (excluding those reports specifically assigned to each
company including Title V permits and reports, HTH landfill permits
and report, etc.).
. OLIN shall communicate with and advise ARCH Charleston Plant
Management of all environmental developments which may impact
ARCH's Charleston operations.
SERVICE CHARGE
. Work performed exclusively for ARCH, such as placing material in
the HTH landfill and the pond dredging of HTH sediment, will be
performed under a work order recording time and material. Labor
will be billed to ARCH at a fully-loaded rate (to cover cost of
equipment and tools used) and material at cost.
. Work performed on shared facilities, such as monitoring outfalls,
for NPDES compliance (including analytical sampling and testing),
testing Site drinking water and operating Site sanitary system will
be recorded as to time and material. Labor will be billed to each
Party at a fully-loaded rate (to cover cost of equipment and tools
used) and material at cost at an agreed upon allocation percentage
(agreed to each year at budget time) which for 1999 is budgeted to
be 45% to ARCH and 55% to OLIN.
TERM:
. This Service will be provided by OLIN to ARCH for an Initial Term
of ten (10) years with ARCH reserving the right to terminate any
specific Service for
41
<PAGE>
which ARCH has an independent permit which case the allocation of
costs will be adjusted accordingly.
42
<PAGE>
Exhibit A
SERVICE: Fire Water
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN shall provide firewater to ARCH through the Charleston Site
firewater system. The Charleston Site firewater system shall have
the capability of delivering 4,500 gallons per minute at 150 psig.
. ARCH, or its designated representative may conduct inspections of
the elements of the Charleston Site firewater system serving ARCH,
including, but not limited to, piping, deluge system, hose houses,
fire monitors and fire pumps. Firewater pumps shall be flow tested
annually or as required by regulation or by the insurance carriers.
. Each Party shall notify the other promptly if any part of its
respective portion of the firewater system is out of service for
any reason.
. Each Party will comply with reasonable recommendations by an
independent inspection agency retained by the parties' respective
insurance carriers concerning maintenance of the firewater system.
. No modifications will be made to the firewater system as it relates
to either company's operations at Charleston unless mutually agreed
upon by both parties.
. Use of the firewater system for tasks normally performed at the
site (such as louvre dryer washes) will continue to follow the same
permit and notification procedures consistent with the practices
and procedures in place before the Distribution Date.
SERVICE CHARGE
. OLIN will bill ARCH monthly for its proportionate share of the
Fixed Costs of operating and maintaining the Charleston Site
firewater system. Such proportionate share be based upon ARCH's
percentage of the total personnel located at the Charleston Site.
TERM:
. This Service will be provided to ARCH for the life of the
Charleston Site facilities.
43
<PAGE>
Exhibit A
SERVICE: Gasoline and Diesel Fuel
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will order, receive and store gasoline and diesel fuel for all
automotive equipment and other internal combustion powered
equipment at the Charleston Site. The gasoline and diesel oil pumps
are located at the west side of the HTH Mechanical Shop.
. Gasoline and diesel fuel will be dispensed to ARCH's authorized
personnel. Records will be maintained and costs allocated per the
current method of allocation until such time that a credit card or
other suitable system is in place.
SERVICE CHARGE
. Until a credit card system is implemented, OLIN will bill ARCH
monthly for the quantity of gasoline and diesel oil withdrawn
multiplied by the average cost of gasoline and diesel oil for that
particular month.
. There will be no Fixed Cost charges to ARCH for this service.
. Any discrepancies at month end between the sums on the withdrawal
tickets and the pump readings will be allocated to each Party on
the basis of percentage of use.
TERM:
. This Service will be provided by OLIN to ARCH for as long as OLIN
provides this service to its own automotive equipment and other
internal combustion powered equipment at Charleston.
44
<PAGE>
Exhibit A
SERVICE: Hydrogen
PROVIDER: OLIN
SERVICE DESCRIPTION
. Hydrogen from OLIN's Chlorine cells will be cooled and blown to
ARCH's J-3 Plant and to ARCH's Boilerhouse. At the Boilerhouse ARCH
will accept the hydrogen at the outlet side of the main block
valve.
. Hydrogen will first be provided to OLIN's HCL operation and to
ARCH's J-3 Plant before being available for burning in the boilers.
. Hydrogen in ARCH's J-3 Plant and Boilerhouse will displace or
reduce the use of natural gas.
. The hydrogen provided by OLIN will be measured in MCF, will have a
pressure of 5-6 psig at the cells and will be greater than 99.5%
H\\2\\.
. Hydrogen provided to J-3 will be metered through an existing meter
in the H\\2\\ line to J-3. Approximately 163,000MCF H\\2\\ are
budgeted to be used by J-3 in 1999.
SERVICE CHARGE
ARCH will be billed for the quantity of hydrogen received by ARCH at the
boilerhouse and at the J-3 Plant as follows:
. For calendar year 1999, hydrogen will be supplied to ARCH at no
charge.
. For calendar year 2000, hydrogen will be billed to ARCH at 25% of
the equivalent BTU value of natural gas received at the Charleston
Site.
. For calendar year 2001, hydrogen will be billed to ARCH at 50% of
the equivalent BTU value of natural gas received at the Charleston
Site.
. For calendar year 2002 and beyond, hydrogen will be billed to ARCH
at 67.5% of the equivalent BTU value of natural gas received at the
Charleston Site.
TERM:
. Hydrogen will continue to be provided to ARCH' J-3 Plant and to the
Boilerhouse as long as it is available from OLIN's Chlorine cells.
OLIN does have the right to pursue alternate economical uses for
the hydrogen and if successful may terminate this Service upon
giving ARCH one (1) year advance written notice.
45
<PAGE>
Exhibit A
SERVICE: Hydrochloric Acid
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will supply 30 36% Hydrochloric Acid (HCL) to ARCH from the
Brine Area HCL Tank.
. HCL is provided to ARCH from either of two sources internal
production by OLIN's Chlor-Alkali Plant or outside purchases.
. HCL delivered to ARCH will be measured at the HTH Acid Meter. From
the total reading of the HTH Acid Meter will be deducted the HCL
meter reading at Secondary Treatment of the Chlor-Alkali Plant to
obtain actual usage by ARCH.
SERVICE CHARGE
. OLIN will bill ARCH at the market price as reported in the Chemical
Marketing Reporter in effect on September 1 of each year and as
budgeted by the Parties for the next year for regular grade 30-36%
Hydrochloric Acid. If at the end of the year, the year's average
market price varies by more than 20% from the budgeted price (i.e.
the September 1 reported price from the prior year), the actual
price of HCL received under this Agreement will be adjusted
accordingly.
TERM:
. OLIN will provide ARCH with HCL for an Initial Term of ten (10)
years with ARCH reserving the right to terminate this Service upon
90 days advance written notice.
46
<PAGE>
Exhibit A
SERVICE: Laboratory Space and Facilities in Technology Center
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will provide laboratory space and facilities in the Technology
Center for ARCH employees to conduct quality assurance work
. Such laboratory space and facilities will be dedicated by OLIN for
ARCH's exclusive use.
SERVICE CHARGE
. OLIN will bill ARCH monthly for use of laboratory space and
facilities at an annual cost agreed to between OLIN and ARCH at
budget time each year for the next succeeding Calendar Year.
TERM:
. OLIN will provide this service for ARCH for an Initial Term of ten
(10) years subject to termination of this Service by either Party
upon one (1) year advance written notice.
47
<PAGE>
Exhibit A
SERVICE: Laboratory Services
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN shall provide to ARCH laboratory services to conduct trace
metal analyses of incoming raw materials, processes and finished
products.
. At budget time each year, ARCH will advise OLIN of the estimated
number of analyses that may be performed and OLIN and ARCH will
determine and agree upon the estimated number of man hours that may
be required to perform the analyses during the next Contract Year.
. OLIN shall provide this Service to ARCH as requested and as
available.
SERVICE CHARGE
. OLIN shall bill ARCH each month at a cost for the analyses
performed during the previous month based on a rate for OLIN
analytical services established and agreed to annually at budget
time.
TERM:
. OLIN shall provide this Service for an Initial Term of ten (10)
years with ARCH having the right to terminate this Service upon
ninety (90) days written notice.
48
<PAGE>
Exhibit A
SERVICE: Medical
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will provide to ARCH's Charleston Site employees the following
but not all inclusive, medical services
. Employment and exit physical examinations
. Regular periodic health physicals
. Treatment of occupational injuries and illnesses
. Non-occupational injuries and illness will be attended to as
staff time is available
. Surveillance examinations for all employees for audiometric and
pulmonary functions
. Return to work authorization
. Substance abuse screening
. Wellness and blood borne pathogens programs
. In performing medical services to ARCH, OLIN's medical staff will
maintain logs of medical visits by ARCH personnel and will retain
medical records to comply with OSHA requirements. Medical records
of ARCH's personnel will receive the same confidentiality as
accorded to OLIN's Charleston employees.
SERVICE CHARGE
OLIN will bill ARCH for its proportionate share of the Charleston Medical
Department expenses based on head count and as per the below formula.
<TABLE>
<S> <C> <C>
ARCH Monthly Charge = Total Monthly Charleston Site Medical Dept. Expenses Charleston Site Head Count for the month
----------------------------------------------------- X ------------------------------------------------
Total Charleston Site Head Count for the month
</TABLE>
TERM:
. OLIN will provide medical services to ARCH's Charleston personnel
for as long as such Service is provided to OLIN's Charleston
employees.
49
<PAGE>
Exhibit A
SERVICE: Natural Gas and Natural Gas Distribution
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will provide natural gas to ARCH's Boilerhouse and J-3 Plant.
. Natural gas to J-3 will be provided on an as-required basis as a
replacement for the unavailability of sufficient hydrogen for the
J-3 operation. The maximum amount of natural gas that can be
consumed at J-3, in lieu of all the hydrogen, is approximately
55,000 MCF per year.
. Natural gas will be provided to ARCH's Boilerhouse as a fuel
supplement to hydrogen. Natural gas will be used in the Boilerhouse
to full extent of its availability before resorting to the use of
fuel oil.
. Natural gas consumed by J-3 will be based upon meter readings of
the combined J-3/TRU gas stream at the Boilerhouse and the gas
meter reading in the TRU building.
. J-3 Natural Gas Consumption = Meter reading of combined J-3/TRU gas
stream minus gas meter reading in TRU building.
. Natural gas consumed in the Boilerhouse will be the sum of the gas
meter readings on Boilers Nos. 1, 2 and 3.
SERVICE CHARGE
. OLIN will bill ARCH for natural gas volumes actually used in any
month multiplied by the same rate per MCF (or per MMBTU) as OLIN
pays to the Charleston Site natural gas supplier.
. No natural gas distribution system Fixed Costs will be billed to
ARCH.
TERM:
. OLIN will provide natural gas to ARCH as long as natural gas is
provided by OLIN to its operations at the Charleston Site.
50
<PAGE>
Exhibit A
SERVICE: Pipe Racks
PROVIDER: OLIN and ARCH
SERVICE DESCRIPTION
. Each Party will own and maintain the pipe racks located within the
battery limits of its Charleston Site operations.
. The maintenance of the pipe lines on or within the pipe racks will
be the responsibility of the Party owning the pipe lines.
. Each Party will negotiate in good faith to make unused pipe rack
capacity available for use by the other Party for expansions or
improvements to operations.
SERVICE CHARGE
. Since each Party will maintain its own pipe racks there will be no
charges from one Party to the other.
TERM: Life of the facilities.
51
<PAGE>
Exhibit A
SERVICE: Propane
PROVIDER: ARCH
SERVICE DESCRIPTION
. ARCH will order, receive, and store propane gas for mobile
equipment and other gas burning equipment at the Charleston Site.
. Propane gas will be dispensed by qualified personnel.
. Records and billing will occur consistent with past practice until
such time as a revised system is instituted such as credit card
purchasing.
SERVICE CHARGE
. ARCH will bill OLIN monthly for the quantity of propane gas
withdrawn during the month multiplied by the then average unit cost
of the propane inventory.
. There will be no Fixed Cost charges for this service.
TERM:
. This Service will be available to OLIN for as long as ARCH provides
this Service to its own Charleston facilities.
52
<PAGE>
Exhibit A
SERVICE: Rail Car Switching and Storage and Track Maintenance
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will provide rail car switching service for lime cars for
ARCH's Charleston Site.
. ARCH will have the responsibility of notifying and coordinating
with OLIN's Customer Satisfaction Team Leader the schedule for
movement of loaded and unloaded lime cars.
. The HTH track spur can accommodate a total of 13 rail cars one
spotted for unloading and twelve available for unloading. Under
normal circumstances this spur should provide sufficient rail car
storage capacity for the HTH operation. If the need arises to store
more than 13 ARCH railcars at the Charleston Site, upon ARCH's
request, OLIN will make additional track available on a temporary
basis if OLIN has such track to make available. If OLIN cannot make
additional track space available, OLIN will assist ARCH in
arranging for outside storage of excess cars.
. ARCH will be responsible for maintaining the lime railroad tracks
up to and including the switch on those tracks. OLIN will be
responsible for maintaining all other tracks in the Charleston
Site.
SERVICE CHARGE
. OLIN will bill ARCH for rail cars switched in and out of the
Charleston Site for ARCH at an annualized rate of $65,000 for 1999,
and for future years in an amount to be agreed as part of the
budgeting process for such year.
. Fixed costs of repairing the track mobile and maintaining the main
line track in the Charleston Site will be allocated and billed to
ARCH on the basis of the percentage of the total number of rail
cars delivered to or shipped from the Charleston Site that are for
ARCH's account.
. Costs of repairing any railcar damage, which occurs while the car
is in the Charleston Site, will be the responsibility of the Party
causing the damage.
53
<PAGE>
Derailing costs will be the responsibility of the Party causing the
derail of cars.
TERM:
. This Service shall be provided by OLIN to ARCH for an Initial Term
of 10 years; however, ARCH has the right to terminate this Service
upon giving one (1) year advance written notice.
54
<PAGE>
Exhibit A
SERVICE: Recovered Salt
PROVIDER: ARCH
SERVICE DESCRIPTION
. Salt is recovered by OLIN at the Chlor Alkali Salt Centrifuge from
the saturated brine slurry pumped to Chlor Alkali 510 brine system
from ARCH's HTH Unit. Weak brine streams are pumped by OLIN to the
J-3 Salt Dissolver and a saturated brine solution is returned to
the Chlor Alkali 812 brine system.
. The slurry from the HTH Unit will contain less than 15%
Hypochlorite and the saturated brine from J-3 will have less than
1.0 ppm Nickel.
. Approximately 27,000 dry tons of salt is budgeted to be recovered
by OLIN in 1999.
SERVICE CHARGE
The quantity of salt recovered by OLIN in the salt centrifuge is estimated based
upon the total caustic soda used in the J-3 and HTH Units, multiplied by a
factor based on salt in the recovery stream adjusted for any known losses and
for salt carried into the HTH products. Salt recovered by OLIN at the salt
centrifuge will be billed to OLIN as follows:
. For calendar year 1999, recovered salt will be supplied at no
charge.
. For calendar year 2000, recovered salt will be billed at 25% of the
budgeted outside-purchase delivered salt price, less freight.
. For calendar year 2001, recovered salt will be billed at 50% of the
budgeted outside-purchase delivered salt price, less freight. For
calendar year 2002 and beyond, recovered salt will be billed at
67.5% of the budgeted outside-purchase delivered salt price, less
freight.
TERM:
. OLIN will accept the saturated brine from the HTH and J-3 Units for
the life of the Service Facilities.
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Exhibit A
SERVICE: Site Security and Gate Access
PROVIDER: OLIN
SERVICE DESCRIPTION
. OLIN will provide directly or through an outside contractor the
security services for the Charleston Site.
. ARCH will prepare and update in a timely manner a Policy and
Procedures Manual which will apply to ARCH employees and ARCH
visitors entering the Charleston Site and which will be
administered by the security personnel at the Main Gate and
Contractors' Gate. This Manual will continuously be consistent with
OLIN Policies and Procedures in effect at the time.
. The Main Gate will be used by ARCH employees for ingress and egress
to ARCH facilities on a 24 hour basis.
. Security personnel to the Main Gate will log all visitors to the
Site, handle documents for outbound shipments (as required),
conduct safety orientations, monitor the Weather Alert System and
monitor the Mutual Aid Radio.
. OLIN security personnel will monitor and OLIN will maintain the
chlorine sensors located at the Site's perimeter.
. OLIN shall make available to ARCH the truck scales located at the
main gate. Weigh tickets will be supplied to the truck driver at
the time of weighing, if requested. There will be no charge to ARCH
for use of the truck scales.
SERVICE CHARGE
. All costs, both Fixed and Variable, will be accumulated and billed
monthly to ARCH on the basis of ARCH's Charleston head count as a
percentage of the total Charleston Site head count.
TERM:
. This Service will be provided by OLIN to ARCH for the life of the
Charleston Site; however, ARCH reserves the right to terminate this
Service upon one (1) year advance written notice.
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Exhibit A
SERVICE: Specialized Skills Support
PROVIDER: Either Party
SERVICE DESCRIPTION
. Either Party will provide to the other company, on an as-requested,
as-available basis, specialized skills support (including the
necessary equipment to perform the specialized skills) such as, but
not limited to: specialty welding, refrigeration mechanics and
freon recovery, vibration analysis, infrared testing, fan balancing
and machinists and crane operations.
SERVICE CHARGE
. Personnel providing specialized skills support to the Service
Receiver will be billed at a fully-loaded hourly rate to include
the cost of equipment and tools.
TERM:
. Either Party will provide specialized skills support to the other
Party for an Initial Term of ten (10) years.
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EXHIBIT 10.11
INFORMATION TECHNOLOGY SERVICES AGREEMENT
This Agreement is dated as of the 8th day of February, 1999, by and between Olin
Corporation, a Virginia corporation, having its principal place of business at
501 Merritt 7, Norwalk, Connecticut 06851 ("OLIN") and Arch Chemicals, Inc., a
Virginia corporation, having its principal place of business at 501 Merritt 7,
Norwalk, Connecticut 06851 ("ARCH").
In consideration of the payments to be made and services to be performed
hereunder, the parties agree as follows:
ARTICLE 1 PRELIMINARY STATEMENT
This Agreement is being made and entered into with reference to the following
facts:
(a) OLIN and ARCH have entered into a Distribution Agreement dated as of
February 1, 1999 (the "Distribution Agreement"), pursuant to which
OLIN has agreed to transfer to Arch certain assets and businesses
constituting the Arch Assets and the Arch Business, respectively
(each as defined in the Distribution Agreement).
(b) Included in the Arch Business being transferred from OLIN to ARCH
will be certain personnel and other assets previously used by Olin to
provide information technology ("IT") services to itself.
(c) Following the Distribution (as defined in the Distribution
Agreement), OLIN desires that ARCH provide certain IT services to
OLIN and its subsidiaries, on the terms and conditions provided in
this Agreement.
(d) ARCH has agreed to provide these IT services and to do such other
acts and things as described in this Agreement for a minimum two (2)
year period, and thereafter as agreed by the parties upon the terms
and conditions set forth below.
(e) OLIN has agreed that ARCH will have access to the OLIN mainframe and
certain other OLIN assets described herein for the term of this
Agreement.
The following is a list of Schedules attached to and forming a part of this
Agreement:
Schedule A - Statements of Work and Services
Schedule A1: Relationship Management
Schedule A2: Enterprise Operations Center
Schedule A3: Desktop/End-User device Services
Schedule A4: Help Desk Devices
Schedule A5: SAP Managed Operations
Schedule A6: Application Services
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Schedule A7: Data Communication Services
Schedule A8: Voice Communication Services
Schedule A9: Year 2000 Program Management
Schedule A10: Internet / Intranet Services
Schedule A11: Business and Technical Information Services
Schedule B - Plan To Define Performance Standards
Schedule C - Pricing/Fees
Schedule D - Disaster Recovery
Schedule E - Personnel Matters
- East Alton , Bethalto and Norwalk IT Employees
- Designation of Account Manager
Schedule G - Asset Allocations, Shared Contracts
Schedule G1: Olin & Arch Data Center Physical Assets
Schedule G2: Division of Olin & Arch Software Contracts
Schedule G3: Division of Olin & Arch Norwalk IT Assets
Schedule G4: Division of Olin & Arch Charleston IT Assets
Schedule G5: Division of Olin & Arch leases
Schedule G6: Olin & Arch Shared Contracts
Schedule X - Technical Reference Documents
Schedule X1: System Technology
Schedule X2: Technical Architecture Standards
ARTICLE 2 TERM
The Initial Term of this Agreement shall begin on the Distribution Date (as
defined in the Distribution Agreement) and continue for a two-year period
through January 31, 2001 (the "Initial Term"), except with respect to certain
Services related to Shared Contracts, for which the Initial Term will be as
stated in Section 16.2. Thereafter, this Agreement shall automatically renew for
successive one-year renewal terms until terminated as provided herein. In the
event that either OLIN or ARCH desires to terminate this Agreement effective as
of the expiration of the Initial Term, or at the end of any one year renewal
term thereafter, such party shall notify the other not less than twelve (12)
months prior to the expiration of the Initial Term or any renewal term
thereafter, as applicable.
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ARTICLE 3 SERVICES
Section 3.1 Services to be Provided
During the term of this Agreement, ARCH will perform, provide, manage and
administer the services and functions described in the Statements of Work,
Schedule A (as such may be modified hereunder, the "Services") in accordance
with the terms set forth in this Agreement.
Section 3.2 Standard of Service
ARCH will use all reasonable and customary measures to provide the Services at
all times in a cost-effective, high-quality fashion and on a basis consistent
with the basis on which it provides such Services internally. Initially, the
Services will be provided on the same basis and manner as that on which IT
services were provided by OLIN internally prior to the Distribution. Thereafter,
ARCH and OLIN shall work together to develop agreed upon service standards and
implementation schedules.
Section 3.3 Non-Material Changes in Services
ARCH may make such non-material changes to the day-to-day delivery of Services
as it deems advisable in the ordinary course of business, to the extent such
changes do not require approval as set forth in Section 3.4 below or otherwise
adversely impact the Services, or reduce the level of Services delivered. Any
change in Services which (i) is described in the first paragraph of Section 3.4,
or (ii) represents a variance from or a change in the description of the Service
contained in the Statement of Work shall require approval as set forth in
Section 3.4 below.
Section 3.4 Changes to Services Requiring Approval
All changes to computing systems, application software or application documents
that would materially alter the functionality of the affected systems or
increase the cost of Services to OLIN over the budgeted amounts shall be
controlled using a formal contract change control process to be developed
jointly by OLIN and ARCH within sixty (60) days after the Distribution Date. The
parties will establish a Contract Change Control Board to implement the change
control process within thirty (30) days after the Distribution Date, consisting
of three (3) representatives appointed by OLIN and three (3) representatives
appointed by ARCH.
The party proposing a change will document it in writing, provide technical and
cost-justification for the change, and specify a desired implementation date.
ARCH and OLIN will assess the impact of the proposed change, considering
resources required, interfaces to other systems and other planned and in process
changes. The completed analysis will be presented to the Contract Change Control
Board for approval. No changes will be implemented without the approval of the
Contract Change Control Board. The Contract Change Control Board may
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determine (or if so directed by the Management Committee or the Executive
Committee, shall determine) that significant changes require: 1) additional
approval by the Management Committee, 2) additional approval by the Executive
Committee and/or 3) a written agreement setting forth applicable specifications,
schedules, resources to be utilized, responsibility of both parties and
definition of successful completion.
Section 3.5 Additional or Substitute Services
In the event that OLIN desires that new Services be added to or substituted for
existing Services, OLIN shall make such proposed change request to ARCH,
including as much information and detail as reasonably available to OLIN. ARCH
will respond to such change request within thirty (30) days with a proposed
solution that identifies: 1) the proposed scope, 2) the expected delivery time
frame, 3) the implementation approach and logistics, and 4) pricing
implications, if any. If in the opinion of ARCH, the change request could be
implemented in a more cost-effective manner than that described in the proposed
solution or should, for any reason, be implemented in a different manner than
that described in the proposed solution, ARCH will advise OLIN in writing of its
recommendations and shall, if requested by OLIN, prepare a proposed solution
which reflects its recommendations.
ARTICLE 4 HUMAN RESOURCES
4.1 General
It is understood and agreed by ARCH and OLIN that all persons employed, directly
or indirectly, by ARCH to perform Services for OLIN shall be employees or agents
of ARCH exclusively, for all purposes and at no time shall be authorized to act
as agents, servants or employees of OLIN.
ARCH shall be solely responsible for the payment of compensation, including
provisions for employment taxes, workers' compensation and any similar taxes
associated with employment of ARCH's personnel.
ARCH shall take appropriate measures to ensure that its employees who perform
Services under this Agreement are reasonably competent to do so.
OLIN and ARCH agree that personnel allocations will be made as provided in
Schedule E.
Section 4.2 Account Team
ARCH shall appoint an individual ARCH employee who from the Distribution Date
shall be in charge of implementing and managing delivery of the Services (the
"Account Manager"). The
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initial appointee shall be the person identified on Schedule E. ARCH's
subsequent appointment of any Account Manager shall be subject to OLIN's
consent, not to be unreasonably withheld.
In order to facilitate the orderly provision of Services hereunder, ARCH agrees
to discuss with OLIN any material change to be made by ARCH in staffing levels
or personnel assignments, which change will have a material impact on ARCH's
delivery of Services hereunder, prior to ARCH's instituting such change.
Section 4.3 Non-Solicitation of Personnel
During the term of this Agreement and for a period of twelve (12) months
following its termination, neither ARCH nor OLIN, except as provided in this
Section 4.3 below, on Schedule E or as otherwise agreed to by the parties in
writing, shall directly or indirectly solicit, recruit, employ, or contract for
the services of any employee of the other who was assigned at any time to
perform or receive Services pursuant to this Agreement, provided however, that
the foregoing non-solicitation provision shall not apply as of and after the
termination date of this Agreement to ARCH employees who are dedicated on a 85%
or more time basis to providing Services exclusively to OLIN pursuant to this
Agreement immediately prior to such termination date.
Notwithstanding the preceding paragraph, ARCH agrees that in the event that OLIN
serves notice under Article 2 hereof that it is terminating this Agreement, in
whole or in part as to specific Services as of January 31, 2001 (a "Year-Two
Termination Notice"), then OLIN shall be permitted hereunder to contact, solicit
and recruit Available ARCH Employees (as defined below), to become employees of
OLIN, for employment by OLIN commencing in February 2001. The parties shall
cooperate with each other regarding such solicitation, so as to permit ARCH to
continue to effectively render the Services hereunder through the termination
date, and to facilitate a smooth transition for OLIN.
Nothing in this Section 4.3 shall be deemed to prohibit either party from (i)
making a general solicitation of employment opportunities or openings
("Opportunities") through the public media (including the Internet), (ii)
posting or advertising Opportunities at any location where such party has
employees, including common areas used by the employees of both parties, (iii)
listing any Opportunities in any government or government-sponsored job bank or
opportunity center or (iv) making any dissemination required to be made by law
regarding Opportunities.
This Section 4.3 shall not apply with respect to (i) any employee of OLIN who is
leased from OLIN to ARCH after the Distribution Date and (ii) any individual who
ceases to be an employee of OLIN or ARCH, for the time such individual ceases to
be such an employee.
"Available ARCH Employees" shall mean those ARCH employees who were directly
involved in providing the terminated Service(s) to OLIN under this Agreement,
but excluding any ARCH
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employee who may have been incidentally involved in provision of such Service,
but such involvement constituted less than fifteen percent (15%) of such
person's overall time. Within thirty (30) days after ARCH receives a Year-Two
Termination Notice from OLIN, ARCH shall provide OLIN with a list of Available
ARCH Employees. The Management Committee shall meet within fifteen (15) days
thereafter to resolve any disputes regarding whether such list is compete and
accurate. In the event that the Management Committee is unable to reach
agreement as to a final list of Available ARCH Employees, the dispute shall be
referred to the Executive Committee for resolution.
ARTICLE 5 SYSTEM TECHNOLOGY
Section 5.1 System Technology, Technical (Infrastructure) Architecture
ARCH shall be responsible for providing the system technology, as described on
Schedule X, necessary to support OLIN's requirements for the Services. ARCH
shall be responsible for ongoing development of technical architecture
standards, which will be reviewed and adopted by OLIN and ARCH from time to time
as appropriate and modified as mutually agreed. The technical architecture
standards last revised April 18, 1997 are as described on Schedule X. Within six
months after the Distribution Date, ARCH will complete a process with OLIN to
update these standards, which updated standards will then be submitted to the
Contract Change Control Board for approval.
Section 5.2 Application Architecture
OLIN's application architecture shall at all times be developed and maintained
by OLIN and shall be OLIN's responsibility. OLIN's application architecture
shall govern the technological direction and specifications developed by OLIN in
consultation with ARCH.
Section 5.3 Current Configuration
OLIN's system configuration as of the Distribution Date is detailed in
Schedule X.
Section 5.4 Changes in Technology
ARCH may, at its discretion, and upon reasonable notice to OLIN, make changes to
the operating environment for the Services. No material change to the operating
environment shall be implemented by ARCH until OLIN has had a reasonable
opportunity to adapt its operations to accommodate such change. Any change
pursuant to this Section shall proceed through the Contract Change Control Board
approval process in Section 3.4.
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OLIN may object to a proposed operating environment change if: 1) the proposed
change will have a material adverse effect on the operating environment or its
interfaces, 2) in the reasonable opinion of OLIN, the proposed change will
result in a net increase of OLIN's information technology costs related to the
Services or 3) the proposed change is not consistent with OLIN's applications
environment or system architecture.
ARTICLE 6 SECURITY AND ACCESS
Section 6.1 Security Measures and Procedures
ARCH shall provide physical and logical protection for OLIN hardware, software,
applications and data that meet or exceed physical and logical protection
practices observed by OLIN prior to the Distribution Date. This may include,
without limitation, the use of: 1) electronic or physical locks, 2) system
identifiers and passwords, 3) database locks and passwords, and 4) periodic
audit security checks.
Section 6.2 Access by OLIN
ARCH shall provide OLIN with access, subject to ARCH's reasonable access
security requirements, seven days a week, 24 hours a day to ARCH data centers
and other locations as appropriate for the purposes of inspection and monitoring
access and use of OLIN data and maintaining OLIN systems. ARCH shall provide
such assistance which may be reasonably required in connection with any such
inspection and monitoring.
ARTICLE 7 BACKUP AND DISASTER RECOVERY
Section 7.1 General
ARCH shall establish and maintain safeguards, including file backup, off-site
storage and contingency site protection, against the theft, destruction, loss or
alteration of OLIN's data, which safeguards are no less rigorous than those
maintained by OLIN prior to the Distribution Date.
Section 7.2 Backup and Recovery Procedures
OLIN shall, at OLIN's expense, establish such back-up security for data and keep
back-up data and data files as is reasonably required by ARCH to assist it in
safeguarding OLIN data. ARCH shall assist OLIN in establishing such other
back-up procedures as reasonably required from time to time by OLIN. As long as
ARCH follows the backup procedures reasonably established or agreed by OLIN,
OLIN (and not ARCH) shall be responsible for any loss or liability incurred
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by it from failing to implement additional or different backup procedures. As
improvements in data security, transmission security, or other technology which
involve security evolve, ARCH and OLIN agree to work together to select and
implement appropriate additional or substitute security measures.
Section 7.3 Disaster Recovery Procedures
Schedule D sets forth the procedures currently in place to be followed with
respect to the continued provision of the Services in the event that ARCH
facilities are unavailable for use to provide Services to OLIN because such
facilities have been destroyed, damaged or are otherwise not available for use
to such an extent that ARCH is unable to provide any or all of the Services. In
the event the Services are provided from a disaster recovery site for more than
sixty (60) days, OLIN may terminate this Agreement upon notice to ARCH without
regard to the provisions of Article 20.
ARCH shall (1) test the Disaster Recovery procedures within 120 days of the
Distribution Date and at least once every calendar year and certify to OLIN that
the Disaster Recovery procedures are operational, (2) consult with OLIN
regarding the priority to be given to the Services in the event of any such
disaster, and (3) not be excused from implementing the Disaster Recovery
procedures s a result of the events described in Section 18.4.
Section 7.4 Contingency Site Charges
OLIN shall reimburse ARCH in the event of a disaster for OLIN's pro rata share
of actual costs and expenses incurred by ARCH in connection with providing
access to its disaster recovery facility, including, without limitation, fees
for actual usage incurred thereunder; provided, however, OLIN shall not be
responsible for the foregoing costs or expenses to the extent the unanticipated
interruption of ARCH data processing capability is caused by the gross
negligence or willful misconduct of ARCH.
Section 7.5 Modified or Additional Backup and Disaster Recovery Procedures
ARCH and OLIN contemplate that development of mutually agreed modifications to
the backup and recovery procedures and to the Disaster Recovery procedures will
be part of the Services, and as described in the Statement of Work. In addition,
ARCH may unilaterally modify the Disaster Recovery procedures at any time as it
deems necessary; provided, however, that such a modification shall not
materially adversely affect ARCH's ability to restore the Services, and further
provided that ARCH shall notify OLIN of any material such modification in the
Disaster Recovery procedures prior to implementation.
ARTICLE 8 PERFORMANCE STANDARDS
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Section 8.1 ARCH Covenants
ARCH covenants that: 1) all Services rendered hereunder will be performed in a
professional manner, conforming in all material respects to the provisions
hereof, and at a minimum shall at all times be provided at or above the levels
provided by OLIN internally prior to the Distribution Date and 2) ARCH will
reperform any Services at no additional charge where it is clearly demonstrated
that erroneous results were created through some fault of ARCH during the
performance of the Services.
Section 8.2 Service Level Requirements
During 1999, ARCH and OLIN shall agree as to a set of Performance Standards,
according to the plan set forth in Schedule B. These Performance Standards will
be tested in calendar year 2000 (such 2000 tests to be informational only), and
measurement and monitoring tools and procedures to measure and report ARCH's
performance of the Services against such agreed Performance Standards. Such
measurements and monitoring shall permit reporting at a level of detail
sufficient to verify compliance with the Performance Standards, and shall be
subject to audit by OLIN. All such reporting shall be prepared and delivered to
OLIN at the monthly meetings described in Section 11.2 of this Agreement. ARCH
shall provide OLIN and OLIN's auditors with information and access to all such
tools and procedures upon request for purposes of verification.
Section 8.3 Revision of Standards
After development and implementation of the Performance Standards for calendar
year 2000, the OLIN Contract Manager and the ARCH Account Manager will meet
periodically, but no less frequently than annually, to review the then current
Performance Standards and make such adjustments thereto as may be reasonably
required to reflect applicable changes in the Services described in Section 8.2
above.
Section 8.4 OLIN Satisfaction
ARCH shall develop, in cooperation with OLIN, a quality measurement of OLIN user
satisfaction. Within 360 days after the Distribution Date, ARCH shall conduct a
survey and provide a report to identify any part of the Services that needs to
be improved, and subsequently to follow up on any user concerns. The survey will
be repeated at intervals reasonably agreeable to both OLIN and ARCH but the
interval between surveys will not exceed fifteen (15) months.
Section 8.5 Performance Documentation
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ARCH will provide OLIN with such performance documentation as currently exists
and other information as may be reasonably requested by the OLIN from time to
time in order to ensure the correct and efficient utilization of the Services
provided by ARCH.
ARTICLE 9 OLIN RESPONSIBILITIES
Section 9.1 Olin Contract Manager
OLIN shall designate prior to commencement of the Services under this Agreement,
a qualified trained person as Contract Manager. Such designated person, and any
subsequent designee as Contract Manager, shall be subject to ARCH's consent, not
to be unreasonably withheld. The Contract Manager shall be responsible for
monitoring and managing this Agreement and shall have the authority to act for
OLIN hereunder, except with respect to matters within the scope of the
Management Committee or the Executive Committee (refer to Schedule A1 for more
details). The Olin Contract Manager will be responsible for providing
information, data decisions, and report approvals to ARCH personnel within
fifteen (15) days after receipt or notification thereof from ARCH, unless OLIN
and ARCH agree to an extended response date.
Section 9.2 Personnel, Facilities, Services and Items to be provided by Olin
OLIN shall provide, at no charge to ARCH, and in a timely manner, reasonable
cooperation and assistance during this Agreement, including: 1) providing work
space and physical facilities and support to ARCH personnel while working at
OLIN's sites, 2) providing the applicable hardware, operating system software,
development tools, local area networks and database software, and the like, 3)
providing physical site security, 4) providing project personnel who are
familiar with the Services to approve all submissions made by ARCH in a timely
manner or as specified herein, and participate in all other aspects of the
Services as necessary, 5) providing appropriate assigned space in the computer
rooms of the OLIN East Alton Administration Building and the Charleston
facilities, 6) providing such other information and support relating to the
Services as are reasonably necessary, and 7) such other specific facilities,
personnel, services and other items to be provided by OLIN as are specified in
the Statement of Work, Schedule A. OLIN will be responsible for the availability
and performance of such facilities, personnel, services and other items.
OLIN shall provide ARCH at OLIN's East Alton Brass/Winchester Administration
Building with dedicated space in which to store backup tapes from the ARCH
Bethalto Data Center, at no cost to ARCH. OLIN acknowledges and agrees that such
tapes shall contain both OLIN and ARCH data on a segregated basis. OLIN shall be
responsible for providing security and a proper environment for such tapes at
agreed levels.
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OLIN shall be responsible for providing building services and facilities
services to the ARCH Bethalto Data Center (e.g. fire protection, security,
shipping and receiving, mail), at no cost to ARCH. Such services shall be
provided by OLIN on a basis consistent with the basis on which they are provided
to OLIN's East Alton facilities.
Section 9.3 Access to OLIN Facilities
OLIN shall provide ARCH with 7 day/24 hour access to all OLIN facilities at
which ARCH is providing Services, subject to OLIN's reasonable security
requirements.
Section 9.4 Non-performance by OLIN
ARCH's obligations are conditional upon the fulfillment by OLIN of its
responsibilities set out in this Agreement. Delay or failure caused by the OLIN
to fulfill its responsibilities may result in an adjustment to the pricing and
performance of Services and shall release ARCH from its obligations hereunder to
the extent that ARCH is affected by such OLIN delay or failure.
ARTICLE 10 PRICING AND PAYMENTS
Section 10.1 Pricing/Fees for Services
OLIN will pay to ARCH the charges and fees for Services (the "Pricing/Fees") in
accordance with the provisions of Schedule C. The Pricing/Fees for 1999 is set
forth on Schedule C. In the event that OLIN and ARCH are unable to agree as to a
mutually acceptable pricing methodology for calendar year 2000, then the pricing
methodology and allocation formulas used in 1999 shall be used in 2000 as well.
Any modification to Pricing/Fees for years after 2000 shall be as mutually
agreed by the parties as a part of the budgeting process described below.
On or before August 1 of each year of this Agreement, ARCH will submit to OLIN a
proposed budget of Pricing/Fees for the following calendar year, together with
(unless a termination notice is then in effect) a budget forecast for the next
successive calendar year thereafter. OLIN and ARCH will meet and begin reviewing
the proposed budget for Pricing/Fees for the following calendar year no later
than by the end of August of each year, and shall work together on such budget
for Pricing/Fees so as to reach mutual agreement no later than November 30 for
the final budget for Pricing/Fees for the following calendar year.
The budgets proposed by ARCH for the following calendar year shall be generally
prepared on a basis consistent with the budget forecast for such year previously
submitted by ARCH to OLIN, subject to differences necessitated by changes in the
OLIN IT environment or OLIN
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business, changes made during the prior year to the Services hereunder or
changes in information technology services and/or equipment, hardware or
software generally.
All capital expenditures made by ARCH on behalf of OLIN as part of the Services
hereunder shall be subject to following the OLIN corporate-wide internal
approval process currently in effect, or as OLIN may modify it in the future
upon notice to ARCH.
Section 10.2 Expenses
Travel expenses for ARCH or its designees for normal business and for attending
training courses and seminars will not be reimbursed to ARCH by OLIN. Normal
business includes, but is not limited to, attending committee meetings;
attending regularly scheduled OLIN service review meetings to review Services
level objectives and performance results; necessary travel for coordinating,
managing, planning, scheduling, and reviewing data center activities and problem
resolution; and employee travel related to discussions initiated by or at the
request of ARCH. In addition, ARCH will provide on-site support on a day-to-day
basis which will minimize travel requirements.
In the event that additional travel is requested by OLIN in conjunction with the
Services, all normal travel expenses incurred by ARCH to support these
activities will be reimbursed by OLIN. ARCH will notify OLIN in advance before
incurring travel expenses for which it expects reimbursement. Normal travel
expenses will include transportation expenses to and from the required
destination, necessary local transportation, hotels and standard per diem
allowances in accordance with the then current ARCH reimbursement policy. Unless
otherwise authorized by OLIN, reimbursed domestic travel will be only for
tourist or coach class, with such discounts as are available at booking.
Section 10.3 Taxes
ARCH is responsible for the payment of all federal taxes (except to the extent
OLIN is required to withhold federal taxes from ARCH), state and local taxes or
contributions imposed or required under unemployment insurance, social security
and income tax laws, with respect to Services performed by ARCH personnel in the
United States and all taxes associated with the performance of Services for OLIN
in any foreign country to the extent applicable.
To the extent not included in the price ARCH charges for Services, OLIN shall
pay to ARCH the amount of any taxes or charges set forth in (a) and (b) below
imposed now or in the future by any Governmental Authority including any
increase in any such tax or charge imposed on ARCH after the Distribution Date:
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(a) Any applicable sales, use, gross receipts (other than gross receipt
taxes which are in lieu of income taxes), value added or similar tax that is
imposed as a result of, or measured by, any sale or Service rendered hereunder
unless covered by an exemption certificate; and
(b) Any other governmental taxes, duties, and/or charges of any kind,
excluding any income or franchise taxes imposed on ARCH, which ARCH is required
to pay with respect to any sale or Service rendered hereunder.
Section 10.4 Invoicing and Payment
OLIN shall make monthly payments in advance to ARCH in an amount equal to
one-twelfth (1/12) of the annual agreed budgeted amount for Services (the
"Budget Amount") as set forth in Schedule C, on or before the last business day
of the preceding calendar month during this Agreement, except that the first
such monthly payment due hereunder shall be paid immediately following the
Distribution Date. Within thirty (30) days after the end of each calendar year,
ARCH will present OLIN with a final accounting of the actual costs for Services
for which OLIN previously has made such monthly payments for the Budget Amount,
and within fifteen (15) days thereafter, OLIN shall make a payment to ARCH (if
actual costs are in excess of the Budget Amount) or shall receive a payment from
ARCH (if actual costs are below the Budget Amount), in an amount equal to
one-half (1/2) of the net variance from the Budget Amount. Notwithstanding the
foregoing, to the extent that specific Services can be identified as being at
variance from the Budget Amount in a material amount based on actual usage
allocable to OLIN or to ARCH, then an adjustment shall be made quarterly in the
Budget Amount to reflect such variance.
ARCH shall render an invoice monthly for any expenses and additional Services
not included in the Budget Amount to OLIN at OLIN's principal place of business
or at such other address designated by OLIN. All charges will be invoiced at the
end of the calendar month in which the charges are incurred. Invoices are
payable by OLIN to ARCH at its principal place of business, within fifteen (15)
days of receipt of invoices. Each invoice will include sufficient information to
enable OLIN to reasonably ascertain and substantiate the appropriateness of the
charges.
All payments due hereunder shall be made by electronic funds transfer.
Section 10.5 Late Charges
Any undisputed amount owed under this Agreement by OLIN , which is not paid on
or before the date such amount is due, and any disputed amount ultimately
determined under this Agreement to be owed to ARCH, shall bear interest
commencing upon the original due date and continuing until paid at two percent
(2%) above the "prime rate" as published in the Wall Street Journal under the
-------------------
title "Money Rates," and defined therein as being the base rate on corporate
loans at large money center commercial banks (or if no longer published, an
equivalent rate
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agreed by OLIN and ARCH). In no event shall the rate charged exceed the maximum
lawful rate of interest permitted by applicable federal or state law.
Section 10.6 Recordkeeping
ARCH shall maintain complete and accurate accounting records to support and
document all charges and fees payable by OLIN. Such records shall be retained
for a period of at least four (4) years after the date of the last applicable
invoice. ARCH shall provide OLIN with such documentation about each invoice as
may be reasonably requested by OLIN to verify that ARCH's charges to OLIN are
accurate, correct, and valid in accordance with the provisions of this
Agreement.
ARTICLE 11 MANAGEMENT AND CONTROLS
Section 11.1 Reporting
ARCH will provide OLIN with monthly status reports on projects and system
operations in accordance with current practices. The content and format of these
reports will be recommended by the Management Committee and approved by the
Executive Committee.
In addition, ARCH will provide OLIN with such other documentation and
information as may be reasonably requested by OLIN from time to time in order to
verify that ARCH's performance of Services is in compliance with the terms and
conditions of this Agreement.
Section 11.2 Meetings of Contract Manager and Account Manager
The OLIN Contract Manager and ARCH Account Manager will meet on a monthly basis,
or more frequently as required, to review ARCH's performance in the prior month
regarding, but not limited to, service level goals and attainment, OLIN
satisfaction, workload and work effort, and billing. These meetings shall be
conducted within ten (10) business days following the close of the prior month,
unless both OLIN and ARCH agree to a different schedule.
Section 11.3 Management and Executive Committees
OLIN and ARCH shall establish and maintain a Management Committee and Executive
Committee throughout the term of this Agreement.
The Management Committee shall consist of the Contract Manager from OLIN and the
Account Manager from ARCH, with advisory members from each company as deemed
appropriate. The responsibilities of the Management Committee include the
following: 1) ensure sufficient and continued communications between OLIN and
ARCH, 2) review planned system changes, 3)
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provide advice on the use of existing and new technology, 4) attempt to resolve
disputes by mutual agreement, with escalation to the Executive Committee as
necessary, 5) review price changes and modifications to Services to this
Agreement, 6) review and revise OLIN and ARCH responsibilities, 7) review and
act upon performance reports, including service level reports, 8) review and
analyze workload trends and variances from plan, and 9) undertake such other
responsibilities as OLIN and ARCH agree upon from time to time.
The Executive Committee shall consist of the OLIN Information Technology
Executive Advisory Committee and the Vice President - Information Technology of
ARCH, with advisory members from each company as deemed appropriate. The
responsibilities of the Executive Committee include the following: 1) perform an
annual review of OLIN business planning initiatives and expected changes as they
relate to the Services provided by ARCH, 2) perform an annual review of ARCH
plans to support OLIN's needs for Services, 3) review quarterly the results of
the Management Committee meetings and review annually performance evaluation
reports, 4) attempt to resolve by mutual agreement any disputes escalated by the
Management Committee, and 5) undertake such other responsibilities as OLIN and
ARCH agree upon from time to time.
Section 11.4 Management Committee and Executive Committee Meetings
The Management Committee will meet on a quarterly basis, or as otherwise may be
agreed by OLIN and ARCH, to review ARCH's performance in the prior quarter
regarding, but not limited to, service level goals and attainment, OLIN
satisfaction, workload and work effort, and billing. These meetings shall be
conducted within fifteen (15) business days following the close of the prior
quarter, unless both OLIN and ARCH agree to a different schedule.
The Executive Committee will meet on a quarterly basis, or otherwise as may be
agreed by OLIN and ARCH, to review the results of the Management Committee
meeting and consider such other matters as the Executive Committee deems
appropriate. These meetings shall be conducted within thirty (30) business days
following the close of the prior quarter, unless both OLIN and ARCH agree to a
different schedule.
ARTICLE 12 DISPUTE RESOLUTION
Section 12.1 Guiding Principles
ARCH and OLIN agree to utilize all reasonable efforts to resolve any dispute,
whether arising during the term of this Agreement or at any time after the
expiration or termination of this Agreement, which touches upon the validity,
construction, meaning, performance or effect of this Agreement or the rights and
liabilities of the parties, promptly and in an amiable manner by negotiations
between the parties.
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Section 12.2 Problem Escalation Procedures
Either party may refer any dispute to the Management Committee. The Management
Committee shall meet as soon as is reasonably possible after a dispute is
referred to it, giving due regard to the nature and impact of the issue under
consideration.
If a dispute cannot be resolved by the Management Committee within a time period
that is reasonably satisfactory to the party raising the issue under
consideration, the Management Committee, at the request of either party, shall
promptly refer the dispute to the Executive Committee. The Executive Committee
shall meet as soon as is reasonably possible after a dispute is referred to it,
giving due regard to the nature and impact of the issue under consideration.
If a dispute cannot be resolved by the Executive Committee within a time period
that is reasonably satisfactory to the party raising the issue under
consideration, the Executive Committee, at the request of either party, shall
promptly submit the dispute for arbitration as provided in Section 12.3.
Section 12.3 Arbitration
The parties stipulate and agree that if they are unable to resolve any
controversy arising under this Agreement then such controversy shall be
submitted at the election of either party to mandatory and binding arbitration
in lieu of litigation and judgment upon the award rendered by the arbitrator may
be entered in any court of competent jurisdiction in State of Connecticut. Such
arbitration shall be held in Fairfield County, Connecticut and shall be
conducted in accordance with the Rules of the American Arbitration Association
then in effect. Every matter in the controversy shall be settled by a panel of
three arbitrators, none of whom may be a director, officer, employee,
representative or agent of either of the parties. Each party shall select one
arbitrator and the two arbitrators so selected shall select a neutral arbitrator
to serve as the third arbitrator. In the event court action is required to
enforce this Agreement to arbitrate, the parties hereby consent to the exclusive
jurisdiction of the courts of the State of Connecticut. This section shall be
interpreted, construed and governed by and in accordance with the Rules of the
American Arbitration Association.
ARTICLE 13 AUDIT RIGHTS
Section 13.1 Audit Areas
During the term of this Agreement, OLIN and its authorized agents and
representatives shall have the right to conduct inspection and/or audits of the
Services provided by ARCH, including
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observing work performance and reviewing ARCH's records, during normal business
hours upon reasonable notice to ARCH, at OLIN's expense, to verify that ARCH is
exercising reasonable procedures in compliance with the requirements of this
Agreement, to verify the integrity of the OLIN data, to examine the systems that
support and transmit OLIN data, and to examine ARCH's conformance with this
Agreement and performance of the Services hereunder, including, to the extent
applicable to the Services and to the pricing for such Services, 1) the
practices and procedures, 2) the systems, 3) the general controls and security
practices and procedures, and 4) the disaster recovery and back-up procedures.
Section 13.2 Access
For the purposes of such audits, ARCH will provide to OLIN (and its designees)
access to the part of any facility at which ARCH is providing the Services, to
ARCH personnel and to data and records relating to the Services. ARCH will
provide reasonable assistance and will cooperate reasonably with OLIN in
connection with audit functions and with regard to examinations by regulatory
authorities. OLIN auditors shall comply with ARCH's reasonable security
measures.
In the conduct of such inspections or audits, OLIN and its authorized agents and
representatives will not be entitled to review any confidential or proprietary
information of ARCH or any third party and may not interfere with the ability of
ARCH to perform the Services hereunder.
Section 13.3 Inspections or Audit Not a Waiver
No failure of OLIN during the progress of the Services to discover Services not
in accordance with this Agreement shall be deemed an acceptance thereof, nor a
waiver of defects therein; and no payment shall be construed to be an acceptance
of Services which are not in accordance with this Agreement.
ARTICLE 14 CONFIDENTIALITY
Section 14.1 Confidential Information
"Confidential Information" shall mean: 1) all information marked confidential,
restricted or proprietary by either party; 2) OLIN's client lists, OLIN
information, account information, and information regarding business planning
and operations of OLIN and OLIN's administrative, financial or marketing
activities; or 3) a party's proprietary intellectual property, such as
proprietary software, methodologies, tools, specifications, drawings, sketches,
models, samples, records, documentation, works of authorship or creative works,
or data which has been originated or developed by such party's personnel or by
third parties under contract to develop same, or which has been purchased by
such party.
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Section 14.2 Obligations as to Confidential Information
Without the prior written consent of the other party, no Confidential
Information shall be used by the receiving party for any purpose other than
performance of this Agreement, or disclosed by the receiving party to any third
party, other than its agents or employees who are subject to non-use and
confidentiality obligations consistent with those contained herein, except: 1)
that in the event that either party receives a subpoena, request for documents,
or other validly issued judicial or administrative process requiring the
disclosure of Confidential Information of the other party, then such party may
disclose such information to the extent required by such demand, provided that
such party promptly notifies such other party of the receipt of process, and
permits the other party a reasonable opportunity to respond to such process, 2)
to the extent such Confidential Information is or becomes generally available to
the public other than as a result of disclosure by the receiving party, 3) to
the extent such Confidential Information becomes available to OLIN or ARCH from
a third party who, to the best of OLIN's or ARCH's knowledge, received such
information on a non-confidential basis, or 4) to the extent such Confidential
Information had been independently developed by OLIN or ARCH at the time of
receipt thereof from the other party.
Section 14.3 Standard of Care
The party receiving Confidential Information will maintain confidentiality by
using the same degree of care that the receiving party takes to hold in
confidence its own proprietary information of a similar nature, but in any event
with no less of a degree of care than is reasonable for such information.
Without limiting the general provisions of this Article, ARCH warrants that its
employees involved in performing the Services shall be obligated in writing to
ARCH to protect OLIN Confidential Information in a manner, at a minimum,
consistent with the terms of this Agreement, and that to the extent that ARCH
retains any third parties to provide Services under this Agreement, ARCH shall
require such third parties to sign confidentiality agreements consistent with
this Article 14.
ARTICLE 15 OWNERSHIP AND LICENSES OF SOFTWARE AND INTANGIBLE ASSETS
Section 15.1 Data
All OLIN data shall be and remain the property of OLIN or its suppliers or
licensers.
Section 15.2 Application Software
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OLIN shall be and remain at all times the owner of all software to be owned by
it exclusively after the Distribution, as set forth in Schedule G, or purchased
by OLIN after the Distribution Date, that is being used to provide Services to
it under this Agreement and of all software developed by ARCH as part of the
Services for OLIN's exclusive use under or pursuant to this Agreement. OLIN
grants to ARCH a worldwide, fully paid-up, non-exclusive right and license to
use, copy, maintain, modify, enhance, and create derivative works of, such
software for the sole purpose of providing the Services pursuant to this
Agreement. Such authorization includes without limitation, operation of the
software for OLIN, maintenance, development, and modification as authorized by
this Agreement (or otherwise in writing); and the duplication for operational,
developmental, and archival purposes. This license does not give ARCH the right,
and ARCH is not authorized, to sublicense such software, except if applicable,
to ARCH subsidiaries for the sole purpose of their providing Services pursuant
to this Agreement. Except as otherwise requested or approved by OLIN, ARCH shall
cease all use of such OLIN owned software upon expiration or termination of this
Agreement.
ARCH shall be and remain at all times the owner of all software to be owned by
it exclusively after the Distribution, as set forth in Schedule G, or purchased
by it on its own behalf after the Distribution Date, provided however, that
certain of such ARCH owned software (as specifically designated on Schedule G,
and only to the extent permitted under the applicable software license), shall
be used by both ARCH and OLIN during the term of this Agreement as part of the
Services. OLIN's right to use of such software is restricted solely to usage as
part of the Services being provided by ARCH to OLIN hereunder, and upon
termination of this Agreement, OLIN shall have no further right to use such
software.
Section 15.3 New Work
Except as otherwise specified, new work will be owned as follows: 1) new work
created by OLIN shall be the property of OLIN, 2) new work created by ARCH as
"work for hire" for OLIN shall be the property of OLIN, and 3) ownership of new
work owned jointly, created jointly or created for joint use by OLIN and ARCH
and the rights and obligations related to the use thereof, shall be negotiated
between the parties on a case-by-case basis. In the event that the parties
cannot reach agreement, the matter will be submitted for dispute resolution in
accordance with Article 12.
ARTICLE 16 SHARED ASSETS AND CONTRACTS
Section 16.1 Fixed Assets
The parties agree that a fixed asset allocation as of the Distribution Date for
OLIN owned IT assets, ARCH owned IT assets and shared IT assets shall be
determined and agreed between
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ARCH and OLIN within ninety (90) days after the Distribution Date, on a basis
consistent with the preliminary fixed asset allocation set forth on Schedule G,
and that such assets shall be allocated in accordance with such agreed fixed
asset allocation. Upon termination of this Agreement, ARCH will have a right of
first refusal to purchase OLIN's portion of any shared IT assets at the book
value of such OLIN portion. If ARCH does not elect to exercise such right of
first refusal on or before termination of this Agreement, then OLIN may within
sixty (60) days thereafter, elect to purchase ARCH's portion of any shared IT
assets at the book value of such ARCH portion. If OLIN does not so elect, then
the shared IT asset shall be sold and the proceeds distributed to ARCH and OLIN
in accordance with their share of the sold asset.
Section 16.2 Shared Contracts
As part of the Services, OLIN shall participate in the contracts listed on
Schedule G6 (the "Shared Contracts") which were distributed to ARCH as part of
the Distribution, and all associated costs will be allocated to OLIN in
accordance with Schedule C. As to the Services identified on Schedule G6 as
relating to a Shared Contract, ARCH and OLIN agree that the Initial Term for
those Services shall be through the expiration date for the related Shared
Contract, and that unless otherwise agreed by the parties, the Pricing/Fees for
such Services during the Initial Term shall use the pricing methodology and
allocation formulas used in 1999.
Notwithstanding the foregoing, either OLIN or ARCH may elect to terminate the
Services related to any such Shared Contract prior to the expiration date of
such Shared Contract set forth on Schedule G6; provided, however, such party
shall be responsible for all termination or cancellation charges imposed by the
third party contractor and allocable to early termination or modification of
such Shared Contract resulting from the party's election to terminate the
related Services, prior to the Shared Contract's expiration date set forth on
Schedule G6, and shall otherwise make the non-terminating party whole for any
increased costs associated with such Shared Contract actually incurred by the
non-terminating party as a result of the termination of the related Services.
16.3 New Shared Assets or Contracts
No new shared (i.e., intended for joint usage and shared cost allocations during
the term of this Agreement) systems, assets or contractual obligations (or
extensions to existing shared systems, assets or contracts), will be committed
to or acquired by either party, except as mutually agreed between OLIN and ARCH
in advance as to ownership, usage, Services to be provided and applicable
Pricing/Fees.
ARTICLE 17 INDEMNITIES
Section 17.1 Indemnification
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(a) ARCH shall indemnify, defend and hold harmless OLIN, including its
affiliates, employees, representatives and agents (the "OLIN Indemnitees") from
and against all claims, losses, damages, expenses, including attorney's fees and
expenses ("Claims"), asserted by any ARCH subcontractor or by ARCH's or such
subcontractor's employees (including their families and estates) against the
OLIN Indemnitees in connection with, or as a result of, ARCH's provision of
Services under this Agreement except to the extent such Claims and Damages are
caused by the gross negligence or willful misconduct of any of the OLIN
Indemnitees.
(b) OLIN shall indemnify, defend and hold harmless ARCH, including its
affiliates, employees, representatives and agents (the "ARCH Indemnitees") from
and against all Claims asserted by any third party (other than ARCH
Subcontractors or ARCH's or such ARCH subcontractor's employees (including their
families and estates) for which ARCH has indemnification obligations under
Section 17.1(a) above), or by OLIN employees (including their families and
estates), against the ARCH Indemnitees in connection with, or as a result of,
ARCH's provision of Services under this Agreement unless such Claims and/or
Damages are caused by the gross negligence or willful misconduct of any of the
ARCH Indemnitees.
(c) Each party shall indemnify, defend and hold harmless the other
indemnitee group from and against all monetary fines, penalties or the like,
imposed by a Governmental Authority against the party entitled to
indemnification arising from a violation by the indemnifying party of applicable
laws, rules, regulations, orders, or the like of any governmental authority.
(d) In no event will an indemnitor be liable hereunder for punitive,
special, indirect, consequential damages or lost profits or business
interruption claimed by a third party.
Section 17.2 Indemnification Procedures
(a) In the event of any Claim for which a party is entitled to
indemnification, the party seeking indemnification shall immediately notify in
writing the indemnifying party of such Claim and shall fully cooperate with the
indemnifying party in the defense of the Claim and, at the indemnifying party's
cost, permit the indemnifying party's attorney(s), reasonable acceptable to the
indemnified party, to handle and control the conduct and/or settlement of such
Claim, including making personnel and records available for the defense of the
Claim.
(b) The indemnifying party shall keep the indemnified party reasonably
informed regarding any claim, action or proceeding in which the indemnifying
party is defending the indemnified party, and shall not enter into any
settlement or compromise of such claim, action or proceeding affecting the
indemnified party without the indemnified party's consent, unless such
settlement or compromise contains a complete and unconditional release of the
indemnified party. In no event shall the indemnifying party agree to a
settlement which
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contains a non-monetary component without the consent of the indemnified party,
which consent not to be unreasonably withheld.
(c) The indemnification provisions of Section 17.1 are contingent upon
the indemnified party promptly turning over the complete control of the claim
and/or suit to the indemnifying party.
Section 17.3 Scope of Indemnification as Permitted by Applicable Law
Nothing in this Article 17 shall be construed to violate directly or indirectly
any applicable law prohibiting indemnification for the sole or partial
negligence of the indemnitee. In the event any provision of this indemnity is
contrary to applicable law, this indemnity shall not be void or unenforceable,
but shall be enforced to, and only to, the fullest extent permitted by the
applicable law.
ARTICLE 18 LIABILITIES
Section 18.1 Limitation of Liability
ARCH's sole liability hereunder with respect to performance of Services shall be
for a breach of its covenants in Section 8.1 above. In no event will either
party's liability hereunder exceed the amounts payable hereunder as described in
Pricing/Fees and Section 16.2 with respect to Shared Contracts.
Section 18.2 Consequential Damages
Notwithstanding anything to the contrary contained herein or at law and in
equity, in no event shall a party be liable to the other party for punitive,
special, indirect or consequential damages (including, without limitation,
damages for loss of business profits, business interruption or any other loss)
arising from or relating to any claim made under this Agreement or regarding the
provision of or the failure to provide Service(s) hereunder, even if a party had
been advised or was aware of the possibility of such damages.
Section 18.3 Mitigation
OLIN and ARCH (as the case may be) shall use all reasonable efforts to mitigate
the loss and damage (if any) incurred by it as a result any breach by the other
party of that other party's obligations under this Agreement.
Section 18.4 Force Majeure
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Both parties will be released from their obligations under this Agreement to the
extent that circumstances beyond the control of either party prevent it from
performing its obligations: 1) if and to the extent such default or delay is
caused by fire, flood, earthquake, elements of nature or acts of God, riots,
civil disorders, wars, rebellions or revolutions, governmental action,
third-party strikes, lockouts, or labor difficulties, or any other similar cause
beyond the reasonable control of such party and 2) provided such default or
delay could not have been prevented by reasonable precautions and cannot
reasonably be circumvented by the non-performing party through the use of
alternate sources, work around plans or other means.
In such event, the non-performing party will be excused from any further
performance or observance of the obligations so affected for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance whenever and to whatever extent
possible without delay. Any party so delayed in its performance will immediately
notify the other by telephone (to be confirmed in writing within two (2)
business days of the inception of such delay) and describe at a reasonable level
of detail the circumstances causing such delay. If any of the above enumerated
circumstances continues for more than thirty (30) days, the party affected by
the other party's delay or inability to perform may elect to suspend performance
under the Statement of Work, obtain the affected Services elsewhere and resume
performance of the Statement of Work once the force majeure event ceases to
exist, provided that ARCH may request an appropriate adjustment to the charges
for any applicable Services to reflect any additional costs incurred as a result
of the force majeure event.
The schedule for any affected Statements of Work will be extended to reflect the
delay caused by a force majeure event and an appropriate adjustment will be made
to the charges thereunder.
ARTICLE 19 INSURANCE
Each party shall be responsible for maintaining insurance (which may include
self insurance) in coverages and amounts sufficient to replace its own
equipment, property and systems, together with its portion of any shared assets,
to cover potential liabilities hereunder, and otherwise to comply with all
applicable requirements of law. Upon request, each party shall deliver
certificates evidencing such insurance to the other party, and otherwise comply
with such requirements regarding such insurance as the other party may
reasonably require and as are consistent with the provisions of this Article.
Each party shall look to its own insurance (including self insurance and any
deductible amount) as its exclusive remedy to recover damages for property
damage, business interruption or extra expenses relating to an insurable event.
Each party hereby waives its rights of recovery against the other for any loss
insured by fire, extended coverage and other property insurance policies
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(including self insurance and any deductible amount) existing for the benefit of
such party. Each party shall obtain from its insurer a waiver of subrogation
against the other party.
ARTICLE 20 TERMINATION
Section 20.1 Termination for Cause
In the event that either party is at any time in material breach of its
obligations under this Agreement, the non-breaching party may elect to terminate
this Agreement or the portion of this Agreement relating to such breach. The
party seeking termination will provide the other party with sufficient
reasonable prior written notice in reasonable detail of such material breach and
the opportunity to cure the breach. If such breach is not cured within ten (10)
days of notice of a monetary breach, or within thirty (30) days of notice of all
other breaches, then the party not in default may terminate this Agreement (or
such portion thereof) as of the date specified in such notice of termination.
OLIN shall pay ARCH for Services performed through the date of termination or
expiration of the term of this Agreement.
The terminating party shall have all rights and remedies generally afforded by
law or equity, subject to the limitations expressed in this Agreement. Such
termination will proceed in an orderly manner, as soon as practical or in
accordance with the schedule agreed to by OLIN and ARCH.
Section 20.2 Termination Assistance
It is the intent of the parties that at the termination of this Agreement, ARCH
will cooperate with OLIN to assist with the orderly transfer of the services,
functions and operations provided by ARCH hereunder to OLIN itself or another
services provider. Prior to termination of this Agreement, OLIN may request ARCH
to perform and, if so requested, ARCH shall perform (except in the event of a
termination due to a failure by OLIN to pay any amounts due and payable under
this Agreement when due) Services in connection with migrating the work of OLIN
to OLIN itself or another services provider. Services transfer assistance shall
be provided until the date of termination with respect to the Services, and for
expiration or termination related services other than those relating to the
Services for up to three (3) additional months after the date of expiration or
termination.
If the Services transfer assistance requires ARCH to incur expenses in addition
to the expenses that ARCH would otherwise incur in the performance of this
Agreement then: 1) ARCH shall notify OLIN of any additional expenses associated
with the performance of any additional services pursuant to this section prior
to performing such services 2) upon OLIN's
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authorization, ARCH shall perform the additional services and invoice ARCH for
such services, and 3) OLIN shall pay ARCH for such additional expenses incurred
to provide the additional services in accordance with the provisions of Article
10 above.
If prior to termination, ARCH has prepaid charges for a license to use any
licensed program included in the Services, to the extent that the OLIN has the
benefit of such license and prepayment following termination, the OLIN agrees to
reimburse ARCH an appropriate portion of the prepaid charges
ARCH will transfer or assign to OLIN or its designee, upon OLIN's request, on
mutually acceptable terms and conditions, any contracts applicable solely to
Services being provided to OLIN for maintenance, disaster recovery services and
other necessary third-party services (other than subcontractor services) then
being used by ARCH to perform the Services, subject to the payment by OLIN of
any transfer fee or charge imposed by the third party contractor.
ARCH shall have no obligation to transfer or assign to OLIN any contracts for
services, facilities or equipment for which usage is shared. Such contracts
shall be governed by Section 16.2 and 16.3, as applicable.
Termination activity shall begin upon ARCH's receipt of 1) notice of the
termination for convenience, 2) notice of the termination for default, or 3)
notice by OLIN of its intention not to renew. There is no additional charge for
termination activities except in the case of when termination if for default
caused by a breach by OLIN.
Pre-migration Services
. Freeze all non-critical software changes
. Notify all outside ARCH of necessary ARCH-related procedures to be
followed during the turnover phase
. Review all software libraries (tests and production) with the new
service provider and OLIN
. Assist in establishing naming conventions for the new production site
. Analyze space required for the databases and software libraries
. Generate a tape and computer listing of the source code for the
software to be provided to OLIN in a form reasonably requested by OLIN
. Deliver all source code, technical specifications and materials, and
user documentation for the software to OLIN and/or OLIN's designee
. Provide listings of equipment and software leases and contracts used to
support OLIN
. Provide a transition plan for personnel who support OLIN
. Explain the operations manual to new operations staff
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. Provide training to new operations staff if OLIN is assuming
responsibility for the services, and assist with training if a third
party is assuming responsibility
. Provide system "walk throughs"
. Provide a security transition plan
. Submit a schedule for termination activities
Migration Services
. Unload the production databases
. Deliver tapes of production databases (with content listings) to the
new operations staff, data files and tape libraries
. Assist with the loading of databases
. Assist with the communications network turnover
. Assist in the execution of a parallel operation, until the Distribution
Date of expiration or termination of this Agreement, including delivery
to OLIN of the then current procedures manual
Post-migration Services
. Answer questions regarding the services on an "as needed" basis
. Turnover any remaining OLIN-owned reports and documentation still in
ARCH's possession
Section 20.3 Return of Materials Upon Termination
Upon termination of this Agreement, each party will promptly deliver to the
other party, or certify destruction of, all data, programs and similar materials
of the other held in connection with the performance of the Agreement.
ARTICLE 21 GENERAL TERMS
Section 21.1 Entire Agreement
The parties agree that this Agreement is the complete and exclusive statement of
the agreement between the parties relating to the subject matter of this
Agreement, which supersedes all proposals or prior agreements or representations
whether oral or written and all other communications between the parties.
Section 21.2 Governing Law
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This Agreement and its application and interpretation will be governed
exclusively by the laws prevailing in the State of Connecticut. The courts of
the State of Connecticut shall have exclusive jurisdiction over all matters
arising in relation to this Agreement that are not subject to dispute resolution
hereunder and each party hereby submits to the jurisdiction of the courts of the
State of Connecticut.
Section 21.3 Headings
The article and section headings are for reference and convenience only and
shall not be considered in the interpretation of this Agreement.
Section 21.4 Severability
If any provision of this Agreement shall be prohibited by or be invalid under
applicable law, it shall be deemed modified to reflect the original intentions
of the parties as nearly as possible in accordance with applicable laws. If for
any reason it is not deemed so modified, it shall be prohibited or invalid only
to the extent of such prohibition or invalidity without the remainder thereof of
any, such other provision being prohibited or invalid. If the remainder of this
Agreement shall not be affected by such declaration or finding and is capable of
substantial performance, then each provision not so affected shall be enforced
to the extent permitted by law.
Section 21.5 Survival
ARCH and OLIN agree that the following Articles shall survive termination to the
extent necessary to give effect to the intent and understanding of the parties:
Article 10-Pricing and Payment, Article 14-Confidentiality, Article
17-Indemnification, Article 18-Limitation of Liability, and Article
20-Termination.
Section 21.6 Consents and Approvals; Compliance with Laws
Each party agrees to obtain all necessary regulatory approvals applicable to its
business, obtain and maintain in effect any necessary permits, and comply with
all laws, rules and regulations applicable to the performance of the Services.
Section 21.7 Waiver
No term or provision hereof shall be deemed waived and no breach excused, unless
such waiver or consent shall be in writing and signed by the party claimed to
have waived or consented. Any consent by any party to, or waiver of, a breach by
the other, whether expressed or implied, shall not constitute a consent to,
waiver of, or excuse for any other different or subsequent breach.
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27
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<PAGE>
Section 21.8 Notices
Whenever one party is required or permitted to give notice to the other under
this Agreement, such notice shall be made in writing (unless otherwise expressly
provided elsewhere in this Agreement) and will be deemed given when received 1)
by personal delivery, overnight delivery courier or U.S. registered or certified
mail, return receipt requested, postage prepaid or 2) by facsimile (provided
that a copy thereof is also delivered promptly by one of the foregoing methods
of delivery). Notices will be sent to the designated addresses. Either party may
hereto from time to time change its address or person for notification purposes
by giving the other prior written notice of the new address or person(s) and the
date upon which it will become effective.
Until notice of change of address has been given in the manner provided in this
Section 21.8, notices shall be addressed as follows:
If to ARCH:
501 Merritt 7
Norwalk, Connecticut 06851
Attention: Vice President - Information Technology
[INSERT TELEPHONE NUMBER]
[INSERT FACSIMILE NUMBER]
If to OLIN:
501 Merritt 7
Norwalk, Connecticut 06851
Attention: Vice President and Comptroller
[INSERT TELEPHONE NUMBER]
[INSERT FACSIMILE NUMBER]
Section 21.9 Assignment
Except for assignment by OLIN or ARCH to a parent, subsidiary or affiliate,
neither party may assign its rights or obligations under this Agreement in whole
or in part without the prior written consent of the other party, which consent
shall not be unreasonably withheld.
Section 21.10 Subcontractors
ARCH shall not subcontract the delivery of all or any substantial part of the
Services provided to OLIN without the express prior written consent of OLIN,
which consent shall not be
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<PAGE>
unreasonably withheld. OLIN's approval of a subcontractor shall not relieve ARCH
of its obligations under this Agreement. Nothing contained in this Agreement
shall create any contractual relationship between a subcontractor and OLIN. ARCH
agrees to bind every subcontractor by the terms and conditions of this
Agreement, as far as appropriate and applicable, to the Services to be performed
by the subcontractor. ARCH shall be fully responsible to OLIN for the acts and
omissions of all subcontractors and of persons directly or indirectly employed
or contracted by any of them.
Section 21.11 Mergers and Acquisitions
If OLIN acquires control of another entity or merges with another business
organization during the Term of this Agreement, ARCH will to the extent
reasonably possible at the time, if requested by OLIN, provide the Services to
such entity, subject to agreement between ARCH and OLIN as to pricing for such
Services, and mutually agreed upon reimbursement for any conversion expenses.
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29
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
OLIN CORPORATION
By: /s/ Johnnie M. Jackson, Jr.
-------------------------------------------------
(signature)
Johnnie M. Jackson, Jr.
-------------------------------------------------
(typed or printed)
Title: Vice President, General Counsel and Secretary
-------------------------------------------------
Date: February 8, 1999
-------------------------------------------------
ARCH CHEMICALS, INC.
By: /s/ Sarah A. O'Connor
-------------------------------------------------
(signature)
Sarah A. O'Connor
-------------------------------------------------
(typed or printed)
Title: Vice President
-------------------------------------------------
Date: February 8, 1999
-------------------------------------------------
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30
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<PAGE>
Exhibit 10.12
FORM OF EXECUTIVE AGREEMENT
---------------------------
Agreement between Arch Chemicals, Inc., a Virginia corporation ("Arch
Chemicals"), and ____________ (the "Executive"), dated as of ______________.
Arch Chemicals and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the Executive to
substantially perform his or her duties; the willful engaging by the Executive
in gross misconduct significantly and demonstrably financially injurious to Arch
Chemicals; or willful misconduct by the Executive in the course of his or her
employment which is a felony or fraud. No act or failure to act on the part of
the Executive will be considered "willful" unless done or omitted not in good
faith and without reasonable belief that the action or omission was in the
interests of Arch Chemicals or not opposed to the interests of Arch Chemicals.
(b) "Change in Control" means:
(i) Arch Chemicals ceases to be, directly or indirectly, owned
of record by at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as a "person" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Act"), other than Arch Chemicals, a majority-owned subsidiary of Arch
Chemicals or an employee benefit plan (or the plan's related trust) of Arch
Chemicals or such subsidiary, become(s) the "beneficial owner" (as defined in
Rule 13d-3 under such Act) of 20% or more of the then outstanding voting stock
of Arch Chemicals;
(iii) During any period of two consecutive years, individuals who
at the beginning of such period constitute Arch Chemicals' Board of Directors
(together with any new Director whose election by Arch Chemicals' Board of
Directors or whose nomination for election by Arch Chemicals' stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors then in office;
(iv) All or substantially all of the business of Arch Chemicals
is disposed of pursuant to a merger, consolidation or other transaction in which
Arch Chemicals is not the surviving corporation or Arch Chemicals combines with
another company and is the surviving corporation (unless the shareholders of
Arch Chemicals immediately following
<PAGE>
2
such merger, consolidation, combination, or other transaction beneficially own,
directly or indirectly, more than 50% of the aggregate voting stock or other
ownership interests of (x) the entity or entities, if any, that succeed to the
business of Arch Chemicals or (y) the combined company) or
(v) Approval by Arch Chemicals' shareholders of (i) a sale of
all or substantially all the assets of Arch Chemicals or (ii) a liquidation or
dissolution of Arch Chemicals.
(c) "Disability" means that the Executive has suffered an incapacity
due to physical or mental illness which meets the criteria for disability
established at the time under Arch Chemicals' short-term disability plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current monthly
salary (without taking into account any reductions which may have occurred at or
after the date of a Change in Control); plus
(ii) an amount equal to the greater of (A) the Executive's
average annual award actually paid under Arch Chemicals' short-term annual
incentive compensation plans or programs ("ICP") (including zero if nothing was
paid or deferred but including any portion thereof the Executive has elected to
defer) for the three completed fiscal years immediately preceding the date of
Termination (or if the Executive has not participated in ICP for such three
completed fiscal years, the average of any such awards for the shorter period of
years in which the Executive was a participant) and (B) the Executive's then
current ICP standard annual award.
(e) "Potential Change in Control" means:
(i) Arch Chemicals has entered into an agreement the
consummation of which would result in a Change in Control;
(ii) any person (including Arch Chemicals) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Arch Chemicals learns that any person (other than an
employee benefit plan of Arch Chemicals or a subsidiary of Arch Chemicals (or
the plan's related trust)) has become the beneficial owner directly or
indirectly of securities of Arch Chemicals representing 9.5% or more of the
combined voting power of Arch Chemicals' then outstanding securities ordinarily
entitled to vote in elections of directors; or
(iv) the Board of Directors of Arch Chemicals adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control of Arch Chemicals has occurred;
<PAGE>
3
provided, if an event specified in clause (iii) above has occurred by or on the
date hereof, such event shall not be deemed a Potential Change in Control unless
such person acquires another 1% of such securities subsequent to the date
hereof.
(f) "Termination" means:
(i) The Executive is discharged by Arch Chemicals other than for
Cause;
(ii) The Executive terminates his or her employment in the event
that:
(1) Arch Chemicals requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that
prior to a Change in Control a requirement to relocate the Executive's office to
Arch Chemicals' corporate headquarters is not a basis for Termination;
(2) Arch Chemicals reduces the Executive's base salary or
fails to increase the Executive's base salary on a basis consistent (as to
frequency and amount) with Arch Chemicals' exempt salary system as then in
effect or, in the event of a Change in Control, as in effect immediately prior
to the Change in Control;
(3) Arch Chemicals fails to continue the Executive's
participation in its benefit plans (including incentive compensation and stock
options) on substantially the same basis, both in terms of the amount of the
benefits provided (other than due to Arch Chemicals' or a relevant operation's
financial or stock price performance provided such performance is a relevant
criterion under such plan) and the level of the Executive's participation
relative to other participants as exists on the date hereof; provided that, with
respect to annual and long term incentive compensation plans, the basis with
which the amount of benefits and level of participation of the Executive shall
be compared shall be the average benefit awarded to the Executive under the
relevant plan during the three completed fiscal years immediately preceding the
date of Termination;
(4) The Executive suffers a Disability which prevents the
Executive from performing the Executive's duties with Arch Chemicals for a
period of at least 180 consecutive days;
(5) Following a Change in Control, Arch Chemicals fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
For purposes solely of clarification, it is understood that (i) if, in
connection with the spinoff of an Arch Chemicals business or Arch Chemicals'
assets as a separate public company to Arch Chemicals' shareholders, the
Executive accepts employment with, and
<PAGE>
4
becomes employed at, the spunoff company or its affiliates, the termination of
the Executive's employment with Arch Chemicals shall not be considered a
"Termination" for purposes of this Agreement, provided that a Change in Control
shall not have occurred prior to the termination of the Executive's employment
with Arch Chemicals and (ii) except as provided in paragraph 5(f), in connection
with the sale of an Arch Chemicals business to a third party or the transfer or
sale of an Arch Chemicals business or Arch Chemicals' assets to a joint venture
to be owned directly or indirectly by Arch Chemicals with one or more third
parties, if the Executive accepts employment with, and becomes employed by, such
buyer or its affiliates or such joint venture or its affiliates in connection
with such transaction, such cessation of employment with Arch Chemicals shall
not be considered a "Termination" for purposes of this Agreement.
2. Previous Change in Control Agreement. This Agreement supersedes and
replaces the Executive Agreement dated as of ________, 199__ between Arch
Chemicals and the Executive.(1)
3. Term/Executive's Duties.
(a) This Agreement expires at the close of business on September 30,
2002, unless prior to that date there is a Potential Change in Control or a
Change in Control, in which case this Agreement will expire on the later of (i)
the close of business on September 30, 2002, (ii) three years following the date
of the Potential Change in Control or (iii) three years following the date of
the Change in Control; provided that the expiration of this Agreement will not
affect any of the Executive's rights resulting from a Termination prior to such
expiration. In the event of the Executive's death while employed by Arch
Chemicals, this Agreement shall terminate and be of no further force or effect
on the date of his or her death; provided that the Executive's death will not
affect any of the Executive's rights resulting from a Termination prior to
death.
(b) During the period of the Executive's employment by Arch Chemicals,
the Executive shall devote his or her full time efforts during normal business
hours to Arch Chemicals' business and affairs, except during reasonable vacation
periods and periods of illness or incapacity. Nothing in this Agreement will
preclude the Executive from devoting reasonable periods required for service as
a director or a member of any organization involving no conflict of interest
with Arch Chemicals' interest; provided that no additional position as director
or member shall be accepted by the Executive during the period of his or her
employment with Arch Chemicals without its prior consent.
(c) The Executive agrees that in the event of any Potential Change in
Control of Arch Chemicals occurring from time to time after the date hereof, the
Executive will remain in the employ of Arch Chemicals until the earlier of (i)
the end of the six month period following the occurrence of such Potential
Change in Control and (ii) a Change in Control during which time the Executive
will have an office, title, duties and responsibilities substantially consistent
with those applicable immediately prior to such Potential Change in Control.
- ------------------
(1) If Executive had a Tier II, use the following language instead: The
Agreement supersedes and replaces the Letter Agreement (Tier II), dated
__________, 19__, between Arch Chemicals and the Executive." If Executive is a
new hire, use the following: "This paragraph intentionally left blank."
<PAGE>
5
4. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration of
this Agreement, Arch Chemicals will pay the Executive a lump sum in an amount
equal to the Executive Severance. The payment will be made within 10 days of the
Termination.
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under paragraph 4(a)
above, Arch Chemicals will pay a Change in Control severance premium to the
Executive in an amount equal to two times the Executive Severance. The Change in
Control severance premium, if it becomes due, will be made within 10 days of the
Termination.
(c) The amount due under paragraph 4(a) and 4(b), if any, will be
reduced to the extent that, if such amount in the aggregate were paid in equal
monthly installments over a 12-month period (or in the event both paragraph 4(a)
and 4(b) are applicable, a 36-month period), no installment would be paid after
the Executive's sixty-fifth birthday.
(d) The Executive will not be required to mitigate the amount of any
payment provided for in paragraph 4(a) or 4(b) by seeking other employment or
otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment except as explicitly provided in this Agreement.
Except as may otherwise be expressly provided herein, nothing in this Agreement
will be deemed to reduce or limit the rights which the Executive may have under
any employee benefit plan, policy or arrangement of Arch Chemicals. Except as
expressly provided in this Agreement, payments made under paragraphs 4 or 5(e)
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim which Arch Chemicals may have against the Executive.
(e) If the Executive receives the Executive Severance, the Executive
will not be entitled to receive any other severance otherwise payable to the
Executive under any other severance plan of Arch Chemicals. If on the
Termination date the Executive is eligible and is receiving payments under any
then existing Arch Chemicals disability plan, then the Executive agrees that all
such payments may, and will be, suspended and offset for 12 months (or in the
event paragraph 4(b) is also applicable, 36 months) (subject to applicable law)
following the Termination date. If after such period the Executive remains
eligible to receive disability payments, then such payments shall resume in the
amounts and in accordance with the provisions of the applicable Arch Chemicals
disability plan.
(f) In the event the Executive, in connection with the sale of an Arch
Chemicals business to a third party or the transfer of an Arch Chemicals
business or Arch Chemicals assets to a joint venture which would be owned
directly or indirectly by Arch Chemicals with one or more third parties, ceases
to be employed by Arch Chemicals and with Arch Chemicals' consent becomes
employed by the buyer or its affiliates or the joint venture or its affiliates,
the Executive shall be entitled to the benefits provided under paragraph 4(a)
(using Arch Chemicals figures at the time of new employment) (subject to
paragraphs 4(c), 4(d) and 4(e)) and the first sentence of paragraph 5(a)
(subject to paragraph 5(c)), and paragraph 5(d), if the Executive has a
Termination as defined in paragraph 1(f) with his or her new employer (with the
new employer being substituted for Arch Chemicals
<PAGE>
6
in such paragraph 1(f) and without giving any effect to the Change in Control
references contained therein following such new employment) within 12 months of
becoming employed by such new employer. Any cash compensation amounts paid under
this paragraph 4(f) shall be reduced by any severance, job transition or
employment termination payments such Executive receives in cash from his or her
new employer in connection with the Termination. In connection with this
paragraph 5(f), in no event shall the Change in Control provisions of this
Agreement be applicable once Executive ceases to be employed by Arch Chemicals.
5. Other Benefits
(a) If the Executive becomes entitled to payment under paragraph 4(a),
the Executive will receive 12 months service credit under all Arch Chemicals
Pension Plans for which the Executive was eligible at the time of the
Termination (i.e., under Arch Chemicals' qualified Pension Plans to the extent
permitted under then applicable law, otherwise such credit will be reflected in
a supplementary pension payment from Arch Chemicals to be due at the times and
in the manner payments are due the Executive under such qualified pension
plans), and for 12 months from the date of the Termination the Executive
(including covered dependents) will continue to enjoy coverage on the same basis
as a similarly situated active employee under all Arch Chemicals medical,
dental, and life insurance plans to the extent the Executive was enjoying such
coverage immediately prior to the Termination. The Executive's entitlement to
insurance coverage under the Consolidated Omnibus Budget Reconciliation Act
would commence at the end of the period during which insurance coverage is
provided under this Agreement without offset for coverage provided hereunder.
The Executive shall accrue no vacation during the 12 months following the date
of Termination but shall be entitled to payment for accrued and unused vacation
for the calendar year in which the Termination occurs. If the Executive receives
the Executive Severance (including the amount referred to in paragraph
1(d)(ii)), the Executive shall not be entitled to an ICP award for the calendar
year of Termination if Termination occurs during the first calendar quarter.
Even if the Executive receives the Executive Severance (including the amount
referred to in paragraph 1(d)(ii)) and if Termination occurs during or after the
second calendar quarter, the Executive shall be entitled to a prorated ICP award
for the calendar year of Termination which shall be determined by multiplying
his or her then current ICP standard by a fraction the numerator of which is the
number of weeks in the calendar year prior to the Termination and the
denominator of which is 52. The Executive shall accrue no ICP award following
the date of Termination. The accrued vacation pay and ICP award, if any, shall
be paid in a lump sum when the Executive Severance is paid.
(b) If the Executive becomes entitled to payment under paragraph 4(b),
the pension credit and insurance coverage provided for in paragraph 5(a) will be
for an additional 24-month period beyond the period provided in paragraph 5(a).
(c) Notwithstanding the foregoing paragraphs 5(a) and 5(b), no such
service credit or insurance coverage will be afforded by this Agreement with
respect to any period after the Executive's sixty-fifth birthday.
(d) In the event of a Termination, the Executive will be entitled at
Arch Chemicals' expense to outplacement counseling and associated services in
accordance with Arch Chemicals' customary practice at the time (or, if a Change
in Control shall have
<PAGE>
7
occurred, in accordance with such practice immediately prior thereto) with
respect to its senior executives who have been terminated other than for Cause.
It is understood that the counseling and services contemplated by this paragraph
5(d) are intended to facilitate the obtaining by the Executive of other
employment following a Termination, and payments or benefits by Arch Chemicals
in lieu thereof will not be available to the Executive.
(e) Notwithstanding the provisions of Section 10 of the Arch Chemicals
Senior Executive Pension Plan (the "Senior Plan"), if the Executive is in active
employment with Arch Chemicals at the date of a Change in Control but has not
attained age 55 at such date, the Executive shall (if then a Participant in the
Senior Plan) nevertheless automatically be paid the lump-sum amount called for
by such Section 10, except that such lump-sum amount will be calculated first,
by calculating the sum equal to the annual benefit which would otherwise be
payable to the Executive at age 65 under all Arch Chemicals pension plans
assuming the Executive had terminated his or her employment with Arch Chemicals
on the date of the Change in Control, second, by multiplying such sum by 72%,
which is the current percentage applicable in the calculation of benefits paid
to employees retiring from active service with Arch Chemicals at age 55 under
the early retirement provisions of the Arch Chemicals Employees Pension Plan,
third, by determining the then lump-sum actuarial value of the product resulting
from the second step, and fourth, by deducting from such lump-sum actuarial
value the then lump-sum actuarial value of the Executive's accrued annual
benefits under all other Arch Chemicals pension plans. The actuarial value
shall be determined as the amount needed to purchase a fixed annuity through
Metropolitan Life Insurance Company ("Metropolitan") or its successor
immediately prior to the Change in Control. In the event such annuity is not
available through Metropolitan, then Prudential Insurance Company or an
insurance company with comparable rating by A.M. Best & Company shall be
substituted for Metropolitan. A lump-sum payment under this paragraph 5(e) will
be used to reduce any payments under the Senior Plan which may become due to the
Executive thereafter. The purpose of this paragraph 5(e) is to ensure that an
Executive who is less than age 55 at the time of the Change in Control receives
a lump-sum payment which when combined with the value of the Executive's pension
benefits from all other Arch Chemicals pension plans preserves the 72% age 55,
subsidized early retirement factor, rather than the actuarial reduction. Such
lump-sum payment shall be discounted by the same interest rate used by the
insurance company to determine the actuarial value to provide for the deferral
of the benefit until the Executive reaches age 55.
(f) If the Executive becomes entitled to the payment under paragraph 4(b),
at the end of the period for insurance coverage provided in accordance with
paragraph 5(b), the Executive shall be entitled to continue in Arch Chemicals'
medical and dental coverage (including dependent coverage) on terms and
conditions no less favorable to the Executive as in effect prior to the Change
in Control for the Executive until the Executive reaches age 65; provided that
if the Executive obtains other employment which offers medical or dental
coverage to the Executive and his or her dependents, the Executive shall enroll
in such medical or dental coverage, as the case may be, and the corresponding
coverage provided to the Executive hereunder shall be secondary coverage to the
coverage provided by the Executive's new employer so long as such employer
provides the Executive with such coverage.
(g) If there is a Change in Control, Arch Chemicals shall not reduce or
diminish the insurance coverage or benefits which are provided to the Executive
<PAGE>
8
under paragraph 5(a), 5(b) or 5(f) during the period the Executive is entitled
to such coverage; provided the Executive makes the premium payments required by
active employees generally for such coverage, if any, under the terms and
conditions of coverage applicable to the Executive. Following a Change in
Control, incentive compensation plans in which the Executive participates shall
contain reasonable financial performance measures and shall be consistent with
practice prior to the Change in Control.
6. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i) or
(ii), the Executive must promptly disclose such participation or agreement to
Arch Chemicals. If the Executive so participates or agrees to participate, no
payments due under this Agreement or by virtue of any Change in Control
provisions contained in any compensation or benefit plan of Arch Chemicals will
be paid to the Executive until the acquiring group in which the Executive
participates or agrees to participate has completed the acquisition. In the
event the Executive so participates or agrees to participate and fails to
disclose his or her participation or agreement, the Executive will not be
entitled to any payments under this Agreement or by virtue of Change in Control
provisions in any Arch Chemicals compensation or benefit plan, notwithstanding
any of the terms hereof or thereof.
(b) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by Arch
Chemicals to or for the benefit of the Executive (whether paid or payable or
distributed or distributable) pursuant to the terms of this Agreement or
otherwise (collectively, the "Payments") but determined without regard to any
additional payments required under this paragraph 6(b), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount equal to (i) the amount of the excise tax
imposed on the Executive in respect of the Payments (the "Excise Tax") plus (ii)
all federal, state and local income, employment and excise taxes (including any
interest or penalties imposed with respect to such taxes) imposed on the
Executive in respect of the Gross-Up Payment, such that after payments of all
such taxes (including any applicable interest or penalties) on the Gross-Up
Payment, the Executive retains a portion of the Gross-Up Payment equal to the
Excise Tax.
7. Successors; Binding Agreement
(a) Arch Chemicals will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Arch Chemicals, by agreement, in
form and substance satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that Arch
Chemicals would be required to perform if no such succession had taken place.
Failure of Arch Chemicals to obtain such assumption and agreement prior to the
effectiveness of any such succession will be a breach of this Agreement and
entitle the Executive to compensation from Arch Chemicals in the same amount and
on the same terms as the Executive would be entitled to hereunder had a
Termination occurred on the succession date. As used in this Agreement, "Arch
Chemicals" means Arch Chemicals as
<PAGE>
9
defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this paragraph
7 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company: Arch Chemicals, Inc.
501 Merritt 7
P.O. Box 5204
Norwalk, CT 06856-5204
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia (without giving effect to its conflicts of law).
10. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Arch Chemicals. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
12. Withholding of Taxes. Arch Chemicals may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
<PAGE>
10
13. Non-assignability. This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 7 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the event of any attempted assignment or transfer by the Executive contrary to
this paragraph, Arch Chemicals shall have no liability to pay any amount so
attempted to be assigned or transferred.
14. No Employment Right. This Agreement shall not be deemed to confer on
the Executive a right to continued employment with Arch Chemicals.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration at Arch Chemicals'
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that the Executive shall be
entitled to seek specific performance of the Executive's right to be paid during
the pendency of any dispute or controversy arising under or in connection with
this Agreement.
(b) Arch Chemicals shall pay all reasonable legal fees and expenses,
as they become due, which the Executive may incur to enforce this Agreement
through arbitration or otherwise unless the arbitrator determines that Executive
had no reasonable basis for his or her claim. Should Arch Chemicals dispute the
entitlement of the Executive to such fees and expenses, the burden of proof
shall be on Arch Chemicals to establish that the Executive had no reasonable
basis for his or her claim.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
ARCH CHEMICALS, INC.
By:
---------------------------------
Michael E. Campbell
Chairman of the Board and
Chief Executive Officer
- -------------------------
Executive
<PAGE>
EXHIBIT 10.13
ARCH CHEMICALS, INC.
1999 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose. The purpose of the Arch Chemicals, Inc. 1999 Stock Plan for
Non-employee Directors is to promote the long-term growth and financial success
of Arch Chemicals, Inc. by attracting and retaining non-employee directors of
outstanding ability and by promoting a greater identity of interest between its
non-employee directors and its shareholders.
2. Definitions. The following capitalized terms utilized herein have the
following meanings:
"Annual Director Grant" means the number of phantom shares of Common
Stock, Options and/or Performance Shares to be granted annually to a Non-
employee Director pursuant to Section 6(a), such number shall be fixed by
the Board during 1999 following the Distribution Date and may be adjusted
prospectively by such Board from time to time thereafter.
"Arch Stock Account" means the Stock Account to which phantom shares
of Common Stock are credited from time to time.
"Board" means the Board of Directors of the Company.
"Cash Account" means an account established under the Plan for a Non-
employee Director to which cash meeting fees and retainers have been or are
to be credited in the form of cash.
"Change in Control" means any of the following:
(i) the Company ceases to be, directly or indirectly, owned of
record by at least 1,000 shareholders;
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as a "person"
within the meaning of Section 13(d)(3) of the 1934 Act, other than the
Company, a majority-owned subsidiary of the Company or an employee
benefit plan of the Company or such subsidiary (or such plan's related
trust), become(s) the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act) of 20% or more of the then outstanding voting
stock of the Company;
<PAGE>
2
(iii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board (together with
any new director whose election by the Board or whose nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office;
(iv) all or substantially all of the business of the Company is
disposed of pursuant to a merger, consolidation or other transaction
in which the Company is not the surviving corporation or the Company
combines with another company and is the surviving corporation (unless
the shareholders of the Company immediately following such merger,
consolidation, combination, or other transaction beneficially own,
directly or indirectly, more than 50% of the aggregate voting stock or
other ownership interests of (x) the entity or entities, if any, that
succeed to the business of the Company or (y) the combined company);
or
(v) the shareholders of the Company approve a sale of all or
substantially all of the assets of the Company or a liquidation or
dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means the Compensation Committee (or its successor) of the
Board.
"Common Stock" means the Company's Common Stock, par value $1.00 per
share.
"Company" means Arch Chemicals, Inc., a Virginia corporation, and any
successor.
"Credit Date" means the first day of each calendar quarter, beginning
with April 1, 1999.
<PAGE>
3
"Distribution" means the distribution of the shares of the Company by
Olin in a spinoff to Olin's shareholders.
"Distribution Date" means the dividend payment date fixed by the Olin
Board of Directors for the distribution of the shares of Common Stock to
the public shareholders of Olin.
"Excess Retainer" means with respect to a Non-employee Director the
amount of the full annual cash retainer payable to such Non-employee
Director from time to time by the Company for service as a director in
excess of the amount paid in shares of Common Stock, if any, pursuant to
Section 6(b).
"Fair Market Value" means, with respect to a date, on a per share
basis, (i) with respect to Common Stock or phantom shares of Common Stock,
the average of the high and the low price of a share of Common Stock
reported on the consolidated tape of the New York Stock Exchange (or such
other primary exchange on which the Common Stock is traded) ("Exchange") on
such date or if the Exchange is closed on such date, the next succeeding
date on which it is open and (ii) with respect to phantom shares of Olin
Common Stock, the average of the high and the low price of a share of Olin
Common Stock reported on the consolidated tape of the Exchange on such date
or if the Exchange is closed on such date, the next succeeding date on
which it is open.
"Interest Rate" means the rate of interest equal to the Company's
before-tax cost of borrowing as determined from time to time by the Chief
Financial Officer, the Treasurer or the Controller of the Company (or in
the event there is no such borrowing, the Federal Reserve A1/P1 Composite
rate for 90-day commercial paper plus 10 basis points, as determined by any
such officer) or such other rate as determined from time to time by the
Board or the Committee.
"1999 Non-employee Director" means a Non-employee Director who
becomes such on or after the Distribution Date but prior to December 31,
1999, and who was not a non-employee director of Olin.
"1997 Plan" means the 1997 Stock Plan for Non-employee Directors of
Olin Corporation as in effect on the Distribution Date.
<PAGE>
4
"l934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Non-employee Director" means a member of the Board who is not an
employee of the Company or any subsidiary thereof.
"Olin" means Olin Corporation, a Virginia corporation.
"Olin Common Stock" means shares of common stock of Olin, par value
$1.00 per share.
"Olin Stock Account" means the Stock Account to which phantom shares
of Olin Common Stock are credited from time to time.
"Option" means an option to purchase shares of Common Stock granted
under Section 6(a)(2).
"Performance Shares" means an award of phantom shares or units of
Common Stock contingent upon the achievement of specified performance goals
granted under Section 6(a)(3).
"Plan" means this Arch Chemicals, Inc. 1999 Stock Plan for Non-
employee Directors as amended from time to time.
"Retirement Date" means the date the Non-employee Director ceases to
be a member of the Board for any reason.
"Stock Account" means an account established under the Plan for a Non-
employee Director to which shares of stock have been or are to be credited
in the form of phantom stock, including the Olin Stock Account and the Arch
Stock Account.
3. Term. The Plan shall be effective on the Distribution Date. Once
effective, the Plan shall operate and shall remain in effect until terminated as
provided in Section 9 hereof.
4. Administration. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Committee. Decisions of the
Committee shall be final, conclusive and binding upon all parties.
5. Participation. All Non-employee Directors shall participate in the
Plan.
<PAGE>
5
6. Grants and Deferrals.
(a) Annual Award. Each Non-employee Director who is serving as such
on January 1 shall be credited with the Annual Director Grant on January 1 of
each calendar year beginning not earlier than 2000. In the event a person
becomes a Non-employee Director after January 1 of any calendar year beginning
with 2000, such Non-employee Director shall not be credited with the Annual
Director Grant for such year. By December 31 of each year commencing with 1999,
the Board shall determine if the Annual Director Grant to each Non-employee
Director for the next following calendar year shall be determined under (1), (2)
or (3) below (or any combination thereof).
(1) Stock Grant. Subject to the terms and conditions of the Plan,
-----------
the Annual Director Grant may consist of a grant of phantom shares of Common
Stock. Actual receipt of shares shall be deferred until the Non-employee
Director's Retirement Date unless the Board elects otherwise prior to the actual
grant, in which case the shares will be distributed as soon as practicable
following their grant unless deferred by a Non-employee Director with the
approval of the Board. If the shares are deferred each eligible Non-employee
Director shall receive a credit to his or her Arch Stock Account in the amount
of such shares as of January 1 of the calendar year for which the award is made.
Subject to the approval of the Board, a Non-employee Director may elect in
accordance with Section 6(e) to defer to his or her Arch Stock Account receipt
of all or any portion of such shares to a date or dates on or following such
Non-employee Director's Retirement Date. Except with respect to any shares the
director has so deferred, certificates representing such shares shall be
delivered to the Non-employee Director (or in the event of death, to his or her
beneficiary designated pursuant to Section 6(h)) as soon as practicable
following the Retirement Date.
(2) Stock Options. Subject to the terms and conditions of the Plan
-------------
and such additional terms and conditions, consistent with the terms of the Plan
as the Committee shall determine, the Annual Director Grant may consist of a
grant of Options. The exercise price per share of Common Stock of each Option
shall be equal to the Fair Market Value of a share of Common Stock on the date
of a grant. The term of each Option shall be equal to 10 years from the date of
grant (whether or not the grantee continues to be a Non-employee Director for
the full term). The Committee shall determine the time or times at which
Options may be exercised in whole or in part (but in no event shall an Option be
exercisable after the expiration of ten years
<PAGE>
6
from the date of its grant and shall determine the method or methods by which
payment of the exercise price in respect thereto may be made.
(3) Performance Shares. Subject to the terms and conditions of the
------------------
Plan and such additional terms and conditions, consistent with the terms of the
Plan as the Committee shall determine, the Annual Director Grant may consist of
a grant of Performance Shares. Such award shall confer on the holder thereof
the right to receive one share of Common Stock for each Performance Share
credited to his Stock Account upon the achievement of specified performance
goals during such performance periods as the Committee shall establish prior to
the date of the grant. The performance goals to be achieved during any
performance period and the length of any performance period shall be determined
by the Committee, provided that a performance period shall be at least one year,
subject to Section 6(g) hereof. The Committee may adjust the performance goals
in the event of extraordinary or unusual events.
Each eligible Non-employee Director shall receive a credit to his or
her Arch Stock Account in the amount of such Performance Shares as of the
January 1 of the calendar year for which the award is made. Actual receipt of
the shares of Common Stock will be deferred until completion of the performance
period and distribution will occur only if the performance goals are satisfied.
Subject to the approval of the Board, a Non-employee Director may elect in
accordance with Section 6(e) to further defer receipt of all or any portion of
such Common Stock. Except with respect to any Performance Shares the Director
has so deferred, certificates representing such shares shall be delivered to the
Non-employee Director (or in the event of death, to his or her beneficiary
designated pursuant to Section 6(h)) as soon as practicable following
satisfaction of the performance goals and completion of the performance period.
(b) Annual Retainer Stock Grant. By December 31 of each year
commencing with 1999, the Board shall determine if all or any portion of the
annual retainer for the next following calendar year shall be paid in shares of
Common Stock. Subject to the terms and conditions of the Plan, if the Board
determines for a calendar year that all or a portion of the annual retainer
shall be paid in shares of Common Stock, on January 1 of such year, each Non-
employee Director who is such on such date shall receive a specified number of
shares of Common Stock as determined by the Board. In the event a person
becomes a Non-employee Director beginning in or after 2000 on a date subsequent
to January 1 during a calendar year and has not received the
<PAGE>
7
annual stock retainer for such calendar year, such person, on the first day of
the calendar month following his or her becoming such, shall receive that number
of shares (rounded up to the next whole share in the event of a fractional
share) of Common Stock equal to one-twelfth of the number of shares of the
annual retainer to be paid in Common Stock times the number of whole calendar
months remaining in such calendar year following the date he or she becomes a
Non-employee Director. In the case of a 1999 Non-employee Director, for 1999
such person shall receive on the first day of the calendar month following his
or her becoming such that number of shares (rounded up to the next whole share)
of Common Stock having an aggregate Fair Market Value equal to $2084 times the
number of whole calendar months remaining in the calendar year after he or she
becomes a 1999 Non-Employee Director. The annual cash retainer payable to the
Non-employee Director shall be reduced by the aggregate Fair Market Value of the
shares the Non-employee Director receives or defers as the annual retainer stock
grant (excluding any rounding of fractional shares) on the date the Non-employee
Director becomes entitled to receive shares under this Section 6(b) for such
calendar year. Subject to the approval of the Board (which approval shall not be
required for a 1999 election by a 1999 Non-employee Director), a Non-employee
Director may elect to defer receipt of all or any portion of such shares in
accordance with Section 6(e). Except with respect to any shares the director has
so deferred, certificates representing such shares shall be delivered to such
Non-employee Director as soon as practicable following the date as of which the
shares are awarded.
(c) Election to Receive Meeting Fees and Excess Retainer in Stock in
Lieu of Cash. Subject to the terms and conditions of the Plan and the approval
of the Board, a Non-employee Director may elect to receive all or a portion of
the director meeting fees and all or a portion of the Excess Retainer payable in
cash by the Company for his or her services as a director for the calendar year
in the form of shares of Common Stock. Such election shall be made in
accordance with Section 6(e). If approved by the Board, the number of shares
(rounded up to the next whole share in the event of a fractional share) for a
calendar year payable to a Non-employee Director who so elects to receive all or
a portion of the Excess Retainer in the form of shares for such year shall be
paid on January 1 (or in the case of proration, when the annual stock retainer
is to be paid or credited) equal to the amount of Excess Retainer which has been
elected to be paid in shares divided by the Fair Market Value per share on
January 1 of such calendar year (or in the case of a Non-employee Director who
becomes such after January 1, on the first day of the calendar month following
the day such new
<PAGE>
8
Non-employee Director became such). If approved by the Board, the number of
shares (rounded up to the next whole share in the event of a fractional share)
for a calendar quarter payable to a Non-employee Director who so elects to
receive meeting fees in the form of shares shall be equal to the aggregate
amount on the Credit Date following such quarter of the director meeting fees
which have been earned in such quarter and which are elected to be paid in
shares divided by the Fair Market Value per share of Common Stock on such Credit
Date. Except with respect to any shares the director has deferred, certificates
representing such shares shall be delivered to the Non-employee Director as soon
as practicable following the date as of which the Excess Retainer and/or meeting
fees would have been paid in cash absent an election hereunder. Notwithstanding
anything in the Plan to the contrary, the approval of the Board shall not be
required for any 1999 election made by a 1999 Non-employee Director.
(d) Deferrals of Meeting Fees and Excess Retainer. Subject to the
terms and conditions of the Plan and the approval of the Board, a Non-employee
Director may elect to defer all or a portion of the shares payable under Section
6(c) and all or a portion of the director meeting fees and Excess Retainer
payable in cash by the Company for his or her service as a director for the
calendar year. If approved by the Board, the amount of the Excess Retainer
deferred in cash shall be credited on January 1 (or in the case of proration, on
the first day of the next calendar month following the day such new Non-employee
Director becomes such). Such election shall be made in accordance with Section
6(e). Subject to the approval of the Board, a Non-employee Director who elects
to so defer shall have any deferred shares deferred in the form of shares of
Common Stock and any deferred cash fees and retainer deferred in the form of
cash. Notwithstanding any thing in the Plan to the contrary, the approval of the
Board shall not be required for any 1999 election made by a 1999 Non-employee
Director.
(e) Elections.
(1) Deferrals. All elections under Sections 6(a), 6(b), 6(c),
6(d), 6(e)(2) and 6(e)(3) shall (A) be made in writing and delivered to the
Secretary of the Company and (B) be irrevocable. All Non-employee Director
elections for payments in cash or stock or for deferrals shall be made
before January 1 of the year in which the shares of Common Stock or
director's fees and retainer are to be earned (or, in the case of an
individual who becomes a Non-employee Director during a calendar year,
prior to the date of his or her election as a director). Deferral
<PAGE>
9
elections shall also (A) specify the portions (in 25% increments) to be
deferred and (B) specify the future date or dates on which deferred amounts
are to be paid, or the future event or events upon the occurrence of which
the deferred amounts are to be paid, and the method of payment (lump sum or
annual installments (up to 10)). However, subject to the approval of the
Board, a Non-employee Director may elect to defer all of his or her cash
dividends on the Stock Account in whole and not in part and all of his or
her interest on the Cash Account in whole but not in part. Installment
payments from an Account shall be equal to the Account balance (expressed
in shares in the case of the Stock Account, otherwise the cash value of the
Account) at the time of the installment payment times a fraction, the
numerator of which is one and the denominator of which is the number of
installments not yet paid. Fractional shares to be paid in any installment
shall be rounded up to the next whole share. In the event of an election
under Section 6(c) for director meeting fees or Excess Retainer to be paid
in shares of Common Stock, the election shall specify the portion (in 25%
increments) to be so paid. Any change with respect to the terms of a Non-
employee Director's election for (A) amount or form of any future deferral
or the form of payment of any director compensation hereunder may be made
at any time prior to such compensation being earned (and in the case of
quarterly fees, prior to the start of the quarter in which the fees are to
be earned) and (B) the timing (which timing may not accelerate a
distribution date) or amount of payments from any Account shall only be
effective if made at least six months prior to the payout and in the
calendar year prior to the calendar year payout is to occur.
(2) Stock Account. On the Credit Date (or in the case of a
proration, on the first day of the appropriate calendar month), a Non-
employee Director who has deferred shares under Sections 6(b) or 6(d) shall
receive a credit to his or her Stock Account. The amount of such credit
shall be the number of shares so deferred (rounded to the next whole share
in the event of a fractional share). A Non-employee Director may elect to
defer the cash dividends paid on his or her Stock Account in accordance
with Section 6(e)(1).
(3) Cash Account. On the Credit Date or in the case of the
Excess Retainer, on the day on which the Non-employee Director is entitled
to receive such Excess Retainer, a Non-employee Director who has deferred
cash fees
<PAGE>
10
and/or the Excess Retainer under Section 6(d) in the form of cash
shall receive a credit to his or her Cash Account. The amount of the
credit shall be the dollar amount of such Director's meeting fees earned
during the immediately preceding quarterly period or the amount of the
Excess Retainer to be paid for the calendar year, as the case may be, and
in each case, specified for deferral in cash. A Non-employee Director may
elect to defer interest paid on his or her Cash Account in accordance with
Section 6(e)(1).
(4) Dividends and Interest. Each time a cash dividend is paid
on Common Stock or Olin Common Stock, a Non-employee Director who has
shares of such stock (other than shares attributable to Performance Shares)
credited to his or her Stock Account shall be paid on the dividend payment
date such cash dividend in an amount equal to the product of the number of
shares credited to the Non-employee Director's Arch Stock Account or Olin
Stock Account, as the case may be, on the record date for such dividend
times the dividend paid per share unless subject to the approval of the
Board, the director has elected to defer such dividend to his or her Stock
Account as provided herein, in which case the Non-employee Director shall
receive a credit for such dividends on the dividend payment date to his or
her Arch Stock Account or Olin Stock Account, as the case may be. The
amount of the dividend credit shall be the number of shares (rounded to the
nearest one-thousandth of a share) of Common Stock determined by
multiplying the dividend amount per share by the number of shares credited
to such director's applicable Stock Account as of the record date for the
dividend and dividing the product by the Fair Market Value per share on the
dividend payment date. At the election of the Board, dividend equivalents
(determined as described above) shall also be paid with respect to
Performance Shares held in a Non-employee Director's Arch Stock Account;
provided, however, that such dividend equivalents shall be automatically
-------- -------
deferred until, when and if the underlying Performance Shares are
distributed in the form of Common Stock.
A Non-employee Director who has a Cash Account shall be paid
directly on each Credit Date interest on such account's balance at the end
of the preceding quarter, payable at a rate equal to the Interest Rate in
effect for such preceding quarter unless with the approval of the Board,
such Non-employee Director has elected to defer such interest to his or her
Cash Account, in which case such interest shall be credited to such Cash
Account on the
<PAGE>
11
Credit Date.
(5) Payouts. Cash Accounts and the Olin Stock Account will be
paid out in cash, and the Arch Stock Accounts shall be paid out in shares
of Common Stock unless the Non-employee director elects otherwise. Cash
amounts and certificates representing shares credited to the Arch Stock
Account to be distributed in Common Stock shall be delivered to the Non-
employee Director as soon as practicable following the termination of the
deferral and consistent therewith.
(f) No Stock Rights. Except as expressly provided herein, the
deferral of shares of Common Stock into a Stock Account shall confer no rights
upon such Non-employee Director, as a shareholder of the Company or otherwise,
with respect to the shares held in such Stock Account, but shall confer only the
right to receive such shares credited as and when provided herein. A Non-
employee Director who has been granted an Option hereunder shall have no rights
as a shareholder until such time as his or her Option is exercised.
(g) Change in Control. Notwithstanding anything to the contrary in
this Plan or any election, in the event a Change in Control occurs, (1) all
Performance Shares shall become vested and deemed earned in full notwithstanding
that the applicable performance cycle shall not have been completed, and (2)
amounts and shares credited to Cash Accounts (including interest accrued to the
date of payout) and Stock Accounts shall be promptly distributed to Non-employee
Directors except that the Arch Stock Account shall be paid out in cash and not
in the form of shares of Common Stock. For this purpose, the cash value of the
amount in the Arch Stock Account shall be determined by multiplying the number
of shares held in the Arch Stock Account by the higher of (i) the highest Fair
Market Value on any date within the period commencing 30 days prior to such
Change in Control and ending on the date of the Change in Control, or (ii) if
the Change in Control occurs as a result of a tender or exchange offer or
consummation of a corporate transaction, then the highest price paid per share
of Common Stock pursuant thereto.
(h) Beneficiaries. A Non-employee Director may designate at any time
and from time to time a beneficiary for his or her Stock and Cash Accounts in
the event his or her Stock or Cash Account may be paid out following his or her
death. Such designation shall be in writing and must be received by the Company
prior to the death to be effective.
<PAGE>
12
(i) 1997 Plan Accounts. As of the Distribution Date, the cash and
stock accounts of each Non-employee Director who immediately prior to the
Distribution Date was a participant in the 1997 Plan shall be transferred from
the 1997 Plan to this Plan after giving effect to the adjustment for the
Distribution in accordance with Section 6(k) of the 1997 Plan as in effect on
the Distribution Date. Such amounts shall be transferred, in the case of an
account denominated in cash, to the Cash Account, in the case of a transferred
account denominated in Olin Common Stock, to the Olin Stock Account, and in the
case of an account denominated in Common Stock to the Common Stock Account.
Shares credited to the Arch Stock Account pursuant to this paragraph
6(i) shall be treated as follows: (i) to the extent such shares represent a
dividend on shares of Olin Common Stock credited pursuant to paragraph 6(a)(1)
of the 1997 Plan (or shares arising from dividend equivalents thereon), such
shares shall be deemed credited pursuant to paragraph 6(a) of the Plan, (ii) to
the extent such shares represent a dividend on shares of Olin Common Stock
credited pursuant to paragraph 6(b) of the 1997 Plan (or shares arising from
dividend equivalents thereon), such shares shall be deemed credited pursuant to
paragraph 6(b) of this Plan, and (iii) to the extent such shares represent a
dividend on shares of Olin Common Stock credited under paragraph 6(c) of the
1997 Plan (or shares arising from dividend equivalents thereon), such shares
shall be deemed credited pursuant to paragraph 6(a)(1) of the Plan. The most
recent prior elections and beneficiary designations applicable to the 1997 Plan
shall govern this Plan unless changed subsequent to the Distribution Date or
inconsistent with this Plan. Approval of the Board shall not be required for
any such elections for 1999 but shall be required in accordance with the terms
of this Plan for years after 1999.
(j) Stock Account Transfers. A Non-Employee Director may elect from
time to time to transfer all or a portion (in 25% increments) of his or her Olin
Stock Account to his or her Arch Stock Account. The amount of phantom shares of
Common Stock to be credited to a Non-Employee Director's Arch Stock Account
shall be equal to the number of shares of Common Stock that could be purchased
if the number of phantom shares of Olin Common Stock in his or her Olin Stock
Account being transferred were sold and the proceeds reinvested in Common Stock
based on the Fair Market Value of each. Except as provided in Section 6(e)(4)
with respect to dividends or in Section 8, no additional contributions or
additions may be made to a Non-Employee Director's Olin Stock Account after the
Distribution Date.
<PAGE>
13
7. Limitations and Conditions.
(a) Total Number of Shares. The total number of shares of Common
Stock that may be issued to Non-employee Directors under the Plan is 150,000.
Such total number of shares may consist, in whole or in part, of authorized but
unissued shares. The foregoing number may be increased or decreased by the
events set forth in Section 8 below. No fractional shares shall be issued
hereunder. In the event a Non-employee Director is entitled to a fractional
share, such share amount shall be rounded upward to the next whole share amount.
(b) No Additional Rights. Nothing contained herein shall be deemed
to create a right in any Non-employee Director to remain a member of the Board,
to be nominated for reelection or to be reelected as such or, after ceasing to
be such a member, to receive any cash or shares of Common Stock under the Plan
which are not already credited to his or her accounts.
8. Stock Adjustments. In the event of any merger, consolidation, stock or
other non-cash dividend, extraordinary cash dividend, split-up, spin-off,
combination or exchange of shares or recapitalization or change in
capitalization, or any other similar corporate event, the Committee may make
such adjustments in (i) the aggregate number of shares of Common Stock that may
be issued under the Plan as set forth in Section 7(a) and the number of shares
and/or Options that may be issued to a Non-employee Director with respect to any
year as set forth in Section 6(a) and the number of shares of Olin Common Stock
or Arch Common Stock, as the case may be, held in a Stock Account, (ii) the
class of shares that may be issued under the Plan, (iii) the amount and type of
payment that may be made in respect of unpaid dividends on shares of Common
Stock or Olin Common Stock whose receipt has been deferred pursuant to Section
6(e), and (iv) the exercise price with respect to any award of Options or, if
the Committee deems it appropriate, make provision for cash payment to the
holder of an outstanding Option, as the Committee shall deem appropriate in the
circumstances. The determination by the Committee as to the terms of any of the
foregoing adjustments shall be final, conclusive and binding for all purposes of
the Plan.
9. Amendment and Termination. This Plan may be amended, suspended or
terminated by action of the Board. No termination of the Plan shall adversely
affect the rights of any Non-employee Director with respect to any amounts
otherwise payable or credited to his or her Cash Account or Stock Account.
<PAGE>
14
10. Nonassignability. No right to receive any payments under the Plan or
any amounts credited to a Non-employee Director's Cash or Stock Account shall be
assignable or transferable by such Non-employee Director other than by will or
the laws of descent and distribution or pursuant to a domestic relations order.
The designation of a beneficiary under Section 6(h) by a Non-employee Director
does not constitute a transfer.
11. Unsecured Obligation. Benefits payable under this Plan shall be an
unsecured obligation of the Company.
12. Rule 16b-3 Compliance. It is the intention of the Company that all
transactions under the Plan be exempt from liability imposed by Section 16(b) of
the 1934 Act. Therefore, if any transaction under the Plan is found not to be
in compliance with an exemption from such Section 16(b), the provision of the
Plan governing such transaction shall be deemed amended so that the transaction
does so comply and is so exempt, to the extent permitted by law and deemed
advisable by the Committee, and in all events the Plan shall be construed in
favor of it\s meeting the requirements of an exemption.
<PAGE>
EXHIBIT 10.14
ARCH CHEMICALS, INC. 1999 LONG TERM INCENTIVE PLAN
Section 1. Purpose
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The purposes of the Arch Chemicals, Inc. 1999 Long Term Incentive Plan (the
"Plan") are to encourage selected salaried employees of Arch Chemicals, Inc.
(together with any successor thereto, the "Company") and its Affiliates (as
defined below) to acquire a proprietary interest in the Company's growth and
performance, to generate an increased incentive to contribute to the Company's
future success and to enhance the ability of the Company and its Affiliates to
attract and retain qualified individuals.
Section 2. Definitions
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As used in the Plan:
(a) "Affiliate" means (i) any entity that, directly or through one or more
intermediaries, is controlled by the Company, and (ii) any entity in
which the Company has a significant equity interest as determined by
the Committee.
(b) "Award" means any Option, Restricted Stock, Restricted Stock Unit,
Performance Award or Dividend Equivalent granted under the Plan.
(c) "Award Agreement" means any written agreement or other instrument or
document evidencing an Award granted under the Plan. The terms of any
plan or guideline adopted by the Board or the Committee and applicable
to an Award shall be deemed incorporated in and a part of the related
Award Agreement.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(f) "Committee" means a committee of the Board designated by the Board to
administer the Plan and composed of not less than two directors, each
of whom is qualified as a "Non-Employee Director" as contemplated by
the Section 16 Rules and as an "Outside Director" as defined in Code
Section 162(m) and any regulations promulgated thereunder.
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(g) "Dividend Equivalent" means any right granted under Section 6(d)(iv) of
the Plan.
(h) "Fair Market Value" means, with respect to any property (including,
without limitation, Shares or other securities), the fair market value
of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(i) "Incentive Stock Option" means an option to purchase Shares granted
under Section 6(a) of the Plan that is intended to meet the
requirements of Section 422 of the Code or a successor provision
thereto.
(j) "Non-Qualified Stock Option" means an option to purchase Shares granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.
(k) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(l) "Participant" means a Salaried Employee granted an Award under the
Plan.
(m) "Performance Award" means any award granted under Section 6(c) of the
Plan.
(n) "Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government
or political subdivision thereof.
(o) "Released Securities" means securities that were Restricted Securities
with respect to which all applicable restrictions imposed under the
terms of the relevant Award have expired, lapsed or been waived or
satisfied.
(p) "Restricted Securities" means Awards of Restricted Stock or other
Awards under which outstanding Shares are held subject to certain
restrictions.
(q) "Restricted Stock" means any Share granted under Section 6(b) of the
Plan.
(r) "Restricted Stock Unit" means any right granted under Section 6(b) of
the Plan that is denominated in Shares.
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(s) "Salaried Employee" means any salaried employee of the Company or of an
Affiliate.
(t) "Section 16 Rules" means the rules promulgated by the Securities and
Exchange Commission with respect to Section 16 of the Securities
Exchange Act of 1934, as amended, or any successor rules.
(u) "Shares" means the common stock of the Company and such other
securities or property as may become the subject of Awards pursuant to
an adjustment made under Section 4(b) of the Plan.
Section 3. Administration
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The Plan shall be administered by the Committee which shall have full power
and authority to: (i) designate Participants; (ii) determine the Awards to be
granted to Participants; (iii) determine the number of Shares (or securities
convertible into Shares) to be covered by Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards, or other property, or canceled, substituted, forfeited
or suspended, and the method or methods by which Awards may be settled,
exercised, canceled, substituted, forfeited or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the
election of the Participant or of the Committee; (vii) interpret and administer
the Plan and any instrument or agreement relating to, or Award made under, the
Plan; (viii) establish, amend, suspend or waive such rules and guidelines and
appoint such agents as it shall deem appropriate for the administration of the
Plan; and (ix) make any other determination and take any other action that it
deems necessary or desirable for such administration. All designations,
determinations, interpretations and other decisions with respect to the Plan or
any Award shall be within the sole discretion of the Committee and shall be
final, conclusive and binding upon all Persons, including the Company, any
Affiliate, any Participants, any holder or beneficiary of any Award, any
shareholder and any employee of the Company or of any Affiliate. The
Committee's powers include the adoption of modifications, amendments,
procedures, subplans and the like as are necessary to comply with provisions of
the laws of other countries in which the Company or an Affiliate may operate in
order to assure the viability of Awards granted
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under the Plan and to enable Participants employed in such other countries to
receive benefits under the Plan and such laws.
Section 4. Shares Available for Awards
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(a) Shares Available. The aggregate number of Shares available for
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issuance under the Plan shall be 2,123,000 subject to adjustment
pursuant to subsection (b) below.
(b) Adjustments. In the event that the Committee determines that any
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dividend or other distribution, recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of
the Company, issuance of warrants or other rights to purchase Shares or
other securities of the Company, or other similar corporate transaction
or event affects the Shares such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits intended to be made available under the
Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property) which thereafter may be made the subject
of Awards, (ii) the number and type of Shares (or other securities or
property) subject to outstanding Awards, (iii) the grant, purchase or
exercise price with respect to any Award, or, if the Committee deems it
appropriate, make provision for a cash payment to the holder of an
outstanding Award and (iv) the limitation contained in Section 4(c).
Notwithstanding the foregoing, a Participant to whom Dividend
Equivalents or dividend units have been awarded shall not be entitled
to receive a special or extraordinary dividend or distribution unless
the Committee shall have expressly authorized such receipt.
(c) Limitation on Awards. Notwithstanding anything contained in this Plan
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to the contrary, grants to any one Participant of Awards which
represent or are designated in Shares shall not exceed 300,000 Shares
in any calendar year.
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Section 5. Eligibility
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Any Salaried Employee, including any officer or employee-director of the
Company or an Affiliate shall be eligible to be designated a Participant.
Section 6. Awards
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(a) Options. The Committee is authorized to grant Options to Participants
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with the following terms and conditions and with such additional terms
and conditions, not inconsistent with the provisions of the Plan, as
the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under
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an Option shall be determined by the Committee; provided,
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however, that such purchase price shall not be less than the
Fair Market Value of a Share on the date of grant of such
Option.
(ii) Option Term. The term of each Option shall be fixed by the
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Committee, provided that in no event shall the term of an Option
exceed a period of ten years from the date of its grant.
(iii) Exercise. The Committee shall determine the time or times at
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which an Option may be exercised in whole or in part (but in no
event shall an Option be exercisable after the expiration of ten
years from the date of its grant), and the method or methods by
which, and the form or forms (including, without limitation,
cash, Shares, other Awards or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal
to the relevant exercise price) in which, payment of the
exercise price with respect thereto may be made; provided that
no Shares may be used by a Participant in payment of the
exercise price of an Option unless such Shares were acquired in
the open market or have been held by the Participant for at
least six months.
(iv) Incentive Stock Options. The terms of any Incentive Stock
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Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code, or any successor
provision thereto, and any
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regulations promulgated thereunder. Without limiting the
preceding sentence, the aggregate Fair Market Value (determined
at the time an option is granted) of Shares with respect to
which Incentive Stock Options are exercisable for the first time
by a Participant during any calendar year (under the Plan and
any other plan of the Participant's employer corporation and its
parent and subsidiary corporations providing for Options) shall
not exceed such dollar limitation as shall be applicable to
Incentive Stock Options under Section 422 of the Code or a
successor provision.
(b) Restricted Stock and Restricted Stock Units.
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(i) Issuance. The Committee is authorized to grant Awards of
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Restricted Stock and Restricted Stock Units to Participants.
(ii) Restrictions. Shares of Restricted Stock and Restricted Stock
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Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the
right to vote a Share of Restricted Stock or the right to
receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time
or times, in such installments or otherwise, as the Committee
may deem appropriate, provided that in order for a Participant
to vest in Awards of Restricted Stock or Restricted Stock Units
where vesting is based solely on continued service, the
Participant must remain in the employ of the Company or an
Affiliate for a period of not less than three years commencing
on the date of grant of the Award, subject to Section 9 hereof
and subject to relief for specified reasons as may be approved
by the Committee.
(iii) Registration. Any Restricted Stock granted under the Plan may
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be evidenced in such manner as the Committee may deem
appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates.
In the event any stock certificate is issued in respect of
Shares of Restricted Stock granted under the
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Plan, such certificate shall be registered in the name of the
Participant and when delivered to the Participant shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock.
(iv) Forfeiture. Except as otherwise determined by the Committee,
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upon termination of employment for any reason during the
applicable restriction period, all Shares of Restricted Stock
and all Restricted Stock Units still subject to restriction
shall be forfeited and reacquired by the Company; provided,
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however, that the Committee may, in its sole discretion, waive
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in whole or in part any or all remaining restrictions with
respect to Shares of Restricted Stock or Restricted Stock Units.
Unrestricted Shares, evidenced in such manner as the Committee
shall deem appropriate, shall be delivered to the holder of
Restricted Stock promptly after such Restricted Stock shall
become Released Securities.
(c) Performance Awards. The Committee is authorized to grant Performance
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Awards to Participants. Subject to the terms of the Plan and any
applicable Award Agreement, a Performance Award granted under the Plan
(i) may be denominated or payable in cash, Shares (including, without
limitation, Restricted Stock or Restricted Stock Units), other
securities, other Awards or other property and (ii) shall confer on the
holder thereof rights valued as determined by the Committee and payable
to, or exercisable by, the holder of the Performance Award, in whole or
in part, upon the achievement of such performance goals during such
performance periods as the Committee shall establish. Subject to the
terms of the Plan and any applicable Award Agreement, the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted, and
the amount of any payment or transfer to be made pursuant to any
Performance Award shall be determined by the Committee, provided that a
performance period shall be at least one year, subject to Section 9
hereof.
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(d) General.
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(i) No Cash Consideration for Awards. Participants shall not be
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required to make any cash payment for the granting of an Award
except for such minimum consideration as may be required by
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may be
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granted either alone or in addition to, in tandem with, or in
substitution for any other Award or any award or benefit granted
under any other plan or arrangement of the Company or any
Affiliate, or as payment for or to assure payment of an award or
benefit granted under any such other such plan or arrangement,
provided that the purchase or exercise price under an Award
encompassing the right to purchase Shares shall not be reduced
by the cancelation of such Award and the substitution of another
Award. Awards so granted may be granted either at the same time
as or at a different time from the grant of such other Awards or
awards or benefits.
(iii) Forms of Payment Under Awards. Subject to the terms of the
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Plan and of any applicable Award Agreement, payments to be made
by the Company or an Affiliate upon the grant, exercise, or
payment of an Award may be made in such form or forms as the
Committee shall determine, including, without limitation, cash,
Shares, other securities, other Awards, or other property or any
combination thereof, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case
in accordance with rules and procedures established by the
Committee.
(iv) Dividend Equivalents or Interest. Subject to the terms of the
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Plan and any applicable Award Agreement, a Participant,
including the recipient of a deferred Award, shall, if so
determined by the Committee, be entitled to receive, currently
or on a deferred basis, interest or dividends or interest or
dividend equivalents, with respect to the Shares covered by the
Award. The Committee may provide that any such amounts shall be
deemed to have been reinvested in additional Shares
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or otherwise reinvested. Notwithstanding the award of Dividend
Equivalents or dividend units, a Participant shall not be
entitled to receive a special or extraordinary dividend or
distribution unless the Committee shall have expressly
authorized such receipt.
(v) Limits on Transfer of Awards. No Award (other than Released
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Securities) or right thereunder shall be assignable or
transferable by a Participant, other than (unless limited in the
Award Agreement) by will or the laws of descent and distribution
(or, in the case of an Award of Restricted Securities, to the
Company), except that an Option may be transferred by gift to
any member of the holder's immediate family or to a trust for
the benefit of one or more of such immediate family members, if
permitted in the applicable Award Agreement; provided, however,
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that, if so determined by the Committee, a Participant may, in
the manner established by the Committee, designate a beneficiary
or beneficiaries with respect to any Award to exercise the
rights of the Participant, and to receive any property
distributable, upon the death of the Participant. Each Award,
and each right under any Award, shall be exercisable, during the
Participant's lifetime, only by the Participant or, if
permissible under applicable law by the Participant's guardian
or legal representative unless it has been transferred to a
member of the holder's immediate family or to a trust for the
benefit of one or more of such immediate family members, in
which case it shall be exercisable only by such transferee. For
the purposes of this provision, a holder's "immediate family"
shall mean the holder's spouse, children and grandchildren. No
Award (other than Released Securities), and no right under any
such Award, may be pledged, attached or otherwise encumbered
other than in favor of the Company, and any purported pledge,
attachment, or encumbrance thereof other than in favor of the
Company shall be void and unenforceable against the Company or
any Affiliate.
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(vi) Term of Awards. Except as otherwise expressly provided in the
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Plan, the term of each Award shall be for such period as may be
determined by the Committee.
(vii) Section 16 Rule Six-Month Limitations. To the extent required
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in order to otherwise satisfy the requirements for exemption
under the Section 16 Rules only, any derivative or equity
security offered pursuant to the Plan may not be sold for at
least six months after acquisition or grant (or such other
period as may be required by the Section 16 Rules), except in
the case of death. Terms used in the preceding sentence shall,
for the purposes of such sentence only, have the meanings, if
any, assigned or attributed to them under Section 16 Rules.
(viii)No Rights to Awards. No Salaried Employee, Participant or
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other Person shall have any claim to be granted an Award, and
there is no obligation for uniformity of treatment of Salaried
Employees, Participants or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be
the same with respect to each recipient. The prospective
recipient of any Award under the Plan shall not, with respect to
such Award, be deemed to have become a Participant, or to have
any rights with respect to such Award, until and unless such
recipient shall have executed an agreement or other instrument
accepting the Award and delivered a fully executed copy thereof
to the Company, and otherwise complied with the then applicable
terms and conditions.
(ix) Delegation. Notwithstanding any provision of the Plan to the
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contrary, the Committee may delegate to one or more officers or
managers of the Company or any Affiliate, or a committee of such
officers or managers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards
to, or to cancel, modify, waive rights or conditions with
respect to, alter, discontinue, suspend, or terminate Awards
held by, Salaried Employees who are not officers or directors of
the Company for purposes of the Section 16 Rules.
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(x) Withholding. The Company or any Affiliate may withhold from any
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Award granted or any payment due or transfer made under any
Award or under the Plan the amount (in cash, Shares, other
securities, other Awards, or other property) of withholding
taxes due in respect of an Award, its exercise or any payment
under such Award or under the Plan, and take such other action
as may be necessary in the opinion of the Company or Affiliate
to satisfy all obligations for the payment of such taxes.
(xi) Other Compensation Arrangements. Nothing contained in the Plan
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shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally
applicable or applicable only in specific cases.
(xii) No Right to Employment. The grant of an Award shall not be
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construed as giving a Participant the right to be retained in
the employ of the Company or any Affiliate. Nothing in the Plan
or any Award Agreement shall limit the right of the Company or
an Affiliate at any time to dismiss a Participant from
employment, free from any liability or any claim under the Plan
or the Award Agreement.
(xiii) Governing Law. The validity, construction and effect of the
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Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of
Connecticut and applicable Federal law.
(xiv) Severability. If any provision of the Plan or any Award is
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determined to be invalid, illegal or unenforceable in any
jurisdiction, or as to any Person or Award, or would disqualify
the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or, if it cannot be so construed
or deemed amended without, in the determination of the
Committee, materially altering the intent of
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12
the Plan or the Award, such provision shall be stricken as to
such jurisdiction, Person or Award, and the remainder of the
Plan and any such Award shall remain in full force and effect.
(xv) No Trust or Fund Created. Neither the Plan nor any Award shall
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create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any
Affiliate and a Participant or any other Person. To the extent
that any Person acquires a right to receive payments from the
Company or any Affiliate pursuant to an Award, such right shall
be no greater than the right of any unsecured general creditor
of the Company or any Affiliate.
(xvi) No Fractional Shares. No fractional Shares shall be issued or
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delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash, other securities or other property
shall be paid or transferred in lieu of any fractional Shares,
or whether such fractional Shares or any rights thereto shall be
canceled, terminated or otherwise eliminated.
(xvii) Share Certificates. All certificates for Shares or other
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securities delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon
which such Shares or other securities are then listed, and any
applicable Federal or state securities laws, and the Committee
may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
(xviii) Conflict with Plan. In the event of any inconsistency or
------------------
conflict between the terms of the Plan and an Award Agreement,
the terms of the Plan shall govern.
(xix) Performance Based Awards. Notwithstanding any provision in
------------------------
this Plan to the contrary,
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Awards granted under Sections 6(b) or 6(c) and designated by the
Committee as being performance-based shall have as performance
measures Return on Equity, Total Return to Shareholders and/or
Cumulative Earnings per Share Growth. For purposes of the Plan,
"Return on Equity" shall mean consolidated income of the Company
after taxes and before the after-tax effect of any special
charge or gain and any cumulative effect of any change in
accounting, divided by average shareholders equity; "Total
Return to Shareholders" shall mean for the performance period
total return to shareholders of $100 worth of Shares for such
period assuming reinvestment of dividends on a quarterly basis
and "Cumulative Earnings per Share Growth" shall mean the
compound annual growth rate for Arch diluted Earnings per Share
for the performance or measurement period. The base Earnings per
Share upon which the annual growth rate will be computed will be
determined by the Committee prior to the start of the
performance period. "Earnings per Share" shall mean the actual
Arch diluted earnings per share at the end of the performance or
measurement period (calculated as the Arch net income available
to common stockholders divided by the weighted average number of
shares of common stock plus any potential dilutive shares of
common stock (such as stock options) outstanding for each year
within the performance or measurement period). The Committee
shall determine the performance goals for each such performance
measure with respect to each such Award.
(xx) Transfer from Olin Plans. As of the dividend payment date fixed
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by the board of directors of Olin Corporation for the
distribution of all outstanding shares of common stock of the
Company to the shareholders of Olin Corporation
("Distribution"), Options for Shares, options for common stock
of Olin Corporation, Restricted Stock Units and restricted stock
units of Olin Corporation held by employees of the Company
(after giving effect to the adjustment for the Distribution)
shall be transferred to this Plan from stock option and
incentive plans maintained by Olin Corporation. Any Options
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and Restricted Stock Units transferred to this Plan shall not
reduce the number of Awards that may be designated in Shares for
any Participant in any calendar year pursuant to Section 4(c).
Section 7. Amendment and Termination
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(a) Amendments to the Plan. The Board (or any authorized committee
----------------------
thereof) may amend, suspend, discontinue or terminate the Plan,
including, without limitation, any amendment, suspension,
discontinuation or termination that would impair the rights of any
Participant, or any other holder or beneficiary of any Award
theretofore granted, without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person;
provided, however, that, notwithstanding any other provision of the
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Plan or any Award Agreement, without the approval of the shareholders
of the Company, no such amendment, suspension, discontinuation or
termination shall be made that would permit any Award encompassing
rights to purchase Shares to be granted with per Share purchase or
exercise prices of less than the Fair Market Value of a Share on the
date of grant thereof; and provided further that no amendment,
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suspension, discontinuation or termination that would impair the rights
of such Participant, holder or beneficiary shall be made with respect
to Section 9 of the Plan after a Change in Control, as defined therein.
(b) Amendments to Awards. The Committee may waive any conditions or rights
--------------------
with respect to, or amend, alter, suspend, discontinue, or terminate,
any unexercised Award theretofore granted, prospectively or
retroactively, without the consent of any relevant Participant or
holder or beneficiary of an Award, provided that no amendment,
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alteration, suspension, discontinuation or termination of an Award that
would impair the rights of such Participant, holder or beneficiary
shall be made after a Change in Control, as defined in Section 9;
provided further that the Committee may not increase the payment of any
Award granted any Participant.
(c) Adjustments of Awards Upon Certain Acquisitions. In the event the
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Company or any Affiliate shall assume outstanding employee awards or
the right or
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obligation to make future such awards in connection with the
acquisition of another business or another company, the Committee may
make such adjustments, not inconsistent with the terms of the Plan, in
the terms of Awards as it shall deem appropriate.
(d) Adjustments of Awards Upon the Occurrence of Certain Unusual or
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Nonrecurring Events. The Committee may make adjustments in the terms
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and conditions of Awards in recognition of unusual or nonrecurring
events (including, without limitation, the events described in Section
4(b) hereof) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in applicable
laws, regulations, or accounting principles, whenever the Committee
determines that statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate
in order to prevent dilution or enlargement of the benefits to be made
available under the Plan.
Section 8. Additional Conditions to Enjoyment of Awards.
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(a) The Committee may cancel any unexpired, unpaid or deferred Awards if at
any time the Participant is not in compliance with all applicable
provisions of the Award Agreement, the Plan and the following
conditions:
(i) A Participant shall not render services for any organization or
engage, directly or indirectly, in any business which, in the
judgment of the Committee or, if delegated by the Committee to the
Chief Executive Officer, in the judgment of such Officer, is or
becomes competitive with the Company or any Affiliate, or which is
or becomes otherwise prejudicial to or in conflict with the
interests of the Company or any Affiliate. Such judgment shall be
based on the Participant's positions and responsibilities while
employed by the Company or an Affiliate, the Participant's post-
employment responsibilities and position with the other
organization or business, the extent of past, current and potential
competition or conflict between the Company or an Affiliate and the
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other organization or business, the effect on customers, suppliers
and competitors of the Participant's assuming the post-employment
position, the guidelines established in the then current edition of
the Company's Standards of Ethical Business Practices, and such
other considerations as are deemed relevant given the applicable
facts and circumstances. The Participant shall be free, however, to
purchase as an investment or otherwise, stock or other securities
of such organization or business so long as they are listed upon a
recognized securities exchange or traded over the counter, and such
investment does not represent a substantial investment to the
Participant or a greater than 1% equity interest in the
organization or business.
(ii) Participant shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other
than the Company's business, any secret or confidential
information, knowledge or data, relating to the business of the
Company or an Affiliate in violation of his or her agreement with
the Company or the Affiliate.
(iii) A Participant, pursuant to his or her agreement with the Company or
an Affiliate, shall disclose promptly and assign to the Company or
the Affiliate all right, title and interest in any invention or
idea, patentable or not, made or conceived by the Participant
during employment by the Company or the Affiliate, relating in any
manner to the actual or anticipated business, research or
development work of the Company or the Affiliate and shall do
anything reasonably necessary to enable the Company or the
Affiliate to secure a patent where appropriate in the United States
and in foreign countries.
(b) Notwithstanding any other provision of the Plan, the Committee in its
sole discretion may cancel any Award at any time prior to the exercise
thereof, if the employment of the Participant shall be terminated,
other than by reason of death, unless the conditions in this Section 8
are met.
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(c) Failure to comply with the conditions of this Section 8 prior to, or
during the six months after, any exercise, payment or delivery pursuant
to an Award shall cause the exercise, payment or delivery to be
rescinded. The Company shall notify the Participant in writing of any
such rescission within two years after such exercise payment or
delivery and within 10 days after receiving such notice, the
Participant shall pay to the Company the amount of any gain realized or
payment received as a result of the exercise, payment or delivery
rescinded. Such payment shall be made either in cash or by returning to
the Company the number of Shares that the Participant received in
connection with the rescinded exercise, payment or delivery.
(d) Upon exercise, payment or delivery pursuant to an Award, the Committee
may require the Participant to certify on a form acceptable to the
Committee, that he or she is in compliance with the terms and
conditions of the Plan.
(e) Nothing herein shall be interpreted to limit the obligations of a
Participant under his or her employee agreement or any other agreement
with the Company.
Section 9. Change in Control
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(a) Except as the Board or the Committee may expressly provide otherwise
prior to a Change in Control of the Company (as defined below), in the
event of a Change in Control of the Company:
(i) all Options then outstanding shall become immediately and fully
exercisable, notwithstanding any provision therein for the exercise
in installments;
(ii) all restrictions and conditions of all Restricted Stock and
Restricted Stock Units then outstanding shall be deemed satisfied
as of the date of the Change in Control; and
(iii) all Performance Awards shall become vested, deemed earned in full
and promptly paid to the Participants, cash units in cash and
phantom stock units in the Shares represented thereby or such other
securities, property or cash as may be deliverable in respect of
<PAGE>
18
Shares as a result of a Change in Control, without regard to
payment schedules and notwithstanding that the applicable
performance cycle or retention cycle shall not have been completed.
(b) A Change in Control of the Company shall have occurred in the event that:
(i) the Company ceases to be, directly or indirectly, owned of record
by at least 1,000 shareholders;
(ii) a person, partnership, joint venture, corporation or other entity,
or two or more of any of the foregoing acting as a "person" within
the meaning of Sections 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Act"), other than the Company, a majority-
owned subsidiary of the Company or an employee benefit plan of the
Company or such subsidiary (or such plan's related trust),
become(s) the "beneficial owner" (as defined in Rule 13d-3 under
the Act) of 20% or more of the then outstanding voting stock of the
Company;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Company's Board of
Directors (together with any new Director whose election by the
Company's Board or whose nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of the
Directors then still in office who either were Directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Directors then in office;
(iv) all or substantially all of the business of the Company is disposed
of pursuant to a merger, consolidation or other transaction in
which the Company is not the surviving corporation or the Company
combines with another company and is the surviving corporation
(unless the shareholders of the Company immediately following such
merger, consolidation, combination, or other
<PAGE>
19
transaction beneficially own, directly or indirectly, more than 50%
of the aggregate voting stock or other ownership interests of (x)
the entity or entities, if any, that succeed to the business of the
Company or (y) the combined company); or
(v) the shareholders of the Company approve a sale of all or
substantially all of the assets of the Company or a liquidation or
dissolution of the Company.
Section 10. Effective Date of the Plan
--------------------------
The Plan shall be effective as of the Distribution Date.
Section 11. Term of the Plan
----------------
No Award shall be granted under the Plan after January 31, 2009, but unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date.
<PAGE>
EXHIBIT 10.15
ARCH SUPPLEMENTAL CONTRIBUTING EMPLOYEE OWNERSHIP PLAN
Arch Chemicals, Inc. ("Arch") hereby establishes a Supplemental
Contributing Employee Ownership Plan (the "Plan" or "SCEOP"), effective February
8, 1999 or, if later, the effective date of the spin-off of Arch from Olin
Corporation (the "Effective Date"). The Plan is intended to be an unfunded,
nonqualified deferred compensation plan for certain management and highly
compensated employees, as described in Section 201(2) and 301(a)(3) of the
Employee Retirement Income Security Act ("ERISA").
Arch is a participating employer in the multiple employer plan known as the
Olin Corporation Contributing Employee Ownership Plan (as from time to time
amended, the "CEOP"). The purpose of this Plan is to permit certain executive
employees of Arch, whose contributions to the CEOP are limited under Sections
401(a)(17) of the Internal Revenue Code of 1986 and the regulations promulgated
thereunder (the "Code"), with certain supplemental benefits to make up for such
Code-imposed limitations.
ARTICLE I
DEFINITIONS AND GENERAL PROVISIONS
1.1 Except as otherwise provided herein, the terms defined in the CEOP are
used herein with the meanings ascribed to them in the CEOP. In addition, when
used herein, the following definitions shall apply:
(a) "Arch Phantom Units" means phantom units of the CEOP's Arch Common
Stock Fund credited under the SCEOP, such units deemed to consist of both
Arch Common Stock and cash.
(b) "CEOP Percentage" means, with respect to a SCEOP Participant, the
annual percentage by which such Participant reduces his Maximum Eligible
Compensation on either a before-tax or after-tax basis in calculating
Contributions made to the CEOP; provided, however, that, if a Participant's
CEOP percentage exceeds six percent (6%), the Participant may elect, for
purposes of this Plan, to limit the CEOP percentage used under this Plan to
six percent (6%).
(c) "Company" or "Arch" means Arch Chemicals, Inc. and its affiliated
companies.
(d) "Compensation" has the same meaning as under the CEOP, except that
it is not subject to the maximum dollar limitation on compensation taken
into account for purposes of the CEOP under Section 401(a)(17) of the Code.
(e) "Distribution Date" has the same meaning as that specified in the
Distribution Agreement by and between Olin Corporation and Arch Chemicals,
Inc.
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(f) "Dividend Equivalents" means (i) with respect to the Arch Phantom
Units held in a SCEOP Account of an Arch Participant, the dollar amount of
regular or special dividends actually paid in cash from time to time on the
actual number of shares of Arch Common Stock reflected in such Arch
Phantom Units; (ii) with respect to the Olin Phantom Units held in a SCEOP
Account of an Arch Participant, the dollar amount of regular or special
dividends actually paid in cash from time to time on the actual number of
shares of Olin Common Stock reflected in such Olin Phantom Units; and (iii)
with respect to Primex Phantom Units held in a SCEOP Account of an Arch
Participant, the dollar amount of regular or special dividends actually
paid in cash from time to time on the actual number of shares of Primex
Technologies, Inc. Common Stock ("Primex Common Stock") reflected in such
Primex Phantom Units. Any Dividend Equivalents shall be deemed reinvested
solely in Arch Phantom Units.
(g) "Excess Company Matching Contribution" means, with respect to a
SCEOP Participant for a Plan Year, an amount derived by multiplying (i)
the percentage used in calculating the Company Matching Contribution (in
excess of $25 per month) (as of the date hereof, 50%) under the CEOP, as
such percentage changes from time to time, by (ii) the annual SCEOP
Participant Contribution for that Participant; provided that, if the
participant's CEOP Percentage exceeds six percent (6%), the SCEOP
Participant Contribution will be calculated using six percent (6%) for the
CEOP Percentage when calculating the Excess Company Matching Contribution.
(h) "Excess Performance Contribution" means with respect to a SCEOP
Participant for a Plan Year, the amount derived by multiplying (i) the
percentage used in calculating the Performance Matching Contribution under
the formula contained in the CEOP that is applicable to an Arch Participant
for that year, if any, by (ii) the SCEOP Participant Contribution of that
Participant for such year; provided that if such Participant's CEOP
Percentage exceeds six percent (6%), the SCEOP Participant Contribution
will be calculated using six percent (6%) for the CEOP Percentage when
calculating the Excess Performance Contribution.
(i) "Maximum Eligible Compensation" means the maximum amount of
Compensation under Section 401(a)(17) of the Code from which a Participant
is permitted to make Contributions to the CEOP, as such maximum amount is
adjusted from time to time under the Code.
(j) "Olin Phantom Units" means phantom units of the CEOP's Olin Common
Stock Fund credited under the SCEOP, such units deemed to consist of both
Olin Stock and cash.
(k) "Plan Year" means a twelve-month period ending on December 31.
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<PAGE>
(l) "Primex Phantom Units" means phantom units of the CEOP's Primex
Stock Fund credited under the SCEOP, such units deemed to consist of both
Primex Stock and cash.
(m) "SCEOP Participant" or "Arch Participant" means an Arch employee
whose contributions to the CEOP are limited as a result of the imposition
of the limitations set forth in the Sections 401(a)(17) of the Code and who
has filed an election to participate in the SCEOP with the Committee.
(n) "SCEOP Account" for a SCEOP Participant means the Account
established under the SCEOP for such Participant holding Arch Phantom
Units, Olin Phantom Units and/or Primex Phantom Units, and/or any other
phantom securities or units created herein.
(o) "SCEOP Participant Contribution" with respect to a SCEOP
Participant shall mean the annual amount by which the SCEOP Participant has
elected to reduce his Compensation under this Plan, such amount being equal
to the CEOP Percentage multiplied by the difference between (i) such
Participant's Compensation and (ii) his Maximum Eligible Compensation.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Any employee of the Company who
(a) is a management employee;
(b) is a "highly compensated employee" within the meaning of Code
Section 414(q);
(c) is participating in the CEOP; and
(d) whose Compensation or rate of pay is in excess of the limitation
contained in Section 401(a)(17) of the Code
shall be eligible to participate in this Plan (an "Eligible Employee").
2.2 Each Eligible Employee who was enrolled in the Olin Supplemental
Contributing Employee Ownership Plan ("Olin SCEOP") as of the Distribution Date
shall automatically become a Participant in this Plan as of its Effective Date,
and the salary reduction agreement in effect as of such date shall be carried
over and be effective with respect to this Plan for the remainder of the
calendar year. Each other Eligible Employee wishing to participate in this Plan
must execute and file a salary reduction agreement in a form acceptable to the
Plan Administrator. Initially, such agreement to reduce Compensation shall be
filed within thirty (30)
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<PAGE>
days following such individual becoming an Eligible Employee. An Eligible
Employee not filing such an agreement within the thirty (30) day period referred
to in the preceding sentence must thereafter file such agreement to reduce
Compensation by December 1 of the calendar year prior to the beginning of the
Plan Year for which it will be effective and prior to the calendar year in which
such Compensation would otherwise be earned. Once filed, agreements to reduce
Compensation shall remain in effect for subsequent Plan Years unless revoked by
the Participant in writing in a form acceptable to the Plan Administrator.
2.3 Any election to reduce salary shall be irrevocable for the Plan Year
to which it relates, provided, however, that during a Plan Year a Participant
may elect to cease all salary reductions for the remainder of the Plan Year, in
which case, no subsequent election shall be effective until the beginning of the
next Plan Year.
2.4 No salary reduction election shall be given effect under this Plan
until the Participant has contributed to the CEOP the maximum amount permitted
by the CEOP and by applicable law for the Plan Year to which such salary
reduction election relates.
ARTICLE III
CONTRIBUTIONS AND ACCOUNTS
3.1 Each Eligible Employee who, immediately prior to the Distribution
Date, was a participant in the Olin SCEOP shall be credited with an opening
Account Balance under this Plan equal to the same number of Arch Phantom Units,
Olin Phantom Units and Primex Phantom Units (if any) as were credited to his
account under the terms of the Olin SCEOP as of the Distribution Date. Any
Eligible Employee whose employment is transferred to Arch after its spin-off
from Olin, but before February 8, 2000, shall have his or her Olin SCEOP account
balances transferred to this Plan and his or her opening Account Balance shall
be determined based upon the number of Olin Phantom Units, Primex Phantom Units,
and Arch Phantom Units credited to his Olin SCEOP account as of the date he
becomes employed by Arch. No additional Olin Phantom Units or Primex Phantom
Units may be acquired under this Plan, whether through the crediting of Dividend
Equivalents, through contributions to the Plan, or through deemed transfers of
sub-accounts under the Plan. Notwithstanding this Section 3.1, no Eligible
Employee who, immediately prior to his employment by Arch, had an account
balance in the Olin SCEOP shall be credited with an initial Account Balance
under this Plan attributable to his participation in the Olin SCEOP until such
employee has released Olin Corporation and its affiliates, and the Olin SCEOP,
from any liability, or claim for benefits, with respect to the employee's
participation in the Olin SCEOP.
3.2 In conjunction with establishing this Plan, Arch hereby assumes the
liabilities of Olin for the provision of benefits to participants who,
immediately prior to the Distribution Date, were participants in the Olin SCEOP
and who, on and after the Effective Date and before February 8, 2000 transfer
to, and become employed by Arch or its affiliated companies ("Arch Employees").
In consideration of such assumption of liability, Olin has transferred, as of
the
4
<PAGE>
Effective Date, to Arch (or to a rabbi trust established by Arch) the reserves
(including any associated assets held in a rabbi trust or similar vehicle)
reflecting the value of the accrued liabilities being transferred, determined in
accordance with Olin's established policies and accounting methods, uniformly
applied for calculating liabilities under its non-qualified plans. In the event
that Olin or its affiliates re-employs any Arch Employee before February 8,
2000, Olin shall assume the liability under this Plan associated with such re-
employed individual and re-enrolling such individual in the Olin SCEOP to the
extent he or she is then eligible, provided the employee releases Arch and this
Plan from such liability.
3.3 Each SCEOP Participant who so elects for a Plan Year shall defer SCEOP
Participant Contributions on a pre-tax basis. For each SCEOP Participant, a
SCEOP Account will be established. The Account will contain sub-accounts for
each type of contribution credited to the SCEOP Account and for each type of
Phantom Unit credited to his Account. For each Plan Year during which a person
is a SCEOP Participant and making deferrals, the Company (or other Participating
Employer) will credit to the SCEOP Account of each SCEOP Participant the number
of Arch Phantom Units equal in value to the sum of (1) the SCEOP Participant
Contribution, plus (2) the Excess Company Matching Contribution, plus (3) the
Excess Performance Contribution, if any. Such crediting shall occur
periodically in accordance with the timing of contributions to the CEOP, in the
case of the SCEOP Participant Contributions and Excess Company Matching
Contributions, and as soon as administratively feasible following the making of
a Performance Matching Contribution under the CEOP, in the case of an Excess
Performance Contribution.
3.4 A Participant's SCEOP Account will also be credited with Dividend
Equivalents from time to time, solely in the form of additional Arch Phantom
Units, when such dividends are paid (i) on the actual number of shares of Arch
Common Stock reflected in the Arch Phantom Units held in such Account, (ii) on
the actual number of shares of Olin Common Stock reflected in the Olin Phantom
Units held in such Account and (iii) on the actual number of shares of Primex
Common Stock reflected in Primex Phantom Units held in such Account.
3.5 For purposes of calculating the number of Arch Phantom Units to be
credited to an Arch Participant's SCEOP Account as a result crediting Dividend
Equivalents or contributions, the SCEOP shall use the Current Market Value for
valuing units in the Arch Common Stock Fund as defined under the CEOP. Phantom
Units will be credited in fractional amounts up to three decimal places. For
purposes of valuing Olin Phantom Units and Primex Phantom Units under this Plan,
the SCEOP shall use the Current Market Value for valuing units in Olin Common
Stock Fund and Primex Common Stock Fund, respectively, as defined in the CEOP.
3.6 SCEOP Participants may either retain their Olin and/or Primex Phantom
Units or may have their entire Olin and/or Primex Phantom Unit Account
Balance(s) deemed transferred at the then Current Market Value and reinvested in
Arch Phantom Units at the then Current Market Value. Once Olin and/or Primex
Phantom Units are deemed transferred and reinvested, a Participant may not re-
direct investment back into Olin Phantom Units or Primex Phantom Units.
5
<PAGE>
No new investment, whether in the form of Company or Participant contributions
or Dividend Equivalents, shall be permitted in Olin Phantom Units or Primex
Phantom Units.
3.7 A Participant shall at all times be fully vested in his SCEOP
Participant Contribution Account Balance, and shall vest in his Excess Company
Matching and Excess Performance Contribution Account Balances in accordance with
the vesting schedule contained in the CEOP. Each Participant shall be deemed
vested in his SCEOP Account Balance to the same extent that he is actually
vested in his CEOP Account Balance. For purposes of determining an Arch
Participant's vested percentage under this SCEOP, such Participant's past
service with Olin shall be recognized to the same extent as if such service had
been rendered with Arch. A Participant shall be fully vested in his SCEOP
Account Balance upon his death, upon his termination of service from the Company
and all affiliates after reaching a retirement date under the CEOP, or upon his
termination of service due to his Permanent Disability as defined in the CEOP.
3.8 In the event that the Compensation Committee of the Board ("the
Committee") determines that any dividend or other distribution,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Arch
Common Stock, Olin Common Stock, Primex Common Stock, or any other securities of
Arch, Olin or Primex, issuance of warrants or other rights to purchase Arch,
Common Stock, Olin Common Stock, Primex Common Stock or other securities of
these companies, or other similar corporate transaction or event occurs that
affects Arch, Olin or Primex Common Stock such that the Committee determines an
adjustment in Phantom Units under the Plan is appropriate in order to prevent
dilution or enlargement of the benefits intended to be made available under this
Plan, then the Committee shall, in such manner as it deems equitable, adjust
Participants' SCEOP Accounts. In the case of a spin-off, split-up, issuance of
an extraordinary stock dividend, or similar transaction, such adjustment, in the
Committee's discretion, may result in creation of phantom shares in a separate
phantom stock fund, reinvestment of such phantom shares in Arch Phantom Units,
and the like. Notwithstanding the foregoing, a Participant to whom Dividend
Equivalents have been allocated shall not be entitled to receive a non-cash
special or extraordinary dividend or distribution unless the Committee expressly
authorizes such receipt.
3.9 Transfers between Arch and Olin. It is contemplated that Plan
---------------------------------
Participants may transfer their employment after the Distribution Date and
before February 8, 2000 from Arch to Olin and vice versa and commence, or
---- -----
resume, participation in the SCEOP of the new employer.
(a) Transfer to Olin From Arch. In the event that a Plan Participant
---------------------------
transfers employment to Olin prior to February 8, 2000, benefit accrual under
this Plan shall cease and Arch shall remain liable for payment of any benefits
accrued under this Plan to the date of transfer. No separation from service
shall be deemed to occur under this Plan permitting a distribution under this
Plan and benefits hereunder shall not commence until the Participant has
terminated his employment with Olin and has otherwise qualified for benefits
hereunder. Arch shall continue to
6
<PAGE>
recognize a Participant's service with Olin and its affiliates subsequent to his
transfer to Olin solely for purposes of determining the Participant's vesting
under this Plan.
(b) Transfer from Olin to Arch. In the event that an Olin employee
---------------------------
transfers employment to Arch from Olin prior to February 8, 2000, benefit
accrual under the Olin SCEOP shall cease and Olin shall remain liable for
payment of any benefits accrued under that Plan to the employee's date of
transfer to Arch. Benefits shall not commence under the Olin SCEOP until the
former Olin employee terminates service with Arch and its affiliates and has
otherwise qualified for benefits under the Olin SCEOP. Following such transfer,
Olin shall continue to credit such employee's service with Arch and its
affiliates subsequent to his transfer to Arch solely for purposes of determining
his vesting under the Olin SCEOP.
ARTICLE IV
DISTRIBUTIONS
4.1 No amounts credited to a Participant's SCEOP Account under this Plan
may be withdrawn or distributed prior to the Participant's termination of
employment with the Company and all affiliates thereof, including, but not
limited to any other corporation in the same controlled group with Arch (within
the meaning of Section 414(b), (c) and (m) of the Code). Amounts credited to a
Participant's Account under this Plan may not be loaned to such Participant. A
Participant's SCEOP Account will be distributed in the form elected under
Section 4.2 upon the earliest to occur of the Participant's death, termination
of service due to Permanent Disability, retirement or termination of active
service from the Company and all affiliates. In the event that an Arch Employee
is re-employed by Olin prior to February 8, 2000, and again participates in the
Olin SCEOP, no separation from service shall be deemed to occur permitting a
distribution of benefits from this Plan.
4.2 Upon becoming a SCEOP Participant, such SCEOP Participant shall elect
to receive the value of his SCEOP Account Balance either (i) in a lump sum, or
(ii) in annual installments for a period not to exceed fifteen (15) years,
commencing on the earliest to occur of the Participant's death, retirement,
termination of service due to Permanent Disability or termination of active
employment from Arch and its affiliated companies. A SCEOP Participant may
change such election upon written notice to the Plan Administrator, provided no
such change shall be given effect if the SCEOP Participant becomes eligible for
a distribution from this Plan within twelve (12) months of such change.
4.3 Installment payments shall commence to be paid as soon as
administratively feasible and generally effective as of the first day of the
month following a Participant's termination of active service. The Company may
delay the payment of any benefit owed hereunder in order to complete the orderly
processing of such benefit.
4.4 Distributions to a SCEOP Participant of his SCEOP Account Balance
shall be made only in the form of cash. Except as provided in Section 7.3, the
value of the amount of any
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<PAGE>
distribution shall be based on the Current Market Value of units in the Arch
Common Stock Fund and, if applicable, the Olin Common Stock Fund and Primex
Common Stock Fund, as calculated in accordance with the CEOP at the close of
business on the last business day immediately preceding the date on which the
distribution is to be effective.
4.5 Any benefit payable under this Plan on account of the death of a
Participant shall be paid to the Participant's beneficiary as designated or
determined under the terms of the CEOP.
ARTICLE V
LIABILITY FOR PAYMENT
5.1 The Company (and each other Participating Employer) shall pay the
benefits provided hereunder with respect to SCEOP Participants who are employed
or were formerly employed by it during their participation in the Plan. In the
case of a SCEOP Participant who was employed by more than one Participating
Employer, the Committee shall allocate the cost of such benefits among such
Participating Employers in such manner as it deems equitable. The obligations
of the Participating Employer hereunder shall not be funded in any manner. The
rights of any person to receive benefits under this Plan are limited to those of
a general creditor of the Participating Employer liable for such benefits
hereunder.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.1 The Pension Administration and Review Committee shall be the named
Plan Administrator of this Plan. The Plan Administrator shall administer the
Plan for the exclusive benefit of the Participants (and their Beneficiaries), in
accordance with the terms of the Plan. The Plan Administrator shall have the
absolute discretion and power to determine all questions arising in connection
with the administration, interpretation and application of the Plan. Any such
determination by the Plan Administrator shall be conclusive and binding upon all
persons. The Plan Administrator may correct any defect or reconcile any
inconsistency in such manner and to such extent as shall be deemed necessary or
advisable to carry out the purposes of the Plan; provided, however, that such
interpretation or construction shall be done in a non-discriminatory manner and
shall be consistent with the intent of the Plan, the Code and ERISA.
The Plan Administrator shall:
(a) determine all questions relating to eligibility of Employees to
participate or continue participation in the Plan;
(b) maintain all necessary records for the administration of the
Plan;
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(c) interpret the provisions of the Plan and make and publish such
rules for regulation of the Plan as are consistent with the terms hereof;
(d) assist any Participant regarding his rights, benefits or
elections available under the Plan; and
(e) communicate to Employees, Participants and their Beneficiaries
concerning the provisions of the Plan.
The Plan Administrator shall keep a record of all actions taken and shall
keep such other books of account, records and other information that may be
necessary for proper administration of the Plan. The Plan Administrator shall
file and distribute all reports that may be required by the Internal Revenue
Service, Department of Labor or others, as required by law. The Plan
Administrator may appoint accountants, actuaries, counsel, advisors and other
persons that it deems necessary or desirable in connection with the
administration of the Plan.
6.2 Except as otherwise provided herein, all provisions set forth in the
CEOP with respect to the administration of that plan shall also be applicable
with respect to this Plan. For purposes of this Plan, the Company shall be
entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Company or by Olin Corporation with
respect to the CEOP.
ARTICLE VII
AMENDMENT, TERMINATION AND CHANGE OF CONTROL
7.1 The Company reserves the right to amend or terminate this Plan at any
time, by action of the Company's Board of Directors, the Compensation Committee
of the Board, or such other committee from time to time designated by the Board,
and without the consent of any employee or other person.
7.2 Notwithstanding Section 7.1 above, no amendment or termination of the
Plan shall directly or indirectly reduce the balance to the credit of any
Participant hereunder as of the effective date of such amendment or termination.
Upon termination of the Plan, no additional amounts shall be credited under the
terms of the Plan. Notwithstanding the termination of this Plan, amounts
credited hereunder shall not be distributed to Participants except as provided
in Article IV, above.
7.3 Upon a Change of Control (as defined below), the Plan shall terminate
and the Account Balance of a SCEOP Participant shall be paid in cash to
such Participant as promptly as practicable, but in no event later than 30
days following the Change in Control. The spin-off of Arch Chemicals from
Olin Corporation shall not be deemed to be a change of control entitling
any Participant herein to benefits under this Plan or the
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prior Olin Supplemental Contributing Ownership Plan. For purposes of the
Plan, a "Change in Control" of the Company shall have occurred in the event
that
(i) the Company ceases to be, directly or indirectly, owned of record
by at least 1,000 stockholders;
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Act"), other than the Company, a majority-
owned subsidiary of the Company or an employee benefit plan of the
Company or such subsidiary (or such plan's related trust), become(s)
the "beneficial owner" (as defined in Rule 13d-3 of the Act) of 20% or
more of the then outstanding voting stock of the Company; or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Company's Board of
Directors (together with any new Director whose election by the
Company's Board or whose nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the
Directors of the Company then still in office who either were
Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Directors then in office; or
(iv) all or substantially all of the business of the Company is
disposed of pursuant to a merger, consolidation or other transaction
in which the Company is not the surviving corporation or the Company
combines with another company and is the surviving corporation (unless
the shareholders of the Company immediately following such merger,
consolidation, combination, or other transaction beneficially own,
directly or indirectly, more than 50% of the aggregate voting stock or
other ownership interests of (x) the entities, if any, that succeed to
the business of the Company or (y) the combined company);.or
(v) the shareholders of the Company approve a sale of all or
substantially all of the assets of the Company or a liquidation or
dissolution of the Company
For purposes of computing the payout under this Section 7.3, the cash value of
the SCEOP Account of a Participant shall be determined by:
(i) multiplying the actual number of shares of Arch Common Stock reflected
in a Participant's Arch Phantom Units by the greater of (a) the highest
Current Market Value of the Common Stock (as defined in the CEOP Plan) on
any date within the period commencing thirty (30) days prior to such Change
in Control and ending on the date of the Change in Control, or (b) if the
Change in Control occurs as a result of a tender or
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exchange offer or consummation of a corporate transaction, then the highest
price paid per share of Common Stock pursuant thereto;
(ii) adding any cash portion attributable to a Participant's Arch Phantom
Units held in his SCEOP Account; then
(iii) adding the then Current Market Value of that portion of a
Participant's SCEOP Account which is deemed invested in Olin Phantom Units
and Primex Phantom Units (and any other phantom units or stock fund
established in the SCEOP).
ARTICLE VIII
GENERAL PROVISIONS
8.1 The Plan at all times shall be entirely unfunded and no provision
shall at any time be made with respect to segregating any assets of the Company
for payment of any distribution hereunder. The right of a Participant or his
designated Beneficiary to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Company, and neither the Participant nor
a designated Beneficiary shall have any rights in or against any specific assets
of the Company. All amounts credited to the SCEOP Accounts of Participants
shall constitute general assets of the Company and may be disposed of by the
Company at such time and for such purposes as it may deem appropriate.
8.2 Nothing contained in the Plan shall constitute a guaranty by the
Company or any other person or entity that the assets of the Company will be
sufficient to pay any benefit hereunder.
8.3 No Participant shall have any right to receive a distribution of
contributions made under the Plan except in accordance with the terms of the
Plan. Establishment of the Plan shall not be construed to give any Participant
the right to be retained in the service of the Company.
8.4 No interest of any person or entity in, or right to receive a
distribution under, the Plan shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment or other alienation or encumbrance
of any kind; nor may such interest or right to receive a distribution be taken,
either voluntarily or involuntarily for the satisfaction of the debts of, or
other obligations or claims against, such person or entity, including claims for
alimony, support, separate maintenance and claims in bankruptcy proceedings.
8.5 The Plan shall be construed and administered under the laws of the
State of Connecticut, to the extent not preempted by federal law.
8.6 If any person entitled to a distribution under the Plan is deemed by
the Company to be incapable of personally receiving and giving a valid receipt
for such payment, then, unless and until claim therefor shall have been made by
a duly appointed guardian or other legal representative of such person, the
Company may provide for such payment or any part thereof to
11
<PAGE>
be made to any other person or institution then contributing toward or providing
for the care and maintenance of such person. Any such payment shall be a payment
for the account of such person and a complete discharge of any liability of the
Company and the Plan therefor.
8.7 The Plan shall not be automatically terminated by a transfer or sale
of all or substantially all of the assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other entity,
but the Plan shall be continued after such sale, merger or consolidation only if
and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan. In the event that the Plan is not continued by the
transferee, purchaser or successor entity, then the Plan shall terminate,
subject to the provisions of Section 7.2.
8.8 Each Participant shall keep the Company informed of his current
address and the current address of his designated Beneficiary. The Company
shall not be obligated to search for the whereabouts of any person. If the
location of a Participant is not made known to the Company within three (3)
years after the date on which payment of any or all of the Participant's
Accounts may first be made, payment may be made as though the Participant had
died at the end of the three-year period. If, within one additional year after
such three-year period has elapsed, or, within three years after the actual
death of a Participant, the Company is unable to locate any designated
Beneficiary of the Participant, then the Company shall have no further
obligation to pay any benefit hereunder to such Participant or designated
Beneficiary and such benefit shall be irrevocably forfeited.
8.9 This Plan shall constitute the entire agreement between the Company
and its executives concerning the provision of supplemental CEOP benefits.
8.10 Notwithstanding any of the preceding provisions of the Plan, neither
the Company nor any individual acting as employee or agent of the Company shall
be liable to any Participant, former Participant or other person for any claim,
loss, liability or expense incurred in connection with the Plan.
IN WITNESS WHEREOF, Arch Chemicals, Inc. has caused this Plan to be
executed by its duly authorized officer as of February 8, 1999.
ARCH CHEMICALS, INC.
By: /s/ Mark A. Killian
-------------------------------------
Its Vice President of Human Resources
12
<PAGE>
EXHIBIT 10.16
ARCH SUPPLEMENTARY AND DEFERRAL BENEFIT PENSION PLAN
Article I. The Plan
--------------------
1.1 Establishment of Plan. Arch Chemicals, Inc. (the "Company" or "Arch")
----------------------
hereby establishes a Supplementary and Deferral Benefit Pension Plan for the
benefit of certain salaried employees of Arch and other Employing Companies who
may be eligible to participate in the Plan. The Plan is known as the "Arch
Supplementary and Deferral Benefit Pension Plan" and is effective February 8,
1999 or, if later, the effective date of the spin-off of Arch from Olin
Corporation (the "Effective Date"). For purposes of this Plan, an "Employing
Company" means any company which has adopted this Plan and is included within
the definition of an Employing Company under the terms of the Arch Chemicals
Employees' Pension Plan and any other qualified defined benefit plans maintained
by Arch (collectively, the "Qualified Plans").
1.2 Purpose of Plan. The purpose of this Plan is to provide benefits to
----------------
certain current and former salaried employees of Arch and other Employing
Companies whose benefits under the Qualified Plans ("Qualified Plan Benefits")
are limited (i) by Section 415 of the Internal Revenue Code of 1986, as amended
(the "Code"), (ii) by the limitations on compensation that can be taken into
account in calculating qualified plan benefits under Section 401(a)(17) of the
Code, and (iii) by the inability to include in compensation for Qualified Plan
Benefits any salary and awards of management incentive compensation that have
been deferred by Eligible Employees into non-qualified plans or arrangements.
These limitations are collectively referred to herein as "Benefit Limitations".
This Plan is intended to provide such employees and their Beneficiaries with
benefits ("Supplemental Pension Benefits") equal to the difference between what
their Qualified Plan Benefits would be absent the Benefit Limitations, and what
their Qualified Plan Benefits would be with the imposition of the Benefit
Limitations.
1.3 Nature of Plan. This Plan is divisible into two components: that
---------------
portion which qualify for the exemption from the Employee Retirement Income
Security Act ("ERISA") as an "excess benefit plan", and that portion which
provides for benefits in excess of applicable compensation limits, and is
intended to be a supplemental executive retirement plan for management and
highly compensated employees.
Article II. Eligibility
------------------------
2.1 Any salaried Arch Employee who is eligible to receive a Qualified Plan
Benefit from the Company or an Employing Company, the amount of which is reduced
by reason of the application of a Benefit Limitation (as previously defined)
shall be a Participant in this Plan and be eligible to receive a Supplemental
Pension Benefit as provided in this Plan. For purposes of this Plan, an "Arch
Employee" includes (i) any employee who is defined as an Arch Employee within
the meaning of the Employee Benefits Allocation Agreement dated as of February
8, 1999 by and between Arch and Olin Corporation ("Olin"), as well as (ii) any
salaried employee hired by Arch after the Effective Date of this Plan.
<PAGE>
For purposes of this Plan, the term "Distribution Date" has the same meaning as
that specified in the Distribution Agreement dated February 1, 1999 by and
between Olin and Arch.
2.2 Assumption of Prior Olin Plan Liabilities for Arch Employees;
-------------------------------------------------------------
Transfers of Reserves. In conjunction with establishing this Plan, Arch. hereby
- ----------------------
assumes the liabilities of Olin for the provision of benefits to participants
who, immediately prior to the Distribution Date (as previously defined) were
participants in either or both of the Olin Supplementary Pension Plan or the
Olin Deferral Benefit Pension Plan as in effect on the Distribution Date
(collectively, the "Olin Supplementary and Deferral Benefit Plan") and who, on
and after the Effective Date and before February 8, 2000 transfer to, and become
employed by Arch or its affiliated companies. In consideration of such
assumption of liability, Olin has transferred, as of the Effective Date, to Arch
(or to a rabbi trust established by Arch) the reserves (including any assets
held in a rabbi trust or similar vehicle) reflecting the value of the accrued
liabilities being transferred, determined in accordance with Olin's established
policies and accounting methods, uniformly applied for calculating liabilities
under its non-qualified plans. In the event that Olin or its affiliates at any
time re-employs any Arch Employee, Olin shall assume the liability under this
Plan associated with such re-employed individual and re-enroll such individual
in the Olin Supplementary and Deferral Benefit Plan to the extent he or she is
then eligible, provided that such employee releases Arch and this Plan from such
liability.
Article III. Calculation of Benefits.
-------------------------------------
3.1 Amount of Benefit. The Supplemental Pension Benefit payable to a
------------------
Participant retiring on or after his Normal Retirement Date shall be calculated
in the form of a single life annuity, commencing at the Participant's Normal
Retirement Date (as defined in the Qualified Plans) or, if later, his actual
retirement date and shall be a monthly amount equal to the difference between
(a) and (b) below:
(a) the monthly amount of the Qualified Plan Benefit to which the
Participant would have been entitled had such benefit been calculated (i)
including non-qualified deferred payments of regular salary and deferred
awards under any applicable management incentive plan, and (ii) without
regard to the Benefit Limitations imposed by Sections 415 and 401(a)(17) of
the Code; and
(b) the monthly amount of the Qualified Plan Benefit actually payable to
the Participant.
The amounts described in (a) shall be calculated as of the date that the
Participant terminates service with the Company and all other Employing
Companies, in the form of a single life annuity payable over the lifetime of the
Participant commencing at his Normal Retirement Date (or, if later, his actual
retirement date).
2
<PAGE>
For purposes of determining the amount and entitlement to the benefits described
in (a) and (b) above, a Participant shall credited with the service,
compensation, and accrued benefit that the Participant was credited with under
the Olin Supplementary and Deferral Benefit Plan, and Olin qualified defined
benefit pension plan(s) as of the Distribution Date, provided however that such
crediting shall not occur under this Plan until such employee has released Olin
and its affiliates, and the Olin Supplementary and Deferral Benefit Plan, from
any liability, or claim for benefits, with respect to the Employee's
participation in said plans.
3.2 Transfers between Arch and Olin. It is contemplated that Plan
---------------------------------
Participants may transfer their employment after the Distribution Date and
before February 8, 2000 from Arch to Olin and vice versa and commence, or
---- -----
resume, participation in the Supplementary and Deferral Benefit Pension Plan(s)
of the new employer.
(a) Transfer to Olin From Arch. In the event that a Plan Participant
---------------------------
transfers employment to Olin prior to February 8, 2000, benefit accrual under
this Plan shall cease and Arch shall remain liable for payment of any benefits
accrued under this Plan to the date of transfer. No separation from service
shall be deemed to occur under this Plan permitting a distribution under this
Plan and benefits hereunder shall not commence until the Participant has
terminated his employment with Olin and has otherwise qualified for benefits
hereunder. When commenced, benefits payable hereunder shall be based upon the
Participants service with Arch (and, if applicable, any past service with, and
compensation from, Olin and its affiliates recognized as of the Distribution
Date), provided, however that Arch shall continue to recognize a Participant's
service with Olin and its affiliates subsequent to his transfer to Olin solely
for purposes of determining the Participant's vesting and attainment of
retirement dates under this Plan.
(b) Transfer from Olin to Arch. In the event that an Olin employee
---------------------------
transfers employment to Arch from Olin prior to February 8, 2000, benefit
accrual under the Olin Supplementary and Deferral Benefit Plan shall cease and
Olin shall remain liable for payment of any benefits accrued under those Plans
to the employee's date of transfer to Arch. Benefits shall not commence under
the Olin Supplementary and Deferral Benefit Plan until the former Olin employee
terminates service with Arch and its affiliates and has otherwise qualified for
benefits under the Olin Supplementary and Deferral Benefit Plan. Following such
transfer, Olin shall continue to credit such employee's service with Arch and
its affiliates subsequent to his transfer to Arch solely for purposes of
determining his vesting and attainment of retirement dates under the Olin
Supplementary and Deferral Benefit Plan. In computing the benefits, and
determining attainment of retirement ages under this Plan, Arch shall recognize
the compensation received, and service rendered by such Participant while
employed by Olin and its affiliates up to the Participant's date of transfer to
Arch. When benefits commence under this Pan, they shall be offset by the
benefit that would be payable to the Participant from the Olin Supplementary and
Deferral Benefit Plan, as of the date benefits commence hereunder, regardless of
when such benefit under the Olin Supplementary and Deferral Benefit Plan
actually commences.
Article IV. Payment of Benefits
--------------------------------
3
<PAGE>
4.1. Benefits commencing on or after Reaching Early Retirement Date.
---------------------------------------------------------------
(a) A Participant may retire from active service with Arch and all
Employing Companies and commence benefits under this Plan at any time after
reaching his fifty-fifth (55th) birthday (his "Early Retirement Date"),
provided, however, that no election as to the commencement date of benefits
under this Plan, including any election under Section 4.4, shall be given effect
if not made at least twelve (12) full months prior to the Participant's actual
retirement. A Participant may commence benefits under this Plan regardless of
the date on which he actually commences benefits under the Arch Chemicals
Employees' Pension Plan or other Qualified Plan.
(b) For purposes of determining whether a Participant has reached his
fifty-fifth (55th) birthday and, thus, is eligible to commence benefits under
this Section 4.1(a) instead of on a deferred vested basis, any Participant who
has completed at least seven (7) Years of Creditable Service (as defined in the
Arch Chemicals Employees' Pension Plan) and who is at least age fifty-two (52),
but less than age fifty-five (55) on the date his service is terminated (without
taking into account any severance period) other than (i) for cause or (ii) as a
result of a voluntary termination, shall be treated as continuing as an eligible
Employee until the date on which the Participant reaches age fifty-five (55). A
Participant in this Plan shall be credited with his prior service with Olin and
its affiliates, as well as his service with Arch, in enabling the Participant to
attain his early retirement age under this Plan. A Participant may not commence
benefits hereunder until he actually reaches age fifty-five (55).
(c) With respect to a Participant retiring from active service on or after
reaching his Early Retirement Date, the Plan Administrator will calculate the
Participant's retirement benefit then payable from all Arch non-qualified and
Qualified Plans using, in the case of the Qualified Plan Benefit, the Benefit
Limitations then in effect and based upon the benefit commencement date elected
by the Participant for commencement of his qualified and non-qualified plan
benefits. In the case of a Participant who elects to defer commencement of his
Qualified Plan benefits, the Arch non-qualified pension plans, including this
Plan, shall provide for the payment of the Participant's estimated Qualified
Plan benefit until such time as the Participant actually commences his qualified
plan benefit, at which time the amount of the Participant's non-qualified plan
benefit, including the benefits payable from this Plan, shall be reduced dollar
for dollar, but not below $0, by the amount of the Qualified Plan benefit
ultimately payable to the Participant, based upon the Benefit Limitations in
effect when the Participant actually commences receipt of such Qualified Plan
benefit.
4.2 Deferred Vested Employees. Any Participant who terminates active
-------------------------
service with Arch and all Employing Companies prior to having reached age fifty-
five (55), may commence benefits under this Plan at any time after having
reached age fifty-five (55); provided, however, that his benefit hereunder shall
subject to the actuarial reductions that would be applicable under the Arch
Chemicals Employees' Pension Plan. In the event that an Arch Employee is re-
employed by Olin prior to February 8, 2000, and again participates in the Olin
Supplementary and Deferral Benefit Plan, no separation from service shall be
deemed to occur permitting a distribution of benefits under this, or any other,
provision of this Plan.
4
<PAGE>
4.3 Payment of Regular Monthly Benefits along with Qualified Plan
-------------------------------------------------------------
Benefits.
--------
(a) In the event that the Participant (i) does not elect to establish an
employee-grantor trust in accordance with Section 4.4(a), (ii) does not elect to
receive Accelerated Benefits in accordance with Section 4.4(a), and (iii) elects
to commence his benefits under this Plan at the same time that he commences his
Qualified Plan Benefit, then the Supplemental Pension Benefit payable hereunder
shall be paid commencing at the same time and in the same form as that in which
the Qualified Plan Benefit is payable to the Participant. If the Participant
elects an actuarially equivalent form of benefit payment with respect to his
Qualified Plan Benefit, that same form of payment shall apply to payment of his
Supplemental Pension Benefit. Any election to receive regular monthly benefits
under this Section 4.3 must be made at least one full year prior to the
Participant's Accelerated Benefit Commencement Date.
(b) An election by the Participant with respect to the timing and form of
this Supplemental Pension Benefit shall be effective only if consented to by the
Plan Administrator. If not so approved, then the timing and form of the
Supplemental Pension Benefit shall be selected by the Plan Administrator in its
sole discretion.
(c) A Supplemental Pension Benefit that is payable in any form other than
a single life annuity, or which commences at any time prior to the Participant's
Normal Retirement Date shall be calculated using the same conversion factors and
actuarial adjustments as those specified in the Qualified Plan as of the date
that such benefit is being determined.
4.4 Choice of Employee-grantor Trust or Payment of Accelerated Benefits.
--------------------------------------------------------------------
(a) As of October 31 of the calendar year following the year in which a
Participant meets the Minimum Benefit Accumulation threshold provided for in
Section 4.5, the Actuarial Present Value (determined as hereinafter provided) of
the after-tax amount of a Participant's Supplemental Pension Benefit shall be
deposited in an employee-grantor trust established by the Participant unless, at
least one full year prior to the funding of such employee-grantor trust, the
Participant shall instead have elected to receive "Accelerated Benefits" as
hereinafter provided.
(i) If a Participant elects to receive Accelerated Benefits, then the
Actuarial Present Value of such Benefits shall be paid, at the election of
the Compensation Committee (or its designee), either in a single sum or in
up to three (3) annual installments (such single sum or annual installments
being referred to in this Plan as "Accelerated Benefits").
(ii) The Participant's Accelerated Benefits shall commence on his
Accelerated Benefit Commencement Date, which shall be twelve full months
following a Participant's actual retirement date at age fifty-five (55) or
later (the "Participant's "Accelerated Benefit Commencement Date"). For
purposes of determining whether a Participant has reached his fifty-fifth
(55th) birthday and, thus, is eligible to commence benefits under Section
4.1(a) instead of on a deferred vested basis under Section 4.2, Section
4.1(b) shall apply.
5
<PAGE>
(b) In the event that an actively employed Participant elects not to
establish an employee-grantor trust, but instead to receive Accelerated
Benefits, regular monthly benefits shall commence to be paid upon such
Participant's actual retirement in accordance with Section 4.1 until such
Participant reaches his Accelerated Benefit Commencement Date, at which time
Accelerated Benefits shall be paid in the form and manner determined by the
Compensation Committee (or its designee), either in a single sum, in up to three
(3) annual installments, or in a combination of annuity payments and either a
single sum or annual installments
(c) In lieu of funding an employee-grantor trust or receiving Accelerated
Benefits, the Participant may elect, at least one full year prior to such
Accelerated Benefit Commencement Date, to receive benefit payments in an annuity
for life in accordance with Section 4.1 of this Plan.
4.5 Assumptions used for Determining Amount to be contributed to Employee-
---------------------------------------------------------------------
grantor Trust; Threshold for Accelerated Benefits.
--------------------------------------------------
(a) Actuarial Assumptions for Employee-Grantor Trust. In determining the
------------------------------------------------
Actuarial Present Value of the Participant's Plan benefit to be used for
purposes of funding an employee-grantor trust, the benefit shall be determined
(i) as of the close of the Plan Year (i.e., December 31) prior to
the year in which the employee grantor trust is being funded;
(ii) using the Code Section 415 limits and 401(a)(17) limits then
currently in effect as of the date on which the actuarial present
value is being determined o, alternatively, in the discretion of the
Plan Administrator, using projected limits, determined based upon
reasonable assumptions concerning cost-of-living indices;
(iii) using an annuity purchase rate based upon a discount rate equal
to the rate for a zero coupon Treasury strip (determined approximately
at the time of the deposit to the employee-grantor trust) with a
maturity that approximates the Participant's life expectancy
determined as of the date the payment to the trust is scheduled to be
made; and
(iv) assuming that the benefit commences under this Plan
(a) on the Participant's 65th birthday, if the Participant
terminates service (or is treated as terminating service)
prior to age 55;
(b) on the Participant's 62nd birthday, if the Participant
terminates service on or after reaching age 55 and before
reaching age 62; and
(c) on the Participant's 65th birthday, if the Participant
terminates service on or after reaching age 62.
6
<PAGE>
(b) Actuarial Assumptions for Determining Accelerated Benefits. In
----------------------------------------------------------
determining the Actuarial Present Value of the Participant's Accelerated
Benefit, the benefit shall be determined
(i) as of the close of the Participant's retirement or termination of
service; and
(ii) using an annuity purchase rate based upon a discount rate equal
to the rate for a zero coupon Treasury strip (determined approximately
at the time that Accelerated Benefits are scheduled to commence) with
a maturity that approximates the Participant's life expectancy
determined as of the date the payment is scheduled to be made.
(c) Minimum Benefit Accumulation Threshold. No Accelerated Benefits shall
---------------------------------------
commence to be paid, and no Participant shall be given the opportunity to
fund an employee-grantor trust, until the Participant has accumulated
benefits under this Plan, and the Arch Senior Executive Pension Plan which,
in the aggregate, have an actuarial present value of at least One Hundred
Thousand Dollars ($100,000.00).
4.6 Death Benefits.
---------------
(a) The Beneficiary of a Participant who dies after commencing regular
-----
monthly benefits under Section 4.1 of this Plan shall receive a death benefit
under this Plan only if the form selected by, or in force with respect to, the
Participant under the Qualified Plan provides for a death benefit. For purposes
of this Plan, a Participant's Beneficiary shall be the Beneficiary designated to
receive death benefits under the Qualified Plan.
(b) The Beneficiary of a Participant who dies after having elected to
receive Accelerated Benefits, but who as of the date of his death has not
received the entire value of his Accelerated Benefits, shall receive the
remainder of any Accelerated Benefits not yet paid in the form of payment in
effect with respect to the Participant.
(c) If a Participant dies prior to commencement of his Qualified Plan
Benefits under circumstances in which a pre-retirement survivor annuity is
payable under the Qualified Plan, then a supplemental surviving Spouse benefit
shall be payable under this Plan in a monthly amount that shall be equal to the
difference between
(i) the monthly amount of the Qualified pre-retirement survivor
benefit to which the surviving Spouse would have been entitled under
the Qualified Plan had such benefit been calculated (i) including non-
qualified deferred payments of regular salary and deferred awards
under the management incentive plan, and (ii) without regard to the
Benefit Limitations imposed by Sections 415 and 401(a)(17) of the
Code; and
7
<PAGE>
(ii) the monthly amount of the Qualified pre-retirement survivor
benefit that is actually payable to the surviving Spouse.
(d) For purposes of this Plan, the term "Spouse" shall mean the person to
whom a Participant is validly married at the date of his death, as evidenced by
a marriage certificate issued in accordance with state law; provided however,
that (i) if a Participant's Spouse at his or her death was not the Participant's
Spouse at least 12 months prior to the Participant's death, no Surviving
Spouse's retirement allowance shall be paid, and (ii) common law marriages shall
not be recognized hereunder.
4.7 Benefit Upon a Change of Control.
--------------------------------
(a) Lump Sum Payment Upon a Change of Control.
-----------------------------------------
The spin-off of Arch from Olin shall not be deemed to be a change of
control entitling any Participant herein to benefits under this Plan or the Olin
Supplementary and Deferral Benefit Plan. Notwithstanding any other provision of
the Plan, upon a Change in Control as defined in 4.7(c), each Participant
covered by the Plan shall automatically be paid a lump sum amount in cash by the
Company sufficient to purchase an annuity which, together with the monthly
payment, if any, under a Rabbi or other trust arrangement established by the
Company to make payments hereunder in the event of a Change in Control and/or
pursuant to any other annuity purchased by the Company for the Participant to
make payments hereunder, shall provide the Participant with the same monthly
after-tax benefit as he would have received under the Plan based on the benefits
accrued to the Participant hereunder as of the date of the Change in Control.
Payment under this Section shall not in and of itself terminate the Plan, but
such payment shall be taken into account in calculating benefits under the Plan
which may otherwise become due the Participant thereafter.
(b) No Divestment Upon a Change of Control. If a Participant is removed
--------------------------------------
from participation in the Plan after a Change of Control has occurred, in no
event shall his years of Benefit Service accrued prior to such removal, and the
benefit accrued prior thereto, be adversely affected.
(c) Change of Control Defined.
-------------------------
For purposes of the Plan, a "Change in Control" of the Company shall have
occurred in the event that
(i) the Company ceases to be, directly or indirectly, owned of record
by at least 1,000 stockholders;
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Act"), other than the
8
<PAGE>
Company, a majority-owned subsidiary of the Company or an employee
benefit plan of the Company or such subsidiary (or such plan's related
trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 of
the Act) of 20% or more of the then outstanding voting stock of the
Company; or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Company's Board of
Directors (together with any new Director whose election by the
Company's Board or whose nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the
Directors of the Company then still in office who either were
Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Directors then in office; or
(iv) all or substantially all of the business of the Company is
disposed of pursuant to a merger, consolidation or other transaction
in which the Company is not the surviving corporation or the Company
combines with another company and is the surviving corporation (unless
the shareholders of the Company immediately following such merger,
consolidation, combination, or other transaction beneficially own,
directly or indirectly, more than 50% of the aggregate voting stock or
other ownership interests of (x) the entities, if any, that succeed to
the business of the Company or (y) the combined company);.or
(v) the shareholders of the Company approve a sale of all or
substantially all of the assets of the Company or a liquidation or
dissolution of the Company.
(d) Arbitration. Any dispute or controversy arising under or in
-----------
connection with the Plan subsequent to a Change in Control shall be settled
exclusively by arbitration in Connecticut, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Article V. Funding
------------------
5.1 Unfunded Plan. This Plan shall be unfunded. All payments under this
-------------
Plan shall be made from the general assets of the Employing Company of the
Participant. No provision shall at any time be made with respect to segregating
any assets of Arch or another Employing Company for payment of benefits
hereunder. No Participant, surviving Spouse or any other Beneficiary shall have
any interest in any particular assets of an Employing Company by reason of the
right to receive a benefit under this Plan and shall have the rights only of a
general unsecured creditor of Employing Company with respect to any rights under
the Plan.
5.2 Liability for Payment. Each Employing Company shall pay the benefits
---------------------
provided under this Plan with respect to Participants who are employed, or were
formerly employed by it during their participation in the Plan. In the case of
a Participant who was employed by more
9
<PAGE>
than one Employing Company, the Committee shall allocate the cost of such
benefits among such Employing Companies in such manner as it deems equitable.
The obligations of the Employing Company shall not be funded in any manner.
5.3 Anti-alienation. No Participant or Beneficiary shall have the right
---------------
to assign, transfer, encumber or otherwise subject to any lien any payment or
any other interest under this Plan, nor shall such payment or interest be
subject to attachment, execution or levy of any kind.
Article VI. Plan Administration
-------------------------------
6.1 Plan Administrator. The Company hereby appoints the Pension
-------------------
Administration and Review Committee as the Plan Administrator (the "Plan
Administrator" or "Committee"). Any person, including, but not limited to, the
directors, shareholders, officers and employees of the Company, shall be
eligible to serve on the Committee. Any person so appointed shall signify his
acceptance by undertaking the duties assigned. Any member of the Committee may
resign by delivering written resignation to the Company. The Company may also
remove any member of the Committee by delivery of a written notice of removal,
which shall take effect upon delivery or on a date specified. Upon resignation
or removal of a Committee member, the Company shall promptly designate in
writing such other person or persons as a successor.
6.2 Allocation and Delegation. The Committee members may allocate the
-------------------------
responsibilities among themselves, and shall notify the Company in writing of
such action and the responsibilities allocated to each member.
6.3 Powers, Duties and Responsibilities. Except for those powers
-----------------------------------
expressly reserved to the Selection Committee, the Plan Administrator shall have
all power to administer the Plan for the exclusive benefit of the Participants
and their Beneficiaries, in accordance with the terms of the Plan. The Plan
Administrator shall have the absolute discretion and power to determine all
questions arising in connection with the administration, interpretation and
application of the Plan. Any such determination by the Plan Administrator shall
be conclusive and binding upon all persons. The Plan Administrator may correct
any defect or reconcile any inconsistency in such manner and to such extent as
shall be deemed necessary or advisable to carry out the purposes of the Plan;
provided, however, that such interpretation or construction shall be done in a
non-discriminatory manner and shall be consistent with the intent of the Plan.
The Plan Administrator shall:
(a) compute the amount and kind of benefits to which any Participant
shall be entitled hereunder;
(b) maintain all necessary records for the administration of the Plan;
(c) interpret the provisions of the Plan and make and publish such
rules for regulation of the Plan as are consistent with the terms hereof;
10
<PAGE>
(d) assist any Participant regarding his rights, benefits or elections
available under the Plan; and
(e) communicate to Participants and their Beneficiaries concerning the
provisions of the Plan.
6.4 Records and Reports. The Plan Administrator shall keep a record of
--------------------
all actions taken and shall keep such other books of account, records and other
information that may be necessary for proper administration of the Plan. The
Plan Administrator shall file and distribute all reports that may be required by
the Internal Revenue Service, Department of Labor or others, as required by law.
6.5 Appointment of Advisors. The Plan Administrator may appoint
------------------------
accountants, actuaries, counsel, advisors and other persons that it deems
necessary or desirable in connection with the administration of the Plan.
6.6 Majority Actions. The Committee shall act by a majority of their
----------------
numbers, but may authorize one or more of them to sign all papers on their
behalf.
6.7 Indemnification of Members. The Company shall indemnify and hold
---------------------------
harmless any member of the Committee and of the Compensation Committee from any
liability incurred in his or her capacity as such for acts which he or she
undertakes in good faith as a member of such Committee.
6.8 Construction of Plan Terms. Except as otherwise expressly provided in
---------------------------
this Plan, all terms and conditions of the Qualified Plan shall be applicable to
a Supplemental and Deferral Pension Benefit payable hereunder.
Article VII. Termination and Amendment
--------------------------------------
7.1 Amendment or Termination. The Company may amend or terminate the Plan
------------------------
at any time, in whole or in part, by action of its Board of Directors, the
Compensation Committee of the Board, or any other duly authorized committee or
officer. Any Employing Company may withdraw from participation in the Plan at
any time. No amendment or termination of the Plan or withdrawal therefrom by an
Employing Company shall adversely affect the vested benefits payable hereunder
to any Participant for service rendered prior to the effective date of such
amendment, termination or withdrawal.
Article VIII. Miscellaneous
----------------------------
8.1 Gender and Number. Whenever any words are used herein in the
-----------------
masculine, feminine or neuter gender, they shall be construed as though they
were also used in another
11
<PAGE>
gender in all cases where such would apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in another form in all cases where they would so apply.
8.2 Action by the Company. Whenever the Company under the terms of this
---------------------
Plan is permitted or required to do or perform any act or thing, it shall be
done and performed by an officer or committee duly authorized by the Board of
Directors of the Company.
8.3 Headings. The headings and subheadings of this Plan have been
---------
inserted for convenience of reference only and shall not be used in the
construction of any of the provisions hereof.
8.4 Uniformity and Non Discrimination. All provisions of this Plan shall
----------------------------------
be interpreted and applied in a uniform nondiscriminatory manner.
8.5 Governing Law. To the extent that state law has not been preempted by
--------------
the provisions of ERISA or any other laws of the United States heretofore or
hereafter enacted, this Plan shall be construed under the laws of the State of
Connecticut.
8.6 Employment Rights. Nothing in this Plan shall confer any right upon
------------------
any Employee to be retained in the service of the Company or any of its
affiliates.
8.7 Incompetency. In the event that the Plan Administrator determines
-------------
that a Participant is unable to care for his affairs because of illness or
accident or any other reason, any amounts payable under this Plan may, unless
claim shall have been made therefor by a duly appointed guardian, conservator,
committee or other legal representative, be paid by the Plan Administrator to
the spouse, child, parent or other blood relative or to any other person deemed
by the Plan Administrator to have incurred expenses for such Participant, and
such payment so made shall be a complete discharge of the liabilities of the
Plan therefor.
IN WITNESS WHEREOF, Arch Chemicals, Inc. has caused this Plan to be
executed by its duly authorized officer as of February 8, 1999.
Dated: ARCH CHEMICALS, INC.
By: /s/ Mark A. Killian
-------------------------------------
Its Vice President of Human Resources
12
<PAGE>
EXHIBIT 10.17
ARCH SENIOR EXECUTIVE PENSION PLAN
Article I. The Plan
--------------------
1.1 Establishment of Plan. Arch Chemicals, Inc. (the "Company" or
----------------------
"Arch") hereby establishes a non-qualified deferred compensation plan known
as the Arch Senior Executive Pension Plan for the benefit of certain
salaried employees of Arch and other Employing Companies who may be
eligible to participate. The Plan is effective February 8, 1999 or, if
later, the effective date of the spin-off of Arch from Olin Corporation
(the "Effective Date"). For purposes of this Plan, an "Employing Company"
means any company which has adopted this Plan and is included within the
definition of an Employing Company under the terms of the Arch Chemicals
Employees' Pension Plan and any other qualified defined benefit plans
maintained by Arch (collectively, the "Qualified Plans").
1.2 Purpose. The purpose of this Plan is to attract and retain a
--------
management group capable of assuring Arch's future success by providing
them with supplemental retirement income under this Plan. This Plan is
intended to be an unfunded, nonqualified deferred compensation plan for
select management employees.
Article II. Eligibility
------------------------
2.1 Participation. Any Arch Employee whose job is rated at 2,000 Hay
--------------
Points (or the equivalent) or more, and who is selected by the Board of
Directors of the Company or the Compensation Committee of the Board
(referred to in this Plan as the "Selection Committee" or "Compensation
Committee"), shall participate in the Plan (a "Participant"). As provided
hereinafter, the Selection Committee shall also have the power to remove
any Participant from the Plan, whether or not he or she has begun to
receive benefits hereunder.
For purposes of this Plan, an "Arch Employee" includes (i) any employee who
is defined as an Arch Employee within the meaning of the Employee Benefits
Allocation Agreement dated as of February 8, 1999 by and between Arch and
Olin Corporation ("Olin"), as well as (ii) any salaried employee hired by
Arch after the Effective Date of this Plan.
The term "Distribution Date" has the same meaning as that specified in the
Distribution Agreement dated as of February 1, 1999 by and between Olin and
Arch.
2.2 Assumption of Prior Olin Plan Liabilities for Arch Employees;
-------------------------------------------------------------
Transfers of Reserves. In conjunction with establishing this Plan, Arch.
----------------------
hereby assumes the liabilities of Olin for the provision of benefits to
participants who, immediately prior to
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<PAGE>
the Distribution Date (as previously defined) were participants in the Olin
Senior Executive Pension Plan as in effect on the Distribution Date (the
"Olin Senior Plan") and who, on and after the Effective Date and before
February 8, 2000 transfer to, and become employed by Arch or its affiliated
companies. In consideration of such assumption of liability, Olin has
transferred, as of the Effective Date, to Arch (or to a rabbi trust
established by Arch) the reserves (including any assets held in a rabbi
trust or similar vehicle) reflecting the value of the accrued liabilities
being transferred, determined in accordance with Olin's established
policies and accounting methods, uniformly applied for calculating
liabilities under its non-qualified plans. In the event that Olin or its
affiliates re-employs any Arch Employee before February 8, 2000, Olin shall
assume the liability under this Plan associated with such re-employed
individual and re-enroll such individual in the Olin Senior Plan to the
extent he or she is then eligible, provided that such employee releases
Arch and this Plan from such liability.
Article III. Benefits
---------------------
3.1 Benefit Formula. As of the Distribution Date, each Eligible
---------------
Employee who, immediately prior to the Distribution Date, was a participant
in the Olin Senior Plan, shall be credited in this Plan with an accrued
benefit equal to that credited to such individual under the Olin Senior
Plan as of the Distribution Date (based upon the Eligible Employee's
Average Compensation and service with Olin), provided however that such
crediting shall not occur under this Plan until such employee has released
Olin and its affiliates, and the Olin Senior Plan, from any liability, or
claim for benefits, with respect to the Employee's participation in said
plan.
Upon retirement, as hereinafter provided, a Participant shall be entitled
to receive an annual "Retirement Allowance" equal to the lesser of (a) and
-------------
(b) below:
(a) three percent (3%) of the Participant's Average Compensation,
multiplied by the sum of his Years of Benefit Service credited while
the employee was a Participant in this Plan and, prior to this Plan,
the Olin Senior Plan, plus one and one-half percent (1 1/2%) of the
Participant's Average Compensation multiplied by his aggregate Years
of Benefit Service credited under all qualified defined benefit plans
of Arch which includes Years of Benefit Service credited under the
Olin Employees Pension Plan while the employee was not a Participant
in either this Plan or the prior Olin Senior Plan, provided that the
resulting percentage of Average Compensation shall be reduced by one-
third of one percent (1/3%) for each month by which the Participant's
benefits under this Plan begin prior to his sixty-second (62nd)
birthday;
reduced by the sum of
(i) the Participant's annual retirement allowance payable from
all Arch Qualified Plans and any other nonqualified defined
benefit pension plans
-2-
<PAGE>
of the Company and all Employing Companies, including, without
limitation, the Arch Chemicals Employees' Pension Plan), and the
equivalent actuarial value of any other arrangement with the
Company or an Employing Company which the Plan Administrator, in
its sole discretion, determines to be a pension supplement
(collectively referred to hereinafter as the "Other Arch Plans");
plus
(ii) fifty percent (50%) of the Participant's Primary Social
Security Benefit.
(b) fifty percent (50%) of the Participant's Average Compensation,
reduced by the sum of
(i) the amount of annual retirement benefits from the Arch
Chemicals Employees' Pension Plan and all Other Arch Plans (as
previously defined) and all qualified and non-qualified deferred
compensation plans of the Participant's previous and subsequent
employers; and
(ii) fifty percent (50%) of the Participant's Primary Social
Security Benefit.
(c) For purposes of determining a Participant's "Average
Compensation", "Years of Benefit Service", "Retirement Allowance" and
"Primary Social Security Benefit" under this Plan, such terms shall
have the same meaning as that contained in the Arch Chemicals
Employees' Pension Plan and shall include credit for the compensation
received, and service rendered by such Participant while employed by
Arch and its affiliates, as well as by Olin and its affiliates up
through the Distribution Date (or through January 31, 2000 in the case
of Participants transferring from Olin pursuant to Section 3.5). In
calculating a Participant's Average Compensation under this Plan, (i)
"Average Compensation" under this Plan shall also include deferred
amounts of regular salary and deferrals under management incentive
plans (other than the Performance Unit Plan, the EVA Bonus Bank or
similar bonus bank arrangements, and other long-term incentive and
long-term bonus plans of Olin and Arch); (ii) executive severance
which is payable to certain Participants under employment agreements
shall be treated as if paid over the number of months of salary used
to calculate the amount of such severance, even if such severance is
received in a lump sum; (iii) Average Compensation shall be calculated
without regard to the dollar limitations imposed by Section 401(a)(17)
of the Internal Revenue Code; and (iv) "Years of Benefit Service"
shall include service imputed as a result of treating any executive
severance paid as having been received over the number of months of
salary used to calculate such severance.
(d) The annual retirement allowances payable under the Arch Chemicals
Employees' Pension Plan, Other Arch Plans and from pension plans of
the
-3-
<PAGE>
Participant's previous employers, which are to be used to reduce the
benefit payable under (a) or (b) above, shall be determined assuming
(i) that the Participant selected a 50% joint and survivor annuity
under such plans, (ii) began receiving benefits thereunder at their
actual commencement date (rather than the commencement date for
benefits under this Plan), and (iii) using the actuarial equivalent
factors specified in the plans which are the subject of the offset or,
if such factors are not reasonably available, such factors as may,
from time to time, be elected by the Plan Administrator.
3.2 Early Retirement.
----------------
(a) Except as otherwise provided in Section 4.2(a), a Participant may
retire from active service with Arch and all Employing Companies and
commence benefits under this Plan at any time after reaching his fifty-
fifth (55th) birthday, provided, however, that Accelerated Benefits may not
commence until at least twelve (12) full months following the Participant's
actual retirement.
(b) For purposes of (i) determining whether a Participant has reached his
fifty-fifth (55th) birthday and, thus, is eligible to commence benefits
under this Section 3.2 instead of on a deferred vested basis, and (ii)
calculating the annual retirement allowance from the Arch Chemicals
Employees' Pension Plan which is to be used as an offset, any Participant
who has completed at least seven (7) Years of Creditable Service (as
defined in the Arch Chemicals Employees' Pension Plan) and who is at least
age fifty-two (52), but less than age fifty-five (55) on the date his
service is terminated (without taking into account any severance period)
other than (i) for cause or (ii) as a result of a voluntary termination,
shall be treated as continuing as an eligible Employee until the date on
which the Participant reaches age fifty-five (55). A Participant in this
Plan shall be credited with his prior service with Olin and its affiliates,
as well as Arch and its affiliates, in enabling the Participant to attain
his early retirement age under this Plan. No Benefit Service shall be
credited under this Section 3.2(b) and a Participant may not commence
benefits hereunder until he actually reaches age fifty-five (55).
3.3 Deferred Vested Employees. Any Participant who terminates active
-------------------------
service with Arch and all Employing Companies prior to having reached age
fifty-five (55) may commence benefits under this Plan only after having
reached age sixty-five (65). In the case of a deferred vested Participant,
benefits paid from this Plan will assume that the Participant did not
commence benefits under the Arch Chemicals Employees' Pension Plan until he
or she reached age sixty-five (65), even though the Participant may
actually commence benefits under the Arch Chemicals Employees' Pension Plan
prior to that date. In the event that an Arch Employee is re-employed by
Olin prior to February 8, 2000, and again participates in the Olin Senior
Plan, no separation from service shall be deemed to occur permitting a
distribution of benefits under this, or any other, provision of this Plan.
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<PAGE>
3.4 Calculation of Benefit if Participant is Disabled. In the event that
-------------------------------------------------
a Participant becomes Totally Disabled as that term is defined in the Arch
Chemicals Employees' Pension Plan, the Participant shall continue to
receive the same service credit under this Plan as would be applicable to
Totally Disabled nonbargaining employees covered by the Arch Chemicals
Employees' Pension Plan. The disabled Participant's benefit under this
Plan shall be calculated in accordance with 3.1(a) and (b), and shall be
payable as of the date that the Participant is no longer Totally Disabled
(if such date occurs after age fifty-five (55)) or at age sixty-five (65),
if the Employee is still then Disabled. If a Participant is no longer
Disabled prior to reaching age fifty-five (55), then his entitlement to
benefits shall be determined under Section 3.3, if he terminates service
prior to reaching age 55, or under the other applicable provisions of this
Plan, if he returns to active service. No Participant shall qualify for
Disability Benefits hereunder once he or she is no longer actively employed
by Arch, Inc. or its affiliates.
3.5 Transfers between Arch and Olin. It is contemplated that Plan
---------------------------------
Participants may transfer their employment after the Distribution Date and
before February 8, 2000 from Arch to Olin and vice versa and commence, or
---- -----
resume, participation in the Senior Executive Pension Plan of the new employer.
(a) Transfer to Olin From Arch. In the event that a Plan Participant
---------------------------
transfers employment to Olin prior to February 8, 2000, benefit accrual under
this Plan shall cease and Arch shall remain liable for payment of any benefits
accrued under this Plan to the date of transfer. As provided in Section 3.3, no
separation from service shall be deemed to occur under this Plan permitting a
distribution under this Plan and benefits hereunder shall not commence until the
Participant has terminated his employment with Olin and has otherwise qualified
for benefits hereunder. When commenced, benefits payable hereunder shall be
based upon the Participants service with Arch (and, if applicable, any past
service with, and compensation from, Olin and its affiliates recognized as of
the Distribution Date), provided, however that Arch shall continue to recognize
a Participant's service with Olin and its affiliates subsequent to his transfer
to Olin solely for purposes of determining the Participant's vesting and
attainment of retirement dates under this Plan.
(b) Transfer from Olin to Arch. In the event that an Olin employee
---------------------------
transfers employment to Arch from Olin prior to February 8, 2000, benefit
accrual under the Olin Senior Plan shall cease and Olin shall remain liable for
payment of any benefits accrued under the Olin Senior Plan to the employee's
date of transfer to Arch. Benefits shall not commence under the Olin Senior Plan
until the former Olin employee terminates service with Arch and its affiliates
and has otherwise qualified for benefits under the Olin Senior Plan. Following
such transfer, Olin shall continue to credit such employee's service with Arch
and its affiliates subsequent to his transfer to Arch solely for purposes of
determining his vesting and attainment of retirement dates under the Olin Senior
Plan. In computing the benefits, and determining attainment of retirement ages
under this Plan, Arch shall recognize the compensation received, and service
rendered by such Participant while employed by Olin and its affiliates up to the
Participant's date of transfer to Arch. When benefits commence under this Pan,
they shall be offset by the benefit that would be
-5-
<PAGE>
payable to the Participant from the Olin Senior Plan, as of the date benefits
commence hereunder, regardless of when such benefit under the Olin Senior Plan
actually commences.
Article IV. Payment of Benefits
--------------------------------
4.1 Payment of Benefits; in General.
-------------------------------
In the event that the Participant (i) does not elect to establish an
employee-grantor trust in accordance with Section 4.2(a), (ii) does not elect to
receive Accelerated Benefits in accordance with Section 4.2(a), and (iii) elects
to commence his benefits under this Plan at the same time that he commences his
Qualified Plan Benefit, then the Retirement Allowance payable hereunder shall be
paid commencing at the same time and in the same form as that in which the
Qualified Plan Benefit is payable to the Participant. If the Participant elects
an actuarially equivalent form of benefit payment with respect to his Qualified
Plan Benefits, that same form of payment shall apply to payment of his
Retirement Allowance hereunder. Any election to receive regular monthly benefits
under this Section 4.3 must be made at least one full year prior to the
Participant's Accelerated Benefit Commencement Date.
4.2 Payment Provisions for Active Employees.
----------------------------------------
(a) As of October 31 of the calendar year following the year in which an
actively employed Participant meets the Minimum Benefit Accumulation
threshold provided for in Section 4.4(c), the Actuarial Present Value
(determined as hereinafter provided) of the after-tax amount of an actively
employed Participant's Retirement Allowance shall be deposited in an
employee-grantor trust established by the Participant unless, at least one
full year prior to the funding of such employee-grantor trust, the
Participant shall instead have elected to receive Accelerated Benefits
commencing on his Accelerated Benefit Commencement Date. In the case of an
actively employed Participant, the "Accelerated Benefit Commencement Date"
shall be twelve full months following his actual retirement date at age
fifty-five (55) or later.
(b) In the event that an actively employed Participant elects not to
establish an employee-grantor trust, but instead to receive Accelerated
Benefits, regular monthly benefits shall commence to be paid upon such
Participant's actual retirement in accordance with Section 4.3 until such
Participant reaches his Accelerated Benefit Commencement Date, at which
time Accelerated Benefits shall be paid in the form and manner determined
by the Compensation Committee (or its designee), either in a single sum, in
up to three (3) annual installments, or in a combination of annuity
payments and either a single sum or annual installments
(c) Alternatively, the actively employed Participant may elect, at least
one full year prior to such Accelerated Benefit Commencement Date, to
receive his entire benefit in the form of an annuity in accordance with
Section 4.3 of this Plan.
-6-
<PAGE>
4.3 Payment of Regular Monthly Benefits.
------------------------------------
(a) Participants retiring from active service from Arch and all Employing
Companies may elect to receive regular monthly benefits in lieu of
receiving Accelerated Benefits or establishing an employee-grantor trust.
Such monthly benefits shall be calculated and payable (without reduction
for the death benefit protection) in the form of a joint and 50% survivor
annuity with the Participant's Spouse as the joint annuitant.
(b) Any Participant who terminates service with Arch and all Employing
Companies before reaching age 55 may not commence benefits under this Plan
prior to reaching age 65 unless he is eligible for "lay-off credit"
pursuant to Section 3.2(b) and, thus, is deemed to qualify for early
retirement benefits. Any benefits payable under this Plan with respect to
a Participant who terminates service prior to reaching age 55, and who is
not eligible for any imputed service under the lay-off provisions of
Section 3.2(b), will be calculated assuming that the Participant did not
commence benefits under the Arch Chemicals Employees' Pension Plan until
reaching age 65, even though his actual commencement date under the Arch
Chemicals Employees' Pension Plan may have been earlier.
4.4 Assumptions used for Determining Amount to be contributed to Employee-
---------------------------------------------------------------------
grantor Trust; Threshold for Accelerated Benefits.
--------------------------------------------------
(a) Actuarial Assumptions for Employee-Grantor Trust. In determining the
------------------------------------------------
Actuarial Present Value of the Participant's Plan benefit to be used for
purposes funding an employee-grantor trust, the benefit shall be
determined:
(i) as of the close of the Plan Year (i.e., December 31) prior to the
year in which the employee grantor trust is being funded;
(ii) using an annuity purchase rate based upon a discount rate equal
to the rate for a zero coupon Treasury strip (determined approximately
at the time of the deposit to the employee-grantor trust) with a
maturity that approximates the Participant's life expectancy
determined as of the date the payment to the trust is scheduled to be
made; and
(iii) assuming that the benefit commences under this Plan
(a) on the Participant's 65th birthday, if the Participant
terminates service (or is treated as terminating service)
prior to age 55;
(b) on the Participant's 62nd birthday, if the Participant
terminates service on or after reaching age 55 and before
reaching age 62; and
-7-
<PAGE>
(c) on the Participant's 65th birthday, if the Participant
terminates service on or after reaching age 62.
(b) Actuarial Assumptions for Determining Accelerated Benefits. In
----------------------------------------------------------
determining the Actuarial Present Value of the Participant's Accelerated
Benefit, the benefit shall be determined:
(i) as of the close of the Participant's retirement or termination of
service;
(ii) using an annuity purchase rate based upon a discount rate equal
to the rate for a zero coupon Treasury strip (determined approximately
at the time the Accelerated Benefit is scheduled to commence) with a
maturity that approximates the Participant's life expectancy
determined as of the date the payment is scheduled to be made; and
(iii) assuming that the benefit commences under this Plan
(a) on the Participant's 65th birthday, if the Participant
terminates service (or is treated as terminating service)
prior to age 55;
(b) on the Participant's 62nd birthday, if the Participant
terminates service on or after reaching age 55 and before
reaching age 62; and
(c) on the Participant's 65th birthday, if the Participant
terminates service on or after reaching age 62.
(c) Minimum Benefit Accumulation Threshold. No Accelerated Benefits shall
---------------------------------------
commence to be paid, and no Participant shall be given the opportunity to
fund an employee-grantor trust, until the Participant has accumulated
benefits under this Plan, the Arch Supplementary and Deferral Benefit
Pension Plan which, in the aggregate, have an actuarial present value of at
least One Hundred Thousand Dollars ($100,000.00).
4.5 Surviving Spouse Benefit.
-------------------------
(a) The Surviving Spouse of a Participant who dies after commencing
-----
regular monthly benefits shall receive a survivor benefit for his or her
lifetime equal to 50% of the monthly payments that were being paid to the
Participant under the Plan as of his death.
(b) The Surviving Spouse of a Participant who dies after having elected to
receive Accelerated Benefits, but who as of the date of his death has not
received the entire value of his Accelerated Benefits, shall receive the
remainder of any Accelerated Benefits not yet paid in the form of payment
in effect with respect to the Participant.
(c) The Surviving Spouse of any Participant who dies prior to benefit
-----
commencement shall be entitled to receive a benefit equal to 50% of the
benefit that the Participant would
-8-
<PAGE>
have been entitled to had he survived to the earliest date on which he
could commence benefits hereunder, retired and commenced monthly regular
benefits under the Plan, and then died the next day.
(d) Notwithstanding (a) -(c) above, if the Surviving Spouse is more than
four years younger than the Participant, the Surviving Spouse's benefit
under this Plan shall be reduced so that the present value of the spouse's
lifetime benefit, as determined by the Company, is the same as it would
have been if he or she were only four years younger than the Participant.
(e) For purposes of this Plan, the term "Spouse" shall mean the person to
whom a Participant is validly married at the date of his death, as
evidenced by a marriage certificate issued in accordance with state law;
provided however, that (i) if a Participant's Spouse at his or her death
was not the Participant's Spouse at least 12 months prior to the
Participant's death, no Surviving Spouse's retirement allowance shall be
paid, and (ii) common law marriages shall not be recognized hereunder.
4.6 Benefit Upon a Change of Control.
--------------------------------
(a) Lump Sum Payment Upon a Change of Control.
-----------------------------------------
The spin-off of Arch from Olin shall not be deemed to be a change of
control entitling any Participant herein to benefits under this Plan or the
prior Olin Senior Plan. Notwithstanding any other provision of the Plan,
upon a Change in Control, each Participant covered by the Plan shall
automatically be paid a lump sum amount in cash by the Company sufficient
to purchase an annuity which, together with the monthly payment, if any,
under a Rabbi or other trust arrangement established by the Company to make
payments hereunder in the event of a Change in Control and/or pursuant to
any other annuity purchased by the Company for the Participant to make
payments hereunder, shall provide the Participant with the same monthly
after-tax benefit as he would have received under the Plan based on the
benefits accrued to the Participant hereunder as of the date of the Change
in Control. Payment under this Section shall not in and of itself
terminate the Plan, but such payment shall be taken into account in
calculating benefits under the Plan which may otherwise become due the
Participant thereafter.
(b) No Divestment Upon a Change of Control. If a Participant is removed
--------------------------------------
from participation in the Plan after a Change of Control has occurred, in
no event shall his years of Benefit Service accrued prior to such removal,
and the benefit accrued prior thereto, be adversely affected.
(c) Change of Control Defined.
-------------------------
For purposes of the Plan, a "Change in Control" of the Company shall have
occurred in the event that
-9-
<PAGE>
(i) the Company ceases to be, directly or indirectly, owned of record
by at least 1,000 stockholders;
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Act"), other than the Company, a majority-
owned subsidiary of the Company or an employee benefit plan of the
Company or such subsidiary (or such plan's related trust), become(s)
the "beneficial owner" (as defined in Rule 13d-3 of the Act) of 20% or
more of the then outstanding voting stock of the Company; or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Company's Board of
Directors (together with any new Director whose election by the
Company's Board or whose nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the
Directors of the Company then still in office who either were
Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Directors then in office; or
(iv) all or substantially all of the business of the Company is
disposed of pursuant to a merger, consolidation or other transaction
in which the Company is not the surviving corporation or the Company
combines with another company and is the surviving corporation (unless
the shareholders of the Company immediately following such merger,
consolidation, combination, or other transaction beneficially own,
directly or indirectly, more than 50% of the aggregate voting stock or
other ownership interests of (x) the entities, if any, that succeed to
the business of the Company or (y) the combined company);.or
(v) the shareholders of the Company approve a sale of all or
substantially all of the assets of the Company or a liquidation or
dissolution of the Company.
(d) Arbitration. Any dispute or controversy arising under or in
-----------
connection with the Plan subsequent to a Change in Control shall be settled
exclusively by arbitration in Connecticut, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
4.7 Removal from the Plan; Non-Payment of Benefits.
-----------------------------------------------
(a) Any Participant may be removed from the Plan by the Compensation
Committee at any time "for cause", as determined by the Compensation
Committee in its sole discretion, whether or not the Participant has begun
to receive payments under the Plan, and whether or not the Participant's
employment has been terminated. "Cause" shall
-10-
<PAGE>
include, without limitation, rendering services in any capacity to a
competitor of the Company or Employing Company without the consent of the
Compensation Committee. Neither the Participant nor his or her Spouse shall
be entitled to receive any payments from the Plan from and after the date
of the removal of the Participant nor have any cause of action as a result
of such removal. The Participant or Spouse shall not be required to return
any payments made prior to removal of the Participant from the Plan.
(b) The Compensation Committee may notify a Participant that he or she is
being suspended from the Plan as a result of job performance which the
Compensation Committee in its sole discretion deems unsatisfactory. From
and after the date of such notification and notwithstanding the
Participant's actual Hay Points, he or she will not be deemed to have 2,000
or more Hay Points for purposes of calculating the Participant's Retirement
Allowance. Any prior Years of Benefit Service shall not be affected by
such suspension.
Article V. Funding
------------------
5.1 Unfunded Plan. This Plan shall be unfunded. All payments under
-------------
this Plan shall be made from the general assets of Arch and other Employing
Companies.
5.2 Liability for Payment. Arch and each other Employing Company
---------------------
shall pay the benefits provided under this Plan with respect to
Participants who are employed, or were formerly employed by it during their
participation in the Plan. In the case of a Participant who was employed
by more than one Employing Company, the Committee shall allocate the cost
of such benefits among such Employing Companies in such manner as it deems
equitable. The obligations of the Employing Company shall not be funded in
any manner. The rights of any person to receive benefits under this Plan
are limited to those of a general creditor of the Employing Company liable
for payment hereunder.
5.3 Anti-alienation. No Participant or beneficiary shall have the
---------------
right to assign, transfer, encumber or otherwise subject to any lien any
payment or any other interest under this Plan, nor shall such payment or
interest be subject to attachment, execution or levy of any kind.
Article VI. Plan Administration
-------------------------------
6.1 Plan Administrator. The Company hereby appoints the Pension
-------------------
Administration and Review Committee as the Plan Administrator (the "Plan
Administrator" or "Committee"). Any person, including, but not limited
to, the directors, shareholders, officers and employees of the Company,
shall be eligible to serve on the Committee. Any person so appointed shall
signify his acceptance by undertaking the duties assigned. Any member of
the Committee may resign by delivering written resignation to the Company.
The Company may also remove any member of the Committee by delivery of a
written notice of removal, which shall take effect upon
-11-
<PAGE>
delivery or on a date specified. Upon resignation or removal of a Committee
member, the Company shall promptly designate in writing such other person
or persons as a successor.
6.2 Allocation and Delegation. The Committee members may allocate
-------------------------
the responsibilities among themselves, and shall notify the Company in
writing of such action and the responsibilities allocated to each member.
6.3 Powers, Duties and Responsibilities. The Plan Administrator shall
-----------------------------------
have all power to administer the Plan for the exclusive benefit of the
Participants and their Beneficiaries, in accordance with the terms of the
Plan. The Plan Administrator shall have the absolute discretion and power
to determine all questions arising in connection with the administration,
interpretation and application of the Plan. Any such determination by the
Plan Administrator shall be conclusive and binding upon all persons. The
Plan Administrator may correct any defect or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable to
carry out the purposes of the Plan; provided, however, that such
interpretation or construction shall be done in a non-discriminatory manner
and shall be consistent with the intent of the Plan.
The Plan Administrator shall:
(a) compute the amount and kind of benefits to which any Participant
shall be entitled hereunder;
(b) maintain all necessary records for the administration of the Plan;
(c) interpret the provisions of the Plan and make and publish such
rules for regulation of the Plan as are consistent with the terms hereof;
(d) assist any Participant regarding his rights, benefits or elections
available under the Plan; and
(e) communicate to Participants and their Beneficiaries concerning the
provisions of the Plan.
6.4 Records and Reports. The Plan Administrator shall keep a record
--------------------
of all actions taken and shall keep such other books of account, records
and other information that may be necessary for proper administration of
the Plan. The Plan Administrator shall file and distribute all reports
that may be required by the Internal Revenue Service, Department of Labor
or others, as required by law.
-12-
<PAGE>
6.5 Appointment of Advisors. The Plan Administrator may appoint
------------------------
accountants, actuaries, counsel, advisors and other persons that it deems
necessary or desirable in connection with the administration of the Plan.
6.6 Majority Actions. The Committee shall act by a majority of their
----------------
numbers, but may authorize one or more of them to sign all papers on their
behalf.
6.7 Indemnification of Members. The Company shall indemnify and hold
---------------------------
harmless any member of the Committee and of the Compensation Committee from
any liability incurred in his or her capacity as such for acts which he or
she undertakes in good faith as a member of such Committee.
Article VII. Termination and Amendment
--------------------------------------
7.1 Amendment or Termination. The Company may amend or terminate the
------------------------
Plan at any time, in whole or in part, by action of its Board of Directors,
the Compensation Committee of the Board or any other duly authorized
committee or officer. Any Employing Company may withdraw from
participation in the Plan at any time. No amendment or termination of the
Plan or withdrawal therefrom by an Employing Company shall adversely affect
the vested benefits payable hereunder to any Participant for service
rendered prior to the effective date of such amendment, termination or
withdrawal.
Article VIII. Miscellaneous
----------------------------
8.1 Gender and Number. Whenever any words are used herein in the
-----------------
masculine, feminine or neuter gender, they shall be construed as though
they were also used in another gender in all cases where such would apply,
and whenever any words are used herein in the singular or plural form, they
shall be construed as though they were also used in another form in all
cases where they would so apply.
8.2 Action by the Company. Whenever the Company under the terms of
---------------------
this Plan is permitted or required to do or perform any act or thing, it
shall be done and performed by an officer or committee duly authorized by
the Board of Directors of the Company.
8.3 Headings. The headings and subheadings of this Plan have been
---------
inserted for convenience of reference only and shall not be used in the
construction of any of the provisions hereof.
8.4 Uniformity and Non Discrimination. All provisions of this Plan
----------------------------------
shall be interpreted and applied in a uniform nondiscriminatory manner.
-13-
<PAGE>
8.5 Governing Law. To the extent that state law has not been
--------------
preempted by the provisions of ERISA or any other laws of the United States
heretofore or hereafter enacted, this Plan shall be construed under the
laws of the State of Connecticut.
8.6 Employment Rights. Nothing in this Plan shall confer any right
------------------
upon any Employee to be retained in the service of the Company or any of
its affiliates.
8.7 Incompetency. In the event that the Plan Administrator
-------------
determines that a Participant is unable to care for his affairs because of
illness or accident or any other reason, any amounts payable under this
Plan may, unless claim shall have been made therefor by a duly appointed
guardian, conservator, committee or other legal representative, be paid by
the Plan Administrator to the spouse, child, parent or other blood relative
or to any other person deemed by the Plan Administrator to have incurred
expenses for such Participant, and such payment so made shall be a complete
discharge of the liabilities of the Plan therefor.
IN WITNESS WHEREOF, Arch Chemicals, Inc. has caused this Plan to be
executed by its duly authorized officer as of February 8, 1999.
ARCH CHEMICALS, INC.
By: /s/ Mark A. Killian
-------------------------------------
Its Vice President of Human Resources
-14-
<PAGE>
EXHIBIT 10.18
ARCH CHEMICALS, INC.
EMPLOYEE DEFERRAL PLAN
1. PURPOSE
-------
The purpose of this Arch Chemicals, Inc. Employee Deferral Plan (the
"Plan") is to provide eligible employees of Arch Chemicals, Inc. and its
subsidiaries and affiliates with an opportunity to defer compensation earned or
to be earned by them as a means of saving for retirement or other future
purposes.
2. DEFINITIONS
-----------
The following definitions shall be applicable throughout the Plan:
(a) "Accounting Date" means each December 31, March 31, June 30 and
September 30.
(b) "Administrator" means the Vice President, Human Resources or his
delegate.
(c) "Arch Stock Account" means the Stock Account to which Arch Stock Units
are credited.
(d) "Arch Stock Unit(s)" means the share equivalents credited to the Arch
Stock Account of a Participant's Compensation Account pursuant to Section 6,
with one Arch Stock Unit equal to one share of Arch Common Stock.
(e) "Beneficiary" means the person(s) designated by the Participant in
accordance with Section 10.
(f) "Board" means the Board of Directors of the Company.
(g) "Cash Account" means an account established under the Plan for a
Participant to which compensation has been or is to be credited in the form of
cash and which is to earn interest at the Rate of Interest as provided herein.
(h) "Change in Control" means that any of the following events shall have
occurred:
(i) the Company ceases to be, directly or indirectly, owned by at
least 1,000 shareholders;
<PAGE>
2
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as a group (or a "person"
within the meaning of Section 13(d)(3) of the Exchange Act), other than the
Company, a majority-owned subsidiary of the Company or an employee benefit plan
of the Company or such subsidiary (or such plan's related trust), become(s) the
"beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act) of 20%
or more of the then outstanding voting stock of the Company;
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Company's Board (together with any
new director whose election by the Company's Board or whose nomination for
election by the Company's stockholders, was approved by a vote of at least two-
thirds of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then in office;
(iv) all or substantially all of the business of the Company is
disposed of pursuant to a merger, consolidation or other transaction in which
the Company is not the surviving corporation or the Company combines with
another company and is the surviving corporation (unless the shareholders of the
Company immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
aggregate voting stock or other ownership interests of (x) the entity or
entities, if any, that succeed to the business of the Company or (y) the
combined company); or
(v) the shareholders of the Company approve a sale of all or
substantially all of the assets of the Company or a liquidation or dissolution
of the Company.
(i) "Committee" means the Compensation Committee (or its successor) of the
Board.
(j) "Common Stock" means the Company's common stock, $1.00 par value per
share.
(k) "Company" means Arch Chemicals, Inc., a Virginia corporation, its
divisions and subsidiaries, and any successor thereto.
(l) "Compensation" means any employee compensation which represents
salary, severance pay, bonus, or any other incentive plan payout, in the form of
cash or stock,
<PAGE>
3
including but not limited to payouts or payment distributions from the Arch
Chemicals, Inc. 1999 Long Term Incentive Plan but excluding stock resulting from
employee stock option exercises and excluding other incentive payouts which the
Administrator prospectively determines to be not eligible to be deferred under
this Plan.
(m) "Compensation Account" means the account established under the Plan to
which the Participant's Deferred Compensation is credited, including the Cash
Account, Stock Account, and such other investment accounts as the Committee may
establish from time to time.
(n) "Corporate Human Resources" means the Corporate Human Resources
Department of the Company.
(o) "Credit Date" means with respect to Deferred Compensation, such date
as designated by Corporate Human Resources that Deferred Compensation shall be
credited to the Compensation Account.
(p) "Deferred Compensation" means the Compensation elected by the
Participant to be deferred pursuant to the Plan.
(q) "Distribution" means the distribution of all outstanding shares of
Common Stock to the shareholders of Olin.
(r) "Distribution Date" means the dividend payment date fixed by the Board
of Directors of Olin for the Distribution.
(s) "Election" means a Participant's delivery of a written notice of
election to Corporate Human Resources electing to defer payment of all or a
portion of his or her Compensation.
(t) "Employee" means a full-time salaried employee (which term shall be
deemed to include officers) on the active payroll of the Company and its
affiliates who has at least 1182 Hay Points and who has been selected by the
Administrator, and if required, approved by the Committee, to participate in
this Plan.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(v) "Fair Market Value" means, with respect to a date, on a per share
basis, the average of the high and the low price of a share of Common Stock or
Olin Common Stock, as
<PAGE>
4
the case may be, as reported on the consolidated tape of the New York Stock
Exchange (or such other primary exchange on which such stock is traded)
("Exchange") on such date or if the Exchange is closed on such date, the next
succeeding date on which it is open.
(w) "Fiscal Year" means that annual period commencing January 1 and ending
the following December 31.
(x) "Olin" means Olin Corporation, a Virginia corporation and any successor
thereto.
(y) "Olin Common Stock" means shares of common stock of Olin, par value
$1.00 per share.
(z) "Olin Employee" means an employee of Olin.
(aa) "Olin Employee Deferral Plan" means the Olin Corporation Employee
Deferral Plan.
(bb) "Olin Stock Account" means the Stock Account to which Olin Stock Units
are credited upon transfer from the Olin Employee Deferral Plan and from time to
time.
(cc) "Olin Stock Unit(s)" means the share equivalents credited to the Olin
Stock Account of a Participant's Compensation Account pursuant to Section 6,
with one Olin Stock Unit equal to one share of Olin Common Stock.
(dd) "Participant" means an Employee selected by the Administrator and if
required, approved by the Committee, to participate in the Plan and who has
elected to defer payment of all or a portion of his or her Compensation under
the Plan. "Participant" shall also include any person who had an account under
the Olin Employee Deferral Plan which has been transferred to this Plan.
(ee) "Plan" means this Arch Chemicals, Inc. Employee Deferral Plan.
(ff) "Rate of Interest" means the rate of interest for the quarterly period
ending with the Accounting Date equal to (i) the Company's before-tax cost of
borrowing as determined from time to time by the Chief Financial Officer,
Controller or Treasurer (or in the event there is no such borrowing, the Federal
Reserve A1/P1 Composite rate for 90-day commercial paper plus 10 basis points as
determined by such officer) or (ii) such other rate as the Board or the
Committee may select prospectively from time to time.
<PAGE>
5
(gg) "Section 16(b) Employee" means an Employee or former Employee who is
subject to Section 16(b) of the Exchange Act.
(hh) "Stock Account" means an account established under the Plan to which
shares of Common Stock and Olin Common Stock have been or are to be credited in
the form of Arch Stock Units and Olin Stock Units, which shall include the Arch
Stock Account and the Olin Stock Account.
(ii) "Stock-based Compensation" means Compensation that is being paid out
in the form of shares of Common Stock (excluding stock options), such as
retention stock units, performance shares and restricted stock units.
(jj) "Termination" means retirement from the Company or termination of
services as an Employee for any other reason.
3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN
------------------------------------------
CAPITALIZATION
--------------
(a) Shares Authorized for Issuance. There shall be reserved for
issuance under the Plan 25,000 shares of Common Stock, subject to adjustment
pursuant to subsection (b) below.
(b) Adjustments in Certain Events. In the event of any change in the
outstanding Common Stock of the Company or Olin Common Stock by reason of any
stock split, share dividend, recapitalization, merger, consolidation,
reorganization, combination, or exchange or reclassification of shares, split-
up, split-off, spin-off, liquidation or other similar change in capitalization,
or any distribution to common shareholders other than cash dividends, the number
or kind of shares or Arch Stock Units or Olin Stock Units, as the case may be
that may be issued or credited under the Plan may be adjusted by the Committee
so that the proportionate interest of the Participants shall be maintained as
before the occurrence of such event. Such adjustment shall be conclusive and
binding for all purposes of the Plan.
4. ELIGIBILITY
-----------
The Administrator shall have the authority to select among any Employees
those Employees who shall be eligible to participate in the Plan. Deferrals to
a Stock Account by Section 16(b) Employees must be approved by the Committee.
<PAGE>
6
5. ADMINISTRATION
--------------
Full power and authority to construe, interpret and administer the Plan
shall be vested in the Committee. This power and authority includes, but is not
limited to, selecting compensation eligible for deferral, establishing deferral
terms and conditions and adopting modifications, amendments and procedures as
may be deemed necessary, appropriate or convenient by the Committee. Decisions
of the Committee shall be final, conclusive and binding upon all parties. Day-
to-day administration of the Plan shall be the responsibility of Corporate Human
Resources.
6. PARTICIPANT ACCOUNTS
--------------------
(a) Compensation Accounts. Upon election to participate in the Plan,
there shall be established a Compensation Account for the Participant to which
there shall be credited any Deferred Compensation as of the Credit Date for such
deferral. For each type of Compensation to be deferred, the Plan shall provide
for a Cash Account and an Arch Stock Account. Stock-based Compensation may only
be deferred to an Arch Stock Account. The Committee may establish from time to
time other types of Compensation Accounts reflecting different investment
options. Each Participant's Compensation Account shall be credited (or debited)
on each Accounting Date with income (or loss) based on a hypothetical investment
in any one or more of the investment options available under the Plan, as
prescribed by the Plan or the Committee. Gains, losses and other elements of
determining value shall be determined substantially on the basis of a
hypothetical investment in the various investment options, as determined and
applied in the manner deemed appropriate by the Committee.
(b) Arch Stock Account. If a Participant elects to invest all or any
portion of his or her Deferred Compensation in the Arch Stock Account, that
portion of the Participant's Compensation Account shall be credited on the
Credit Date with Arch Stock Units equal to the number of shares of Common Stock
(including fractions of a share determined to three decimal places) that could
have been purchased with the amount of such Deferred Compensation at the Fair
Market Value on the Credit Date; provided that in the case of Stock-based
Compensation, the Arch Stock Account shall be credited with the number of Arch
Stock Units equal to the number of shares being paid out as the Stock-based
Compensation.
(c) Dividends and Interest. Each time a cash dividend is paid on Common
Stock or Olin Common Stock, a Participant
<PAGE>
7
who has shares of such stock credited to his or her Stock Account shall receive
a credit in applicable Stock Units for such dividends on the dividend payment
date to his or her applicable Stock Account. The number of additional Arch Stock
Units or Olin Stock Units (rounded to the nearest one-thousandth of a share)
credited to the applicable Stock Account will be determined by dividing (i) the
product of (a) the dollar value of the cash dividend declared in respect of a
share of Common Stock or Olin Common Stock, as applicable, multiplied by (b) the
number of Stock Units credited to the Participant's applicable Stock Account as
of the dividend record date by (ii) the Fair Market Value of a share of Common
Stock or Olin Common Stock, as applicable, on the dividend payment date.
The Cash Account of a Participant shall be credited on each Accounting Date
with interest for the quarter ending on such date, payable at the Rate of
Interest on such date.
(d) Adjustment for Distribution. As of the Distribution Date, the cash
account and stock account held under the Olin Employee Deferral Plan of each
Arch Employee (after giving effect to the adjustment described in Section 6(e)
of the Olin Employee Deferral Plan) shall be transferred to this Plan.
Except as provided in Section 6(c) with respect to dividends or in Section
3, no additional contributions or additions may be made to a Participant's Olin
Stock Account after the Distribution Date.
(e) Plan Remains Unfunded. Amounts credited to a Compensation Account
shall remain a part of the general funds of the Company and nothing contained in
this Plan shall be deemed to create a trust or fund of any kind or create any
fiduciary relationship. Nothing contained herein shall be deemed to give any
Participant any ownership or other proprietary, security or other rights in any
funds, stock or assets owned or possessed by the Company, whether or not
earmarked for the Company's own purposes as a reserve or fund to be utilized by
the Company for the discharge of its obligations hereunder. To the extent that
any person acquires a right to receive payments or distributions from the
Company under this Plan, such right shall be no greater than the right of any
unsecured creditor of the Company.
7. MANNER OF ELECTION
------------------
(a) General. Any Employee selected by the Administrator to participate
in the Plan may elect to do so in any Fiscal Year by delivering to Corporate
Human Resources a written notice on a form prescribed by Corporate Human
<PAGE>
8
Resources electing to defer payment of all or a portion (in 25% increments or
other increments so prescribed by the Committee) of his or her Compensation (an
"Election"), provided Section 16(b) Employees who elect to defer to an Arch
Stock Account must have the prior approval of the Committee. Such Election
shall specify whether the payout for the Compensation Account shall be in a lump
sum or in annual installments (not to exceed 20). Separate elections may be
made with respect to each type of Deferred Compensation; however, Compensation
Accounts for the same type of Deferred Compensation shall be paid out in
accordance with the same payout schedule. The Election must be filed on or
before December 31 in order to be effective for amounts earned in the
immediately succeeding Fiscal Year. An effective Election may not be revoked or
modified (except as otherwise stated herein) with respect to a Fiscal Year for
which such Election is effective.
(b) Changes in Election. A Participant will be allowed to change the
Election as provided herein. Any change with respect to the terms of a
Participant's Election for (i) amount or form of any future deferral hereunder
may be made at any time prior to such Compensation being earned and (ii) the
timing (which change may not accelerate a distribution date) or amount of
payments from any Compensation Account shall only be effective if made at least
six months prior to the payout and in the calendar year prior to the calendar
year payout is to occur. The most recent prior elections and beneficiary
designations applicable to the Olin Employee Deferral Plan shall govern this
Plan unless changed subsequent to the Distribution or is inconsistent with this
Plan.
8. MANNER OF PAYMENT
-----------------
(a) Form of Payment. In accordance with the Participant's Election,
amounts credited to a Participant's Compensation Account will be paid in a lump
sum or in the form of annual installments. Except as provided in Section 11, in
the case of distributions from the Arch Stock Account (unless the Administrator,
or in the case of a Section 16(b) Employee, the Committee, decides it shall be
in the form of cash), distributions shall be in shares of Common Stock and in
case of distributions from any other Compensation Account (including the Olin
Stock Account), distributions shall be in the form of cash (unless the Committee
decides it shall be in the form of shares of Common Stock), in each case to the
Participant or, in the event of his or her death, to the Beneficiary. If a
Participant elects to receive payment in installments, the payment period shall
not exceed 20 years.
<PAGE>
9
Payment dates shall be January 1 or July 1 pursuant to Participant's Election.
(b) Calculation for Payments in Cash. The amount of any cash distribution
to be made in installments with respect to a Compensation Account (other than
the Arch Stock Account) will be determined by multiplying (i) the balance in
such Compensation Account on the payment date by (ii) a fraction, the numerator
of which is one and the denominator of which is the number of installments in
which distributions remain to be made (including the current distribution). If
a Stock Account is to be paid out in cash, the amount of any cash distribution
to be made in installments with respect to Arch or Olin Stock Units will be
determined by (i) multiplying the number of Arch Stock Units or Olin Stock Units
attributable to such installment (determined as hereinafter provided) by (ii)
the Fair Market Value of a share of Common Stock or Olin Common Stock, as
applicable, on the fifth business day immediately prior to the date on which
such installment is to be paid. The number of Arch Stock Units or Olin Stock
Units, as applicable, attributable to an installment shall be determined by
multiplying (i) the current number of Arch Stock Units or Olin Stock Units in
the applicable Stock Account by (ii) a fraction, the numerator of which is one
and the denominator of which is the number of installments in which
distributions remain to be made (including the current distribution).
(c) Calculation for Payments in Stock. The amount of any stock
distribution to be made in installments with respect to the amount of a
Compensation Account invested in the Arch Stock Account shall be determined by
multiplying (i) the current number of Arch Stock Units by (ii) a fraction, the
numerator of which is one and the denominator of which is the number of
installments in which distributions remain to be made (including the current
distribution). If a Compensation Account (other than the Arch Stock Account) is
to be paid out in shares of Common Stock, the amount of any stock distribution
to be made in installments with respect to such Compensation Account shall be
determined by dividing the amount of cash attributable to such installment
(determined as provided above) by the Fair Market Value of the Common Stock on
the fifth business day immediately prior to the date on which such installment
is to be paid.
(d) Fractional Shares; Required Withholding. Only whole numbers of shares
of Common Stock will be issued, with any fractional shares to be paid in cash.
To the extent required by law, taxes shall be withheld from payouts of the
<PAGE>
10
Compensation Account, provided that if a fractional share results after
withholding, such fractional share shall be withheld as additional tax.
9. COMMENCEMENT OF PAYMENTS
------------------------
Payments of amounts deferred pursuant to a valid Election shall commence
(i) with respect to a lump sum, on January 1 or July 1 as indicated in a
Participant's Election and (ii) with respect to annual installments, on January
1 or July 1 of the first calendar year of deferred payment as selected by a
Participant in his or her Election. If a Participant dies prior to the first
deferred payment specified in an Election or prior to completion of all
installments, payments shall commence to the Participant's Beneficiary on the
first or next payment date so specified, unless the Administrator elects
otherwise to provide for a lump-sum distribution of the deceased Participant's
Compensation Accounts.
10. BENEFICIARY DESIGNATION
-----------------------
A Participant may designate one or more persons to whom payments are to
be made if the Participant dies before receiving payment of any or all amounts
due hereunder. A designation of Beneficiary will be effective only after the
signed Election is filed with Corporate Human Resources while the Participant is
alive and will cancel all designations of Beneficiary signed and filed earlier.
If Corporate Human Resources so permits, Beneficiaries may be designated for
each type of Compensation that is deferred. If the Participant fails to
designate a Beneficiary as provided above, the remaining unpaid amounts shall be
paid in one lump sum to the estate of such Participant. If all Beneficiaries of
the Participant die before the Participant or before complete payment of all
amounts due hereunder, the remaining unpaid amounts shall be paid in one lump
sum to the estate of the last to die of such Beneficiaries. A Participant may,
at any time prior to death, elect to change the designation of a Beneficiary.
11. CHANGE IN CONTROL
-----------------
Notwithstanding any provision of this Plan to the contrary, in the event
of a Change in Control, each Participant in the Plan shall receive an automatic
lump-sum cash distribution of all amounts accrued in the Participant's
Compensation Account (including interest at the Rate of Interest from the date
of the Change in Control through the business day immediately preceding the date
of distribution) not later than 15 days after the date of the
<PAGE>
11
Change in Control. For this purpose, the balance in the portion of a
Participant's Compensation Account invested in the Arch Stock Account or Olin
Stock Account shall be determined by multiplying the number of applicable Stock
Units by the higher of (a) the highest Fair Market Value of Common Stock or Olin
Common Stock, as applicable, on any date within the period commencing 30 days
prior to such Change in Control and ending on the date of the Change in Control,
or (b) if the Change in Control of the Company occurs as a result of a tender or
exchange offer or consummation of a corporate transaction, then the highest
price paid per share of Common Stock or Olin Common Stock, as applicable,
pursuant thereto. Any consideration other than cash forming a part or all of the
consideration for Common Stock to be paid pursuant to the applicable transaction
shall be valued at the valuation price thereon determined by the Board.
In addition, the Company shall reimburse a Participant for the legal fees
and expenses incurred if the Participant is required to seek to obtain or
enforce any right to distribution. In the event that it is determined that such
Participant is properly entitled to a cash distribution hereunder, such
Participant shall also be entitled to interest thereon payable in an amount
equivalent to the prime rate of interest as announced from time to time by
Citibank, N.A. from the date such distribution should have been made to and
including the date it is made.
Notwithstanding any provision of this Plan to the contrary, this Section
11 as applied to any Participant may not be amended or modified to the detriment
of a Participant after a Change in Control occurs without the written consent of
such Participant.
12. LOANS
-----
The Administrator may, upon rules and procedures established by it,
permit Participants to borrow from their Compensation Accounts up to 50% of the
value of the Participant's Stock Account and up to 100% of the Participant's
other Compensation Accounts with such accounts constituting security for
repayment of such borrowings and with such borrowings bearing interest at market
rates as determined by the Administrator. In addition to terms established by
the Administrator, borrowings shall be subject to the following terms and
conditions: (1) a borrowing may not exceed in principal amount outstanding at
any one time $50,000 and the minimum borrowed amount shall be $1,000, (2) a
Participant may not have more than one borrowing outstanding hereunder at any
one time, (3) a
<PAGE>
12
borrowing shall mature in not more than five years, (4) the annual interest rate
on the borrowing, which shall be fixed during its term (except it may increase
in the case of default), shall be 25 basis points over the minimum rate required
by the Internal Revenue Service to avoid imputation of income and (5) principal
and interest payments will amortize over the life of the borrowing except
Participants with borrowings maturing over two years or more may instead elect
to make annual principal installment payments of five percent and pay the
balance of principal at maturity. Notwithstanding any later maturity date, all
such borrowings by Participant become due and payable when the Participant's
employment with the Company and any affiliate terminates.
13. INALIENABILITY OF BENEFITS
--------------------------
The interests of the Participants and their Beneficiaries under the Plan
may not in any way be voluntarily or involuntarily transferred, alienated or
assigned, nor subject to attachment, execution, garnishment or other such
equitable or legal process. A Participant or Beneficiary cannot waive the
provisions of this Section 13.
14. GOVERNING LAW
-------------
The provisions of this plan shall be interpreted and construed in
accordance with the laws of the State of Connecticut, except to the extent
preempted by Federal law.
15. AMENDMENTS
----------
The Committee may amend, alter or terminate this Plan at any time without
the prior approval of the Board; provided, however, that the Committee may not,
without approval by the Board increase the number of securities that may be
issued under the Plan (except as provided in Section 3(b)). No amendment or
modification may impair the rights of a Participant to receive amounts accrued
in the Participant's Compensation Account at the time of the effectiveness of
the amendment or modification.
16. RULE 16b-3 COMPLIANCE
---------------------
It is the intention of the Company that all transactions under the Plan
be exempt from liability imposed by Section 16(b) of the Exchange Act.
Therefore, if any transaction under the Plan is found not to be in compliance
with an exemption from such Section 16(b), the provision of the Plan governing
such transaction shall be deemed amended so that the transaction does so comply
and is so exempt, to the extent permitted by law and deemed advisable by the
<PAGE>
13
Committee, and in all events the Plan shall be construed in favor of its meeting
the requirements of an exemption.
17. EFFECTIVE DATE
--------------
The Plan shall become effective as of the Distribution Date.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF ARCH CHEMICALS, INC./1/
(as of December 31, 1998)
N.B. This list was prepared assuming the Distribution had occurred on
---------------------------------------------------------------------
December 31, 1998
-----------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Subsidiary Jurisdiction Percentage of Direct/
- ---------- ------------ ---------------------
Where Organized Indirect Ownership
--------------- ------------------
by Arch of Voting
-------------------
Securities
----------
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Doe Run Gas Transmission Company Kentucky 100%
- ---------------------------------------------------------------------------------------------
Etoxyl, C.A./2/ Venezuela 100%
- ---------------------------------------------------------------------------------------------
Hydrochim, S.A France 100%
- ---------------------------------------------------------------------------------------------
Hyrdomen Espana, S.L Spain 100%
- ---------------------------------------------------------------------------------------------
N.V. Olin Hunt Specialty Products/3/ Belgium 100%
- ---------------------------------------------------------------------------------------------
N.V. Olin Hunt Trading/4/ Belgium 100%
- ---------------------------------------------------------------------------------------------
Olin Asia Holdings, Ltd./5/ Republic of Mauritius 100%
- ---------------------------------------------------------------------------------------------
Olin Brasil Ltda./6/ Brazil 100%
- ---------------------------------------------------------------------------------------------
Arch Chemicals Canada, Inc. Canada 100%
- ---------------------------------------------------------------------------------------------
Olin Chemicals B.V./7/ The Netherlands 100%
- ---------------------------------------------------------------------------------------------
Olin Chemicals (Suzhou) Co., Ltd./8/ People's Republic of 100%
China
- ---------------------------------------------------------------------------------------------
Olin Electronic Chemicals, Inc./9/ Pennsylvania 100%
- ---------------------------------------------------------------------------------------------
Olin GmbH/10/ Germany 100%
- ---------------------------------------------------------------------------------------------
Olin Hunt Specialty Products, Inc./11/ Delaware 100%
- ---------------------------------------------------------------------------------------------
Olin Industrial (Hong Kong) Limited/12/ Hong Kong 100%
- ---------------------------------------------------------------------------------------------
Olin Japan, Inc./13/ Japan 100%
- ---------------------------------------------------------------------------------------------
Olin Kimya, A.S./14/ Turkey 98.85%
- ---------------------------------------------------------------------------------------------
Olin Microelectronic Chemicals, Inc./15/ Delaware 100%
- ---------------------------------------------------------------------------------------------
Olin Microelectronic Materials AG/16/ Switzerland 100%
- ---------------------------------------------------------------------------------------------
Olin Microelectronic Materials GmbH/17/ Germany 100%
- ---------------------------------------------------------------------------------------------
Olin Microelectronic Materials Limited/18/ United Kingdom 100%
- ---------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
/1/ There are omitted from the following list the names of certain subsidiaries
which, if considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
/2/ Name to be changed to Arch Quimica Andina
/3/ Now known as Arch Electronic Chemicals N.V.
/4/ Now known as Arch Trading N.V.
/5/ Now known as Arch Asia Holdings, Ltd.
/6/ Now known as Arch Quimica Brasil Ltda.
/7/ Now known as Arch Chemicals B.V.
/8/ Now known as Arch Chemicals (Suzhou) Co., Ltd.
/9/ Now known as Arch Electronic Chemicals, Inc.
/10/ Now known as Arch Chemicals GmbH
/11/ Now known as Arch Chemicals Specialty Products, Inc.
/12/ Now known as Arch Chemicals (Hong Kong) Limited
/13/ Now known as Arch Chemicals Japan, Inc.
/14/ Name to be changed to Arch Kimya, A.S.
/15/ Now known as Arch Specialty Chemicals, Inc.
/16/ Now known as ARCH Chemicals AG
/17/ Now known as Arch Semiconductor Chemicals GmbH
/18/ Now known as Arch Semiconductor Chemicals Limited
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Subsidiary Jurisdiction Percentage of Direct/
- ---------- ------------ ---------------------
Where Organized Indirect Ownership
--------------- ------------------
by Arch of Voting
-------------------
Securities
----------
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Olin Microelectronic Materials N.V./19/ Belgium 100%
- ---------------------------------------------------------------------------------------------
Olin Microelectronic Materials S.A./20/ France 100%
- ---------------------------------------------------------------------------------------------
Olin Overseas Finance N.V./21/ Belgium 100%
- ---------------------------------------------------------------------------------------------
Olin Pte. Ltd./22/ Singapore 100%
- ---------------------------------------------------------------------------------------------
Olin Quimica S.A./23/ Delaware 100%
- ---------------------------------------------------------------------------------------------
Olin Quimica S.A. de C.V./24/ Mexico 100%
- ---------------------------------------------------------------------------------------------
Olin S.A./25/ France 100%
- ---------------------------------------------------------------------------------------------
Olin S.R.L/26/ Italy 100%
- ---------------------------------------------------------------------------------------------
Olin (U.K.) Limited/27/ United Kingdom 100%
- ---------------------------------------------------------------------------------------------
Superior Pool Products, Inc. Delaware 100%
- ---------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
/19/ Now known as Arch Chemicals N.V.
/20/ Now known as Arch Semiconductor Chemicals S.A.
/21/ Name to be changed to Arch Overseas Finance N.V.
/22/ Now known as Arch Chemicals Singapore Pte. Ltd.
/23/ Now known as Arch Quimica De Venezuela S.A.
/24/ Now known as Arch Quimica S.A. de C.V.
/25/ Now known as Arch Chemicals S.A.
/26/ Now known as Arch Chemicals S.R.L.
/27/ Now known as Arch Chemicals Limited
EX21
<PAGE>
Exhibit 23
Consent of Independent Auditors
The Board of Directors
Arch Chemicals, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 333-71719 and 333-71721) on Form S-8 of Arch Chemicals, Inc. of our report
dated January 26, 1999, relating to the combined balance sheets of Arch
Chemicals, Inc. as of December 31, 1998 and 1997 and the related combined
statements of income, equity and cash flows for each of the years in the three-
year period ended December 31, 1998, which report appears in the December 31,
1998 annual report on Form 10-K of Arch Chemicals, Inc.
KPMG LLP
Stamford, Connecticut
March 15, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements contained in the Form 10-K for the period ended December
31, 1998 and is qualified in its entirety by reference to such Financial
Statements. Figures are rounded to the nearest 100,000 (except EPS).
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 7,100
<SECURITIES> 0
<RECEIVABLES> 137,000
<ALLOWANCES> (6,700)
<INVENTORY> 139,300
<CURRENT-ASSETS> 313,700
<PP&E> 862,000
<DEPRECIATION> (530,400)
<TOTAL-ASSETS> 721,600
<CURRENT-LIABILITIES> 166,600
<BONDS> 7,000
0
0
<COMMON> 0
<OTHER-SE> 504,500
<TOTAL-LIABILITY-AND-EQUITY> 721,600
<SALES> 862,800
<TOTAL-REVENUES> 862,800
<CGS> 622,000
<TOTAL-COSTS> 622,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,400
<INTEREST-EXPENSE> 600
<INCOME-PRETAX> 60,800
<INCOME-TAX> 20,800
<INCOME-CONTINUING> 40,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
