================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTION 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, 1999
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 06851
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
------------------- ---------------------
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 _X_ No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: [_]
As of January 31, 2000, the aggregate market value of registrant's common
stock held by non-affiliates of registrant was approximately $359,920,104.
As of January 31, 2000, 22,538,963, shares of the registrant's common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE
IN THIS FORM 10-K AS INDICATED HEREIN:
PART OF 10-K
DOCUMENT INTO WHICH INCORPORATED
-------- -----------------------
Proxy Statement relating to Arch's 2000
Annual Meeting of Shareholders Part III
================================================================================
<PAGE>
TABLE OF CONTENTS
FORM 10-K
PART I
PAGE NO.
--------
Item 1 Business ......................................................... 1
Item 2 Properties ....................................................... 7
Item 3 Legal Proceedings ................................................ 9
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 12
Item 6 Selected Financial Data .......................................... 12
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 7A Quantitative and Qualitative Disclosures
about Market Risk 22
Item 8 Financial Statements and Supplementary Data ...................... 24
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 44
PART III
Item 10 Directors and Executive Officers of the Registrant ............... 44
Item 11 Executive Compensation ........................................... 44
Item 12 Security Ownership of Certain Beneficial Owners
and Management 44
Item 13 Certain Relationships and Related Transactions ................... 44
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K .. 44
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Arch Chemicals, Inc. ("Arch" or 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.
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 ("Common Stock")
(such one share for every two being the "Distribution Ratio").
Information as to sales and income (loss) of, and the total assets
attributable to, each of the Company's segments as of the last three fiscal
years appears in Note 9 "Segment Reporting" to the Notes to Consolidated
Financial Statements 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.
1999 EVENTS
In September 1999, the Company purchased the hydroquinone di
(beta-hydroxyethyl) ether ("HQEE") business of Eastman Chemical Company. HQEE is
an aromatic chain extender used in high performance applications for
thermoplastic urethanes and cast elastomers.
On October 28, 1999, the Company's Board of Directors approved a stock
repurchase program, whereby the Company is authorized to buy back up to 1.2
million shares of its Common Stock, representing approximately five percent of
its then outstanding shares. Shares are expected to be repurchased from time to
time in the open market, or otherwise, as conditions warrant.
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 Note 9 "Segment Reporting" to the Notes to
Consolidated Financial Statements 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 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. The Company has
recently announced new products based on two new series of 248nm deep UV
resists, new advanced i-line products and environmentally-friendly residue
removers and has begun sampling both thin imaging systems (TIS2000) and
single-layer 193nm resist materials. The current focus of the photoresist
research and development
1
<PAGE>
efforts is aimed at evolving the technology platforms underlying these products
through 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 microelectronic chemicals sold by the Company also include a variety of
high purity acids, bases, oxidizers, etchants and solvents (collectively
referred to as "process chemicals"). The industry structure in which the process
chemicals business operates results in low profitability at present. Its
customer group is concentrated and enjoys significant purchasing leverage.
Manufacturing overcapacity exists and, unless the industry rationalizes, will
exist in the foreseeable future. This results in unsatisfactory pricing. In
addition, the industry suffers from inefficiencies in manufacturing, asset
utilization, logistics, research and development, and selling and administrative
costs.
Another microelectronic chemical product line, referred to as thin film
systems, includes film deposition precursors, dopants, chlorine sources and
chemical delivery equipment.
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'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. 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. The Company sells calcium
hypochlorite to purify potable water mainly in a number of countries outside the
U.S. The Company has plans to expand its presence in the municipal water market
both domestically and internationally.
In 1999, approximately 78% of the Company's water chemical sales were
within North America, and the remaining 22% were throughout the rest of the
world. In North America, the Company sells water chemical products
2
<PAGE>
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 19 locations throughout Arizona,
California and Nevada. Another subsidiary, Hydrochim, S.A., located in France,
distributes chemicals and equipment throughout Europe. The Company is currently
pursuing a sale of Superior Pool Products, Inc.
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 glycols 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
glycols 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 fungi 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, 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.
3
<PAGE>
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 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 (POCL3),
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, lime and chlorinated isocyanurates.
Chlorine and caustic soda are provided by Olin pursuant to a long term
chlor-alkali supply agreement with Olin and with respect to the Company's
Charleston facility, are 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, propylene oxide,
ethylene oxide, pyridine, iodine, propargyl butyl carbamate, chlorine, caustic
soda, sulfur and ammonia. For this segment, propylene is the most significant
raw material and is subject to price volatility.
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 AND PATENTS
The Company's research activities are conducted at a number of facilities.
Company-sponsored research expenditures were approximately $17.7 million in
1999, $16.2 million in 1998 and $21.1 million in 1997.
4
<PAGE>
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 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 2010 and the others
expire in 2009. The Company owns a patent covering a process for producing Ultra
PureTM 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, approximately 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. 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 $63.1 million in 1999, $63.9 million in 1998 and $93.6 million in 1997. The
financial information about geographic areas contained in Note 9 "Segment
Reporting" to the Notes to the Consolidated Financial Statements found in Item 8
of Part II of this Report is incorporated herein by reference.
EMPLOYEES
As of December 31, 1999, the Company had approximately 3,100 employees,
approximately 740 of whom were working in foreign countries. Approximately 376
of the hourly paid employees of the Company located at its Brandenburg,
Kentucky, Lake Charles, Louisiana, Shreveport, Louisiana and Beaumont, Texas
facilities are
5
<PAGE>
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 which
expire in the years 2000, 2001, 2002 and 2003. 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, dated as of February 1, 1999 (the "Distribution
Agreement"), between the Company and Olin relating to the Distribution,
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 1999, 1998 and 1997, 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
$12.5 million in 1999, $12.0 million in 1998 and $10.8 million in 1997. During
1999, $2.4 million ($1.0 million in 1998; $2.8 million in 1997) was spent on
capital projects, $9.7 million ($10.6 million in 1998; $8.0 million in 1997) was
spent on normal plant operations, and $0.4 million ($0.4 million in 1998) 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 consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting to
$2.4 million at December 31, 1999 and $2.8 million at December 31, 1998, 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
from $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.
6
<PAGE>
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.
LOCATION PRIMARY ACTIVITIES
-------- ------------------
McIntosh, Alabama(1) Blending and storage 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(3) Research and development facility and offices
Norwalk, Connecticut(2) Corporate headquarters
Bethalto, Illinois(2) Corporate data center
Naperville, Illinois(2) Water chemicals service center
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
Maracaibo, Venezuela Manufacturing facility for performance
chemicals
- ----------
(1) Land is leased.
(2) Leased facility.
(3) Subject to a contract of sale. If sold, will become a 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 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.
7
<PAGE>
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 thin film
systems was constructed at Mesa in 1999.
In addition to manufacturing operations, the Company has extensive
analytical testing, applications testing and warehousing capabilities for both
process and thin film chemicals at the Mesa plant site. Current operations
occupy approximately 30 acres of the 52 acre plant site. The remaining acreage
is available for future expansions.
BRANDENBURG, KENTUCKY. The ISO 9002-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.
Additional equipment of the Company at this site produces propellant grade Ultra
PureTM 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 alternative 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, fungi 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.
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 multiple sized formulation vessels
available here.
NORTH KINGSTON, RHODE ISLAND. This ISO 9001-certified 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
8
<PAGE>
state-of-the-art manufacturing facility and product development center for
advanced photoresists has been 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 receives raw
materials and formulates, filters and packages finished goods in a high purity,
clean environment. Full test capabilities are located on-site. The high degree
of flexibility required to custom manufacture specific products is maintained
through the number of multiple sized formulation vessels available here.
Packaging and manufacturing facilities were designed for a new generation of
purity requirements.
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 the Company's 65% (nominal) available chlorine product
while the other produces the Company's 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.
BEAUMONT, TEXAS. The Company's facility 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 alternative 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 thin film 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.
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.
MARACAIBO, VENEZUELA. The Company's ISO 9002-certified facility in
Venezuela is a multi-product manufacturing plant producing a broad range of
polyols, demulsifiers, and specialty 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. 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
9
<PAGE>
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 consolidated balance sheet as of December
31, 1999 would not be material to the Company's financial position, 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, 1999.
EXECUTIVE OFFICERS
The biographical information of the executive officers of the Company as of
March 1, 2000 are noted below.
NAME AND AGE OFFICE
------------- ------
Michael E. Campbell (52) Chairman of the Board and Chief Executive
Officer
Leon B. Anziano (57) President and Chief Operating Officer
Mark A. Killian (52) Corporate Vice President, Human Resources
Louis S. Massimo (42) Corporate Vice President and Chief Financial
Officer
Sarah A. O'Connor (40) Corporate Vice President, General Counsel and
Secretary
W. Paul Bush (49) Vice President and Treasurer
Hayes Anderson (39) Vice President and General Manager,
Semiconductor Chemicals and Services
Paul J. Craney (51) Vice President, Strategic Development
John E. Culbertson (45) Vice President and General Manager, Biocides
Roderick C. Flint (34) Vice President and General Manager, Acids and
Hydrazine and International Operations
James P. LaCasse (48) Vice President and General Manager,
Photopolymers
John J. Margherio (51) Vice President and General Manager,
Performance Urethanes and Organics
James A. Rushton (50) Vice President and General Manager, Water
Chemicals
Alfred C. Schmidt (54) Vice President, Information Technology
Carl G. Seefried (55) Vice President and Chief Technologist
Charles W. Shaver (41) Vice President, Operations
Steven C. Giuliano (30) Controller
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 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. Anziano has announced his intention to retire from the Company
effective mid-2000.
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.
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 served as Olin's
Director of Corporate Accounting. Prior to November 1994, he was an Audit Senior
Manager for KPMG LLP.
10
<PAGE>
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.
Mr. Anderson was appointed Vice President and General Manager,
Semiconductor Chemicals and Services on June 8, 1999. Prior to that time and
since February 19, 1999, Mr. Anderson was Business Director, Process Chemicals
and Chemical Management Services. Prior to serving as Business Director and
prior to the Distribution, Mr. Anderson served as Business Director, Chemicals
Management Services of Olin since 1995 and from 1993 to 1995 was Business
Manager, Chemical Management Services at Olin.
Mr. Craney was appointed Vice President, Strategic Development on August
31, 1999. From February 7, 1999 until August 30, 1999, he was Vice President and
General Manager, Urethane Products. 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. On August 31, 1999, he was given the
additional title of General Manager, International Operations. 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. Margherio was appointed Vice President and General Manager, Performance
Urethanes and Organics on August 31, 1999. From February 7, 1999 until August
30, 1999, he was Vice President, International. 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
Chemicals 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.
11
<PAGE>
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. Shaver was appointed Vice President, Operations on April 29, 1999. From
September 1996 to December 1998, he held several progressive positions with MMT
Environmental, Inc., an environmental R&D company, including Vice
President-Manufacturing, Chief Operating Officer and President. From 1980 to
1996, he held various positions with Dow Chemical Co., serving since 1995 as
Engineering and Technology Manager, Epoxy Products and Intermediates.
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, SEC filings, private offerings and
other services for certain domestic and multinational clients.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
As of January 31, 2000, there were approximately 8,200 record holders of
Company Common Stock.
The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") 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
1999 is set forth in Note 15 "Quarterly Financial Data (Unaudited)" to the Notes
to Consolidated Financial Statements in Item 8 of Part II of this Report. Data
on sales prices and dividends paid for earlier periods are not presented because
no "regular way" stock trading occurred and no cash dividends were paid prior to
February 1999.
Among the provisions of the Credit Facility (as defined on page 20) are
restrictions relating to the payments of dividends and the acquisition of the
Company's Common Stock based on a financial formula. As of December 31, 1999,
dividends and stock repurchases were limited to approximately $83 million.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected historical financial and
operating information with respect to the Company and is derived from the
Consolidated Financial Statements of the Company. The financial data as of and
for each of the three years ended December 31, 1999 were derived from the
audited financial statements included elsewhere herein. Such historical
financial data may not be indicative of the Company's future performance. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-K. The historical financial information for the
periods preceding February 8, 1999 (the "Distribution Date") include an
allocated share of Olin's historical centralized activities. The following
information is qualified in its entirety by the information and financial
statements appearing elsewhere in this Form 10-K.
12
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATIONS
Sales ..................................................... $879.8 $862.8 $929.9 $913.5 $872.8
Cost of Goods Sold ........................................ 637.7 622.0 676.3 647.8 659.6
Selling and Administration (1) ............................ 163.8 167.6 153.5 159.0 141.1
Research and Development .................................. 17.7 16.2 21.1 21.0 17.4
------ ------ ------ ------ ------
Operating Income .......................................... 60.6 57.0 79.0 85.7 54.7
Interest and Other Income, net (2) ........................ 0.9 3.8 7.2 8.4 12.6
------ ------ ------ ------ ------
Income Before Taxes and Extraordinary Gain ................ 61.5 60.8 86.2 94.1 67.3
Income Tax Provision ...................................... 20.8 20.8 29.9 33.0 23.4
------ ------ ------ ------ ------
Income Before Extraordinary Gain .......................... 40.7 40.0 56.3 61.1 43.9
Extraordinary Gain, net (3) ............................... 1.3 -- -- -- --
------ ------ ------ ------ ------
Net Income ................................................ 42.0 40.0 56.3 61.1 43.9
------ ------ ------ ------ ------
Diluted/Unaudited Proforma Income Per Share (4) ........... 1.82 1.55 2.26 2.47 1.72
Common Dividends Per Share (5) ............................ 0.60 -- -- -- --
OTHER
Capital Expenditures ...................................... 58.9 84.3 71.0 53.2 65.4
Depreciation .............................................. 49.3 43.1 43.6 40.2 41.4
Effective Tax Rate ........................................ 33.8% 34.2% 34.7% 35.1% 34.8%
FINANCIAL POSITION
Working Capital ........................................... $168.5 $147.1 $151.5 $124.9 $129.9
Property, Plant and Equipment, net ........................ 326.7 331.6 280.4 257.3 261.4
Total Assets .............................................. 759.5 721.6 693.2 651.2 624.1
Long-Term Debt (4) ........................................ 76.8 7.0 5.5 5.5 5.5
Shareholders' Equity (4) .................................. 451.8 504.5 455.6 429.6 411.4
Capitalization ............................................ 549.6 512.4 462.5 436.9 417.0
</TABLE>
- ----------
Notes:
(1) Selling and administration expenses for 1999 include $2.3 million of
nonrecurring expenses related to an unfavorable arbitration award and the
decision to delay construction of a facility in China.
(2) 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 and includes
equity in earnings of affiliates for all years.
(3) Extraordinary gain, net in 1999 represents a gain on the extinguishment of
debt related to the settlement of a $5.2 million face value note through a
payment of $3.0 million, net of related taxes of $0.9.
(4) In January 1999, Olin borrowed $75 million and on February 8, 1999, the
Company assumed this debt from Olin. Pro forma net income for the periods
1995 through 1998 reflects the pro forma effects of borrowings assuming $75
million was outstanding and that the Company had 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 Note 14 "Pro Forma Financial Information (unaudited)" to
the Notes to Consolidated Financial Statements.
(5) The annual dividend rate is $0.80 per share. 1999 dividends represent three
quarterly payments in 1999.
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 certain periods when the Company operated as the
specialty chemical businesses of Olin. However, this Management's Discussion and
Analysis of Financial Condition and Results of Operations has been prepared as
if the Company were
13
<PAGE>
a separate entity for all periods discussed. It should be read in conjunction
with the Company's historical Consolidated 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. In addition, segment
operating income includes the equity in earnings of affiliated companies.
RESULTS OF OPERATIONS
CONSOLIDATED
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Sales ................................ $879.8 $862.8 $929.9
Gross Margin ......................... 242.1 240.8 253.6
Selling and Administration ........... 161.5 167.6 153.5
Nonrecurring Expenses (1) ............ 2.3 -- --
Research and Development ............. 17.7 16.2 21.1
Equity in Earnings of
Affiliated Companies ............... 5.8 3.4 7.1
Interest Expense (2) ................. 5.7 7.2 7.5
Extraordinary Gain, net (3) .......... 1.3 -- --
Net Income (2) ....................... 42.0 35.7 52.0
Basic Income Per Share (2) ........... $ 1.83 $ 1.55 $ 2.26
Diluted Income Per Share (2) ......... $ 1.82 $ 1.55 $ 2.26
Weighted Average Common Stock
Outstanding:
Basic (2) ............................ 23.0 23.0 23.0
Diluted (2) .......................... 23.1 23.0 23.0
- ----------
Notes:
(1) Represents nonrecurring expenses related to an unfavorable arbitration
award and the decision to delay construction of a facility in China.
(2) Pro Forma Financial Information--In January 1999, Olin borrowed $75 million
and on February 8, 1999, the Company assumed this debt from Olin. Pro forma
net income for 1998 and 1997 reflects the pro forma effects of borrowings
assuming $75 million was outstanding and that the Company had 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 Note 14 "Pro Forma Financial
Information (unaudited)" to the Notes to Consolidated Financial Statements.
(3) Extraordinary gain, net in 1999 represents a gain on the extinguishment of
debt related to the settlement of a $5.2 million face value note through a
payment of $3.0 million, net of related taxes of $0.9.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO 1998
Sales increased 2.0%. The sales increase was due to a 4.7% increase in
volumes partially offset by a 2.7% decrease in prices. The increase in volumes
was primarily related to the water chemicals segment. The decrease in pricing
was primarily related to the microelectronic chemicals and performance chemicals
segments.
Gross margin percentage was 27.5% in 1999 and 27.9% in 1998. Higher raw
materials and manufacturing costs more than offset the impact of higher volumes.
Selling and administration expenses, excluding nonrecurring expenses, as a
percentage of sales decreased to 18.4% in 1999 from 19.4% in 1998 due to higher
sales and lower expenditures. Selling and administration expenses decreased in
amount due to the effect of cost-cutting initiatives implemented by the Company
in 1999, which more than offset incremental public company costs.
14
<PAGE>
Research and development expenses increased due to higher expenditures
associated with the photopolymers business.
Equity in earnings of affiliated companies increased $2.4 million due to
the favorable performance of both of the Company's joint ventures.
Interest expense was $5.7 million in 1999 compared to pro forma interest
expense of $7.2 million in 1998. The decrease was primarily due to lower average
working capital borrowings and lower rates on such borrowings than those assumed
in the prior year.
The effective tax rate decreased to 33.8% in 1999 from 34.2% in 1998 as a
result of higher equity in earnings of affiliated companies, partially offset by
lower foreign tax credits.
Results for 1999 include an extraordinary gain on the extinguishment of
debt of $1.3 million after-tax, or $0.06 per share, and nonrecurring charges of
$1.5 million after-tax, or $0.07 per share.
The Company's sales and operating income for 2000 are expected to be higher
than 1999. Sales for 2000 are expected to be 4% to 6% higher than 1999. Diluted
income per share for 2000 is expected to be 12% to 15% higher than 1999. These
estimates are based upon expected improved financial performance across a number
of Arch's businesses. In microelectronic chemicals, the recovery in the
semiconductor industry, added new photopolymer product qualifications and
actions to improve the short-term performance of process chemicals should
benefit this segment. In water chemicals, the Company expects improved
performance as a result of strategically focusing on our branded business. As
for the performance chemicals segment, recovery in the Asian markets should
benefit the hydrazine business, and organic growth within the segment is
expected to improve 2000 results. The Company also expects to derive additional
benefits overall from continuing cost reduction initiatives.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
Sales decreased 7.2%. The 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.
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.
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
15
<PAGE>
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. Sales and operating income for
each of the years ended December 31, 1999 and 1998 include $9.5 million related
to the amortization of deferred income under the supply agreement.
MICROELECTRONIC CHEMICALS
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
----- ----- -----
($ IN MILLIONS)
RESULTS OF OPERATIONS
Sales ................................ $ 214.8 $ 227.6 $ 242.6
Operating Income (Loss) .............. (3.0) (4.1) 9.5
YEAR ENDED DECEMBER 31, 1999 COMPARED TO 1998
Sales decreased 5.6% and the operating loss decreased in 1999. The results
were negatively impacted by the depressed performance of the process chemicals
product line. Process chemicals reported sales of $67.8 million and incurred an
operating loss of $11.6 million in 1999 compared with sales of $77.6 million and
an operating loss of $8.0 million in 1998. The industry structure in which the
process chemicals business operates results in low profitability at present. The
customer group is concentrated and enjoys significant purchasing leverage.
Manufacturing overcapacity exists and, unless the industry rationalizes, will
exist in the foreseeable future. This results in unsatisfactory pricing. In
addition, the industry suffers from inefficiencies in manufacturing, asset
utilization, logistics, research and development, and selling and administrative
costs. The Company has initiated actions to improve process chemicals
performance in the near-term, which include structural reengineering to
eliminate costs, significant improvement in manufacturing operations and better
inventory management. In addition, the Company is pursuing other various
strategic options.
Excluding the impact of the process chemicals product line, sales decreased
2.0%. Operating income excluding process chemicals improved significantly
primarily due to lower operating expenses as a result of cost reduction
initiatives and favorable joint venture performance (Fuji Photo Film), which
more than offset the effect of slightly lower sales.
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.
WATER CHEMICALS
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------ ------ ------
($ IN MILLIONS)
RESULTS OF OPERATIONS
Sales .................................. $326.8 $290.3 $286.9
Operating Income ....................... 26.3 13.8 26.5
16
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO 1998
Sales increased 12.6% and operating income increased 90.6%. The increase in
sales was attributable to increased volumes from the distribution businesses,
Superior Pool Products and Hydrochim, and higher bulk export and branded volumes
(HTH(R) and Pace(R)). Prices were slightly lower compared to last year as lower
bulk prices were almost entirely offset by higher average brand prices. The
operating income increase was attributable to the additional sales volumes and
favorable joint venture performance which more than offset higher advertising
expenses.
The Company is currently pursuing a sale of one of its distribution
businesses, Superior Pool Products, Inc. ("SPPI") due to its lack of strategic
connection with any of Arch's other businesses. SPPI had sales and operating
income of $84 million and $3.7 million, respectively, in 1999. The Company
expects to complete a transaction during the second quarter of 2000.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
Sales increased 1.2% while operating income decreased 47.9%. Increased
sales from North America branded calcium hypochlorite, higher volumes of Pace(R)
brand products (chlorinated isocyanurates) and higher distribution sales more
than offset lower bulk and export volumes and lower prices. Chinese calcium
hypochlorite producers increased their exports of product, which disrupted the
supply/demand balance and affected prices on a worldwide basis. The decrease in
operating income was primarily attributable to the decline in calcium
hypochlorite prices and higher manufacturing costs and operating expenses. Lower
production volumes, higher depreciation expense and other plant costs, legal
expenses, along with higher distribution costs in connection with a new customer
accounted for the increased operating costs.
PERFORMANCE CHEMICALS
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------ ------ ------
($ IN MILLIONS)
RESULTS OF OPERATIONS
Sales .................................. $338.2 $344.9 $400.4
Operating Income:
Before Nonrecurring Expenses ........ 45.4 50.7 50.1
Nonrecurring Expenses ............... (2.3) -- --
------ ------ ------
Operating Income ....................... 43.1 50.7 50.1
YEAR ENDED DECEMBER 31, 1999 COMPARED TO 1998
Sales decreased 1.9%, while operating income decreased 15%. Excluding $2.3
million of nonrecurring expenses incurred in the third quarter of 1999 related
to an unfavorable arbitration award and the decision to delay construction of a
facility in China, both of which are associated with the Biocides product line,
operating income decreased 10.5% primarily due to lower hydrazine hydrate
pricing.
Performance urethanes and organics sales decreased due to lower pricing and
volumes for nonfoam polyols and lower pricing for propylene glycol products
combined with lower volumes and pricing in Latin America, principally related to
the surfactants business. Operating income increased slightly from the prior
year as increased contract manufacturing fees, improved domestic product mix and
favorable operating expenses due to cost reduction programs more than offset the
lower volumes, pricing and higher raw material costs.
Biocides sales were higher primarily due to increased volumes related to
the anti-dandruff, building products and marine paint markets. Operating income
before nonrecurring expenses was higher due to the impact of higher sales
partially offset by higher international operating expenses. In addition,
manufacturing costs were negatively impacted by an unscheduled outage at the
Rochester plant during the first quarter of 1999 resulting from a severe
snowstorm.
17
<PAGE>
Hydrazine sales were lower due to lower hydrazine hydrate pricing and
volumes caused by poor Asian economic conditions and lower Ultra PureTM sales
due to the timing of launch schedules. Operating income decreased from the prior
year due to the sales shortfall and an unanticipated, extended plant outage
earlier in the year, resulting in unfavorable manufacturing costs.
Sulfuric acid sales were comparable to prior year as higher pricing offset
lower volumes. Operating income increased primarily as a result of lower
manufacturing costs and operating expenses due to cost reduction efforts.
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 anti-dandruff 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 anti-dandruff agent volumes to the Asian
market, and higher administration expense for additional international
personnel.
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 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. Sales and
operating income for each of the years ended December 31, 1999 and 1998 include
$9.5 million related to the amortization of deferred income under the supply
agreement.
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
18
<PAGE>
investigatory and remedial efforts were not material to operating results in
1999, 1998 and 1997 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
$12.5 million in 1999, $12.0 million in 1998 and $10.8 million in 1997. During
1999, $2.4 million ($1.0 million in 1998; $2.8 million in 1997) was spent on
capital projects, $9.7 million ($10.6 million in 1998; $8.0 million in 1997) was
spent on normal plant operations, and $0.4 million ($0.4 million in 1998) 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 Consolidated Balance Sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting to
$2.4 million at December 31, 1999, and $2.8 million at December 31, 1998, 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
from $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.
INCOME TAXES
The Company provides for deferred taxes on temporary differences between
the financial statement and tax bases of assets using the enacted tax rates
which are expected to apply to taxable income when the temporary differences are
expected to reverse.
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 prior to the Distribution 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 were
settled with Olin on a current basis. Olin and the Company entered into a Tax
Sharing Agreement that provides that Olin is 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.
LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA
Cash flows from operations supplemented by the Company's credit facility
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.
19
<PAGE>
CASH FLOW DATA
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------ ------ ------
($ IN MILLIONS)
PROVIDED BY (USED FOR)
Net Operating Activities ............. $ 58.7 $ 85.2 $ 83.5
Capital Expenditures ................. (58.9) (84.3) (71.0)
Net Investing Activities ............. (67.0) (85.3) (59.4)
Net Financing Activities ............. 13.8 (1.2) (21.6)
For the 1999 year, the reduction in cash flow provided by net operating
activities was primarily attributable to higher accounts receivable due to
increased fourth quarter sales and an increase in the overall days sales
outstanding as compared to 1998.
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.
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.
Capital spending for the 1999 year decreased 30.1% compared to the prior
year. The decrease is primarily attributable to the completion of certain
capital projects in the microelectronic chemicals segment in the prior year and
as a result of the Company's focus on reducing capital spending levels.
In September 1999, the Company purchased the Hydroquinone di
(beta-hydroxyethyl) ether ("HQEE") specialty chemicals business from Eastman
Chemical Company of Kingsport, Tennessee.
Capital spending for the 1998 year increased 18.7% over the prior year. In
microelectronic chemicals, there were 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 started up during 1999. These three projects represent a total
investment of approximately $58 million, of which approximately $36 million was
spent during 1998. 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 2000 is expected to be in the $65 million range.
Cash provided by financing in 1999 was due to increased borrowings
associated with higher working capital requirements, dividends paid to
shareholders of $13.8 million, and $6.7 million used to repurchase common stock.
Net financing activities in 1998 and 1997 related to intercompany activity
with Olin.
On January 27, 1999, Olin obtained an unsecured $125 million revolving
five-year credit facility, which expires in January 2004 and an unsecured $125
million, 364-day facility, which expired in January 2000 (collectively, the
"Credit Facility"). Olin borrowed $75 million under the Credit Facility. On
February 8, 1999, the Company succeeded to the Credit Facility and assumed the
$75 million of debt. The unsecured $125 million, 364-day facility was renewed by
the Company under the same terms, and now expires in January 2001.
20
<PAGE>
The Credit Facility contains leverage and interest coverage ratio
covenants, and restricts the payment of dividends in excess of $65 million plus
50% of cumulative net income under certain circumstances. Fees are payable on
the Credit Facility and range from 0.125% to 0.30%. The Company may select
various floating rate borrowing options, including but not limited to, LIBOR
plus 0.325% to 1.00% and the prime rate. At December 31, 1999, the Company had
$160 million of available borrowings under this Credit Facility. The Company
believes that the Credit Facility is adequate to satisfy its liquidity needs for
the near future.
Arch also currently has approximately $30 million of uncommitted lines of
credit.
On October 28, 1999, Arch's Board of Directors approved a stock repurchase
program whereby the Company is authorized to buy back up to 1.2 million shares
of its common stock, representing approximately 5% of outstanding shares.
Through December 31, 1999, the Company had repurchased approximately 391,000
shares under this program at a cost of $6.7 million. The Company believes that
its current financing ability and liquidity are more than adequate to fund this
program and allow it to continue to pursue strategic acquisitions.
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, 2000.
The Company is currently evaluating the effect this statement will have on its
financial position and results of operations in the period of adoption.
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.
Conversion to the euro is not expected to have a material impact on the
Company's 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 euro, Canadian dollar 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, 1999, the Company had forward contracts to sell
foreign currencies with face values of $0.9 million (1998-$5.3 million) and
forward contracts to buy foreign currencies with face values of $2.3 million
(1998-$3.1 million). At December 31, 1999 and 1998 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 transaction 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 Consolidated 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.
21
<PAGE>
YEAR 2000 COMPUTER SYSTEMS
The Company's year 2000 initiatives have been successful to date. The
Company's approach was to subdivide its Year 2000 program into four distinct
segments: 1) Business Systems; 2) Manufacturing; 3) Supply Chain; and 4)
Infrastructure. The Company has transitioned all of its systems to the new
millennium without experiencing significant problems in any of its business
systems, manufacturing, supply chain or infrastructure areas.
In addition, the Company believes it has identified, tested and developed a
plan to respond to all known Year 2000 concerns in accordance with its
contractural obligations and operational requirements. The Company currently is
not aware of any significant Year 2000 or similar problems that have arisen for
its customers or suppliers. Therefore, management believes it has minimized its
risk related to future exposure concerning Year 2000 issues. The Company intends
to continue to monitor Year 2000 issues and does not believe such future costs
will be material to the Company's results of operations, financial position or
liquidity.
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 businesses
operate. Words such as "anticipates," "believes," "estimates," "expects,"
"forecasts," "opines," "plans," "predicts," "projects," "should," "targets,"
"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 2000; the continued recovery of economic
conditions in Asia; customer acceptance of new products, efficacy of new
technology, changes in U.S. laws and regulations, 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 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 Credit
Facility which is based upon various floating rates. Based upon the expected
levels of borrowings under this facility in 2000, an increase in interest rates
of 100 basis points would not have a material adverse effect on the Company's
results of operations or cash flows (approximately $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 affect the Company's equity
investments and its respective share of earnings (losses), the Company's net
investment in foreign subsidiaries,
22
<PAGE>
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
euro, Canadian dollar and Japanese yen). It is the Company's policy to hedge
approximately 60% to 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, 1999, the Company had forward contracts to sell foreign
currencies with face values of $0.9 million and forward contracts to buy foreign
currencies with face values of $2.3 million. The fair values of these forward
contracts approximated face values.
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 of between $1 million to $2 million, as any increase
(decrease) in cash flows resulting from the Company's hedged forward contracts
would be offset by an equal increase (decrease) in cash flows on the underlying
transaction being hedged.
23
<PAGE>
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 consolidated balance sheets of Arch
Chemicals, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, shareholders' equity (equity prior to
the distribution) and cash flows for each of the years in the three-year period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Arch
Chemicals, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
Stamford, CT
January 26, 2000
24
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------
1999 1998
------ ------
(IN MILLIONS,
EXCEPT PER
SHARE AMOUNTS)
ASSETS
Current Assets:
Cash and Cash Equivalents ........................... $ 12.1 $ 7.1
Receivables, net:
Trade ............................................. 156.0 130.3
Other ............................................. 12.6 11.4
Inventories, net .................................... 147.3 139.3
Other Current Assets ................................ 26.7 25.6
------ ------
Total Current Assets .............................. 354.7 313.7
Investments & Advances--Affiliated Companies
at Equity ........................................... 20.8 21.1
Property, Plant and Equipment, net .................... 326.7 331.6
Goodwill .............................................. 37.1 34.8
Other Assets .......................................... 20.2 20.4
------ ------
Total Assets ...................................... $759.5 $721.6
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-Term Borrowings ............................... $ 21.0 $ 0.9
Accounts Payable .................................... 108.1 106.7
Accrued Liabilities ................................. 57.1 59.0
------ ------
Total Current Liabilities ......................... 186.2 166.6
Long-Term Debt ........................................ 76.8 7.0
Other Liabilities ..................................... 44.7 43.5
------ ------
Total Liabilities ................................. 307.7 217.1
Commitments & Contingencies
Shareholders' Equity:
Common Stock, par value $1 per share,
Authorized 100.0 shares:
22.6 shares issued and outstanding
at December 31, 1999 ............................ 22.6 --
Additional Paid-in Capital .......................... 431.9 --
Retained Earnings from February 8, 1999 ............. 23.8 --
Equity .............................................. -- 519.0
Accumulated Other Comprehensive Loss ................ (26.5) (14.5)
------ ------
Total Shareholders' Equity ........................ 451.8 504.5
------ ------
Total Liabilities and Shareholders' Equity ........ $759.5 $721.6
====== ======
See accompanying notes to the consolidated financial statements
25
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
Sales ......................................... $879.8 $862.8 $929.9
Operating Expenses:
Cost of Goods Sold .......................... 637.7 622.0 676.3
Selling and Administration .................. 163.8 167.6 153.5
Research and Development .................... 17.7 16.2 21.1
------ ------ ------
Operating Income .............................. 60.6 57.0 79.0
Equity in Earnings of Affiliated Companies .. 5.8 3.4 7.1
Interest Expense ............................ 5.7 0.6 0.9
Interest Income ............................. 0.8 1.0 1.0
------ ------ ------
Income Before Taxes and Extraordinary Gain .... 61.5 60.8 86.2
Income Taxes ................................ 20.8 20.8 29.9
------ ------ ------
Income Before Extraordinary Gain .............. 40.7 40.0 56.3
Extraordinary Gain (net of taxes of $0.9) ... 1.3 -- --
------ ------ ------
Net Income .................................... $ 42.0 $ 40.0 $ 56.3
====== ====== ======
PRO FORMA
UNAUDITED
------------------
Basic Income Per Share:
Before Extraordinary Gain ................... $ 1.77 $ 1.55 $ 2.26
Extraordinary Gain .......................... 0.06 -- --
------ ------ ------
Net Income .................................. $ 1.83 $ 1.55 $ 2.26
====== ====== ======
Diluted Income Per Share:
Before Extraordinary Gain ................... $ 1.76 $ 1.55 $ 2.26
Extraordinary Gain .......................... 0.06 -- --
------ ------ ------
Net Income .................................. $ 1.82 $ 1.55 $ 2.26
====== ====== ======
Weighted Average Common Stock
Outstanding--Basic .......................... 23.0 23.0 23.0
Weighted Average Common Stock
Outstanding--Diluted ........................ 23.1 23.0 23.0
See accompanying notes to the consolidated financial statements
26
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
----- ----- -----
($ IN MILLIONS)
OPERATING ACTIVITIES:
Net Income .................................... $42.0 $40.0 $56.3
Adjustments to Reconcile Net Income to
Net Cash and Cash Equivalents
Provided (Used) by Operating Activities:
Earnings of Non-consolidated Affiliates ... (5.8) (3.4) (7.1)
Depreciation .............................. 49.3 43.1 43.6
Amortization of Intangibles ............... 4.1 4.0 3.8
Deferred Taxes ............................ 2.1 2.7 (5.2)
Change in Assets and Liabilities Net of
Purchases and Sales of Businesses:
Receivables ............................. (26.7) 19.9 (13.7)
Inventories ............................. (7.9) 0.2 (14.9)
Other Current Assets .................... (1.4) 1.4 0.7
Accounts Payable & Accrued Liabilities .. 7.4 (14.0) (8.4)
Noncurrent Liabilities .................. (5.2) (7.1) 17.4
Other Operating Activities .................... 0.8 (1.6) 11.0
----- ----- -----
Net Operating Activities .................... 58.7 85.2 83.5
----- ----- -----
INVESTING ACTIVITIES:
Capital Expenditures .......................... (58.9) (84.3) (71.0)
Business Acquired in Purchase Transaction ..... (8.0) -- --
Proceeds from Sales of Businesses ............. -- -- 12.0
Investments and Advances-Affiliated Companies
at Equity ................................... -- 0.1 (0.2)
Other Investing Activities .................... (0.1) (1.1) (0.2)
----- ----- -----
Net Investing Activities .................... (67.0) (85.3) (59.4)
----- ----- -----
FINANCING ACTIVITIES:
Long-Term Debt Assumed from Olin .............. 75.0 -- --
Long-Term Debt Borrowings (Repayments) ........ (3.4) 1.7 --
Short-Term Debt Borrowings (Repayments) ....... 20.5 (0.7) (0.2)
Dividends Paid ................................ (13.8) -- --
Purchases of Arch Common Stock ................ (6.7) -- --
Transfers to Olin ............................. (58.1) (2.2) (21.4)
Other Financing Activities .................... 0.3 -- --
----- ----- -----
Net Financing Activities .................... 13.8 (1.2) (21.6)
----- ----- -----
Effect of Exchange Rate Changes on Cash
and Cash Equivalents ...................... (0.5) (0.6) 1.0
----- ----- -----
Net Increase (Decrease) in Cash and
Cash Equivalents .......................... 5.0 (1.9) 3.5
Cash and Cash Equivalents, Beginning of Year .. 7.1 9.0 5.5
----- ----- -----
Cash and Cash Equivalents, End of Year ........ $12.1 $ 7.1 $ 9.0
===== ===== =====
CASH PAID DURING THE YEAR FOR:
Income Taxes, net ........................... $18.4 $ -- $ --
Interest .................................... $ 5.4 $ 0.5 $ 0.8
See accompanying notes to the consolidated financial statements
27
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(EQUITY PRIOR TO THE DISTRIBUTION)
<TABLE>
<CAPTION>
EQUITY IN ACCUMULATED COMPRE-
COMMON STOCK ADDITIONAL EARNINGS OTHER HENSIVE
---------------- PAID-IN RETAINED PRIOR TO COMPREHENSIVE INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) SHARES AMOUNT CAPITAL EARNINGS DISTRIBUTION LOSS (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ........................ -- -- -- -- $436.9 $(7.3) --
Net Intercompany Activity ........................... -- -- -- -- (21.4) -- --
Net Income .......................................... -- -- -- -- 56.3 -- $56.3
Other Comprehensive Loss ............................ -- -- -- -- -- (8.9) (8.9)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 ........................ -- -- -- -- 471.8 (16.2) 47.4
----
Net Intercompany Activity ........................... -- -- -- -- 7.2 -- --
Net Income .......................................... -- -- -- -- 40.0 -- 40.0
Other Comprehensive Income .......................... -- -- -- -- -- 1.7 1.7
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 ........................ -- -- -- -- 519.0 (14.5) 41.7
----
Net Intercompany Activity ........................... -- -- -- -- (62.6) -- --
Net Income Prior to the Distribution ................ -- -- -- -- 4.4 -- 4.4
Capitalization of Divisional Equity ................. 23.0 $23.0 $437.8 -- (460.8) -- --
Net Income Subsequent to the Distribution ........... -- -- -- $37.6 -- -- 37.6
Other Comprehensive Loss ............................ -- -- -- -- -- (12.0) (12.0)
Stock Options Exercised ............................. -- -- 0.4 -- -- -- --
Stock Repurchase .................................... (0.4) (0.4) (6.3) -- -- -- --
Dividends Paid ($0.60 per share in 1999) ............ -- -- -- (13.8) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 ........................ 22.6 $22.6 $431.9 $23.8 $ -- $(26.5) $30.0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements
28
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FORMATION OF ARCH CHEMICALS, INC.
Arch Chemicals, Inc. ("Arch" or 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 semiconductor industries. The principal
businesses in which the Company competes are microelectronic chemicals, water
chemicals and performance chemicals.
Prior to the Distribution, the Company operated the Specialty Chemicals
Division of Olin. 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, glycol ethers,
pyrithione-based and IPBC-based biocides, hydrazine hydrates, propellants and
virgin and regenerated sulfuric acid.
Olin and the Company entered into a Tax Sharing Agreement that provides
that Olin is 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 entered into a Chlor-Alkali Supply Agreement that
provides for the supply by Olin of chlorine and caustic soda. Under the terms of
the agreement, Olin will supply all the Company's requirements for chlorine and
caustic soda for a five-year period ending in 2003, with extensions unless
cancelled on two years' prior notice by either party. Purchases of
electrochemical units of chlorine and caustic soda will be at a fixed price.
BASIS OF PRESENTATION
The preparation of the Consolidated Financial Statements requires estimates
and assumptions that affect amounts reported and disclosed in the Consolidated
Financial Statements and related Notes. Actual results could differ from those
estimates.
The accompanying Consolidated 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, include only
those assets, liabilities, revenues and expenses attributable to the Company's
operations. The Consolidated Financial Statements include the accounts of the
Company and certain majority-owned subsidiaries. Intercompany balances and
transactions between entities included in these Consolidated Financial
Statements have been eliminated. Investments in 20-50% owned affiliates are
accounted for on the equity method.
The Consolidated Financial Statements prior to the Distribution do not
include an allocation of Olin's consolidated debt and interest expense nor do
they reflect the $75 of debt assumed by the Company from Olin on February 8,
1999. For 1998 and 1997, an assessment of corporate overhead is included in
selling and administration expenses with the allocation based on either effort
committed or number of employees. Management believes that the allocation
methods used to allocate the costs and expenses are reasonable, however, such
allocated amounts may or may not necessarily be indicative of what selling and
administration expenses would have been if the Company operated independently of
Olin.
29
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
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.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value.
Certain inventories are valued by the dollar value last-in, first-out (LIFO)
method of inventory accounting. 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.
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:
Improvements to land ................................ 10 to 20 years
Buildings and building equipment .................... 10 to 25 years
Machinery and equipment ............................. 3 to 12 years
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.
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. Other intangibles, which consist primarily of
patents, trademarks, non-compete agreements, and various technology licensing
agreements, are amortized on a straight-line basis principally over 3 to 15
years. Accumulated amortization was $39.2 and $35.3 at December 31, 1999 and
1998, respectively.
VALUATION OF ASSETS
The impairment of tangible and intangible assets is assessed when changes
in circumstances indicate that their current carrying value may not be
recoverable. Under SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," a determination of
impairment, if any, is made based on the undiscounted value of estimated future
cash flows, salvage value or expected net sales proceeds, depending on the
circumstances. The Company periodically reviews the value of its goodwill to
determine if any impairment has occurred. It is the Company's policy to record
asset impairment losses, and any subsequent adjustments to such losses as
initially recorded, as well as net gains or losses on sales of assets as a
component of operating income when the estimated fair value exceeds the carrying
value of such assets. Under Accounting Principles Board Opinion No. 17,
"Intangible Assets," the Company also periodically evaluates the future period
over which the benefit of goodwill will be received, based on the undiscounted
value of future cash flows, and records an impairment if necessary based on the
undiscounted value of estimated future cash flows.
ENVIRONMENTAL LIABILITIES AND EXPENDITURES
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based upon current law and existing technologies. These amounts,
which are not discounted and are exclusive of claims against third parties, are
adjusted periodically as assessment and remediation efforts progress or
additional technical or legal information becomes available. Environmental
30
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
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.
FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable, and short-term borrowings 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 maturity. The fair values of currency forward and option contracts were
estimated based on quoted market prices for contracts with similar terms.
REVENUE RECOGNITION
Revenues are principally recognized when services are rendered or products
are delivered to customers.
U.S. GOVERNMENT CONTRACTS
The Company had entered into a contract with the United States Department
of the Air Force to supply hydrazine-based propellant. It was a one-year
contract with four one-year renewal options beginning January 1, 1995, which
expired on December 31, 1999. The Company is currently in the process of
renegotiating this contract and has received an extension of the contract until
June 30, 2000. The new contract is expected to be a three-year contract with two
one-year renewal options. Negotiations are expected to be completed during the
first half of 2000. The current contract consists of a fixed price facility
management 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 1999, 1998 and 1997 the Company's performance chemicals
segment sales include $17.3, $17.6 and $20.2, related to this agreement.
FOREIGN CURRENCY TRANSLATION
Foreign affiliate balance sheet amounts are translated at the exchange
rates in effect at year-end, and income statement and cash flow amounts are
translated at the average rates of exchange prevailing during the year.
Translation adjustments are included in the accumulated other comprehensive loss
component of shareholders' equity. Where foreign affiliates operate in highly
inflationary economies non-monetary amounts are translated at historical
exchange rates while monetary assets and liabilities are translated at the
current rate with the related adjustments reflected in the Consolidated
Statements of Income.
STOCK OPTIONS
The Company accounts for stock-based compensation under Statement of
Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based
Compensation." As allowed under SFAS No. 123, the Company has chosen to account
for stock-based compensation cost in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Pro forma
information regarding net income and earnings per share, as calculated under the
provisions of SFAS No. 123, is disclosed in Note 6.
INCOME TAXES
The Company provides for deferred taxes on temporary differences between
the financial statement and tax bases of assets using the enacted tax rates,
which are expected to apply to taxable income when the temporary differences are
expected to reverse.
Prior to the Distribution, the Company's operations were included in the
U.S. Federal consolidated tax returns of Olin. The provision for income taxes
prior to the Distribution, includes the Company's allocated share of Olin's
consolidated income tax provision and is calculated on a separate company basis
consistent with the requirements of
31
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
SFAS No. 109, "Accounting for Income Taxes." Allocated income taxes payable were
settled with Olin on a current basis.
EARNINGS PER COMMON SHARE
All earnings per share computations and presentations are in accordance
with SFAS No. 128, "Earnings Per Share." Basic earnings per common share is
computed by dividing net income available to common shareholders by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per common share is calculated in a similar manner except that the
weighted-average number of common shares outstanding during the period includes
the potential dilution that could occur if stock options or other contracts to
issue common stock were exercised. The number of shares included for the
potential issuance of common shares was 0.1 million in 1999. Performance Shares
are not presently included in the calculation of diluted earnings per share, but
may potentially dilute earnings per share in the future.
COMPREHENSIVE INCOME (LOSS)
The Company's other comprehensive income (loss) consists solely of foreign
currency translation gains and losses. 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.
EMPLOYEE BENEFIT PLANS
Pension and postretirement health care and life insurance benefits earned
during the year as well as interest on projected benefit obligations are accrued
currently. Prior service costs and credits resulting from changes in plan
benefits are amortized over the average remaining service period of employees
expected to receive benefits. Curtailment gains and losses are recognized when
they occur. Settlement gains and losses are recognized when significant pension
obligations are settled and the gain or loss is determinable.
2. ADDITIONAL BALANCE SHEET INFORMATION
TRADE RECEIVABLES
Allowance for doubtful accounts was $5.7 and $6.7 at December 31, 1999 and
1998, respectively. Provision for doubtful accounts charged to operations was
$1.2, $1.4 and $1.3 in 1999, 1998, and 1997, respectively. Bad debt write-offs,
net of recoveries, amounted to $2.2, $0 and $0.3 in 1999, 1998, and 1997,
respectively.
INVENTORIES
DECEMBER 31,
------------------
1999 1998
------ ------
Raw materials and supplies ........................ $ 54.9 $ 55.4
Work-in-progress .................................. 13.4 14.2
Finished goods .................................... 129.0 121.7
------ ------
Inventories, gross ................................ 197.3 191.3
LIFO reserves ..................................... (50.0) (52.0)
------ ------
Inventories, net .................................. $147.3 $139.3
====== ======
Inventory valued using the LIFO method comprised 59% of the total inventory
at December 31, 1999 and 65% at December 31, 1998. Gross inventory values
approximate replacement cost.
32
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31,
------------------
1999 1998
------ ------
Land and improvements to land .................... $ 28.5 $ 34.0
Buildings and building equipment ................. 124.0 117.7
Machinery and equipment .......................... 659.2 624.3
Leasehold improvements ........................... 3.1 4.4
Construction-in-progress ......................... 61.9 81.6
------ ------
Property, plant and equipment .................... 876.7 862.0
Less accumulated depreciation .................... 550.0 530.4
------ ------
Property, plant and equipment, net ............... $326.7 $331.6
====== ======
Leased assets capitalized and included in the previous table are not
significant. Maintenance and repairs charged to operations amounted to $35.1,
$33.7, and $37.9 in 1999, 1998, and 1997, respectively.
ACCRUED AND OTHER NON-CURRENT LIABILITIES
Included in accrued liabilities are the following items:
DECEMBER 31,
------------------
1999 1998
------ ------
Deferred income .................................. $ 9.3 $ 9.6
Accrued compensation ............................. 11.0 10.3
Other ............................................ 36.8 39.1
------ ------
Total accrued liabilities ...................... $ 57.1 $ 59.0
====== ======
Included in other non-current liabilities are the following items:
DECEMBER 31,
------------------
1999 1998
------ ------
Deferred income .................................. $ 1.6 $ 12.8
Other ............................................ 43.1 30.7
------ ------
Total other non-current liabilities ............ $ 44.7 $ 43.5
====== ======
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, 1999 and 1998
include $9.5, related to the amortization of the deferred income under such
supply agreement (see Note 10).
3. DEBT
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 expired in January
2000, was subsequently renewed by the Company under the same terms, and now
expires in January 2001 (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 cumulative
net income under certain circumstances. Fees are payable on the Credit Facility
and range from 0.125% to 0.30%. The Company may select various floating rate
borrowing options, including but not limited to LIBOR plus 0.325% to 1.00% and
Prime. The weighted average interest rate for the year ended December 31, 1999
was 6.6%. At December 31, 1999, borrowings under the Credit Facility were $90.0
of which $75.0 was classified as long-term, and the effective interest rate was
7.4%.
33
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
In addition, at December 31, 1999 the Company had $1.8 of long-term
borrowings outstanding floating with LIBOR.
At December 31, 1999, Arch also had approximately $30 of uncommitted
short-term lines of credit available under which $5.4 was outstanding at an
interest rate of 6.2%.
The fair value of the Company's long-term debt was $76.8 at December 31,
1999 and $5.1 at December 31, 1998.
4. FINANCIAL INSTRUMENTS
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 euro, Canadian dollar 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, 1999, the Company had forward contracts to sell
foreign currencies with face values of $0.9 (1998-$5.3) and forward contracts to
buy foreign currencies with face values of $2.3 (1998-$3.1). The fair market
values of these forward contracts approximated face values at December 31, 1999
and 1998. At December 31, 1999, 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. The Company does
not use financial instruments for speculative or trading purposes nor is the
Company a party to leveraged derivatives.
In accordance with Statement of Accounting Standards No. 52 ("SFAS No.
52"), "Foreign Currency Translation," a transaction is classified as a hedge
when the foreign currency transaction 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 Consolidated 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, net of taxes, were $0.2 in 1999, $0.7 in
1998, and $0.5 in 1997.
5. INCOME TAXES
COMPONENTS OF PRETAX INCOME
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
----- ----- -----
Domestic ................................ $45.1 $39.7 $64.4
Foreign ................................. 16.4 21.1 21.8
----- ----- -----
Pretax income ........................... $61.5 $60.8 $86.2
===== ===== =====
COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)
Currently payable:
Federal ............................... $ 7.3 $ 7.5 $20.5
State ................................. 1.9 3.0 6.8
Foreign ............................... 5.0 7.6 7.8
Deferred ................................ 6.6 2.7 (5.2)
----- ----- -----
Income tax expense ...................... $20.8 $20.8 $29.9
===== ===== =====
34
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
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)
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
----- ----- -----
Statutory federal tax rate .............. 35.0 35.0 35.0
Foreign income tax ...................... (3.7) (6.6) (3.5)
State income taxes, net ................. 3.0 3.6 4.2
Goodwill ................................ 0.8 1.0 0.7
Equity in net income of affiliates ...... (3.2) (0.6) (1.5)
Other, net .............................. 1.9 1.8 (0.2)
----- ----- -----
Effective tax rate ...................... 33.8 34.2 34.7
===== ===== =====
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
DECEMBER 31,
------------------
1999 1998
------ ------
Deferred tax assets:
Postretirement benefits ........................ $ 8.7 $ 7.0
Non-deductible reserves ........................ 18.1 21.9
Other miscellaneous items ...................... 6.6 3.7
------ ------
Total deferred tax assets ................... 33.4 32.6
------ ------
Deferred tax liabilities:
Property, plant and equipment .................. 19.3 12.7
Other miscellaneous items ...................... 2.2 1.4
------ ------
Total deferred tax liabilities .............. 21.5 14.1
------ ------
Net deferred tax asset ........................... $ 11.9 $ 18.5
====== ======
Included in Other Current Assets at December 31, 1999 and 1998,
respectively, are $19.2 and $19.5 of net current deferred tax assets. Included
in Other Long-Term Liabilities at December 31, 1999 and 1998, respectively, are
$7.3 and $1.0 of net long-term deferred tax liabilities. 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.
The Company provides for deferred taxes on temporary differences between
the financial statement and tax bases of assets using the enacted tax rates that
are expected to apply to taxable income when the temporary differences are
expected to reverse. At December 31, 1999, the Company's share of the cumulative
undistributed earnings of foreign subsidiaries was approximately $84. No
provision has been made for U.S. or additional foreign taxes on the
undistributed earnings of foreign subsidiaries since the Company intends to
continue to reinvest these earnings. Foreign tax credits would be available to
substantially reduce or eliminate any amount of additional U.S. tax that might
be payable on these foreign earnings in the event of distributions or sale.
6. STOCK OPTION AND SHAREHOLDER RIGHTS PLAN
STOCK OPTION PLAN
At the time of the Distribution, stock options issued by Olin were
converted into both an option to purchase Company common stock ("Company
Options") and an option to purchase Olin common stock ("New Olin Options") with
the same aggregate "intrinsic value" at the time of the Distribution as the old
award. The conversion of the options did not result in a charge to earnings as
no new measurement date was created. The Company is
35
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
responsible for delivering shares of Company common stock upon exercise of
Company Options, and Olin is 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
retain the original term of the option. Options granted to such employees under
the Olin 1996 Stock Option Plan, which were not 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.
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.
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 grants were made under the Company's 1999 Long Term Incentive Plan. The
options vest and become exercisable 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.
The following table summarizes stock option activity during 1999 (number of
options in thousands):
STOCK AVERAGE
OPTIONS PRICE RANGE OF PRICES
----- ------ -------------
Olin stock options converted
as of the Distribution ............... 1,557 $26.84 $15.68-$34.88
Options granted .................... 1,032 19.51 19.41-22.72
Options exercised .................. 34 19.38 19.38
Options cancelled or forfeited ..... 181 23.82 19.38-34.88
----- ------ -------------
Balance, December 31, 1999 ............. 2,374 $23.99 $15.68-$31.92
===== ====== =============
At December 31, 1999, options covering 1,100,061 shares were currently
exercisable at a weighted average exercise price of $25.89. The average
remaining contractual life was approximately seven years.
Pursuant to APB No. 25, 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, and Arch's policy is, 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. Compensation cost for performance
share units is estimated based on the number of shares to be earned. The
ultimate cost will be based on the market price of the Company's stock at the
settlement date. Prior to the Distribution, certain employees of the Company
received 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 Consolidated Statements of Income and is not material to
operating results.
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 1996. The
fair value of each Olin option granted during 1998 and 1997 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 and 2.8% in
1997, risk free interest rate of 5.5% in 1998 and 1997, expected volatility of
27% in 1998, and 21% in 1997 and an expected life of 7 years. The fair value of
each Arch option granted during 1999 was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
36
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
assumptions used: dividend yield of 4.2%, risk free interest rate of 6.25%,
expected volatility of 40% and an expected life of 7 years. Pro forma net income
as if the Company had recorded compensation expense for the Arch and Olin stock
options granted was $40.7, $39.5, and $55.6 in 1999, 1998 and 1997,
respectively. Pro forma earnings per share in 1999 would have been $1.76 per
share.
The 1998 and 1997 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.
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.
7. EMPLOYEE BENEFIT PLANS
PENSION PLANS AND RETIREMENT BENEFITS
Effective February 8, 1999, the Company established the Arch pension
benefit plan, a defined benefit pension plan covering virtually all U.S.
employees. Prior to the Distribution, these employees were participants in one
of several Olin pension benefit plans covering employees of other Olin
businesses. The Arch pension benefit plan provides benefits based on service
with Olin and with the Company. The Company is 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 transferred assets to the
Company's pension plan. The amount of the assets transferred was calculated in
accordance with Section 4044 of the Employee Retirement Income Security Act of
1974, as amended. The assets of the Arch plan consist primarily of investments
in commingled funds administered by independent investment advisors.
Olin is liable for postretirement medical and death benefits provided to
former employees of the Company who retired prior to the Distribution.
Subsequent to the Distribution, the Company adopted a retiree medical and death
benefits plan, that largely replicated the Olin retiree medical and death
benefit program. The Company is liable for the payment of all retiree medical
and death benefits earned by Company employees prior to and following the
Distribution who retire. The Olin plan was an unfunded plan; therefore, no
assets were 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 Arch
retirement plan, which prior to the Distribution represents Arch's portion of
Olin's pension benefit plans, and are reflected in the Consolidated Financial
Statements.
37
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
-------------------------------- --------------------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RECONCILIATION OF PROJECTED BENEFIT OBLIGATION:
Projected benefit obligation at beginning of year .... $107.1 $ 81.0 $ 8.2 $ 6.4
Service cost (benefits earned during the period) ..... 6.1 5.0 0.6 0.7
Interest cost on the projected benefit obligation .... 7.6 6.6 0.5 0.5
Plan amendments ...................................... -- 1.8 -- --
Actuarial (gain)/loss ................................ (16.8) 12.7 (1.4) 0.6
Benefits paid ........................................ (0.3) -- -- --
------ ------ ------ ------
Projected benefit obligation at end of year .......... $103.7 $107.1 $ 7.9 $ 8.2
====== ====== ====== ======
RECONCILIATION OF FAIR VALUE OF PLAN ASSETS:
Fair value of plan assets at beginning of year ....... $ 87.0 $ 73.4
Adjustment to fair value of plan assets .............. 27.0 --
Benefits paid ........................................ (0.3) --
Actual return on plan assets (net of expenses) ....... 13.4 13.6
------ ------
Fair value of plan assets at end of year ............. $127.1 $ 87.0
====== ======
FUNDED STATUS ........................................ $ 23.4 $(20.1) $ (7.9) $ (8.2)
Unrecognized net actuarial loss/(gain) ............... (41.3) 5.5 0.2 1.6
Unamortized prior service cost ....................... 4.1 4.8 (0.4) (0.5)
Unrecognized transition asset ........................ (0.5) (1.0) -- --
------ ------ ------ ------
Accrued benefit cost ................................. $(14.3) $(10.8) $ (8.1) $ (7.1)
====== ====== ====== ======
1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------
WEIGHTED AVERAGE RATE ASSUMPTIONS:
Discount rate ........................................ 8.00% 7.00% 7.25% 8.00% 7.00% 7.25%
Rate of compensation increase ........................ 4.60% 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) ..... $ 6.1 $ 5.0 $ 6.1 $ 0.6 $ 0.7 $ 0.4
Interest cost on the projected benefit obligation .... 7.6 6.6 4.6 0.5 0.5 0.4
Expected return on plan assets ....................... (10.1) (7.0) (5.8) -- -- --
Amortization of prior service cost ................... 0.7 0.8 0.7 (0.1) (0.1) (0.1)
Amortization of transition obligation ................ (0.5) (0.5) (0.5) -- -- --
Recognized actuarial (gain)/loss ..................... (0.2) 0.1 -- -- -- --
------ ------ ------ ------ ------ ------
Net periodic benefit cost ............................ $ 3.6 $ 5.0 $ 5.1 $ 1.0 $ 1.1 $ 0.7
====== ====== ====== ====== ====== ======
</TABLE>
The accumulated benefit obligation relating to the Company's unfunded
pension plans was $3.6 and $4.1, as of December 31, 1999 and 1998, respectively.
For measurement purposes, the assumed health care cost trend rate was 5.7%
for HMO plans and 7.25% for non-HMO plans in 1999, 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 utilized would have resulted in a
$0.1 increase or decrease, respectively, in the aggregate service and interest
cost components of expense for the year 1999, and a $0.4 increase or decrease,
respectively, in the accumulated postretirement benefit obligation at December
31, 1999.
The Company's foreign subsidiaries maintain pension and other benefit plans
that are consistent with statutory practices and are not significant.
38
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
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. Subsequent to the Distribution,
the Olin CEOP was converted into a multiple employer plan in which both Olin and
the Company participate. The matching contribution allocable to the Company
employees has been included in costs and expenses in the accompanying
Consolidated Statements of Income and was $3.4, $3.6, and $3.1 in 1999, 1998 and
1997, respectively.
8. SHAREHOLDERS' EQUITY
On February 8, 1999, 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 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.
9. SEGMENT REPORTING
Segment results for the periods ended December 31 were as follows:
1999 1998 1997
------ ------ ------
SALES:
Microelectronic Chemicals ................ $214.8 $227.6 $242.6
Water Chemicals .......................... 326.8 290.3 286.9
Performance Chemicals .................... 338.2 344.9 400.4
------ ------ ------
TOTAL SALES ................................... $879.8 $862.8 $929.9
====== ====== ======
OPERATING INCOME (LOSS), INCLUDING
EQUITY INCOME IN AFFILIATED COMPANIES:
Microelectronic Chemicals ................ $ (3.0) $ (4.1) $ 9.5
Water Chemicals .......................... 26.3 13.8 26.5
Performance Chemicals .................... 45.4 50.7 50.1
------ ------ ------
TOTAL OPERATING INCOME, INCLUDING
EQUITY INCOME IN AFFILIATED COMPANIES
BEFORE NONRECURRING EXPENSES ................ 68.7 60.4 86.1
NONRECURRING EXPENSES ....................... (2.3) -- --
------ ------ ------
TOTAL OPERATING INCOME, INCLUDING
EQUITY INCOME IN AFFILIATED COMPANIES ....... $ 66.4 $ 60.4 $ 86.1
====== ====== ======
EQUITY INCOME IN AFFILIATED COMPANIES:
Microelectronic Chemicals ................ $ 2.7 $ 0.9 $ 4.5
Water Chemicals .......................... 3.1 2.5 2.6
------ ------ ------
TOTAL EQUITY INCOME IN AFFILIATED COMPANIES ... $ 5.8 $ 3.4 $ 7.1
====== ====== ======
DEPRECIATION EXPENSE:
Microelectronic Chemicals ................ $ 18.5 $ 14.3 $ 13.1
Water Chemicals .......................... 12.0 11.7 10.4
Performance Chemicals .................... 18.8 17.1 20.1
------ ------ ------
TOTAL DEPRECIATION EXPENSE .................... $ 49.3 $ 43.1 $ 43.6
====== ====== ======
AMORTIZATION EXPENSE:
Microelectronic Chemicals ................ $ 3.9 $ 3.9 $ 3.7
Water Chemicals .......................... 0.1 0.1 0.1
Performance Chemicals .................... 0.1 -- --
------ ------ ------
TOTAL AMORTIZATION EXPENSE .................... $ 4.1 $ 4.0 $ 3.8
====== ====== ======
CAPITAL SPENDING:
Microelectronic Chemicals ................ $ 14.8 $ 43.3 $ 39.8
Water Chemicals .......................... 12.2 10.1 16.2
Performance Chemicals .................... 31.9 30.9 15.0
------ ------ ------
TOTAL CAPITAL SPENDING ........................ $ 58.9 $ 84.3 $ 71.0
====== ====== ======
39
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
1999 1998 1997
------ ------ ------
TOTAL ASSETS:
Microelectronic Chemicals ............... $304.5 $309.6 $286.5
Water Chemicals ......................... 180.9 166.4 182.1
Performance Chemicals ................... 283.1 251.0 235.3
Other ................................... (9.0) (5.4) (10.7)
------ ------ ------
TOTAL ASSETS ................................. $759.5 $721.6 $693.2
====== ====== ======
INVESTMENT & ADVANCES--
AFFILIATED COMPANIES AT EQUITY:
Microelectronic Chemicals ............... $ 11.2 $ 9.2 $ 10.0
Water Chemicals ......................... 9.6 11.9 11.1
------ ------ ------
TOTAL INVESTMENT & ADVANCES--
AFFILIATED COMPANIES AT EQUITY ............. $ 20.8 $ 21.1 $ 21.1
====== ====== ======
Segment operating income includes the equity in the earnings of investees
accounted for by the equity method and does not include interest income,
interest expense or extraordinary items. Segment operating income includes an
allocation of corporate charges based on various allocation bases. Segment
assets include only those assets that are directly identifiable to a segment and
do not include such items as cash, deferred taxes, LIFO reserves, and other
assets. Sales by segment substantially represent sales for the three major
product lines of the Company.
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------ ------ ------
SALES
United States .......................... $647.9 $646.2 $719.8
Foreign ................................ 231.9 216.6 210.1
Transfers between areas:
United States .......................... 69.7 57.6 68.9
Foreign ................................ 2.1 1.7 1.9
Eliminations ........................... (71.8) (59.3) (70.8)
------ ------ ------
Total Sales ......................... $879.8 $862.8 $929.9
====== ====== ======
DECEMBER 31,
----------------------------
1999 1998 1997
------ ------ ------
TOTAL ASSETS
United States .......................... $569.9 $560.1 $503.9
Foreign ................................ 218.9 243.7 234.1
Investments ............................ 11.2 9.5 10.5
Eliminations ........................... (40.5) (91.7) (55.3)
------ ------ ------
Total Assets ........................ $759.5 $721.6 $693.2
====== ====== ======
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 $63.1, $63.9 and $93.6 in 1999,
1998, and 1997, respectively.
10. ACQUISITIONS AND DISPOSITIONS
ACQUISITION
In September 1999, the Company purchased the Hydroquinone Di
(Beta-hydroxyethyl) Ether ("HQEE") specialty chemicals business of Eastman
Chemical Company. This acquisition was accounted for as a purchase and
40
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
the results of operations have been included in the Consolidated Financial
Statements from the date of purchase and were not material in 1999. The related
goodwill is being amortized over 20 years.
Supplemental cash flow information on the business acquired is as follows:
YEAR ENDED
DECEMBER 31, 1999
-----------------
Working capital ....................................... $ 0.1
Property, plant and equipment ......................... 0.2
Other assets .......................................... 3.3
Goodwill .............................................. 4.4
-----
Cash paid for acquisition ............................. $ 8.0
=====
DISPOSITION
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.
Supplemental cash flow information on the business sold is as follows:
YEAR ENDED
DECEMBER 31, 1997
-----------------
Proceeds .............................................. $12.0
Working capital ....................................... (9.0)
Property, plant and equipment ......................... --
Other assets .......................................... (0.2)
Other liabilities ..................................... (2.8)
-----
Gain on disposition of business ....................... $ --
=====
11. COMMITMENTS AND CONTINGENCIES
The Company leases certain properties, such as manufacturing, warehousing
and office space and data processing and office equipment. Leases covering these
properties generally contain escalation clauses based on 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 $27.7 in
1999, $19.8 in 1998, and $19.2 in 1997 (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, 1999
are as follows: $6.6 in 2000; $5.5 in 2001; $4.2 in 2002; $3.6 in 2003; $3.5 in
2004; and $1.2 thereafter.
There are a variety of non-environmental legal proceedings pending or
threatened against the Company. Those matters that are probable have been
accrued for in the accompanying Consolidated Financial Statements. Any
contingent amounts in excess of amounts accrued are not expected to have a
material adverse effect on annual results of operations, financial position or
liquidity of the Company.
41
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
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 retained 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 Consolidated Balance Sheets include liabilities for future
environmental expenditures to investigate and remediate known sites amounting to
$2.4 and $2.8 at December 31, 1999 and 1998, 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.
12. RELATED PARTY TRANSACTIONS PRIOR TO THE DISTRIBUTION
Olin sells chlorine and caustic soda to the Company, which is used
primarily in the production of calcium hypochlorite. These product purchases
aggregated $20.7 in 1998, and $22.8 in 1997, and are reflected in cost of goods
sold in the Consolidated 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 was 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. Aggregate charges to the Company for centralized corporate
services were $30.6 in 1998, and $31.8 in 1997.
13. EXTRAORDINARY GAIN AND NONRECURRING EXPENSES
EXTRAORDINARY GAIN
During the fourth quarter of 1999, Arch recorded an after-tax gain of $1.3
(net of taxes of $0.9), or $0.06 per diluted share related to the early
extinguishment of a $5.2 face value note through a payment of $3.0.
NONRECURRING EXPENSES
During the third quarter of 1999, Arch recorded $2.3 of nonrecurring
expenses related to an unfavorable arbitration award and the decision to delay
construction of a facility in China. These nonrecurring expenses reduced diluted
earnings per share $0.07.
14. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
On January 27, 1999, Olin obtained an unsecured $125 revolving five-year
credit facility which expires in January 2004 and an unsecured $125 364-day
facility, which expired 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 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 $20 under the Credit Facility at an aggregate effective rate of 7%, inclusive
of facility fees and amortization of initial bank fees.
42
<PAGE>
ARCH CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN MILLIONS, EXCEPT SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
------------------------
1998 1997
------ ------
Pro forma effect on:
Increase to interest expense ................... $ 6.6 $ 6.6
Decrease to net income ......................... 4.3 4.3
Pro forma 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.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's common stock began trading on the New York Stock Exchange on
a "regular way" basis on February 9, 1999.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1999 QUARTER QUARTER QUARTER QUARTER YEAR
- ---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Sales ..................................................... $225.0 $268.2 $201.6 $185.0 $879.8
Cost of goods sold ........................................ 157.7 190.4 151.0 138.6 637.7
Income before extraordinary gain .......................... 13.5 20.9 4.1 2.2 40.7
Extraordinary gain ........................................ -- -- -- 1.3 1.3
Net income ................................................ 13.5 20.9 4.1 3.5 42.0
Diluted income per share:
Before extraordinary gain ............................... 0.59 0.90 0.18 0.09 1.76
Extraordinary gain ...................................... -- -- -- 0.06 0.06
Net income .............................................. 0.59 0.90 0.18 0.15 1.82
Stock market price:
High .................................................... 23 1/4 25 5/16 24 3/8 21 5/8 25 5/16
Low ..................................................... 15 15/16 15 1/2 16 13 15/16 13 15/16
Close (at end of quarter) ............................... 16 3/4 24 5/16 16 3/16 20 15/16 20 15/16
Common dividend paid per share ............................ -- 0.20 0.20 0.20 0.60
<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 diluted income (loss) per share ................. 0.65 0.86 0.14 (0.10) 1.55
</TABLE>
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the Company's Directors under the paragraphs
entitled "Who are the persons nominated by the Board in this election to serve
as directors?" and "Who are the other remaining directors and when are their
terms scheduled to end?" under the heading "Item 1--Election of Directors" in
the Proxy Statement relating to the Company's 2000 Annual Meeting of
Shareholders (the "Proxy Statement") is incorporated by reference in this
Report. See also the list of executive officers following Item 4 of this Report.
The information regarding compliance with Section 16 of the Securities Exchange
Act of 1934, as amended, contained in the paragraph entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" under the heading "Security Ownership
of Directors and Officers" in the Proxy Statement is incorporated by reference
in this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information under the heading "Executive Compensation" in the Proxy
Statement (but excluding the Report of the Compensation Committee on Executive
Compensation appearing on pages 11 through 12 of the Proxy Statement and the
graph appearing on page 16 of the Proxy Statement) is incorporated by reference
in this Report. The information under the heading "Additional Information
Regarding the Board of Directors--What are the directors paid for their
services?" in the Proxy Statement is incorporated by reference in this Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning holdings of Company stock by certain beneficial
owners contained under the heading "Certain Beneficial Owners" in the Proxy
Statement and the information concerning beneficial ownership of Common Stock by
directors and officers of the Company under the heading "Security Ownership of
Directors and Officers" in the Proxy Statement are incorporated by reference in
this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the paragraph entitled "Certain Relationships and
Related Transactions" under the heading "Executive Compensation" in the Proxy
Statement are incorporated by reference in this Report.
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:
PAGE
Independent Auditors' Report .............................................. 24
Consolidated Balance Sheets as of December 31, 1999 and 1998 .............. 25
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997 ........................................ 26
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................ 27
Consolidated Statements of Shareholders' Equity
(Equity prior to the Distribution) for the
Years Ended December 31, 1999, 1998 and 1997 .............................. 28
Notes to Consolidated Financial Statements ................................ 29
44
<PAGE>
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 consolidated
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 10.22 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.
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 as amended January 27, 2000.
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(a) 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.*
4.4(b) Amendment No. 1, dated July 25, 1999, to Rights Agreement, dated as of
January 29, 1999-Exhibit 4 to the Company's Quarterly Report on Form
10-Q, for the period ending June 30, 1999.*
4.5 Form of Rights Certificate (attached as Exhibit B to the Rights
Agreement filed as Exhibit 4.4(a) hereto).*
4.6(a) 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.*
4.6(b) Extension Agreement, dated as of January 26, 2000, among the Company,
the Lenders party thereto, Bank of America, National Trust and Savings
Association, as Syndication Agent, Wachovia Bank, N.A., as
Documentation Agent and The Chase Manhattan Bank, as Administrative
Agent, relating to the 364-Day Credit Agreement.
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--Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the period ending December 31, 1998.*
10.3 Covenant Not To Compete Agreement, dated as of February 8, 1999,
between the Company and Olin--Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the period ending December 31, 1998.*
10.4 Form of Employee Benefits Allocation Agreement between the Company and
Olin--Exhibit 10.4 to the Company's Annual Report on Form 10-K for the
period ending December 31, 1998.*
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.*
45
<PAGE>
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(a) Transition Services Agreement, dated as of February 8, 1999, between
the Company and Olin--Exhibit 10.8 to the Company's Annual Report on
Form 10-K for the period ending December 31, 1998.*
10.8(b) Amendment to Transition Services Agreement, dated as of December 29,
1999, between the Company and Olin.
10.9 Tax Sharing Agreement, dated as of February 8, 1999, between the
Company and Olin--Exhibit 10.9 to the Company's Annual Report on Form
10-K for the period ending December 31, 1998.*
10.10 Charleston Services Agreement, dated as of February 8, 1999, between
the Company and Olin--Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the period ending December 31, 1998.*
10.11 Information Technology Services Agreement, dated as of February 8,
1999, between the Company and Olin--Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the period ending December 31, 1998.*
10.12 Form of Executive Agreement.
10.13 1999 Stock Plan for Non-employee Directors, as amended January 1, 2000.
10.14 1999 Long Term Incentive Plan, as amended October 28, 1999.
10.15 Supplemental Contributing Employee Ownership Plan, as amended through
January 27, 2000.
10.16 Supplementary and Deferral Benefit Pension Plan, as amended July 29,
1999.
10.17 Senior Executive Pension Plan, as amended July 29, 1999.
10.18 Employee Deferral Plan-Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the period ending December 31, 1998.*
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.*
10.21 Arch Chemicals, Inc. Annual Incentive Plan, as amended December 9,
1999.
10.22 Senior Management Incentive Compensation Plan as amended January 27,
2000.
21. List of Subsidiaries.
23. Consent of KPMG LLP, dated March 8, 2000.
24. Power of Attorney.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
* Previously filed as indicated and incorporated herein by reference. Exhibits
incorporated by reference are located in SEC File No. 1-14601 unless
otherwise indicated.
46
<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 8, 2000
ARCH CHEMICALS, INC.
By 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
-------- -----
MICHAEL E. CAMPBELL Chairman Of The Board, Chief Executive
- ---------------------------- Officer and Director (Principal
Michael E. Campbell Executive Officer)
RICHARD E. CAVANAGH*
- ----------------------------
Richard E. Cavanagh Director
JOHN W. JOHNSTONE, JR.*
- ----------------------------
John W. Johnstone, Jr. Director
JACK D. KUEHLER
- ----------------------------
Jack D. Kuehler Director
H. WILLIAM LICHTENBERGER
- ----------------------------
H. William Lichtenberger Director
MICHAEL O. MAGDOL
- ----------------------------
Michael O. Magdol Director
JOHN P. SCHAEFER
- ----------------------------
John P. Schaefer Director
LOUIS S. MASSIMO Vice President and Chief Financial
- ---------------------------- Officer (Principal Financial Officer)
Louis S. Massimo
STEVEN C. GIULIANO Controller
- ---------------------------- (Principal Accounting Officer)
Steven C. Giuliano
*By: Sarah A. O'Connor
- ----------------------------
Sarah A. O'Connor
Attorney-in-fact
Date: March 8, 2000
47
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.2 Bylaws of the Company as amended January 27, 2000.
4.6(b) Extension Agreement, dated as of January 26, 2000, among the
Company, the Lenders party thereto, Bank of America, National Trust
and Savings Association, as Syndication Agent, Wachovia Bank, N.A.,
as Documentation Agent and The Chase Manhattan Bank, as
Administrative Agent, relating to the 364-Day Credit Agreement.
10.8(b) Amendment to Transition Services Agreement, dated as of December
29, 1999, between the Company and Olin.
10.12 Form of Executive Agreement.
10.13 1999 Stock Plan for Non-employee Directors, as amended January 1,
2000.
10.14 1999 Long Term Incentive Plan, as amended October 28, 1999.
10.15 Supplemental Contributing Employee Ownership Plan, as amended
through January 27, 2000.
10.16 Supplementary and Deferral Benefit Pension Plan, as amended July
29, 1999.
10.17 Senior Executive Pension Plan, as amended July 29, 1999.
10.21 Arch Chemicals, Inc. Annual Incentive Plan, as amended December 9,
1999.
10.22 Senior Management Incentive Compensation Plan, as amended
January 27, 2000.
21. List of Subsidiaries.
23. Consent of KPMG LLP, dated March 8, 2000.
24. Power of Attorney
27. Financial Data Schedule.
- --------------------------------------------------------------------------------
BYLAWS
OF
ARCH CHEMICALS, INC.
EFFECTIVE
JANUARY 27, 2000
- --------------------------------------------------------------------------------
<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,
<PAGE>
at 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. Notwithstanding the foregoing, a shareholder or a
shareholder's duly authorized attorney-in-fact may authorize another person or
persons to act for such shareholder or attorney-in-fact as proxy by transmitting
or authorizing the transmission of a telegram, cablegram, internet transmission,
telephone transmission or other means of electronic transmission to the person
who will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person who
will be the holder of the proxy to receive such transmission, provided that any
such transmission must either set forth or be submitted with information from
which the judges or inspectors of election can determine that the transmission
was authorized by the shareholder or the shareholder's duly authorized
attorney-in-fact. If it is determined that such transmissions are valid, the
judges or inspectors of election shall specify the information upon which they
relied. Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to this Section 6 may be
substituted or used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.
2
<PAGE>
The Secretary or any Vice President of the Corporation may approve procedures to
implement the foregoing authorization of such transmissions.
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 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)
3
<PAGE>
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 I, 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 I, Section
9 and, if any business is not proposed in compliance with this Article I,
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 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
4
<PAGE>
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 I, 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 I, Section 10 and, if any proposed nomination is not in compliance with
this Article I, 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 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
5
<PAGE>
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.
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
6
<PAGE>
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.
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.
7
<PAGE>
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.
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
8
<PAGE>
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.
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.
9
<PAGE>
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 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
10
<PAGE>
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 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
11
<PAGE>
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 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
12
<PAGE>
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.
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation and the year "1998."
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.
14
<PAGE>
(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.
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
EXHIBIT 4.6(B)
EXTENSION AGREEMENT
Arch Chemicals, Inc.
501 Merritt 7
Norwalk, Connecticut 06856
Attention: Mr. W. Paul Bush
The Chase Manhattan Bank, as Administrative Agent
under the 364-Day Credit Agreement referred to below
270 Park Avenue
New York, New York 10017
January 26, 2000
Gentlemen:
Each undersigned Lender hereby agrees to extend, effective on January
26, 2000 (the "EXTENSION DATE"), the Maturity Date under the 364-Day Credit
Agreement dated as of January 27, 1999 (as the same may be amended, supplemented
or otherwise modified from time to time, the "364-DAY CREDIT AGREEMENT") among
Arch Chemicals, Inc., Olin Corporation, the Lenders and agents party thereto and
The Chase Manhattan Bank, as administrative agent for the Lenders, to January
24, 2001. Terms defined in the 364-Day Credit Agreement are used herein as
therein defined.
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
[Remainder of this page intentionally left blank]
<PAGE>
This Extension Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent,
By: /s/ Lawrence Palumbo, Jr.
---------------------------------
Name: Lawrence Palumbo, Jr.
Title: Vice President
BANK OF AMERICA, N.A.,
individually and as Syndication Agent,
By: /s/ Eileen C. Higgins
---------------------------------
Name: Eileen C. Higgins
Title: Vice President
WACHOVIA BANK, N.A.,
individually and as Documentation Agent,
By: /s/ Jane C. Deavor
---------------------------------
Name: Jane C. Deavor
Title: Senior Vice President
2
<PAGE>
THE BANK OF NEW YORK
By: /s/ Kenneth P. Sneider, Jr.
---------------------------------
Name: Kenneth P. Sneider, Jr.
Title: Vice President
BANK ONE, N.A. (Main Office Chicago)
By: /s/ Stephen E. McDonald
---------------------------------
Name: Stephen E. McDonald
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ Stephen T. Dorosh
---------------------------------
Name: Stephen T. Dorosh
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Roger C. Boucher
---------------------------------
Name: Roger C. Boucher
Title Senior Vice President
3
<PAGE>
SUNTRUST BANK
By: /s/ W. David Wisdom
---------------------------------
Name: W. David Wisdom
Title: Vice President
By:
---------------------------------
Name:
Title:
ABN AMRO BANK N.V.
By: /s/ George Dugan
---------------------------------
Name: George Dugan
Title: Vice President
By: /s/ Patricia Christy
---------------------------------
Name: Patricia Christy
Title: Assistant Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Donald V. Davis
---------------------------------
Name: Donald V. Davis
Title: Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ K.M. O'Conner
---------------------------------
Name: K.M. O'Conner
Title: Vice President
4
<PAGE>
BBL INTERNATIONAL (U.K.) LIMITED
By /s/ C.F. Wright
---------------------------------
Name: C. F. Wright
Title: Authorised Signatories
By: /s/ M-C Swinnen
---------------------------------
Name: M-C Swinnen
Title: Authorised Signatories
5
<PAGE>
Agreed and accepted:
ARCH CHEMICALS, INC.
By: /s/ W. PAUL BUSH
-------------------------------------
Name: W. Paul Bush
Title: Vice President & Treasurer
6
Exhibit 10.8(b)
AMENDMENT TO TRANSITION SERVICES AGREEMENT
THIS AMENDMENT ("AMENDMENT") TO THE TRANSITION SERVICES AGREEMENT,
dated as of December 29, 1999, by and between ARCH CHEMICALS, INC., a Virginia
corporation ("ARCH"), and OLIN CORPORATION, a Virginia corporation ("OLIN").
WITNESSETH:
WHEREAS, ARCH and OLIN have entered into a Transition Services
Agreement, dated as of February 8, 1999, as amended (the "Transition Services
Agreement"), in connection with the spinoff of ARCH from OLIN; and
WHEREAS, the parties desire to amend and extend certain of the ARCH
Services and OLIN Services that are called to be provided under the Transition
Services 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. Unless otherwise defined in this Amendment, capitalized terms
utilized herein have the meanings assigned to them in the Transition Services
Agreement.
2. The following exhibits contained in the Transition Services
Agreement are hereby amended prospectively to read in their entirety effective
January 1, 2000 as attached hereto:
EXHIBIT NAME OF SERVICE
------- ---------------
A Administration (Account #401)
A Automotive (Account #402)
A Mail pickup and delivery/shipping and receiving (Account
#405)
A Catering and Pantry Services (formerly Cafeteria)
(Account #407)
A Environmental Remediation Consultation by Dr. L. Wikstrom
A Medical Services for 501 Merritt 7
<PAGE>
2
B Tax
B Payroll Processing & Distribution
B Research and Development support from Metals Research
Laboratories ("MRL")
B Executive Compensation Administration
B Public Affairs and Investor Relations
The following exhibits contained in the Transition Services Agreement
are deleted in their entirety effective January 1, 2000:
EXHIBIT NAME OF SERVICE
------- ---------------
A Purchasing
A Laboratory Services
B PeopleSoft Processing
B Labor & Employee Relations Consulting
Notwithstanding any longer term originally provided for the Services described
in each such deleted exhibit, the parties acknowledge and agree that the
Services described in each such deleted exhibit shall be terminated as of
January 1, 2000, and waive any non-compliance with any notice provisions of the
Transition Services Agreement relating to termination of such Service.
3. All ideas, improvements, inventions or other intellectual property
conceived or developed by OLIN in the performance of work under the Transition
Services Agreement after February 7, 1999 for ARCH in connection with the
Service referred to in Exhibit B Research and Development support from Metal
Research Laboratories shall become the exclusive property of ARCH and any ideas
or developments accruing therefrom shall be fully disclosed to ARCH and may be
dealt with by ARCH without payment of any consideration other than as specified
in such Exhibit B; provided, however, that OLIN (and any entity controlled by
OLIN or in which OLIN owns 50% or more of an ownership interest) shall have a
continuing, fully paid up, perpetual license to use any such ideas,
improvements, inventions or other intellectual property (the "Technology")
solely in its internal manufacturing process for OLIN products (including toll
manufacturing by OLIN of OLIN products for others) and in its research and
development efforts for OLIN products, provided further in each case, such use
is neither within the field of microelectronic chemicals nor as a chemical
mechanical planarization or stripper product ("Technology License"). Under such
license, OLIN shall be entitled to grant further sublicenses and/or transfer
such license to one
<PAGE>
3
or more persons, in each case solely in connection with the transfer of all or a
portion of OLIN's business if the Technology so licensed is used or useful in
such OLIN business at the time of such transfer. Such sublicensee or transferee
shall be subject to the restrictions contained in the original Technology
License. OLIN and ARCH further agree to execute all papers and documents
reasonably requested by the other party, at no out-of-pocket-cost to the party
of whom the request is made, necessary to, respectively: (i) vest title to such
ideas, developments, information, data, improvements and inventions in ARCH and
to enable ARCH to apply for and obtain Letters Patents thereon and (ii) further
evidence the license granted hereunder in OLIN and its permitted sublicensees or
transferees. Following any sublicense or transfer permitted by this paragraph,
OLIN shall give ARCH prompt notice thereof along with a copy of the sublicence
or transfer agreement as the case may be.
4. All documents, including but not limited to hard copies of
documents, video tapes, audio tapes, CD ROMs, floppy disks and documents
embodied in any other electronic format, which are prepared by Provider for
Customer in connection with a Service, or under Provider's direction for
Customer in connection with a Service, which contain information supplied by
Customer or are based on information supplied by Customer, and all documents
provided to Provider by Customer in connection with any Service shall be the
sole and exclusive property of Customer. All such documents and copies of such
documents shall be forwarded promptly to Customer upon Customer's reasonable
request without charge.
5. Except as amended by this Amendment, the Transition Services
Agreement shall remain unaffected and in full force and effect.
6. This Amendment 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.
IN WITNESS WHEREOF, the parties have executed this Amendment 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, General Counsel
and Secretary
<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, general building
maintenance and other administrative
services (including winding up of
cafeteria operations and equipment
disposal).
TERM: Ends no later than December 31, 2000.
MONTHLY FEE: (35% $81,412/YR. $6,784
ADDITIONAL CHARGES: $0
<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, one
(1) Tahoe and one (1) van. Includes
repairs, gas and car phones. Board
meeting car travel arrangements.
Chauffeur driven eligibility
scheduling.
TERM: Ends no later than December 31, 2000.
MONTHLY FEE: (50% $139,209/yr) $11,600.75
ADDITIONAL CHARGES: $0
<PAGE>
Focus Team: Admin
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, 2000.
MONTHLY FEE: (35% $110,850/yr) $9,237.50
ADDITIONAL CHARGES: $0
<PAGE>
Focus Team: Admin
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
NAME OF SERVICE: Catering & Pantry Services (Account
#407)
ARCH DEPARTMENT PROVIDING SERVICE: Facility Services
LOCATION OF PROVIDER: Norwalk
OLIN DEPARTMENT RECEIVING SERVICE: Various
LOCATION OF RECEIVER: Norwalk
DESCRIPTION: Providing catering services as needed
and pantry service daily. Excludes
cost of each catered event, which is
a direct charge.
TERM: Ends no later than December 31, 2000.
MONTHLY FEE: (35% $22,750/YR. $1,895
ADDITIONAL CHARGES: $0
<PAGE>
Focus Team: EH&S
EXHIBIT A
ARCH SERVICES TO OLIN
---------------------
NAME OF SERVICE: Environmental Remediation Consultation by
- --------------- Dr. L. Wikstrom
ARCH DEPARTMENT PROVIDING SERVICES: ARCH - Environmental Hygiene and Toxicology
- -----------------------------------
LOCATION OF PROVIDER: Norwalk
- ---------------------
OLIN DEPARTMENT RECEIVING SERVICES: OLIN - Environmental Remediation Group
- ----------------------------------
LOCATION OF RECEIVER: Wilmington, MA
- --------------------
DESCRIPTION: 1. Provide consulting services
- ------------ regarding water chemicals and treatment
at Wilmington.
2. Continue review of Town Wells and
Sentinel Wells analyses.
3. Interface with Town of Wilmington Water
Treatment personnel on water chemistry,
analysis and contingency treatment
upgrades.
4. Assist in design, implementation and
review of IRA Pilots
5. Provide consulting services and act as
expert witness for cost recovery trial.
Time to be sent for services shall not be
more than the amount reflected on page two
hereof.
TERM: Ends no later than 12/31/00
- ----
MONTHLY BASE FEE: $ 2,583/month
- -----------------
ADDITIONAL CHARGES: $ 0
- -------------------
<PAGE>
2
Town Wells 12 events 1/2 day 6
Follow up 6 of 12 1 day 6
Sentiniel wells 4 events 1 day 4
Follow up 3 of 4 1 day 3
Town Water treatment
Assessments
Modifications
Upgrades 5 days 5
Plant "B" 4 days 4
IRA's
Plant "B" Bio Pilot 8 days 8
West Ditch Bio 4 days 4
DAPL Stabilization 2 days 2
Interface on Phase III water treatment
Projects 5 days
Conference calls 8 1/2 day each 8
Site Team Meetings 4 4
Non Routine analysis 8
<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 term will be from January 1, 2000 through
- ----- December 31, 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: $10,791 per month.
- -----------
ADDITIONAL CHARGES: $0
- ------------------
<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).
TERM: Ends no later than 4/30/2000
- ----
MONTHLY BASE FEE: $0
- ----------------
ADDITIONAL CHARGES: Compliance Services: $250/hour
<PAGE>
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
OLIN PAYROLL SERVICES TO ARCH CHEMICALS
---------------------------------------
Name of Service: Payroll Processing & Distribution
Olin Dept. providing
Service to Arch Chemicals: Corporate Payroll Department
Location of Provider: East Alton
Arch Dept. Receiving Service: Entire Company
Locations of Receiver: Various
Description: Provide routine processing of employee
payroll and distribution of pay
checks/EFT receipts utilizing the
PeopleSoft Payroll module.
Term: Anticipated to end by 7/31/2000, but in
no case beyond 12/31/2000.
Monthly Base Fee: $15,257 (See attached memo)
Additional Charges for
Additional Services Provided
by Olin Corporation: To be negotiated on an as-needed basis
Additional Charges for
Additional Software
Licensing: All additional licensing costs will be
paid by Arch Chemical
All Charges for
Ceridian Tax Services
For Arch Chemicals: All invoices to be paid by Arch
Chemicals
All Charges for Services
Related to PeopleSoft: To be negotiated on an as-needed basis
<PAGE>
TO: Tony Sandonato Arch Chemicals December 8, 1999
FR: Dennis McGough Olin Corporation C.C.: Rose Gibson
RE: Payroll Services for Arch Chemicals for 2000
This memo confirms our discussions regarding payroll services for Arch Chemicals
beyond 1999.
For 1999, Olin Corporation has been charging Arch Chemicals $18,000/month for
normal payroll services, including the processing and distribution of all normal
payrolls (approximately 67 individual payrolls per month), a once-per-year
special payroll (annual bonuses, etc.), a reasonable number of special check
requests, tax withholding and distribution services and W2 preparation and
distribution. Ceridian Tax Service was paid directly by Arch Chemicals.
Arch would like to continue our payroll services arrangement through the year
2000 because of concerns with potential Y2K issues, (including leap year issues)
that may arise. **For 2000, the fee to Arch Chemicals would be $15,257/month,
which represents a 3.9% increase over 1999 plus modifications to the payroll
process stated in the footnote below. This fee arrangement ANTICIPATES THE SAME
LEVEL OF SERVICE as 1999. Therefore, it does not include the monthly fee to
Ceridian Tax Service. This fee will be paid to the vendor directly from Arch
Chemicals. Also, it does not include the costs related to PeopleSoft, which will
be billed separately. We anticipate that an outside consultant will complete the
PeopleSoft year-end work. Olin Corporation will bill you the costs it incurs to
complete this activity. If, as we have discussed, you are able to reduce the
number of payrolls processed each month, Arch Chemicals will enjoy a negotiated
reduction in fees, commensurate with the level of decrease. If the number of
payrolls increases, the fee will increase commensurate with the increase. Fees
for special services not within the scope of this agreement will be negotiated
at the time these services are requested.
Olin Corporation or Arch Chemicals may terminate this agreement upon three
months written notice to the other. If this agreement is terminated prior to the
end of a calendar year, Olin Corporation agrees to provide all necessary
year-end payroll processing services reflecting transactions through the date of
termination and contract for necessary PeopleSoft year-end services, provided
that Arch Chemicals agrees to pay the appropriate fees for both services.
If the foregoing is agreeable to you, please indicate by signing this memo
below. These changes will be incorporated into the Payroll Processing &
Distribution Services section of the Olin/Arch Transition Services Agreement.
**THIS NEW MONTHLY CHARGE IS BASED ON PENDING CHANGES IN CURRENT PAYROLL
PROCESSING. THIS REPRESENTS THE PROPOSED CHANGE OF WEEKLY TO BI-WEEKLY FOR 4
PAYROLLS. IT ALSO REPRESENTS A 75% REDUCTION IN PRINTING AND POSTAGE CHARGES FOR
EFT STATEMENTS.
<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: Semiconductor Photopolymers
- ------------------
LOCATION OF RECEIVER: Various
- ---------------------
DESCRIPTION: Continued research & development activities
- ------------ related to the chemical mechanical
planarization ("CMP") in support of
photopolymer group.
TERM: Through June 30, 2000. Notwithstanding
- ----- Section 11(a), 3 month advance notice
required to terminate or extend the period
except Arch shall have the right to
terminate this service upon 30 days prior
notice in the event an individual performing
a key role in providing services hereunder
terminates his/her employment with Olin.
MONTHLY FEE: Actual costs incurred on a time and material
- ------------ basis. The base cost for work related to the
CMP project during calendar year 2000 shall
be $25,000 per month. Expenditure beyond
this base level should be authorized by the
appropriate Arch manager.
ADDITIONAL CHARGES
FOR ADDITIONAL SERVICES: To be negotiated on an as-needed basis.
- ------------------------
<PAGE>
HR/BENEFITS
D.J. ENNICO/L.S. MERCEDE
EXHIBIT B
OLIN SERVICES TO ARCH
---------------------
NAME OF SERVICE: Executive Compensation Administration
- ----------------
OLIN DEPARTMENT PROVIDING SERVICE: Compensation
- ----------------------------------
LOCATION OF PROVIDER: Norwalk
- ---------------------
ARCH DEPARTMENT RECEIVING SERVICE: Corporate Compensation & Benefits
- ----------------------------------
LOCATION OF RECEIVER: Norwalk
- ---------------------
DESCRIPTION: Administer Arch Stock Option Plan
- ------------ including participant transactions
ad plan recordkeeping, Director's
Plan and establish recordkeeping
system for Employee Deferral Plan and
Restricted Stock Units.
TERM: Through 12/31/00
- -----
MONTHLY FEE: $250.00
- ------------
CHARGES FOR STOCK OPTION TRANSACTIONS: $20.00 per transaction
- --------------------------------------
CHARGES FOR ADDITIONAL SERVICES: To be negotiated on an as-needed
- -------------------------------- basis.
<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 (Dale Walter)
- -----------------
LOCATION OF PROVIDER: Norwalk
- ---------------------
ARCH Department
RECEIVING SERVICE: Arch Public Affairs
- ------------------
LOCATION OF RECEIVER: Norwalk
- ---------------------
DESCRIPTION: Assistance in message development and
- ----------- speech writing.
TERM: Through 12/31/00.
- ----
MONTHLY FEE: $50.00/hour
- ------------
ADDITIONAL CHARGES: None
- -------------------
Exhibit 10.12
FORM OF
EXECUTIVE AGREEMENT
Agreement between Arch Chemicals, Inc., a Virginia corporation ("Arch
Chemicals"), and (First Name) (Last Name) (the "Executive"), dated as of
(Month Year).
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;
<PAGE>
(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 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 cash
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
2
<PAGE>
(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;
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,
3
<PAGE>
unless reasonably equivalent arrangements (embodied in an on-going substitute or
alternative plan) have been made with respect to such plans; or
(6) Following a Change in Control, 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 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 all previous agreements and understandings (whether oral or written),
including but not limited to, the Executive Agreement dated as of
(Date_of_Agreement) between Arch Chemicals and the Executive. The Executive
hereby releases and forever discharges Arch Chemicals and its affiliates from
any and all obligations or claims the Executive may have with respect to such
prior Executive Agreement and waives any obligations or rights Executive may
have accrued under such prior Executive Agreement, including obligations which
may arise under any circumstances, occurring prior to the date hereof.(1)
3. Term/Executive's Duties.
(a) This Agreement expires at the close of business on July 30,
2004, 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 July 30, 2004, (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.
- ----------
(1) If the Executive did not previously have a Tier I Agreement, substitute
the following language for this paragraph: "This paragraph intentionally
left blank."
4
<PAGE>
(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.
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 30 days of the
Termination or if a Change in Control has occurred, 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 the sum of: (i) two times the Executive
Severance plus (ii) three times the higher of (x) Executive's annual long term
incentive target as last determined by the Arch Chemicals' Board of Directors
(or committee thereof) prior to the Change in Control and (y) the Executive's
annual long term incentive target as in effect immediately prior to the
Termination. 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
5
<PAGE>
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 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.
(g) If the Termination occurs prior to a Change in Control, no
Executive Severance and, except for payments and benefits that the Employee is
legally entitled to by employment or labor law in the absence of this Agreement,
no other benefits and payments pursuant to paragraph 5 below, will be paid or
credited to the Executive unless and until the Executive shall have executed and
delivered to Arch Chemicals a release substantially in the form of Exhibit A
hereto and the seven day period referred to in Exhibit A shall have elapsed
without revocation. Whether the release is "substantially" in such form shall be
determined by Arch Chemicals in its sole discretion. If the Termination occurs
at or following a Change in Control, no such release shall be required.
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'
6
<PAGE>
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 no
Change in Control has occurred at or prior to Termination, the Executive shall
not be entitled to an ICP award for the calendar year in which Termination
occurs. Even if a Change in Control occurs at or prior to Termination, the
Executive shall not be entitled to an ICP award for the calendar year of
Termination if Termination occurs during the first calendar quarter of such
year. However, if a Change in Control occurs and at the same time or thereafter
if Termination occurs during or after the second calendar quarter of a year (and
even if the Executive receives the Executive Severance (including the amount
referred to in paragraph 1(d)(ii)), the Executive shall be entitled to a
prorated ICP award for such calendar year of Termination which shall be
determined by multiplying the higher of (i) his or her then current ICP standard
and (ii) his or her ICP standard in effect prior to the Change in Control, by a
fraction the numerator of which is the number of weeks in such 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 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.
7
<PAGE>
(e) Notwithstanding the provisions of Section 4.6 of the Arch
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 4.6, 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. The lump-sum payment made under the Senior Plan as
calculated under this paragraph 5(e) will be used to reduce any other 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 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
8
<PAGE>
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
9
<PAGE>
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: (Name)
(Address1)
(Address2)
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 State of
Connecticut (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. This Agreement, including its exhibits, constitutes
the complete understanding between the parties with respect to the subject
matter hereof except as otherwise provided in this paragraph 10 or paragraph
16(e). This Agreement shall remain a valid and enforceable contract between the
parties notwithstanding any voluntary, for Cause or other employment
termination. The Executive acknowledges that the Employment Agreement relating
to
10
<PAGE>
Inventions, Patents and Confidential Information which the Executive signed
and is attached as Exhibit B shall continue to remain in effect in accordance
with its terms.
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.
13. Non-assignability. This Agreement is personal in nature and neither
of the parties hereto shall, without the written 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 or any of its
subsidiaries.
15. Disputes/Arbitration.
(a) Except with respect to enforcement by Arch Chemicals of
Paragraph 16 or other legal action by Arch Chemicals for breach by the Executive
of paragraph 16, 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.
(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.
16. Nonsolicitation.
(a) Executive agrees that while employed by Arch Chemicals and for
one year immediately following the cessation of Executive's employment with Arch
Chemicals for any reason (whether voluntary or otherwise), Executive shall:
11
<PAGE>
(i) not, in any way, directly or indirectly, on Executive's
own behalf or on behalf of or in conjunction with any person, company, business,
partnership, enterprise or organization solicit, entice, hire, employ or
endeavor to employ any of the employees of Arch Chemicals (but excluding former
employees who are not so solicited, enticed or hired prior to such former
employee's employment termination); and
(ii) not, directly or indirectly, contact or solicit (or
advise or consult for any person, organization, partnership, business, company
or enterprise with respect to soliciting or contacting) any person or entity who
was a customer of Arch Chemicals at any time in the twenty-four (24) month
period prior to the Executive's cessation of employment or any potential
customer of Arch Chemicals who was specifically targeted for solicitation by
Arch Chemicals at any time during such 24-month period (such customer and
potential customer being an "Arch Customer"), for the purpose of diverting such
customer from Arch Chemicals with respect to, or for the purpose of
recommending, selling or providing any product or service similar to or
competing with, any product or service that (A) is offered by Arch Chemicals at
time of employment termination and (B) the Executive was engaged in managing,
marketing, selling or manufacturing at any time during his or her employment
with Arch Chemicals or Olin Corporation (together with subsidiaries of Olin
Corporation, being collectively "Olin"); provided further that this clause (ii)
shall also apply to (x) those Arch Customers with whom the Executive met or
contacted at any time prior to employment termination for the express purpose of
establishing, soliciting or maintaining a customer relationship with Arch
Chemicals or Olin and (y) any product or service that is offered by Arch
Chemicals at the time of employment termination and that was or was to be the
basis of such customer relationship.
(b) The parties have carefully read this Agreement and have given
and do now give careful consideration to the restraints imposed upon Executive
by this Agreement and are in full accord as to their necessity for the
reasonable and proper protection of Arch Chemicals' businesses. Executive
acknowledges and agrees that (i) each and every restraint imposed by this
Agreement is reasonable with respect to subject matter, duration and geographic
area and (ii) that his or her services to Arch Chemicals are unique and special
and that the Executive has knowledge of Arch Chemicals' trade secrets, customer
base and other confidential information of Arch Chemicals and the Executive
hereby agrees he or she will not assert anything to the contrary in any court,
hearing, arbitration, mediation or other legal forum. Executive further
acknowledges and agrees that the restrictions contained in this Agreement will
not prevent Executive from earning a living within his or her trade or
specialty. The restraints imposed by this Agreement shall continue for their
full periods and throughout the geographic areas set forth in this Agreement
except as provided in paragraph 17 below.
(c) If the Executive shall violate or attempt to violate any of
the provisions of this paragraph 16, then Arch Chemicals shall be entitled, as
of right, to an injunction and/or other equitable relief against Executive,
restraining Executive from violating or attempting to violate any of these
provisions. The parties further agree that this provision does not limit any
other remedies that may be available to Arch Chemicals for breach of this
paragraph 16 by Executive.
12
<PAGE>
(d) The Executive acknowledges that, because of the competitive
nature of Arch Chemicals' businesses and Arch Chemicals' repeat transactions
with many customers, the development and enhancement of customer relationships,
contacts and goodwill are critical factors in ensuring Arch Chemicals' survival
and success and that such customer relationships, contacts and goodwill
constitute valuable assets belonging to Arch Chemicals, whether or not such
assets are produced by the Executive's own efforts. Executive further
acknowledges that directly or indirectly soliciting Arch Chemicals' customers
for a competitor of Arch Chemicals would inevitably result in disclosure of
trade secrets and confidential information belonging to Arch Chemicals, thus
irreparably harming Arch Chemicals.
(e) The provisions contained in this Paragraph 16 are in addition
to, and supplement, any other nonsolicitation or noncompete agreements to which
the Executive may be a party involving Arch Chemicals and do not supersede,
amend or limit any such prior agreements. The Executive acknowledges and agrees
that any prior noncompetition agreement between the Executive and Olin has been
assigned to Arch Chemicals and is effective as if originally entered into with
Arch Chemicals instead of Olin.
(f) For purposes of this paragraph 16, "Arch Chemicals" means Arch
Chemicals including its subsidiaries.
17. Severability. The parties have entered into this Agreement in the
belief that its provisions are valid, reasonable, and enforceable. However, if
any one or more of the provisions contained in this Agreement shall be held to
be unenforceable for any reason, such unenforceability shall not affect any
other provision of this Agreement, and this Agreement shall be construed as if
such unenforceable provision had never been contained herein. However, if any
one or more of the provisions contained in paragraph 16 hereof shall for any
reason be held to be excessively broad as to time, duration, geographic scope,
activity or subject, it shall be construed, by limiting and reducing it, so as
to be enforceable to the extent compatible with applicable law.
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:
------------------------
- -------------------------
(Executive)
13
<PAGE>
Exhibit A
Form of Release
1. In return for the payments and benefits provided by Arch Chemicals, Inc.
(the "Company") under the Executive Agreement, dated ________, 1999 (the
"Executive Agreement") between the undersigned and the Company, the undersigned
agrees not to bring or to participate in any legal proceedings against the
Company, its subsidiaries or successors or the officers, agents, representatives
or executives of the Company or its subsidiaries or their respective successors
(collectively "Releasees") which the undersigned may have or claim to have as a
result of the undersigned's employment which arise out of or relate to acts or
conduct or omissions which occurred prior to the execution of this release. For
purposes of the preceding sentence, "participation" does not include
participating in legal proceedings under compulsion of legal process.
2. The undersigned releases and forever discharges each of the Releasees from
any and all claims or causes of action of any kind, known or unknown, including
claims of discrimination based on age under the federal Age Discrimination in
Employment Act, as amended, or under any related state, federal or local law,
ordinance or regulation; or claims or causes of action under Title VII of the
Civil Rights Act, as amended, or under any related federal, state or local law,
ordinance or regulation; or discrimination claims or causes of action under the
American with Disabilities Act or under any related federal, state or local law,
ordinance or regulation; any claims under the Family and Medical Leave Act or
any related state or local law, ordinance or regulation, or based upon any other
factor prohibited by federal, state or local law, ordinance or regulation; any
claims for wages, incentive pay, bonuses or other compensation or for benefits
of any kind (exclusive of accrued but unpaid wages and vacation pay as of the
date of employment termination, any compensation deferred under the Employee
Deferral Plan, qualified and non-qualified pension and savings plan benefits and
any rights with respect to outstanding and exercisable stock options, vested
performance share units or similar outstanding and vested stock-based awards
granted under the Company's incentive stock plan (which stock-based awards are
the subject of other arrangements and plan provisions), any payments or benefits
to which the undersigned is entitled under the Executive Agreement) or claims
under the Employee Retirement Income Security Act; any claims for attorney's
fees, costs or expenses; and any other statutory or common law claims, including
but not limited to any claims for wrongful discharge, for negligent and/or
intentional infliction of "emotional distress" or any other tort claim, any
claim for breach of any implied or express contract, libel, slander, promissory
or equitable estoppel, breach of an implied covenant of good faith and fair
dealing, fraud or misrepresentation. In addition, the undersigned further agrees
that except as may be required by court order or subpoena or federal law or
regulations, the undersigned will not in any way, directly or indirectly, assist
any individual or entity in bringing or prosecuting any lawsuit against the
Releasees.
3. The undersigned acknowledges that the consideration the undersigned has
received from the Company under the Executive Agreement fully satisfies any and
all claims he or she
14
<PAGE>
may now have or previously had with respect to his or her employment with or
separation from the Company and any of its subsidiaries, including, without
limitation, Job Transition Benefits.
4. It is understood, however, that the undersigned's agreement not to bring a
cause of action against the Company does not include any action alleging a
breach of the Executive Agreement by the Company and that nothing herein shall
prevent the undersigned from bringing a claim for indemnification as a Company
officer under Article IV of the Company's Amended and Restated Articles of
Incorporation at any time as provided therein and in accordance therewith.
5. The undersigned understands that the Employment Agreement Relating to
Inventions, Patents and Confidential Information with the Company, which the
undersigned signed and is attached hereto as Attachment A, shall continue to
remain in effect according to its terms.
6. Moreover, the undersigned agrees that should he or she breach this release
in any manner, including but not limited to by bringing or participating in a
legal proceeding or legal cause of action against the Releasees, contrary to the
terms hereof, the undersigned will return to the Company any and all payments
which the undersigned received under the Executive Agreement, with the exception
of any benefits to which the undersigned was legally entitled by law, in the
absence of the Executive Agreement.
7. The undersigned understands that the Company does not acknowledge or admit
that it has violated any of the undersigned's rights under any federal, state or
local law or ordinance or that it has violated any contractual or other legal
obligations. Nothing in this release, nor the fact that the Company has entered
this release, shall be construed as an admission of liability or wrongdoing by
the Company, which liability or wrongdoing is expressly denied.
8. The undersigned is hereby advised to consult with an attorney of his or
her choice and the undersigned agrees that he or she has been afforded a period
of at least twenty-one (21) days to consider the terms of this release with such
attorney or with anyone else whom the Employee chooses to consult, that the
undersigned understands he or she has seven (7) days from the date of signing
this release in which to revoke it and that this release shall not become
effective or enforceable until this revocation period has expired.
9. Finally, the undersigned acknowledges that he or she is fully competent to
enter this release that he or she has carefully read and fully understands all
of the provisions of this release and the Executive Agreement and that he or she
has knowingly and voluntarily executed this release and the Executive Agreement
without any pressure or duress in exchange for full and sufficient consideration
for which he or she otherwise would not normally be entitled.
Dated:
----------------------------- ------------------------------------
Name:
15
Exhibit 10.13
ARCH CHEMICALS, INC.
1999 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
(As amended effective January 1, 2000)
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
<PAGE>
13d-3 under the 1934 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 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.
2
<PAGE>
"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.
3
<PAGE>
"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.
4
<PAGE>
5. PARTICIPATION. All Non-employee Directors shall participate in the
Plan.
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
5
<PAGE>
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 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.
6
<PAGE>
(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 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. 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
7
<PAGE>
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 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
8
<PAGE>
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 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
9
<PAGE>
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
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
10
<PAGE>
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 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
11
<PAGE>
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.
(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
12
<PAGE>
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.
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
13
<PAGE>
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.
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 its
meeting the requirements of an exemption.
14
EXHIBIT 10.14
ARCH CHEMICALS, INC. 1999 LONG TERM INCENTIVE PLAN
(As amended effective October 28, 1999)
Section 1. PURPOSE
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
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
<PAGE>
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.
(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.
2
<PAGE>
(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.
(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
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,
3
<PAGE>
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 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
(a) SHARES AVAILABLE. The aggregate number of Shares available for
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
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
4
<PAGE>
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 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.
Section 5. ELIGIBILITY
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
(a) OPTIONS. The Committee is authorized to grant Options to
Participants 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
an Option shall be determined by the Committee; PROVIDED,
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
Committee, provided that in no event shall the term of an
Option exceed a period of ten years from the date of its
grant.
5
<PAGE>
(iii) EXERCISE. The Committee shall determine the time or times at
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
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 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.
(i) ISSUANCE. The Committee is authorized to grant Awards of
Restricted Stock and Restricted Stock Units to Participants.
(ii) RESTRICTIONS. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such
6
<PAGE>
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
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 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,
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,
HOWEVER, that the Committee may, in its sole discretion, waive
in whole or in part any or all remaining restrictions with
respect to Shares of Restricted Stock or Restricted Stock
Units.
7
<PAGE>
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
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.
(d) GENERAL.
(i) NO CASH CONSIDERATION FOR AWARDS. Participants shall not be
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
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
8
<PAGE>
arrangement, provided that the purchase or exercise price
under an Award encompassing the right to purchase Shares shall
not be reduced by the cancellation 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
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
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
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
Securities) or right thereunder shall be assignable or
transferable by a Participant, other than (unless limited in
the
9
<PAGE>
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, 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.
(vi) TERM OF AWARDS. Except as otherwise expressly provided in the
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
in order to otherwise satisfy the requirements for exemption
under the
10
<PAGE>
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
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
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.
(x) WITHHOLDING. The Company or any Affiliate may withhold from
any Award granted or any payment
11
<PAGE>
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
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
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
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
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
12
<PAGE>
altering the intent of 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
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
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
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
13
<PAGE>
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, 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 by the board of directors of Olin Corporation for the
distribution of all outstanding shares of common stock of the
14
<PAGE>
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 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). As used in and for all purposes of the Plan
(other than for purposes of Sections 4(a) with respect to
options to purchase stock of Olin Corporation, 4(c) and
6(a)(i) of the Plan), the term "Option" includes an option
transferred to the Plan in connection with the Distribution
("Transferred Option"), the term "Restricted Stock Unit"
includes a restricted stock unit transferred to the Plan in
connection with the Distribution ("Transferred Stock Unit")
and the term "Award" includes a Transferred Option and a
Transferred Stock Unit.
Section 7. AMENDMENT AND TERMINATION
(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 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
15
<PAGE>
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, 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,
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
Company or any Affiliate shall assume outstanding employee awards or
the right or 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
NONRECURRING EVENTS. The Committee may make adjustments in the terms
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
16
<PAGE>
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.
(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 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
17
<PAGE>
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.
(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
18
<PAGE>
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
(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 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.
19
<PAGE>
(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 transaction beneficially own, directly
or indirectly, more than 50% of the aggregate voting stock or
other ownership
20
<PAGE>
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.
EXHIBIT 10.15
ARCH SUPPLEMENTAL CONTRIBUTING EMPLOYEE OWNERSHIP PLAN
Effective February 8, 1999
As Amended by a First Amendment Dated July 29, 1999 and a
Second Amendment dated January 27, 2000
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.
<PAGE>
(e) "Distribution Date" has the same meaning as that specified in
the Distribution Agreement by and between Olin Corporation and Arch
Chemicals, Inc.
(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.
2
<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) 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
3
<PAGE>
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, as of the Effective Date, 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 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.
4
<PAGE>
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. 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,
5
<PAGE>
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 on or
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 after the Distribution Date and on or 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 reserves shall be transferred with respect to such Participant. 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 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 after the Distribution Date and on or
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. No reserves shall be transferred from
Olin or the Olin SCEOP with respect to such Olin employee. 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
6
<PAGE>
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 on or 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 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; however, a Participant may, by filing
with the Plan Administrator prior to death on a form supplied by the Plan
Administrator, designate a different individual or entity to be the designated
Beneficiary of such Participant for purposes of this Plan, in which case the
subsequent designation will supercede any designation of a beneficiary under the
CEOP.
7
<PAGE>
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;
(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
8
<PAGE>
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 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
9
<PAGE>
(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 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).
10
<PAGE>
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 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.
11
<PAGE>
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
Exhibit 10.16
ARCH SUPPLEMENTARY AND DEFERRAL BENEFIT PENSION PLAN
Effective February 8, 1999
As Amended by a First Amendment Dated July 29, 1999
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
<PAGE>
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. For purposes of this Plan, the term "Distribution Date" shall mean
February 8, 1999.
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, as
of the Effective Date, 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.
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).
For purposes of determining the amount and entitlement to the benefits described
in (a) and (b) above, a Participant shall be 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,
2
<PAGE>
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 on or
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 after the Distribution Date and on or before
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 reserves shall be transferred with respect to any
such Participant. 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 its affiliates) and has otherwise qualified for
benefits hereunder. When commenced, benefits payable hereunder shall be
based upon the Participant's 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 after the Distribution Date and on
or before 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. No reserves shall be transferred from Olin or the
Olin Supplementary and Deferral Benefit Plan with respect to such Olin
employee. 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
Plan, 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, or whether, such
benefit under the Olin Supplementary and Deferral Benefit Plan actually
commences.
ARTICLE IV. PAYMENT OF BENEFITS
4.1. BENEFITS COMMENCING ON OR AFTER REACHING EARLY RETIREMENT DATE.
3
<PAGE>
(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. In the case of a Participant who transfers directly to Olin on or
prior to February 8, 2000, "actual retirement" shall be construed to mean
retirement or termination of service from Olin and its affiliates. Service with
Olin and its affiliates shall be credited in enabling the Participant to attain
his early retirement age under this Plan. 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. In the case of Participants who
transfer directly to Olin on or before February 8, 2000, service with Olin and
its affiliates shall be credited in determining whether the Participant has
reached age 55 under this paragraph (b). Such service shall be imputed for the
sole purposes of determining whether the Participant qualifies for subsidized
early retirement benefits, and shall not be treated as "Benefit Service" for the
purpose of calculating the amount of the benefit 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 using the early retirement reductions
specified in the Qualified Plan 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
4
<PAGE>
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 and further provided that, in the case of Participants who transfer
directly to Olin on or prior to February 8, 2000, service with Olin and its
affiliates shall be counted in enabling such Participants to retire on or after
age fifty-five (55) and actually retiring from Olin and its affiliates, in
accordance with Section 4.1 above. In the event that an Arch Employee is
re-employed by Olin on or 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.
4.3 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
5
<PAGE>
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. In the case of a Participant who transfers directly to
Olin (or its affiliates) on or before February 8, 2000, "actual
retirement" shall be construed to mean retirement or termination of
service from Olin and its affiliates. Service with Olin and its affiliates
shall be credited in enabling the Participant to attain his early
retirement age (but not in determining his Years of Benefit Service) under
this Plan.
(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, provided, however that, with respect to
Participants who transfer to Olin on or before February 8, 2000, no benefits
shall be paid under this Plan until they terminate service with Olin and its
affiliates.
(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 or, 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
6
<PAGE>
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.
(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.
7
<PAGE>
(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
(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.
8
<PAGE>
(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 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.
9
<PAGE>
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 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
10
<PAGE>
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.
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
11
<PAGE>
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.
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.
12
<PAGE>
Dated: ARCH CHEMICALS, INC.
By: /s/ Mark A. Killian
-------------------------------------
Its Vice President of Human Resources
ARCH SENIOR EXECUTIVE PENSION PLAN
Effective as of February 8, 1999
As Amended by a First Amendment Dated July 29, 1999
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" shall mean February 8, 1999.
-1-
<PAGE>
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 the Olin Senior Executive Pension Plan as in effect on the
Distribution Date (the "Olin Senior Plan") and who, as of the Effective Date
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.
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 of the Company and all Employing Companies, including,
without limitation, the Arch Chemicals Employees' Pension Plan), and
the
-2-
<PAGE>
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 February
8, 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 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
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
-3-
<PAGE>
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
(as provided in Section 4.2(b) of the Plan) may not commence until at
least twelve (12) full months following the Participant's actual
retirement. In the case of a Participant who transfers directly to Olin on
or before February 8, 2000, (i) "actual retirement" shall be construed to
mean retirement or termination of service from Olin and its affiliates,
and (ii) service with Olin (and its affiliates) shall be credited in
enabling the Participant to attain his early retirement age (but not in
determining Years of Benefit Service) under this Plan.
(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. In the
case of a Participant who transfers directly to Olin on or before February
8, 2000, service with Olin shall be credited in determining whether the
Participant has reached age 55 under this paragraph (b). Such service
shall be imputed for the sole purposes of determining whether the
Participant qualifies for subsidized early retirement benefits, and shall
not be treated as "Benefit Service" for the purpose of calculating the
amount of the Participant's Retirement Allowance. 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); provided however that, in the case of a Participant who
transfers directly to Olin on
-4-
<PAGE>
or prior to February 8, 2000, service with Olin and its affiliates shall be
counted in enabling such Participant to retire on or after attaining age
fifty-five (55) (and actually retiring from Olin), in accordance with Section
3.2 above. 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.
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 on or
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 after the Distribution Date and on or 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 reserves shall be transferred with respect to any
such Participant. 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 Participant's 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.
-5-
<PAGE>
(b) TRANSFER FROM OLIN TO ARCH. In the event that an Olin employee
transfers employment to Arch from Olin after the Distribution Date and on
or 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. No reserves shall be transferred from Olin or the Olin Senior Plan
with respect to such Olin Employee. 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
Plan, they shall be offset by the benefit that would be payable to the
Participant from the Olin Senior Plan, as of the date benefits commence
hereunder, regardless of when, or whether, 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"
as hereinafter provided. If a Participant elects to receive
-6-
<PAGE>
Accelerated Benefits, then the Actuarial Present Value of such Benefits
shall be paid, at the election of the Chairman of the Board of Directors
of the Company, 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"). The Participant's Accelerated
Benefits shall commence on his Accelerated Benefit Commencement Date,
which shall be twelve full months following his actual retirement date at
age fifty-five (55) or later (the "Participant's Accelerated Benefit
Commencement Date"). In the case of a Participant who transfers directly
to Olin on or before February 8, 2000, "actual retirement" shall be
construed to mean retirement or termination of service from the transferee
employer. Service with Olin (and its affiliates) shall be credited in
enabling the Participant to attain his early retirement age (but not in
determining his Years of Benefit Service) under this Plan.
(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.
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'
-7-
<PAGE>
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
(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;
-8-
<PAGE>
(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 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.
-9-
<PAGE>
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
(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
-10-
<PAGE>
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 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.
-11-
<PAGE>
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 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
-12-
<PAGE>
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.
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
-13-
<PAGE>
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.
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.
-14-
<PAGE>
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
-15-
Exhibit 10.21
ARCH CHEMICALS, INC.
ANNUAL INCENTIVE PLAN
(As amended effective December 9, 1999)
1. ADOPTION AND PURPOSE. The Company hereby adopts this Plan
providing for the award of annual incentive compensation to selected employees
of the Company and its Subsidiaries if specified Performance Goals are achieved.
The general purpose of the Plan is to promote the interests of the Company and
its Subsidiaries by providing to their employees incentives to continue and
increase their efforts with respect to, and remain in the employ of, the Company
and its Subsidiaries.
2. ADMINISTRATION. The Plan will be administered by the
Administrator.
Subject to the express provisions of the Plan, the
Administrator shall have plenary authority, in its discretion, to administer the
Plan and to exercise all powers and authority either specifically granted to it
under the Plan or necessary and advisable in the administration of the Plan,
including without limitation the authority to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to grant Awards,
to determine the terms, provisions and conditions of all Awards granted under
the Plan (which need not be identical), the individuals to whom and the time or
times when Awards shall be granted, and to make all other necessary or advisable
determinations with respect to the Plan. The determination of the Administrator
on such matters shall be conclusive.
3. PARTICIPANTS. The Administrator shall from time to time select
the officers and key employees of the Company and its Subsidiaries to whom
Awards are to be granted, and who will, upon such grant, become participants in
the Plan.
4. PERFORMANCE AWARDS. (a) The Performance Goals and Performance
Period applicable to an Award shall be determined by the Administrator no later
than 90 days after the commencement of the Performance Period and shall be
communicated to the Participant; provided for the 1999 Performance Period, not
later than August 1, 1999. For those employees of the Company or any
Subsidiaries who become Participants after January 1 of a given year, such
determination shall be made for the Performance Period as soon as practicable by
the Administrator. The Administrator shall have the discretion to later revise
the Performance Goals.
(b) In making an Award, the Administrator may take into
account an employee's responsibility level, performance, cash compensation
level,
<PAGE>
incentive compensation awards and such other considerations as it deems
appropriate. Each Award shall be established in dollars and shall be based on
the Company's Performance Goals for the Performance Period.
5. EMPLOYMENT. Except as provided in the next sentence, and
unless the Administrator otherwise decides following termination, an Award shall
terminate for all purposes if the Participant is not an employee in good
standing with the Company or any subsidiary on the last day of the Performance
Period. The Participant (or in the event of the Participant's death, his or her
beneficiaries or estate) whose employment was terminated prior to such last day
because of death, disability or Retirement will be considered as the
Administrator determines in its sole discretion for pro rata portion of the
payment of his or her Award based upon the portion of the Performance Period
during which he or she was so employed so long as the Performance Goals are
subsequently achieved.
6. VESTING AND PAYMENT OF AWARDS. Awards shall not vest in a
Participant until actually paid; provided however, that if all or a portion of
an Award for a Performance Period is based on a Performance Goal that is a
financial goal (including the payout of any bonus bank amount), such portion of
an Award shall vest on the last day of such Performance Period in those
Participants who are employees of the Company or its subsidiaries on such last
day to the extent earned as a result of the achievement of such financial
Performance Goal. The vested Award for the Participants who were employed on
such last day but were not so employed continuously throughout such Performance
Period shall be prorated to reflect the period during which they were employed
by the Company or its subsidiary during the Performance Period. Payment with
respect to an Award will be distributed in a lump sum wholly in cash as soon as
practicable following the determination of actual performance and approval by
the Administrator that the Performance Goals with respect to an Award has been
met. Required withholding taxes shall be withheld from the payment of any Award.
7. DEFERRAL. Participants may defer the payment of Awards subject
to and as provided in the Employee Deferral Plan (or its successor).
8. NONEXCLUSIVE PLAN. The adoption of the Plan by the Company
shall not be construed as creating any limitation on the power of the
Administrator to adopt such other incentive arrangements as it may deem
desirable and such arrangements may be either generally applicable or applicable
only in specific cases.
9. NONASSIGNABILITY. No Awards may be transferred, alienated,
pledged or assigned other than by will or by the laws of descent and
distribution.
2
<PAGE>
10. AMENDMENT OR DISCONTINUANCE. The Plan may be amended,
terminated or discontinued by the Administrator at any time as the Administrator
determines. Upon termination of the Plan, unvested Awards shall terminate and
participants shall have no rights to unvested Awards.
11. EFFECT OF PLAN. Neither the adoption of the Plan nor any
action of the Administrator shall be deemed to give any officer or employee any
right to continued employment or any other rights.
12. PLAN REMAINS UNFUNDED. Nothing contained in this Plan shall be
deemed to create a trust or fund of any kind or create any fiduciary
relationship whether or not the Company elects to fund the Plan through a "rabbi
trust". 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.
13. EFFECTIVE DATE OF PLAN. The Plan shall take effect as of
January 1, 1999.
14. GOVERNING LAW. This Plan shall be governed by the laws of the
State of Connecticut without giving effect to its conflicts of law.
15. DEFINITIONS. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
(a) "Administrator" means (1) for Participants who report
directly to the Chief Executive Officer or Chief Operating Officer and who
are subject to Section 16 of the Securities Exchange Act of 1934, as
amended, the Committee and (2) for all other Participants, the Chief
Executive Officer of the Company (or his or her designees).
(b) "Award" means an incentive award made pursuant to the
Plan, the payment of which is contingent upon attainment of Performance
Goals.
(c) "Board" means the board of directors of the Company.
(d) "Committee" means the Compensation Committee of the
Board (or its successor committee).
3
<PAGE>
(e) "Company" means Arch Chemicals, Inc., a Virginia
corporation.
(f) "Participant" means an individual selected by the
Administrator to participate in the plan for a fiscal year.
(g) "Performance Goals" means performance goal (or goals)
and formulae as may be established by the Administrator which shall be
based on the one or more financial or nonfinancial performance factors as
the Administrator selects with respect to the Performance Period.
(h) "Performance Period" means the fiscal year of the
Company or such other period of time as is designated by the Administrator
during which the Performance Goals are measured.
(i) "Plan" means this Arch Chemicals, Inc. Annual Incentive
Plan as amended from time to time.
(j) "Retirement" means, with respect to any participant, the
participant's retirement as an employee of the Company on or after
reaching age 55 with at least ten years of service.
(k) "Subsidiary" means any corporation in an unbroken chain
of corporations beginning with the Company if, at the time of the granting
of the Award, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain. The "Subsidiaries" means more than one of any such
corporations.
ARCH CHEMICALS, INC.
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
(As amended effective January 27, 2000)
Section 1. PURPOSE. The purposes of the Senior Management Incentive
Compensation Plan (the "Plan") are (i) to compensate certain members of senior
management of Arch Chemicals, Inc. (the "Company") on an individual basis for
significant contributions to the Company and its subsidiaries and (ii) to
stimulate the efforts of such members by giving them a direct financial interest
in the performance of the Company.
Section 2. DEFINITIONS. The following terms utilized in this Plan
shall have the following meanings:
"Cash Flow" shall mean for a fiscal year consolidated net
income (loss), before the after-tax effect of any special charge or
gain or cumulative effect of any change in accounting principle, plus
depreciation and amortization, less capital and investment spending and
plus or minus changes in working capital at the end of such fiscal
year.
"Committee" shall mean the Compensation Committee of the Board
of Directors of the Company or such other committee of such Board as
such Board may from time to time designate; provided only those members
of the Compensation Committee (or other Committee designated by such
Board) who qualify as "Outside Directors" as defined in Section 162(m)
shall constitute members of the Committee for purposes of the Plan.
"Consolidated Net Assets" shall mean for a fiscal year
consolidated total assets less consolidated non-interest bearing
liabilities at the end of such fiscal year.
"Earnings Per Share" shall mean for a fiscal year the actual
diluted earnings per share at the end of such fiscal year (calculated
as the net income available to common stockholders divided by the
weighted average number of common stock plus any potential dilutive
common stock (such as stock options) outstanding at the end of such
fiscal year.
"EBIT" shall mean for a fiscal year consolidated net income
(loss) plus income tax expense, interest expense, extraordinary
expenses or losses and any special charges minus interest income and
any extraordinary gains or sales not in the ordinary course of business
at the end of such fiscal year.
"Participant" shall mean for a fiscal year, each salaried
employee who is designated as a Participant by the Committee prior to
<PAGE>
the commencement of such fiscal year (or such later date, if any, as
permitted by Section 162(m)); provided for 1999, the Committee shall
designate the Participants prior to April 1, 1999.
"Performance Measures" shall mean for a fiscal year any one or
combination of the following: "Earnings Per Share," "Profit Margin,"
"Return on Total Assets," "Cash Flow," "Return on Equity" and "Return
on Capital" as the Committee determines from time to time with respect
to such fiscal year; provided such determination would not subject any
Incentive Award to Section 162(m).
"Profit Margin" shall mean for a fiscal year consolidated EBIT
(at the end of such fiscal year) divided by consolidated net sales at
the end of such fiscal year.
"Return on Capital" shall mean for a fiscal year consolidated
net income plus after-tax interest expense and the after-tax effect of
any special charge or gain and any cumulative effect of a change in
accounting principle (at the end of such fiscal year), divided by
average Consolidated Net Assets (the average calculated using
Consolidated Net Assets at the beginning and end of such fiscal year).
"Return on Equity" shall mean for a fiscal year consolidated
net income before the after tax effect of any special charge or gain
and any cumulative effect of any change in accounting principle (at the
end of such fiscal year), divided by average shareholders' equity (the
average calculated using shareholders' equity at the beginning and end
of such fiscal year).
"Return on Total Assets" shall mean for a fiscal year the
consolidated EBIT (at the end of such fiscal year) divided by
consolidated average total assets (the average calculated using the
consolidated total assets at the beginning and end of such fiscal
year).
"Section 162(m)" shall mean Section 162(m) of the Internal
Revenue Code of 1986, and the regulations promulgated thereunder, all
as amended from time to time.
Section 3. TERM. The Plan shall be effective as of February 25, 1999
(the "Effective Date"), and shall be applicable for 1999 and all future fiscal
years of the Company unless amended or terminated by the Company pursuant to
Section 7 or as provided in Section 14.
Section 4. INCENTIVE AWARD.
4.1 For each fiscal year of the Company, each Participant may be
entitled to receive an award payable in cash ("Incentive Award") in an amount
determined by the Committee as provided in this Plan. Prior to the commencement
of a fiscal year (or such later date, if any, as permitted by Section 162(m))
(but in the case of the 1999 fiscal year, prior to April 1, 1999), for the
Incentive Awards for such fiscal year, the Committee will designate or approve
(i) the individuals who will be Participants in the Plan, if any, (ii) the
<PAGE>
Performance Measures, (iii) if there is more than one Performance Measure, the
weighting of the Performance Measures in determining the Incentive Award, (iv)
the performance goals and payout matrix or formula for each Performance Measure
and (v) the target Incentive Award for each Participant. Following the end of a
fiscal year, the Committee shall determine the Incentive Award for each
Participant by:
(i) comparing actual performance for each measure against the
payout matrix approved for such fiscal year,
(ii) multiplying the payout percentage from the payout matrix for
each Performance Measure by the appropriate weighting factor, and
(iii) summing the weighted payout percentages and multiplying their
overall payout percentage by the Participant's target Incentive Award.
Notwithstanding anything contained in this Plan to the contrary, the
Committee in its sole discretion may reduce any Incentive Award to any
Participant to any amount, including zero, prior to the certification by
resolution of the Committee of the amount of such Incentive Award; however, the
Committee may not reduce an Incentive Award for a fiscal year after December 31
of such fiscal year for a Participant who is employed by the Company on such
date and such Incentive Award shall vest in such Participant on such date.
The Committee shall, by resolution of the Committee, certify, prior to
payment of an Incentive Award, that the Incentive Award has been determined in
accordance with the provisions of this Plan.
Incentive Awards for a fiscal year shall be determined as soon as
practicable after such fiscal year and shall be paid no later than 75 days
following such fiscal year unless deferred as provided in Section 4.4 hereof.
The maximum Incentive Award paid a Participant under this Plan with respect to a
fiscal year may not exceed 200% of such Participant's annual base salary in
effect on December 31 of the immediately preceding fiscal year.
4.2 A Participant whose employment terminates with cause or without the
Committee's written consent during a fiscal year shall forfeit such
Participant's Incentive Award for such fiscal year.
4.3 Incentive Awards shall be payable in a single, lump sum. However,
the Participant may defer payment if the participant so elects pursuant and
subject to the terms of Company's Employee Deferral Plan (or its successor).
4.4 The Company shall withhold from any Incentive Award or payments
made or to be made under this Plan any amount of withholding taxes due in
respect of an Incentive Award, its deferral or payment.
4.5 Participation in this Plan does not exclude Participants from
participation in any other benefit or compensation plans or arrangements of the
Company, including other bonus or incentive plans.
<PAGE>
Section 5. ADMINISTRATION AND INTERPRETATION. The Plan shall be
administered by the Committee, which shall have the sole authority to make rules
and regulations for the administration of the Plan. The interpretations and
decisions of the Committee with regard to the Plan shall be final and
conclusive. The Committee may request advice or assistance or employ such
persons (including, without limitation, legal counsel and accountants) as it
deems necessary for the proper administration of the Plan.
Section 6. ADMINISTRATIVE EXPENSES. Any expense incurred in the
administration of the Plan shall be borne by the Company out of its general
funds.
Section 7. AMENDMENT OR TERMINATION. The Committee of the Company may
from time to time amend the Plan in any respect or terminate the Plan in whole
or in part, provided that no such action shall increase the amount of any
Incentive Award for which performance goals have been established but which has
not yet been earned or paid; provided further that such action will not cause an
Incentive Award to become subject to the deduction limitations contained in
Section 162(m).
Section 8. NO ASSIGNMENT. The rights hereunder, including without
limitation rights to receive an Incentive Award, shall not be pledged, assigned,
transferred, encumbered or hypothecated by an employee of the Company, and
during the lifetime of any Participant any payment of an Incentive Award shall
be payable only to such Participant.
Section 9. THE COMPANY. For purposes of this Plan, the "Company" shall
include the successors and assigns of the Company, and this Plan shall be
binding on any corporation or other person with which the Company is merged or
consolidated.
Section 10. NO RIGHT TO EMPLOYMENT. The designation of an employee as a
Participant or grant of an Incentive Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any
affiliate or subsidiary.
Section 11. GOVERNING LAW. The validity, construction and effect of the
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.
Section 12. NO TRUST. Neither the Plan nor any Incentive Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Participant. To the extent any
Participant acquires a right to receive payments from the Company in respect to
any Incentive Award, such right shall be no greater than the right of any
unsecured general creditor of the Company.
Section 13. SECTION 162(m). It is the intention of the Company that all
payments made under the Plan be excluded from the deduction limitations
contained in Section 162(m). Therefore, if any Plan provision is found not to be
in compliance with the "performance-based" compensation exception contained in
<PAGE>
Section 162(m), that provision shall be deemed amended so that the Plan does so
comply to the extent permitted by law and deemed advisable by the Committee, and
in all events the Plan shall be construed in favor of its meeting the
"performance-based" compensation exception contained in Section 162(m).
Section 14. SHAREHOLDER APPROVAL. This Plan shall be submitted for
approval to the shareholders of the Company at the Company's 2000 Annual Meeting
of Shareholders. If the Plan is not approved by such shareholders within the
meaning of Section 162(m), this Plan shall immediately terminate and all
Incentive Awards granted but unpaid at the time of such non-approval shall also
terminate.
Exhibit 21
SUBSIDIARIES OF ARCH CHEMICALS, INC.1
(as of December 31, 1999)
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------- --------------------------
PERCENTAGE OF DIRECT/
INDIRECT OWNERSHIP BY
JURISDICTION ARCH OF VOTING SECURITIES
SUBSIDIARY WHERE ORGANIZED
- ---------------------------------------- --------------------------- --------------------------
<S> <C> <C>
Arch Asia Holdings, Ltd. Republic of Mauritius 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Benefits Management, Inc. Delaware 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals B.V. The Netherlands 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals Canada, Inc. Canada 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals Far East, Limited Delaware 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals GmbH Germany 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals (Hong Kong) Limited Hong Kong 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals Japan, Inc. Japan 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals Limited United Kingdom 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals NV Belgium 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals S.A. France 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals S.R.L. Italy 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals Singapore Pte Ltd Singapore 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals Specialty Products, Inc. Delaware 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Chemicals (Suzhou) Co., Ltd. People's Republic of China 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Electronic Chemicals NV Belgium 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Electronic Chemicals, Inc. Pennsylvania 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Export Trading Corporation Barbados 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Kimya A.S. Turkey 98.85%
- ---------------------------------------- --------------------------- --------------------------
Arch Overseas Finance N.V. Belgium 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Quimica Brasil Ltda. Brazil 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Semiconductor Chemicals GmbH Germany 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Semiconductor Chemicals Limited United Kingdom 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Semiconductor Chemicals S.A. France 100%
- ---------------------------------------- --------------------------- --------------------------
Arch Specialty Chemicals, Inc. Delaware 100%
- ---------------------------------------- --------------------------- --------------------------
Doe Run Gas Marketing Company Kentucky 100%
- ---------------------------------------- --------------------------- --------------------------
Doe Run Gas Transmission Company Kentucky 100%
- ---------------------------------------- --------------------------- --------------------------
Etoxyl, C.A.2 Venezuela 100%
- ---------------------------------------- --------------------------- --------------------------
Hydrochim S.A. France 100%
- ---------------------------------------- --------------------------- --------------------------
Hydromen Espana, S.L. Spain 100%
- ---------------------------------------- --------------------------- --------------------------
Superior Pool Products, Inc. Delaware 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.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Arch Chemicals, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 333-71719 and 333-71721) filed on Form S-8 of Arch Chemicals, Inc. of our
report dated January 26, 2000, relating to the consolidated balance sheets of
Arch Chemicals, Inc. and subsidiaries as of December 31, 1999 and 1998 and the
related consolidated statements of income, shareholders' equity (equity prior to
the distribution) and cash flows for each of the years in the three-year period
ended December 31, 1999, which report appears in the December 31, 1999 annual
report on Form 10-K of Arch Chemicals, Inc.
KPMG LLP
Stamford, Connecticut
March 8, 2000
Exhibit 24
FORM 10-K FOR 1999
------------------
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned officers
and directors of ARCH CHEMICALS, INC., a Virginia corporation (the
"Corporation"), which proposes to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Exchange
Act of 1934, a Form 10-K of the Corporation for the fiscal year ended December
31, 1999, hereby constitutes and appoints Louis S. Massimo, Sarah A. O'Connor
and Joseph P. Lacerenza the undersigned's true and lawful attorneys-in-fact and
agents, and each of them with full power to act without the other, his or her
true and lawful attorney-in-fact and agent, for the undersigned and in his or
her name, place and stead, in any and all capacities, to sign said Form 10-K and
any and all amendments thereto, and to file said Form 10-K and each such
amendment, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, hereby
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform any and all acts and things requisite and
necessary to be done in exercise of any of the rights and powers herein granted,
as fully to all intents and
<PAGE>
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals this 18th day of February 2000.
(L.S.) (L.S.)
- ---------------------------------- ---------------------------------
Michael E. Campbell H. William Lichtenberger
Chairman of the Board, Director
Chief Executive Officer
and Director
/S/RICHARD E. CAVANAGH (L.S.) (L.S.)
- ---------------------------------- ---------------------------------
Richard E. Cavanagh Michael O. Magdol
Director Director
/S/JOHN W. JOHNSTONE, JR. (L.S.) (L.S.)
- ---------------------------------- ---------------------------------
John W. Johnstone, Jr. John P. Schaefer
Director Director
(L.S.) (L.S.)
- ---------------------------------- ---------------------------------
Jack D. Kuehler Louis S. Massimo
Director Vice President and
Chief Financial Officer
(Principal Financial Officer)
(L.S.)
---------------------------------
Steven C. Giuliano
Controller (Principal
Accounting Officer)
Power of Attorney for 1999 Form 10-K
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements contained in Item 8 of Form 10-K for the period ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements. Figures are rounded to the nearest 100,000 (except EPS).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,100
<SECURITIES> 0
<RECEIVABLES> 161,700
<ALLOWANCES> 5,700
<INVENTORY> 147,300
<CURRENT-ASSETS> 354,700
<PP&E> 876,700
<DEPRECIATION> 550,000
<TOTAL-ASSETS> 759,500
<CURRENT-LIABILITIES> 186,200
<BONDS> 76,800
0
0
<COMMON> 22,600
<OTHER-SE> 429,200
<TOTAL-LIABILITY-AND-EQUITY> 759,500
<SALES> 879,800
<TOTAL-REVENUES> 879,800
<CGS> 637,700
<TOTAL-COSTS> 637,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,200
<INTEREST-EXPENSE> 5,700
<INCOME-PRETAX> 61,500
<INCOME-TAX> 20,800
<INCOME-CONTINUING> 40,700
<DISCONTINUED> 0
<EXTRAORDINARY> 1,300
<CHANGES> 0
<NET-INCOME> 42,000
<EPS-BASIC> 1.83
<EPS-DILUTED> 1.82
</TABLE>
